They either weren’t trying very hard, or this was this best they could do…which wasn’t a lot. Gold was off about $15 from it’s 3:00 a.m. peak, but silver recovered a lot of its losses…such as they were. I wouldn’t read a lot into Thursday’s activity until we have a few more trading days under our belts and a short-term pattern develops.

Open interest numbers for Wednesday’s trading are unusual. Gold o.i. dropped a hefty 13,808 contracts. In a conversation with Ted Butler, he advised me that most of this was lifting of a bunch of butterfly spreads. When spreads are closed out, both a long and a short are extinguished, and o.i. naturally falls. And despite a 20-cent rise in the price of silver on Wednesday, o.i. actually dropped by 228 contracts. With first day notice a week from today, there will be lots of activity as traders either close out their positions or switch them to future months. One would hope that next week’s COT report should have all this current activity in it.

But despite all these changes in open interest and the rise and fall of the silver and gold prices, don’t forget that ‘8 or less’ traders are short 75+% of the entire Comex market in both these metals. As Ted Butler said in his latest commentary…”They are, quite literally, the biggest fish in the smallest pond in financial history. They are trapped. Their motive couldn’t be more simple, or compelling – they are postponing delivering actual silver because it doesn’t exist and delaying buying back their short positions because to do so will destroy them financially.” And that, dear readers, is the current situation in a nutshell. A clearer picture could not be painted. It boggles the mind that some people just can’t understand something this simple…but there are lots of them out there.

Here’s a look at the current silver chart…and the gold chart is identical. Are the boys trying to engineer a top here…paint the charts? If they are, it wouldn’t be the first time that a big rally to the upside ‘failed’ under mysterious circumstances right after the 50-day moving averages were breached to the upside…and long before the RSI flashed any kind of oversold signal. As I said yesterday, they can pull the lever any time them want, despite the number of mice (tech longs) they’ve got in the trap. The silver chart is linked here.

I see in a miningweekly.com article that “Gold Fields Ltd, the world’s No. 4 gold producer, has cut its gold output forecast for this year by 15 percent, because of power shortages in South Africa.”
The company now expects to produce about 3.6-million ounces of gold, down from a previous target of 4.25-million ounces.
“We’re probably going to miss (the target) by about half a million ounces,” Gold Fields CEO Nick Holland told Reuters at a gold conference in Peru. “I suspect we’re going to be 3.6 … something like that.” I’m sure that GF won’t be the only SA company ‘fessing up’ this year.
In the news department today, it was another embarrassment of riches. We’ve all heard the expression “How to win friends and influence people”…or the Einstein quote about the universe, hydrogen and human stupidity. This Reuters story is exactly like that, and is entitled “House Passes bill to sue OPEC over oil price.” I couldn’t believe it either…but the link is here, so fill yer boots!

The second story drags corporate debt default kicking and screaming into the naked light of day. This Bloomberg story points out that defaults so far this year have already surpassed all the corporate debt defaults from 2007…and we aren’t even half way through the year yet. I expect this trend to accelerate. The headline reads “Corporate Defaults Reach 28, Exceeding Total for 2007″…and the story is linked here.

And in closing, I see that Jefferson County in Alabama is having some serious problems in the credit market. This story surfaced earlier this year, but now it has turned really ugly. There are some unbelievable creepy-crawlies coming out of the woodwork down there, and I’ll have that story tomorrow.

Today is Friday. Expect anything…and all of us at Casey’s Daily Resource Plus will be here to discuss it Saturday morning.

And to all my American readers…I hope you have a happy and safe Memorial Day long weekend.

Casey Research correspondent-at-large Ed Steer is a keen observer of the financial scene and a board member of GATA.org.

Source: And Then There’s This…Friday, May 23rd, 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.

We are still well below both the 20- and 50-day moving averages in both metals, so the tech funds aren’t a huge factor in this market at the moment. If they were, the volumes would be a lot higher and prices would be moving to the upside. However, while we’re waiting for that to happen, here are two questions that will need answers: 1) is the Cartel through with their down-side price management…or more succinctly…are the 200-day moving averages still in their sights, or are they just about finished? Secondly; if and when the tech funds do return to the market, will the Cartel be there to take the short side of their trades once again, which is what they’ve been doing for decades. Remember, if these ‘8 or less’ traders (the bullion banks) weren’t going short for every long…the prices of both metals would explode to the upside as there would be nobody (and I mean nobody) to take the short side of the tech fund longs until astronomically higher prices were attained. As I’ve said before, unless it’s an exogenous event, it’s the dance between the tech funds and the Cartel that always determines what the prices are doing.

Lots of stories to pick from today, and I’m not happy about having to limit it to two. Maybe I’ll have more space for them sometime later this week. The first story is from last Friday, but is worth mentioning here, as the guy doing the talking is no dummy. Nobel Laureate Joseph Stiglitz had a few things to say on CNBC about the recession that the U.S. is in…and how bad it could get. The story is linked here.

The second article is from my good friend James Turk over at goldmoney.com. This piece is entitled “Another Record Low in the Dollar”. It contains the usual wonderful graphs…and it’s all linked here.

