India Buys 200 Tonnes of IMF Gold: Barrick and JPMorgan Run For The Exits

Gold did virtually nothing all through Far East trading on Monday. That changed at the usual time in Hong's afternoon, and gold tacked on $10 from there until about an hour into London's morning session. Then the price basically went sideways until moments before the London p.m. gold fix at 10:00 a.m. in New York. From there the price spiked about $8 to it's high of the day [$1,064.00 spot]. The it slid for the next couple of hours through the floor close and into electronic trading. But shortly after 2:00 p.m. a buyer of some sort showed up, and the price climbed back to $1,060 by the time New York trading was through for the day at 5:15 p.m. An interesting day, with gold up $15... but I wouldn't read a lot into it... at least not for the moment.

Pricewise, silver had a somewhat similar, but more volatile day. The price gained a decent amount during New York trading, but had most of those gains were eradicated between 12:00 noon and 2:00 p.m.

The HUI and XAU followed the gold price in lock step.

Considering the price action on Friday [blue line in the above gold graph], there was a surprisingly large drop in gold open interest reported on Monday. Gold o.i. fell 7,921 contracts on really decent volume of 141,358 contracts. Total gold open interest is now down to 481,965 contracts... a number that's still in the stratosphere. Silver's open interest decline was a far more modest [puny, actually] 222 contracts. Volume was right up there at 42,763 contracts... with total o.i. now 130,427 contracts.

On Sunday I noted, with some chagrin, that I had inadvertently left out a paragraph of information in my Saturday commentary... so I will make amends now.

On Friday, the CME delivery report showed no deliveries in either metal worth mentioning. And after SLV's big 4.3 million ounce increase on Thursday, there were no reported changes on Friday. However in the GLD, another 29,417 troy ounces were withdrawn. Surprisingly, the U.S. Mint had one more update on Friday. They showed another 4,500 gold and 160,000 silver eagles were minted. The final totals for October are as follows: gold eagles 115,500... and silver eagles 2,939,000. That monthly total for silver eagles represents the second-largest month's production of 2009... as only March was bigger at 3,132,000. Year-to-date, there have been 1,069,500 gold eagles and 23,406,500 silver eagles produced by the U.S. Mint. Over at the Comex-approved warehouses, another 434,754 ounces was reported taken into inventory. As of the end of the business day on Thursday, the Comex showed an inventory level of 117,308,272 ounces troy.

Now for Monday's activity. Once again there were no gold or silver deliveries worth mentioning in the CME Delivery Report... and there were no changes reported by the GLD or SLV ETFs either. At the Zürcher Kantonalbank in Switzerland they reported no weekly changes in either their gold or silver ETF as well [Thanks for nothing, Carl!]... and the U.S. Mint had no report either. Only the boys and girls over at the Comex-approved warehouses gave me something to talk about. Their silver inventories fell a whopping 3,627,012 troy ounces! That has to be the biggest one-day drop that I can remember. A million ounces of that came out of the Brink's depository... and the other 2.6 million came out of HSBC, USA. The Comex warehouses always report a day late. The report date was Monday... but the actual date that this all took place was last Friday... the last business day of October. The inventory level at the Comex depositories for the end of October shows 113,681,260... the lowest silver inventory level since late 2006.

Here's the 20-year graph for silver Comex warehouse stocks. The chart is kindly provided by Nick Laird of sharelynx.com... for which I thank him.

The usual New York gold commentator had a couple of reports yesterday... one early yesterday morning... and the other in the wee hours of this morning. I will summarize... "India's stock and foreign exchange markets were closed today. Local Vietnam gold stood at a $19.69 premium to world gold of $1,043.33 early Monday morning. The Japanese public resumed buying... and added 3.63 tonnes to their long... up 11.3%!"

"According to the Istanbul Gold Exchange, Turkey imported 4.208 tonnes of gold in October, up from 1.706 tonnes in September. While a welcome father demonstration that Turkey's October-June abstention from importing gold is over, this will be somewhat disappointing to gold's friends given the rumor [of] stronger activity at certain points last month."

"The news emerging in the early evening N.Y. time that the Reserve Bank of India has bought 200 tonnes of the 403.3 tonnes from the IMF is currently empowered to sell, is likely to be a decisive tonic to the bullion market. Removing half the overhang, especially in the context of the ECB [European Central Bank] echelon of banks apparently virtually not selling, is obviously positive. And the fact that a Central Bank has, in fact, stepped in to take the gold... is likely to greatly excite those who have been predicting such an event."

"They are probably right to be excited. Notwithstanding the Indian population's interest in gold, the economic authorities there have traditionally been rather disdainful of the metal. For many years it has been clear that Washington has been strongly opposed to Central Bank interest in gold, out of jealousy for the US$. That India feels able to defy American preferences in this way is an ominous sign for the dollar hegemony." [The Reuters gold story headlined "IMF sells 200 tonnes of gold to RBI" is linked here.]

"Having spent quite some time up $23 or so on Monday morning, Comex gold slid into the floor close. ScotiaMocatta reported [that] 'selling was persistent'. December gold finished up only $13.60 at $1,054. Estimated volume was 129,885 lots, of which only a suspiciously low 1,800 lots are alleged to have traded in the final half hour. By 4p.m. gold was over $5 higher. Euro gold tracked US$ gold quite nicely."

