Russia's Central Bank Adds Another 200,000 Ounces of Gold in November

The gold price didn't do much of anything on Friday. From it's open at $1,097.10 spot at the beginning of Far East trading, it took four hours to rise $10... and then sat around $1,107 until the London p.m. gold fix at 3:00 p.m. local time... 10:00 a.m. in New York. From there, gold spent the next hour falling to its low of the day, which [according to Kitco] was $1,095.70 spot.

The low of the day happened to coincide with the London close at 4:00 p.m. local time... 11:00 a.m. on the East Coast. From there, gold tacked on about $20... and then traded sideways for the New York session.

Silver opened at $17.13 at the beginning of Far East trading... and took its sweet time getting to $17.30. From there, it spent the rest of Friday trying to break through that price level, but got sold off every time the price rose above it. It mainly followed gold's lead... with the New York high [$17.38 spot] at the London p.m. gold fix... and it's low [$17.05] just after the London close. From there, the price rose back to just under $17.30... and basically stayed there until New York closed for the weekend.

The gold and silver prices pretty much followed what the U.S. dollar was doing yesterday... but the fact that the U.S. dollar had an intermediate top at precisely 9:00 a.m... and an intermediate low at precisely 10:00 a.m...which is the London p.m. fix... followed by the dollar high of the day at the London close at 11:00 a.m. New York time, is just too cute for words. Coincidence? Not bloody likely.

The HUI pretty much looks like the inverse of the US$ chart... and the price paths of both precious metals. It was great to see the rally in the last half-hour... which began at precisely 3:30 p.m. in New York... and the HUI came close to finishing on its high of the day.

After Thursday's big declines in gold and silver prices, I was expecting a rather large drop in open interest in both metals... and stated so in my Friday morning commentary. It stands to reason that the longs would liquidate and the shorts would cover... at least that's been the pattern. Well, dear reader, nothing like that even remotely happened. Open interest in gold rose 475 contracts! Silver open interest rose as well... 720 contracts. And if you're looking for an answer from me that makes any sense whatsoever, you aren't going to get it... unless there was massive shorting going on... which I doubt.

Ted Butler and I spent a long time talking about this... and neither of us could come up with a logical answer. We were both expecting big declines in open interest... 20,000+ contracts in gold and 2,500+ contracts in silver. This is what normally would occur when a sell-off of this magnitude happens. Ted and I both remember what happened two weeks prior when gold and silver got hit initially... the big o.i. drops we were expecting showed up a day late. Maybe this happened here as well... so I will reserve judgment until the Friday's open interest numbers are published on the CME website late on Monday morning.

Well, for sure I knew that the new Commitment of Traders report would show a big improvement... as I had mentioned that the bullion banks can hide the numbers one week, but couldn't hide them two weeks in a row... and yesterday's report would tell all. I was only partially correct about that. In silver, the bullion banks improved their net short position by 3,914 contracts... which is a bit under 20 million ounces... but they're still net short 289.5 million ounces of the stuff. And what's really amazing if the fact that '4 or less' traders are short 302.6 million ounces... which works out to 104.5% of the net short position. These '4 or less' traders are short 49.7% of the entire open interest in Comex silver! The lion's share of this position is held by JPMorgan.

It was the changes in gold's open interest that was unbelievable. As the gold price continued to decline, the report shows that the bullion banks short position continued to rise!. The bullion banks actually increased their net short position by 4,605 contracts during the last reporting week... and are now holding a net short position back over 30 million ounces... 30.4 million ounces to be exact. What the heck is going on???

I don't know. I haven't got a clue. This is unexpected and unprecedented. I didn't have a chance to talk to Ted about the COT report, because I had other fish to fry yesterday afternoon. His interview with Eric King of King World News has been burning a hole in my in-box for about an hour now [4:31 a.m. Eastern time]... but I haven't listened to it yet, because I wanted to write my comments independently of his, and not have them tainted by what he had to say. Without doubt this interview is a must listen... so stop right here and listen to what Ted has to say... because I'm going to do exactly the same myself. The link is here.

