Silver Analyst Ted Butler Says That JPMorgan's Silver Price Management Scheme Will End In 2010

Well, it was a very interesting day for the precious metals on Monday. As I mentioned in my commentary yesterday, it was only a matter of when 'da boyz' would show up. It appears that they capped a major breakout attempt at 11:00 a.m. in London... and again right after the Comex opened for business. The high of the day was shortly after 9:00 a.m. in New York, when the gold price spiked to $1,124.70 spot before it was capped for the day. Gold's low price [around $1,092 spot] was during Sydney trading very early Monday morning... which was about 7:00 p.m. on Sunday night in New York.

Here's the gold price action during New York trading. You can see that gold got sold off every time it tried to recover after reaching its high of the day. It's easy to spot the four times that gold got sold off hard every time the price attempted to break out to new highs.

Silver was a slightly different animal yesterday. Its low was early in Hong Kong trading... and from that point didn't do much of anything until the major rally began in both metals shortly before 4:00 p.m. in the late afternoon in Hong Kong. In an hour, the price was up about 20 cents... but sat on those gains until the Comex open... and then really got going. Silver's high price during Comex trading was shortly after 11:00 a.m. when it hit $17.57 spot. From that point, silver lost about 15 cents, but went on to close at its absolute high of the day which was $17.61 spot.

The precious metals stocks followed the precious metals prices like a shadow... with the absolute peak within 30 minutes of the opening of the equity markets... and then sliding a bit for the next six hours before rallying a tad into the close.

However, as wonderful as these rallies were, they did not go unopposed, so I expect that Monday's open interest numbers... if they're all reported by tomorrow morning... will show a pretty chunky rise in both metals when the CME puts them up on their website later this morning.

Open interest changes for December 31st were as follows. Gold o.i. fell 4,370 contracts on volume of only 73,987 contracts. Total gold o.i. is now down to 489,779... which Ted Butler says is the lowest it's been since late September. Silver o.i. went in the other direction... up 89 contracts on tiny volume of 12,598 contracts. Total silver o.i. is still a monstrous 124,057 contracts.

There weren't any big changes in the Commitment of Traders report that was issued yesterday. Total silver open interest actually increased, as the bullion banks went net short another 190 contracts. They now have a net short position of 57,350 contracts... 286.8 million ounces. The '4 or less' traders are short 58,561 contracts... so they [the lion's share being held by JPMorgan] are short 102% of the net short position... which translates into about 64% of the entire Comex silver market [all spreads removed]. The '8 or less traders' on the short side of the silver market are short roughly 75% of the entire Comex silver market... all spreads removed. The full-colour interactive COT silver graph is linked here.

In gold, open interest fell 6,723 contracts, which isn't a lot. The net short position in gold is still a whopping 278,942 contracts... or 27.9 million ounces. The '4 or less' bullion banks are short 21.0 million ounces of that... and the '8 or less' traders [which includes the '4 or less'] are short 26.6 million ounces... which is almost the entire net short position. The full-colour interactive COT gold graph is linked here.

The latest Bank Participation Report should be issued along with the next Commitment of Traders report this coming Friday.

The CME Delivery Report on Monday showed that 22 gold and 12 silver contracts are up for delivery tomorrow. The GLD ETF showed a decline of 156,783 troy ounces. There were no reported changes in the SLV ETF. Over at Switzerland's Zürcher Kantonalbank, their gold ETF reported no changes as of December 31st... but their silver ETF showed an increase of 189,592 ounces. I, as always, thank Carl Loeb for those numbers. The U.S. Mint had a report yesterday as well... the first for 2010. There was nothing reported sold in gold eagles, but they've chalked up 107,500 silver eagle sales for January already.
The Comex-approved depositories showed a very small decline in silver for their December 31st report... down 9,702 ounces. They finished out 2009 with a closing silver inventory of 112,436,308 troy ounces.

I received an interesting e-mail from reader Ivo Kristen in the Czech Republic yesterday. He sent me the web page showing China's expected production of gold and silver commemorative bullion coins. I would guess that a lot of it is destined for export... and the link is here.

