World Gold Hedge Book Falls by 33% to 7.9 Moz in Q4/09

In my closing paragraph in my Saturday column, I mentioned that I was looking forward to the Far East open on Sunday night "with some interest". Well, both gold and silver started out doing exactly what I expected... rising rather smartly. But, dear reader, you will notice that a not-for-profit seller showed up shortly after Hong Kong opened and put an end to the merriment.

From there, it was all down hill through the balance of Far East and all of London trading. Yesterday's high price [around $1,132 spot] was shortly before 9:00 a.m. on Monday morning in Hong Kong. From that point, gold declined about $13 going into the New York open. But once Comex trading began at 8:15 a.m... the New York bullion banks really got serious and peeled another $15 or so off the price. The slide ended at the close of London trading at 4:00 p.m. local time... 11:00 a.m. in New York... and also at its low of the day... $1,108.20 spot. From there gold didn't do much... and basically traded sideways for the rest of the day.

Silver followed a similar route, but after being capped in early Hong Kong trading, silver's price really hung in there and was [like gold] hanging onto most of it's gains until the Comex opened. Then down went its price until the London close... and from there silver basically traded sideways for the rest of the New York session. Silver's high price of the day [around $16.58 spot] was at 4:00 p.m. in Hong Kong trading... and the low [$16.11 spot] was at 11:15 a.m. in New York.

The dollar was not a factor in yesterday's precious metal's action.

The precious metals shares pretty much followed what was going on with the stock market in general... and they also rolled over shortly after 3:00 p.m. in sympathy with the rest of the equity markets. The HUI was down 1.36%.

The open interest numbers for Friday are as follows. Gold o.i. rose a smallish 2,350 contracts on light volume of 181,736 contracts. Silver's open interest fell 476 contracts on decent volume of 48,565 contracts. Today is options expiry for the March contract in both gold and silver. March is not a delivery month for gold... but it certainly is for silver... and there are lots of roll-overs, switching and spreading going on in this market as we approach first day notice for Monday, March 1st delivery. The first deliveries for March will posted on the CME's website late on Thursday night... early Thursday morning East coast time.

As of last night's CME data, there were only 1,079 gold futures contracts open for March... but a whopping 36,697 silver futures contracts. I expect this March silver o.i. number to plunge precipitously over the next three days. If it doesn't... we're going to have Comex short squeeze of biblical proportions.

Last night's CME Daily Delivery Report shows that 43 gold and zero silver contracts are due for delivery on Wednesday. The GLD ETF showed a tiny increase yesterday as 9,794 ounces were added. There were no changes reported in the SLV... nor was there a report from the U.S. Mint, either. For the week that was, the Zürcher Kantonalbank in Switzerland reported a smallish 8,744 ounces of gold were received in their gold ETF... but in the silver ETF, it was another blockbuster week, with almost a million ounces being received... 974,230 ounces to be exact! Last week it was slightly more than a million ounces. These, dear reader, are big numbers! I once again thank Carl Loeb for providing this data.

There was a lot of activity over at the Comex-approved depositories on Friday... and by the time the smoke cleared, they reported receiving 603,434 ounces of silver. Click here for all the action.

I have quite a few gold-related stories today. The first is a smallish piece courtesy of Craig McCarty... and it's posted over at businessinsider.com and bears the headline "Citi: China Sold Their Treasuries Because They Want To Buy Tons Of Gold". It appears that Citigroup's Alan Heap thinks that China is dumping U.S. Treasuries to buy the IMF gold. The Chinese have had months to do it... why have things changed now? I guess we'll find out soon enough... and the link to the story is here.

Market analyst Gary North's new commentary at LewRockwell.com says it plainly: The Federal Reserve's opposition to being audited under legislation being pressed by U.S. Rep. Ron Paul, R-Texas, is largely a matter of needing to prevent the American people from learning the status of the U.S. gold reserve. North's commentary is imbedded in a must read GATA release headlined "Gary North: Fed's secrecy aims mainly to hide gold's disposition"... and the link is here.

This next story is courtesy of reader Roy Stephens who sent it to me late on Sunday night... and it was all over the Internet yesterday. As the opening paragraph states... "A new advisory being sent by America’s third largest bank [Citigroup] to its account holders has stoked fears that major financial institutions could be preparing for old fashioned bank runs if the economy takes a turn for the worse. This particular version of the story is posted at prisonplanet.com. The headline reads "Update: Citigroup Says Fed Ordered 7 Day Restriction on Bank Withdrawals". I might suggest that you read this very, very carefully. The link is here... and you might have to scroll down the page to find it.

The next gold-related story is to be found posted over at goldseek.com. It's wildly bullish... and the headline reads "Research on the Central Fund of Canada Screams "Buy Precious Metals and Miners"!" The link is here.

The next story is the headline for today's column. This 14-page global dehedging report is courtesy of Fortis Bank Nederland... and was posted over at Kitco. The title reads "Q4/09 Global Gold Hedging Declines by 4.0 Million Ounces to 7.9 Million Ounces". It's basically in plain English... and has some excellent graphs... but once you get to the parts that makes your eyes glaze over... it's time to move on to my next story. The link to the pdf file is here.

Here's another gold-related story that went up at mineweb.com late last night. The headline reads "Peak gold theory gains impressive adherents"... "Global market strategist Don Coxe, chairman of Coxe Advisors, said he believes in "a hitherto-undiscovered erogenous zone in gold bugs: peak gold-which could be the latest Big Thing since peak oil." When Don Coxe is talking dirty like this... you, dear reader, should be listening... and the link is here.

And lastly, dear reader, is this rather innocuous story that was posted over at Bloomberg yesterday. It seems like Paul Volker's got company, as five former U.S. Treasury secretaries now agree that "restricting proprietary trading by banks is a 'key element in protecting our financial system and will assure that banks will give priority to their essential lending and depository responsibilities'." This is the same theme that CFTC chairman Gary Gensler is going on about when he talks about position limits and trading exemptions in commodities. The silver market is the poster child here. The voices against proprietary trading are getting louder and louder. The story is only a few short paragraphs and is headlined "Former U.S. Treasury Secretaries Endorse Volcker Rule in WSJ"... and the link is here.

The U.S. Treasury is still trying to flog a lot of paper this week, so it's really hard to tell when both gold and silver will be 'allowed' to rally. But, when it does happen, the big question always is... will JPMorgan et al go short... or will they stand aside with their hands in their collective pockets? This, too, is unknown... but something else to keep in mind. And, as Ted said in a note to clients yesterday... "never underestimate the treachery of the bullion banks." Amen to that!

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