"The gold shares did not behave well. Having been up 4.27% and 3.89% respectively at their highs, both the HUI and XAU slipped into negative territory around the floor close. The subsequent father rise in gold brought only a grudging response: The HUI closed up only 0.96% and the XAU up 1.03%. The CEF bullion vehicle showed a premium to NAV of only 8.3%."

"This morning [Tuesday], local Vietnam gold stood at a $12.49 premium to world gold of $1,064.60. Quite a respectable response to a $20 overnight surge in world gold."

"The effect of Monday's move was to turn The Privateer's long-term US$ 5x3 chart, positive." [The link is here.]

"Judging by the late-day floor action in gold... and the behavior of the gold shares, the Bears were mustering on Monday afternoon. The Indian news is likely to disrupt their plans."

Here are a couple of graphs that I lifted from a story over at zerohedge.com entitled "Commercial Mortgage-Backed Securities Delinquency Rates Accelerate". The first graphs shows percentages... and the second shows dollar amounts. The item itself is a short read... and is linked here.

I have quite a few stories this morning... as the weekend was rather busy... and Monday was a big news day as well.

The first story is from the Sunday edition of The New York Times. It's an account by the newspaper's city critic, Ariel Kaminer, of her visits to gold recycling shops in Manhattan. This may be a small, but telling, report from the front in the gold war... where the public is selling, not buying, and jewelry demand is transforming into investment demand whose origin is not quite as visible. The underlying message may be that gold is still money, and, increasingly, a better sort of money. The headline reads "Cashing in Memories, at $1,000 an Ounce" and the link is here.

Here's a story that falls into the must read category. It's a Sunday offering from Ambrose Evans-Pritchard over at The Telegraph in London. "Japan is drifting helplessly towards a dramatic fiscal crisis. For 20 years the world's second-largest economy has been able to borrow cheaply from a captive bond market, feeding its addiction to Keynesian deficit spending ˆ and allowing it to push public debt beyond the point of no return." The story is entitled "It is Japan we should be worrying abut, not America"... and the link is here.

Here's another Sunday afternoon story from The Telegraph that's well worth your time. Last week I reported that Saudi Arabia had dropped the WTI [West Texas Intermediate] crude benchmark. That drew this response from columnist Garry White. The story is entitled "Do Saudis have the clout to destroy NYMEX?"... and the link is here.

In the next piece, GoldMoney.com founder and GATA consultant James Turk argues in commentary posted yesterday that the daily analysis of gold, silver, and currency prices matters little against the general long-term trend, which is that all currencies are devaluing against the precious metals. Save regularly in metal, Turk writes, and you'll come out well ahead. Turk's commentary is headlined "Take the Long View for Gold and Silver... and the link is here.

In a two-paragraph Bloomberg story early Monday morning, the World Gold Council's CEO, Aram Shishmanian said that "I believe that central banks will be net buyers over time." Well, Aram... You have a keen grasp of the obvious. The central banks have been net buyers of gold for most of 2009 which you obviously hadn't noticed... and I wouldn't break your arm trying to pat yourself on the back for that, as it's certainly no thanks to the WGC itself that it's been happening.

And less than 12 hours after that story showed up, the IMF gold sale to the Reserve Bank of India hit the news wires. So I guess that would suddenly make the world's central banks big buyers of gold, as 200 tonnes is quite a bit... and it will be of interest to see where the other 203 tonnes of that IMF tranche ends up. The usual New York gold commentator had the Reuters version of the story is his comments above. The one here is from Bloomberg and has the GATA interpretation of the sale included. This is worth the read as well. I thank Wesley Legrand for bringing the original story to my attention... and the link is to the GATA release is here.

Lastly is another story about Barrick Gold and its hedge book. This story is of equal importance to the IMF gold sale to the RBI. Barrick announced that not only did the company buy back one million ounces of hedged gold in October, "it may complete the planned closure of its hedge book announced last month before the end of the 12-month window it had set." To me it means that much higher gold prices are in our future... as Barrick [and its bullion bank, JPMorgan] are obviously now running for the exits... not just heading for them. Barrick's CFO, Jamie Sokalsky, admitted as much when he said "It is hard to put a number on it [new high gold prices], but if you look at where gold rose to back in the early 1980s on an inflation-adjusted basis, it was over $2,000 an ounce." When the Dark Prince of the gold world starts talking dirty like that, you just have to know they're preparing for that exact eventuality. The link to the Reuters story headlined "Barrick May Close Hedge Book Ahead of Plan" is here.

The next eight days will be interesting times for the precious metals. Firstly, the U.S. jobs report comes out on Friday... and, with only one exception in the past five years, the 'powers that be' have smacked the gold price the moment they're released... which is around 8:30 a.m. Eastern time. Watch for it! Then, next Tuesday and Wednesday is the FOMC meeting. I'm sure Bernanke will have something to say about "quantitive easing" plans... and how they will manufacture even more money out of thin air. I doubt that they'll touch interest rates, but who knows.

By then, we'll be one week closer to December option expiry on the Comex... November 23rd. Will 'da boyz' try to bury gold and silver prices one more time so they can cover as many shorts as possible? Who knows. I certainly don't... and neither does anyone else for that matter. We'll just have to wait it out, as this market is impossible to call.

I note, as I put this report to bed in the wee hours of Tuesday morning, that both gold and silver rose a bit in the Far East... with the top coming at 10:00 a.m. in Hong Kong trading... and have given all those gains back going into the London open. I expect that it will be another interesting day in New York when the U.S. bullion banks swing into action.

See you tomorrow.