o sooner had I sent in my Wednesday rant, when rallies began in both gold and silver shortly after London opened. The rallies really developed some legs once Comex floor trading got underway in New York. But, it all came to an end at the London p.m. fix. Then, shortly after London closed for the day, the New York bullion banks went to work and erased not only the wonderful N.Y. gains…but all the gains in London as well!

However, prices did manage to recover slightly, later in electronic trading in New York.

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Open interest on Tuesday’s big down day in both metals was something out of the Twilight Zone. Gold open interest, which should have fallen off a cliff, rose 3,565 contracts to 372,697. And in silver, o.i only fell 116 contracts to 101,629…hardly worth mentioning. I was not able to talk to Ted Butler yesterday, but my e-mail query got this answer in reply….”On options expiration [Tuesday at the close of trading. - Ed], all calls and puts in the money must be exercised, in other words, these in-the-money options must be converted into futures contracts. It can cause big distortions in the next day’s futures open interest changes. That’s what happened. All the Daily Report indicates is 11,000 options [were] exercised in both gold and silver. They don’t break it down by puts or calls. Sometimes it results in big liquidation in the open interest, sometimes the opposite. This time [it] looks like it resulted in an increase in gold [o.i.]. It seems to be the only explanation for your original question. This is one of those times when we will be forced to rely upon the COT…assuming it’s up to date this week. – Ted.” As I said yesterday, there should be no attempt to read too much into the daily changes in open interest for the rest of this week…with options expiry, first day notice and all the switches going on.

In the gold world yesterday, it was noted at lemetropolecafe.com that Goldman Sachs (NYSE:GS) has finally covered the last of their huge gold short position on the TOCOM yesterday. GS had a 52 tonne short position back in May of 2006…and they’ve been whittling away at it for almost three years. Now they’re done. I note the U.S. Mint has now increased their February one ounce gold eagle production to 111,000. Silver eagles are up to 2,125,000 for the month. There was another whack of gold deliveries on the Comex yesterday as well…409 contracts in total. There were three big issuers…Prudential Bache, Bank of Nova Scotia (NYSE:BNS) and JPMorgan (NYSE:JPM). The big stopper was Goldman Sachs once again…with 257 of the 409 contracts accepted. Comex silver stocks rose again yesterday…up about 565,000 ounces…to a total of 125,457,947. There were no deliveries into either the GLD or SLV yesterday. And lastly, I see [according to the usual N.Y. commentator] that Dennis Gartman went long another ‘unit’ of gold yesterday morning. I wonder if the boyz stopped him out the same day? It wouldn’t be the first time that’s happened to him.

In other news, in a Bloomberg story headlined “Poland Can’t Delay Asset Sales”…their Treasury Minister Aleksander Grad says that “Poland plans to accelerate asset sales to help state companies raise funds and prop up public finances as the country faces its worst economic slowdown in almost a decade.” And in another Bloomberg story, I note that “Ukraine’s credit rating was cut to CCC+ by Standard & Poor’s to the lowest in Europe…a day after Latvia was downgraded to junk…as eastern Europe’s most debt-laden economies lurch closer to default.” And lastly, in a story out of the Vancouver Sun…”more than 300 municipal police officers in Zihuatanejo, a tourist spot on the Pacific coast of Mexico, went on strike after grenades were lobbed at their offices over the weekend.”

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A few stories today. The first two are gold related and do require registration. The first is from the Financial Times out of London and is entitled “Gold coin shortage as demand soars” and the link is here. The second is out of the WSJ and is headlined “Worried Investors Want Gold on Hand” and the link is here.

The next story is from jessescrossroadscafe.com. In this brief story, the comment is that “cost of a Credit Default Swap for insuring a 5-year bond is now 1.00%. The yield on a 5-year T-bond is 1.92%!!!” That makes you want to run out and buy a bunch, now does it? This very short read is entitled “The Risk in US Treasuries” and is worth your time. The link is here.

And lastly is this offering from Bloomberg entitled “Jailed Billionaires Show New Face of China as Markets Unravel”…”As the new rich become the newly poor in China’s see-sawing economy, the one thing that seems constant is the power of the state.” I thank P.S. for this rather longish [but well worth reading] story…and the link is here.

The money power preys on the nation in times of peace, and conspires against it in times of adversity. It is more despotic than monarchy, more insolent than autocracy, more selfish than bureaucracy. It denounces, as public enemies, all who question its methods or throws light upon its crimes. – Abraham Lincoln

It’s obvious from the cross-section of stories that I have linked today, that the world is quickly coming apart at the seams. The really awful news is that the total destruction of everything as we know it, has barely started…but the process is now accelerating rapidly. Look at this bullion bank-inspired sell-off as an opportunity to buy more precious metals on the cheap…if you can find any, that is. And despite the short-term antics of the US$ at the moment, physical precious metals are the only game in town.

Source: And Then There’s This…Thursday, February 26th, 2009

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