Saturday, December 11, 2010

CFTC to discuss position limits Dec 16.2010/Kirby's paper--massive silver derivatives/bonds continue to decline

Good morning Ladies and Gentlemen:


Before starting this morning's commentary, I would like to introduce to you our two latest entries into the banking morgue:

Bank Closing Information – December 10, 2010

These links contain useful information for the customers and vendors of these closed banks. 

Earthstar Bank, Southampton, PA 
Paramount Bank, Farmington Hills, MI 




Gold closed down on Friday's session to the tune of $7.70, with its weekend comex closing of $1384.30  Silver also fell by 21 cents to close out the week at $28.58.

In the access market after the comex closed, gold and silver gained lost ground with gold finishing at $1385.80 and silver at $28.68.


I would like to go straight to the comex trading action on Friday.

The total gold comex open interest fell by a rather large 7,047 contracts to rest at 591,298.  The front December delivery month saw its open interest decline from 2771 to 1593 contracts which reflected the huge delivery notices sent down on Thursday  (1189 contracts).  The estimated volume for Friday has been corrected to 151,515 from an earlier release of 134,362.  The confirmed volume on Thursday remained at 142,157.  The volume was large as there were no switches as the cartel tried to shake as many leaves as possible from the gold and silver tree of outstanding longs.

The silver comex open interest also fell by 1364 contracts to rest the weekend at 130,647. We certainly lost some weaker longs due to the raid. The front December open interest fell marginally from 599 contracts to 529 reflecting the number of notices sent down for delivery on Thursday (63).  The estimated volume for the silver comex trading yesterday has been released by comex officials at 62,674.  Last night it was originally estimated at 58,112 and there has been an update on their estimates.  The confirmed volume for Thursday was a very high 68,929 contracts.  Remember, that Thursday was an up day for gold and silver so it seems the banking cartel provided all the necessary un-backed paper to contain these precious metals from rising to far.


Here is a chart on the 10th of December for gold and silver comex inventory changes and deliveries.




Withdrawals from Dealers Inventory 

Zero oz

Withdrawals from customer Inventory 

1,391,933 oz

Deposits to the dealer Inventory


Deposits to the customer Inventory

283,271 oz

No of oz served  (contracts50

250,000 oz

No of notices to be served..479



Withdrawals from Dealers Inventory 

zero oz

Withdrawals from customer Inventory 


Deposits to the dealer Inventory

  zero oz

Deposits to the customer Inventory

100  oz

No of oz served (contracts  523

52300 oz

No of oz to be served 1070



let us start with the silver deliveries and inventory changes:

There was massive movement in the silver comex today, all belonging to the customer.  There were 3 deposits of silver into the customer's inventory:
1.  5170 oz    2.  376,033 oz   3.  2068 oz.  Total:  383,271 oz.

There were two huge withdrawals of silver:
1. 60,378 oz   2.  1,331,555 oz   total number of oz leaving the comex vaults: 1,391,933 oz.  Net withdrawals of the customer is 1,008,662.

There seems to be massive confusion at the silver comex whenever you constantly see this kind of volume moving around.  The net silver withdrawal is going to put out fires in other jurisdictions.
The silver comex folk notified us that 50 notices were sent down for servicing for a total of 250,000 oz.  The total number of notices sent down so far this month total 1280 contracts or 6,400,000 oz of silver.  In order to see how many notices remain, I must take the open interest recorded for Friday at 529 and subtract the 50 deliveries which gives us  479 notices   (2,395,000 oz).
Thus the total number of silver oz standing in this delivery month is 6,400,000 oz (already served)  +  2,395,000 (to be served)  =  8,795,000 oz.  We lost a tiny 35,000 oz to cash settlements.

Now for gold:

Please note again the extreme tranquility at the gold comex.  Nothing is entering.  This is strange as how can there be settlement?  For this to occur during the biggest delivery month is also very, very unusual.  You will note that one customer received a tiny 100 oz brick and that is all that has been received by either a dealer or customer.   One customer withdrew a total of 418 oz of gold leaving a net withdrawal of 318 oz.  There were no adjustments so the activity was sparse in total contrast to silver.
The comex notified us that 523 notices were sent down for servicing for a total of 52300 oz of gold.  The total number of notices sent down so far this month total 10,210 or 1,021,000 oz of gold.  The number of notices that remain to be served is calculated by taking the open interest recorded for Friday at 1593 and subtract the Friday deliveries of 523 to give us 1070 notices or 107000 oz of gold left to be served.

