Gold & Silver Daily
"It appears that Friday's price rally in all precious metals was met with massive short selling by JPMorgan Chase et al"
 

¤ Yesterday In Gold & Silver

It was a pretty quiet day price wise all over Planet Earth on Monday.  Gold traded mostly within a five dollar price range.

However, gross volume was very heavy, which is no surprise as we head into the final few days of roll-overs out of the December contract.  Everybody with a December futures contract that isn't standing for physical delivery has to be out by the end of the trading day on Wednesday at the latest.

Gold closed at $1,749.40 spot...down $2.50 from Friday's close.  Once again there was no follow-through from Friday's big up day...and I'll have much more on this in 'The Wrap' further down.  Gross volume was 247,000 contracts, but once the roll-overs were subtracted out, the net volume was light at only 84,000 contracts or so.

It was almost the same story in silver, except there was somewhat more 'volatility in the silver price...and the attempted rally at the Comex open ran into the usual not-for-profit crooks.

Silver closed at $34.18 spot...up a whole nickel from Friday's close.  Gross volume was monstrous at 106,000 contracts, but netted out it was only around 26,500 contracts.

The dollar index did virtually nothing on Monday, although it began to weaken a bit starting at 3:00 p.m. in New York trading, where it fell 20 basis points down to the 80.05 mark...and then rallied a hair into the close.  The index finished at 80.13...down a mere 8 basis points from Friday.  Nothing to see here.

Here's the 2-day dollar index chart.  It includes the 6:00 p.m. Sunday night open in New York.

The gold stocks gapped down a bit at the open...hit their nadir around 10:30 a.m. in New York, which was gold's low price tick...and then rallied a bit from there.  But shortly before 2:00 p.m. a rally with some legs ensued...and most of the day's losses were eliminated by the 4:00 p.m. Eastern time equity market close.  The HUI finished down a tiny 0.17%.

The silver stocks didn't go quite as well as the gold stocks, even though the price finished in the black.  Nick Laird's Silver Sentiment Index closed down 0.82%.

(Click on image to enlarge)

As expected the CME Daily Delivery Report wasn't much, as the November delivery month is virtually over.  It showed that 9 gold and 7 silver contracts were posted for delivery tomorrow.

There were no reported changes in either GLD or SLV.

It was a different story over at the U.S. Mint yesterday.  They sold 8,500 ounces of gold eagles...500 one-ounce 24K gold buffaloes...and 400,000 silver eagles.

The Comex-approved depositories reported receiving 690,125 troy ounces of silver on Friday...and shipped 157,945 troy ounces out the door.  Virtually all of the action was at Scotia Mocatta...and the link to that activity is here.

Because of the U.S. Thanksgiving holiday on Thursday, the Commitment of Traders Report was delayed until yesterday...and I was shocked at what it showed.

In silver, the Commercial net short position increased by a very chunky 4,225 contracts...or 21.1 million ounces.  The Commercial net short position now sits at 275.9 million ounces. On a net basis, the 'big 4' short holders are short more than 44.0% of the entire Comex futures market in silver...263 million ounces worth, almost the size of the entire Commercial net short position.

Ted Butler says that JPMorgan Chase holds 34.0 percentage points of that total on its own...so it's a good bet that Scotiabank/Scotia Mocatta holds the lion's share of the remaining 10 percentage points.  It's my opinion that there are only two big shorts that matter...and these are them.

But, just to keep piling it on, the '5 through 8' big short holders are short another 8.9 percentage points.  However, in the grand scheme of things, the positions of the  '5 through 8' traders...plus the smallest two traders in the 'Big 4' category...are immaterial, as they can only possible hold a percentage point or two of the short position apiece.  On a net basis, the 'Big 8' are short 52.9% of the entire Comex silver market...and JPMorgan chase is short 34 percentage points of that amount all by itself.

