Speaking of open interest numbers, gold o.i. on Thursday fell 3,216 contracts to 391,144…on absolutely monstrous volume of 174,662 contracts. Silver’s decline was much more modest…only 93 contracts to 96,309…on total volume of 18,664 contracts.

The Commitment of Traders report issued yesterday, was as expected. In silver, the bullion banks decreased their net short position by 1,522 contracts. This doesn’t seem like a very big number, but it’s impressive because o.i. fell in the face of a silver price that rose quite a bit during the reporting week. The full color COT report is linked here.

Gold o.i. was exactly as expected…with the bullion banks going short against every long…effectively stopping the gold rally in its tracks. The bullion banks increased their net short position by a staggering [but not surprising] 21,939 contracts. The bullion banks are now net short 204,226 contracts…20.4 million ounces. The full-color COT graph for gold is linked here.

We are now sitting with a COT structure that is bullish to very bullish for silver…and very bearish for gold. This situation has only existed a few times during the last ten years. Ted suggested [and not for the first time] that maybe ‘da boyz’ are trying to permanently separate silver and gold prices so that silver will rise independently of gold. That’s possible…but we’ll have to wait and see if it pans out that way.

The Comex Delivery Report for Friday showed that only 55 gold contracts were delivered…and nothing at all in silver. There were no changes in the alleged holdings of either GLD or SLV. The U.S. Mint has updated their production numbers in silver eagles again. This time they showed that another 275,000 silver eagles were minted…bringing the monthly total up to 2,300,000. Nothing was added for gold eagles. And the Comex-approved warehouses reported that 320,392 ounces of silver were withdrawn from their collective inventories.

The usual N.Y. gold commentator mentioned that The Gartman Letter’s buy stop at $955 was not triggered yesterday because gold did not, in fact, trade long enough above that price to trigger its buy. He also had this…”There is a good deal of commotion today regarding forecasts that China will pass India in gold consumption in some five years. It is odd that so many observers extrapolate about the intensely volatile Indian gold market based on a few months recent history. At the time of the enormous imports last summer, the talk might well have been of India monopolizing the world gold stock! In any case, China’s gold production, bolstered by subsidized fuel and the hugely undervalued Yuan apparently supplies almost all local demand (India mines almost no gold). How seriously can one take the Shanghai Gold Exchange, which today reports that the gold contract is backed by only 156 kilos of metal? The Bloomberg story is headlined “China May Overtake India in Gold Demand, Council Says”..and the link is here.”

The other day, several companies [i.e. Ford (NYSE:F), eBay (NASDAQ:EBAY) and AT&T (NYSE:T)] reported better than expected earnings and as a result, the stock market rallied on the news. While some companies have reported better than expected earnings for Q2/2009, others have struggled. Today’s chart provides some perspective on the current earnings environment by focusing on 12-month, as reported, S&P 500 earnings. You can see how earnings are expected [38% of S&P 500 companies have reported for Q2/2009] to have declined over 98% since peaking in Q3/2007, making this by far the largest decline on record…and the data goes back to 1936. I thank P.S. for providing this data…which is all [including the chart] courtesy of www.chartoftheday.com …the link to the website is here.

Besides the Bloomberg story embedded in the usual N.Y. gold commentator’s paragraph above, I have three other stories for your reading pleasure this weekend. The first is from yesterday’s edition of The Economist out of London. It bears the headline “Here today, gone by 2010: Russia reserve fund is emptying fast.” The story is certainly worth the read…and I thank P.S. for sending it along. The link is here.

The next story is from the hallowed halls of the The New York Times. It’s a story about high-frequency trading—which has become one of the most talked-about and mysterious forces in the markets. Casey Research’s own Bud Conrad was circulating this story around the company yesterday…and I thought it worthy of your time. It’s entitled “Stock Traders Find Speed Pays, in Milliseconds”…and the link is here.

The last story today is from commodityonline.com…and filed from Johannesburg. The title pretty much says it all…”New law boosts gold bar sale in South Africa.” Until I read this story, I wasn’t aware that South Africans were not allowed to own gold in bar form. You learn something new every day. The link is here.

Throughout all my years of investing, I’ve found that the big money was never made in the buying or the selling…the big money was made in the waiting. – Jesse Livermore

Today’s ‘blast from the past’ goes back to 1972. I believe that this was their biggest, if not their only, hit. But what a hit it was. Turn up your speakers and then click here.

