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Message: Ed Steer this morning

India and China Lead Gold Rush

"That's a pretty good start to what could be another blockbuster month for the U.S. Mint...and I hope you're getting your share at these bargain-basement prices."

¤ Yesterday in Gold and Silver

Very shortly after I hit the 'send' button on my Wednesday column, about twenty-five dollars got carved off the gold price...with the Wednesday low of the day [just under $1,600 spot] coming at the London a.m. gold fix which occurred around 10:30 a.m. British Summer Time, or 5:30 a.m. Eastern.

From that low, gold rose in fits and starts until shortly before lunch in New York. Then a somewhat more serious buyer showed up...and gold was up more than thirty bucks in just over an hour...before trading mostly sideways into the close of electronic trading at 5:15 p.m. Eastern.

The spot gold price finished up $18.40 on the day. Net volume wasn't overly heavy...around 145,000 shares...and down sharply from Tuesday's big volume day.

As I mentioned in yesterday's column, silver was down about fifty cents by the time that London opened for trading yesterday morning...and then got smacked at the same time as the gold price. In an hour and a half, the usual suspects had taken the silver price down another $1.25...with the low coming at the same time as gold...the London a.m. gold fix.

The subsequent rally had a little more force behind it than gold's...but you can tell from the silver chart that every time the price got a little to exuberant to the upside, there was a willing seller there to nip that in the bud.

Silver's high of the day came at the same moment as gold's high...around 1:10 p.m. in New York...shortly before Comex trading ended. There was little price activity in the New York Access Market that followed.

Silver finished up 28 cents on the day...and net volume was around 48,000 contracts...which wasn't a lot lower than the big down-day volume that silver had on Tuesday.

The gold stocks hovered around unchanged for the first fifteen minutes after the equity markets opened in New York yesterday morning...and then away they went to the upside. The buy-the-dip crowd was out in some force. The HUI finished up a solid 4.44%...making up for all of Tuesday's losses...and then some.

The same can be said for the silver stocks. They were on fire yesterday...with a lot of the juniors doing particularly well. But, with the odd exception, they were all up pretty big on the day. Nick Laird's Silver Sentiment Index was up a chunky 6.11%.

(Click on image to enlarge)

The CME Daily Delivery Report showed that 25 gold, along with 25 silver contracts, were posted for delivery on Friday. The link to this action is here.

Neither GLD nor SLV reported any changes yesterday.

It's been a while since we've had any word about what's happening over at Switzerland's Zürcher Kantonalbank. It appears that they've changed their reporting period from weekly to monthly. So, from September 9th to September 30th, they've added 138,607 troy ounces of gold and a very chunky 4,587,934 troy ounces of silver. As always, I thank Carl Loeb for these numbers.

They had a pretty good day over at the U.S. Mint on Wednesday. They sold 6,000 ounces of gold eagles...2,000 one-ounce 24K gold buffaloes...and another 225,000 silver eagles. Month-to-date, which is only three business days long at this point, gold eagles sales are 14,500 ounces, one-ounce 24K gold buffaloes are 5,000...along with 1,012,000 silver eagles. That's a pretty good start to what could be another blockbuster month for the U.S. Mint...and I hope you're getting your share at these bargain-basement prices.

The Comex-approved depositories reported receiving 600,692 troy ounces of silver on Tuesday...and shipped 699,135 ounces out the door. The link to the action is here.

Silver analyst Ted Butler posted his mid-week commentary to his paying subscribers yesterday...and here's a free paragraph...

"[I took] a moment to revalue the world's above ground bullion inventory of silver and gold adjusted for the new prices. World silver bullion inventory of one billion ounces is now worth $30 billion, whereas gold world bullion inventory of 3 billion ounces in now valued at $4,900 billion [$4.9 trillion]. All the gold in the world is worth 163 times more than all the worlds silver bullion is worth, even though silver is much more rare than gold. I would suggest that is absurd and silver is destined to climb sharply in value, both on an absolute basis and relative to gold."

I know that my bullion dealer continues to sell silver in huge amounts...and that's certain to continue while JPMorgan et al hold the price at this fire-sale price level.

I'm delighted to report that I don't have that many stories for you today, which is always fine by me.

¤ Critical Reads

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Michael Lewis Slams Wall Street, Leadership Deficit: Interview

Michael Lewis’s “Boomerang: Travels in the New Third World” begins with Kyle Bass, a Texas hedge fund manager who’s buying guns and gold bricks. Bass is also betting against European governments.

Following on last year’s “The Big Short: Inside the Doomsday Machine,” Lewis’s exploration of the subprime mortgage debacle, “Boomerang” is a collection of articles Lewis wrote about his adventures in Iceland, Greece, Ireland and Germany, with a bonus look at the parlous state of California.

