'Da Boyz' Are Back In Town!

Gold's high price of the day was set in early Tuesday morning trading in Hong Kong. The price then managed to stay within $5 of the $1,160 level for the next eight hours or so... but that ended the moment that the London a.m. gold fix was in at 10:30 a.m. in London [5:30 a.m. East Coast time]. From there, the price 'declined' around $20... with an interim low of around $1,145 at 8:30 a.m. in New York... 15 minutes after the Comex open. From that point, and in fits and starts, the gold price managed to get about $6 of that back... but the roof caved in a few minutes after lunchtime as a really serious not-for-profit seller arrived on the scene. This sell-off lasted for precisely four hours, as the selling stopped a few minutes after 3:00 p.m... well into electronic trading. The low price of the day [according to Kitco] was set at that point at $1,123.50 spot... and from there to the close, gold didn't do much.

Silver's high was also in early Hong Kong trading... but then silver declined about two bits until that magic time of 3:00 a.m. in New York, where it caught a bid going into the London a.m. gold fix... and after that, it was a carbon copy of gold's price path.

The shares were under pressure all day long and closed near their lows of the day.

Well, the bullion banks appear serious this time... but the only question is... how serious? As you are more than aware, dear reader, they were sitting on this mega-short position that had to be dealt with one way or another. As Ted Butler and I have said countless times, this short position was going to be resolved one of two ways... they were either going to get over run and the price would explode; or they would engineer a sell-off to cover as many short positions as they could. Now that we have the answer, the next two questions are; where's the bottom and how soon are we going to get there? I'll deal with that in my closing comments.

Well, the open interest numbers that were missing in Friday's CME report, turned up on Monday. Gold open interest showed a decline of 21,043 contracts. Volume was pretty heavy at 296,524 contracts... and total open interest declined to 508,730 contracts. Silver open interest was only down 497 contracts on decent volume of 47,302 contracts. Total open interest declined to 128,735 contracts. Ted Butler was underwhelmed, as based on the price action on Friday, he was expecting much larger declines in open interest than that... and on sober second thought, I have to agree with him.

Tuesday was another huge down day for both metals, and undoubtedly open interest in both metals took another big drop... but I would guess that a lot of this drop [just like Friday] won't be reported in the open interest numbers later this morning... and thus won't make Friday's Commitment of Traders report, as the cut-off for the report was at the close of trading yesterday. So this report, when it comes out, won't be telling the whole truth either. I strongly suspect that JPMorgan et al are withholding data.

As far as December deliveries go, the open interest for December delivery in both gold and silver declined once again. Gold o.i. fell 423 contracts to 4,833 contracts... and silver o.i. was down a smallish 81 contracts to 809 contracts. Not much chance of a delivery default here.

Since we're on the topic of December deliveries, the CME's Daily Delivery Notice yesterday showed that 227 gold and 23 silver contracts were scheduled for delivery tomorrow. So far in December 6,643 gold and 2,178 silver contracts have already been delivered... and what remains to be delivered is shrinking with each passing day. Of course, all that can change pretty quickly... so we'll just have to wait and see.

Over at the GLD ETF, a rather large amount of gold was withdrawn yesterday... 441,083 troy ounces. There were no changes reported in SLV yesterday. I'm sure that JPMorgan, the ringleader of this price decline, will get the price down to the point where the shares in SLV that the SLV managers have shorted because they don't have the silver, will get covered. So JPMorgan's rigged price decline in silver will serve two purposes... reduce their own short position on the Comex and the short position in the SLV... which they are the custodians. This is how things are done in the land of Mordor.

The U.S. Mint reported a minor addition to their silver eagle sales yesterday... adding another 40,000... bringing the monthly total up to 1,052,500. And the Comex-approved warehouses reported a decline of 327,940 ounces in their combined silver stocks.

I see, in a story filed from Frankfurt and posted over at fxstreet.com, "that "The European Central Banks' reserves of gold and gold receivables fell by €2 million to €238.15 billion in the week ended Dec. 4th, the European Central Bank said Tuesday." That's less than a tenth of tonne! As players in the international gold market at the moment, the European banks are sitting on the sidelines with their hands in their pockets. This bear raid in gold and silver has "Made in the U.S.A." stamped all over it.

I'm happy to say that I don't have a lot of stories today. But the first two I do have are gold related. The first is from Vietnam and the website vietnamnet.vn. With local premiums for gold back up to big numbers once again, it doesn't look like the Central Bank of Vietnam is bringing in enough gold to meet local demand... or is not bringing in any at all. Regardless, the gold smuggling business is booming. Now the Vietnamese "Prime Minister has ordered the State Bank of Vietnam to 'enhance administration' of the gold sector, particularly gold-trading centres." The story reads "State Bank told to monitor gold"... and the link is here.

The next story, courtesy of a GATA release, is from the hallowed halls of The Wall Street Journal. The longish title reads "That '70s Show: Gold Prices Surge... While Parallels Exist, New Factors Could Make High Prices More Sustainable Now and Limit Falls When They Come". Gold's new rise in price is compared and contrasted with that of the 1970s... and the link is here.

In a story out of London's Financial Times comes this headline... "Greece warned about credit rating risk"... and since that story was written, I understand that Greece has received a downgrade. I've posted quite a few stories about the problems in Greece over the last year or so. This is one of many countries in Europe that's circling the financial and monetary drain right now... and the link is here.

And lastly is this story from Al Jazeera out of China. China's economy is continuing to grow despite the global recession, helped by a massive government stimulus package of $585 billion. But doubts remain whether such strong growth can be sustained by public spending alone. Al Jazeera's Melissa Chan reports from Inner Mongolia, where a whole town built with government money is standing empty. This 4:21 long video is definitely worth watching... and I thank Australian reader Wesley Legrand for bringing it to my attention... and the link is here.

Here's the 1-year gold chart. In the last four trading days, gold has been smacked for $100... and the 50-day moving average is still about $35 below yesterday's close. Note the RSI trace, it's plunging... already at 46.18. The U.S. bullion banks seem to be in a real hurry to get this clean-out over with as quickly as possible, because if they keep up this pace of long liquidation/short covering, it could all be over in just a few more days. One wonders why they're in such a rush. Could it have anything to do with the CFTC's new position limits that they're supposed to announce this month? We'll find out soon enough.

The one-year silver chart looks similar... but yesterday's close was slightly below silver's 50-day moving average, so if this 'correction' continues unabated, we'll see massive liquidation by the long holders in silver starting almost right away. The silver price has only been hit for $2 since its high four trading days ago... and the RSI is down to 43.15 already. With gold down $100, both Ted and I are really surprised that silver hasn't been hit harder.

As I mentioned earlier, this record high short position held by the U.S. bullion banks has to be resolved... and it remains to be seen just how many longs they can force to liquidate... which, of course, will show up as a decline in price. If they intend on going the "full monty" it could get interesting. But then, again, maybe they won't... or can't.

The gold and silver charts are starting to look similar to the DJI chart... which isn't the healthiest looking graph I've seen. I wonder if they're going to let the Dow go as well? I just hope that this isn't going to be a repeat of July 2008. Time will tell... and not too much time, either.

I note in Far East trading today that silver hit a new low price for this move, but has rebounded a little. Gold has been hovering around $1,130 through all of Far East trading as well, and isn't doing much in early trading in London. Volume in gold is already an enormous 47,222 contracts as 5:20 a.m. Eastern time... and silver's volume is a hefty 6,056 contracts... but almost insignificant compared to gold.

New York trading in the precious metals today will certainly be interesting.

See you on Thursday.