Gold & Silver Daily: JPMorgan's Short 200 Million Ounces Comex Silver - Nov 21, 2009

JPMorgan's Short 200 Million Ounces of Silver on the Comex
Almost the moment that I hit the 'send' button on my Friday commentary, both the gold and silver price headed south. Starting shortly before 9:00 a.m. in London trading... and ending precisely four hours later... gold dropped $12. But, from that point, and through the New York open about half an hour after that, the gold price kept rising right until the close of trading at 5:15 p.m. on Friday afternoon. Not only did gold close on it's high of the day, it closed at a new record high price as well.... $1,150.90 spot.



Silver's price followed gold's in virtual lock step, losing about 50 cents during the same four hour period during London trading. Silver recovered virtually of its losses of the day on the subsequent rally... but in order for silver to set a new high record closing price, it would have to close about $3 higher than it did yesterday... which was $18.51 the ounce.



This non-confirmation by silver during this rally is one of several reasons that this current run-up has made me nervous. The poor showing by the precious metals equities [considering gold's nice gain on the day] didn't add to my confidence level, either.



Open interest changes in gold for Thursday's trading activity showed another sharp rise of 11,750 contracts... which, considering the price activity [red line on the above gold graph] was a lot. Volume was an absolute stunning 253,364 contracts! Total open interest is now up to 538,709 contracts. In silver, open interest rose a more modest 1,470 contracts on more modest [but still huge] volume of 46,843 contracts. Total open interest in silver is now up to 141,208 contracts.

Now, for the latest Commitment of Traders report for positions held at the end of trading on Tuesday, November 17th. I wasn't expecting a lot of change in either metal... and, for once... that's the way it turned out. In silver, the bullion banks reduced their net short position a very small 365 contracts, but still hold a net short position of 58,381 contracts... which translates into 291.9 million ounces... and Ted Butler says that JPMorgan holds 200 million ounces of that short position all by themselves. The full-colour silver COT graph is linked here.

In gold, the bullion banks also improved their net short position by a bit. In this case it was an insignificant 1,238 contracts. So... as of Tuesday... the bullion banks were sitting on a net short position of 281,546 contracts, which represents 28.15 million ounces of gold. The full-colour gold COT graph is linked here... and it is ugly, ugly, ugly!!! Of course, the silver COT graph looks the same.

Silver analyst Ted Butler had a few things to say about the Commitment of Traders report in general... and the silver market in particular... during his weekly interview with Eric King over at King World News yesterday. As always, anything Ted has to say, is worth your undivided attention... and the link to the interview is here.

The CME Delivery Report contained nothing of interest... and there were no changes reported in GLD or SLV yesterday, either. However, the U.S. Mint had an update on eagle production yesterday. They reported another 25,000 gold eagles and 685,000 silver eagles were minted. Along with that was another 5,000 of the 24K buffaloes. Month-to-date there have been 99,500 gold eagles, 2,285,000 silver eagles... and 34,000 buffaloes produced. These are big numbers and there's still a lot of November left on the calendar. And over at the Comex-approved depositories, they reported that 181,763 ounces of silver were added to their collective inventories.

Yesterday was November 20th, and that's the day that the Central Bank of the Russian Federation updates their website with October's data. On the "Data Template on International Reserves and Foreign Currency Liquidity" page, they showed that they purchased another 500,000 "fine troy ounces" of gold. This brings their total gold bullion position to 19.5 million ounces. It's my guess that none of this gold reported was purchased was from Gokhran, the company that was about to sell up to 50 tonnes of gold on the open market. I would suspect that those purchases [now mentioned at 30 tonnes] are still forthcoming... and will show up in either November's or December's updates. If that's the case, then the Russian Central Bank is going to report adding at least another 960,000 ounces of gold to their reserves before they close the books on 2009. We won't know the final number until their December update which will occur on January 20th... if they follow the same update procedure for the year end.

Show below is the usual monthly graph of Russia's bullion purchases over the last three year period. My back-of-the-envelope arithmetic shows that the Russian Central Bank has added 2.8 million ounces of gold to their reserves so far in 2009... and if my above hypothesis is correct, they're going to add about another 1 million ounces before the end of the year. I thank Richard Nachbar [and his tireless assistant, Susan McCarthy] for providing this graph. Richard Nachbar is a rare coin dealer in upstate New York whose website Richard Nachbar Rare Coins is linked here.




I have a fair number of items for your weekend reading/listening/viewing pleasure. The first item is from the pages of News, Travel, Weather, Entertainment, Sports, Technology, U.S. & World - USATODAY.com. We've all seen [and read] stacks of gold stories in the main-stream press lately... but this is the first one I've seen about silver, so I thought it was worth sharing. The headline reads "Silver price soars on heavy demand, high hopes for gains". I thank Florida reader Donna Badach for bringing it to my attention... and the link is here.

