Gold: The Commodity of the Year

Gold rose a bit during Far East trading on Monday... with the peak price of the day [around $1,114 spot] coming shortly after 9:00 a.m. in London. From there the price didn't do much until the Comex opened in New York where a not-for-profit seller peeled about $12 off the price in short order. The low of the day was around 10:30 a.m. in New York when the spot price touched $1,100.30. From that low, the price gained back about $6 before electronic trading closed in New York at 5:15 p.m. yesterday afternoon.

Silver peaked at 11:00 a.m. in Hong Kong trading around $17.65... and it was all downhill from there. Silver made several valiant attempts to rally during New York trading, but there was always a not-for-profit seller there to make sure that nothing got out of hand. Silver's low of the day [$17.40 spot] was around 12:45 p.m. during the New York lunch hour. From there, its price recovered just a bit before the market closed.

The HUI closed with a small loss... and the U.S. dollar action [such as it was] was an irrelevant factor in yesterday's gold action.

Volume on Monday wasn't much... although it was heavier than on December 24th... which isn't saying a lot. Monday's preliminary volume data from the CME shows that a hair over 79,000 gold contracts and 15,400 silver contracts traded. Like Thursday, I wouldn't read much into these price movements. There was obviously some price management going on, but in such thin trading it didn't mean a lot.

The open interest numbers that were provided yesterday for Thursdays trading activity, showed that gold o.i. fell 7,343 contracts. Was the New York rally partly short covering? Volume was a very light 67,369 contracts. Gold's total open interest is now sitting at 495,276 contracts. Silver open interest went in the other direction... up a very small 150 contracts. Volume was an insignificant 9,256 contracts, but total silver o.i. is still a whopping 122,448 contracts.

Well, the data from yesterday's Commitment of Traders data was mixed. In silver, the bullion banks only improved their net short position by a very small 748 contracts. The net short position held by these banks is still a monstrous 285.8 million ounces... the vast majority of this is held by JPMorgan. That's the just the net position... as the '4 or less' traders are short 58,823 contracts [294.1 million ounces]... and the '8 or less' traders [which includes the '4 or less'] are short 68,729 contracts... which is 343.6 million ounces. Put another way... if you take out the market-neutral spread trades... the '8 or less' bullion banks in the Commercial category are short 75% of the entire Comex silver market. If you have any concerns about this... and you should... please contact CFTC Chairman Gary Gensler at Ggensler@cftc.gov and ask him when he's going to do something about it... and gold, too!

In gold, the fall in open interest was a more substantial 18,126 contracts. The bullion bank net short position is now down to 28.6 million ounces... which is still up there in nosebleed territory, despite the fact that gold has been below its 50-day moving average for a number of days already. A back-of-the-envelope calculation shows that the '8 or less' traders are short well north of 60% of the entire Comex gold market. Any questions? The link to yesterday's COT report is here.

So, despite this big sell-off we've had in both gold and silver in the last three weeks, the bullion banks still hold these grotesque short positions like the sword of Damocles over the head of the market. And you wonder why both Ted Butler and myself worry about it. We have good reason. But maybe it doesn't mean anything anymore, as the bullion banks can never cover all these short positions...ever. But the sword still hangs there nevertheless.

The CME Daily Delivery Notice showed that 263 gold and 25 silver contracts were put up for delivery on Wednesday. Wednesday, December 30th, is the last delivery day into the December contract. There were no reported changes in GLD or SLV. However, over at the Zürcher Kantonalbank in Switzerland, they added a very small 8,973 ounces of gold and 198,821 ounces of silver to their precious metal ETFs last week. I thank Carl Loeb for those numbers. There was no report from the U.S. Mint either... and the Comex-approved warehouses reported that an additional 353,485 ounces of silver were added to their inventory on December 24th.

I don't have a lot of stories today... as I ran most of them yesterday. I have three in total... the first two are gold related.

In a piece that was posted over at businessinsider.com... the title reads "Jim Rogers Is "Flabbergasted" By Roubini's Wrongheaded Call On The Gold Bubble". This interview is definitely worth reading. I thank New York reader Elliott Grayson for sending it along... and the link is here.

The second gold-related story is from The Telegraph in London. It's a very short piece [which includes a wonderful photo] headlined "Gold: the commodity of the year". I thank Australian reader Wesley Legrand for sending it along... and the link is here.

Today's last story is from the December 16th issue of the Houston Chronicle. It's a piece about Congressman Ron Paul. "Ron Paul has been brought to prominence by his long-standing opposition to the nation's monetary system and the Federal Reserve Board that prints money and controls its supply." The headline reads "Paul goes from ridicule to respect"... and I thank Florida reader Donna Badach for bringing it to my attention... and the link is here.

It was pretty quiet in the precious metals market yesterday. As I said earlier, volumes have been very light the last couple of trading days. Nothing exciting happened in the Far East earlier today... and now that London is open for business... there doesn't appear to be too many exciting things happening there, either. Judging by the volume at 4:26 a.m. Eastern time [14,275 contracts in February gold... and 1,617 contracts in March silver] there isn't going to be a lot of trading in the precious metals market for the rest of the week. But once all the traders are back from holidays next Monday, I'm sure the gold and silver markets will show some 'direction'... one way or another.

I hope your Tuesday goes well... and I'll see you here tomorrow.