Well, I've heard it now, and I have nothing else to add.

The CME Delivery report yesterday shows that 144 gold and 175 silver contracts are up for delivery on Tuesday. The GLD ETF reported receiving another 196,015 ounces yesterday. As Ted mentioned in his interview, this is a bit of a surprise considering how badly the GLD has been sold down. I note that even after a $100 decline in price, GLD is almost back to the same amount of gold it held before the 'correction' began. There were no reported changes in SLV. The U.S. Mint didn't have a report either... and the Comex-approved warehouses reported that 177,212 ounces of silver were withdrawn on Thursday.

I note that The Central Bank of the Russian Federation updated their website a couple of days early this month. For November, they reported purchasing another 200,000 ounces of gold for their reserves, which now sits at 19.7 million troy ounces. The Russian Central Bank has also said that it would purchase an addition 32 tonnes [960,000 ounces] in December. This purchase won't show up on their website until around January 20th.

I have quite a number of stories today... and I'm sure glad it's the weekend, because a few of them are on the long side... starting with the first one. It's a Bloomberg piece that shows how the hallowed halls of Harvard fell on hard times last year... and was so strapped for cash that it had to ask Massachusetts for fast-track approval to borrow $2.5 billion. Almost $500 million was used within days to exit agreements known as interest-rate swaps that Harvard had entered to finance expansion when Lawrence Summers led the university back in 2004. This is a very interesting... but very long... piece. The headline reads "Harvard Swaps Are So Toxic Even Summers Won't Explain"... and I thank Craig McCarty for bringing this story to my attention... and the link is here.

The next story is courtesy of reader Joseph Weiler who sent me this piece out of the L.A. Times. It's all about real estate. I've known about the 'shadow' inventory of properties close to foreclosure or seized... but not yet for sale. I know there's lot of them and that this number has been growing. As a 27-year veteran of the residential real estate market in Edmonton, I'm very aware of how disastrous the U.S. real estate market is in both residential... and now commercial real estate. This story tells all. The headline reads "More home are poised to hit the market"... and the link is here.

The next story has an interesting twist. Normally you hear about coins being melted down for their precious metals content... but razor blades? It's just amazing to see how all currencies are being debased these days... even in India. The headline reads "Razors made out of Indian coins in Bangladesh". I thank reader Donna Badach for sending it along... and the link is here.

About ten days ago, I ran the latest essay on gold written by John Hathaway, Senior Managing Director & Portfolio Manager, Tocqueville Funds. Yesterday he was interviewed by Eric King over at King World News. This is a must listen as well... and the link is here.

And lastly is another big read. This is writer Matt Taibbi of Rolling Stone magazine latest commentary entitled "Obama's Big Sellout"... "The president has packed his economic team with Wall Street insiders intent on turning the bailout into an all-out giveaway." Needless to say, it's worth your time, and the link is here.

Since Christmas is right around the corner, this piece reflects the season. I've posted this work before, but it's so incredible, I thought it was worth another look... and listen. The recording dates from the very early 1980s. It's soprano Emma Kirkby singing "But who may abide the day of his coming" from Handel's Messiah. This version is definitive... and I won't live long enough to hear better. Christopher Hogwood conducts The Academy of Ancient Music... and the link is here.

So... now what? Don't know. Nothing I see out there in the gold and silver world... at least as defined by open interest... means anything anymore, at least not by past historical standards. Even Ted Butler doesn't know quite what to make of it... and if he doesn't know... then nobody knows. I hate to say it, but we're flying blind into the great unknown... and it's not a comfortable feeling. Anything can happen between now and year end... and it wouldn't surprise me in the slightest.

And... as the 'usual New York gold commentator' said yesterday... "It's too early to write off 2009 gold." Indeed it is... and that goes double for silver!

Enjoy the rest of your weekend and I'll see you here on Tuesday morning.