I read in a story out of Britain…that the British bank bailouts now underway are to be kept secret…forever. Not only a permanent news blackout, but any requests for information under the Freedom of Information Act are to be denied…even after 30 years. It probably won’t be long before this type of secrecy is everywhere.

It now appears that everything my grandfather fought for in Belgium and France during WW1 was for naught.

See you tomorrow.

Casey Research correspondent-at-large Ed Steer is a keen observer of the financial scene and a board member of GATA.org.

The strange thing about Friday’s trading is that gold went down further (percentage wise) than did silver…and silver had a huge ‘V’ bottom and recovered a lot of its losses. Ted Butler pointed out to me that this is the first time that this has ever happened. Normally silver is hammered for huge percentage losses compared to gold. It didn’t happen this time.

I’ve been so busy with the conference, I don’t have exact open interest numbers for Thursday, but gold…on its $6 price decline…showed an o.i. increase of about 1,300 contracts. This means that there were more traders actively shorting the market than there were dumping their longs. Gee, I wonder who that might be? Silver o.i. declined around 500 contracts…not a lot.

The Commitment of Traders report (for positions held at the close of trading on Tuesday) showed an increase in gold o.i of about 10,500 contracts…the short side of these trades showed up in the ‘4 or less’ and ‘8 or less’ traders in the Commercial short position, so the concentration ratio for the ‘8 or less’ is now well in excess of 80% of the net Commercial short position. It is super super concentrated now.

In silver, open interest only went up by about 500 contracts…which isn’t very much. All of the shorts were taken on by the ‘4 or less’ traders in the Commercial category.

However, after Friday’s massacre, I’m sure that there were huge changes in o.i., and that the ‘8 or less’ traders in the Commercial short category covered a pile of shorts in both gold and silver, as there was huge volume yesterday. Ted Butler feels that virtually all the long positions that were put on in the last month in gold and silver, got wiped out yesterday. That’s only true if there wasn’t a lot of shorting going on, which boosts open interest. That’s probably not the case here, but we’ll have to wait until next Friday’s COT to find out.

I’ve got a couple of stories today that are worth your time. The first one is from a couple of days ago and refers to the 300% price rise that Chinese importers have agreed to pay for potash. If this doesn’t have commodity producers, users and speculators looking over their shoulder at the real value of all commodities, I don’t know what will. Maybe they’ll offer 300% over market for the IMF gold…if it comes up for sale! Obviously China is desperate to dump as many dollars as it can, as this action proves. It’s a Reuters story entitled “Chinese Potash Importers Agree to Huge Price Rise” and it’s linked here.

The second story is equally alarming. It has been discovered that British and European banks borrowing money using LIBOR, have been fibbing about what interest rates they have actually been paying for overnight money. The story is from The Wall Street Journal and is entitled “Bankers Cast Doubt on Key Interest Rate Amid Crisis”. This shows just how bad things are within the banking system. The story is linked here.

Today’s music video is, as always, a blast from the past. I just can’t believe all this time has passed by so quickly. You will find the youtube.com video by clicking here.

Friday’s market on the Dow was right out of Alice in Wonderland again. Silk purses out of sows’ ears as far as the eye could see. And check out yesterday’s action in the oil markets! Any east coast epileptic oyster schucker could see that the fix was in across the board. Monday should be interesting. Let’s see how high they can pile it…and all of us at Casey’s Daily Resource Plus will be here to talk about it on Tuesday morning.

Casey Research correspondent-at-large Ed Steer is a keen observer of the financial scene and a board member of GATA.org.

Considering the lack of volume, Monday’s open interest numbers were a little larger than either I (or Ted Butler) expected. Gold o.i. was up 4,143 contracts and silver was up 1,193. There were probably a lot of spread trades buried in those numbers.

If you remember a couple of stories on the huge price increases in rice and other cereal grains that I’d posted in my remarks over the last couple of days, I said that things would get much worse before they got any better. Well, we’ve had our first casualty. According to an Ambrose Evans-Pritchard piece in London’s Financial Times, Haiti’s government fell over the weekend following rice and bean riots. Five died. It has begun.

I have a couple of stories today. Since it’s Wednesday, I have silver analyst Ted Butler’s regular contribution. In Saturday’s commentary, you may remember me waxing philosophic about the huge concentrated short positions in both gold and silver in the Commercial category of the COT. I said the following…”The ‘8 or less’ traders (bullion banks) completely control the prices in the both the gold and silver markets…that’s all there is to it.” Ted’s latest deals with exactly this issue. The essay is entitled “Super Concentration” and is linked here.

The other story is about oil…Russian oil. The VP of Russia’s Lukoil pretty much says that “the top is in” for Russia’s oil output. There aren’t too many shades of grey in this story which is from the Financial Times in London…and is entitled “Fears Emerge Over Russia’s Oil Output.” It’s linked here.

Once again, yesterday’s news was wall-to-wall bad. PPI up 1.1%. Home foreclosures jump 57%. Oil above $113, gasoline at a record… and auction-rate bond market “will cease to exist” says Citigroup. That must have meant that the Dow and the US$ were both up yesterday. They were.

Take the blue pill this morning…and I’ll meet you and Alice down the proverbial rabbit hole tomorrow morning…same time, same place.

Casey Research correspondent-at-large Ed Steer is a keen observer of the financial scene and a board member of GATA.org.