Golden Minerals Company

Bullion Banks Now Net Short 26 Million Ounces of Gold!!!

The gold price was incredibly quiet on Friday...right from the moment it opened in early Far East Trading... until the London close at 4:00 p.m. in their afternoon. This corresponds to 11:00 a.m. in New York. During that 17 hour time frame, gold drifted about four dollars lower. Once London was closed for the Labour Day long weekend, gold managed to rally about $8... and was able to hold that gain almost into the close of electronic trading. Every tiny uptick in price during the last hour of Comex trading was met with a tiny little bout of selling. As I said yesterday, I highly doubted that gold would be allowed to close above $1,000 on the Friday before a long weekend. That turned out to be the case.

But having said that, I was rather [pleasantly] surprised, considering that there was very light trading volume all day yesterday, that the bullion banks didn't lean a little harder on the gold price, as they had every opportunity at that point to do some damage if they wished to do so. As I've said before, it's now getting to the point that maybe they can't... or won't.

The silver price, as usual, was more volatile. In a general way, it followed gold's price lead... with the low of the day coming at the close of London trading, much the same as what happened to gold. And from that point, silver put in a spirited 48 cent price rally that had to be capped, as the price went almost vertical about half past lunchtime in New York. From there it 'drifted' lower, but it still managed a small positive close.

Now for the open interest numbers for Thursday... which were even worse than I expected. Gold o.i. rose another monstrous 14,538 contract to 425,292... on even bigger volume that Wednesday... 176,148 contracts! The bullion banks are obviously desperate to stop this gold rally. Over in silver, o.i. was up another big chunk... 4,094 contracts to 112,394... on big volume of 41,030 contracts. The bullion banks continue to take the short side of every long. How much more blatantly obvious, dear reader, can they get?

The latest Commitment of Traders report [for positions held at the close of trading on Tuesday, September 1st] showed that the silver short position by the bullion banks [principally JPMorgan] continues to grow. As of Tuesday, they went short another 5,338 contracts for the week that was... 26.7 million ounces. The entire bullion bank net short position [as of that date] is now up to 48,056 contracts... which is 240.3 million ounces. This represents 137 days of world silver mining production... or 37.6% of one entire year. This short position is held by '4 or less' bullion banks. The full colour COT graph for silver COT is linked here. You may require a bit of patience, as the page takes a while to load.

In gold, the bullion banks went short another 5,366 contracts, which isn't a lot... only 536,600 ounces. Their net short position is now 21.7 million ounces... well over 20% of 2009's expected world gold production. The full colour COT for gold is linked here... and it is u-g-l-y!!!

However, as ugly as the COT for last week was, the situation has deteriorated alarmingly in the three days since the Tuesday cut-off. The bullion banks have gone short at least another 4 million ounces of gold and about 24 million ounces of silver... and probably a bit more if you count Friday's action, whose o.i. numbers won't be available until Tuesday. Ted Butler said that as of the close of trading yesterday, we are sitting at COT short positions in both gold and silver that are the highest since early last year... and the gold short position is probably at an all-time record high. Ted did a wonderful interview with Eric King over at kingworldnew.com on the latest COT [and other items of great interest] and I think you should stop right here and listen to every word he says at least twice. The link is here.

Another report that came out yesterday was the monthly Bank Participation Report for September... also for the close of trading on Tuesday... same as the COT. For this one week per month, we can compare apples to apples, so let's begin. In silver, as of Tuesday, two U.S. bullion banks were long 13 contracts and short a whopping 29,888 contracts... 28.0% of the entire silver open interest of 106,761 contracts! This sort of concentration is a prima facie case of manipulation. Any judge could see it... but obviously not anyone at the CFTC.

There are also 13 foreign banks holding silver contracts on the Comex. They hold 7,015 long contracts and 2,270 short contracts. So, between all 13 foreign banks, they hold 4.5% of the entire Comex open interest in silver. That's about 0.4% per bank.

Any question so far?

Now for gold. Three U.S. bullion banks hold 509 long contracts and 75,550 short contracts on the Comex as of Tuesday's cut-off. These three banks hold 19.5% of the entire open interest on the Comex... all of it on the short side. There are 19 foreign banks that hold 23,833 long contracts on the Comex... and 43,486 short contracts... for a net short position of 19,653 contracts, or 5.1% of the total open interest. This works out to a short position of about 0.25% net short by each of the 19 foreign banks.

The Bank Participation Report for August [in gold] was quite a bit different than September. There were some fairly big changes. There were only two U.S. banks short 105,900 contracts equal to 27.0% of open interest. So, in one month, the 2 or 3 U.S. bullion banks have cut their short position by about 30,000 contracts and the foreign banks have increased their short position by about 8,000 contracts.

