Gold Standard Fully Supported by Alan Greenspan

As I mentioned in this column yesterday, I'm at the Vancouver Resource Conference...and this column is going to be as short as I can make it.

The gold price didn't do much on Friday anywhere on Planet Earth...and the low price tick [$1,337.00 spot] occurred in New York minutes after 9:30 a.m. Eastern time. Gold then traded sideways for the rest of the day...and closed down $3.20 from Thursday's close.

Silver's trading pattern was similar, but it hit a new low for this move down when 'da boyz' pulled their bids shortly before the London open at 8:00 a.m. GMT...and the tech funds found themselves selling into a vacuum...and down went the price. The low was around $27.05 spot. From there, the silver price recovered about fifty cents...and actually closed the New York trading session up 6 cents on the day.

Despite how poorly gold and silver did in the face of a declining dollar, platinum finished up $17 on the day...and palladium rose $11... up 0.94% and 1.36% respectively.

The dollar, which hit its high around l1:00 a.m. Eastern time on Thursday, continued to decline in fits and starts through the rest of Thursday's...and all of Friday's...trading day, closing on its absolute low of the day. From the top to the bottom, the dollar was down about 102 basis points...and down 70 basis points of that during Friday's trading session. There was, of course, no sign of that big dollar decline in either the gold or silver price action.

The gold stocks tried mightily to stay in positive territory on Friday but, in the end, the HUI finished down 1.01%...and I wouldn't read much into that. Here's the 5-day HUI chart...and as you can tell, most of the damage came on Thursday's smash-down.

The CME Delivery report showed that 10 gold and 27 silver contracts were posted for delivery on Tuesday.

Much to my surprise, the GLD ETF showed a very large addition yesterday...up a whopping 653,831 troy ounces. But the SLV ETF headed in the other direction with another monstrous withdrawal. This time it was 4,249,437 ounces. That's the second withdrawal of 4+ million ounces this week. The first one was on Tuesday...and that one was 4.5 million ounces. Since the beginning of the year, 17.0 million ounces have been withdrawn from SLV...and very little of that would be because of the price action. It's obvious that, for whatever reason, large amounts of silver were urgently needed elsewhere.

The U.S. Mint had a sales report yesterday. They sold another 7,500 ounces of gold eagles...along with another 136,000 silver eagles. Month-to-date...83,000 ounces of gold eagles have been reported sold, along with 4,724,000 silver eagles. That's a silver/gold sales ratio of 57 to 1. I hope you're getting your share.

Over at the Comex-approved depositories, they reported a net withdrawal of 204,379 ounces of silver from their warehouses on Thursday.

The Commitment of Traders report [for positions held at the close of trading on Tuesday, January 18th] was interesting. In silver, the Commercial open interest only fell 1,382 contracts...dropping the Commercial short position down to 226.8 million ounces. The '4 or less' bullion banks are short 202.8 million ounces...and the '8 or less' bullion banks are short 259.1 million ounces. Both Ted and I were expecting a somewhat bigger improvement.

But it was gold that was the big surprise, as the Commercial open interest fell a very large 18,591 contracts, leaving the Commercial net short position at 20.65 million ounces. Ted says it's been a couple of years since the Commercial net short position has been this low. The '4 or less' bullion banks are short 16.9 million ounces...and the '8 or less' bullion banks are short 23.4 million ounces.

The other thing to note about gold this week was that the technical funds went massively short to the tune of 12,379 contracts...or 1.24 million ounces.

In both gold and silver, Ted noted that it was the raptors...all the traders not in the '8 or less' category...that covered a lot of short positions this past week. This is absolute proof that not only is JPMorgan heading for the exits...so is everyone else.

Without doubt, there was further improvement in the bullion banks' short positions in both metals since Tuesday's cut-off...especially after the hammering they both took on Thursday. I'd give a day's pay to see what the open interest numbers are now, without having to wait until next Friday.

Here's Ted's "Days to Cover Short Positions" graph that's courtesy of Nick Laird over at sharelynx.com.

