This time around, silver has failed to match the gains that gold posted in recent months, spawning a widespread believe that silver is poised for a bull run. Such factors as a decline in supply and a weakening U.S. dollar have buttressed that bullish belief. And so has the fact that China’s government is strongly encouraging that country’s residents to buy the white metal.

With Beijing’s plan to inject $587 billion (4 trillion yuan) into China’s economy, and a growing desire to diversify away from the U.S. dollar as its key reserve currency, the Asian giant could increase its reliance on such precious metals as gold and silver – especially if global inflation takes hold.

China’s central bank “could use gold, silver or even a basket of commodities” to diversify away from the dollar, said Money Morning Contributing Editor Peter Krauth, a recognized expert in metals, mining and energy stocks. “It’s impossible to know how they’d go about it.”

This wouldn’t be the first time that silver played an important economic and transactional role in Mainland China. Nearly 2,500 years ago, the Red Dragon was the first to use silver as money. While China invented paper money in the ninth century, silver made its way back several dynasties later as legal tender until the government again prohibited its ownership in 1935.

Now, 75 years later – in the wake of the worst economic downturn since World War II – China has reversed its stance on silver.

In July, state-run China Central Television (CCTV) began a campaign that pushes the purchase of silver bullion as investment opportunity. Analysts say silver has been undervalued in the last few years, and is a good investment for individual investors, according to CCTV.

“The investment threshold [for silver] is not high, and is more suitable for the general public,” said Want Chunli, GM of Beijing’s Caibai Shopping Mall, the first to offer silver as an investment opportunity. “Silver is much cheaper than gold.”

Silver’s investment potential is best measured by the silver-gold ratio, or the price of gold divided by the price of silver. Over the past five years, the ratio has held fairly steady, requiring 55 ounces of silver to buy an ounce of gold. Earlier this year, as gold increased at a faster rate than sliver, the ratio skyrocketed to 70 to 1. It has since corrected to around 60.

Money Morning’s Krauth says that when this relative price ratio does correct, it tends to overshoot.

“I see it going to 50 at least,” Krauth said. “With gold at $1,000, that means silver could trade to $20 or even higher, which is another 20% from [the current price].”

Silver closed Friday at $16.06, while gold closed at $991.10 – implying a silver-to-gold ratio of 61.71.

Krauth sees China returning to an asset-backed currency and says ownership of silver could help the average citizen, even if its central bank is unable to diversify out of the U.S. dollar fast enough.

The more Chinese citizens who own silver, “the stronger the country will be in the eventuality that the world establishes a new world reserve currency backed by (most likely) precious metal(s).”

China’s middle class is estimated at 300 million – roughly equal to the entire U.S. population. And that consumer group in China is growing. As those incomes continue to rise, so, too, will the demand for silver.

China’s use for silver goes beyond jewelry or as a safeguard against inflation. Thanks to the antibacterial properties of silver ions, the white metal is used for everything from socks to wash machines, to name a few.

Silver Supply is Falling

The world once had 2.2 billion ounces of silver above ground, but that figure has plummeted 86% to the current 300 million ounces, according to Addison Wiggin, a best-selling author and an executive publisher at Agora Financial LLC, which, like Money Morning, is part of the Agora Inc. group of companies.

However, above-ground silver accounts for only 25% of the silver produced today, says Money Morning’s Krauth. The other three-quarters is actually a byproduct of such mined base metals as iron, nickel or lead.

When the financial markets nearly collapsed last fall, base-metals producers weren’t spared. As demand forecasts were cut, they quickly throttled back on production, expansion and exploration.

“More has to come from mine production, which can only grow so fast,” Krauth said. “The fact that base-metals producers have cut back a lot hurts silver production because it’s a byproduct of base-metal mining.”

Once the recovery begins – and it’s already under way in China – supplies will be hard to come by as demand for base metals returns, resulting in higher prices for silver.

Gold’s “Lap Dog”

The price of gold doesn’t necessarily affect the price of silver, but when other economic factors such as the U.S. dollar falter, prices traditionally rise at the same pace. But when the global financial crisis took hold last year, the silver-to-gold ratio shot up to 84.

Much like a “nervous little lapdog,” the price of silver follows gold closely, Krauth says.

Since its mid-July low of $12.46 an ounce, silver has rebounded roughly 30% to current levels. But if gold supplies run short, silver may have even more room to run.

