Gold price action on Monday looked similar to Friday’s. The bottom for gold in the Far East came shortly after 3:00 p.m. in Hong Kong…rose until shortly after London opened, declined a couple of bucks…but once the London a.m. gold fix was in [10:30 a.m. in London...5:30 a.m. in New York], gold rose to its high of the day shortly after 11:00 a.m. This high [once again over $940] lasted until 9:00 a.m. in New York, shortly after the Comex opened…then it got taken down eight bucks to its low of the day at 10:00 a.m. in New York…which just happens to be the London p.m. fix…3:00 p.m. over there.

From that point it rose right into the Comex close…and was taken down and closed below $940 once again in the electronic market.

Silver’s chart pattern was virtually identical to gold’s. The only major difference was that silver’s low of the day was a few minutes before the close of electronic trading in New York around 5:15 yesterday afternoon.

There wasn’t big volume in either metal yesterday…as the ’summer doldrums’ are now upon us. But it’s plain to see the trading by the New York centre banks controls the price. As I’ve said before…well over 90% of all trading volume in the gold and silver markets occurs during Comex hours in New York. It’s wonderful to watch the metal prices rise in the Far East [as they're doing as I write this]…but all the bullion banks have to do is throw a bunch of contracts into the New York [Globex] Access Market and they can drop the prices in a heartbeat…which they do…when overseas markets are showing any kind of “irrational exuberance”.

Friday’s down-day in both metals produced some rather predictable drops in open interest in both metals. In gold, o.i. fell 1,850 contracts to 378,433… on volume of 80,641 contracts. In silver, o.i. fell as well…down 854 contracts to a total open interest of 102,788. Volume was a very chunky 52,694…mostly spreads and switches. I would expect Monday’s open interest numbers to show further declines when they’re posted on CME website later this morning.

Monday was the last delivery day in the June contract. There were 81 gold contracts delivered…and five in silver. Today is the first notice [and delivery] day for the July contract in both metals, so we should see some pretty big numbers when I report on them tomorrow morning. There were no changes reported by the U.S. Mint yesterday. They might report their past week’s activity today…being the last day of June and all. But I would bet dollars to donuts that whatever they’ve minted in the last five business days of June will be reported as July production. We’ll see. There were no changes to the alleged holding of the either the GLD or SLV on Monday. But over in Switzerland at Zürcher Kantonalbank, they added the real deal to their ETFs during the past week…64,928 ounces of gold…along with a substantial 484,769 ounces of silver. As always, I thank Carl Loeb for those numbers. And lastly, over at the Comex-approved warehouses, another 244,051 ounces of silver were withdrawn from their inventories.

The usual New York gold commentator had the following to say…”World gold rallied some $8 during the European morning, prompting Mitsui-London to remark: ‘We are trading for a new quarter today, and without the recent sales that have capped the market, there is a distinct possibility that gold resumes its path higher.’ [As you know, the N.Y. bullion banks put an end to that optimistic comment later in the day. - Ed] This, of course, concurs with the analysis of The Gartman Letter which repeated [a previous] thought: ‘As far as gold and the other precious metals are concerned, as we have said, there is someone or something as a willing and large seller of gold between $980-$990, with that level having turned back the gold bull three times over the past year…We are small mice in a field of large elephants at war, and it is best that we watch from the sidelines of their field of battle…’ The forces opposed [to] gold may not be TGL’s elephants, but they are certainly resolute.”

The OCC’s [Office of the Comptroller of the Currency] Quarterly Report on Bank Trading and Derivatives Activities for the First Quarter of 2009 was just released. And before your eyes glaze over and you skip down to the next paragraph, please bear with me on this. Firstly, I’m only dealing with the derivatives on precious metals…and which U.S. banks have the most. It’s so simple…and I’ve talked about this before. In gold, four [4] U.S. banks [out of thousands] have $116.9 billion in outstanding gold derivatives. The other thousands of U.S. banks have $140 million between them. That’s right…million, not billion!!! So the grand total, including all U.S. banks, adds up to…wait for it…$117.0 billion…the thousand of other banks, and their piddling $140 million, are [barely] a rounding error!!! But these four U.S. banks have a concentrated short position in gold that’s off the charts…and they’re all the ‘usual suspects’. And it gets worse!!! Of that $117.1 billion in gold derivatives held by all U.S. banks, a whopping 79.3% are over at the Fed’s bank…JPMorgan (NYSE:JPM). HSBC USA (NYSE:HBC) owns 16.7% of them, Citi (NYSE:C) has 3.2% and Bank of America (NYSE:BAC) owns a piddling 0.7%. But what about the other ‘thousands of U.S. banks’…well, between them, they own a magnificent 0.1%. The really cute thing is that the U.S. Treasury’s bank…Goldman Sachs (NYSE:GS)…doesn’t have a dollar in the precious metals derivatives market at all. Go figure!

And now for the balance of the precious metals derivatives…the vast majority of these would be in the silver market…way over 90%. Only the ‘usual suspects’ have any derivatives in this category. The thousands of other U.S. banks don’t play in this sandbox at all. JPMorgan has 56.2%, HSBC USA has 40.3%, Citi…1.9% and BofA…1.6%.

