Are 'Da Boyz' Back in Town Again?

Gold had fallen about $5 by 11:00 a.m. in Hong Kong Yesterday morning... but gained it all back again [plus a few dollars more] by 8:00 a.m. in New York... which turned out to be the high yesterday at around $1,108 spot. Then the U.S. bullion banks swung into action at the Comex open... and that, as they say, was that. In the next three and a half hours, gold fell about $11. That bout of selling ended at 11:30 a.m... and the price slid another couple of bucks into the close of electronic trading at 5:15 p.m. New York time. The gold price closed virtually on its low of the day... which was $1,095.20.

Silver's path was similar... but it got a much rougher ride in New York trading than did gold. It's high of the day was also at 8:00 a.m. yesterday morning... around $17.50 spot. Then, for five and a half hours, the silver price got bashed. The selling mercifully stopped at the close of Comex trading at 1:30 p.m. in the New York afternoon. This turned out to be its low price of the day, which was $17.03 spot... and from there was comatose into the New York close.

From their New York highs to their New York lows, gold had $12 shaved off its price... and silver about 47 cents.

Needless to say, the U.S. dollar had it's low at 8:00 a.m. yesterday morning... almost to the minute... and at gold and silver's exact highs of the day. But both metals got hammered to the downside well before the dollar showed signs of blasting off to the upside... so to blame the precious metals 'fall' on a dollar 'rise' is not exactly truthful. The whole thing looked staged to me... as the guy with the 'sell gold and silver' button pushed it before the other guy was ready to push the 'buy dollar' button.

Despite the drubbing both metals took, the shares acted rather well... all things considered. Both the XAU and HUI were down less than a percent.

Despite the decline in gold and silver prices on Monday, the open interest in both metals showed increases when the CME published their final o.i. numbers late yesterday morning. Gold o.i. rose 2,735 contracts on light holiday volume of 79,420 contracts. Silver open interest rose 1,853 contracts on equally light volume of 15,455 contracts.

The cut-off for the next Commitment of Traders report was at the close of trading yesterday... so whatever is reported by the CME this morning as far as open interest changes for Tuesday's price action, will show up in the next COT report, which will most likely be on Monday, January 4th.

The CME delivery report showed that 82 gold and 15 silver contracts are up for delivery on December 31st. I had stated yesterday that today [Wednesday] was the last day of delivery into the December contract... but this latest CME report shows that I was mistaken. Total deliveries for December were 9,963 gold and 2,748 silver contracts. All of those calling for a December delivery default in one or both metals were wrong again for the umpteenth month in a row. Maybe they'll stop doing this now, but I doubt it.

Much to my absolute amazement, the GLD added some more gold to its alleged inventories yesterday. It wasn't a lot, but the fact that they reported an increase in the face of declining prices was a big surprise. They reported adding 29,399 troy ounces. The SLV reported no changes. The U.S. Mint also had an update. They reported selling another 234,500 silver eagles. It will be interesting to see if they have another big update during the next 36 hours... which is all the time they have left in the 2009 business world. The Comex-approved depositories reported receiving another 90,913 ounces of silver on Monday. Their final inventory report of 2009 will come next Monday, January 4th... as they always report activity a day late.

I note that shortsqueeze.com has updated the short positions held in both the GLD and SLV ETFs. These are shares that are owned by two different owners... both are assuming that the equivalent amount of precious metals is backing their respective holdings. This is, of course, patently false. At the moment, the number of GLD shares held short is 17.1 million [1.71 million ounces]... down 21.2% from the last report. In SLV, the short position increased by 11.7% to 9.87 million shares [9.87 million ounces of silver]. You can check it out for yourself, as the link is here.

In a Reuters story yesterday, I see that the European Central Bank weekly statement indicated that there was no change in "gold and gold receivables". And as I've pointed out many times this year, dear reader, it's not the central banks of Europe that are selling gold into this market. This market management exercise in the precious metals is... as it has always been... a "Made in the USA" operation.