Something appears to be up in the gold and silver market…which the latest COT confirms. Further rallies in gold never amount to much when the bullion banks are short this amount of gold. Sure, I’ve seen their short position as high as 26 million ounces…which is 55,000 contracts higher than we are today…so I guess we can go higher, but the odds are not in our favor. How high we go from here [if we do go higher] depends entirely on whether the bullion banks are prepared to take on an even larger short position. But once that high [whatever, and whenever it is] is in, there is only one direction gold can go…down. Will silver go with it? Don’t know, but Ted Butler says that they would have to get the price below its latest low, which is around $12.40…about $1.50 below where it closed yesterday…before there would be any more significant long liquidation by the tech funds and the small traders. The 200-day moving average is at $12.29. Ted doesn’t think they can do it. We’ll see.

I note in closing that this is the last edition of Casey’s Daily Resource Plus. I hope that you have found it to be both educational and entertaining. Many parts of it will be shuffled off into other reports…and as most of you already know, I’ve been fortunate enough to be given my own daily stand-alone column. That honor is entirely because of you, dear reader…and for that, I’m grateful, appreciative…and thankful.

Enjoy the rest of your weekend and I’ll see you next week with a brand new look…which I look forward to seeing for the first time myself…as I haven’t seen it yet either.

Source: And Then There’s This…Monday, July 27, 2009

Silver developed the gentlest of upward trends early in London and rode that trend through the Globex, ending just off its intraday high at $13.87/oz., up 17 cents. For the week, silver is up 3.4%. (Click here for charts)

Although profit-taking kept gold from staging a big rally this week, the yellow metal should be well supported at current levels because of dollar weakness and inflation fears, analysts said.

“We are still up here in quite a high range. We don’t see any physical buying coming in at these levels, but what is supporting it is the dollar,” said Andrey Kryuchenkov, an analyst at VTB Capital.

“The dollar’s weakness and the idea that inflation expectations are on the rise are holding gold here,” Kryuchenkov added.

In company specific news, Mineweb reported that Kinross Gold (NYSE:KGC) has recently assumed stock price leadership of the loosely-defined Tier 1 global gold stocks sector, which includes 12 companies with an aggregate market value of just under $200 billion. Kinross’s stock price fluctuated between a 52-week low of $6.85 and high of $20.98 a share, with current trades around the $20.28 mark.

Barrick, the world’s biggest gold miner by value and production, is trading nearly 25% off its 52-week high. Kinross was one gold stock chosen for investment this year by US hedge fund Paulson & Co Inc., which famously scored gains of nearly $4 billion betting against banks in 2007 and 2008.

In the past several years, Kinross has transformed itself from a stodgy, higher cost gold producer to one that increasingly reports lower costs, along with a highly convincing longer-term growth profile.

Source: Gold Pushes Through $950

Wednesday’s open interest in gold showed an increase of 3,421 contracts to 394,360…on big volume of 120,609 contracts. Silver o.i went the other way…down 1,867 contracts to 96,402…on decent volume of 22,687. Ted said that most of the decline in silver came from far-dated spreads being lifted. I was surprised that silver o.i. fell at all, considering the fact that silver rallied 30 cents in New York trading…at the same time that gold rose nine dollars…as did its open interest. Another unsolved mystery in the dichotomy that exists in the o.i. between these two metals. Since this occurred on Wednesday, one day after the Commitment of Traders cut-off, we won’t see the actual results of this until the COT on July 31st.

Speaking about the COT…the latest one comes out at 3:30 Eastern time this afternoon. Ted and I figure that the net short position in gold has deteriorated at least 20,000 contracts since the last report…and that the bullion banks are now short over 20 million ounces…again. And don’t forget that of that 20 million ounces, pretty close to 14 million ounces of that short position is held by ‘3 or less’ U.S. bullion banks.

The Comex Delivery Report showed that 66 gold and 38 silver contracts were delivered yesterday. There were no changes in the alleged gold holdings of either GLD or SLV either. There were no changes in production over at the U.S. Mint…and the Comex-approved warehouses showed a small decline in silver inventories of 117,180 ounces troy.

Before continuing further, I’d like to explain what I mean by “alleged” when I refer to the gold holdings of either the GLD or SLV. I know I’ve explained it before, but an e-mail that I received yesterday via Ted Butler suggests that I should do it again. Yes, I’m confident that there is gold and silver in these ETFs…but not all that they say they have. The individual prospectus on each of these ETFs is so full of holes, you could drive a Mack truck through most of them. There are no public audits, so there is no way of knowing whether all the metal they say they have, is actually there. The custodians for each do not lend confidence either. The two U.S. bullion banks with the biggest derivatives positions in the precious metals market…JPMorgan (NYSE:JPM) and HSBC USA (NYSE:HBC)…are the custodians of the silver and gold ETFs respectively. Both Ted Butler and I agree that JPMorgan is by far the biggest silver short…if not the only silver short…amongst all the U.S. bullion banks. You’ll excuse me [and the rest of the GATA crowd] if we think something stinks here.

