The gold price straddled the $740 mark throughout most of trading in the Far East on Monday, although a smallish rally began at 3:00 a.m. New York Time. That tiny rally ended shortly after London opened and began a gentle decline right into the Comex…where both gold and silver had the rug pulled out from underneath them. About 9:00 a.m. Eastern, the selling pressure disappeared and another rally began which got capped just under $750. As of this writing, $12 has been carved from the peak price of the day…and 22 cents for silver. Volume was extremely light…even lower than Friday…so it wasn’t hard to push the price around. Having said that, the US$ was down 95 basis points, but the powers that be wouldn’t let the precious metals prices reflect that. One wonders how much gold and silver would have declined if the US$ had actually risen on the day.

Silver fared much worse than gold, as it finished almost 40 cents off its London highs.

Friday’s open interest changes for gold showed yet another decline…this time 3,655 contracts. Silver o.i. was also down….a sizeable 1,046 contracts. This will all be in Friday’s COT…and it will be of great interest to see the changes for this past reporting week. The cut-off for this week’s report is today at the close of New York trading.

From the usual NY commentator comes the following…”John Reade of UBS (NYSE:UBS) has emerged as the most candid of the bullion bank commentators. This morning of Indian demand he said… ‘UBS is seeing solid Indian jewellery interest and ongoing safe-haven physical investment flows from Europe and the US at the moment. High volatitily increases the risks of any short position in gold…and getting short when India wants gold is never, in our experience, a sensible idea. We hold our one and three month forecasts for gold at US$800/oz.’ Reade also makes a useful comment on the CFTC data in the Commitment of Traders report: ‘net longs fell by 1.2 million ounces to 5.92moz, the smallest since May 2005 and the second smallest since July 2003. But there is one crucial difference between now and other recent lows in the net long position - the size of the gross short position, at 8.12moz, is sizeable and increased by 0.6moz last week. Speculative longs in gold are greatly reduced with some decent sized Comex shorts in evidence’.”

I see that Bloomberg is reporting that China’s gold production for 2008 is expected to be in the neighbourhood of 285-300 tonnes. Iran reported over the weekend that it had converted some of its fiat currency into gold. And in silver news, I received an e-mail from Jeff Clark, Casey Research’s editor for Big Gold, and he had some silver news of note. It a Bloomberg story dated November 3rd, Jim Rogers said that “silver will outperform gold as a hedge against inflation”…”It’s been beaten down horribly.”…”If you put a gun to my head and said you have to buy one, I would buy silver rather than gold.” From your lips…to God’s ears, Jimmy!

In other news I see that Fannie is looking for $13.8 billion. Philadelphia, Phoenix and Atlanta are looking for $50B between them…and San Jose, CA has their hand out for $14B!!! And in a CBS story, Chicago’s mayor Daley says “prepare for mass layoffs”. Talking about mass layoffs, Citigroup (NYSE:C)is going to be giving out 50,000 pink slips. The ‘long knives’ are out in the mutual fund industry as well. Merry Christmas to all. And lastly, retail sales fell 10.9% annualized, in the three months ending in October. This is something beyond recession.

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Today’s first story is from Ambrose Evans-Pritchard at The Telegraph in London. “Russia has been losing $10B in foreign reserves a week since it snatched South Ossetia and ramped up the new Cold War with nuclear threats.” The article is entitled “Russia’s banal reality lies in between energy superpower and bankrupt state.” (Bankrupt state? How about the USA. - Ed) The story is linked here.

Although the G-20 meeting was a bust, there were a few more stories over the weekend about a return to some sort of gold standard. Here’s one from The Wall Street Journal entitled “Stable Money Is the Key to Recovery: How the G-20 can rebuild the ‘capitalism of the future’ “, and the link is here.

And lastly, here’s an interesting story from yahoo.com about the recovery of ancient gold and silver coins. The tribe is long gone, but its money is still pretty good. I wonder how Federal Reserve Notes would fare after being buried in the ground for over 2,000 years? Just asking. The link is here.

Suppose you were an idiot. And suppose you were a member of Congress…but then I repeat myself. - Mark Twain

As I mentioned before, the G-20 meeting amounted to nothing. The US economy and its financial system continue to implode…and there’s no end in sight. Almost every commodity on the planet is hugely oversold, and I still firmly believe that a rally is just around the corner…especially in gold and silver. Will we have to wait until December options expiry on the 20th and first day notice on the 29th are over before that happens? I don’t know, but we’ll find out soon enough.

And in a final note, I’d like to thank all of my readers who came up and introduced themselves to me at the (now ended) New Orleans Investment Conference. It was great meeting you all…and once again I (and the rest of the good folks that contribute to Casey’s Daily Resource Plus) thank you for taking the time to read our column every morning.

See you tomorrow.

Source: And Then There’s This…Tuesday, November 18th, 2008

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