Casey Research Publication
Gold & Silver Daily
"JPMorgan headingfor the silver exit door, Bank Participation Report shows. Silver analyst Ted Butler has a few things to say.Important interview with James Turk... and much more."
 

¤ Yesterday In Gold & Silver

Nothing much exciting happened to the gold price on Friday until lunchtime in London... which is 7:00 a.m. in New York.  Then the price began to roll over... and got even more help once Comex trading began at 8:20 a.m. Eastern time.  The low price of the day [$1,371.30 spot] came around 10:15 a.m. in New York.  From that low, the gold price rallied for a couple of hours before trading sideways into the close at 5:15 p.m.  The high of the day [such as it was] came at the London a.m. gold fix at 10:30 a.m. local time... 5:30 a.m. Eastern.

The silver price began to slide much earlier in the day... around 2:30 p.m. Hong Kong time.  The low [$28.01 spot] was, of course, at the same time as gold's low in New York, with silver's subsequent rally lasting until 12:30 p.m. before it, too, traded sideways into the close of electronic trading.

For the third day in a row, the world's reserve currency oscillated in a very tight trading range around 80 cents.  The big sell off in gold and silver in Comex trading in New York, that ended at 10:15 a.m. Eastern time, was aided and abetted by a 40 basis point rally in the dollar that occurred simultaneously.

Despite the fact that both silver and gold finished in slightly negative territory, the gold stocks ended the day in slightly positive territory... with the HUI up 0.38%.  Not surprisingly, Friday's low for the precious metals stocks came at 10:15 a.m. Eastern time.  For the second day running, it was the large cap gold stocks that held the HUI index back... as the junior companies, by and large, put on a much better showing than the index as a whole.  The shares of most silver companies did way better than the HUI... and, in case you've missed the point I'm making, this is phenomenon that has been going on for quite some time.  Here's the 5-day HUI to put it in perspective.  Despite the "Day of Infamy" on December 7th... we survived this pounding pretty much unscathed.

It was obvious that the bullion banks pressed their advantage on Friday... selling down both metals.  There certainly were more leveraged gold and silver longs that were forced to cover... but not a lot, as we didn't hit new lows for this move down... and we won't know how much improvement there was in open interest until Monday morning's CME report.  All this action will certainly be in next Friday's Commitment of Traders report.

The CME's Delivery Report on Friday showed that 284 gold and 29 silver contracts were posted for delivery on Tuesday.  And, for the second day running, JPMorgan was the big issuer [280 contracts] from their client account... and Deutsche Bank [206 contracts] was the stopper [receiver] in their proprietary [house] account.  The link to all this action is here.

The GLD ETF reported another withdrawal yesterday.  This time it was a more substantial 175,739 ounces.  There was no reported change over at the SLV ETF.  And, for the second day in a row, there was no sales report from the U.S. Mint.

After a big addition on Wednesday, the Comex-approved depository reported a big draw-down in silver stocks on Thursday.  This time it was a net 1,008,662 troy ounces... with the lion's share coming out of HSBC USA.  There was activity in all four warehouses... and the link to all that action is here.

Yesterday's Commitment of Traders report [for positions held at the end of trading on December 7th] did not contain any hint of the smash-down in prices that occurred on that day.  As I've been mentioning every day this week, 'da boyz' made sure that all the pertinent data from the 'day of infamy' was reported late enough so that it would not make it into this COT report.  Mission accomplished!

Anyway, here's what the report actually did say.  The Commercial net short position in silver declined 945 contracts.  The Commercial net short position in silver is now down to 244.1 million ounces.  The '4 or less' bullion banks are still short 220.3 million ounces... and the '8 or less' bullion banks are short 293.9 million ounces.  At least they're under the 300 million ounce mark for the first time in quite a while.