When gold hit its all-time high of $1,033.90 per ounce in March 2008, silver prices soared as high as $20.92. But when gold hit its 18-month high earlier this month, silver stayed in check.

“Silver has lagged the rise in gold prices since 2000,” said Money Morning Contributing Editor Martin Hutchinson, a former investment banker with more than 25 years’ experience in the global financial markets. “If gold really takes off and the big money finds there isn’t enough of it, there should be spillover into silver.”

Famed commodities investor Jim Rogers also noted the lag in silver and gold’s prices.

“I’m looking at all commodities, but some commodity prices are very depressed,” Rogers told China International Business. “Silver is 70% or so below its historical highs, coffee is 70% or so, as is sugar, while gold is only 10% off its all time high.”

Making the Investment

While buying physical silver is an option for investors, the simplest way to get in, Krauth says, is via the iShares Silver Trust (NYSE: SLV) exchange-traded fund (ETF). In the three years since its inception, SLV has accumulated $3.91 billion in assets, and the share price – which is the equivalent to one ounce of silver – is up more than 50% this year.

During last fall’s market crash, SLV’s holdings remained nearly flat, around 220 million silver ounces. Since then, it has grown a further 22% to about 280 million ounces.

“That’s a testament to investor commitment,” Krauth said.

Hutchinson calls SLV “quite a good vehicle” over the big silver miners – such as Coeur d’Alene Mines Corp. (NYSE: CDE).

Coeur d’Alene has a large silver deposit in Bolivia. But Hutchinson characterizes Bolivia as a country that he “wouldn’t touch,” thanks chiefly to the Venezuela-like nationalization of the country’s other commodities, including oil and natural gas.

Source: The No. 1 Way to Profit When Silver Upstages Gold

It’s a world shrouded in deep myths and folklore that include stories of people losing their homes, or having 5,000 bushels of soybeans dumped on their front lawn.

I’m talking about the commodities world, of course.

But despite these tall tales, commodities aren’t necessarily dangerous investments. Not if you know what you’re doing and take adequate precautions. Rather, the “secret society” stuff comes from the belief that the sector is a murky one that many investors simply don’t understand. Just the mere sound of “commodity futures and futures options contracts” was enough to send people running for cover…

However, nothing could be further from the truth when dealing with commodities. And over the past few years, we’ve seen great changes in the financial world that have opened the doors to this “secret society.”

Step Out of Your Comfort Zone… Don’t Be Afraid of Futures & Futures Options

I’ll tell you what I’ve told my friends and acquaintances over the years: Don’t be scared of commodity futures and futures options, they’re essentially little different than stock and stock options. If you know how to trade stocks and stock options, then there’s no difference from futures and futures options.

For example, if you can buy and sell IBM (NYSE: IBM) shares and IBM options, then why can’t you buy and sell sugar futures and sugar options? There is no difference. As long as you have an idea of where an investment (be it IBM or sugar) might move to and its underlying fundamentals, then what is there to be scared about?

Here’s the problem as I see it (based on my 18 years of experience in the commodities sector): Most people just don’t know enough about the underlying fundamentals of commodities – how/why soybeans, cocoa, cotton, or live cattle trade in a certain way. The majority of people know stocks and that’s that. They don’t like change and are fearful to step out of their comfort zone.

But all commodities that are available to trade on various U.S. exchanges are highly regulated. They have strict rules, which are efficient and assure the integrity and safety of your capital.

So if you’re looking to add some great potential gains to your portfolio, then consider what commodities can do for you…

Four Commodities… Four Explosive Moves

Want some examples of how explosive the world of commodities can be? Just look at these moves for oil, natural gas, gold and silver over the past year…

How would you have liked to hop aboard some of those moves?

Oil: When it started rising in 2007 and topped in 2008, it encompassed a staggering $90,000 move if you’d held just one contract. And the freefall that ended last March brought in an unheard of $110,000 for anyone being bearish.

If you’d held 10 contracts during those moves, you could have seen gains of over $1 million! And that’s just one direction. Double it if you went both ways.

Natural Gas: The move up in the summer of 2007 to the top in 2008 encompassed an $85,000 move, while the drop back down to the lows hit just two weeks ago and saw an even larger haul of $110,000. And this was for holding just one measly little contract. Imagine if you had 100 contracts.