In gold, the Commercial net short position increased by 11,269 contracts, or 1.13 million ounces.  The Commercial net short position in gold now sits at 23.61 million ounces.  The 'Big 4' are short 14.94 million ounces of gold, which represents 34.3% of the entire Comex futures market on a 'net' basis.  The '5 through 8' traders are short an additional 5.59 million ounces of gold, or 12.9% of the entire Comex futures market on a 'net' basis.  Adding this up, the 'Big 8' are short about 47.2% of the entire futures market in gold...and that's a minimum number.

Here are a few sentences I stole from silver analyst Ted Butler's short Monday commentary to his clients regarding yesterday's COT Report...

"By my calculations, JPMorgan is holding a net short position of 35,000 contracts in COMEX silver futures, one of their largest short positions ever, as of the latest COT. That’s the equivalent of 175 million oz. Because there was also a large increase in spread positions in the Disaggregated COT report, JPM’s market share is now up to 34% of the entire short side of the COMEX silver futures market. While I am stating this as factually as possible, it almost qualifies as being unbelievable."

Nothing free market about this.  If you want a visual and historic representation of the COT reports going back about 16 year...these linked interactive charts show the short and long term trends for all COT categories, which are visible at a glance.  For gold the link is here...and for silver the link is here.

Yesterday's COT Report snapshot of the 'big 4' and 'big 8' short-side traders comes in this excellent graph of "Days of World Production to Cover Comex Short Positions" as provided by Nick Laird.

(Click on image to enlarge)

It's my belief that almost the entire red bar in silver is made up of the short positions of JPMorgan and Scotiabank/Scotia Mocatta.  As I said before, the short positions of the other six traders in the '8 or less' category...are immaterial.

Reader E.W.F...who was kind enough to send out a full set of charts from that data contained in the Disaggregated COT Report...sent me this table of numbers, along with the following comments...

"The silver top 4 net short position hasn't been this large since September 28, 2010.  Silver open interest hasn't been this high since November 9, 2010.  The current silver COT structure is remarkably similar to the COT structure seen in late 2010 when the silver price started to spike."

Without doubt, we're probably beyond those 2010 numbers at this point already, as the deterioration on Friday was shocking...and I'll have more on that in 'The Wrap'.

Since it's my Tuesday column, I have more than the usual number of stories for you today...and I'll happily leave the final edit up to you.

 

¤ Critical Reads

Retailers’ Thanksgiving Deals Cut Black Friday Spending

Thanksgiving Day openings and midnight deals at retailers from Target Corp. to Wal-Mart Stores Inc. drew U.S. shoppers out earlier than ever, trimming spending on Black Friday.

Sales on the day after the Thanksgiving holiday in the U.S. fell 1.8 percent from last year to $11.2 billion, according to a report today from ShopperTrak, a Chicago-based researcher. That compares with a 6.6 percent gain in Black Friday sales in 2011. Foot traffic this year rose 3.5 percent 307.7 million store visits, ShopperTrak said.

Retailers have turned Black Friday, once a one-day event after Thanksgiving, into a week’s worth of deals and discounts. With the earlier openings, online deals starting as far back as last weekend and new promotions stores are offering to win return visits, shopping malls were less hectic on Black Friday this year, said Ramesh Swamy, an analyst at Deloitte LLP.

And as Bill King said in yesterday's King Report..."If one were to adjust year-over-year Black Friday sales by population growth and inflation, the number would be much worse."

This Bloomberg story showed up on their website on Saturday afternoon...and I thank reader 'David in California' for finding our first story of the day.  The link is here.

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What A Difference A Year Makes

As we approached the debt-ceiling debacle last year, there was much wailing and gnashing of teeth among talking heads and portfolio managers and indeed the latter actually started to put their money where there mouth was - i.e. they sold/reduced exposure to US equities. A year or so later and the fiscal cliff and debt-ceiling SNAFU is once again upon us but this time, while sentiment is just as negative, real speculative positioning is at multi-year record high longs.