For the second week in a row, the bullion banks increased their short position in gold... this time by 820,040 ounces.  The Commercial net short position in gold is now up to 27.9 million ounces.  The '4 or less' bullion banks are short 22.3 million ounces of gold... and the '8 or less' bullion banks are short 28.7 million ounces.

Unless both gold and silver prices explode on Monday... and the increase in open interest on that day negates December 7th's 'day of infamy'... next Friday's Commitment of Traders report will be an education.

Here's Ted Butler's "Days to Cover Short Position" graph courtesy of Nick Laird over at sharelynx.com.

Click here to enlarge.

Now for the December Bank Participation [Futures] Report... as of the close of trading on December 7th.  The BPR and COT reports are generated from the same data set... so the numbers between them are directly interchangeable.

In gold, it shows that 4 U.S. bullion banks are long 32,444 Comex contracts and short 135,602 contracts... for a net short position of 103,158 contracts.  This represents 10.3 million ounces of gold.  The lion's share of this position would be held by JPMorgan...followed at a great distance by HSBC USA.

Also in gold, it shows that 15 Non-U.S. bullion banks are long 7,388 contracts and short 53,120 contracts... for a net short position of 45,732 contracts.  This represents 4.6 million ounces of gold.  I'd be prepared to be a few dollars that a huge chunk of these short positions held by foreign banks are held by either the Bank of Nova Scotia or Deutsche Bank... with UBS maybe a minor player as well.

In silver, the report doesn't show the number of U.S. banks because there are so few of them.  The CME changed the rules a couple of years back to benefit JPMorgan and HSBC.  When Ted Butler found this report years back, he called them out on it... because they stood out like sore thumbs in this category, because there were only the two of them.  So the CME changed the rules [probably by request from JPMorgan] to hide their tracks.  Ted doesn't call the CME and JPMorgan crooks for no reason!!!

Anyway, having said all that, JPMorgan and HSBC are long 376 contracts... and short a whopping 26,332 Comex contracts.  This makes them net short 25,956 contracts... with [and I'm guessing here] well over 90% of that net short position held by JPMorgan.  That's 130 million ounces held short by these two U.S. banks... 68 days of world silver production!

The report shows that a total of 11 banks [both U.S. and Non-U.S. banks] hold all the silver short positions, by the process of subtraction [11-2]... there are 9 Non-U.S. banks that are long 2,335 Comex silver contracts... and short 6,329 Comex silver contracts.  This leaves these 9 foreign banks net short 3,994 Comex contracts.  This represents one sixth of the short position held by JPMorgan and HSBC combined... and since it's spread out over 9 banks vs. 2 banks... the concentration drops even more.  I'd also bet a fair amount of money that the major portion of this short position held by foreign banks is held by Canada's Bank of Nova Scotia and Germany's Deutsche Bank.

These numbers are all wonderful, of course... but in order for them to mean something, they have to be compared against what happened in November.  Since the November report, JPMorgan and HSBC have reduced their net short position in silver by 3,500 Comex contracts.  The Non-U.S. banks increased their net short position in silver by 1,200 Comex contracts.

In gold, the U.S. bullion banks [read JPMorgan] only decreased their net short position by about 10,000 Comex contracts, while the Non-U.S. bullion banks increased their net short position by around 7,900 Comex contracts... so not much change month-to-month for gold

Of course, December 7th's 'day of infamy' numbers, which should have been included in both the COT and BPR , weren't... so, without doubt, JPMorgan et al have decreased their net short positions even more since the Tuesday cut-off... and we really won't know how much for sure until next Friday's COT report.

The Bank Participation Reports for all futures contracts, not just gold and silver, is linked here.  Silver and gold are about two thirds of the way down the page in both months.

One thing does stand out, however... and that is that JPMorgan is heading for the exits in silver.  In his note to private clients yesterday, silver analyst Ted Butler had this to say... "What has come to be my central theme over the past year or so, is the inexorable march towards the resolution of the silver manipulation.  My premise has been that one way or another, the 25-year downward manipulation of the silver price, via excessive and concentrated commercial short-selling on the Comex, would be terminated in the relative near future.  There have been many milestones indicating the end is near for the manipulation, not the least of which has been price behavior, as silver has moved to a series of new 30-year highs."

