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

Gold got smacked as soon as the Globex opened for trading in the Far East on Thursday morning…but came roaring back within an hour…only to be hit again in late afternoon trading in Hong Kong, and shortly before London’s morning open. This particular hit corresponded almost to the minute with a similar hit two days earlier on the January 6th. Just compare the green line with the blue line on the Kitco graph below. This corresponds to about 3:00 a.m. in New York…which is a favourite time of day for the boyz to make a move (either up or down) when trading in both gold and silver is razor thin. And please don’t forget that 90+% of all trading volume in either gold or silver occurs while the Comex is open in New York. You never see this kind of precious metals price action in any other market around the world.

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Gold stayed down around $840 until the Comex opened, then popped up for a $20 gain in about an hour of trading time. Then the usual not-for-profit seller put an end to the merriment. Estimated volume in gold yesterday was 125,267 contracts, with a switch effect of 11,620. Silver followed a similar path…with the turning points at precisely the same times as gold. For a so-called “industrial metal”, it sure does follow the gold price pattern in lock step, doesn’t it?

As far as Wednesday’s open interest changes, the almost $30 drop in gold price should have been accompanied by a sharp drop in open interest. Once again, that didn’t happen. Open interest rose instead…this time by 7,893 contracts to 328,284. Was it spread trades…new shorting…new buying??? Don’t know. What I do know is that this info won’t be in the Commitment of Traders report until Friday, January 16th. Silver open interest actually dropped, which was what it should have done…but only 304 contracts to 86,484. I haven’t a clue as to what’s happening behind the scenes.

The usual N.Y. commentator had the following words of wisdom under his headline of “Here There be Elephants”…”Comex gold’s $24.30 loss on Wednesday did not, in fact, stem from Index rebalancing or long liquidation as (for instance) Scotia Mocatta asserted. Open interest went up, not down, leaping another 7,893 contracts (24.55 tonnes). There must surely have been some longs washed out, but evidently a very strong buyer came forward, and a lot of fresh selling had to be mobilized to contain him… As of Wednesday night, Comex gold had risen $4.10 from the recent December 19th $837 low (0.5%) while open interest has surged 37,552 contracts (12.9% or 116.8 tonnes) – 43% of that in the last two trading days….The large buyer thesis looked vindicated Thursday. After the Japanese close around $848 world gold was pushed back down into the $842 area, where it stayed until a storm of buying, unleashed at 8:30 a.m. NY time, ran gold up almost $25 in just over half an hour. Estimated volume was a huge 59,496 at 9 a.m. Almost as impressive, half of this gain was held through the day, with gold almost immediately performing a right-angle turn and trading at approximately it’s up $12.80 floor close level for the next four hours. [Like I said yesterday, I'd love to know who this 'mystery buyer' is. – Ed] ”

In other gold news, I see that Central Gold Trust (AMEX:GTU) has proposed an offering which closes at 8:00 a.m. this morning. The proposal is being underwritten by CIBC World Markets Inc. “The entire amount of US$250,000,000 provided for in the base shelf prospectus is available for this offering.” so the press release states. It will be of interest to see what portion is taken…and we’ll find out this morning shortly after 8:00 a.m. Eastern. And in a story at thehindubusinessline.com, I see that GFMS has altered India’s 2008 gold import numbers substantially. Just a week ago it was reported to be only 420 tonnes. This story revises it to 720 tonnes! This is only a small difference…like 15% of 2008 world mine production!!! I have the story on that (and another big story on gold) linked further down.

In other news, I see in a story out of The Telegraph in London that the Bank of England has lowered its benchmark interest rate to the lowest since the central bank was founded in 1694. The headline reads “Bank of England says Interest Rate Cuts Won’t Be Enough”. This means that the printing presses are about to be turned on. The same problem just popped up in Germany. The headline in the Financial Times read “German bond sale’s fate signals trouble ahead”…”A German sovereign bond auction failed on Wednesday as investors shunned one of the most liquid and safe assets in the world in a warning for governments seeking to raise record amounts of debt to stimulate slowing economies.” Germany will soon have to print money as well…and they have some ugly past experiences with this. In a Reuters story “Corporate America faces big pension shortfalls, as stock losses leave pension funds underfunded by $409 billion.” And lastly, in a story in The New York Times of all places, is this…”Bailouts Gone Wild! Porn Chiefs Seek $5 Billion”…”Larry Flynt, the publisher of Hustler magazine, and Joe Francis, the producer of the ‘Girls Gone Wild’ videos, said Wednesday that they were asking Congress for $5 billion in federal assistance, asserting that the adult entertainment industry was among those hit by the recession…MSNBC’s ‘Countdown With Keith Olberman’ devoted its final segment to it.” [Such a request is highly likely to be a publicity stunt, but it shows the whole absurdity of the rescue programs. – Ed]