Earlier this week the news broke about John Paulson's new gold fund... which he seeded with $250 million of his own money. Here's another story about his new fund which is rather unusual... and the headline says it all... "Paulson's Golden Investors Have to Commit $10 Million"... and they also have to keep it in there for a year. With a price barrier like that, they're obviously not looking for Joe Six-Pack to invest his $1,000. And there was one other item concerning this fund that did not warm the cockles of the hearts of any of us over at GATA, and that was the fact that they hired John Reade, a former senior metals strategist at UBS, as one of the fund's managers. Mr. Reade is not a gold bull in any way, shape, or form... which, if you've read any of his comments while he worked at UBS, is an understatement. Nevertheless, I'm cheering for the fund's success, regardless of Paulson's error in judgment in this particular instance. The above Reuters story appears in a GATA release... along with a similar, but slightly different story in The Wall Street Journal... and the link is here.

The next story is to be found over at the Breaking News and Opinion on The Huffington Post. "In an unprecedented defeat for the Federal Reserve, an amendment to audit the multi-trillion dollar institution was approved by the House Finance Committee with an overwhelming and bipartisan 43-26 vote on Thursday afternoon despite harried last-minute lobbying from top Fed officials and the surprise opposition of Chairman Barney Frank [D-Mass.], who had previously been a supporter." Alan Grayson [D-Fla.], co-sponsor of the bill, said afterwards that "Today was Waterloo for Fed secrecy." The link to the story... headlined "Fed Beaten: Bill to Audit Federal Reserve Passes Key Hurdle"... and the link is here.

The next story is posted over at Mineweb and concerns a press release from the World Gold Council. Using the always dubious [and that's being kind] data from Gold Field Mineral Services, they conclude "that whichever way you cut it, gold demand in the third quarter of this year was down against Q3 2008." Both these organizations are always searching for dark linings in any golden cloud they find... and this report is no exception. But, it is gold-related, so I'm posting it here despite my personal opinions of the organizations involved. The headline [which is the only positive remark in the whole piece] reads "Central banks net gold buyers for the second quarter in succession - WGC"... and the link is here.

Ted Butler sent me a very interesting CNBC interview yesterday. It was 6-minute clip with CFTC chairman, Gary Gensler. The conversation mainly revolves around possible regulatory reforms of the over-the-counter derivatives market... but they do discuss the upcoming changes in the futures market... and Gensler mentions that the metals will be part of the package. Both Ted and I are absolutely convinced that when he says the word 'metal', he's talking about precious metals in general, and silver in particular. The link to the interview, headlined "CFTC Chairman Sounds Off", is linked here.

And lastly today comes this 20-minute interview of GATA Chairman Bill Murphy. Murphy appeared Thursday night on Bernie Lo's "Asia Confidential" on Bloomberg Television out of Hong Kong. The interview is posted in three parts on YouTube - Broadcast Yourself.... and is well worth your time. The link to the GATA release on all three of them is here.

My 'blast from the past' this week is straight out the 1970s. I remember playing her music when I was a D.J. on radio station CHAR in Alert, N.W.T. [82 degrees 20 minutes north latitude] way back then. Along with Karen Carpenter, Carole King and a small handful of others, this female vocalist ruled the airwaves, and is still a household name just about everywhere in North America... and probably beyond. Here she is... singing one of her signature pieces... and I thank reader Dave Mancini for bringing it to my attention... and the link is .

So... where to from here in the gold and silver world? Do the U.S. bullion banks and their government sponsors fold their tents and withdraw from the market and let nature take its course... or are we in for another hit to the downside first? Beats me. Options expiry is on Monday, and there's no sign whatsoever that they have made much of an effort to mount a bear raid to cover their obscene short positions. It seemed like they made an effort in early trading on Friday morning, but willing buyers [or short covering] drove the price right back up to a positive close. It wouldn't be unheard of for them to hit the markets after options expiry is over... but why wait until then?

As Ted Butler has pointed out many times over the last month, these grotesque and obscene concentrated short positions held by the bullion banks must be resolved one way or another... sooner or later. I'm wondering if these changes in position limits that CFTC chairman, Gary Gensler, will play a part in this? Despite what the World Gold Council and the Gold Field Mineral Services have to say, we are currently at an historic moment in the precious metals market. It's only the resolution [and the timing of that resolution] that's unknown at this point.

One thing is absolutely certain... gold and silver prices will be significantly higher by this time next year, as this bull market in both metals still has a long way to go. I urge you, dear reader, to consider making an investment in your future by purchasing a subscription to Casey Research's flagship publication International Speculator. The returns on the many of the micro-cap exploration plays and small producers covered in it, should make big money for those of you who take an equity position in them. I'm certainly more than happy with the returns I've achieved... and they've paid for the subscription price at least by at least a factor of fifty. Besides which, it comes with the usual Casey Research "100% guarantee of satisfaction within 90 days, or your money is refunded." Think about it.

So, another week come and gone. Monday, Comex option expiry, awaits... and the following Monday [November 30th] is first day notice for delivery into the December contract in both silver and gold. I can pretty much guarantee that it's going to be an exciting week. The price action on Sunday afternoon/evening, when the markets open for trading in the Far East on Monday morning, should be interesting.

Enjoy the rest of your weekend... and I'll see you here on Tuesday.