It would seem to us that all those holding out for a hero in Congress and some compromise to provide a lift-a-thon in stocks are already all-in (as the two charts below indicate oh so clearly). One can only hope they are not disappointed as the 'money on the sidelines' appears to be more exposed than ever and unlike last year's massive net short positioning, there is no more squeeze ammunition left for the next leg.

This short Zero Hedge piece has two must-see graphs embedded in it...and I consider it a must read as well.  Marshall Angeles sent it to me on Sunday...and the link is here.

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Congress Damns Corzine but Lets Him Off the Hook

Perhaps we should no longer be surprised by the arrogance of Wall Street executives. Still, the level of hubris and bullying displayed by Jon Corzine during his 19-month tenure as chairman and chief executive officer of MF Global Holdings Ltd. -- as described in a recent congressional report about the company’s 2011 collapse -- stands out for sheer offensiveness.

The 97-page report prepared by the staff for Republicans on the House Financial Services Committee panel on oversight and investigation pulls no punches when it comes to blaming Corzine for the MF Global disaster, which wiped out thousands of jobs and billions of dollars of customers’ and creditors’ money. “Jon Corzine caused MF Global’s bankruptcy and put customer funds at risk,” the report concludes flatly.

“The goal here is not to be a prop trader,” the report claims Corzine said. “I don’t think that we will be in a risk taking position, substantial enough to have it be the kind of thing that the rating agencies would say ‘holy cow, these guys got a different business strategy’ than what we told them we had.”

This is another Bloomberg story from Sunday afternoon...this one courtesy of Manitoba reader Ulrike Marx...and the link is here.

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Mortgage Interest Deduction, Once a Sacred Cow, Is Under Scrutiny

A tax break that has long been untouchable could soon be in for some serious scrutiny.

Many home buyers deduct their mortgage interest when assessing their tax bill, a perk that has helped bolster the income of millions of families — and the broader housing market.

But as President Obama and Congress try to hash out a deal to reduce the budget deficit, the mortgage interest deduction will likely be part of the discussion.

Limits on a broad array of deductions could emerge in any budget deal. It is likely that any caps would be structured to aim at high-income households, and would diminish or end the mortgage tax break for many of those taxpayers.

This New York Times article showed up on their Internet site early yesterday afternoon...and I thank Phil Barlett for sending it.  The link is here.

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Doug Noland: Following Weidmann, Lacker Takes a Stand

Courageously, Mr. Lacker comes with a quite sound proposal:  “If the Federal Reserve cannot limit credit policy of its own accord, legislation may be the best option. And the restraint of credit policy would not be complete unless limits on reserve bank lending are complemented by limits on the Fed’s ability to buy private sector assets.”

This is absolutely correct:  Some basic rules of the game would go a long way toward containing the ongoing damages associated with profligate discretionary monetary management.  This runaway experiment must be reined in; there has to be a return to trusted central banking principles.  The Fed should be limited to government debt purchases, and there must be clear limitations on the size of its balance sheet.  And I would argue that until there is a return to a sound monetary doctrine there will remain this pall of uncertainty overhanging the economy.

Interminable “fiscal cliff” and European infighting are not the only games in town.  I hope others will bravely support Mr. Lacker in what could prove a fascinating – and critically important - battle brewing at the Federal Reserve.

Here's Doug Noland's Credit Bubble Bulletin from last Friday...and what Doug has to say is always worth reading.  It was posted on the prudentbear.com Internet site on Friday evening...and the link is here.  I thank reader U.D. for sending it.

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Britain Selects a Canadian To Lead the Bank of England

In a surprising departure from convention, the British government on Monday selected Mark J. Carney, the head of the Canadian central bank, to succeed Mervyn A. King as the next governor of the Bank of England.

The appointment ended months of jockeying by some of Britain’s most prominent public officials. As a result of changes to take effect next year, the job will come with sharply enhanced powers.

