Golden Minerals Company

From Ed Steer:

Well, you don't need me to tell you what happened in Thursday's trading. A master's degree in rocket science is not necessary here.

Gold opened down [for the third day in a row] in Globex trading in New York to start off Thursday morning activity in the Far East. The New York bullion banks are the only ones playing in the gold and silver sandbox at that time of day, so they set the price...and the tone. At, or shortly before the Hong Kong open, the selling stopped and both gold and silver began to rise. At 4:00 p.m. in Hong Kong, the highs for gold were in for the day...and the moment that the HK gold market closed...the rug got pulled out from under the price. Whether it was new shorting or long liquidation is not known, but a price move such as that could have only been generated by the bullion banks. These not-for-profit sellers showed up again...right at the opening of trading on the Comex about 8:20 a.m. yesterday morning in New York...dropping the price another $10 in only a few minutes...to its low of the day. From there the price rose until Comex trading was over...then the bullion banks took the price right back down in Globex trading in the New York Access market. The Kitco gold price graph is here. This is a 'Kodak moment' if there ever was one. All the lowlights [the red line] stand out like sore thumbs.

click to enlarge

Despite the beating that gold took, it pales in comparison to what they did to the silver price...which is the metal at the centre of the bullion banks’ universe. It followed a similar path to gold, with the top at 4:00 p.m. in Hong Kong...with rugs pulled just before the Hong Kong close, at the Comex open and [additionally] right after the London p.m. gold fix. That's a 60+ cent hit...an even 5%. Volume in silver yesterday was pretty decent. Ted Butler says that if you take out all the spreads over the last three days, silver had more volume yesterday than Tuesday and Wednesday combined.
The lowlights [in red] are in Kitco's chart below.

click to enlarge

There were some pretty big numbers in the open interest changes for Wednesday's gold and silver price hammering. Gold o.i. was down a whopping 11,389 contracts leaving the total open interest at 331,648 contracts. Volume [including switches] was a robust 83,687 contracts. It sure is an impressive sounding number...but how much of it was spreads being closed out...and how much of that was long liquidation or fresh short selling? In silver, Wednesday's hammering showed a decline of 1,468 contracts in open interest...down to an open interest of 89,219 contracts. It's been a while since it's been that low. Volume was a robust 44,775 contracts...the vast majority being switches. As with gold, this change in open interest doesn't indicate what longs were sold/bought, or what shorts were placed/covered.

The same can be said for Thursday's o.i. numbers when they come out later this morning. The white-collar criminals at the bullion banks that are running this price management scheme are smart enough to do most of their damage after the Tuesday cut-off for today's Commitment of Traders report. We won't know what really happened until next Friday's report. However, the shenanigans they pulled off last Wednesday will be in today's COT when it comes out at 3:30 Eastern time today. Ted and I figure that the COT will show a wash [or slight deterioration] in silver and a slight deterioration in gold. But despite this week's painful and depressing price action, the internal structure of the Commitment of Traders [especially in silver] grows stronger by the day, as the eight largest traders [bullion banks] in the Commercial category [both gold and silver] continue to cover their shorts and go long...and the traders in the other two categories pitch their longs and go shorter.

Ted and I had another intense chat about gold's 200-day moving average yesterday. I've been harping on it for quite a while...and almost no day goes by now without me bringing the subject up...much to his consternation at times. We both agreed that silver [after yesterday's pounding] is in an even more bullish position that it was at this time last week...and the COT structure is also better than it was back in October with silver at $8.70. But...in a word...the COT for gold sucks big time. Not only is the 200-day moving average still intact...but the bullion banks were still net short about 14.0 million ounces of gold as of last Friday's COT...about 5-6 million ounces higher than what it was when the gold price was back at its lows in October. That represents 50-60,000 Comex contracts...and [potentially] big dollars to the downside. This is the dichotomy of which I have often spoken. Are the bullion banks saving this short position for a reason? Are they going to crush the price now...or later? Or is this the best they can do? If/when they do, gold will certainly be used as a club to beat the living crap out of the silver price so JPMorgan and HSBC USA can cover their huge short positions. [According to the last Bank Participation Report, these two banks (or maybe JPM all by itself) hold 98% of net Commercial silver short position...which works out to around 123 million ounces!]

The '8 or less' bullion banks in the Commercial category are net short roughly 13.0 million troy ounces of gold as of yesterday's pounding. That's a hair over 400 tonnes of the stuff. The physical gold exists to cover this short position right now...and I'm not talking about what the central banks are alleged to have. They could cover it any time they wished to...with not too much problem if they did it quietly over a period of months. And let's not forget about all that scrap gold that's shown up this last quarter. If there's as much as they say, that would cover it with lots to spare.

But silver is another animal entirely. Except for what's sitting in the Comex-approved warehouses [every ounce of which is owned by hundreds of different people or organizations...almost half of which is not currently for sale] and in the ETFs, there isn't an ounce to be found in size anywhere. If there was lots of it, the Comex-approved warehouses would be bursting at the seams. They're not...as inventory levels have been falling for the last year or so. The physical metal does not [and will probably never] exist to cover this huge short position that JPM and HSBC have. If they can't deliver the physical, then they either declare force majeure and let the NYMEX/CME pick up the tab...or arrange to cover their short position losses in cash. One way or another, that's the way Ted [and I] see this whole thing ending. It won't be with a whimper...but with a bang. I suppose they could close the exchange for trading in these two metals...but that would just make matters worse. When that day arrives, it will be one for the history books.

