CFTC Open Meeting On Speculative Position Limits is Today

The gold price was pretty steady in Wednesday trading in the Far East... but starting at 1:00 p.m. Hong Kong time, gold got sold off about ten bucks going into the morning gold fix in London around 10:30 a.m.GMT...5:30 a.m. in New York. Gold then rose back to almost unchanged by 8:00 a.m. in New York, before rolling over and heading lower for the rest of the Wednesday trading day. The gold price closed virtually on its low of the day... which was $1,377.80 spot]

Silver's price path was very similar to gold's on Wednesday... except far more volatile price wise... with the highs and lows pretty much corresponding with what happened to the gold price. Silver's low price tick of the day [$28.70 spot] came minutes after 4:00 p.m. in electronic trading in New York.

One thing that I've noticed since the close of Comex trading at 1:30 p.m. on Tuesday... and the cut-off for tomorrow's Commitment of Traders report... is the selling pressure that both metals have come under once the very thinly-traded electronic market starts in New York. This was particularly evident in the silver price for both Tuesday and Wednesday... and looks very similar to the selling pattern that developed in electronic trading on Tuesday, December 7th... the 'day of infamy'.

Of course there's nothing going on in silver's supply/demand cycle that would account for the 60 cent drop in the silver price between precisely 2:00 p.m. and 4:00 p.m. yesterday. The bullion banks just pulled what few bids they had... and forced what few sellers there were, to sell out at progressively lower price points that the bullion banks themselves set. This is as criminal as you can get... and blatant price manipulation... and no one in a position to do anything about it either lifts a finger, or asks a question.

The world's reserve currency gained a bit over 45 basis points between the Far East open and 11:00 a.m. in London... then gave virtually all of that gain back by 8:00 a.m. in New York, two hours later. However, at that precise 8:00 a.m. time... just like on Tuesday... a dollar rally materialized out of nowhere... and, by precisely 3:00 p.m. Eastern time, the dollar was up the better part of 80 basis points before trading sideways for the rest of the New York session. Free markets work in such mysterious ways.

Despite the dollar's big gain during the New York trading session yesterday, both gold and silver didn't fall by very much as the dollar rally unfolded. As a matter of fact, in the two hour stretch between 8:40 a.m. and 10:40 a.m. Eastern time, both metals were in a rally mode before they rolled over... and very reluctantly headed south.

All things considered, the gold shares put in a decent performance early in the trading day... but the sell-off grew more pronounced once gold came under selling pressure in the electronic market starting at 2:00 p.m. Eastern time. But, it could have been a lot worse... with the HUI finishing down 1.85%... but not quite on its low of the day. Most silver stocks did not do well yesterday... which is not surprising, considering the price action between 2:00 and 4:00 p.m. Eastern.

Wednesday's CME Delivery Report showed that 170 gold and 6 silver contracts were posted for delivery on Friday. The link to the 'action' is here.

The GLD ETF reported a smallish withdrawal of 19,526 ounces yesterday... and there was no report from SLV.

The U.S. Mint reported selling another 7,500 ounces of gold eagles yesterday... but nothing in silver eagles. Month-to-date, gold eagles sales total 43,000 ounces and silver eagles sales are sitting at 1,422,000.

The Comex-approved depositories showed a withdrawal of 300,758 ounces of silver on Tuesday... all of it coming out of Scotia Mocatta.

¤ Critical Reads

Retail Investors Celebrate 32 Consecutive Weeks Of Equity Outflows By Pulling Money Out Of Taxable Bond Funds As Well

My first offering today is from reader 'David in California'. It's a zerohedge.com piece headlined "Retail Investors Celebrate 32 Consecutive Weeks Of Equity Outflows By Pulling Money Out Of Taxable Bond Funds As Well". It's obvious that no one is believing all that happy talk out there, despite what the equity markets are doing. It's one long paragraph along with a couple of nifty graphs... and the link is here.