This is one of the few areas that Ted and I totally disagree on. Our conversations turn ugly whenever this subject comes up…and he calls me a lot of terrible names at times. He thinks that it would be pure fraud if the ETFs did not have all precious metals they said they did. True…but how is one to find out? And I trust these two bullion banks just about as far as I can throw them. How about you?

The ETFs are fine for speculating on the price…but to say you own gold when you own one of these [or other] ETFs is pure fiction. The ETFs short their own shares whenever they don’t have the metal to back up demand. Ted and I agree that JPMorgan will rig a sell-off just so that it can buy back the shares they shorted and not have to physically deliver the metal to the SLV.

If you really want to make sure that whatever investment vehicle you buy in the precious metals arena has the physical to back it up, you have several choices…and here are a few of them…the first of which is Central Fund of Canada, James Turk’s GoldMoney, Bullion Management Group, Central Gold Trust (AMEX:GTU)…and soon CEF will have their Silver Trust up and running. I’d bet my life savings on the fact that these firms have the metal to back up their funds that they say they do. All you have to do is phone their auditors and ask. And I’m also fortunate enough to know the principals of all these firms…most of them personally.

But before you invest a dime in any of them, just make sure that your own personal stockpile of gold and silver [in your physical possession] is big enough, before you buy any fund…even GLD and SLV if you must. I don’t…and won’t…own either.

The usual N.Y. gold commentator also had this to say as well…”Amongst today’s buyers was apparently The Gartman Letter which cut its buy stop to $955/1 hour this morning. This will distress many of gold’s friends. [Yes, it does...but as I said earlier this week, I'm praying fervently that he is correct this time. - Ed] While TGL’s initial entry points for gold have a reasonable record, the history of its attempt to double up on breakouts is alarming. Perhaps TGL gets into the wrong hands! With the physical market faltering and Comex open interest and volume getting to levels seen at the late May/early June peak, this move has entered a risky phase.” [It has indeed!!! - Ed]

One of things that has gold where it is…and the bullion banks pulling out all the stops to prevent its rise…is the sheer amount of paper that the U.S. Treasury has monetized…or is about to sell. It is money printing on a scale not seen since Weimar Germany after WWI.

I note in Gregory T. Weldon’s latest edition of Weldon’s Money Monitor that he had this to say…”The most recent data reveals a HUGE single-week [sixth largest EVER] of debt monetization by the Fed, to the tune of $36.9 billion or, at an annualized pace, that would see the Fed monetize TWO Trillion Dollars worth of debt in a 12-month period.”

“Moreover, purchases were broad-based, providing the market with a GRAND-SLAM, covering all ‘four bases’ … with monetization of Treasury debt ($8.67 billion), Mortgage-Backed debt ($26.6 billion), Agency debt ($1.7 billion) and Term-Asset-Backed debt ($1.4 billion).”

And I see that Karl Denninger has gone apoplectic on this issue. Starting today, and ending next Thursday, there are $235 billion dollars in U.S. Treasuries being auctioned…almost a quarter of a Trillion dollars!!! Yep, you read that right! The article, courtesy of Craig McCarty, is entitled “Holy !@#!! Treasury Auction Schedule” and the link is here. There was a story about this in Bloomberg yesterday as well.

There should be a great smoking hole where the U.S. dollar used to be…along with a big four-digit gold price and three-digit silver price on such news…but we all know why there isn’t.

Besides the Denniger piece above, I have two other today. The first I found while I was reading Bill Murphy’s MIDAS commentary over at lemetropolecafe.com. It’s posted at the Ottawa Citizen…and is a reprint from The Financial Post. The story is headlined “On the road to higher gold prices: ‘Barometer of investor anxiety’”…and the link is here.

And lastly is this article in the Financial Times of London…written by Eckart Woertz, who is the Program Manager in Economics at the Gulf Research Centre in Dubai. Amongst other things, he recommends that…”they should engage in cautious currency diversification with gold being the ultimate dollar hedge.” The link is here.

The stock market is no longer the sum product of informed, or Captains of Industry, action. It is a rigged casino and asset bubble that is used to paper over declining US living standards. – Bill King, the King Report…23 July 2009

I’m still on the fence…but every reason why the price of gold and silver should explode…or why the price should be crushed…is on display in this commentary. Rampant money printing…and a large [and growing] gold short position that is well into the danger zone. But can they…or will they? The third possibility is that the bullion banks could get totally over run. I’m not optimistic about this scenario…but like I said before, if it does happen, the party’s at Ted Butler’s place!