The odds had been seen as heavily favoring the Bank of England’s deputy governor, Paul Tucker. The decision to select a foreigner to lead the bank, Britain’s most storied financial institution and the equivalent of the Federal Reserve in the United States, came as a shock when George Osborne, the chancellor of the Exchequer, broke the news during a session of Parliament.

I wouldn't read much into this.  At the moment, Canada is doing great, and a lot of the credit has been laid at the feet of Mr. Carney who is enjoying almost 'rock star' status in the world of central banking.  I'm sure he was chosen mainly because he didn't bring any baggage with him, but I'm sure his time spent at Goldman Sachs was a plus as well.  This story showed up on The New York Times Internet site yesterday...and it's Ulrike Marx's second offering in today's column.  The link is here.

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Catalan separatists take qualified victory in elections

Catalan parties pushing for a referendum on breaking away from Spain won strong backing in an election Sunday, while voters punished the rich region's leader Artur Mas, forcing him to share power.

The result could set Catalonia up for a clash with Spain's central government, already riled by Mas's push for greater self-determination as Spain fights to avoid getting bailed out by its EU neighbours.

But it was unclear how Mas would move forward after he saw his support plunge in favour of rival parties that share his desire for some kind of referendum but not all his political objectives.

Mas's centre-right Convergence and Union alliance (CiU) won the vote, but its share of the parliamentary seats plunged to 50 from 62, while left-wing nationalists ERC surged to 21 seats from 10, official results showed.

This News Wires story showed up on the france24.com Internet site yesterday...and I thank Roy Stephens for bringing it to our attention.  The link is here.

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Spain to get EU bank aid Dec. 15 in return for job losses: Report

European authorities will transfer 35 billion euros to Spain's state bank rescue fund on Dec. 15 in exchange for massive layoffs at Spain's four nationalised banks, including state-rescued Bankia, El Pais newspaper reported on Sunday.

The cash injection from European bailout funds will be disbursed to troubled Spanish banks two weeks after it is paid into Spain's bank restructuring fund, or FROB, the paper said.

Bankia, which sought a 23.5 billion euro bailout from the state in May, is expected to be forced to lay off up to 6,000 people from its current 20,000 staff, while NovaGalicia Bank is seen laying off 2,000 of its 5,800 workforce, said El Pais, citing European and banking sources.

Bankia and NovaGalicia Bank declined to comment on the report, which also said the banks would have to close 1,000 branches between the two of them.

This Reuters story, filed from Madrid early on Sunday morning Eastern time, is a little something that I borrowed from yesterday's edition of the King Report.  The link is here.

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Denying Reality: Germany's Ongoing Refusal to Forgive Greek Debt

An elegant appearance is important to Christine Lagarde. The head of the International Monetary Fund (IMF) wears her short hair carefully coiffed, and diamonds glitter on her manicured fingers. When she talks about global financial issues, she hardly ever raises her voice. Her colleagues at the Washington-based financial authority call her "Ms. Perfect."

But last Tuesday Lagarde, who was once French finance minister, was having trouble keeping her composure. She had hurried back to Europe from Asia to attend the latest in a series of Euro Group crisis meetings on Greece. And even though she had a fever and felt weak from the flu, she began to raise her voice as she spoke. For Greece to recover, she insisted, creditor countries would have to forgive the government in Athens a large share of its debt. "Nothing else will work," Lagarde said.

But the group, most notably Germany's impassive Foreign Minister Wolfgang Schäuble, from Chancellor Angela Merkel's Christian Democratic Union (CDU), refused to budge. The meeting ended unsuccessfully at around 5 a.m. and was adjourned until this Monday.

This story was posted on the German website spiegel.de yesterday...and my thanks go out to Roy Stephens once again for sending it along.  The link is here.

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No amendments to Morsi decree after meeting with top judges

Egyptian President Mohamed Morsi has met with the country’s top judges to reassure them that last Thursday's decree granting him sweeping powers is “temporary” and limited only to “sovereignty-related issues.”

