Marc Faber Says 'Sky Will Be The Limit' for Rising Gold Price

Well, the wonderful gold price action that was evident at the London open as I put this report to bed around 6:00 a.m. Eastern time on Wednesday morning, was just about all the excitement there was. True, there was a brief spike to gold's high around the London p.m. fix, but that was it. Then, at lunchtime in New York, the price got sold off about $7... and from there, gold traded sideways until the close of electronic trading at 5:15 p.m. Gold closed up $2.80 from its Tuesday's closing price.

Silver's price path was virtually identical. It put in a double top, with one top in London and the other along with gold around the London p.m. gold fix... and I wouldn't read a thing into that. Silver closed up 14 cents on the day.

Gold's high price of the day [according to Kitco] was $1,153.90 spot... and silver's high checked in at $18.86. Although both metals finished in the plus column, the shares were underwhelmed... and got sold into negative territory the moment that the gold price came under pressure at noon in New York.

Open interest changes for Tuesday's trading [which should be in tomorrow's Commitment of Traders report, but might not make it] showed that gold o.i. rose 4,287 contracts on decent volume of 164,938 contracts. Total open interest is now up to 526,619 contracts. This is not a new high, but still pretty high nonetheless. In silver, open interest rose another 2,482 contracts to 141,146 total open interest. Volume was an absolutely stunning 73,914 contracts. [I've seen days when gold didn't trade that many contracts] This is another record... which is no surprise, as it was already heading for record territory going into the London open yesterday morning... a fact that I mentioned in my closing comments yesterday.

Yesterday was the cut-off for Friday's COT... and even though Tuesday's data should be in it, I wouldn't count on it. My guess is that we won't really get a clear picture of this options expiry cycle until the COT comes out on November 27th.

Wednesday's delivery notice from the CME showed nothing worth mentioning. But both GLD and SLV ETFs had some big additions yesterday. GLD added another 117,647 ounces and SLV added another huge chunk... this time it was 2,161,456 ounces. So far in November, the SLV has added 9.04 million ounces. That's a huge amount... but they probably have to add another 25+ million ounces minimum, just to get remotely close to where they have one ounce of silver backing every share. If the SLV is this far behind, one can only imagine how long it's going to take the Central Fund of Canada to get its 5.2 million ounce order delivered.

The U.S. Mint also had an update yesterday... but only in their mintings of gold eagles. They reported another 14,000 produced... which brings their monthly total to 74,500. I also have the production numbers for the 24K Gold American Buffalo... which the mint just started producing again in October. Since they started up that program again, they have minted 145,500 in the last six weeks.

And over at the Comex-approved depositories yesterday, they reported receiving 137,647 ounces of silver.

For those of you who have been following what the usual New York gold commentator has been saying for the last year or so, I regret to inform you that his commentary for Wednesday below, is the last such report that I will be able to publish. In telephone and e-mail communications with him over the last few days, I get the impression that he is going to establish his own pay site with his proprietary gold data. I must admit that this was not unexpected. In his e-mail to me late last night, he had the following comments... "Your service is better known than I expected in [East Coast] professional investment circles. Magic of Google, I suppose. I just cannot hope to make any kind of living out of "Gold Jottings" while you are posting it so quickly and for free."

Flattering words, for sure... as my readership has really taken off for the heavens since Casey Research was kind enough to give me my own space... but it's at a great loss to you, dear reader. It was a privilege to be able to post this quality of data on the world's gold markets that most North American readers don't have any inkling of. His insights, personal contacts and data sources are irreplaceable. I thank him on your behalf... and on my behalf... and I wish him well.

"India was a gold importer in the morning, but not in the afternoon. The stock market gave up initial gains to close down 0.3%."

"Rises during the Indian business day of $10 in world gold are never going to be welcomed by Indian importers or consumers. But in previous surges in world gold this decade, it was not uncommon to see local Indian prices lag by as much as $15. So far, the Indians cannot be counted out of the party."

"Reuters did produce a [Wednesday] afternoon Vietnam gold price. Local gold stood at a $20.92 discount to world gold of $1,139.84. The unofficial dong rate weakened to a new low, probably because of gold transactions."

"In a valuable piece, Standard Bank reports that its 'gold physical flow index' has swung positive despite the rise in the gold price."

"Three weeks ago, we reported on gold support in the physical market despite gold reaching new highs at that time…This morning, gold touched another high, at $1,148… Still we see gold upside, as support in the physical market remains intact. Should gold reach $1,150 in coming days, $1,200 may be in the cards."

"When gold breached $1,000 in early September, physical selling went neutral…"

"Buying momentum spiked sharply in Q4:09 and, although down from recent highs, we still see net physical buying. As a result, support remains intact. We believe buying momentum will remain positive for most of Q4:09 on high seasonal demand, and we estimate that Q4 seasonal demand is 3x higher than in Q3 [after accounting for price and currency effects]."

"We believe the current gold rally still has some legs irrespective of high investment demand."

"While the TOCOM public sold this morning, someone bought Japanese gold futures. On day session volume equal to 18,152 Comex, the public cut 1.235 tonnes from its long, but open interest rose 0.88 tonnes (284 Comex)."