All of us at Casey’s Daily Resource Plus hope you have a great weekend and I’ll see you on Saturday morning.

Source: And Then There’s This…Friday, July 24th, 2009

Silver traded flat most of the day, as a gentle rise and fall in London and the same in New York canceled each other out perfectly. The metal finished exactly where it started at $13.70/oz., up/down 0 cents. Overnight, silver is trending higher. (Click here for charts)

Despite big gains in oil yesterday, which is usually gold supportive, the yellow metal fell as it took its cue from rising equities and a slightly stronger dollar.

“We have a tug of war here between those who dare to buy at these levels and people who got in at previous levels. If it breaches $960 [an ounce] it might make a quick run to $975, or it might swing back to the lower end,” said Jon Nadler, senior analyst at Kitco Metals Inc.

If Treasury auctions or GDP data coming next week prove dollar supportive, “it would bring gold down to the $930s at a minimum,” Nadler continued.

While Peter Grant, a senior metals analyst at USAGOLD – Centennial Precious Metals, Inc., believes inflation to be a “legitimate risk,” Nadler calls the jury very much out. “Right now we’re still grappling with deflation if anything.”

In reality, we’ve already had massive inflation (meaning expansion of the monetary base), but it hasn’t manifested in prices yet because the banks are holding the funds in reserve rather than lending them out. Once that money hits the market, however, (and there’s no telling when that will be exactly) you can and should expect huge price inflation to follow. This will be extremely positive for gold.

Source: Gold Takes a Step Back

For the first time in quite a while, there were no deliveries in either gold or silver on the Comex Delivery Report. There were no changes [as usual] in the alleged holdings of the SLV ETF…but GLD showed a drop of 186,507 ounces yesterday. The U.S. Mint has another update for us…they increased their gold eagles by another 4,000 and their silver eagles by 150,000…bringing their monthly totals so far to 60,000 and 2,025,000 respectively. And lastly, there were no material changes in silver inventories over at the Comex-approved warehouses.

The only gold story of interest that I could find was over at mineweb.com where the headline read “Saudi retail gold sales plunge: Higher prices and fewer visitors force sales down 30%”…and the link is here. On top of that, the usual New York gold commentator mentioned in his commentary that neither India or Vietnam were importing gold yesterday.

In other news, I note in a Bloomberg story headlined “Credit Card Charge-offs rise again in June”. As a matter of fact, they rose to a record high. The Moody’s credit card charge-off index — which measures credit card loans that banks do not expect to be repaid — rose to 10.76% in June from 10.62% in May. Moody’s also mentioned that charge-offs should peak at 12-13% in mid-2010.” [I wouldn't bet any money on that. It sounds like another case of whistling past the graveyard to me. - Ed]

Not a lot of interesting stories…as it was a ho-hum kind of day everywhere yesterday. The first one is an item that I lifted from Bill Murphy’s MIDAS commentary over at lemetropolecafe.com. It’s a story from the BBC in London. The headline reads “U.K. Debt Hits a Record of £799 billion” One wonders how much hacking, slashing and outright cooking of the financial books it took to get that number below £800 billion? The link is here.

The next story is from Bloomberg. The opening paragraph reads…”The Federal Reserve is “embroiled” in politics and has “stretched beyond reason” its authority to make loans, said William Poole, who served as president of the St. Louis Fed from 1998 to 2008.” The ‘long knives’ are out for the Fed…even from their own people. The short article is well worth the read…and the link is here.

Normally, press releases from the CFTC would not show up in my column, but this one is different. The headline reads…”CFTC to Hold Three Open Hearings to Discuss Energy Position Limits and Hedge Exemptions: First Hearing Scheduled for July 28, 2009″. Ted Butler sent it to me early yesterday morning. He pointed out the fact that one paragraph was all in bold type. Now why on earth would a government press release do that? It stands out like the proverbial sore thumb. Maybe its because the boys over at JPMorgan Chase (NYSE:JPM) [and the other silver shorts] can only read large print. But it sure looks like a warning to me. Ted went on to say that the 8-point list below that describes to a ‘T’ what has to be done in the silver market to bring it back into line with every other traded commodity on the planet. Or, it could mean nothing. You be the judge…and the link is here.

While the crash only took place six months ago, I am convinced we have now passed through the worst — and with continued unity of effort, we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us. – Herbert Hoover, President of the United States…May 1, 1930

To make up for the lack of anything of much interest yesterday…here’s a video I ran at least 18 months ago. I’ve picked up a lot of new readers since then, so I thought I’d run it up the flagpole one more time. It’s not a music video, but turn up your speakers anyway, and then click here. Enjoy!

