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Gold jumped over five bucks right at the open, but there was a not-for-profit seller waiting in the wings…and gold was soon down below its Friday closing price…and never made it back above it for the rest of the trading day on Monday, as every rally attempt ran into selling.

Volume was very heavy in the first couple of hours trading in the Far East yesterday morning…so it took a fair amount of firepower to keep the gold price down during that time period.  Early Far East trading volume is normally extremely light in both metals.  That wasn’t the case yesterday.

It was the same story in silver…with silver up 30+ cents at the Far East open.  Every silver rally attempt ran into selling as well…especially the two that occurred at 9:30 a.m. and noon in the New York trading session.  By the time the smoke cleared, silver had finished basically unchanged on the day.

The world’s reserve currency spiked up about 15 basis points right at the Far East open in New York on Sunday night.  But that proved to be the high of the day…and by the time the low was around 10:20 a.m. Eastern…the dollar had shed about 65 basis points, although it recovered some of its loses going into the New York close.  As you can tell by looking at the gold chart, there was no sign of this rather significant slide in the U.S. dollar anywhere to be found.

  

Here’s the 6-month dollar chart.  As you can see, it’s really oversold at the moment…and it will be interesting to see if it continues lower, or whether we’ll get a bounce at this point.  If the bullion banks want to continue downward pressure on gold or silver, a rally in the dollar would give them a perfect opportunity.  We’ll see.

  

The gold stocks were under pressure for most of the day…and the New York high in the gold price did not correspond to the highs in the stocks.  The HUI, which was down almost 2% by 2:30 p.m. Eastern time yesterday afternoon, rallied into the close…and finished down only 0.69% on the day.

  

The CME’s Daily Delivery report showed that another 1,699 gold contracts were posted for delivery…these ones for delivery on Wednesday.  There were numerous issuers and stoppers…and the stand-out was the 989 contracts stopped/received by HSBC USA in their house/proprietary trading account.

In the first two days of the February delivery month…8,594 gold contracts have already been posted for delivery.  That’s a fair chunk.

In silver, there were only 10 contracts posted for delivery on Wednesday.  Only 121 silver contracts have been posted so far this month…and the link to the action in both metals [which is well worth checking out] is here.

The GLD ETF reported receiving 97,576 ounces of gold yesterday…and there were no reported changes in the SLV ETF.

Over at Switzerland’s Zürcher Kantonalbank for the week that was…they reported adding 10,033 ounces to their gold ETF…and their silver ETF reported no change.  As always, I thank Carol Loeb for those numbers.

For the seventh business day in a row…and the last day of January…the U.S. Mint reported no sales in either gold or silver eagles.  Very strange.  For the month of January, the mint reported selling 83,000 ounces of gold eagles, along with 4,724,000 silver eagles.

Over at the Comex-approved depositories, they reported a decline of 104,706 ounces of silver on Friday…and the link to that action is here.

Here’s a neat graph that Nick Laird over at sharelynx.com in Australia sent me on the weekend.  It’s the Baltic Dry Index updated as of last Friday…and it ain’t a pretty sight.

Nick mentioned to me that Tropical Cyclone Yasi was bearing down on Cairns [where he lives]…and it’s a category IV…with winds in the 125-150 knot range.  He figures he might be offline for a week, as Cairns is expected to take a direct hit, so no more charts for the moment.  The link to the cyclone track map from the Australian Bureau of Meteorology is here.

  

As an independent currency, a currency to which investors can resort when they are dissatisfied with government currencies, gold carries the enormous power to discipline governments, to call them to account for their inflation of the money supply and to warn the world against it. Because gold is the vehicle of escape from the central bank system, the manipulation of the gold market is the manipulation that makes possible all other market manipulation by government.– Chris Powell, GATA

It was obvious from the resistance [and the huge trading volume] that they ran into shortly after the Far East opened yesterday morning, that the prices of gold and silver were not going to be allowed to do much during the rest of the trading day on Monday…and that turned out to be the case when I turned on the computer yesterday morning.

The CME’s preliminary volume numbers show that Monday’s trading volume wasn’t overly heavy…and if the preliminary open interest numbers are a reliable guide…we should see another sharp drop in open interest when the final figures are posted on their website later this morning.

Silver’s volume was pretty decent…but, based on the preliminary open interest figure, the final o.i. number is a much harder call.  I’ll find out when I get up later this morning.

Friday’s open interest numbers showed that gold o.i. fell 10,026 contracts…which is a lot.  But Ted Butler pointed out that 6,895 of those contracts were probably the deliveries posted for First Day Notice into the February gold contract.  The act of delivery automatically reduces the open interest, because a long and short are extinguished…because the party that is short, has to deliver to the long…and when that happens, open interest drops by that amount.  This is most pronounced at the beginning of the delivery month, when the bulk of deliveries are made.

This Friday’s Commitment of Traders report will, hopefully, tell us more.

Open interest in silver actually rose 792 contracts on Friday.

In commentary to his paying clients on Saturday, silver analyst Ted Butler had this to say…”The latest Commitment of Traders Report [COT] confirmed expectations of a further reduction in the total net commercial short positions in both Comex silver and gold futures; this week by a further 2,200 contracts in silver…and 9,000 contracts in gold.  I had actually expected more of a reduction, given the price action during the reporting week, in which we spent every day below the important 50-day moving averages in both gold and silver, the first time that has occurred in both in many months.  The price action included the “slicing of the salami,” a term used by myself and my silver mentor and friend, Izzy Friedman, to describe a series of purposeful new price lows intended to induce technical funds and traders to sell, by the big Comex commercial crooks.  This technique was used quite commonly in the past when the commercials were near the end of a manipulated flush-out of leveraged longs.  In fact, the slicing of the prices during the reporting week convinces me that the commercial manipulators may have gotten all the blood out of the margined long stone that was getable.  That’s what usually defines the bottom.  Coupled with the sharp and sudden price rally on Friday, the path of least price resistance now appears upward.”

Regardless of whether we are at the absolute lows or not, this is not a market where I want to be sitting on the sidelines.  The vast majority of the flush-out of the weak Non-Commercial and Nonreportable longs is now behind us…and any attempt to trade this market might leave one standing on the sidelines if the bullion banks decide not to go short the next rally.

We’ve seen this sort of action many times over the years…and, as Eric Sprott told me in Vancouver last weekend, he’s rather sanguine about the whole thing, as he has more silver he wants to buy…and if the price stays low for a few more days/weeks…he doesn’t care, because much higher silver prices are in the cards further down the road.

Since Eric hasn’t been on the losing side of too many trades in his lifetime, I’m more than willing to wait this out alongside him.  If it’s a sure bet for him…it should be good enough for you and I. And, as he said in his speech last Monday…”silver is the trade of this decade.”  He got all his silver knowledge from the same source I did…silver analyst Ted Butler.

I note, as I put the finishing touches on this column, that gold is up a few bucks and silver is about fifteen cents as of 4:37 a.m. Eastern.  At the London open, gold volume was around 16,000 contracts net…and silver was around 4,500 contracts.

I have no idea what the price action will be like in New York this morning…and I’m not really concerned.  This base we’re building in both metals will be over when it’s over…and we’ll be on our way to new highs in the near future.

See you tomorrow.

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