Today's first story is courtesy of reader Donna Badach. Just when you thought that stealing metal for its scrap value had gone the way of the Dodo bird... up comes this story from The Sacramento Bee. The title says it all... "Copper heist makes for messy day on Sacramento light rail"... and the link is here.

The next piece is a silver story... which is also courtesy of Florida reader Donna Badach. I consider it a must read. The headline states "Silver Investors Ordered to Keep Gripes Off Web". A sentence from the second paragraph states... "It concerns Monex, the controversial Newport Beach precious-metals dealer with a long history of unhappy customers, regulatory run-ins and, if you believe a pending Internal Revenue Service lawsuit, fraudulent tax avoidance to the tune of $378 million." I asked Ted Butler what he thought of all this... and his answer was shocking, and I'll just leave it at that. The link is here.

A number of months back you may remember that the Chinese government mentioned offhand that it would back state-owned companies in any legal action against foreign banks that sold them derivatives contracts that had gone sideways. Well, here's the first case. "A small Chinese power generator on Tuesday rejected demands from a Goldman Sachs unit to pay for nearly $80 million lost on two oil hedging contracts, part of a long-running dispute over how China deals with derivatives losses." This could get interesting... and I suggest you take the time to read this short piece. The link to the Reuters story is here.

The next story [from cnbc.com] has to do with the continuing horrific losses that credit card companies are taking as they write down uncollectable debt. "Credit card charge-offs rose by about one-half percentage point in November to 10.56%, and is likely to continue to rise to a peak of between 12-13% in mid-2010, Moody's said in a statement." [The credit card companies are dreaming in Technicolor if they think the loses will stop at those levels - Ed] It's a short read... and the link is here.

This story is courtesy of yesterday's King Report and is from London's Financial Times newspaper. This is one of your longish [less than 10 minutes] read of the day. At the top of the article it says it was written by Niall Ferguson... but at the bottom it says it was written by Laurence A. Tisch. However, it matters not, because it's well worth your time regardless. The essay is entitled "The decade the world tilted east"... and the link is here.

And lastly is this must read "Conversations With Casey" interview... "An ongoing dialogue on the passing parade with Doug Casey, Chairman of Casey Research". Louis James, editor of Casey Research's International Speculator provides the questions... and the link is here.

Something smells good to eat... at least this moose thinks so!

Well, 'da boyz' certainly showed up in New York yesterday. Don't forget that the U.S. Treasury has got $118 billion worth of paper to 'sell' this week, and this could be one of the reason's why both precious metals are getting such a rough ride. There's also the possibility [which Ted and I discussed yesterday... and most days as a matter of fact] is that the U.S. bullion banks are finally going to get serious about these concentrated short positions they have on the Comex.

I note that both silver and gold tried to rally the moment that the precious metals market opened in the Far East earlier today, but got sold off shortly after that attempt. Plus I see that the gold price spiked down at, or shortly before, the London open this morning. This was either a not-for-profit seller... or someone was putting on a short position. Volume this morning, as I file this report at 5:15 a.m. Eastern time, shows a pretty decent 20,676 gold and 2,933 silver contracts already traded so far.

The CME has just published its preliminary volume numbers for yesterday's trading. They show gold volume of about 104,000 contracts... and silver at just under 20,000 contracts. I'm certainly interested in the changes in open interest for both metals... and that will be posted later this morning. I'm not expecting a huge drop in either metal, because no major moving averages have been broken to the downside... and the prices haven't fallen to new lows [yet] for this move. Once either [or both] of these events occur, then we'll see much more serious spec long liquidation [hopefully, because we haven't seen it yet!]... and covering of short positions by JPMorgan et al. But can they... or will they? That question, and that sword, are still hanging there.

It could be another interesting day in New York today.

Tomorrow morning's column will be my last for the year... and I'll see you then.