SLV Takes in Another 2.5 Million Ounces of Silver

It was a pretty quiet trading day yesterday. Gold spent most of its time meandering between $1,230 and $1,240 spot. Then, at 7:00 a.m. Eastern time, a bit of a rally began that took gold to it's high of the day of $1,244.30 spot at precisely 11:30 a.m... before a not-for-profit seller showed up to take gold to its low of the day at $1,226.60 spot about two hours later. This is the second day in a row that gold was turned back from breaking through $1,250 spot.

Silver's graph was a virtual carbon copy of gold's. The price pretty much hugged $19.50 up until 7:00 a.m. Eastern time in New York... when it, too, began to rally. This rally also ended at precisely 11:30 a.m. That was silver's high of the day as well... $19.84 spot. Silver's low price of the day [$19.32 spot] was shortly before 4:00 p.m.

Not that I'm the suspicious type or anything... but I think someone was dicking with the precious metals prices yesterday. However, Ted Butler said that the declines that began at precisely 11:00 a.m. were on very little volume... just enough to do the job of getting the price away from $1,250 in gold... and $20 in silver.

Here's the dollar action yesterday. If you can find any co-relation between its activity and what happened in the precious metals market, you're a better observer than I am.

The HUI pretty much followed the gold price yesterday and was only slightly affected by the sell-off in the general equity markets.

As I suggested yesterday, gold's open interest was up again on Thursday. This time it rose 4,602 contracts to a total of 588,106 contracts. This is awfully close to record territory... and, as always, it makes me nervous when we're at nosebleed levels like this. Volume was pretty chunky... but there were a lot of switches. Silver's open interest was only up 380 contracts... and volume was pretty decent as well, without too many switches.

The Commitment of Traders report [for positions held at the end of Tuesday's trading] will be released at 3:30 p.m. precisely this afternoon. Ted says that gold will be ugly... and silver will be neutral. We'll find out soon enough... and the link to this week's COT report [once it's posted] is here.

Thursday's CME Delivery Report wasn't very exciting. It showed that 14 gold and one whole silver contract were posted for delivery on Monday. The GLD ETF showed no changes yesterday... but the SLV had another huge delivery... this time it was 2,450,365 ounces. Ted figures that based on the price action of this past week, SLV is owed at least 10 million ounces. Thursday was also a busy day at the U.S. Mint. They reported selling another 28,000 one-ounce gold eagles... 13,500 24k-gold buffaloes... and 364,000 silver eagles. Month-to-date totals for these three bullion coins are 85,000... 47,000 and 1,872,500 respectively. I suspect that most of this is going to end up in the pockets of European investors. One can only speculate what the demand will be from U.S. investors once the U.S. dollar hits the skids.

The Comex-approved depositories showed a decline of 602,209 ounces of silver yesterday.

One last thing on silver, Ted Butler pointed out that the short position in SLV took a big drop during the last two week... down 27% to be exact. There are still 5,700,300 shares of SLV that have been shorted that have no silver backing them. The short position in GLD hardly changed at all... and sits at 1,436,880 ounces held short. You can check out the action at shortsqueeze.com, here.

Well, here's one more thing on silver that Nick Laird from sharelynx.com just sent me. It's the latest graph of the SLV ETF... and it's worth pondering. The thing worth noting is that despite the huge price swings in silver... the general trend inside the SLV shows that silver continues to be accumulated over time. And you should be doing the same things as well, dear reader.

I see [in a very short Reuters piece filed from Johannesburg] that South African gold production is down again compared to last year. I stole this story from Kitco yesterday... and the headline reads "S. Africa gold output falls 12.7 percent yr/yr in March". It's a 30 second read... and the link is here.

I see that gold ETFs in India are trying once again to get the Indian people to buy paper gold instead of the real metal. Here's a story filed from Mumbai that's posted on thehindubusinessline.com website. The headline reads "Stock Exchanges to open shop for Gold ETFs on Akshaya Tritiya". I think the comments by one Mr. Prashanth Bhansali in the last paragraph pretty much sums up how this will all turn out. The whole story will take a little over a minute of your time... and the link is here.