Gold: From the gold chart below, you can see the trend higher from 2002. But even if you got onboard as late as 2006, the move could still have netted you $45,000.

Silver: A bullish position taken in 2006 would have scored $60,000 on just one contract. And if you’d hopped on the bear train near the highs in the spring of 2008, you could have pocketed another $65,000 just six months later.

This is some serious money folks.

And the great thing about commodities is that it’s normal for them to cycle from highs to lows and then back again. This gives you opportunities to profit on the way up and the way down. Moreover, it’s in contrast to the stock market, where most moves are biased to the upside.

Now, if you want to profit today…

Three Reasons Why You Should Trade These Four ETFs

Due to the changes that have taken place in the commodities world, regular investors have a chance to take part in the sector without leaving the comfort of a stockbroker.

We’re talking about commodity-related exchange-traded-funds (ETFs), which mimic the moves of the underlying asset. So you can use them to play some of the most popular and active commodity markets.

For example, if you’d like to go for oil, natural gas, gold, and silver, consider these ETFs:

• Oil: United States Oil Fund (NYSE: USO)
• Natural Gas: United States Natural Gas Fund (NYSE: UNG)
• Gold: SPDR Gold Shares (NYSE: GLD)
• Silver: iShares Silver Trust (NYSE: SLV)

If you want to gain exposure to the often lucrative commodities world, here’s why you should trade these ETFs…

1. Simple: ETFs trade like stocks, so you can buy and sell them as you would with shares of any other company from a regular stock brokerage account. So you don’t even need to get involved with commodity brokers, futures, or futures options contracts.
2. Options: The ETFs also have options available, which offers you more leverage and can reduce your risk.
3. Liquidity: Because all four of these ETFs are the largest ones available for their respective commodities, there is enough volume to be able to get in and out quickly and safely.

Next time, I’ll show you one of my favorite ways to use an options strategy to execute a bullish commodity trade. But in the meantime, check out those ETFs above.

Good trading,

Lee Lowell

Source: Four Easy Ways to Trade the World’s Top Commodities

Spot gold hit an intra-day high of $961.00 an ounce, its highest since June 11, and was bid at $959.10 an ounce at 1329 GMT, against $953.90 an ounce late in New York on Friday.

U.S. gold futures for August delivery on the COMEX division of the New York Mercantile Exchange rose $5.70 to $959.40 an ounce.

“At the moment we’re seeing the dollar as the key factor to movements in the gold market,” said Eugen Weinberg, senior analyst at Commerzbank.

“In the past few months (gold) has gone from being a safe haven to becoming a dollar play. The dollar right now is so weak because no one is looking for a safe haven — because corporate results are so good and stock markets are performing so well.”

Silver was at $14.40 an ounce against $13.89, earlier it touched a high of $14.47, the highest since mid-June.

“Silver tracks gold in both directions,” Weinberg said.

The dollar hit a 2009 low versus a basket of currencies, stung by buoyant risk demand. The dollar index <.DXY>, a gauge of the U.S. currency’s performance against six other major currencies, fell to its lowest since December.

Appetite for risk was boosted by rising stock markets. European shares hit a nine-month high, as financials advanced after earnings results from Europe’s biggest bank HSBC cheered investor sentiment.

Rising equity markets also boosted interest in oil, with prices hitting a one-month high. Stronger crude prices support interest in gold as a hedge against oil-led inflation.

SILVER INFLOWS

Silver took further support from fresh inflows into exchange-traded funds last week.

The largest silver ETF, the iShares Silver Trust, said its holdings rose to a record 8,828 tonnes on Friday, while Switzerland’s Zurich Cantonal Bank said its silver holdings rose 1.929 million ounces last week.

Investment demand for gold and jewellery buying remain lacklustre, however. Holdings of the largest gold ETF, the SPDR Gold Trust , fell nearly 50 tonnes in July.

ETFs issue securities backed by physical commodities, and constituted a big source of gold demand in the first quarter.

Jewellery demand was also weak as Indian consumption softened on the back of higher prices. “Traders are waiting for lower prices,” said one dealer.

Among other precious metals, platinum was at $1,218.50 an ounce against $1,207.50, while palladium was at $267.50 against $261.50. Platinum traders are awaiting U.S. car sales data due later in the day for direction.

Government measures to boost demand for new cars supported European car sales in July, data showed, with French sales rising 3.1 percent, helping to lift both platinum and palladium which are chiefly used in automobile production.

