Russian Finance Minister Raise Gold Sale Issue Again

As I mentioned in my closing paragraph yesterday, both gold and silver started their descent at the usual 3:00 a.m. New York time. The gold price declined until about 7:30 a.m. in New York and then rallied for a couple of hours before declining once again. Gold closed in New York almost at its low of the day. Volume was heavy... estimated by the N.Y. gold commentator "at 91,341 lots by 11AM."

In silver, the beating continued. It was almost straight down hill from 3:00 a.m. until the New York closed at 5:15 p.m.... 15 hours and 15 minutes later. Silver closed on its low of the day.

The gold and silver shares really took a pounding... with the HUI down 5.9% and the XAU down 5.09%.

And the U.S. dollar rally continues. Let's see how long it lasts. Here's the 1-year chart.

I provided Tuesday's preliminary open interest numbers in yesterday's report, as soon as they became available in the wee hours of Wednesday morning. Now that the final figures for Tuesday are posted, there weren't any significant changes. Gold open interest fell 11,674 contracts and silver o.i. fell 1,571 contracts. Wednesday's preliminary open interest numbers read as follows... gold o.i. rose a surprising 3,537 contracts on big volume of about 164,000 contracts. Total open interest is now back over 500,000 contracts at 501,016. I'm surprised at this number, quite frankly... as I was expecting another decrease. Maybe it was disguised by putting on more spread trades. Not that it matters, because this set of figures won't be in tomorrow's Commitment of Traders report anyway. Silver o.i. fell a very small 451 contracts on decent volume of around 53,000 contracts. Total silver o.i. is now 132,392 contracts.

Considering the pounding that silver's taken in the last three days, these numbers [now that silver broke through and closed below its 50-day moving average yesterday on decent volume] are a shock. I don't know what to make of them... unless the bullion banks are covering their tracks by increasing their spread trades. This is the strangest liquidation cycle that I can remember.

The CME delivery report showed nothing of interest. The GLD showed that another 39,224 ounces were removed... which is exactly the same number of ounces [to the ounce] that was reported withdrawn on Tuesday... and, of course, there were no changes in the SLV ETF once again. The U.S. Mint had nothing to say... and the Comex-approved warehouses showed a rather substantial increase of 1,040,474 ounces of silver.

The usual New York commentator had a couple of reports yesterday... "India was not an importer at all on Wednesday, as the rupee was hit hard again... down almost 1% to a three week low. Thebulliondesk.com has a story reporting that the Bombay Bullion Association says Indian gold imports in the first three weeks of October were 27 tonnes, said to be down 18% from last year. Since rupee gold is roughly 28% higher, this seems credible. As always, the issue with India is, will it buy on a pull-back? And, of course, the rupee is critical. Despite the slump of the last few days, it is not likely to weaken forever."

"TOCOM is now on the buy side, as public added 1.15 tonnes to its long."

"Local Vietnam gold stood at a $24.94 premium to world gold of $1,031,30 early on this Thursday morning. This was despite a further 0.4% softening in the unofficial dong rate -- very likely due to gold purchases. Vietnam is serious about buying gold."

"Rupee weakness recently has given the Bears more room then they would otherwise have had. But the rupee is not going to zero."

Ted Butler sent me some interesting information yesterday. It was the latest short interest numbers on the SLV and GLD ETFs as provided by the website shortsqueeze.com. As of October 8th, the number of SLV shares sold short stands at 7,548,200. That does not, of course, include any shares that are sold naked short. But regardless of that, there are 7,548,200 shares of SLV that do not have any physical silver backing them whatsoever. This is fraud! In the GLD ETF... 12,917,500 shares are reported sold short... that represents 1.29 million ounces that should be backing those shares... and deposited in the GLD ETF, but aren't. This should be illegal.

Just when we thought that the Russian's weren't going to sell any gold... at least that's what they reported yesterday... along come Russia's Finance Minister and says that the gold sale could be back on again. The link to the yahoo.com story is here.

I now have room to run two stories that I've had in my in-box since Sunday night. Both are courtesy of the King Report and both are from The Telegraph in London... and both involve food. The first is by Ambrose Evans-Pritchard and bears the headline "Food will never be so cheap again"... "Biofuel refineries in the US have set fresh records for grain use every month since May. Almost a third of the US corn harvest will be diverted into ethanol for motors this year, or 12% of the global crop." It's definitely worth the read... and the link is here.

The second food story from The Telegraph bears the headline "Buy food -- price rises are almost guaranteed"... and the link to that story is here.

The next story is a Reuters piece filed from Dubai. It appears that investors from the Gulf are not overly enthusiastic about an exchange traded gold fund. It seems that the fund managers "may not have realised just how much people preferred to have the [physical] gold rather than a gold-backed product." The fund, which was started earlier this year, only has about $4 million in it... less than 4,000 troy ounces. I could fit that in the back seat of my car quite easily. The whole enterprise sounds like a failure to me. The link to the story is here.

In a story posted at the Financial Times in London, I see that "Saudi Arabia on Wednesday decided to drop the widely used West Texas Intermediate oil contract as the benchmark for pricing its oil, dealing a serious blow to the New York Mercantile Exchange." The headline reads "Saudis drop WTI oil contract"... and the link to this worth-the-read story is here.

And lastly, in a story filed from Ankara, Turkey and posted at RIA Novosti, comes this piece bearing the headline "Turkey to use national currencies in trade with Iran, China"... "ending dependence on the U.S. dollar and the euro for about 20% of its commodity turnover." The link to the story is here.

As I mentioned earlier, this is the strangest liquidation cycle I've ever seen for both gold and silver... especially for silver. Here's the 1-year chart once again.

Note silver's closing price of $16.15 was well below the 50-day moving average of $16.41 the ounce. There should have been massive liquidation of long positions by the technical funds and huge short covering by the bullion banks. But that didn't happen... or at least no long liquidation/short covering that the bullion banks are letting us see in yesterday's changes in open interest. And silver is now rapidly becoming oversold. This makes no sense to me at all. I'm just wondering what 'da boyz' are up to. I'll be watching today's silver price action during New York trading with great interest.

And, as I put this commentary to bed for another day, I see that gold was up about five bucks during early trading in the Far East today... and has popped a few dollars now that London is open. Silver's up about 15 cents... and volume in both metals is nothing to write home about.

I hope your Thursday goes well... and I'll see you here on Friday.