Films based on his books, like “Moneyball” and “The Blind Side,” have brought Lewis wider success. “Liar’s Poker,” about his short-lived Wall Street career, may finally start shooting. He has a couple of television series in the works and is a columnist for Bloomberg View.

It's a short, but very interesting interview...and I thank Washington state reader S.A. for bringing it to my attention. The link is here.

FDIC Board to Consider Volcker Rule at Oct. 11 Meeting

The Federal Deposit Insurance Corp. board is scheduled to consider a notice of proposed rulemaking on the Volcker rule to restrict proprietary trading by banks at a meeting next week.

Discussion of the interagency rule, part of the FDIC’s rulemaking under the Dodd-Frank Act, was included in the agenda for the Oct. 11 meeting that was released by the agency.

Let's hope they enforce it. Amongst many other things, that would end proprietary trading by JPMorgan against its own clients in the gold and silver futures market.

You've already read this 2-paragraph Bloomberg story from yesterday. Once again I thank Washington state reader S.A. for providing this story...and the link to the hard copy is here.

The Ticking Euro Bomb: How a Good Idea Became a Tragedy

Before Germany's Horst Reichenbach had even stepped off the plane in Athens, the Greeks knew who was coming. He had already been given various unflattering nicknames in the Greek media, including "Third Reichenbach" and "Horst Wessel" -- a reference to the Nazi activist of that name who was posthumously elevated to martyr status. The members of his 30-strong team, meanwhile, had been compared to Nazi regional leaders.

The Greek crisis has revealed why the euro is the world's most dangerous currency. The euro was built on a foundation of debt and trickery, where economic principles were sacrificed to romantic political visions. The history of the common currency is the story of a good idea that turned into a tragedy of epic proportions.

This is Part 1 of SPIEGEL's recent cover story on the history of the common currency. The remaining installments will be published in English on Thursday and Friday.

If you have the time, this spiegel.de story is a must read. I thank Roy Stephens for sharing it with us...and the link is here.

'Whole Set of Options' - IMF Offers to Dramatically Expand Euro-Zone Help

With the Greek economy failing to recover to the degree expected, plenty of officials and analysts this week have fretted about whether efforts currently in place to prop up the country will be sufficient. On Wednesday, the International Monetary Fund joined the chorus, offering to vastly increase its role in helping the euro zone put the brakes on the accelerating debt crisis.

Borges also indicated that the IMF was prepared to change its role in ongoing efforts to get Europe's debt crisis under control. The IMF, he said, could step in to bond markets to help prevent Spain and Italy from succumbing to the crisis.

"We have a whole set of options that could be put on the table to restore confidence in those countries," Borges said.

Of course this is just another name for money printing on an unprecedented scale. This is another Roy Stephens offering from spiegel.de...and the link is here.

Kitco tax case a test of zealous enforcement

When Revenue Quebec raided the offices of Montreal gold bullion dealer Kitco Metals Inc. in June, it alleged that a huge tax scam was under way.

The allegation that the company had evaded GST and QST payments surprised many people [including this writer] in the gold trading industry, where Kitco had been a well-regarded dealer since its founding in 1977.

But Revenue Quebec’s actions didn’t surprise accountants and tax lawyers who deal with the department on a regular basis.

Over the past 18 months, they say, the Quebec government has been much more aggressive in trying to enforce sales tax collection – even to the extent of holding companies liable if their suppliers don’t remit what they owe.

Quebec provincial law has no effect on what happens in the rest of Canada...federally or provincially.

This is an interesting read...and if these rules are being applied to Kitco, they could be equally applied to any other company that's registered in Quebec. So what's happening to Kitco should not be taken out of context. I thank Quebec reader Howard Brown for sending me this story out of the Tuesday edition of The Montreal Gazette...and the link is here.

Fund managers Pento, Leeb see money creation, inflation boosting metals

Eric King sent me a couple of blogs yesterday. Both of them are contained in this GATA release from late last night...so I'll let Chris do the honours once again. The link is here.

Old Glory Mint CEO, Reed Larsen, Interviews James Turk

Reed sent me this 5:37 video interview he did with James Turk while he attended the Utah Monetary Summit early last week. I think it's worth your time...and the link to this youtube.com video is here.

Lehrman's five-step plan for getting back to a gold standard

Yesterday, thestreet.com gave industrialist, philanthropist, historian, and Reagan gold commission member Lewis E. Lehrman a few minutes to explain his five-step plan to return the United States and the world to a gold standard to eliminate currency market manipulation and volatility. It's a short clip that only runs 2:25...and is posted at the Lehrman Institute's The Gold Standard Now website. The link is here.

How gold confiscation could happen and what you can do about it: David Ganz

Writing for the Internet site of Centennial Precious Metals in Denver, USAGold.com, New York lawyer David L. Ganz, who specializes in precious metals and numismatic law, has produced a detailed and fascinating history of gold confiscation in the United Sates and commentary on the applicability of current U.S. law to gold ownership.