Ted had a couple of things to say in a private note to clients early on Friday. The first was this..."The sole reason for this latest swoon in the price of silver is coordinated and collusive manipulation upon the part of the big commercial interests, including JPMorgan, on the CME Group's Comex market. I realize that I have to make this statement repeatedly whenever there is a significant sell-off in silver. I don't set out to be repetitive, nor do I have my mind made up in advance; it's just that commercial manipulative behavior always stands out as the sole cause of every silver sell-off. Certainly, one would think if it weren't so clear, that the commercials were engaged in collusive illegal behavior on what I call a criminal enterprise of a market [the CME], one of them would object to my characterization of them as crooks. I'll let you know when, and if, that occurs."

"Collusion is a strong word. I don't use it loosely. It's easy for me to label the large Comex commercial trading entities as operating collusively on this sell-off, because they have operated collusively on every silver sell-off over the past 25 years. The proof is simple and clear...and contained in CFTC data...and both the COT and Bank Participation Reports. This sell-off...and every sell-off...have always been met with uniform commercial net buying. There has never been an exception to this pattern. How is it possible that the big commercials can always find themselves to be net buyers on every sell-off? Easy--they are acting collusively. In fact, considering their easily-documented history, it is not possible for them not to be acting collusively. How otherwise could one cohesive group always end up buying big on every decline?"

Then there was this comment on what happened in the silver spread market earlier this week. This is only two of the many paragraphs that silver analyst Ted Butler used in his explanation...and I don't completely understand it myself... "On Wednesday, the Comex experience an epic event in the silver spread market. Let me state this clearly--the spread difference between the various trading months in Comex silver futures experienced the largest price changes in history. The price direction of the spreads was to relative price strength in the nearby months...and weakness in the more deferred months; a dramatic "tightening" of the spreads that may be a precursor to backwardation, or a premium developing on the nearby months. Let me by frank--I'm not sure what this monumental spread price move may mean at this point. There is no news from knowledgeable and trusted observers, just that the market changed."

The spread tightening was unusual in that it didn't appear driven by delivery considerations. Generally, spread pricing is more gradual and trending than the sharp out-of-nowhere event that occurred on Wednesday. It appeared to be driven by spread traders for financial reasons. The tightening was completely at odds with the dramatic fall in the price of silver these past few days, as such spread tightening would normally be thought to result in sharply rising silver prices. Instead, the opposite occurred. I don't know how this is connected to the manipulation, but I have been conditioned to believe that there can be no coincidences in a market as crooked as silver. I don't mean to leave you with more questions than answers regarding the spread event, but I don't want to make things up. I'm sure we'll know more as time rolls on."

¤ Critical Reads

Irish government falls and calls 11 March poll

Today's first story is courtesy of reader "Nick in San Diego". It's from The Independent in Ireland and bears the headline "Irish government falls and calls 11 March poll". The Irish Government collapsed yesterday, with multiple ministerial resignations propelling Prime Minister Brian Cowen into setting 11 March as the date for a general election. His Fianna Fail party, which dominates the government, is widely expected to be largely wiped out in the contest, since under the Cowen leadership it has slumped to unprecedented depths in opinion polls. The Irish Government collapsed yesterday, with multiple ministerial resignations propelling Prime Minister Brian Cowen into setting 11 March as the date for a general election. His Fianna Fail party, which dominates the government, is widely expected to be largely wiped out in the contest, since under the Cowen leadership it has slumped to unprecedented depths in opinion polls. This is worth the read...and the link is here.

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Spain to rescue its banks

Reader Roy Stephens provides the next story which is out of yesterday's edition of The Telegraph. The Spanish government is set to launch a sweeping restructuring of its troubled regional savings banks in an attempt to reassure the market it can sort out the problems of its financial system. The headline reads "Spain to rescue its banks"...and the link is here.

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The World is sinking: Dubai islands 'falling into the sea'

Here's a real cute story from reader U.D. out of Thursday's edition of The Telegraph. The headline falls into the "you can't make this stuff up" category...and reads The World is sinking: Dubai islands 'falling into the sea'. The islands were intended to be developed with tailor-made hotel complexes and luxury villas, and sold to millionaires. They are off the coast of Dubai and accessible by yacht or motor boat. Now their sands are eroding and the navigational channels between them are silting up. This is definitely worth your time...and the link is here.