Let’s cut right to the chase…JPMorgan and HSBC USA hold 96.0% of all gold derivatives and 96.5% of all silver derivatives in the entire U.S. banking system…as of March 30th. And don’t forget…the latest Bank Participation Report issued on June 2nd. It showed that ‘3 or less’ U.S. banks in gold and ‘2 or less’ U.S. banks in silver were net short 123,100 Comex gold contracts [12.3 million ounces] and net short 27,500 Comex silver contracts [137.5 million ounces] respectively. Can you, dear reader, figure out which two U.S. banks they might be??? This is not rocket science…is it???

JPMorgan is the custodian of the SLV ETF…and HSBC USA is the custodian of the GLD ETF. And you wonder why I use the word “alleged” when I talk about how much silver and gold they have in them. Wonder no more.

The OCC derivatives report is linked here. The small chart [Table 9 on page 30] is the only item on the page, and is simple to read…so you can check it out yourself. The June Bank Participation Report is linked here. You have to scroll about two thirds of the way down the page to find silver and gold…in that order. The numbers are presented in a way that any person with a room temperature [in degrees Fahrenheit] can understand.

So why don’t the CFTC and/or the SEC do something to put an end to this grotesque situation…which has been going on for decades? The reason is that both these organizations are there to protect these banks…not enforce the law. But what about the gold and silver mining companies…and their fiduciary responsibilities to their true owners…you, the shareholder? Go ahead and ask them and see what kind of answer they give you. As John Embry over at Sprott Asset Management said years ago…”The mining companies are either ignorant, naive…or complicit.”

In other gold news, I see that the Canadian Mint is still looking for about 17,500 troy ounces of gold that has vanished into thin air. “The corporation says that the un-reconciled precious metals only relate to metals owned by the Royal Canadian Mint and not the stockpile owned by the mint’s customers stored in its Ottawa headquarters.” The full story from the Ottawa Citizen is linked here.

And lastly is a comment that comes from one Mr. Orlandini at DTAnalysis.com out of Lima, Peru…”This morning Barclay’s Capital came out and said that the rally in silver is overdone and there will be a significant correction. They advised everybody to sell short the December silver futures contract and look for a decline down to $12.00. By association, that means gold should go a lot lower as well. I have other thoughts on the subject.” The last time I checked, Barclays ran the silver ETF…SLV. Very strange coming from the likes of Barclays. By the way, $12 silver would take it below its 200-day moving average and clean out all the spec longs. Gold’s 200-day m.a. is at $875…and we’d have to close below that…and stay there for a few days/weeks to get all these longs to puke up their positions. The ‘4 or less’ traders shown in the COT report are short more than 20 million ounces of gold and over 230 million ounces of silver. They can pull it off any time they want…as I [and Ted Butler] have been going on about for the last month. It’s just the timing that’s unknown.

Wow! I see that I’ve really been on a soap box today. But there’s been lots to talk about. I have three stories…once of which is a repeat from Saturday. My editor and I were have problems getting the hyperlink to work properly on this one, so it wasn’t posted until much later on Saturday…long after CDR+ was loaded on the Net. The only reason I’m reposting it is because it’s important that those of you who missed it, read it. I’ve just ‘cut & paste’ the appropriate paragraph from Saturday’s commentary below.

In their latest “Markets at a Glance” commentary, Eric Sprott and David Franklin, from Sprott Asset Management conclude that…”the future solvency of the United States as a nation state is currently in jeopardy. It is in far deeper trouble than the mainstream press cares to admit. There are simply not enough new buyers of debt on this planet to support the spending programs of the United States government – and it appears that current holders of debt are beginning to sell.” It’s entitled “The Solution…is the Problem”…To access it, first go here. Then on the “Manager Insights” drop-down, select Eric Sprott. Click on the May/June link.

The second story is an offering from Bloomberg…with thanks to Craig McCarty for sending it along. The headline is chilling…but no surprise to me…”AIG Discloses New Risk on Derivatives Sold to European Banks”…”The risk of losses on the derivatives may last ‘longer than anticipated’, the New York-based insurer said late yesterday in a regulatory filing updating the ‘risk factors’ in its 2008 annual report.” [No 'green shoots' here! - Ed]. The link is here.

Lastly…if you’re not already fast asleep…is silver analyst Ted Butler’s latest commentary. For those of you who don’t know, Ted was a commodities traders for many decades…and since his retirement from that, he has focused the last 20+ years on ending the manipulation of the silver market. Here he spends a great deal of time discussing the US Senate Permanent Subcommittee on Investigations’ 247-page report entitled “Excessive Speculation in the Wheat Market”…and how it applies to what’s going on with silver [and gold]. The story, entitled “The Senate Report”, is buried in a GATA release, because I feel that the preamble…written by GATA’s secretary treasurer [and senior editor of Manchester, Connecticut's Journal Enquirer]…is worth reading, and the link is here.

It is the nature of protracted Credit Bubbles to impart deleterious effects upon the underlying economic structure. As the master of “activist” monetary management, Mr. Greenspan’s reign at the helm of Fed saw a move into uncharted territory with respect to marketplace interventions and manipulations. – Doug Noland, prudentbear.com, 26 June 2009

I see, as I put this commentary to bed for another day, that a not-for-profit seller showed up in late Hong Kong trading. This activity has now moved into London…which has just opened as I file this. It could get wild and wooly in gold and silver today.

See you tomorrow.

Source: And Then There’s This…Tuesday, June 30th, 2009