I’m still sitting on the precious metals fence…waiting to see which way the gold [and silver] price is going to go…but ready to jump into either the bull or bear camp, depending on the outcome. And as I’ve mentioned several times over the last week or so…I’ve got the perfect explanation as to why the price is going up or down…and by now, dear reader, you should have figured that out too.

Enjoy the rest of your day, and I’ll see you here on Friday.

Source: And Then There’s This…Thursday, July 23rd, 2009

Silver started to fall midway through trading in the Far East and moved sideways through London but trended much higher the rest of the day through the Globex to close at $13.70/oz., up 17 cents. Overnight, silver is trending higher. (Click here for charts)

Gold closed at its highest price on the Globex since June 11 as the dollar weakened in response to an up-tick in risk appetite.

“Almost all the recent momentum is coming on the back of recent dollar weakness,” said Pradeep Unni, a Richcomm Global Services analyst. “Earlier this month economic worries encouraged investors to buy the dollar and U.S. Treasuries. Appetite for other assets including gold and equities seems to be returning.”

“Prices remain well supported above the $950 an ounce mark, largely on the back of the weaker dollar,” said Calyon metals analyst Robin Bhar.

“It may be that outflows from things like the ETFs or the retail base are being offset by more buying of OTC- or futures-based [products],” Bhar added.

Meanwhile, reported holdings of SPDR Gold Shares (NYSE:GLD) dropped another 5.8 metric tons yesterday from 1,092.41 tons to 1,086.61 tons. In the last 30 days, holdings have fallen 44.63 metric tons, or 3.9%.

Some analysts view the decline in holdings at GLD as a sign of waning investor demand.

“We fear that there will be very few buyers above $955 an ounce,” said Andrey Kryuchenkov, a VTB Capital analyst. “Investor demand is waning and it is too early for a seasonal pick-up in jewelry demand.”

Source: Gold Closes Above $950

I mentioned yesterday that the open interest decline on Friday [in that short-covering rally] would have been somewhat offset by the big rally that we had on Monday. Well, I was only partially right. Open interest for Monday’s big day showed a staggering increase…up 12,999 contracts to 393,536…on big volume of 139,361 contracts. Friday’s improvement in o.i. got buried by more than 10,000 contracts! I was stunned! Ted Butler was flabbergasted! Ted feels that the net short position in gold is now back over 20 million ounces, as the bullion banks have increased their net short position by 20,000+ contracts since last Tuesday’s Commitment of Traders report cut-off.

With these open interest changes for Monday now public information, it is more than obvious that bullion banks prevented an explosion in the gold [and silver too?] price on Monday. The reason I say that should be crystal clear to all…because if the bullion banks hadn’t been there to take the short side against all these speculators pouring in on the long side, there would have been nobody else to take the short side and the price of gold [and silver] would have been bid to the stratosphere in a New York minute! This was not an act of strength by the bullion banks…but rather one of extreme weakness…desperation, if you will.

With this untimely [and unhappy] turn of events, Ted and I spent most of our time on the phone discussing a ‘where to from here’ scenario for the bullion banks. In five trading days, they piled on the short positions that just took them five weeks to get out of…and again have a short position that would choke a whole herd of horses…but the questions that remain to be answered are…can they, or will they?

And in silver??? I’m glad you asked. Silver also had a robust day on Monday, and its price also got trashed along with gold’s. It would be fair to presume, would it not, that silver open interest would have soared as well? Well, one would be wrong to presume that. Silver o.i. on Monday rose a magnificent 191 contracts to 98,823…on decent volume of 21,428 contracts. Ted figures that there has been little, if any, deterioration in silver open interest since last Tuesday’s cut-off. I feel [and Ted agrees] that, at the absolute maximum, there are about 7,000 speculative long contracts left to be liquidated in silver for it to be all cleaned out on the downside. In gold, it’s 50-100,000 contracts…and more than that, if we talk about returning to the lows of last November.

It should also be obvious that the bullion banks are treating the silver market like it was a bucket of nitroglycerine…which, in fact, is exactly what it is. They have the kid gloves on here. Ted Butler has always said that the silver market is the center of the universe for the bullion banks…and he would be right about that. These changes in open interest…gold vs. silver…should speak volumes to you. The bullion banks [principally JPMorgan] do not want to go back on the short side of this market.