This is another GATA release where Chris has already done extensive heavy lifting in the preamble, part of which appears in the above paragraph. So I'll leave the rest in his capable hands...and the link is here.

India, China lead gold rush

Here's a story filed from Mumbai that showed up as a posting over at the Asia Times Online website early yesterday morning.

Beijing becoming host to Asia's first automatic gold vending machine - in a continent where millions are yet to see the variety that spews paper cash and potato crisps - offers the latest indication of China and India being world's leading gold buyers, despite record fluctuating prices mid-September.

Accounting for over 55% of global craving for the noble metal, India and China ensure gold remains a trusted refuge of investment in an ailing world economy, weakened further with the deepening debt crisis in Europe and United States.

This is an absolute must read from one end to the other...and I thank Swiss reader B.G. for sending it my way...and the link is here.

Is gold on the cusp of a rise to unheard of levels? - John Embry

This is an article that appeared on September 2nd in the Investment Digest of Canada. How I missed it, I don't know. It finally showed up in my inbox yesterday courtesy of Australian reader Wesley Legrand. It was obviously written before the August 22nd peak in the precious metals market...but it's a must read nonetheless.

I spoke to John on the phone yesterday...and his October commentary is just about ready to be published as well...so I'll certainly keep an eye open for that. The link to his September commentary, posted over at the sprott.com website, is here.

¤ The Funnies

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Columbus Gold Closes Transaction to Acquire Paul Isnard, 1.9 Million Inferred Oz. Gold Project; Plans Drilling

On June 30, 2011, Vancouver, Canada based, Columbus Gold (CGT: TSX-V) announced that it had closed its previously-announced transaction with Auplata SA, gaining the exclusive right to obtain up to a 100% interest in the Paul Isnard gold project in French Guiana, which includes the 43-101 compliant 1.9 million Inferred gold resource in the Montagne d'Or gold deposit. Columbus Gold now has fully satisfied the share issuances required to earn into the project, and can earn its initial 51% interest in the project by incurring $7 million in exploration expenditures, which it expects to complete by early 2012. Upon Columbus Gold earning a 51% interest in the project, it will have an option to increase its interest to 100% (subject to an underlying royalty) by completing a bankable feasibility study. Drilling is planned to commence in August 2011.

For additional information, please see Columbus Gold news release dated June 30, 2011, or contact the company at:

Investor Relations
604-634-0970 or

1-888-818-1364
info@columbusgoldcorp.com

¤ The Wrap

The preliminary open interest numbers for Wednesday's trading day showed that, despite the rally, there will be another decline when the final numbers are posted later this morning. It's possible that some of yesterday's rally involved short covering, but the final open interest numbers won't be conclusive no matter what they are...and they will be in next Friday's COT report, not the one coming out tomorrow.

The only thing of real interest in the preliminary o.i. numbers was an increase of 109 contracts in silver for the October delivery month, so it's obvious this amount [545,000 troy ounces] will be withdrawn from Comex inventories sometime before the month is out.

The final open interest numbers for Tuesday, despite the big price declines in both silver and gold on that day, showed little change from the preliminary numbers...and I'm not prepared to read anything into that, because the bullion banks are excellent at hiding their tracks, which they could have done on Tuesday...and yesterday as well for that matter.

Neither gold nor silver prices did much during Far East trading...and not much happened until shortly after London opened. But then rallies developed in both metals...and silver really took off, making it up to $31.30 for a moment, before getting sold off a bit. Gold volume is on the lighter side...and silver volume is a bit heavier than I'd like to see.

With virtually all the leveraged technical longs flushed out of all the precious metals in the Comex futures market, we just have to wait around for the next major rally to develop. And, as is always the case, it's not the buyers coming in on the long side of the market that concerns me...it's the entities taking the short side of the trade that will determine how far and how fast that prices rise. Will the '4 or less' traders show up on the short side again? If they do, the rallies will inevitably result in another sell-off in the Comex futures market somewhere down the road. If these bullion banks don't show up, then the sky will be the limit.

Of course there's always the possibility that we could experience a short-covering rally similar to the one that started in August of 2011. A rally such as that is accompanied by falling open interest, as the Commercial traders [mostly bullion banks] show up in the market to cover their short positions by buying long positions. I would suspect that we'll find out reasonably quickly which scenario turns out to be the correct one.

Considering what happened yesterday...and what's going on in London as of 5:02 a.m. Eastern time, it's really impossible to tell what might happen during the Thursday trading day in New York...so we'll just have to see what the day brings once the Comex opens for business at 8:20 a.m. Eastern.

That's all for now...and I'll see you here on Friday.

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