“We view the development in vehicle sales as a positive signal,” Standard Bank said in a note. “We view this as a bullish signal for platinum, palladium, aluminium demand.”

In Japan industry-wide auto sales fell 5.2 percent in July from a year earlier.

LONDON, Aug 3 (Reuters)

In fact, when you peruse the news it’s difficult to come to any other conclusion. For instance:

• A number of key earnings reports have been much better than expected, and company executives buttressed those profit figures with positive comments about the next 18 months.
• The trading operations of Goldman Sachs Group Inc. (NYSE:GS) and JPMorgan Chase & Co. (NYSE: JPM) both just reported record profits.
• U.S. housing prices rose in May for the first time in three years. Initial jobless claims have plunged 15% since their April peak. The Conference Board’s Index of Leading Economic Indicators rose 0.7% in June, its third successive positive reading.
• And just yesterday (Thursday), the Dow Jones Industrial Average topped the 9,200 mark for the first time since November – a potentially highly bullish development for the economy, since stock prices are forward-looking.

But while many experts will look at these developments as an excuse to celebrate the looming rebound to come, I actually see them as a real cause for concern. The reality is that these reports, when viewed in concert with other data, are actually a sign of a re-inflating financial bubble.

This is actually an “Economic Recovery Trap” that – when sprung – will inflict a lot of pain on overly optimistic investors. Now that we’re sufficiently forewarned, we should re-orient our money accordingly.

Doomed by Deficits

It’s not surprising that the U.S. economy has shown signs of strength in recent weeks; it has had huge amounts of money thrown at it.

On the fiscal side, the Obama administration’s May budget plan suggested deficit for the 2009 fiscal year (which ends in September) would reach $1.83 trillion – about 13% of gross domestic product (GDP).

However, subsequently released unemployment figures have shown that the U.S. jobless level reached 9.5% in June, far above the 8.3% rate assumed in the budget. And unemployment is expected to spike further in the second half of the year.

This worsening unemployment situation strongly suggests that the true budget-deficit figures will be even worse than those already announced, a supposition strengthened by the postponement – from mid-July to mid-August – of the normal mid-term budget review. Since U.S. President Barack Obama is currently attempting to steer two difficult and expensive pieces of legislation – the cap-and-trade energy bill and the healthcare-reform bill – through Congress, he does not want unfavorable budget numbers appearing that might be used to persuade wavering legislators to oppose them.

Even at 13% of GDP in fiscal 2009 and 10% of GDP in fiscal 2010, the U.S. federal deficit is far above any previous level reached in peacetime, so it’s likely that if the economy begins to recover these deficits will prove difficult to finance, meaning the budgetary shortfalls will push up long-term interest rates.

That escalation in long-term rates, in turn, could choke off the economic recovery, which to be healthy requires a rebuilding of inventories, extensions of credit to new domestic-and-foreign customers, and a revival of enthusiasm for such large-ticket items as housing and automobiles.

With the yield on 10-year U.S. Treasuries already up from a low of 2.07% in December to a recent level of 3.60%, the dampening effect of rising interest rates may already be becoming apparent. In any case, the deficit is a dark cloud that threatens to obscure the economic outlook.

And that dark deficit cloud will be very difficult to remove.

Know Your (Real) Enemy

The other main problem with today’s economy is the likely resurgence of inflation. Even the U.S. Federal Reserve – which under central bank Chairman Ben S. Bernanke for a long time apparently maintained a fear of deflation above all else – admitted in its last meeting that the likelihood of deflation had receded.

That’s not surprising: In the last six months, core consumer price inflation (excluding food and energy) was a reported 2.4% annually. Although the “headline figure” has been low because of the sharp drop in energy prices the United States economy has experienced since last year, that effect is about to disappear, as energy prices peaked in early July 2008 and fell sharply throughout the fall. Thus, even reported consumer price inflation – on a year-over-year basis – is likely to surge in the months after this one (July).

Moreover, the reported inflation figure may be low. Each month, the U.S. Bureau of Labor Statistics “seasonally adjusts” consumer price statistics to remove normal seasonal patterns from the data. That seasonal adjustment process is thoroughly opaque, and is subject to manipulation. In the early months of 2008, for example, when reported inflation was high, the downward seasonal adjustments were consistently much larger than the average of the decade 1998-2007. The process was then reversed late in the year, when reported inflation was negative, but the upward seasonal adjustments made it less negative. For the year as a whole, “seasonally adjusted” inflation was 0.5% below unadjusted inflation, which shouldn’t happen, except by bizarre rounding effects.

