Friday was an extremely quiet day in the gold and silver markets everywhere on planet earth…and volume was extremely light. The only thing of note was the fact that the highs of the day in gold, silver and the HUI came at precisely the same time…high noon in Comex trading in New York…almost to the second. To see gold and silver simultaneously have the rug pulled out from under their respective prices as they go vertical is commonplace…an almost daily occurrence. But the HUI too…with no lag time at all…not even five or ten minutes???

And how about the US$? It was heading for the nether parts of the earth. So it’s a pretty good bet that the call went out that when Mickey’s big and little hands were pointing at the number 12…it was time to intervene…and they did.

Open interest changes for Thursday showed that gold o.i. rose a smallish 1,177 contracts to 377,013…on volume of 85,231 contracts. In silver, o.i. fell 418 contracts to 107,740…on 23,898 contracts traded. Nothing to see here, folks.

The Commitment of Traders [for positions held at the end of trading on Tuesday, June 16th] showed some improvement in the grotesque short positions that the bullion banks are currently carrying. In silver, it wasn’t much of a change…as the bullion banks only reduced their net short position by 1,348 contracts…and are still net short 228.0 million ounces. The full-colour silver COT report is linked here.

In gold, the COT numbers were in line with what Ted expected. The bullion banks reduced their net short position by a respectable 17,679 contracts. But…and it’s a big but…the bullion banks are still net short an obscene 20.7 million ounces of gold…more than 25% of world production. The full-colour gold COT graph is here.

Is there any good news in this COT report? Not really. The sky-high short positions in both metals still exist…and there hasn’t been any further improvement in them since the Tuesday cut-off. Past history indicates that 100% of the time, there is only one way that these scenarios end…and that’s with a plunge to the downside as the bullion banks start the avalanche, pull their bids, and cover their shorts while they ring the cash register. The really scary part is that, with almost no significant reduction in the bullion banks short position since the peak in price during the first few days of June, the gold price is already down about $55…and silver is down more than two bucks. To make matters worse, we haven’t even broken through the 50-day moving average to the downside in either metal…but are hovering just above them. So…if the bullion banks get really serious about this…it could get ugly in a hurry.

But…on the other hand, as I’ve said before, we could go up in price from here and establish new record highs before the bullion banks finally pull the plug. That scenario is not unheard of…and has actually happened a couple of times during the last ten years. The other wonderful-to-contemplate scenario is that they get totally overrun as gold and silver prices explode and the bullion banks…led by JPMorgan (NYSE: JPM)…crash and burn. But what are the chances of that being allowed to happen at this particular point in time? Nothing that I’d bet the ranch on.

The Comex Delivery Report for Friday showed that only 15 gold contracts were delivered…and so were another 97 silver contracts. That brings June’s silver deliveries to 1,021 contracts…5.1 million ounces. It was well under four million ounces at the beginning of the week. The GLD, SLV and U.S. Mint showed no changes. And over at the Comex-approved warehouses, another 722,988 ounces of silver were withdrawn. Total silver inventories in all four warehouses at week’s end were 118,590,889 troy ounces.

In other gold news yesterday, I noted that The Central Bank of the Russian Federation had updated their gold reserves. In May, they added another 100,000 ounces, bringing their total reserves up to 17.4 million “fine troy ounces”…as they so eloquently put it.

Today’s first offering is a story out of the Financial Times in London that went to press late on Friday afternoon. Whether this is a tempest in a teapot…or the beginning of real trouble…is yet to be determined, but the headline reads “Turkish army on defensive over alleged plot”…and the link is here.

The next story is from timesonline.co.uk. It’s the only interesting gold story that I could find this late on a Friday night. The headline reads “Submarine hunts for Tsarist gold ‘worth billions’ in Lake Baikal”. I know a fair amount about Lake Baikal…and all I can do is wish them luck, because they’re going to need it. The link is “here.

And lastly is a piece from the Asia Times by veteran Indian diplomat, M.K. Ghadrakumar. I’ve been reading his commentary for years, and I’ve always been impressed with his grasp of the issues…especially in his own back yard. The essay is entitled “Beijing cautions U.S. over Iran” and the link is here.

Government has no wealth of its own. Before it gives anything to anyone, it must take it from those who produce it. – John Stossel

Today’s blast from the past was part of the “British Invasion” of the 1960s when The Beatles…followed by many other groups…took North America by storm. I was in Grade 11 when this song came out. The video is in black and white…but it matters not. Turn up your speakers and then click here.

So…IMF gold is now supposedly in play. We’ll see. There have been several stories out there trying to put lipstick on this pig, by saying that this is wonderful news. The press release from the World Gold Council comes to mind. The story is a negative…but only if the gold actually sees the open market, which I strongly doubt. It’s been two days since this news broke, and so far there’s been no sign of panic in the streets…as the decision has obviously been priced into the market already. My only concern…as it should be yours…is this grotesque short position by the ‘8 or less’ traders in general…and the ‘3 or less’ U.S. bullion banks in particular. What these institutions do, will determine what the gold [and silver] price does in the next few weeks and months.

It was ever thus.

Enjoy the rest of your weekend and I’ll see you bright and early on Tuesday morning.

Source: And Then There’s This…Monday, June 22nd, 2009

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