Home > GOLD > Why This Gold Boom Will Be So Much Bigger Than The Last One

Why This Gold Boom Will Be So Much Bigger Than The Last One

September 4, 2011


As I mentioned in The Wrap last night, the gold market was comatose until shortly before the London open…and the rest, as they say, is history.

There was another spike up shortly after London opened…and from 9:00 a.m. in London, until the Comex open at 8:20 a.m. Eastern time, the gold price tacked on an additional ten bucks.

As soon as Comex trading began…and the jobs numbers were made public at 8:30 a.m…the gold price added another twenty bucks…and by 9:00 a.m. Eastern time, gold was up about $55 from Thursday’s close.  The price slid a hair from that point until just a few minutes before the Comex trading session closed at 1:30 p.m…but tacked on over ten dollars in the electronic trading session that followed, closing the day virtually on its high…up $58.80 spot.  Volume was surprisingly light.

The silver price action was very similar, however it was obvious that the price wanted to move much higher after the Comex open, but someone was there to make sure that the price didn’t get too frisky to the upside. Silver closed up $1.75 spot on the day, but would undoubtedly finished higher if had been allowed free rein.  Volume wasn’t overly heavy.

Here’s the dollar chart for the week that was…and it’s price action certainly had no influence on the precious metals over the last five business days.

Here’s the HUI for the week that was.  The ino.com feed is missing all of Thursday and part of Friday’s data…but the HUI finished up about 4.6% on the week.  Although the HUI finished up 2.39% on Friday, it would have done better if the general equity markets hadn’t tanked.

The silver stocks did very well for themselves…and that’s certainly reflected in Nick Laird’s Silver Sentiment Index, which was up a robust 3.11%

(Click on image to enlarge)

The CME’s Daily Delivery Report showed that 213 gold, along with 18 silver contracts, were posted for delivery on Tuesday.  In gold, the big short/issuer was the Bank of Nova Scotia with 197 contracts…and the big long/stopper was JPMorgan [205 contracts] in its client account.  The action is silver isn’t worth a comment.  The link to the action is here.

The GLD ETF reported no changes yesterday…but the SLV ETF added 1,136,365 troy ounces of silver.

The U.S. Mint had a small sales report yesterday.  They sold 3,000 ounce of gold eagles and 52,000 silver eagles.

While on the subject of silver sales from the U.S. Mint…the silver eagles sales are only part of what the mint produces in silver products every year.

Reader Ron Copley from Carmel, Indiana sent me the following sales records for other silver products the mint produces.  Here are some of the incredible statistics he sent my way last night…and I thank him for this.

Sales of the 5-ounce ‘America the Beautiful’ coin series used up 175,065 ounces of silver in August…and 1,902,000 ounces year-to-date.  And the proof U.S. Silver Eagle had sales of 133,460 in August…and they have sold 726,921 year-to-date.

So you can toss that 2,628,921 ounces of silver usage on top of the 29,045,000 silver eagles that the U.S. Mint has produced as of yesterday.

It was another huge day over at the Comex-approved depositories on Thursday.  They didn’t receive an ounce of silver, but shipped 1,446,799 troy ounces out the door.  Most of the action was at Brink’s, Inc. and HSBC USA.  The link is here.

The Commitment of Traders report showed improvement in the Commercial net short position in both silver and gold…but Ted Butler was expecting better numbers than were reported..and I must admit that I was expecting better as well.

In silver, the bullion banks reduced their net short position by 1,951 contracts, or 9.75 million ounces.  The Commercial net short position now sits at 225.7 million ounces.  The ‘4 or less’ bullion banks are short 198.3 million ounces…and the ‘5 through 8’ bullion banks are short 38.8 million ounces.  The eight bullion banks are short 237.1 million ounces…about 12 million ounces more than the entire Commercial net short position.

In gold, the Commercial net short position declined by 13,081 contracts…about 1.31 million ounces.  The Commercial net short position is now down to 21.7 million ounces.  The ‘4 or less’ bullion banks are short 14.4 million ounces of gold…and the ‘5 through 8’ bullion banks are short 5.2 million ounces.  These eight bullion banks are short 19.6 million ounces of gold…which is 2.1 million ounces less than the Commercial net short position.

It’s been a while since gold’s Commercial net short position has been this low…and I’d guess that there’s not much room left to the downside in gold.  There’s a bit of room to the downside in silver, as I’ve seen much lower Commercial net short positions that this, but JPMorgan et al would have to engineer a new low silver price for this move down [which would be well below $37 spot] to get more serious long liquidation.  I wish them luck.

But the big take-away from these COT numbers is the fact that the open interest is falling as gold and silver prices are rising.  As Ted Butler has pointed out many times, short covering by the Commercial traders has been the prime driver of this big rally in both metals…and it’s entirely possible that Friday’s big rally was largely short covering as well.  We’ll find that out in next Friday’s COT report.

Since this is my weekend column, I can empty my in-box today…and, fortunately, I don’t have that many stories in total…and you should be able to fit them all in this weekend.

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  1. January 8, 2012 at 1:19 am

    G’Day! Crisisboom,
    I know what you mean, Gold Bullion Money Making Success System- Gold Bullion and Financial Sense Integer

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