So... Where To From Here?

Thursday's trading definitely fell into the "watching grass grow... or paint dry" category. I can't remember the last time we had such a non-activity in the gold or silver price... although Wednesday's trading activity would be close. Gold never made it [or was not allowed to make it] over $1,092... and in silver, the price turned downward every time that it looked remotely close to heading over $17.50. Estimated volume yesterday [according to the usual N.Y. commentator], was a smallish 100,406 contracts... a number that will, no doubt, be revised upwards this morning.

Here's the gold chart...

And here's the silver chart...

The precious metals shares followed suit... but I was encouraged by the tiny rally into the 4:00 p.m. New York close.

Well, the final open interest numbers for Wednesday didn't turn out as bad as the preliminary numbers had indicated in the wee hours of Thursday morning. Gold o.i. rose only 6,020 contracts... but on monstrous volume of 213,028 contracts. Total open interest in gold is now at 511,924 contracts... about 80,000 contracts below its record o.i. recorded back in January of 2008. Silver open interest wasn't as bad as the preliminary numbers stated, either... but they were bad enough nevertheless. Open interest rose a very large 3,161 contracts [15.8 million ounces]. Volume was 53,550 contracts, which is considerably less than the 60,000+ contracts reported in the preliminary numbers. Total silver open interest now sits at 135,544 contracts. And because of these huge differences between preliminary and final CME reported open interest numbers, I shan't report the preliminary numbers again.

As I mentioned yesterday morning, today brings us a new COT report and Bank Participation Report... both out at 3:15 p.m. Eastern time. It will give us a snapshot as to what those white-collar criminals at the bullion banks are up to. I will report on this tomorrow.

As is to be expected in a non-delivery month for either gold or silver, there was nothing worth mentioning in the CME Delivery Report yesterday. SLV reported no changes... and GLD reported a very small decline of only 1,756 ounces. There was no report from the U.S. Mint... and over at the Comex-approved warehouses, they reported a very small 6,819 ounces taken into inventory on Thursday. On Wednesday, for whatever reason, they had no report. I mentioned that in my commentary yesterday morning. When I was talking to Ted Butler yesterday, he said that it appeared that [based on the daily silver inventory totals] around 1.8 million ounces was added on Wednesday.

The usual N.Y. gold commentator had two reports yesterday... one late in the morning... and the other late last night... "India was not an importer on Thursday, even though the rupee recovered and the stock market was up."

"TOCOM continued to sell, as the public cut 2.22 tonnes from their long."

"Standard Bank [which is in a position to know] is expressing some mild concern about the physical market: The physical buying we have seen in gold has stopped... and there is more scrap metal coming to the market. We expect this to provide resistance to gold. But despite current resistance, we see the downside well protected and dips should still be bought."

"Reuters has been beating the bushes looking for further central bank gold buyers. So far, only unimportant Sri Lanka has admitted it: We have been fairly strong accumulators of gold reserves over the past few months, Sri Lanka Central Bank Governor Ajith Nivard Cabraal told Reuters in a telephone interview from the southern Indian city of Chennai. We haven't stopped yet, he added." [The Reuters story is linked here.]

"While one cannot imagine any substantial central bank would be naive enough to disclose a buying intention before actually completing a transaction, those with old enough scars will recall the continual interrogation of the group about selling intentions in the '90s. Fashion and conformism seemed then to be highly influential amongst central banks; gold's friends will be comforted that the tide seems to be set in the other direction."

"The CME website reports that yesterday's $2.40 gains saw aggregate volume of 194,789 lots [22.4% above estimate] and an open interest increase of 6,020 lots [18.7 tonnes] to 511,924 contracts. That is still below the highs seen last month, let along January 2008."

"Gold shares were quiet, but did respond a little to the late recovery. The XAU closed up 0.6% and the HUI up 0.68%. The CEF bullion vehicle finished with a premium to NAV of 9.8%: not exciting."

"Local Vietnam gold stood at a $6.41 premium to world of $1,090.30 early on Friday morning. The unofficial dong rate hit a new low, down 2.7% at $1=18,650 dong -- possibly reflecting gold transactions."

"According [to] the Istanbul Gold Exchange web site, updating late this [Thursday] morning, kilo bars in Turkey have risen back to a premium of over $5. They were briefly at a discount earlier this week."