"The two leading contenders for causing the end of the silver manipulation have been a silver physical shortage which will bring a certain end to the scam... and potential regulatory actions which would end it sooner by enforcing the spirit of commodity law.  Based on recent developments, it's starting to appear that it has turned into a real horse race as to which contender passes the finish line first."

 

¤ Critical Reads

M2 Rises To Fresh All Time Record, 19 of 21 Consecutive Weekly Increases

Today's first story is courtesy of Australian reader Wesley Legrand.  It's a zerohedge.com post that's headlined "M2 Rises To Fresh All Time Record, 19 of 21 Consecutive Weekly Increases".  There are two very interesting graphs included in this very short read... and the link is here.

Read more...

U.S. November budget deficit $150.4 billion: Treasury

The next item is from reader 'David in California'.  It's an item that was posted over at marketwatch.com yesterday... and the headline reads "U.S. November budget deficit $150.4 billion: Treasury".  The whole story is as follows... and their is no link.  "The U.S. government ran a $150.39 billion budget deficit in November, the Treasury Department reported Friday. A year ago in November the deficit was $120.29 billion. Income was $148.96 billion in November, the Treasury said, about $15 billion higher than receipts in November 2009. Spending was $299.35 billion. This is $45 billion higher compared with outlays a year earlier. The November deficit was $8 billion above a congressional estimate."

Read more...

A&P Supermarket Chain Expected To File For Bankruptcy, Another Harbinger Wipe Out?

Here's David's second offering of the day.  It's another zerohedge.com piece.  This one is headlined "A&P Supermarket Chain Expected To File For Bankruptcy, Another Harbinger Wipe Out?".  The link to the story is here.

Read more...

We Understand Bank of America's Problem - They are Completely INSOLVENT

Here's another item from Wesley Legrand.  This time it's a video interview with Chris Whalen, co-founder of Institutional Risk Analytics".  Jim Rickards calls Whalen the best bank analyst around.  The headline of this interview reads "We Understand Bank of America's Problem - They are Completely INSOLVENT".  This is true of almost all banks in the western world these days.  The video runs about 14 minutes... and Chris really gets into the nuts and bolts of the whole thing... and the link is here.

Read more...

Companies Cling to Cash

The next story is one that I ripped from Friday's King Report.  It's a story from yesterday's edition of The Wall Street Journal that's headlined "Companies Cling to Cash".  Rather than pouring their money into building plants or hiring workers, nonfinancial companies in the U.S. were sitting on $1.93 trillion in cash and other liquid assets at the end of September, up from $1.8 trillion at the end of June, the Federal Reserve said Thursday. Cash accounted for 7.4% of the companies' total assets—the largest share since 1959.  The link is here.

Read more...

Dow vs. Gold

I'm going to preface my handful of gold-related stories with this chart that was sent to me by Washington state reader S.A.  It's a "Dow vs. Gold" graph that goes back to January of 2000.  No further comment is necessary, as the graph tells all.  If there was a "Dow vs. Silver" graph... it would be even more impressive than this.

Read more...

Interview with GoldMoney founder James Turk

My first of only two precious metals-related stories today is a King World News Interview with GoldMoney founder James Turk.  I consider this a must listen... and the link is here.

Read more...

Dialing 911

The other precious metals-related story concerns silver... and it's another trip down memory lane from silver analyst Ted Butler's archives.  This one is from June 20, 2006... and is headlined "Dialing 911".  The imbedded letter to the CFTC by Carl Loeb is of particular interest... and the link is here.

Read more...