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China buys gold and the world follows

The rest of the stories are, more or less, all precious metal related in one form or another. This first is a piece from marketwatch.com that's headlined "China buys gold and the world follows". It's contained in this GATA release of the same title...and the link is here.

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James Turk - Silver in backwardation, set to explode

The next one is from King World News. Chris Powell's preamble reads GoldMoney's James Turk told King World News yesterday that silver is in backwardation a year out and the last time this happened, silver exploded 40 percent in a few weeks. May the excerpts of this interview find their way to the Great Market Manipulator's ears, and we don't mean Bernanke. The headline reads "James Turk - Silver in backwardation, set to explode"...and the link is here.

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Stunner: Gold Standard Fully Supported By... Alan Greenspan!?

Here's a shocker for you. Tyler Durden at zerohedge.com reports that former Fed Chairman Alan Greenspan, the chief of the bubble blowers, has just remarked to Fox Business that the gold standard might be a preferable monetary system. The last time he said that was back in 1966 when he wrote an essay entitled "Gold and Economic Freedom" to be included as a chapter in Ayn Rand's new book called Capitalism: The Unknown Ideal. The headline reads "Stunner: Gold Standard Fully Supported By... Alan Greenspan!?". The link to this must read article is here.

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Interview With Jim Rickards

Here's another interview from Eric King over at King World News. I haven't listened to it...and I have no idea how long it is...but the guy on the other end of the telephone with Eric is Jim Rickards. As you know, I have all the time in the world for whatever Jim has to say. And, without doubt, what he's got to say here, is more than worth your time. The link to the "Interview With Jim Rickards" is here.

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Interview With John Hathaway

My last item is yet another interview that Eric King sent me a few moments ago. This is an Interview With John Hathaway, chief investment strategist with the Tocqueville Fund. This is another interview that I haven't listened to either...but he's also another person in the gold world that I have lots of time for. Eric says it's an 'outstanding interview'...and I have no reason to doubt him...and the link is here.

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[Editor’s note: Today’s funnies are not available at this time. However, they may be added to the Casey Research website at a later point this weekend.]

Yes, we did produce a near-perfect republic. But will they keep it? Or will they, in the enjoyment of plenty, lose the memory of freedom? Material abundance without character is the path of destruction. - Thomas Jefferson

Gold volume on Friday was average...if there is such an animal these days...with volume net of all roll-overs around 169,000 contracts. Silver's net volume was a pretty chunky 62,000 contracts...not as high as Thursday's...and that's to be expected...but still huge considering there wasn't a lot of price action...although we did set a new low price for this move down.

Thursday's changes in open interest in gold showed a decline of 2,629 contracts...and in silver, it was only 711 contracts. Considering the hammering that both metals [especially silver] took, these numbers are way out of line...but could be skewed by raptor buying and/or spread trades. Only next Friday's Commitment of Traders report will tell all...unless the price blows sky-high between now and the Tuesday cut-off for that report. We'll see.

Here's the 6-month silver chart including Friday's candle. If I had to bet ten bucks...I'd make the bet that we saw silver's low tick for this move down. Ted is hopeful as well. You can never time the market exactly...but if you catch 80% of the move on most occasions, you can consider yourself a successful trader. And, with all the mysterious goings on in the silver market right now, I wouldn't want to be out of it...or short it.

As I said in this column yesterday, I know it's hard to think of precious metals investment opportunities at a time like this. But, as I mentioned in the previous paragraph, you can never catch the entire move...but if you catch a major portion of it, you're doing well. There's still time to either readjust your portfolio...or get fully invested in the continuing major up-leg of this bull market in both silver and gold...and I respectfully suggest that you take a trial subscription to either Casey Research's International Speculator [junior gold and silver exploration companies], or BIG GOLD [large producers], with all our best [and current] recommendations...as well as the archives. A subscription to the International Speculator also includes a free subscription to BIG GOLD as well. And don't forget that our 90-day guarantee of satisfaction is in effect for both publications.

That's it for today. Enjoy the rest of your weekend...and I'll see you here on Tuesday morning.