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Today’s first story is one I mentioned two paragraphs ago. It’s the story out of Mumbai in India as reported by thehindubusinessline.com about the huge revision in India’s gold imports for 2008. The headline reads “2008 imports put at 720 tonnes”. The link is here.

The second story is a video from cnbc.com…probably from their Far East bureau…or maybe London. It certainly wasn’t done out of CNBS in New York. It’s an interview about the safe haven status of gold with Jurg Kiener, CEO of Swiss Asia Capital in Singapore. I thank Brad Robertson for sending me this story..and the link is here.

And lastly, another big gold story…this one from Ambrose Evans-Pritchard out of The Telegraph in London. The headline reads “Merrill Lynch says rich turning to gold bars for safety” and the link is here.

…President Bush’s response was to meet some small business owners in San Antonio last week. The small business owners are General Motors (NYSE:GM), General Electric (NYSE:GE) and Century 21. – Jay Leno

Today the jobs numbers come out. The numbers are expected to be horrific. The last jobs report brought a major thumping to the gold price as soon as it was released. Will the Fed get JPMorgan (NYSE:JPM) to “kill the messenger” again this time? We’ll find out soon enough. Regardless of what happens…my message remains the same…buy and take delivery of as much physical gold and silver as you can.

See you on Saturday. Have a great weekend.

Source: And Then There’s This…Friday, January 09th, 2009

A: No. You can make gasoline out of asphalt. Oil is a hydrocarbon, which is a fancy name for a long chain of carbon, hydrogen, and various other atoms.

The smallest of these chains is methane gas (cow flatulence), made up of one carbon and four hydrogen atoms. The really long chains, like asphalt or the bitumen from oil sand, can be “cracked” into smaller pieces to make gasoline and heating oil.

Some refiners lack the ability to crack extra-long hydrocarbons, and must rely on “lighter” crudes. But these days, those crudes are harder to find and carry a premium price tag.

So several companies are either updating their refineries or building upgraders. An upgrader is simply a pre-refinery, where they can clean up bitumen, remove all the impurities (like salt and sand), and chop it into shorter chains so regular refiners can handle it.

As these upgraders come on line, demand for the oil sands’ bitumen will skyrocket, pushing prices up. That’s great news for big oil sands players, like Suncor. But the triple-digit gains will come to the smaller oil sands outfits Wall Street has yet to discover. Click here to read about one of my favorites right now.

Q: When I began to buy gold, I bought IAU instead of GLD. Their performance is the same, but everyone seems to recommend GLD and never IAU. Have I made a major mistake? – D.H.

A: Nope, your investment is fine. IAU and GLD both hold bullion, i.e. physical gold. The big difference between the two is size: GLD has a market value of $19.2 billion, while IAU is only about $2 billion. So anyone who wants to buy large blocks of shares will choose the more liquid option, GLD. But their price performances are virtually identical.

Besides the bullion funds, you can buy ETFs to bet on gold miners and gold futures. Take a look:

As you would imagine, bullion is the most straightforward. These funds have a vault full of coins or bars that, theoretically, cover the shares.

The only futures fund on there is DGL. But using gold futures seems like an unnecessarily complicated way of tracking the price of gold, so I’m not fond of it.

The last fund is simply a basket of gold-mining companies that tracks the AMEX Gold Miners Index (^GDM on Yahoo). The top five holdings – Barrick, Goldcorp, AngloGold Ashanti, Newmont, and Goldfields – make up about 36% of the index.

These big miners are underperforming bullion ETFs over the last two years (GLD is up 27% while GDX is up about 17%). But I think this fund will do well when we reach the mania stage in the gold bull market.

For investors who simply want exposure to gold or mining, these funds are an easy place to start.

Good investing,

Matt

P.S. If you have another exchange traded fund you use to buy gold, send me the symbol so I can tell people about it. I’m always looking for new ideas.

Source: Why Athabasca Crude Oil Will Be Worth More and More