According to a presidential spokesman, no amendments were made to the decree after the meeting, Al-Ahram newspaper reported. The talks with the Supreme Judicial Council (SNJ) come as demonstrators in Cairo continue a week-long sit-in protesting the Morsi's move to grant himself near-absolute powers, including immunity from judicial oversight.

Meanwhile the ruling Muslim Brotherhood party has announced that it has canceled a massive pro-Morsi rally to avoid “public tension.”

This story was posted on the Russia Today website late last night...and it's Roy Stephens second offering in a row.  The link is here.

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Japanese Stocks? Yes, They Really Think So

Less than a quarter-century ago, Japan was the economic envy of the world. In 1989, Tokyo-listed shares represented nearly half the planet’s equity value, while the land beneath the city’s royal palace was worth more than all of California. American nightly news anchors practically misted up when they had to report that Rockefeller Center was turning Japanese.

Two lost decades and massive property- and stock-bubble explosions later, Japan is a one-word cautionary tale. Caught in economic and demographic atrophy—and stewarded by countless false-start prime ministers—the country has become a hub for zombie banks, a generation of disenchanted youth, and fading brands such as Sony, Sharp, and Panasonic.

Last year, for the first time, sales of adult diapers in Japan exceeded those for babies. Factor in how the strong yen has been making the country’s critical exports more expensive, and you can see why the world’s No. 3 economy (recently pushed into third place by China) has been quicksand for investors; when international markets hit bottom in early 2009, Japan’s Nikkei slumped to levels it hadn’t seen since 1983. A Merrill Lynch survey of global fund managers discovered that their net exposure to Japan is at its lowest in a decade.

Note the highlighted sentence above.  This businessweek.com story, courtesy of Scott Pluschau, showed up on their website on Friday...and the link is here.  It's well worth reading...especially in light of what the story below says about Japan.

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Ex-Olympus CEO: Japan is Dysfunctional

Reader Paul Laviers sent me this absolute must watch CNBC video...and he had this to say about it in his covering e-mail.

"Here is another CNBC video that I found very interesting, so thought I'd let you know about it."

"It features the ex-CEO of Olympus in which he explains that Japan is dysfunctional and corrupt, and that he feared for his life after exposing the Olympus fraud."

Wow!  Paul wasn't kidding. I wouldn't invest a nickel in Japan after watching this 10-minute video clip.  This is one of the most candid interviews I've ever watched on any main stream media source.  The link is here.

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Dr. Marc Faber: 44 Charts That Show Why The World Is Doomed

In a new presentation given in Hong Kong to the London Bullion Market Association, Faber offers a thick stack of 44 charts that makes him very bearish on the global economy.  They include overviews of the emerging and evolving trends on debt, trade, stocks and commodities.

Faber points to the explosion of public and private debt and how they have been far outpacing GDP growth for the last 50 years. In this backdrop, the wealth gap between younger and older Americans have been widening.

Overseas, China has seen its economy boom on expansionary monetary policy, which has turned the world's second largest economy into a giant credit bubble.

His entire LBMA presentation was posted over at the businessinsider.com Internet site last Friday...and I thank Scott Pluschau for his second offering in today's column.  The link is here.

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CME Declares Force Majeure at Manhattan Gold Depository

CME Group Inc. on Monday said that Manfra, Tordella and Brookes Inc., one of the exchange's gold depositories, will not be able to delivery metal as the lower Manhattan company deals with "operational limitations" almost a month after the arrival of Hurricane Sandy.

MTB, one of five depositories licensed to deliver gold against CME's benchmark 100-troy ounce gold contract, held 29,276 troy ounces of gold and 33,000 troy ounces of palladium as of Nov. 23, according to data from CME subsidiary Comex.

In a notice to customers on Monday, CME declared force majeure, a contract clause that frees parties from liability due to an event outside of their control, for the facility.