You have to know that we're in a major bull market in gold when analysts over at JP Morgan are turning bullish on the stuff. This story is posted at yesterdays businessinsider.com website. The very provocative headline reads "JP Morgan: Gold Could Now Face 'Unlimited' Demand". I thank Colorado reader Jerrilyn Emison for bringing this story to my attention... and now to yours. The link is here.

Here's a story that made the rounds... and I got many copies of it in my in-box yesterday. But the first one through the door was Casey Research's own Jeff Clark. It's an AFP story filed from Abu Dhabi... and posted over at yahoo.com. The headline says it all... "Abu Dhabi hotel installs gold vending machine"... and the link is here.

In commentary posted yesterday, Bloomberg columnist Jonathan Weil weighs on Goldman Sachs, JPMorgan and Citigroup's perfect trading record during the first quarter... they all made money every day of the first quarter. Weil knows that it's an un-level playing field... and the title to his column reflects that. It reads "Rigged-Market Theory Scores a Perfect Quarter". It's worth the read... and the link is here.

Next is a Bloomberg story courtesy of Washington state reader S.A. The headline is pretty stark... and it reads "Volcker Sees Euro 'Disintegration' Risk From Greece"... and the link is here.

The next story was contributed by reader Scott Pluschau. It's another Bloomberg piece... and it's more gloomy news about the U.S. real estate market. U.S. home foreclosures climbed to a record in April, a sign that government mortgage relief efforts have yet to turn the tide of property seizures, according to a report by RealtyTrac Inc. The headline reads "U.S. Home Seizures Reach Record as Recovery Delayed". [What recovery? - Ed] For all you real estate junkies... this is a must read... and the link is here.

Here's a piece from the English language edition of chinatoday.com that was sent to me by reader Roy Stephens. It's filed from the north Chinese port city of Tianjin. Chinese Premier Wen Jiabao said Thursday that the complications of the global financial crisis with deepening sovereign debt crisis in some nations should not be underestimated. The headline is similar... and reads "Beware of complications of financial crisis, Premier warns". The link is here.

And lastly, thank heavens, is this Bloomberg story courtesy of reader U.D. U.S. federal prosecutors and the Securities and Exchange Commission are cooperating in a preliminary criminal probe into whether banks misled investors about their participation in mortgage-bond deals. JPMorgan, Deutsche Bank AG, UBS AG and Citigroup have received civil subpoenas from the SEC. Nobody's gone to jail yet... but hope springs eternal that someone will. The headline reads "U.S. Prosecutors, SEC Probe Mortgage Bond Deals, WSJ Reports"... and the link is here.

I must admit that even though the entire world is starting to circle the economic, financial and monetary drain... I'm still more than a little nervous about the sky-high gold open interest. Ted Butler says the net short position is probably back over 30 million ounces... of which at least 90% is held by the '8 or less' bullion banks. The huge run to gold and silver in Europe [and probably elsewhere, to a smaller degree] is hugely positive... but what will these bullion banks do? Or, more aptly, what can they do?

I supposed they can instigate a short-term sell-off in gold... dragging silver down with it. But they're all still trapped like rats with no way out. As a matter of fact, if we do see a big sell-off from here, it will because the bullion banks [led by JPMorgan] will have engineered it. First notice day for delivery into the June gold contract is two weeks from today... so maybe they'll do it between now and then. But... with the Department of Justice breathing down their necks... maybe they won't.

But I'm still 'all in'... and I'm not budging.

Both gold and silver didn't do much during the Far East trading day... but are now showing some signs of life now that London has opened. Gold's trading volume is a very light 17,000 contracts as of 4:57 a.m. Eastern time... with silver around 4,000 contracts traded. These volume numbers are all net of roll-overs.

Volume figures for Thursday's trading are now posted at the CME's website and show that gold's volume was around 204,000 contracts of which about 80,000 were roll-overs. Silver traded around 48,500 contracts of which about 14,500 were roll-overs. As I mentioned a few paragraphs ago, first day notice for delivery into the June gold contract is exactly two weeks from today... so the activity in gold trading will become more intense as the month winds down.

Fridays in the past have sometimes proved to be interesting days for both gold and silver in New York trading... and today's action may be more interesting than most. We'll find out soon enough.

Have a great weekend... and I'll see you here tomorrow.