Barrick Chairman Sees Upward Gold Trend Intact

There was no clear pattern in gold's price from the time that trading began in the Far East on Thursday morning… until shortly after Comex trading began in New York about 14 hours later. The gold price was in a $5 range either side of $1,090 spot. This erratic trading pattern lasted until gold recorded its high spike of the day around 9:10 a.m. in Comex trading… which Kitco reported as $1,096.10 spot. And from there, it was all down hill for the next 3 and a half hours… with the big drop coming around 12:30 p.m… when the bullion banks pulled their bids and the price really cratered. Gold's bottom also coincided with the low in the equity markets as well… around 12:45 p.m. Coincidence? I doubt it. The low price of the day was reported as $1,072.40 spot. But gold managed to regain a large portion of its loss… and closed only slightly below Wednesday's close. But it's low price of the day was also a new low price for this move down.

I'd like to blame the dollar, but chart further down belies that. However, with the equity markets about to perform a face-plant on the open, I'm sure that the powers that be didn't want gold shining too brightly… so the order went out… and JPMorgan et al went to work. Just as 'da boyz' did on Tuesday… they did it again yesterday. They are breaking the law in full view of everyone, and they don't care, because they know that CFTC Chairman Gary Gensler isn't going to do a thing to stop them… and may actually be protecting them instead.

Silver had a similar day to gold. Silver's price hugged $16.60 from the Far East open until 8:00 a.m. in New York… which turned out to be the high of the day around $16.75 spot. Then, like gold, the roof caved in shortly after 9:00 a.m… with the absolute low coming at the same moment as gold's… at 12:45 p.m. The low was reported by Kitco as $15.99 spot… which is another low for this move down.

Wednesday's open interest numbers were a relief, as gold open interest finally fell a large amount… 10,095 contracts. This would be virtually pure bullion bank short covering as the tech funds pitched their longs. Volume was also large… 340,357 contracts. But, as I mentioned yesterday, I highly suspect that this big change in o.i. came from Tuesday's huge decline that just didn't get reported in a timely manner… probably deliberately. Too bad, because it would have made a nice reduction in the bullion banks' net short position in today's Commitment of Traders report due out at 3:30 p.m. Eastern time. I'll mentally take that 10,000 contracts off the open interest the moment I see the report… plus whatever drop is reported when Thursday's open interest numbers are posted later this a.m.

Silver's open interest only showed a decline of 313 contracts. I highly suspect that the bullion banks are buying long positions and covering short positions at the same time, in order to hide what they're doing… and they may be doing that in gold as well. Silver volume was only 34,876 contracts… not a whole lot.

The precious metals shares… which were down hard while JPMorgan et al were pounding the gold and silver prices… recovered most of their losses, and would have probably finished in positive territory if the Dow hadn't taken a nose dive during the last hour of trading. As it was, the HUI finished down only 0.73%… which was a terrific performance… all things considered.

Thursday was first day notice for delivery into the February gold contract which begins on Monday. The CME Delivery Report showed that 1,040 gold and 119 silver contracts are to be delivered on February 1st. There were no changes at GLD and SLV… and there was no report from the U.S. Mint. The Comex-approved warehouses reported that 137,762 troy ounces were withdrawn from their collective inventories on Wednesday.

Nick Laird at sharelynx.com was kind enough to provide a couple of graphs showing gold and silver's deviation from their respective 200-day moving averages. Each shows how far above these moving averages [in percent] before the bullion banks pulled the pin on them. Here's gold…

And here's silver…

Here's a gold story of interest that was posted in today's South China Morning Post. In it, "the China Gold Association said that mainland China's gold output jumped 11.34% to a record of 313.98 tonnes in 2009, securing the country's position as the world's largest producer of the yellow metal."

Well, AIG is back in the news again. The supposedly secret document stored at the SEC that was dubbed "CONFIDENTIAL" until 2018… is not a secret any more. The story [and pdf file containing the not-so-secret documents] is contained in this story posted at ritholtz.com. I ran this by Bill King over at the King Report yesterday and he said… "It proves that the AIG bailout was essentially a bailout of Goldman Sachs and French bank Société Générale." The link to the story is here.

In a story that was all over the Internet yesterday, I see that the Senate has approved legislation to raise the federal government's borrowing limit by $1.9 trillion… enough to enable the Treasury to pay its bills through 2010. As reader S.A. put it yesterday… "Eric Sprott is right, the U.S. dollar is "not a safe haven". It should be a message to you, gentle reader, to buy physical gold and silver with both hands.

But it appears that George Soros doesn't have any hands. He's declaring that "Gold is now 'the ultimate bubble'… sparking fears that prices for the precious metal may soon suffer a tumble." The headline from The Telegraph in London reads "Davos 2010: George Soros warns gold is now the 'ultimate' bubble'". I thank Australian reader Wesley Legrand for bringing it to my attention… and the link is here.

