China: Did They… or Didn't They?

Gold's Far East high yesterday was around $1,101 spot shortly before Hong Kong opened.  Then a dollar 'rally' materialized that dropped the gold price down to the $1,090 level… and it kept bouncing off that low right up until precisely 9:30 a.m. in New York trading… where the low of the day [$1,087.70 spot] was set.  From there, gold had a rally that lasted until precisely 2:00 p.m. Eastern time… and from that point, gold traded sideways into the close.  Gold's high of the day was $1,110.50 spot… which, naturally enough, occurred at 2:00 p.m.

Silver's Far East high was at the same point as gold's high… before it, too, headed lower on the dollar 'rally'.  The silver price vacillated within a dime of $15.80 right up until the precise 9:30 a.m. low point that gold had.  Silver's spike low at that point was $15.60 spot.  From there, it joined gold in its rally… and it should be no surprise to you, dear reader, that silver's rally stopped at 2:00 p.m. Eastern time as well.  These bullion banks are oh, so predictable… as these MBA-types don't know what to do if it doesn't happen on the hour… or half-hour.  From that point, silver also traded sideways into the New York close.  Silver's high price in New York was $16.19 spot.

The U.S. dollar had a double top [if you still believe technical analysis] yesterday… with two highs of 81.12… with the first coming in the wee hours [1:00 a.m.] of Thursday morning… and the second one was eleven hours later, just moments before lunchtime in New York.  From there, the dollar fell… with most of the damage occurring in a two hour period right up until 2:00 p.m. in New York… and mostly traded sideways from there.

The HUI had a much better time of it yesterday… and came close to closing on its high of the day… which was [wait for it] at 2:00 p.m. precisely.  The HUI finished up 3.05%… and above the magic 400 mark.

Open interest changes for Wednesday's action were very gratifying to see.  On volume of 185,187 contracts, gold o.i. fell 6,568 contracts… and silver's o.i. fell a huge 3,045 contracts.  It's hard to tell whether these declines were actual long liquidation… or spread trades being lifted.  That won't be known until next Friday's COT report.

Well, the CME's Delivery Report yesterday showed how much gold and silver were being delivered on the first day of the March contract on Monday… and it was pretty much as expected.  Gold only showed 85 contracts posted for delivery.  This small amount is no surprise, as March is not a traditional delivery month for gold.  In silver, there were a rather large 1,737 contracts put up for delivery… of which a whopping 1,712 were issued [delivered] by JPMorgan!!!  The stoppers were no surprise either, with the biggest three being JPMorgan, Bank of Nova Scotia and Deutsche Bank.  The three of them combined received 1,341 contracts… and a whole raft of smaller firms divided up the other approximately 400 contracts between them.  HSBC USA was not on the list of either issuers or stoppers… but may show up later in the delivery month.  I think it's safe to assume that the '4 or less' bullion banks that are massively short the silver market are not hard to pick out of this list.  Only HSBC USA is missing.  The delivery report itself is definitely worth looking at… and the link is here.

As of the close of trading on Wednesday, there were still 12,267 silver contracts open for the March contract.  That's a lot, but I expect that number to crater when the CME posts their preliminary numbers for Thursday in the wee hours of this morning.

There were no changes reported in either the GLD, SLV or the U.S. Mint's sales figures.  However, there was movement once again at the Comex-approved depositories, where their report showed that 199,007 ounces of silver were withdrawn on Wednesday.

I have another bunch of stories today… and the first one has to do with China and the IMF's 191.3 tonnes of gold.  I'm sure you've heard the quote that "truth is stranger than fiction".  Well, dear reader, try this on for size!  There were a couple of stories, including this one yesterday from Pravda, that said that China was going to buy the gold.  Then there was this story from Kitco saying that the "IMF Declined Comment on China IMF Gold Purchase"… and there a couple of stories filed earlier this morning from Beijing and Moscow, saying that there was 'no sale'… and the original source of the Pravda story, when contacted by Reuters, admitted that she had no source herself. Here's the Beijing 'no sale' story posted by Reuters… and sent to me by Australian reader, Wesley Legrand.

Confused?  You should be.  What we don't have is any official Chinese confirmation… or denial.  Maybe that will come before I finish this column… and if it doesn't, maybe the mystery will be resolved later today.

The next gold-related story has more meat on its bones and is equally as positive.  In a Reuters story sent to me by Russian reader Alex Lvov… and posted late yesterday afternoon from New Delhi… comes this headline… "India February gold imports seen up at 30-35 tonnes year/year"  That compares to 7.9 tonnes imported in February 2009.  The link to the two sentence story is here.

