World Gold Council's New Chairman Seeks 'Lasting Prominence' For Gold

There haven't been too many days lately that fall into the "watching grass grow... or paint dry" category, but Thursday's trading action was pretty close... as price volatility has just about disappeared. Gold's high price for the day, if you wish to dignify it with that name, occurred early in Hong Kong trading at around $1,136 spot... with the low [$1,121 spot] occurring just before lunchtime in London. The only thing worth noting is that the closing gold price for the last three trading days in a row were within a few dollars of each other... regardless of high or low the price was during intra-day trading on each of those days. I wonder if the guys at JPMorgan who ride shotgun over the gold and silver markets, win some sort of prize for getting the closing price in such a tight grouping? It's the most obvious 'stand out' feature on the whole chart.

Silver's action during trading on Thursday was a little more interesting... but just barely. It's high price was set at the same time as gold's... early morning trading in Hong Kong... around $17.50 spot. Shortly after that, the price dropped into the $17.30-$17.45 range for the rest of Far East, London... and early New York trading. Starting around 9:40 a.m. in New York there was a minor sell-off to silver's low of the day [$17.11 spot] which occurred minutes before the close of Comex trading.... but once electronic trading took over, silver rallied about 15 cents and then flat-lined into the close of New York trading at 5:15 p.m.

The shares didn't do a lot either; which, considering the price action, should be no surprise. I continue to be impressed by the resilience of the shares in the face of this price decline, as it seems that buyers are just waiting to jump in the moment that gold and silver show the first signs that they want to head higher in price. Could this be the bottom already? Is the correction over? Don't know.

Volume wasn't very big in either metal yesterday... with an abnormally large part of that volume occurring before New York opened for the day. This activity is most likely the U.S. bullion banks intervening through Globex... which they can access 24 hours per day. Open interest numbers for Thursday shouldn't show much when the final numbers are posted at the CME website later this morning.

While I'm on the subject of open interest, here's what Wednesday's final numbers looked like for both precious metals. Gold open interest fell 3,795 contracts on pretty decent volume of 279,388 contracts. Total gold open interest is now down to 501,857 contracts. Silver o.i. declined another 1,523 contracts on 47,612 lots traded... with total open interest now down to 124,476 contracts... which [historically] is still a monstrous number.

The Commitment of Traders report [for positions held at the end of trading on Tuesday, December 8th... will be released by the CFTC this afternoon at 3:30 p.m. Eastern time today. I'll comment on what it has to say in my column tomorrow.

The CME's Delivery Notice yesterday stated that a fairly large 1,076 gold contracts were to be delivered on Monday. The big issuer was the Bank of Nova Scotia... and the big stoppers were JPMorgan and Goldman. In silver, only 7 contracts were slated for delivery on Monday. The link to the report is here.

Once again, there were no reported changes in either GLD or SLV yesterday. The U.S. Mint had another minor update in their silver eagle sales... this time by 61,500 to 1,114,000 for December so far. And over at the Comex-approved depositories, a smallish 89,791 troy ounces of silver were added to their collective inventories.

Talking about the GLD and SLV... Ted Butler mentioned to me yesterday that the new short interest numbers were up for both ETFs. Ted wasn't surprised that the short position on SLV had dropped by 33%... but was amazed that GLD's short position had jumped over 56% from the prior reporting period. Right now there are 8,833,300 shares of SLV sold short... and a whopping 21,697,500 GLD shares sold short. Of course, all these shares that are sold short [sold twice], have absolutely no metal backing them at all. The link to this info at shortsqueeze.com is here.

I thought I'd spend a minute or two on the 3-year gold chart which is shown below. You can see right away that, along with the price, both the RSI and MACD traces have taken a tumble as well... as they should. The only question now, is this the end of it or not? The bullion banks are certainly painted into a corner of their own making and, for the most part, are trapped with this grotesque short position in both metals that they can't get rid of... as the vast majority of traders want to be long this market. And who can blame them? That's why the bullion banks have turned out to be the shorts of last resort, as there are no free-market short buyers [at least not at current price levels] who are prepared to take that side of the trade. If the bullion banks weren't there to perform this non-free market function, the price of gold and silver would have exploded to the moon already... and that's the last thing that the U.S. government and banking system wants to see happen... and that's what CFTC chairman Gary Gensler is really up against with this position limits issue of his.

Thursday was another slow news day. Fortunately, all stories are gold related... and, in my opinion, the two longest reads are both worth spending some time on. However, both of today's big reads pale in comparison to the John Hathaway essay that I posted yesterday... and if you didn't take the time to read it then, I urge you to dig it out of the archives and give it the time it richly deserves. As I told John in an e-mail last night, it's the best essay on gold that's been posted on the Internet in the last five years... and that's saying a lot! To heck with the archives... the link is here... so, if you haven't read it, get started. It's also the sort of essay that you could re-read a couple of days later and it would still seem fresh. I plan on doing that myself.

I have four news items for you today.

The first is a piece that was posted at miningweekly.com yesterday. It's a story filed from Johannesburg and headlined "South Africa mining output down 8,5%, platinum drops 19,3%". Buried in the second paragraph is the fact that "gold production dropped by 5,8%, when compared with October 2008." The link to the entire story is here.

The next story refers to the title of today's column. The World Gold Council's new chairman, Ian Telfer, states... "I am taking on a great role at a time when gold has never been more relevant and important to so many people. It is a great privilege to be able to work with [the] WGC to deliver a new and lasting prominence for gold." He has other things to say as well, so I urge you to take one minute and read this WGC press release... and the pdf file is linked here.

The pseudonymous "FOFOA" -- Friend of Friend of Another -- posted a thoughtful treatise on his blog this week, arguing that gold is not in a bubble but rather is itself the anti-bubble of the financial markets, the place where everyone will end up [or wish they had] when the bubbles pop. His treatise cites GATA's work, is headlined "Gold: The Ultimate Un-Bubble," and the link is here.

And lastly, is this excellent piece posted over at David Tice's prudentbear.com website. It's written by author Martin Hutchinson... and this is the second piece in as many months that he's done regarding gold. It's entitled "Sliding Back Towards A Gold Standard"... and needless to say, it's very much worth your time. I thank reader Dr. Scott Diering for bringing it to my attention... and the link is here.

Well, I wouldn't hazard a guess as to what will happen in New York trading today. If gold went up $100, I'd have an easy explanation... and if it went down $100, I'd have an easy explanation for that, too. So, at the moment, this market is an easy call.

There's not much of anything happening in either gold or silver in Far East trading so far... but a smallish rally has begun in early morning trading in London. Gold's volume [as of 4:40 a.m. Eastern time] is sitting at 28,919 contracts... and silver's volume is way behind at 3,404 contracts. Today is Friday, and is a day that can be filled with price surprises in either direction... so, we wait.

I hope you have a great weekend... and I'll see you here on Tuesday morning.