But, speaking from the same podium, was Barrick Gold's CEO, Mr. Peter Munk. As you can imagine, he rather disagrees with George, and his speech indicates that. Besides which, Barrick didn't pay off it's hedge book in such great haste if Munk didn't already know what was coming down the pipe. The Reuters headline reads "Barrick chairman sees upward gold trend intact". I thank Russian reader Alex Lvov for sending this to me in the wee hours of this morning… and the link is here.

The next item is something near and dear to my heart. As you may know, dear reader, I'm no fan of either GLD or SLV because there's just no way to prove that they have all the precious metals they say they do. GATA consultant James Turk is also in that camp… and has written extensively on this issue. Here's another piece on that very subject. It's a 2-page report from a firm called Wainwright Economics… a firm that I've not heard of before. The interview in this report is about the major differences between precious metals ETFs and open-ended precious metals mutual funds. I urge you to read every word with great care. And, in the interest of full disclosure, I own a big chunk of Bullion Management Groups precious metals fund… the company that's interviewed here. It's entitled "Risks of investing in precious-metals ETFs"… and the link is here.

Greece is back in the headlines as well… and I've got two stories about it… and both are must reads. The first is from last night's edition of The Telegraph in London. It is, of course, by Ambrose Evans-Pritchard. "Germany has triggered a near-panic flight from southern European debt markets by warning that there will be no EU bail-outs, even though it fears the region's economic crisis has turned dangerous and could prove "fatal" for the entire eurozone.". The headline reads "Funds flee Greece as Germany warns of 'fatal' eurozone crisis"… and the link to the story is here.

The second story on Greece is from California reader Joseph Weiler. It's a piece from yesterday's edition of The New York Times… and it, too, is very much worth your time. The headline reads "Europe Weighs Possibility of Debt Default in Greece"… and the link is here.

And lastly comes another offering from Australian reader Wesley Legrand. This story, by well-known author Martin Hutchinson, is posted over at moneymorning.com. This story [which isn't long] is also well worth your while. The piece is entitled "Why the Volcker Plan Doesn't Go Far Enough"… and the link is here.

Trays with gold ingots are placed in a room for final weighing and packaging at the Krastsvetmet plant in the Siberian city of Krasnoyarsk – November 16, 2009. [Reuters/Ilya Naymushin]

There are no market anymore… only interventions. – Chris Powell, GATA

It now appears that JPMorgan et al are going to do the "Full Monty" on the silver price. They got within two bits of the 200-day moving average yesterday… and there's no reason to think [despite all the financial and monetary horror stories in my column above] why they can't keep the pressure on as long as it takes. But it's gold that concerns me. Even though the chart shows that we're approaching oversold with a current RSI of 39.25… the price is still a hell of a long way above it's 200-day moving average… about $75 as I eyeball the chart.

What concerns me is the fact that even though they have the silver price virtually on the ropes right now… JPMorgan et al may use the current short position in gold as a final hammer against silver to drive the price well belong the 200-day moving average in order to cover every last short position that they can. This will, of course, fix the grotesque short position they have in gold as well. But, can they… or will they? The sword of Damocles is still hanging there… and I'm only offering that scenario as a possibility… not something that's cast in stone, as I'm not a prophet.

Here's the 6-month gold chart to show the point I'm making.

And here's the same 6-month graph in silver as well.

As I said in yesterday's column, we are much closer to the end of this liquidation cycle than we are to the beginning, so it's time to think seriously about where to deploy any capital you may have still lying about. Market bottoms, although financially and emotionally painful, are the exact times that one should be making serious investment decisions… while blood is running in the streets. I respectfully request, gentle reader, that you consider shelling out $39 and making the investment in a one-year subscription to Casey's Gold & Resource Report. And it's not just about gold and large-cap gold stocks. It also covers gold funds, silver, and other resources. And, as a bonus, you'll learn everything you need to know about buying physical gold… and how to safely store it. Please give this some serious thought.

I note, as I [finally] put this report to bed at 6:02 a.m. Eastern time, that Far East trading hasn't resolved much. Gold has been vacillating between $1,080/85… and silver hasn't strayed far away for $16.20. London is open now, but a clear trend in either direction is not apparent… yet. But, if 'da boyz' show up… the trend will become obvious immediately. And it's Friday to boot… so expect anything.

Gold volume as of the above time is 32,064 contracts in the April contract. In silver, it's a pretty hefty 4,976 contracts in March. These are impressive numbers, but don't forget that around 90% of all contracts are traded during New York hours, or by the U.S. bullion banks buying and selling in the 24-hour world-wide Globex trading system … so these numbers are sort of a drop in the bucket.

The preliminary volume figures for Thursday's trading as posted at the CME's website show that 320,000 gold and 50,000 silver contracts were traded. And, as usual, I'll be looking for the changes in open interest as soon as they're posted there later this a.m.

I'm off to bed. Have a great weekend… and I'll see you here on Saturday morning.