The Gold Cupboard is Bare at the U.S. Mint Once Again

The gold open in the Far East on Monday morning was not much of a surprise, as it was under pressure from the open... and down around $8 by 4:00 p.m. in afternoon trading in Hong Kong... 3:00 a.m. Eastern. Then, as has happened countless times in the past, a not-for-profit seller showed up at that time and shaved another $20 off the price, to it's low of the day somewhere around $1,135 spot. From there, the gold price recovered to slightly over $1,140... and sat there basically unchanged until minutes after 11:30 a.m. in New York. From there, a substantial rally got underway that lasted until the moment that floor trading in New York ended... and that was its high of the day. Kitco reports that the high was $1,165.80 spot.

Silver, as everyone would say, was more 'volatile'. It suffered more price indignities that gold, as per usual... and it's low price of the day was just before the big rally got underway during Comex trading just after 11:30 a.m. From its high of $18.47 spot at its close on Friday, silver 'fell' to $17.88 spot [the graph shows lower] at that point... 59 cents from top to bottom. However, the subsequent rally cut those loses by quite a bit... and silver had its high of the day... which, like gold... occurred at the end of Comex trading in New York.

I must admit that I was surprised that the bullion banks didn't press their advantage yesterday... and the late-morning rally in both metals was even more of a surprise. Maybe it falls into the category of "Can they... or, will they? Maybe they're just keeping their powder dry for some other time [like today, maybe?]... but, I can't imagine them waiting, as they primed the pumped so well when they hit the precious metals on the jobs numbers release on Friday morning. The bullion banks are painted into the smallest of corners right now... and neither Ted Butler nor myself can figure out how big a bang there's going to be when they finally blow themselves up... or get bailed out. Right now I'm more concerned about the depth and length of this bullion bank-orchestrated sell-off than anything else... but also sensitive to the idea that they may have done all they're going to [or can] do. So we wait.

The shares weren't amused either... but, like Friday, they didn't close on their lows. And, as I said then... that, in and of itself, is encouraging.

Well, to add to Friday's price action, are the changes in open interest for that day. With gold down approximately $50... gold o.i. was down the magnificent sum of 594 contracts! Neither Ted nor I can make hide nor hair of this. It's one of two things... either the numbers are flat out wrong [not all reported... or worse], or there was massive shorting going on at the same time as longs were being pitched. True, no major moving averages were violated to the down-side on Friday, but o.i. down only 594 contracts on such a big price drop? It strains credulity. Let's see what's reported for Monday's open interest later this morning. As I mentioned on Saturday, volume on Friday was gargantuan... just a hair under 400,000 contracts. Of course, total open interest was basically unchanged.

Silver's open interest was far more believable. O.i. was down 1,616 contracts on volume of 51,961 contracts. Total open interest is now down to 129,232 contracts.

There were other big changes in the CME's report yesterday... and that was the open interest for December delivery. The CME's preliminary numbers that I reported in my Saturday column were not even close to being correct when the final numbers were put up. In gold, instead of open interest being down 1,619 contract... December o.i. fell 3,727 contracts to just 5,256 contracts left open for delivery. In silver, instead of the 492 contracts I reported, December open interest fell 669 contracts... leaving only 890 silver contracts left open for delivery this month. Based on this new data, the likelihood of a December delivery squeeze in either metal is looking more doubtful than ever.

The CME Delivery Report went up on their website around midnight last night... and it showed that another 944 gold and 74 silver contracts are slated for delivery tomorrow. For the first time in a while, there was nothing to report from either the GLD or SLV ETFs. Over at the Zürcher Kantonalbank in Switzerland, their gold ETF showed its second weekly decline in a row... this time down 37,677 ounces. But [and also for the second week in a row] their silver ETF showed another hefty increase... as another 683,566 ounces was added. And, as usual, I thank Carl Loeb for those numbers.

As the headline on my commentary states, the U.S. Mint is no longer taking orders for just about every gold bullion coin that they produce. However, despite that, they did have an update yesterday... but it was all in silver eagles. As I stated before, when they report silver eagles sales in December, they do it by the million ounce chunk. Yesterday they reported that 1,012,500 silver eagles had been sold in December so far. Unless they run out of blanks, or silver to produce those blanks, their December sales should be well north of 3 million pieces... and their biggest month of the year by far. There's a story about all of this posted over at mineweb.com headlined "U.S. Mint now suspends all one ounce gold coin sales due to shortage of physical gold!"... and the link is here.