Web Attackers Find a Cause in WikiLeaks

I have three more stories today, all of which I thought were more suitable for weekend reading than trying to find room for them in my weekly columns.  The first two are about the ongoing WikiLeaks saga.  The first one is courtesy of reader Roy Stephens and is posted in the December 9th edition of The New York Times.  The headline reads "Web Attackers Find a Cause in WikiLeaks".  It's an inside look at the hacker culture... “This is kind of the shot heard round the world — this is Lexington,” said John Perry Barlow, a co-founder of the Electronic Frontier Foundation, a civil liberties organization that advocates for a freer Internet.  The link to the 2-page story is here.

Read more...

WikiLeaks Latest: A Minefield in Eastern Europe

This next story regarding WikiLeaks was sent to me by reader G.G... and is written by foreign affairs expert Srdja Trifkovic... an author whose work I posted earlier this week.  I've been reading his commentaries for years... and have all the time in the world for whatever he has to say.  The title to this essay reads "WikiLeaks Latest: A Minefield in Eastern Europe".  For any students of Eastern European politics... and the 'Great Game' that surrounds it... this is amust read from one end to the other.  The story is posted over at chroniclesmagazine.org... and the link is here.

Read more...

Mystery Surrounds Cyber Missile That Crippled Iran's Nuclear Weapons Ambitions

Lastly today, is this rather longish [but incredibly fascinating] story about how a secret computer worm, codenamed Stuxnet, found its way into Iran's nuclear weapons program... and did untold damage.  The construction of the worm was so advanced, it was "like the arrival of an F-35 into a World War One battlefield," said Ralph Langner, the computer expert who was the first to sound the alarm about Stuxnet.  Others have called it the first "weaponized" computer virus.  This is an amazing read... and the link to this November 26th FoxNews.com essay headlined "Mystery Surrounds Cyber Missile That Crippled Iran's Nuclear Weapons Ambitions" is here... and I thank reader Dennis Miller for sharing it with us.

Read more...

 

¤ The Funnies

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Drill hole RLD-015 intersected 10.09 meters of massive sulphide in the Zone 10 horizon, which assayed 0.67 g/t Au, 5.20 g/t Ag, 2.39% Cu and 0.23% Zn. This massive sulphide mineralization indicates the zone remains open down plunge and up plunge toward the main deposit.  The exploration drill will continue delineating this zone up-plunge towards known mineralization.

Please visit our website to read the full release and learn more about VMS Ventures.

 

¤ The Wrap

The permanent printing of money is not a solution.- German economic minister Rainer Burderle, December 1, 2010

The big decline in both gold and silver prices yesterday occurred on fairly light volume... and since no new lows were set in either silver or gold prices, it's doubtful if there was big long liquidation by the tech funds... nor significant short covering by the bullion banks.  Any indication of that won't be available until Monday morning when the CME updates their open interest numbers.

As of this morning's CME report, there are less than a 1,000 gold and under 500 silver contracts left to deliver in the December contract.  More deliveries could be added as the month progresses, but for the moment, everything looks as it should.

As Ted Butler has pointed out, all that matters now is what happens at next Thursday's public hearings by the CFTC.  It's anticipated that the level of position limits in silver will be proposed by the staff... and voted on by the Commission.  Thousands of people have written to the Commission on this issue... and on multiple occasions... proposing that the limits in Comex silver be no more than 1,500 contracts... and that phony exemptions to that limit be disallowed.  We'll soon find out if the agency has considered our collective voices.

There still time to either readjust your portfolio... or get fully invested in the continuing major up-leg of this bull market in both silver and gold... and I respectfully suggest that you take a trial subscription to either our International Speculator [junior gold and silver exploration companies], or BIG GOLD [large producers] today, as that will allow you the luxury of spending time the weekend perusing the current issues, with all our best [and current] recommendations... as well as the archives.  Don't forget that our 90-day guarantee of satisfaction is in effect for both publications.

Enjoy what's left of your weekend... and I'll see you on Tuesday.