Russia's Central Bank Buys 500,000 Ounces of Gold in March

The little rally in gold that started around 3:00 a.m. Eastern time on Tuesday morning, only lasted about an hour before the price went sideways until 9:30 a.m. in New York. Then there was a sharp spike into the London p.m. gold fix at 3:00 p.m. local time... 10:00 a.m. Eastern. The London fix was also gold's high price of the day, which was reported as $1,147.40 spot. From that high price, gold got sold off quickly... and only finished up $5.20 on the day.

Silver's price path was very similar to gold's. The high price spike was also at the London p.m. gold fix... and was reported at $18.06 spot. Silver made another attempt to break through the $18 level shortly after the fix, but got sold off the moment it showed signs of succeeding. Silver closed up a dime on the day, but at one time was up more than 30 cents.

Here's the dollar chart for Tuesday... and I wouldn't attempt to read anything into it.

I was less than impressed with the share performance yesterday. Even though both metals were up all day long, the shares got sold off for a small loss on the day. A lot of the juniors did OK though... but the HUI trading action over the last few days does not instill confidence. The HUI finished down 0.23% on the day.

The open interest numbers for Monday's activity shows no signs of any carry-over from Friday's trading. Gold open interest was up once again... this time by 1,035 contracts. Total volume was a reasonably light 129,465 contracts. Silver's volume was 38,534 contracts... of which about 20% were roll-overs in future months as options expiry and first notice day loom. Open interest was up an insignificant 62 contracts.

Tuesday's open interest numbers, when reported later this morning, will be the final numbers for Friday's Commitment of Traders report, as the cut-off was at the close of trading yesterday. The bullion banks have a tendency to make their big moves [either up or down] on a Wednesday... the day after the cut-off... so their shenanigans don't get reported until the following Friday's COT. Let's see if that applies today.

The CME Delivery Report on Tuesday showed that 32 gold and zero silver contracts are up for delivery on Thursday. There were no reported changes in GLD or SLV yesterday, either... however, the U.S. Mint had some sales to report. They showed that another 10,000 one-ounce gold eagles and another 609,000 silver eagles were sold. That brings gold eagle sales up to 43,500 for the month... and silver eagles are up to 1,756,000. Silver eagle sales are outselling gold eagles by about 40-1. You can never own too many silver eagles, dear reader.

And that goes for Canada's silver maple leaf as well. Shortly before 10:00 a.m. yesterday morning, the phone rang, and I found myself talking to a representative of the Royal Canadian Mint... who actually asked for me by name! I had sent in an e-mail sometime in February asking if they would provide mintage amounts for their silver maple leaf production for 2009. About a month after I sent that e-mail, I got a reply saying that the numbers I wanted were in the annual report due out in April... and I could check there. Then, out of the blue, I got this call.

The lady on the other end of the phone had the sexiest French-Canadian accent you can possible imagine... and the conversation didn't last long enough to suit me. Anyway, she told me that the Royal Canadian Mint produced 9,727,592 silver maple leafs last year. And that, dear reader, is an absolutely stunning number! It blows the old record right out of the water by many millions. She also went on to say that the mint also produced 569,000 one ounce silver coins in support of the 2010 Winter Olympic Games held in Vancouver earlier this year. There were also hundreds of thousands of other silver coins the mint produced in various levels of silver purity. So Canada has done its part in taking silver off the market.

If you want to dig further into Canadian silver sales in 2009... the mint's 88-page annual report for that year is linked here.

And finally, the Comex-approved depositories indicated that another chunk of silver was taken out of their inventories on Monday. This time it was a paltry 298,372 troy ounces. There was a lot of activity on Monday... and all the action is linked here.

The European Central Bank's weekly statement of condition reported no change in "gold and gold receivables" for the prior week... continuing the stance that has basically been in effect all year. Yesterday [in a story I ran in my column] the ECB annual report revealed that the 35.5 tonnes sold last year was used to buy US$ instruments. Not a wise move, dear reader, which I'm sure is one of the reasons that the ECB hasn't sold an ounce since. I thank the usual New York gold commentator for this information.

As the headline to my column states, Russia's Central Bank purchased 500,000 ounces of gold in March... bringing their total gold stash to 21.3 million ounces. Without doubt, all this gold would have been purchased from Russia's own mine production.