CME said that individuals holding MTB warrants, or certificates for a specific lot of metal stored in the depository, may receive gold delivered from Brinks Co. in New York. MTB is responsible for any additional costs incurred by customers receiving metal from Brinks, CME said.

This Dow Jones Newswire story was picked up by the foxbusiness.com Internet site yesterday...and the link is here.

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$300,000 In Gold Dust Found In Sacramento Home During HVAC Installation

Sacramento homeowners called for what was going to be an expensive new heating and air system but ending up striking gold.

Workers installing the equipment found a secret gold stash hidden away in the house. Back in September, beneath the floor grill of an older home, Steve and his partner discovered 12 baby food jars filled to the brim with gold dust.

They pride on customer service at Clark & Rush, but this is one guarantee they say they can’t make, finding gold on every house call. The total value of what they found was $300,000 worth of gold. The total cost of the HVAC installation was around $6,500.

This CBS story out of Sacramento last week has a 2:05 minute video embedded...and it's Scott Pluschau's third and final offering in today's column.  The link is here.

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Montana GOP Rep.: "Pay Me In Gold Before Dollars Have No Value"

Jerry O'Neil, six-term GOP state representative in Montana, has asked to receive his salary (which at $10.33 per hour is around $1800 per month) in gold or silver. The long-standing legislator was driven to this decision by his constituents' concerns about the nation's massive debt-load and fears of our country's collapse as "only so many dollars can be printed before they have no value."

The long-time Ron Paul supporter, according to Time, cited Article 1, Section 10 of the US Constitution, which says, in part, that "No State shall... make any Thing but gold and silver Coin a Tender in Payment of Debts." State administrators have denied his request and added that "a bill could be introduced to accomplish this result." O'Neil, like many other, believes "The Keynesian era of financing government with debt appears to be close to its demise."

This item showed up over at the zerohedge.com Internet site on Saturday...and I thank Marshall Angeles for bringing it to our attention.  The link is here.

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South Africa’s gold industry on edge - Gold Fields

South Africa’s gold mining industry, one of the country's most important sectors, is on the brink and will collapse if no steps are taken to boost its productivity, the world's fourth-largest bullion producer Gold Fields said on Monday.

The mining industry in Africa’s biggest economy, particularly its gold and platinum producers, have just emerged from one of the toughest periods in their history with mines ground to a halt by months of wildcat strikes.

"If the last five years' decline in production continues, there will be no industry in five years time," Gold Fields' Chief Financial Officer Paul Schmidt said as the company unveiled its third quarter earnings.

This story, which is no surprise to me, was filed from Johannesburg on Monday...and was posted on the mineweb.com Internet site yesterday...and I thank Ulrike Marx for her last offering in today's column.  The link is here.

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The Gold Market Through China's Eyes

Have you ever wondered what the typical Chinese gold investor thinks about our Western ideas of gold? We read month after month about demand hitting record after record in their country – how do they view our buying habits?

Since 2007, China's demand for gold has risen 27% per year. Its share of global demand doubled in the same time frame, from 10% to 21%. And this occurred while prices were rising.

Americans are buying precious metals, no doubt. You'll see in a news item below that gold and silver ETF holdings just hit record levels. The US Mint believes that 2012 volumes will surpass those of 2011.

But let's put the differences into perspective. This chart shows how much gold various countries are buying relative to their respective GDPs.

This must read commentary by Casey Research's own Jeff Clark showed up in the Casey Daily Dispatch yesterday.  The chart alone is worth the trip...and the link is here.

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Lawrence Williams: Can we trust China’s gold reserve figures – or anyone else’s either?

According to a Reuters report, China’s Ministry for Industry and Information Technology has put out a statement suggesting that the country’s gold output will continue to rise over the next three years to reach between 420 and 450 tonnes per annum, thus comfortably retaining its position as the world’s largest gold producer.  It also predicts Chinese consumption of some 1,000 tonnes of gold per annum by then.