Many times in the past, the bullion banks have used the price of gold to smash the price of silver. But the question keeps coming up…can they? Will they? If this effort we saw over the last six weeks [gold down to $907...silver to $12.45 at the lows ten days ago] was the best they can do…well, it could get interesting to the upside. But…they have the firepower in their arsenal to blast gold down at least $100 from where it is right now if they choose to. But can they…or will they? The price action in the days and weeks ahead will tell us a lot. The rest of the summer could be really interesting.

Yesterday’s Comex Delivery Report showed that 3 gold and 42 silver contracts were delivered. There were no changes in the alleged holdings at SLV…and over at GLD, a smallish 68,713 ounces were withdrawn. And at last…after six days in a row…the U.S. Mint reported no changes in their production numbers on Tuesday. Over at the Comex-approved warehouses, total silver inventories dropped by four rather small good delivery bars…3,891 ounces.

The usual N.Y. gold commentator had the following…”[This week] the European Central Bank weekly statement of condition indicated no change in “gold and gold receivables”. At a glance, this is only the second time in almost a decade nothing was reported sold. Last week’s disposal was only €2 Million – 0.09 tonnes. The ECB squadron of banks appears to have withdrawn from the market.”

“[On Monday] very powerful opposition immediately materialized on gold’s challenging important technical levels. Both UBS (NYSE:UBS) and Mitsui have remarked that the Spec long as reported by the CFTC had, as of last Tuesday, come down to levels at which they could entertain the possibility of a rally. Perhaps the CFTC data influenced the instigator of yesterday’s move. Unfortunately, as of last night, open interest had added 23,027 lots (71.6 tonnes, or 6.2%) for a $26 rise (2.8%).” [Ted's comment in a prior paragraph that gold o.i. had increased 20,000+ contracts since last Tuesday's cut-off is obviously correct. - Ed]

Before I start on my stories for the day, I want to mention something from my commentary yesterday. One of the charts provided was the contraction of the Commercial Paper market. The chart I cut and paste wasn’t overly clear…so here is the URL where I got the chart from…and it’s infinitely better. The link is here.

Over at Bill Murphy’s lemetropolecafe.com came this item of interest. It appears that a Café member e-mailed David Einhorn of Greenlight Capital to get some clarification on the switch from GLD to bullion (Did Greenlight simply redeem its GLD shares for bullion from GLD, or did Greenlight sell its GLD shares and procure the bullion from a source other than GLD?). The reply he got from Einhorn was as follows…”We didn’t discuss the transaction at that level of detail (and don’t plan to).”

Today’s first story involves the U.S. Postal Service. It appears that four unions representing the nation’s postal workers are pleading for a meeting with the White House to address possible funding shortfalls for workers’ payroll and retiree health benefits. USPS top executives are now saying that the USPS will default on a $5.4 billion payment to prefund future retiree health benefits on September 30, 2009…and may not be able to make payroll in October and will be forced to issue IOUs instead. I thank Craig McCarty for the story over at myfederalretirement.com and the link is here.

In a story out of the Financial Times in London is this headline…”China to deploy foreign reserves”…”Beijing will use its foreign exchange reserves to support and accelerate overseas expansion and acquisitions by Chinese companies…” and the link is here.

Along with Philadelphia yesterday [and the ongoing bankruptcy saga in California] is this Bloomberg story headlined “Jefferson County, Alabama, to Put One-Third of Workers on Leave”…and unpaid leave at that! The link is here.

Thanks to Bill King over at the King Report on Sunday night, came this insider story posted over at advancedtrading.com. It’s a fascinating look into the world of “proprietary algorithmic trading codes”…the story that engulfed Goldman Sachs (NYSE:GS) just recently. Despite its rather complex subject matter, the article is pretty easy to understand…and very much worth your time. The article is entitled “The Real Story of Trading Software Espionage”…and the link is here.

And lastly is another article by silver analyst Ted Butler. Now that the U.S. Commodity Futures Trading Commission is talking seriously about imposing position limits in silver, Butler says the suppression of silver prices can be broken. But only if silver investors express themselves and encourage the new regime at the CFTC, every step of the way. For the commodity exchanges will fight behind the scenes to preserve the status quo…and the illicit profit it ensures for the market manipulators. Butler’s new commentary is headlined “The Real Solution” and is linked here.

It is hard to imagine a more stupid or more dangerous way of making a decision than by putting those decisions in the hands of people who pay no price for being wrong. – Thomas Sowell

I’d forgotten that Gentle Ben was giving his semi-annual monetary policy report to the House Finance Services Committee yesterday morning. That may have been part of the reason why there was no follow-through in the gold market on Tuesday. As to what’s coming down the pipe…if you’ve carefully read what I had to say further up…it’s really a crap shoot. Either gold and silver get killed and the bullion banks cover as many shorts as they can…or the price continues to rise and the bullion banks just get more mega-short. Then there’s the issue of the CFTC’s position limit changes…if, and/or when they happen. I think I’ll flip a coin instead.

