Still Unresolved... and Still Sitting on the Fence

Both gold and silver got sold off pretty hard starting shortly after 3:00 p.m. in Hong Kong trading yesterday. Three or four separate bouts of selling from that point took both metals down to a low which occurred moments before trading began in New York.

From that low, silver and gold rallied to their N.Y. highs, which occurred between 11:00 a.m. and noon... and shortly after half-past lunchtime, both metals got sold off again... with their absolute lows occurring in electronic trading around 3:45 Eastern time.

The daily gold and silver charts are virtual mirror images of each other.

And the silver graph proves beyond a shadow of a doubt that silver trades like a precious metal... not an industrial one... as its price pattern yesterday [and most days, actually] is in virtual lock-step with gold.

The usual N.Y. gold commentator chimed in with this regarding precious metal stocks... "On the whole, gold shares had a muted response. The HUI and XAU closed near their lows... down 2.19% and 1.83% respectively. The Central Fund of Canada bullion vehicle closed with a premium to NAV [Net Asset Value] of only 7.6%... suggestive of quite weak sentiment."

I was rather surprised at Wednesday's open interest numbers, as gold was mostly down on the day, but it did briefly set a new all-time high price around 4:00 p.m. in Hong trading. Anyway, the long and the short of it is that gold o.i. rose a hefty 6,565 contracts to a new multi-year-high open interest of 510,752 contracts... no short covering there. Volume was pretty decent at 137,853 contracts. Silver o.i. rose a much smaller 716 contracts to a total o.i. of 136,731 on volume that wasn't overly large... 29,939 contracts.

The CME Daily Delivery Report showed that 53 gold and 3 silver contracts are slated to be delivered on Monday. There were no changes reported in the alleged holdings of either the GLD or SLV ETFs yesterday. The U.S. Mint had another update on their silver eagle production... up another 375,000 to 1,267,000 month-to-date. There were no changes reported in gold eagle production, which currently sits at 50,000 for the month so far.
The Comex-approved precious metals depositories showed that 73,804 ounces of silver were withdrawn.

The usual New York gold commentator had the following to report yesterday... "India was a gold importer all day long yesterday, as the rupee surged to a 13-month high of R45.87 this morning, before falling back to close down, at $1=R46.225. The stock market slipped 0.2%."

"The extremely important Diwali festival is on Saturday, and the period before it is considered an appropriate time to purchase gold items. Some are suggesting that Indian demand will slump afterwards. In the 15 year or so that I have been following Indian premiums, I have never noted a perceptible change after the festival, as the wholesale trade continues to respond to prices... as usual."

"According to data supplied by Reuters, local Vietnam gold leapt to a premium of $16.45 to world gold of $1,064.30 on Thursday morning... $15.34 this [Friday] morning. This is the third day of high premiums. This is very surprising. There is some evidence of a gold buying surge in Vietnam. In part, a story about this [linked below] reads as follows... Domestic prices are currently rising faster than global prices, fetching VND400,000 higher than on the global market. The scarcity of supply has also led gold traders to push the domestic price quicker than the global price. Trading volume on the bullion market improved significantly, with buying taking the upper hand. Customers boosted buying as they expected prices to advance further. The story, posted at saigon-gpdaily.com.vn, is linked here. [If premiums like this keep up for any period of time, smuggling will start anew. - Ed]

"The active Shanghai gold contract on the other hand, stands at a $1.92 discount to world gold."

"The TOCOM stopped selling yesterday... and the public added 0.44 tonnes to its long."

"Yesterday's 30 cent loss in December gold, which closed at $1,064.70, saw aggregate volume of 133,865 lots. Open interest surged 6,565 lots [20.4 tonnes] to 510,752 contracts... a level not seen since January 30, 2008."

I have quite a few stories today. The first is about this year's 'bonuses' over at Goldman Sachs and JPMorgan. 'Dave from Denver' has a few choice comments about that in his blog over at truthingold.com and the link is here. And over at The Motley Fool, writer Morgan House, has his take on Goldman's earnings. I thank Donna from Florida for sending it along... and that link is here.

The next story is on a similar vein. It's a commentary written by Bloomberg news columnist, Jonathan Weil. The headline reads "Mark-to-Make-Believe Turns Junk Loans to Gold"... and the link is here.

The next story, courtesy of Craig McCarty, is also a Bloomberg offering. In the story, Daisuke Uno, Sumitomo Mitsui Banking Corp.’s chief strategist, said that "The dollar may drop to 50 yen next year and eventually lose its role as the global reserve currency... The U.S. economy will deteriorate into 2011 as the effect of excess consumption and the financial bubble linger," and... "The dollar's fall won't stop until there's a change to the global currency system." These uncharacteristically strong public warnings from a major Japanese bank reflect the growing rift between Japan and the USA... which are the direct result of the outcome of recent Japanese elections, which threw out the old-line-pro-USA LDP party, in favor of the pro-Japan DJP party. The Bloomberg headline reads "Dollar to Hit 50 Yen, Cease as Reserve, Sumitomo Says"... and the link is here.

If the above story out of Japan wasn't bad enough news for the U.S. dollar, the following story posted at the Russian news service RIA Novosti, isn't going to help things either. The article [which is well worth the read] is filed from Beijing and bears the headline "Russia ready to abandon dollar in oil, gas trade with China"... and the link is here.

The next item is a GATA release that was filed late last night. GATA's secretary treasurer, Chris Powell, one of the keynote speakers at the New Orleans Investment Conference, was able to meet with U.S. Representative Ron Paul... and filed this brief report headlined "Fed's gold swap admission is another reason for audit, Paul says"... and the link is here.

And my last story is directly related to the Ron Paul piece above. After he spoke in New Orleans, he was autographing his new book End The Fed. Now you, too, can have your say in preventing Ben Bernanke from being re-nominated as Chairman of the Federal Reserve. Last week I posted a letter that was written by Congressmen Paul and Grayson, asking the Senate Banking Committee to withhold Bernanke's nomination until he comes clean on what's going on at the Fed... and who got that $2 Trillion they handed out. There's a "Grayson Initiative" you can sign [if you wish] that's posted over at zerohedge.com. The story is entitled "Tired Of Being Robbed by the Fed? Here is Your Chance to Tell Your Senator"... and the link is here. I've already sent mine in.

Political leaders in capitalist countries who cheer the collapse of socialism in other countries, continue to favor socialist solutions in their own. They know the words, but they have not learned the tune. - Milton Friedman

Not much happened in Far East trading earlier today. There was a minor sell off going into the Sydney close... and both metals are rallying a bit into the London open. Volume is slightly higher than normal, but not by a lot. The Commitment of Traders report comes out at 3:30 p.m. Eastern time [precisely] this afternoon. It will, I believe, show massive deterioration in both gold and silver, compared to last Friday's report. This short position has to be resolved one way or another, and I'm still sitting on that proverbial fence. It will be interesting to see how it works itself out, but I'm mentally prepared for either eventuality... a violent, short-term correction, followed by a monster rally... or a blast off from here.

Either way, you have to be invested in solid well-researched precious metals companies to ride the gold and silver rocket. The cheapest way to find out which ones to invest in, is to shell out US$39 and get a one-year subscription to Casey's Gold and Resource Report. Included, is CR's unconditional money back guarantee that's good for 90 days. You just can't lose on an offer like that.

I hope you have a great weekend, and I'll see you here tomorrow.