But how accurate are these figures, particularly with regard to consumption?  China may, or may not be the world’s largest consumer of gold this year.  It and India vie for first place.  But with the Indian government trying to dampen down demand for physical gold imports as a means of trying to help curb its annual trade deficit, while China seems to consume more and more each year, if China doesn’t become the world’s largest gold consumer this year it can’t be long before it achieves this position.

What the big unknowns are with these figures is firstly how much of China’s gold demand is from the general public and how much, if any, is wending its way into official reserves even though this may remain unreported.  China already has a track record of not reporting its full official gold holdings until it thinks it appropriate to do so, but given that this is the case is there any certainty that even these figures are accurate?

I found this story posted on the mineweb.com Internet site in the wee hours of this morning...and it's a must read as well.  The link is here.

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Need to arrest gold demand; imports widening trade deficit: RBI deputy governor

Reserve Bank Deputy Governor Subir Gokarn today said there is a need to "dematerialise" gold like any other financial product to reduce its physical imports, the rise of which has been blamed for the high current account deficit (CAD). It is feared to touch a record high this year.

"It (high gold imports) is creating some macroeconomic stresses and so the challenge is to find ways to replicate the financial characteristics of gold without necessarily causing physically importing," Mr Gokarn told the last day of the two-day annual Bancon here.

The current account deficit or CAD has been rising on the back of record trade deficits, which in October jumped to a 12-year high of $21 billion on the back of rising oil and gold imports.

Nothing like coming out and calling a spade a shovel.  The Indian people are just buying too much gold and that's got to stop.  This story showed up on the ndtv.com Internet site on Sunday evening India Standard Time...and I thank Mumbai reader Avinash Raheja for sharing it with us.  It's worth reading...and the link is here.

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Austrian Press Agency cites GATA in report on possible audit of Austria's gold

The Oesterreichische Nationalbank (OeNB) last week revealed a lot about the 280 tons of gold held by the Republic of Austria, but to which part of it they really have access is hard to identify, according to a U.S. organization that has been working for 15 years on the international gold market.

"In order to know that, the bank would have to disclose not only how much it has lent out up to date, but also whether the gold is held in allocated or unallocated accounts," Chris Powell of the Gold Anti-Trust Action Committee (GATA) told APA over the weekend.

The OeNB was forced to admit last week in Parliament that 80 percent of Austria's national gold is in London and explained that the bank has earned 300 million euros in the past decade with gold-leasing operations. After an expert commented that this suggested that a large part of the gold was leased out, the bank leaked that currently only 16 percent of the reserves are affected. The bank gave no explanation for the relatively high income from gold lending.

According to GATA, allocated gold means that the bars are accurately weighted and have serial numbers that can be directly attributed to the owner and the bars must be handed over at the depositor's request. Unallocated gold is merely a claim against the storing institution, in this case, for example, the Bank of England (BoE) and the Bank for International Settlements (BIS).

There's a lot more to this story in this GATA release from yesterday...and I consider it a must read.  The link is here.

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Do gold manipulation deniers really know the secrets of central banking?

A couple of common assertions that are frequently made to dismiss complaints of manipulation of the gold market have come up again in recent days and may deserve rebuttal.

First, interviewed in part about gold market manipulation last week by Max Keiser on Russia Today's "The Keiser Report," Charteris Treasury Portfolio Managers CEO Ian Williams remarked, "We've always worked on the theory that the market is bigger than any one particular player".

Second, in his latest gold market commentary, financial letter writer Clive Maund says: "The long-term chart for gold also makes clear that all the talk about it being manipulated and suppressed is arrant nonsense. With it having risen from about $250 at its low at the start of the bull market to its latest peak around $1,900 last year, it doesn't look like the manipulators have had much success, does it? The fact of the matter is this: If currencies get debased, and they are being debased at an ever-increasing rate, then gold, which is real money, is going to go up to compensate".

