Then down again until London closed…and then a rise in both metals until Comex trading was through for the day, then they flat-lined in Globex trading after that until the 5:15 NY close. Not a lot of volume, either.

On Tuesday, gold open interest rose 5,461 contracts and silver o.i. fell 801. Considering both metals had reasonably large rallies on Tuesday, it’s hard to know what to think of these diametrically opposite numbers. These numbers too, should be in the COT tomorrow…maybe.

As I’ve mentioned a couple of times before…with the 20-day and 50-day moving averages still way above the spot price, there are no reasons for the tech funds to start buying. Only when some unknown combination of these moving averages are broken to the up-side, will the black boxes tell the tech funds to buy. Also, and not to be forgotten, is options expiry for silver next Tuesday the 26th. September is a huge delivery month for silver, so there may be lots of strange goings-on between now and then. First day notice is Friday, August 29th.

As Ted Butler keeps harping about, 90% of all major price moves (either up or down) are a direct result of the interplay between the tech funds in the Non-Commercial category and the bullion banks in the Commercial category of the COT…depending on which one is buying and which one is selling.

The usual New York gold commentator had the following to say about Wednesday’s activity…as India’s ex-duty premiums were off the charts again on Wednesday and obviously that country was a massive importer of gold once more.

“This is a completely unprecedented situation, including the 1999 and 2001 lows. It is not a matter of a single city…although Ahmedabad is used here as a benchmark…similar results are seen at the other import conduits. Conceptually, India’s well-financed and professional bullion importing community should be, and historically has been, able to import whatever the local market demanded without premiums rising above a couple of dollars…except perhaps fleetingly and anomalously. At a glance, it looks as if there is an impediment in the market–similar to the unavailability of metal at many North America dealers.

“Slightly comfortingly, John Reade at UBS” (A permanent gold bear – Ed) “also finds the situation unprecedented: ‘We had a long conversation with our physical gold specialist in Zurich yesterday as he wanted to update us on what had gone on in the market over the past few weeks. Erwin, who has traded our physical book for 20 years, reports that over the past two weeks our vault staff have been the busiest he can remember across his career, with demand for all types of gold from all sorts of clients. The only time we were as busy as this was in the first half of 2005, when rampant demand from India bought all the gold we could supply. Recent demand has been as strong as this, but more geographically spread: the Middle east, some parts of Europe and other Asia (ex-India) have also seen very good buying, with refiners struggling to supply their customer needs.’

“On Tuesday, the ECB’s (European Central Bank) statement of condition revealed that ‘gold and gold receivables’ fell last week by E24 million, 1.26 tonnes at the current book value. The previous week’s reduction was 0.74 tonnes. The ECB group does not (want) to appear involved in the gold market at present.”

In a corroborating Reuters story about Indian imports was the following comment… “Krishna Kumar Nathani, managing director of consultancy Indiabullion.com, agreed: ‘There is no ready delivery of gold available, for love or money’.”

And from a story filed at mineweb.com comes these three paragraphs from a Citigroup analyst… “While gold is suffering during this time of a rallying U.S. dollar, nevertheless, Citigroup advised, ‘We would be aggressive buyers at current levels.’

“While Citigroup finds that gold ‘has been punished amid a broad-based correction in commodities,’ the analysts assert that the floor in the U.S. dollar ‘is likely a short-term blip for gold, as it underscores the frailty of fiat currency globally.’

“We see gold as attractive, heading into a period of seasonally strong physical out-take, which tends to tighten the market and allow any negative macro catalysts to be rapidly transmitted to prices. …Gold will likely shine over time. Long-term drivers remain intact; falling mine production…especially in S. Africa, competitive currency devaluations, wealth creation in India/China, and petrodollar flows.”

I have two terrific stories today…a double header from Asia Times Online. The first is about Pakistan and the stories coming to light now that Musharraf has stepped down to avoid impeachment. In this case it has to do with the cozy (maybe now ex-cozy) relationship between Bush, the CIA, Musharraf, the Taliban and al-Qaeda. Lots of skeletons in the closet here. The story is headlined “Bush buried Musharraf’s al-Qaeda links” and the link is here.