But, without a doubt, all is totally changed in this report as well. As I mentioned in my COT comments, in the three days since the cut-off, the bullion banks [probably all U.S. based] have tacked on about 45,000 contracts on the short side of the ledger in gold... plus a whole bunch in silver. As I said yesterday, I think that the timing was deliberate so nothing that happened this week will show up until October's Bank Participation Report.

The current Bank Participation Report is linked here. You have to scroll about two thirds of the way down the page to find silver and gold. The numbers are a snap to read... and easy to understand.

The Comex Delivery Report showed that six gold and 362 silver contracts were delivered on Friday. There were no changes over at SLV... but there was a smallish drop of 12,077 ounces over at GLD. Silver and gold should be pouring into these two ETFs... and since they're not, it's pretty obvious that the ETF managers are shorting the shares instead. The managers???...JPMorgan and HSBC USA Ltd... the two biggest silver and gold shorts on the planet. If this isn't a classic example of the fox guarding the henhouse, I don't know what is. There were no changes reported over at the U.S. Mint... and the Comex-approved warehouses did not update their silver warehouse inventories yesterday.

The usual New York bullion commentator had the following yesterday... "The Gartman Letter had this bullish comment today: "We can say that the number of interview requests is not nearly as high now as it was last year when gold first moved upward toward and through $1,000, so gold still has some way to rise this time if the past is prologue to the future... and we think that it is."

"Obviously at present, the Asian physical market is in the back seat: forces operating in NY are dominant. But it should be noted that Asia is far from the disgorging mode which was seen in Q1/09. There seems no sentiment or physical market reason why gold could not go higher."

In other news, I see in a Reuters story posted over at lemetropolecafe.com that "More than 35 million Americans received food stamps in June, up 22% from June 2008, and a new record as the country continue to grapple with the worst recession since the Great Depression of the 1930s."

The following Bloomberg story was the first thing that really jumped out at me yesterday. Anybody that thinks that there's even a glimmer of hope for the economy anywhere, will have their hopes dashed by just reading the headline which states "U.S. Airlines' Cut in Seats to be Deepest Since 1942"... and the link is here.

The next story is from silver market analyst Ted Butler, where he speculates in his latest commentary that China's recent threat to repudiate certain commodity derivative contracts may involve the overwhelmingly concentrated short position in silver on the New York Commodities Exchange. Butler's commentary is headlined "Warnings Ignored" and you can find it linked here.

And lastly is this interview with GATA's secretary treasurer, Chris Powell. He was interviewed for about 10 minutes yesterday by Eric King of King World News. Among the topics were this week's rallies in gold and silver, China's threat to repudiate certain commodity derivatives contracts, the historic conflict of the producing and banking interests that dates back to the time of William Jennings Bryan and his "Cross of Gold" speech in 1896, the monstrous unaccountability of the Federal Reserve, the use of the dollar reserve currency system to suppress commodity prices, and the prosperity that would accrue to developing countries if they linked their currencies to the natural resources they produce. The interview, which is a must listen, is linked here.

I think it's an indication that China has realized that the New York investment houses are basically organized crime syndicates and [they're] selling paper instruments of no value that really only enrich the N.Y. investment houses themselves, so if anyone ripped them off, we would not be too unhappy about it. - Chris Powell, Secretary Treasurer, Gold Anti-Trust Action Committee, Inc.

Today's 'blast from the past' is a Country & Western song from a Canadian singing legend... superstar, Ian Tyson. I dedicate this song to my good friend at Casey Research... Doug Hornig... the one who introduced me to his music. I'm not a C&W fan, so I never followed his career, although I knew who he was from way back in the 1960s. Here, Tyson teams up with Emmylou Harris to sing this old chestnut... so turn up your speakers and click here.

Yesterday I mentioned that it would be more than worth your while to pony up the big dollars it requires to subscribe to Casey's International Speculator, but I realize that may be too rich for some. A good second choice in this ongoing precious metals bull market would be Casey's Gold and Resource Report... the details of which can be found by clicking here.

As I mentioned earlier in this missive, I was pleasantly surprised that the bullion banks didn't hit gold hard in the thin trading in New York yesterday. Is this an indication that they can't... or they won't? Don't know. I would be delighted to see this 'Commercial Signal Failure' and watch these bastards burn in hell with a full short position on, as the precious metals prices head for the moon. But will it happen? Don't know that, either. The boyz also love to hit the precious metals prices on the first trading day of the week, which is Tuesday. The Japan open on Sunday night should tell us a lot.

Enjoy the rest of your long weekend... and I'll see you here on Wednesday morning.