In the first six months of 2009, the negative seasonal adjustments have re-appeared, to the extent that total seasonal adjustments for the six months were minus 1.2%, compared with a 1998-2007 average of minus 0.61%. If the seasonal adjustments are indeed wrong, and should have been at only the average level, then “core” price inflation in the six months to June would have been 3.6% annually.

Not only is that not deflation; it suggests accelerating inflation.

Money Supply Moves

Another reason I wouldn’t be surprised by a reappearance of rapid inflation is the big increases in the money supply we’ve seen over the last year.

According to St. Louis Fed data, the M2 money supply has increased by 8.8% in the last year. The St. Louis Fed’s own Money of Zero Maturity (MZM) – the best measure of the broad U.S. money supply available since the central bank ceased reporting M3 in 2006 – jumped 10.2%. And the overall monetary base zoomed an astounding 92.8%.

In addition, the Federal Reserve has bought $300 billion of government bonds, always an inflationary warning signal since it monetizes the deficit. Furthermore, the Fed and the government together have engaged in rescue, stimulus and guarantee programs totaling an astounding $23.7 trillion, according to Neil Barofsky, inspector general for the government’s Troubled Assets Relief Program (TARP). A “gross” number if ever there was one, that figure is nearly twice overall U.S. GDP.

Let’s face reality: We’re going to be paying this bill for decades to come – almost certainly largely through resurgent inflation. In those circumstances, the recovery in the stock market is based not on reality, but simply on a bubble – an assertion that’s already been vindicated by the extraordinary afore-mentioned profitability of the Goldman Sachs and JPMorgan Chase trading operations, which typically benefit enormously when bubbles are inflating and there is too much money sloshing about.

The near-bankruptcy of CIT Group Inc. (NYSE: CIT), and the losses recorded by the commercial banking sides of Citigroup Inc. (NYSE: C) and Bank of America Corp. (NYSE: BAC), demonstrate that even in a period when short-term rates are exceptionally low, conventional commercial banking is not currently a moneymaker.

Other then Goldman Sachs shares (whose prosperity is likely to be short-lived), it is clear that our investment dollars should be concentrated in two areas:

• Conservatively run overseas economies.
• And inflationary hedges such as gold and silver.

Let’s look at some investment opportunities in each category.

First, we should buy moderately priced shares in countries where “stimulus” has been limited and in which monetary and fiscal policies are close to balance. The two largest such countries are Germany and Brazil, so you should look at the Germany ETF iShares MSCI Germany Index (NYSE: EWG) and the Brazilian iShares MSCI Brazil Index (NYSE: EWZ).

Second, you should make sure that a substantial portion of your assets are in inflation hedges such as gold and silver, either in the metals directly through SPDR Gold Shares (NYSE: GLD) and iShares Silver Trust (NYSE: SLV) or through gold mining shares, the exchange-traded fund (ETF) for which is the Market Vectors Gold Miners ETF (NYSE: GDX).

Source: Beware of the Obama Stimulus Trap

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

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

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

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

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

Yesterday’s low tick on the U.S. dollar occurred around 2 p.m. in New York at 79.72 cents…plus or minus a couple of ticks. Gold’s peak price in the first few days of June was around $990…when the dollar printed a low of about 78.70 cents. In five weeks, the U.S. dollar has gained a full cent [one percent and change], while the US$ gold price has been hit for 77 big ones. That’s a drop of 7.8%.

The point I’m making here is that this decline in the gold and silver price over the last five weeks has had nothing to do with the dollar. It has been entirely dependent on who is buying or selling contracts on the Comex…and how many. Of course large and long-term moves in the US$ make a difference…especially if you look back ten years.

But right now, the dollar has been trying mightily to rise since its low in the early days of June…and this is the best it could do…so far. In order for gold to get sold off heavily from here, we will have to see a real [or manufactured] rally in the US$. It’s so much easier for ‘da boyz’ to hit the precious metals when the dollar is rising. This week the U.S. Treasury has been busy selling oodles of paper products [about $125 billion worth]. Eager to buy them are other central banks, not because they want them, but because if they didn’t, the world’s financial system would disintegrate right on the spot.