The second story is about Georgia and Russia…and the NATO/US response to the ‘war’ in that Caucasian nation. The essay is entitled “US falters on NATO’s failure”. The link is here.

For those of you who do not understand the historical context of what’s going on from the Red Sea to the borders of Afghanistan…and would like to know more about it, I would recommend two books. The first is A Peace to End All Peace: The Fall of the Ottoman Empire and the Creation of the Modern Middle East by David Fromkin…and the second…former national security advisor to Jimmy Carter…Zbigniew Brzezinski’s book The Grand Chessboard: American Primacy and its Geostrategic Imperatives.

See you on Friday.

Source: And Then There’s This… Thursday, August 21, 2008

This sell-off lasted until noon, then lo and behold, the price took off again, but it was capped just before the NYMEX close. But all in all, it wasn’t a very exciting day, as everyone just wanted to get the heck away from work and enjoy the long weekend. I’m sure there weren’t a lot of people around after lunch.

Thursday’s open interest showed that gold o.i. rose 497 contracts (probably more shorting) and silver dropped 1,390 contracts.

The Commitment of Traders report for positions held as of May 20th are as follows. The bullion banks in the Commercial category went net short by an additional 3,187 contracts and the Non-Commercial/Tech funds went net long by an additional 3,028 contracts…so the bullion banks matched the tech funds almost contract for contract. The bullion banks went short against every long that the tech funds placed. The ‘8 or less’ traders (bullion banks) in the Commercial category are now net short 77.2% of the entire Comex silver market…a small increase from the previous week’s report.

In gold, there were some really big changes. The Commercial/bullion banks increased their net short position by a monstrous 37,584 contracts while the Non-Commercial/tech funds went net long 29,181 contracts. Not only have the bullion banks matched every change by the tech funds, they’ve also added a bunch of new shorts on top of that. And since Tuesday’s cut-off, Ted Butler feels that the bullion banks have added another 10-15,000 contracts to their net short position during the last three trading days of the week. The ‘8 or less’ traders (bullion banks) in the Commercial category are now net short a new record amount…an absolutely grotesque 81.4% of the entire gold short position on the Comex.

None of this warms the cockles of my heart one iota. Nothing has changed on this week-old rally, as the bullion banks continue to go short against all longs in both gold and silver…although the deterioration in silver wasn’t anywhere near as bad as it was in gold.

Since it’s a long weekend, I’ll really stretch the outside of the envelope with three stories. The first one is a front page story from Friday’s Wall Street Journal…the last place that one would expect to find a story such as this. It’s about the shortage of silver eagles…and without doubt, this story will help fan the flames of desire even hotter than they already are. It’s entitled “Losing a Mint: Curb on Coin Sales Anger Collectors” and it’s linked here.

The second story is one that I promised yesterday about JPMorgan and the woes in Jefferson County, Alabama. I wonder if it will be the first county to declare bankruptcy…as Vallejo, CA was the first city to do so. The item is from Bloomberg and is entitled “JPMorgan Swap Deals Spur Probe as Default Stalks Alabama County”…and the whole ugly mess is linked here.

And lastly, another story involving JPMorgan. Their CEO, Jamie Dimon, definitely had some unhappy thoughts to share at a UBS financial conference in New York earlier this week. This is one of the first indications I’ve seen, from a large American financial firm, that this will be no garden variety recession…and things, as he said, could get “really bad”. (Note to J. Dimon: Jamie, why don’t you just tell the truth and say that this “really bad” recession you talk about is a ‘best case’ scenario…not the worst case. – Ed) The link is here.

I got a request from a reader in Britain for ’something classical’ rather than the ‘pop’ music I’ve been putting up. I didn’t know if youtube.com carried that sort of thing, but it didn’t take me long to discover that they did…and lots of it. The piece I’ve picked was determined more by the artist, than the music itself. I met 15 year old violin prodigy, Joshua Bell, when he came to play with the Edmonton Symphony Orchestra. I think he played the Sibelius violin concerto. He performed for the ESO twice…and after that, we couldn’t afford his fee.