This Bloomberg story is courtesy of yesterday's King Report.  Greece has been getting all the headlines in that part of the world lately… but its historical long-time enemy [Turkey] is also starting to show signs of strain.  "Investors are betting [that] political turmoil will weaken Turkey's lira more than any other currency as the arrest of about 50 army officers over an alleged coup plot raises tension between the government and the military."  The headline reads "Turkey Risks Worst Currency Slump on Military Arrests"… and the link is here.

Here's a story from the chicagotribune.com that was sent to me by California reader, Joseph Weiler.  There's big financial trouble brewing in Illinois, as the current deficits are basically unsolvable.  These problems are almost as big as those facing California… and "ranks Illinois as one of the nation's worst financial basket cases… if not the worst."… "Talk of major tax increases coupled with draconian spending cuts, is building in Springfield".  The headline reads "Illinois stuck in a 'historic, epic' budget crisis"… and the link is here.

My second-to-last story is from yesterday's commentary by Rick Ackerman.  The title… "Stocks Waft Higher, Oblivious to Reality"… and the first two paragraphs, are innocuous… but they set up the last two paragraphs perfectly.  It's only four paragraphs long… and I urge you to invest the two minutes it takes to run through it.  It was a real education to read this piece… and I was amazed at how it summed up the realities of Wall Street trading these days.  The commentary is posted at goldseek.com… and the link is here.

And lastly is this excellent commentary posted over at mineweb.com.  Writer Rhona O'Connell does a first rate job of describing the current goings on in the foreign exchange markets… particularly the euro and the U.S. dollar… plus the gold market.  The graphs are terrific as well.  The net long dollar position on the Intercontinental Exchange [ICE] is 150 times the six-year average… and the CME Euro is heavily oversold.  O'Connell says that it's only a matter of timing before both positions unwind… both to the benefit of gold.  The headline reads "Gold: A picture tells a thousand words".  I thank Russian reader Alex Lvov for bringing it to my attention… and the link to this must read article is here.

I hope we can find a way of resurrecting the subprime market, because it was working well until those mortgages were widely securitized [Sir] Alan Greenspan, Bloomberg, February 23, 2010

Just in the last couple of days I get the impression that the world's financial crisis is fast coming to some sort of tipping point.  As things currently exist, there is absolutely no way out of this world-wide financial, economic and monetary situation that we are in.  And as I've said many times before… we face one of three possibilities: a deflationary collapse, a hyperinflationary depression, or a return to some sort of international gold standard with the price of gold set at some fantastically high price.  Or it may turn out to be a combination of these three things.  But one thing is certain, the current situation cannot last much longer… as something is about to blow up… it's just the timing that we don't know.

That's why, dear reader, I'm 'all in' with my precious metals investments. If this isn't a safe haven in the times we face, then nothing is.  That's why I keep urging you to invest in a subscription to either Casey's Gold & Resource Report… or Casey Research's International Speculator.  It's absolutely critical to be invested in the right precious metals companies at this point.  I feel that time is running out real quick… and when the move in both gold and silver gets going, there won't be much of an entry point on this rally.

I note that gold is up about $7 and silver is up about a dime in Far East trading… and the dollar isn't doing much.  London is now open… and the tiny rally is still continuing.  Gold volume [at 5:04 a.m. Eastern time] shows that 26,520 contracts have already traded… and silver's volume is 1,258 contracts in March… plus 4,741 in May… the next delivery month.

The CME's preliminary report for Thursday's trading activity shows that gold's volume was a fairly chunky 216,787 contracts… and silver's volume was a very large 86,002 contracts, which is to be expected on first notice day.

I also note that silver's open interest for March has plummeted a very large 8,324 contracts… and total o.i. left in March is down to 3,943 contracts… of which 1,737 are up for delivery on Monday, March 1st.  There will be no short squeeze in March silver… at least not based on these numbers.  Of course, more contracts can be added for delivery as the month progresses, but as it sits right now, everything looks pretty normal… and the operative word in that sentence is 'looks'.

One thing I am interested in seeing in Thursday's open interest numbers when they're posted later this morning, is whether or not much of yesterday's gains were short covering or not.  If it was, I'm sure that the bullion banks involved would not make it obvious by covering their short positions… but may have gone long instead.  And, of course, that won't be know until next Friday's COT report.

While on the subject of the COT report… today's Commitment of Traders report will be out at 3:30 p.m. Eastern time… and if you want to check it out the moment that the CFTC updates it… the link is here.

I hope you have a great weekend, dear reader… and I look forward to seeing you here tomorrow.