Including the Sri Lanka gold story linked above, I have a lot of other stories today... even more than yesterday. Most of them are gold related. The first one [which I promise will be the last one regarding India's 200 tonne gold purchase from the IMF] was filed earlier today from India and comes from the website thehindubusinessline.com. It's a 3-paragraph story entitled "Gold Comfort"... "For the Reserve Bank of India, the most comforting aspect of the purchase is how far it has come from 1991, when it pledged reserve gold to meet international commitments." I urge you, dear reader, to give this short story the attention it deserves... and the link is here.

The next story is a Reuters offering filed from Beijing. The first paragraph reads "It would be cheaper for China to buy domestically mined gold than purchase bullion the International Monetary Fund is seeking to sell, a former adviser to the People's Bank of China said on Thursday." The story isn't very long... and worth running through. The link is here.

In a story posted in the Investor's Notebook section of yesterday's Financial Times out of London, James Turk gets an opportunity to skewer paper gold... and he puts it to full use. The headline reads "View of the Day: Gold dances to its own tune"... and it, too, is a short piece worth reading... and the link is here.

Up to bat next is monthly commentary by Sprott Asset Management's chief investment strategist, John Embry. He argues that central bank and government treasury talk about withdrawing "stimulus" funds from the world financial system is a con job and that the desperate debasement of world currencies will continue, causing gold and silver prices to go berserk. Embry's commentary appeared in Investor's Digest of Canada on October 23rd... and is headlined "Con Job in the Financial Markets Continues". The link is here.

Here's a fun gold story from The Telegraph in London. An amateur Scottish treasure hunter discovered a hoard of Iron Age gold worth more than £1 million on his first outing with his new metal detector. He had only gone about seven steps from his car when the discovery was made. The photo is wonderful, the story heart-warming... and the link is here. I thank Donna Badach for bringing it to my attention.

Next is commentary from silver analyst Ted Butler that was posted at silverseek.com yesterday... and excerpted from his newsletter to private clients on October 22nd. In it, Butler states that the moment of decision on commodity futures position limits is near for the U.S. Commodity Futures Trading Commission. Butler cites recent speeches made by CFTC Chairman Gary Gensler and Commissioner Bart Chilton... and repeats his optimism that something will be done to compel JPMorganChase to break up its grotesque short position in silver. Butler's commentary is headlined "The Bomb Squad"... is a must read... and is linked here.

Yesterday I ran a gold commentary by Bloomberg columnist, William Pesek... and today comes this commentary by Bloomberg's London bureau chief, Mark Gilbert. The title of the piece reads "Valuing Bonds, Dollar is Crazy in World Gone Mad". At one point he states... "If anyone is worried that the multi-trillion dollar global Keynesian experiment we’re in the middle of might backfire and ignite inflation, they haven’t told the Treasury market. You know markets have gone mad when the 10-year Treasury couldn’t care less that gold is at a record." Mike from Ottawa originally sent me the story early yesterday morning, but I'm going to use the GATA dispatch of this Bloomberg piece because it contains a long and very worthwhile preamble by GATA's secretary treasurer, Chris Powell. This is a big, but must read, if you follow all the links. Powell's title for Gilbert's rant is "Mark Gilbert: Pervasive intervention makes it impossible to value anything"... and the link is here.

I'm still very nervous about a short-term correction between now and December options expiry on the Comex on November 23rd. The silver, gold and HUI charts are all indicating a bearish scenario. Neither silver nor the gold shares have confirmed this record run-up in the gold price, and the RSIs for both are not pretty.

Here's the 1-year silver chart...

And the 1-year HUI chart...

We'll find out pretty quick I would think, whether we power higher from here... or go lower in the very short term. If we do go down, it will certainly turn out to be a buying opportunity extraordinaire. And at this time I once again urge you to seriously consider investing US$39 and purchasing a 1-year subscription to Casey's Gold and Resource Report. It provides ongoing analysis and recommendations of the world's most active and well-positioned gold and natural resource stocks... and the best precious metals mutual funds, royalty companies, and ETFs for your money today. Plus your satisfaction is 100% guaranteed!!! For less than 12 cents a day... how can you lose?

I note, as I write this final paragraph, that both gold and silver showed some activity starting at the usual time in late afternoon trading in Hong Kong... and this has continued into the London open. Volume earlier in the day in Far East trading was very light... particularly in silver. But now that prices are on the rise and London is up and running, it has picked up substantially. Silver shows 2,194 contracts traded and gold shows 12,126 contracts traded as of 4:30 a.m. in New York, which is 9:30 a.m. in London.

It could be a wild ride during Comex trading today, so hang on to your hats!

See you Saturday.