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Retail Sales Rise 0.8% On Expectations Of 0.6%, Down From 1.7%, Ex-Autos Up 1.2%

Here's a story that I borrowed from yesterday's King Report. It's about all the b.s. 'happy talk' I was referring to in the previous story. Zero Hedge said this about it on Tuesday... "And the comedy continues. After Best Buy makes it clear that not even liquidation level prices are enough to draw consumers in, the Department of Truth is out with its latest attempt to make Americans believe that even with $10 billion in November credit card and other revolving debt declining $10 billion from October, and home equity loans outstanding falling another $2.6 billion, coupled with a drop in average hourly wages, retail sales actually picked up by 0.8%, better than expectations of 0.6%". The short zerohedge.com story bears the headline "Retail Sales Rise 0.8% On Expectations Of 0.6%, Down From 1.7%, Ex-Autos Up 1.2%"... and the link is here.

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Massive Selling of US Currency Lies Ahead

Eric King over at King World News sent me the following blog yesterday. It's headlined "Massive Selling of US Currency Lies Ahead". It's by John Williams of shadowstats.com fame. It's a very worthwhile read, especially if you're down in the dumps about what's happening to both gold and silver in the very short term... and the graph is terrific as well. The link is here.

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Safe sales soar as worried bank customers keep money at home

Here's a story out of the Irish Independent newspaper in Dublin. The headline reads "Safe sales soar as worried bank customers keep money at home". Another reason for the increased use of home security safes is a growing fear of burglaries because of the recession. I thank reader U.D. for the story... and the link is here.

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Tackling the Debt Crisis: Protests in Europe Ahead of Euro Summit

Reader Roy Stephens provides our next read of the day. It was posted yesterday over at the German website spiegel.de. The headline reads "Tackling the Debt Crisis: Protests in Europe Ahead of Euro Summit". North America readers certainly aren't seeing any of this in the main stream media, so you want to find out what's happening elsewhere, you have to go overseas. The link to the story is here.

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Interview with CFTC commissioner Bart Chilton

I have three stories about the CFTC's plans for commodity position limits. The first is an interview with CFTC commissioner Bart Chilton on Canada's Business News Network yesterday afternoon on this very subject. Silver position limits figure prominently. The interview runs a few seconds over five minutes... and it's worth watching. The link is here. I thank Florida reader Donna Badach for sharing it with us.

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"In-Laws and Outlaws" by CFTC Commissioner Bart Chilton

Silver analyst Ted Butler is responsible for your next read of the day. It was speech headlined "In-Laws and Outlaws" by CFTC Commissioner Bart Chilton given to the Americans for Financial Reform. It's not a long read... but it's the contents of the third-from-last paragraph that you will find the most interesting. Chilton states "For example, I think the idea of 5,000 crude contracts, which Delta Airlines has suggested, and 1,500 silver contracts which hundreds of individuals have suggested are levels we should ask questions about as part of our proposal." It's obvious that Ted Butler's idea [that a lot of us wrote to the CFTC about] not only had merit... but had an obvious impact as well. The link to the entire speech is here.

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CFTC admits will miss deadline on position limits

Then this Reuters article appeared yesterday afternoon bearing the headline "CFTC admits will miss deadline on position limits". Chairman Gary Gensler admitted that he won't have the final rule in mid-January... and the CFTC plans to phase in limits starting with the spot month. It's a short read... and the link is here.

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Interesting Graph From Reader Bill Downey

Besides the above, I have a reasonable number of gold and silver related items for you today. The first is a very Interesting Graph From Reader Bill Downey over at GoldTrends.net... and here's what he had to say about it. "Here's a chart of SLV using Equivolume. The fatter the bar... the greater the volume. And look at that volume ! Have the big boyz hedged themselves? WHAT could spurt that type of volume??? In a normal market, this would favor a top... but with silver, I'm just not sure. Regardless, it appears that something's up."

Click here to enlarge.

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Swiss banks are resisting metal delivery

I received the following e-mail from a reader in Switzerland yesterday... and he had a very interesting story to tell... "After reading about the anecdotal evidence to suggest that even Swiss banks are resisting metal delivery, I decided to request delivery of my own allocated metal. I reside in Switzerland and have my custody account with one of the large banks here. Maybe I'm just being paranoid, but it does seem to me that delivery is not encouraged. Even though the spread on allocated metals already reflects some element of additional administration, the fees they wanted to charge were outrageous. After fighting this for days, they finally agreed to the delivery fee I was originally quoted when I bought the metals.. I was also asked the reason why I wanted to take delivery (to which I replied, it is none of their business). I am still waiting for the delivery confirmation and I'll be happier once I have the metal in my safety deposit box. As an aside, I must comment that there seems to be no shortage of deposit boxes here in Zurich. Also worth mentioning is that the safety deposit box costs around the same as my custody fee, which makes 'own storage' a no brainer." Of course, dear reader, if you own gold or silver in an unallocated or 'pool' account... you don't own any real metal at all... and are an unsecured creditor of that company. Good luck to you.