See you on Thursday.

Source: And Then There’s This…Wednesday, July 22nd, 2009

Silver hit its intraday high of $13.70 about midway through Hong Kong then developed a volatile but generally downward sloping trend and fell to its intraday low of $13.45 around 1 p.m. in New York. From there silver was able to regain some ground through the Globex to close at $13.53/oz., down 10 cents. Overnight, silver is down sharply. (Click here for charts)

Gold was propped up by higher oil prices yesterday but that upward force was slightly overpowered by investors’ naïve belief that the Federal Reserve will be able to combat future dollar devaluation and price inflation.
Still, analysts like Shuji Sugata, a manager at Japan’s Mitsubishi Corp Futures & Securities, said crude oil is currently a key factor in providing gold with direction.

“We’ve seen crude oil climb almost daily and before we knew it it had topped $60, which has been a positive factor for gold,” Shuji said.

“Now whether crude oil challenges $70… will also be key to whether gold will rise towards its recent high near $990,” he continued.

Meanwhile, reported holdings of SPDR Gold Shares (NYSE:GLD) dropped 2.13 metric tons yesterday from 1,094.54 tons to 1,092.41 tons. In the last 30 days, holdings have fallen 38.83 metric tons, or 3.4%.

In company specific news, Australia’s largest gold producer, Newcrest Mining’s annual gold production fell more than 8% over the past fiscal year, only just meeting company guidance.

Newcrest’s latest production report showed total gold production across its operations fell to about 1.63 million ounces, compared to about 1.78 million ounces last year, a fall of 8.4%.

Newcrest shares fell 57 cents, or 1.84%, to $30.39 on the news.

Source: Gold Holds Firm

There wasn’t big volume yesterday, so not too much should be read into this action…but it’s always noteworthy so see that parabolic rises in prices are never allowed to get too far out of hand before the usual ‘not for profit’ sellers show up.

Despite the fact that Thursday was a quiet trading day and neither metal did much price wise…open interest in gold increased another 3,100 contracts to 383,107 contracts. Volume was decent….74,589 contracts. Open interest in silver rose as well, another 410 contract to 99,744…on volume of 15,052 contracts.

The Commitment of Traders report came out yesterday as per usual. In silver, the bullion banks decreased their net short position by a respectable 2,807 contracts…but are still net short 34,625 contracts or 173.1 million ounces of silver. Virtually all of that net short position is held by two U.S. banks…JPMorgan (NYSE:JPM) and HSBC USA (NYSE:HBC). Since the Tuesday cut-off for this report, the bullion banks have decreased their net short position a bit more. The full-color COT graph for silver is linked here.

In gold, the bullion banks decreased their net short position by 9,020 contracts…but are still net short 182,287 contracts…which is quite a bit…18.23 million ounces of the stuff. What’s really unfortunate in gold is that since the Tuesday cut-off, these same bullion banks have put the entire 9,020 short contracts back on…plus more! A ‘back-of-the-envelope’ calculation indicates that they’re short position is now back up to around 19.5 million ounces as of the close of trading on Thursday…and they probably added more on Friday when they capped that $10 rally. So, from a COT point of view, gold is still well into the danger zone…and the chance of a huge sell-off in gold is still a distinct possibility. The full-color COT graph for gold is linked here.

But…under current circumstances…can they, or will they??? This is why I find this price capping at $940 so suspicious. If they’re painting the charts with a false top, we could get creamed in the near future. But…then again…maybe not. The COT says ‘yes we will’…and current circumstances say ‘no we won’t.’ And as I said yesterday, I could easily explain a big price move in either direction for both metals. I’m sure glad that I don’t have to bet any money on the near-term outcome of all this.

As far as deliveries went yesterday, the Comex reported that 55 gold and 42 silver contracts were delivered. There were no changes in the SLV ETF…but over at GLD, I see that they reversed the transaction of the piddling 9,817 ounces they added on Thursday…and have now removed it. Much to my amazement, the U.S. Mint had another update to their production numbers. This is five days in a row…a record! On Friday they reported another 5,500 gold eagles and another 75,000 silver eagles…bringing the monthly totals up to 56,000 in gold and 1,800,000 in silver. And over at the Comex-approved warehouses, another 208,010 ounces of silver were withdrawn on Thursday. Friday’s changes will be reported on Monday.