"As Europe opened, gold surged to new US$ highs, and has started again as the NY stock market opened. Estimated volume at 9AM was a stunning 100,518 lots. [No kidding!!! - Ed] [Preliminary open interest data from the CME early this a.m. shows total volume of Wednesday was 222,500 contracts]

"The Gartman Letter, happily enjoying one of its most successful gold trades in years... net, four of the 9 "units" in the TGL model portfolio are gold types... recalls that... As liquidity dwindles next week because of the long US Thanksgiving holiday, and with gold moving ever closer to $1,200, we wonder how uncomfortable the holder of that short position feels?"

I have a lot of gold-related stories today. The first one I found posted over at Kitco... and is from the website businessday.co.za. The headline reads "South Africa third quarter gold production up 4.8% to 54,110.9kg". The article is 6 very short paragraphs and is worth a look... and the link is here.

The next story is from The Wall Street Journal and is headlined "U.S. Mint to Resume Selling Some Gold Coins". It appears that they are about to resume production of half, quarter and tenth ounce gold eagle bullion coins. The story normally requires a subscription, but it's posted in the clear here.

The next piece is a Bloomberg story posted out of London early this morning. The headline pretty much says it all... and reads "U.K. Royal Mint Quadruples Gold Coin Output in Third Quarter". The link to the story is here.

Yesterday I mentioned that Russia's Central Bank was going to purchase all the gold that the Russia's state repository, Gokhran, was prepared to sell in the open market last month. In a story that appeared in the Kahleej Times yesterday, the headline reads "Russia to sell 30 tonnes of gold to central bank"... so that makes it official... and the link to that story is here.

Here's a very important story that was posted at Bill Murphy's lemetropolecafe.com yesterday. It's a piece that appeared over at marketwatch.com. The headline reads "Paulson & Co. to launch gold fund". John Paulson is already up to his neck in the gold market... and now he's launching this vehicle... and seeding it with $250 million of his own money. The story is, of course, well worth the read... and the link is here.

GoldMoney founder and GATA consultant James Turk, visiting Zurich, where GoldMoney has a vault, was interviewed about gold for five minutes yesterday on CNBC Europe. Turk attributed gold's hastening ascent not to the weakness of the U.S. dollar but to a switch by investors out of "paper gold" and into real metal. This was a nice way of saying that a lot of people have sold and a lot of people have bought not gold but mere thoughts of gold... gold that maybe really isn't there, or anywhere, except in their heads, from which it may be hard to extract when it is most needed. The interview is well worth watching... and the link is here.

Here's another video clip courtesy of Australian reader, Wesley Legrand. It's a 14-minute Bloomberg/Hong Kong interview with Dr. Marc Faber... a guy whose opinion I have a lot of time for. The video headline says it all... "Faber Says 'Sky Will Be The Limit' for Rising Gold Price". It's certainly well worth your time... and the link is here.

Here's another piece that Wesley Legrand sent me yesterday. The story is ten days old, but still worth your while. It's posted at the Australian website moneymorning.com.au. As most of you are aware, England is in dire straits. Here's an Australian point of view on that. The headline reads "Britain and its Near Death Economy"... and the link is here.

And lastly, finally, is this piece from The Telegraph in London. It is, of course, by their international business editor, Ambrose Evans-Pritchard... and is a must read from one end to the other. The headline states... "Société Générale tells clients how to prepare for 'global collapse' ". The French bank has advised clients to be ready for a possible "global economic collapse" over the next two years, mapping a strategy of defensive investments to avoid wealth destruction. "Gold would go 'up, and up, and up' as the only safe haven from fiat paper money."... and the entire story [which isn't very long] is linked here.

The state is the most destructive institution human beings have ever devised -- a fire that, at best, can be controlled for only a short time before it o'erleaps its improvised confinements and spreads its flames far and wide. - Robert Higgs

As I noted yesterday... and as Dennis Gartman mentioned as well... there's a huge pile of December gold call options at the $1,200 strike price. The CME preliminary report for Wednesday's trading shows that there are still 28,157 call options at that price... down 1,696 from what was reported on Tuesday. But there are also 9,187 call options at $1,300... 12,319 at $1,400 and a huge 15,658 at $1,500... plus 2,892 at $1,700... 9,696 at $2,000... and 5,189 gold call options at $2,500. These are big numbers! Either somebody knows something... or there are a lot of traders out there that want to throw their money away, regardless of the price of the option when they bought it. And, as I said yesterday, all of this will be settled by the close of trading on Monday, November 23rd... either in or out of the money. The next three days of trading activity could prove interesting.

I see, as I write this last paragraph, that both gold and silver prices are under pressure. This started around the usual time in Hong Kong's afternoon trading session... about 3:30 p.m. local time over there. London is now open for trading as well... and gold open interest is already a chunky 33,700 contracts... and silver volume is about half of what it was yesterday at this time, around 5,700 contracts.

It's going to be another busy day when trading begins in New York.

See you on Friday.