As the headline to today's column states... Ted Butler has drawn his line in the sand and said that 2010 is the year that the silver price management scheme will be terminated... and one would assume that that applies to gold as well. In his last commentary of the year... dated 30 December 2009... and headlined "A Remarkable Year and Decade"... Ted Butler goes "all in" with the following statement: "In 2008 there was one new and important revelation -- the identity of the big COMEX silver and gold short. The identification of JPMorgan [as that entity] is important for a number of reasons. It confirms just how big the silver short problem is. JPMorgan is at the top of the food chain. There is no one else left to pass the short hot potato to, save the US Government itself [which, on a defacto basis, is probably the real short holder anyway]. To me, this is the best news possible, as it means this is the end of the line for the silver manipulation. This silver short position and manipulation stops here, with JPMorgan and/or the US Government. It gets transferred to no one else. It may mean the end of the COMEX as we know it, but it definitely means that the silver manipulation will soon end. Let me stick my neck out here and be more precise -- the silver manipulation, because we know so much more about it, will end in 2010. Make sure you are positioned for that by being as heavily invested in silver as possible." For Ted's complete year and decade-end review... and access to all his research... please click here.

About an hour after I sent in my column yesterday morning, the Bombay Bullion Association 'revised' their gold import numbers for 2009. From just over 200 tonnes, the number has been changed to 300-350 tonnes... and 2008 numbers were revised a bit higher as well. Does anybody over there know what the real number is? Stay tuned for the next revision. The Reuters story is very short. I thank Alexander Lvov for bringing it to my attention... and the link is here.

I have a couple of stories about the grand opening of Burj Dubai yesterday... the tallest building in the world. Both stories are totally different... and both are 'must reads'. The first [from france24.com] was sent to me by reader Roy Stephens and contains an excellent video imbedded in it. The story is headlined "Dubai inaugurates world's tallest building amid financial fears"... and the link is here.

The second story came from reader Joseph Weiler in Santa Barbara, California... and this is the story that I prefer. It's longer... but really cuts to the chase. It's a piece that was in the January 1st edition of the L.A. Times. The headline reads "The Burj Dubai and architecture's vacant stare"... and the link is here. Read it!

The next item [courtesy of Craig McCarty] is a very important story about money-market funds that's posted over at zerohedge.com. "The primary purpose of money markets is to provide virtually instantaneous access to a portfolio of practically risk-free investment alternatives: a typical investor in a money market seeks minute investment risk, no volatility, and instantaneous liquidity, or redeemability. These are the three pillars upon which the entire $3.3 trillion money market industry is based."

"Yet new regulations proposed by the administration, and specifically by the ever-incompetent Securities and Exchange Commission, seek to pull one of these three core pillars from the foundation of the entire money market industry, by changing the primary assumptions of the key Money Market Rule 2a-7. A key proposal in the overhaul of money market regulation suggests that money market fund managers will have the option to "suspend redemptions to allow for the orderly liquidation of fund assets." so, the next time there's a market crash, and you try to withdraw what you thought was "absolutely" safe money... good luck to you! The link to the story is here.

A story that showed up in the mainstream press about six months ago is turning out to be true. China indicated that it was going to keep strategic rare earth elements [REEs] at home... and it's doing just that. I thank reader Sean McTaggart for bringing it to my attention. The headline [from the independent.co.uk] reads "Concern as China clamps down on rare earth exports"... and the link is here.

And lastly comes this piece from I. Vronksy... the proprietor over at gold-eagle.com. Vronsky argues that "there will NEVER be a peak gold price." He sounds pretty convincing to me... and the article is entitled "China's Pressing Need to Buy Gold"... and the link is here.

Below is a 3-year graph of the Dow. It paints an ugly picture. The RSI, MACD and [seriously declining] volume are all sick puppies... and the Dow itself [regardless of its performance yesterday] looks like it wants to roll over and die... despite all the interventions by 'the powers that be'. I just don't see too many legs left in this bear market rally.

Could the precious metals shares get hit if the bottom fell out of the Dow? Sure, probably, maybe... but I think the U.S. dollar has a one-way ticket to the fiat currency graveyard... so I'm still 'all in' and will stay that way through all of 2010. But I'll let you know if, or when, I change my mind.

Preliminary open interest figures for Monday have just been posted at the CME's website. Volume in gold was a pretty heavy... around 181,000 contracts. In silver, o.i. was reported around 34,000 contracts. These aren't big numbers, but they're certainly more substantial than what we've seen in the last ten days over the holiday season. The open interest numbers are what I'm most interest in... and they'll be on the CME's website in a couple of hours.

I note, as I put the finishing touches on this column, that both gold and silver are inching higher. Gold volume [February contract] is sitting at 26,675 contracts... and silver's volume [March contract] is currently reported at 4,580 contracts. This is a pretty big silver number for this time of morning... 4:02 a.m. Eastern time.

It might be another interesting day in New York again... and we'll find out soon enough.

See you on Wednesday.