So...when these bullion banks are through pounding the price of both gold and silver to whatever price point it takes to cover the maximum number of short positions that they can in both metals...we will be at the moment of truth once again...as we have been so many times in the past. If, and only if, the bullion banks do not show up to short the next rally...the price management scheme will have come to an end. At that point, maybe the world will 'discover' the true free-market price in both metals. Because no man or woman, living or dead, knows what those prices are. And that's precisely what banks and governments have been trying to prevent.

And how will we know when that day arrives? As Ted Butler said to me over and over..."just look at the price and you won't have to ask ‘Is this it?’...because it will be self-evident.”

Yesterday was first notice day for delivery into the May contract. In gold, the two big deliveries were by Goldman Sachs [280 contracts] and Bank of Nova Scotia [204 contracts] the big receivers/stoppers were the Bank of Nova Scotia [279] and Fortis Clearing [101]. May is a big delivery month for silver...and it showed. 1,058 contracts were delivered yesterday, with Goldman Sachs [867] and Bank of Nova Scotia [174] the big issuers. The biggest stopper was the Bank of Nova Scotia [473 contracts]...with eleven other companies combined receiving the rest. The next couple of days [including today, of course] will show heavy deliveries. There are about 3,300 contracts in silver left to deliver in May...plus whatever is purchased [and delivered] as the new month goes along.

In other gold news, there were no changes in either the GLD or SLV again yesterday. However, the U.S. Mint did update their April eagle mintings, but because their website is currently down, I can't give you the exact numbers, so I'll have them for you on Saturday. The changes weren't overly large. There was a minor decline in Comex-approved warehouse silver inventories of 1,808 ounces. Another gold story of note [which was mentioned by the usual N.Y. commentator the other day] was this piece about a new agreement on gold sales by the central banks. This is a polite and public way of managing the gold market. This third agreement, if it materializes, is "seen as bullish for gold...". You'll excuse me if I reserve judgment on that. The Reuters story is headlined "Third Gold Sales Pact to Plant Flag of Support"...and you can form your own opinion as you read it. The link is here.

Before leaving the precious metals scene today...here are a few lines from the usual New York commentator that I thought were worth sharing...’The World Gold Council has reported that Indian gold purchases during the recent festival were 45 tonnes, down 8% from last year. The Reuters story is linked here. If true, this is astonishingly strong. While the US$ price of gold was some 3% higher this year, the rupee price was 25% higher because of the softness of the Indian currency."

"Vietnam [another large importer in the Far East] was closed today and will be tomorrow.

“Inexperienced observers might wonder why any large long, official or not, would want to sell so aggressively when key physical markets are closed...as India, Vietnam and China will be shut Friday. Others will be wondering how the profit-motivated bears are going to cover next week, especially if the raid continues [today - Ed]."
I see I've carried on a bit today, so...mercifully...I only have four stories for your consideration.

The first is from the good folks over at globalresearch.ca. It appears that Swine Flu is only the beginning of the problems that this disease may bring to all U.S. citizens. Next they have to worry about what the U.S. War Department...plus their Lite version of the Gestapo...Homeland Security, have in store for them. The story is headlined "Department of Homeland Security Guidelines For Possible Swine Flu Quarantines". I thank the "Charleston Voice" for sending it...and the link is here.

Next is commentary by Eric de Carbonnel over at marketskeptics.com. His comments on the gold price suppression scheme are similar to mine...or are mine similar to his? You decide. The piece is entitled "Increasingly Blatent Attempts to Supress Gold Prices are Evidence of Desperation". I thank Craig McCarty for the story and the link is here.

The next story, posted over at mineweb.com, bears the really scary headline "CPM forecasts big silver surplus this year". Casey Research's Louis James, Senior Editor/Analyst, was kind enough to send the story along. He made the big mistake of asking me what I thought. Well, first off, by the time the new CPM silver survey hit the street it was already horribly out of date. Then I said this..."CPM and GFMS wouldn't say a positive thing about either gold or silver no matter how bullish things were. Base metal production has been going down for at least a year...taking silver production with it. For at least six or seven months, the silver ETFs have had to wait weeks...sometimes months, to get their silver. CEF won't get the full allotment on their last offering for many months. The two biggest precious metals smelters in Mexico and Peru are either not producing at all...or in the case of Penoles...have declared force majeure. Unlike every other commodity on the planet, Comex silver inventory levels have been in steady decline for more than a year. If there is lots of silver out there...and more coming...would someone please ask Jeff Christian over at CPM Group where the hell it is. Inquiring minds would like to know!" Louis was too polite to tell me that he was sorry he asked. The link is here.

And in top spot is this story that was sent to me by one of my kind readers. I must admit that someone else had sent it to me on Wednesday, but I only skimmed the first bit...thought it uninteresting...and deleted it. This time [when it arrived in my mailbox] I decided that maybe, just maybe, it might be worth taking the time to read the whole thing. It was. The piece is from the Ludwig von Mises Institute and bears the headline "The Link Between Obama and John [Jean] Law". My thanks to John Pruitt for sending it along. The link is here.

We are fast approaching the stage of the ultimate inversion: the stage where the government is free to do anything it pleases, while the citizens may act only by permission; which is the stage of the darkest periods of human history, the stage of rule by brute force. - Ayn Rand

I see that gold and silver are down more in early London trading as I file this rant with my editors in the wee hours of Friday morning. The bullion banks will do whatever they want, whenever they want...as there is no one to stop them. Not the SEC...nor the CFTC...and certainly not your gold and silver companies. We just have to sit here and take whatever is dished out...the letter of the law be damned.

My rant on Saturday will be my last for about ten days or so, as I'm going to take some time off and go on vacation. I'd be perfectly happy staying at home, but my wife has decided otherwise. I should be back in the saddle on May 14th.

See you tomorrow.

Casey Research correspondent-at-large Ed Steer is a keen observer of the financial scene and a board member of GATA.org.