So, regardless of what the dollar does, both gold and silver could explode to the moon tomorrow if the four bullion banks that are sitting on their respective prices would either start covering their grotesque short positions, or fold their arms and do nothing…i.e. don’t go short against virtually every long that’s being placed…which is what they’ve been doing now for the last 10+ years.

The changes in open interest for Wednesday’s price action [as reported by the NYMEX] were a joke. Wednesday was a huge down day in both gold and silver and there was big liquidation…but the numbers, once again, did not show any sign of that. Gold o.i. actually rose 1,058 contracts to 374,043…on monstrous volume of 145,432 contracts. Silver o.i. was also reported as being up…515 contracts to 100,891…on 26,823 contracts traded. There are only two explanations for this dichotomy…the numbers were either not reported in a timely manner, or someone is lying big time. Ted Butler figured that there were about 15,000 gold contracts and maybe 3,500 silver contracts liquidated on Wednesday. So…where are they? Hopefully they will show up in today’s report when it’s released later this morning.

Today’s Commitment of Traders report will be issued at 3:30 Eastern time today, and I will report on it on in my Saturday commentary. For those of you who can’t wait…and want to see the report the moment it’s posted…the link is here.

The Comex Delivery Report yesterday showed that 30 gold contracts and 61 silver contracts were delivered. There were no changes in the alleged holdings of either GLD or SLV…and the Comex-approved warehouses reported that a further 563,172 ounces of silver were withdrawn from their inventories.

Very little in the way of gold news yesterday. The only thing of note I could find was posted over at Kitco. It was a Reuters story filed from Johannesburg stating that gold output in May had dropped 10.5% from the same month in 2008…and total production of non-gold minerals fell 15.1%.

Today’s first story is about AIG. In a piece filed at Bloomberg yesterday, an analyst at Citigroup “said the firm may have no value left for shareholders after repaying the U.S.” [If that isn't the pot calling the kettle black, I don't know what is! - Ed] Then there was a washingtonpost.com story that stated that “AIG was preparing to pay millions of dollars in bonuses this month to several dozen top corporate executives.” As can be imagined, AIG stock got hammered yesterday…falling 27%. The Bloomberg story is linked here.

In a Reuters story, China once again called “for reform to the reserve currency system at a meeting of world leaders in one of its most direct attacks on the dollar’s global dominance.” The headline reads “China demands currency reform, France backs debate”…and the link is here.

Here’s a piece [courtesy of the King Report] by Ambrose Evans-Pritchard from The Telegraph in London. The headline reads “Shipping flashes early warning signals again”. This short piece is definitely worth reading…and the link is here.

In the next story…a Reuters piece filed from Zurich and posted over at newsmax.com…it appears that the Swiss government is about to put its foot down and defend the secrecy of the Swiss banking system by preventing UBS from handing over client information to U.S. tax authorities…”Switzerland will use its legal authority to ensure that the bank cannot be pressured to transmit the information illegally, including if necessary by issuing an order taking effective control of the data at UBS,” the Swiss government said. This story is also very much worth reading, and I thank Casey Research’s Jeff Clark for bringing it to my attention. The link is here.

And lastly comes this piece posted from the GlobalEurope Anticipation Bulletin posted at leap2020.eu. The story bears the title of “Global systemic crisis in summer 2009: The cumulative impact of three rogue waves”. Because this is a European website, the story is available in three other languages besides English. This story, although dated from June 17th, is also very much worth the read. I thank Brad Robertson for sending it along…and the link is here.

The foremost corporate responsibility is to serve others so well that you produce a profit. – James Cook

The G8 meeting in Italy was another non-event. I note, in looking at the chart of the Dow, that it has now broken down from its ‘head and shoulders’ pattern…and I see that another dollar ‘rally’ is in progress from its low yesterday afternoon in New York. I also note that the high in gold and silver for Friday are probably already in…their tops occurring at the close of Sydney trading in their Friday afternoon. Gold has already given back all of its magnificent three dollar gain from yesterday…and the silver price has ‘dropped’ like a rock now that London has opened for trading today. ‘Da boyz’ are back in town…and probably gunning for those 200-day moving averages. This could be an interesting day. Take two red pills and I’ll see you tomorrow.

All of us at Casey’s Daily Resource Plus hope you have a good weekend and we’ll see you here sometime on Saturday.

Source: And Then There’s This…Friday, July 10, 2009