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Chinese rush to purchase gold as long holiday season gets under way

Reader Nick Laird [of sharelynx.com fame] provides your next read of the day. This is a posting from mineweb.com... and is headlined "Chinese rush to purchase gold as long holiday season gets under way". Chinese department stores and gold traders have been collectively making small cuts in the price at which they are selling gold which reportedly has led to a huge boost in gold sales over the holiday period, which continues for another month. The link is here.

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Alasdair Macleod: Are the central banks running a fractional gold system?

Lastly today is your big read... and another must read. It's a GATA release that Chris Powell has headlined "Alasdair Macleod: Are the central banks running a fractional gold system?" Macleod states that... "China and Russia must be watching this with greatinterest. We can assume that their intelligence services are more aware of the trueposition than the general public, and if they also conclude that the Western central banks are running a fractional system using sight accounts, this knowledge hands them great economic power."

But there's much more to the commentary than that... as Powell's preamble shows. If you read nothing else in my column today... the contents of this GATA release should be the one you pick... and the link is here.

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The best single year for the US Gold price ever was 1979, a year in which the price more than doubled. That was also the year in which US interest rates soared as a large "risk premium" was built into the interest rates demanded by buyers of Treasury debt paper. The sudden surge of Treasury yields on December 7-8 is the first sign of a potential repeat performance.- Bill Buckler, The Privateer, December 11, 2010

The last couple of days have seen a big dollar rally in which the bullion banks took every opportunity to beat on the precious metals prices... including stooping to hitting the price in the thinly-traded New York electronic market.

Here's the 1-year dollar chart. You can see the tiny rally in the dollar that's allowed the bullion banks to lean on the silver and gold prices for the last few days. It will be interesting to see how many legs this dollar rally has before it heads south once more.

Volumes in both gold and silver were somewhat larger on Wednesday then they were on Tuesday. And, as I expected, Tuesday's open interest declines in both metals pretty much cancelled out the increases that occurred during Monday's trading session. After the antics in after-hours trading in New York yesterday, I have a more than passing interest in the o.i. numbers for both gold and silver when they become available later this morning.

In a note to his paying subscribers yesterday, silver analyst Ted Butler had this to say... "[Today] should be a big day for silver. Not necessarily in terms of price; but more in an historical context. Of course I'm speaking of the CFTC open hearing on several rule-makings mandated by the new Dodd-Frank Financial Reform Act; most notably as it pertains to speculative position limits. There is no question in my mind that the issue of position limits [and this meeting] will be historic in regards to silver."

Ted says that he has no idea what to expect from this meeting tomorrow. The truth is that there is no way he could possibly know, apart from what should be said. He knows that something will be said or decided about position limits... and that's enough for him to label this meeting as historically significant... and it almost doesn't matter what is said. Ted goes on to say that even if the Commission sidesteps or delays the issue... or come up with an unreasonably large position limit for silver; that will be instructive, as it will aid us in what to do next.

The above commentary was sent out to clients many hours before yesterday afternoon's Reuters story was dispatched, where the CFTC admitted that they will miss the January deadline for position limits... but I'm sure the meeting tomorrow will be action-packed regardless... especially after what CFTC Commissioner Bart Chilton has been going on about all week. Stay tuned!

Both silver and gold are showing some signs of life at the moment... as both are in positive territory in early London trading. Volumes are not particularly heavy in either metal. Although everything looks great, as I write these words at 4:56 a.m. Eastern time, we all know that what the U.S. bullion banks have in store during the New York session [both Comex... and the electronic trading that follows] is what determines the price.

I note that the dollar has rolled over... and is down about 20 basis points from its New York close yesterday afternoon... so, unless the 'powers that be' can manufacture another dollar rally out of thin air, just like they've been doing the last couple of days... it could be a battle for JPMorgan et al to keep a lid on precious metals prices today. We'll find out soon enough.

I hope your Thursday goes well... and I'll see you on Friday.