The Comex-approved warehouses did not post a report on their website yesterday.

In the 'trivia' category today, all this 'Climategate' stuff has had some results. I see that the former vice president and Nobel Peace Prize winner, Al Gore, has canceled a lecture he was supposed to deliver to an audience of 3,000 people in Copenhagen on December 16th. It was said that he cancelled because of "unforeseen changes in his schedule." I would bet that it would have something to do with global warming being exposed for the fraud that it is. There would be a lot of reporters with a lot of embarrassing questions... as the event was being hosted by the Berlingske Tidende newspaper group. I thank Roy Stephens for bringing this little gem to my attention.

Well, it didn't take the main-stream press long to come out with a negative slant on gold. True, there's a lot of bullish material in this report as well, but the headline certainly doesn't indicate that. It reads "Gold Can't Beat Checking Accounts 30 Years After Peak"... and the link is here.

Here's another bearish-type story... but I'm not disagreeing too much with what's in it. Most of the fund managers said that some sort of correction was due... and we got one. But it's only temporary, and without doubt, we'll close 2010 higher [probably much higher] than we are today. They don't call it a 'wall of worry' for no reason. The story, headlined "Funds grow uneasy as gold glitters", is from London's Financial Times... and the link is here.

In this next story that appeared in Bloomberg [and was filed from Singapore early on Tuesday morning], a spokesman for the Bank of Korea disparages gold. He certainly doesn't sound very convincing... almost laughable, as a matter of fact... like a certain gold commentator whose name I will not utter here. Here's the link.

A couple of stories from James Turk over the weekend. The first one in my in-box is entitled "Conflicting Signals for Mining Stocks from Two Important Indicators". The story is a must read... and the link is here. The two graphs included are terrific.

The second piece is entitled "Another Bounce in the Dollar". Turk puts last Friday's U.S. dollar rally in perspective, suggesting that the dollar's increasing volatility makes it like a spinning top nearing the point of tipping over, and notes that the euro is falling against gold almost as fast as the dollar is. There are two more excellent graphs in this commentary as well... and the link is here.

And lastly is another gold-related story... one with a more bullish slant. It's written by Peter Brimelow over at marketwatch.com... and is entitled "Yellow metals' boosters see no problem with recent correction... Gold bugs cite India, silver, miners as causes for hope". It's certainly worth the read... and won't take up more than a couple of minutes of your time... and the link is here.

Below is a photo of an outdoor Christmas 'decoration' that ran afoul of the law for obvious reasons. After two days, the local constabulary politely asked him to remove it. It was a heck of an idea, though... and I bet it was fun to watch while it lasted!

Socialism won't work... except in Heaven, where they don't need it... and in Hell, where they already have it. - Stephen Leacock

So... now what? Don't know. To steal Ted Butler's line... "I'm not a prophet". Here's a look at the 3-year Dow chart. The DJI is showing all the technical signs of a classic secondary top. The graph in general... and the RSI trace in particular... are indicating that a top of some sort is in. It will be interesting to see if the Plunge Protection Team can save it his time... as this bear market rally that began back in early March, is starting to look a little long in the tooth to me.

Then there's the little matter of gold's open interest on Friday. I'm at a complete loss to explain it. The whole thing stinks to high heaven... but I'm not about to point fingers just yet.

Then there's the dollar. It just broke through its 50-day moving average to the upside... but just barely. Which way it will it go? If it doesn't rise [by natural forces... or otherwise] it doesn't have far to fall to take out the 2008 all-time lows.

Then there's the little matter of the grotesque Comex short positions in silver and gold. CFTC chairman Gary Gensler has been all over media talking about the need for realistic and enforceable position limits on the Comex... including limits for 'the metals'. When is that coming? Will it be effective, or will Gensler wimp out? He's talked the talk... and now it's time to see if he's going to walk the walk.

But as far as I'm concerned, any sell-off in the precious metals such as the one we're in now; is, in my opinion, a buying opportunity. And as I've said before [and recently at that] this bull market in precious metals has got a long, long way to run before it breaths its last.

See you on Wednesday.