He’s playing in a hall I don’t recognize, and with a first rate chamber orchestra that I don’t recognize either. I’m sure some reader will happily provide the details. Here is (a lot older) Joshua Bell playing the final movement of Beethoven’s Violin Concerto in D minor – Op. 61. I thank Percy L. for the suggestion…and I hope you like my choice…despite the fact that I’m not wild about the cadenza. The link is here.

Now get as far away from a computer as possible for the rest of the weekend, and I’ll see you here bright and early on Wednesday morning.
Source: And Then There’s This…Saturday, May 24, 2008

However, oil was up $3.80 a barrel, and one would figure that gold and silver should have done better…but they didn’t.

Well, the open interest numbers for Thursday finally make some sense in gold for a change. Gold o.i. was down 4,079 contracts…and silver fell another 1,063. These numbers are very believable.

But now for the Commitment of Traders. Ted Butler and I had a chat about these long anticipated numbers, and here are the highlights…such as they are. In silver, the tech funds added a tad over 1,200 contracts to their net long positions. One would have expected that number to have dropped…not gone up…because the silver price has been dropping. The tech funds in the Non-Commercial category are supposed to be pitching their longs and the Commercial traders are supposed to be covering their shorts. That obviously didn’t happen.

To add to the mystery, the traders in the Commercial category added about 800 longs. This is perfectly legal, as they can go long instead of covering shorts…if that’s what they wish to do. The big changes were in the spreads.

In the Non-Commercial/tech fund category, 14,208 spread trades disappeared, and in the Commercial category another 12,000 were also removed. Total o.i in silver dropped 26,730 contracts for the week…virtually all of it spread related. But the ‘8 or less’ traders are now short 83% of the total silver market…up 1% from the COT the previous Friday. Other than the spreads, the COT in silver was almost a non-event. By the way, the silver ETF…SLV…added another 3.5 million ounces on Thursday despite the massacre.

In gold, the Non-Commercial/tech funds decreased their longs by about 5,400 contracts. The Commercials (including the ‘8 or less traders’) improved their position by roughly 14,000 contracts. They did this by adding 5,800 contracts to their long position and covering 8,200 shorts. The other big area of activity was the Nonreportable category where the thousands of small traders do business. Here they added 5,570 contracts to their long positions and a whopping 12,712 contracts to their respective short positions.

I must admit that I’m somewhat (more than somewhat, actually) suspicious of this. Here’s the reason. The Non-Commercials and Commercials are required to report their trading positions to the CFTC by the end of trading on Tuesday. The CFTC takes these numbers and plugs them into the spread sheet that produces the COT report. If it doesn’t balance (which it never does), they arbitrarily assign long and short positions in the Nonreportable category so that it does balance…because the number of shorts and longs must be the same.

This category is a balancing mechanism for the other two categories. It’s my opinion that if everything that should have been reported by Tuesday’s cut-off was actually in there, those positions in the Nonreportable would be entirely different…as would the rest of the report. The long form of Friday’s COT is linked here.

I spend a lot of time (as does Ted Butler) talking about the ‘4 or less’ or ‘8 or less’ traders. Who are they? Here’s the members list of the LBMA. There are eleven members in the category of Market Maker. They are the first eleven names on the list. It’s pretty safe to say that most, if not all, of these traders are there. The list is linked here.

Today’s story has to do with another infusion of cash into the banking system by the Fed…and the ECB. I see that the Fed has increased its term auction facility to $150 billion/month. In December it was $40 billion/month. The problem is still that banks don’t want to lend to each other. The story is from Bloomberg and is entitled “Fed Revs Up Emergency Lending in Latest Jolt to Credit Market”. The link is here.

Today’s fun video is a bit of a change from the normal music video. It’s a video about a pool shark. I’ve always considered excellence with the billiard cue to be the signs of a misspent youth…and that would be from personal experience. That’s not quite the case with this one. Click here.

Another winning day on the Dow. It was heading for negative territory, and below 13,000…but that never happened. I also note that the jobs report showed a loss of only 20,000. But that number included 267,000 fictitious ‘birth/death model’ jobs which the BLS made up out of thin air. All in a day’s work for the US government.