The really interesting part about their central bank's purchases in the first quarter of 2010 is that they are off to their biggest [reported] first quarter gold purchases in history. In Q1/07, their net purchases were zero. In Q1/08 they purchased 200,000 ounces... and in Q1/09 Russia's central bank purchased 360,000 ounces. But in Q1/10 they bought a monstrous 800,000 ounces. March 2010 purchase of 500,000 ounces is tied for the third-highest gold purchase for any one month...ever! If they keep this up, heaven only knows how many ounces they'll have in their vaults by the end of this year. The graph below tells all... and I thank Richard Nachbar and Susan McCarthy for providing it.

Mother nature has been sticking her nose into the gold business lately. Here's the first story posted over at indiatimes.com bearing the headline "European flight disruption hits Indian gold imports". I shamelessly stole this story [and the next one] from Kitco... and the link is here.

And if it's not volcanoes in Iceland... it's earthquakes in Western Australia. Here's a story posted at theage.com.au bearing the headline "Work resumes at mines after WA quake"... and the link is here.

These next two stories are Goldman Sachs related. The first is a piece from The New York Times that I 'borrowed' from yesterday's King Report. The headline reads "Senior Executives at Goldman Had a Role in Mortgage Unit". The really cute part about this story is that the real estate bulls and the real estate bears at G.S. were at daggers drawn. The real estate bulls "clashed with Goldman sales staff who were working with hedge funds that wanted to bet against subprime mortgages. [They] told the [real estate bears] to stop promoting bets against some mortgage investments since such trades were hurting the market and Goldman’s own position." This 2-page is a must read... and the link is here.

Here's another interview with Rolling Stone's Matt Taibbi. This is an 8-minute Bloomberg piece that's posted over at youtube.com. In it, he discusses the SEC's lawsuit against Goldman Sachs. I thank Roy Stephens for sending along this must watch video... and the link is here.

This story, posted at huffingtonpost.com, is sort or related to Goldman Sachs... but it's from an AIG perspective. The headline pretty much spells it out... "There's a New AIG Story. I Was an AIG Exec. Here's the Deal". It's not a long read... but it's a must read as well... and I once again thank Roy Stephens for sharing it with us. The link is here.

The next story is from the IMF's own website. In their Global Financial Stability Report the headline reads... "Government Borrowing Is Rising Risk to World Financial System". The positive spin in parts of this article is just the IMF 'whistling past the graveyard' in my opinion. It's their focus on sovereign debt that shows where the real problems lie. I thank reader Scott Pluschau for sending it along... and the link is here.

And lastly today comes this shocking story from GoldMoney founder and GATA consultant, James Turk. In an article published late last night over at his fgmr.com website, James writes that the U.S. dollar has reached its "Havenstein moment"... the point in time memorialized by the decision of the president of Weimar Germany's Reichsbank to print as much money as necessary to allow the population to keep up with rising prices. Turk's commentary is headlined "Hyperinflation Looms -- The Dollar Arrives at Its 'Havenstein Moment'". I exchanged e-mails with James in the wee hours of this morning... and I asked him for some sort of time line. His reply was as follows... "It's impossible to predict, of course... but I have my doubts whether they can hold it all together through the rest of the year. There are too many warning signs, including this one I just wrote about." Needless to say, dear reader, you should read this commentary at least twice... and the link is here.

The capitalist system has lifted mankind out of mass poverty. It is this system that in the last century and in the last generation, has progressively changed the face of the world, and has provided the masses of mankind with amenities that even kings did not posses or imagine a few generations ago. - Henry Hazlitt

As I wind down this commentary, I see that gold and silver are both up a bit in Hong Kong and early London trading... but nothing worth jumping up and down about. The dollar isn't doing much either. Gold volume for June is only 16,485 contracts as of 5:18 a.m. Eastern time... and silver's volume is around 2,700 contracts for May... net of roll-overs.

The CME website has posted the preliminary volume figures for Tuesday's trading. It shows that 130,931 contracts were traded... of which about 5% were roll-overs. In silver, preliminary volume was reported as a very large 53,898 contracts traded... but as one can imagine, about 30% of that was roll-overs into future months... mostly July, which is the next front month after May. I'm not expecting any big changes in open interest when they're reported later this morning.

As I mentioned earlier, I'm not overly optimistic about the short term... as I've seen no sign whatsoever that the bullion banks are backing down from being the short of last resort... and the share price action doesn't exactly instill confidence, either. I have no idea what 'the powers that be' have in store for gold and silver at the moment... but I'm still 'all in', regardless.

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