The big precious metals news yesterday was in the silver market…and I’m surprised that nobody has picked up on this already…and I thank Ted Butler for sending it to me in the wee hours of Saturday morning. The story is posted at newswire.ca and the headline reads “Claymore Silver Bullion Trust Closes its IPO”. The IPO was for 3.6 million units at $10 [probably Canadian dollars since it's a Canadian fund]…plus a full warrant. The fund has also granted the agents an over-allotment option for up to an additional 540,000 fund shares [plus warrant] during the next 30 days. A quick guess says that they should be able to pick up about 2.6 million ounces of silver if everything works out. Central Fund of Canada and their silver trust should be out of the starting gate pretty soon too, I would think. The link to the Claymore IPO story is here.

Today’s first story is from cnsnews.com. Just when you thought you’d heard everything, here is U.S. Vice President Joe Biden saying “We Have to Go Spend Money to Keep From Going Bankrupt”. I wonder if the Chinese government has read this article and heard the video? I thank P.S. for this story…and the link is here.

The next story comes from the …and I thank the usual New York gold commentator for bringing it to my attention. In what some on Wall Street are calling the biggest blockbuster deal in the history of the financial sector, Goldman Sachs confirmed that it was in talks to acquire the U.S. Treasury Department. I know that it’s ‘impossible!!!’ to believe, but the story is linked here, so you can draw your own conclusions.

The third story today is from over at the mineweb.com…and I thank Bill Murphy over at lemetropolecafe.com for running it in his MIDAS commentary yesterday, or I would have missed it entirely. The headline reads “Vault Space Shortage: Swiss banks running out of storage space for gold bullion”. This is a problem that sounds like it’s going to get much worse before it gets any better. The link is here.

And lastly is this piece from Hugo Salinas Price. Not only is Hugo one of the richest men in Mexico, he is also the President of the Mexican Civic Association for Silver…an organization that is getting very close to re-monetizing silver in that country. When he is talking, I’m only too happy to listen. His latest commentary is entitled “Causes and effects” and the link is here.

There is only one way to kill capitalism…by taxes, taxes and more taxes. – Karl Marx

Today’s ‘blast from the past’ is somewhat different this week. The rock band Toto scored its biggest hit with Africa back in 1982. But this is not the 1982 version linked here…it has, as they say, been reinvented. It is sung a cappella…by a jazz choir called Perpetuum Jazzile from Slovenia of all places! And before you dismiss this out of hand, I urge you to give it a listen. It’s absolutely amazing! I was totally blown away. It was a Paul Potts/Susan Boyle [Britain's Got Talent] kind of moment when I heard this for the first time. I like it even more than the original version…and I thank reader Dave Delve for sending it to me. This piece definitely requires that you turn up your computer’s speaker system…then click here. Enjoy!!!

I have no idea what gold and silver prices will do next week. If they scream higher…I’ll understand the reasons. And if they get killed…I’ll understand the reasons for that, too.

But, that’s two days away. So forget about it, and enjoy the rest of your summer weekend and I’ll see you on Tuesday morning.

Source: And Then There’s This…Monday, July 20th, 2009

Platinum got a boost early in Hong Kong trading, then trended down until things got started in New York where the metal broke through resistance at $1170 to post a solid gain, closing at $1172/oz., up $11. For the week, platinum is up 6.1%.

Silver’s chart yesterday resembles the Nike swoosh symbol. After a curving downward trend through Hong Kong and London the metal went vertical in the early hours of Comex trading, but then tapered off, ending near its intraday high at $13.41/oz., up 12 cents. For the week, silver is up 6.0%. (Click here for charts)

Investors showed slightly renewed interest in gold as an inflation hedge Friday, as crude oil closed at its highest price since July 6.

Here’s what The Hightower Report had to say about the action in gold and silver: “The bull camp will praise the gold market’s capacity to hold up around this week’s highs for most of the session today. The bear camp will suggest that the bull camp should have made more hay out of the scheduled data flow and the corporate earnings news. However, while the scheduled data flow as much better than expected, the corporate earnings news did have some troubling components. It was also clear that a stronger Dollar and weaker equity prices took some of the positive macroeconomic psychology out of the trade on Friday morning. The bulls might suggest that renewed terrorism threats could support gold, but the bear camp will quickly suggest that terrorism news on Friday morning supported the Dollar and that in turn crimped the action in the gold market.”

“The silver market was clearly lifted by an improved macroeconomic outlook in the wake of the US Housing starts and permits data. It is also likely that a firm bid in the energy complex allowed silver and copper prices some added bullishness. Like the gold market, it is possible that silver was at least partially restrained by the combination of a higher Dollar and weaker US equity prices.”

Source: Silver Goes Swoosh