This is another must read commentary from Chris Powell.  It's contained in this GATA release...and the link is here.

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Ted Butler: A Manipulation Time Line

A friend and long-time subscriber who intends to write a book about the silver manipulation asked if I could provide him with a bit of history. To my mind, the silver manipulation dates back to early 1983, when the commercial traders grew confident that they could sell any quantity of paper short contracts to the technical fund buyers on the COMEX. By that time the commercials learned that technical fund buyers would never take physical delivery and could be counted on to buy or sell based upon price signals that the commercials could easily influence and control. In essence, the game has remained remarkably similar ever since.

While the commercials learned to behave collusively when dealing with the technical funds, there was an additional requirement that there would be one large commercial standing ready to be the short seller of last resort to backstop the combined commercial effort. Without a “Mr. Big” standing behind and guaranteeing that the combined commercial effort to trick the technical funds would never get overpowered, the long term silver manipulation would not have been possible. Over the past 30 years, there have been a series of Mr. Big’s that have been the paper silver short sellers of last resort. Therefore, the history of the silver manipulation can be recorded along the lines of who was the big short seller at any particular time.

This is Ted's commentary from last Wednesday that I was hoping that he would post in the clear...and he has done so.  I know it's three-in-a-row...but this is a must read as well. It's posted in the clear on the silverseek.com Internet site...and the link is here.

Read more...

 

¤ The Funnies

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¤ The Wrap

There are only two  mistakes one can make along the road to truth; not going all the way, and not starting. - Buddha

I was disappointed, but not entirely surprised by the fact that there was no follow-through price action to the upside on Monday, after Friday's big day in all four precious metals.  What did surprise me was the monstrous increase in the preliminary open interest numbers for both gold and silver that were posted on the CME's website early Saturday morning.  I was expecting/hoping that there would be some major reduction when the final numbers were posted late Monday morning Eastern time...but there wasn't.  There were almost no changes at all.

It appears that Friday's price rally in all precious metals was met with massive short selling by JPMorgan Chase et al...as there is no other explanation for such a big increase in open interest.  The bullion banks, led by JPM...are going short against all comers.

I mentioned in my closing comments about yesterday's Commitment of Traders Report that we have probably already exceeded the October 2010 figures for open interest, Commercial net short position...and short positions for the big 4 and big 8 that reader EWF showed in his table of numbers just above the 'Critical Reads' section above.  As Ted Butler correctly pointed out in his COT commentary yesterday, all will be revealed with this Friday's Commitment of Traders Report.  Based on what I've seen so far, it's going to be ugly.

At the moment, the final roll-overs out of the December delivery month are in progress...and it should be all wrapped up by the close of trading tomorrow.

Today is the cut-off for this Friday's Commitment of Traders Report, so most of the roll-over data will be in it.

Here are the 6-month gold and silver charts.  Yes, the rallies on Friday show that we've broken nicely above the 50-day moving averages in both metals.  Can we go higher from here?  Absolutely, but based on the COT data, we're much closer to a top then a bottom...and unless JPMorgan Chase et al get over run, or puts their hands in their pockets and do nothing as this rally progresses, or start buying back part of their massive short position...this rally will end the same as every other rally...in tears.  We've seen this picture many times before.

(Click on image to enlarge)

(Click on image to enlarge)

In overnight trading, gross volume is decent in gold...and very heavy in silver.  But once the roll-overs are removed, volumes sink to fumes and vapour.  I expect this situation to continue for the rest of the Tuesday session.   The prices of both metals aren't doing much of anything...and the dollar index is still hanging in just above the 80.00 level...and is up about 14 basis points from Monday's New York close.

Unless something comes out of left field during the next four days, I'm not expecting a lot of price fireworks until after the December contract goes off the board.  Once we get into next week, then we'll see what the lay of the land is when we have Friday's COT Report under our belts.

That's more than enough for one day...and I'll see you here tomorrow.

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