Gold Bull Has Many Years, and Thousands of Dollars to Go

Unknown to me at the time, I filed my commentary yesterday morning right at the low for Wednesday's gold price... which occurred at the London a.m. gold fix at 10:30 a.m. local time... 5:30 a.m. in New York. From that point, gold rallied about $15 to its absolute Wednesday high of $1,096.40 spot... which occurred shortly after 12:00 p.m. in New York. From there, gold got sold off into the New York close, but still up about $4 from Tuesday's close of $1,083.20.

Silver's path was similar, except it began to rally about two hours after the London a.m. gold fix... which turned out to be about 30 minutes after the London silver fix... which is noon local time. From there, the price rose a bit over 30 cents, with the high price of the day [$17.23 spot] occurring about the same time as gold's... during the New York lunch hour.

Volume in both metals Wednesday was extremely light... at least compared to what we've been seeing over the last six months or so. The preliminary CME volume numbers for yesterday show that gold volume traded was 111,000 contracts... and silver a bit under 19,000 contracts.

The precious metals shares were almost "irrationally exuberant". Although not closing on its high, the HUI was up 3.22%... which is quite a bit... considering that gold was up less that four bucks. Are the shares anticipating a bottom?

Open interest changes for both gold and silver on Tuesday finally went in the right direction... down. However, it didn't fall by a lot in either metal. Gold o.i. fell 3,196 contracts on volume of 200,000 contracts. Silver o.i. fell 1,407 contracts on volume of just under 34,000 contracts. Total open interest in gold is 499,233 contracts... and in silver it's 122,294 contracts.

Since gold's December 3rd peak of $1,218... the price has fallen abut 11%... but open interest is only down about 6%. This unprecedented [apparent] lack of liquidation on such a huge price drop is the dichotomy that both Ted Butler and myself are at our wits' end trying to figure out... and, as of yesterday, we still don't have a clue. We're both hoping that Monday's Commitment of Traders report will shed some light on the situation.

The CME's Daily Delivery Notice yesterday showed that 124 gold and 16 silver contracts were up for delivery on Monday, December 28th. So far in December... 9,533 gold and 2,683 silver contracts have been delivered. Last delivery day into the December contract is on Wednesday... and first notice day for the January contract is Thursday, December 31st. January is not a big delivery month for either metal... so the daily delivery notices won't be worth following.

There were no changes reported in either the GLD or SLV ETFs yesterday. The U.S. Mint reported that another 556,000 silver eagles were sold... bringing the month-to-date total up to 2,406,000. Year-to-date silver eagle sales are at 28,399,000... and that, dear reader, is a lot!

Since this is my last report until next Tuesday morning [although I may have one on Monday if the precious metals markets show some shocking price movements in New York trading today]... I'm going to 'load the boat' with some great reading material.

The first story is courtesy of yesterday's King Report. YRC Worldwide Inc... the biggest U.S. trucking company... has less than two weeks to persuade bondholders to accept a debt exchange and prevent a bankruptcy filing. If that happens, its employees' union says it may force the company to liquidate. The headline reads "YRC Has Until Year End to Corral Bondholders, Avert Bankruptcy"... and the link is here.

The next story is from The Telegraph out of London. It's an Ambrose Evans-Pritchard piece with the headline "Fitch warns that Britain and France risk losing their AAA rating". As far as I'm concerned, both countries [including a whole raft of others] should have a 'junk' status rating already... including the U.S.A. It's a short read... and the link is here.

This next piece is the 'big read' of the day. It's an essay posted at the German website heise.de bearing the title "In Hungary the Financial Crisis has picked up a Second Wind". Hungary is one of the former Soviet Union's satellite countries... but is now a recent member of the European Union. It, like many former Soviet Bloc countries, finds its economy in ruins... and on the brink of total financial and economic collapse. This story delves deeply into how the country got into this state of affairs... and how its problems mirror what's going on in the vast majority of these former "Iron Curtain" countries. There's almost too much information here... but I urge you, dear reader, to persevere regardless... and the link is here.

The next story is another offering from James Turk... and it's posted over at his fgmr.com website. The piece is entitled "Hyperinflation Watch"... and it's certainly worth your time... and the link is here.

Today's next story is gold-related... and comes from The Wall Street Journal. The headline reads "Passport Capital's Experiment: Owning Physical Gold". "Passport, headed by John Burbank, wanted to find out how easy it would be to buy physical gold, rather than futures contracts or gold exchange-traded funds. The firm was also interested in testing conspiracy theories about the availability of the precious metal." The story is contained in a GATA release... and the link is here.

This next story is also gold-related. It comes from Sprott Asset Management's chief investment strategist, John Embry... who explains in detail in the new issue of Investor's Digest of Canada why gold is not in a bubble, why today's gold price suppression by central banks is many times greater than it was in the 1970s, and how declining production has made gold a fantastic supply/demand imbalance investment. Embry's commentary is headlined "Gold Bull Has Many Years, Thousands of Dollars to Go," and you can find it linked here.

And lastly comes December's monthly Markets at a Glance commentary from Sprott Asset Management's Eric Sprott and David Franklin. The title pretty much says it all... and reads "Is it all just a Ponzi scheme?" In a word, the answer is... YES!. This is, of course, a must read. I thank Australian reader Wesley Legrand for bringing it to my attention... and Russian reader Alexander Lvov for providing the link from zerohedge.com... and that link is here.

What is Christmas? It is tenderness for the past, courage for the present, hope for the future. It is a fervent wish that every cup may overflow with blessings rich and eternal, and that every path may lead to peace. - A. M. Pharo

I thought I'd throw a musical selection in this column, since I won't have a weekend commentary. The 13-year old boy who sings this piece is now a millionaire... thanks to Simon Cowell of Britain's Got Talent. It's a heartwarming story from beginning to end... and there was hardly a dry eye in the house when he was done. His CD is in my wife's Christmas stocking... and the link is here.

One thing that can be said about December's gold and silver markets is that they're not boring! There's no way of telling whether a bottom is in or not. At the moment, it all looks terrific... but I must admit that I'm always on the lookout for "in your ear!"

I note that Far East trading this Thursday morning has been interesting to say the least... and this price activity has extended into early trading in London. Volume in gold is already a very respectable 22,499 contracts in the front month, which is February. In silver, as always, the volume is more subdued... and is currently sitting at 2,413 contracts in its front month, which is March.

Unless there are some big price surprises, I'm not expecting huge volume during the rest of the trading day in either London or New York. I'm sure that all markets will close early in both countries... and it wouldn't take a lot of buying or selling pressure to push the price in either direction. But right now [6:00 a.m. New York time] the price action in both gold and silver is very positive indeed.

I wish, dear reader, the best of the holiday season to you and yours... and I'll see you on Tuesday morning... or possibly Monday morning, if New York price action warrants it.