Thus the total number of gold oz standing in this delivery month is as follows:  1,021,000 oz (already served) +  107000 (0z to be served) =  1,128,000 oz  (we gained 700 oz from Thursday as our finalist longs refuse to accept cash settlements.  They are patiently waiting for their metal.

Herein is the ETF story for today:

Total Gold in Trust

Tonnes: 1,289.83


Value US$:


The GLD registered a fall in inventory of 3.85 tonnes  as this "inventory" was used in the raid at the comex on Friday.  Thus the GLD in tonnage has its inventory at 1289.3 tonnes of gold.


Surprisingly, the folk at the SLV held pat with their "inventory" today. 



Ounces of Silver in Trust


Tonnes of Silver in Trust Tonnes of Silver in Trust



Our ETF's that we follow still command a decent positive to NAV.

The Sprott silver fund PSLV registered a huge  positive to NAV of 12.08% reflecting silver's huge strength. (Friday night's reading)

The Sprott gold fund PHYS registered a positive to NAV of :3.57$  (Friday night)

The central fund of Canada which represents equal parts of physical silver and gold registered a positive to NAV of:9.6%  (Friday night)


The USA Mint has resumed production of the 5 oz silver coin "America the beautiful".  Demand has been very strong for these collectibles:

U.S. Mint resumes sale of five-ounce silver coins

* Mint relaunching silver coins after suspension

* Dealers must charge no more than 10 pct premium

NEW YORK, Dec 10 (Reuters) - The U.S. Mint is relaunching sales of its five-ounce "America the Beautiful" silver coins on Friday after a delay this week due to complaints about high prices charged by dealers.

In a note to its authorized dealers, the Mint said they must agree to charge their customers no more than 10 percent above what they paid for the bullion coins, an amendment to the original agreement.

Demand is expected to be significant, the Mint said, citing limited quantities of the coins.

Authorized dealers will pay a premium of $9.75 per coin over the spot price of silver, it said.

On Monday, the first day of their sale, the Mint suspended the offering due to concerns about high prices charged for the coins by dealers amid strong demand from collectors and investors and 30-year highs in the price of silver.

Silver rose above $30 an ounce for the first time since 1980 on Monday in a safe-haven play on the back of speculation the Federal Reserve and other central banks would extend monetary easing and amid worries over euro zone debt.

The metal traded at $28.50 an ounce on Friday.

While gold has grabbed investors' attention this year with its rally to record highs above $1,420 an ounce, silver has quietly outpaced those gains. A $100 investment in silver on Jan. 1 would now be worth about $170, versus $125 for gold.

Sales of the one-ounce American Eagles, another popular U.S. Mint silver bullion coin, hit a record above 4 million ounces in November.

There are 33,000 America the Beautiful coins available for each of the five designs, based on features from five U.S. National Parks.

Each America the Beautiful silver coin has a diameter of 3 inches (7.6 cm) and contains five ounces of pure silver.


On Thursday night, I received news that the CFTC commission will decide on position limits on Dec 16.2010.

Here is the announcement released by the CFTC Dec 9.2010:

CFTC to Consider Commodity Speculation Caps Next Week


 All I can tell you is that there will be position limits set and the elimination of the phony exemptions.  The CFTC will delay the enforcement of this by a few weeks.

Needless to say, this is very big news and I will be on top of this story as it unfolds.

The next commentary is a dandy and it was released by fellow Torontonian, Rob Kirby.  I will highlight the entire commentary for you and I will add my comments at the end:

Something's Wrong in the Silver Pit:
But It's Much Bigger than J.P. Morgan

Rob Kirby

When researching the precious metals, often times things are seldom as they appear on the surface. GATA Secretary and Treasurer – Chris Powell – has said that the true picture of a nations’ gold holdings are, “more closely guarded than their nuclear secrets”.

This has been more-or-less proven true based on the Federal Reserve’s reaction to GATA’s 2009 FOIA request for information concerning GOLD SWAPS. The Fed is ON RECORD admitting they’ve done gold swaps – which, by definition, necessarily utilize sovereign American gold stocks.

To date, the Federal Reserve has stonewalled GATA’s FOIA request citing their ‘privileged status’ and reluctance to divulge ‘trade secrets’.

GATA has maintained that the Federal Reserve / U.S. Treasury in conjunction with other Central Banks have for years been suppressing the price of gold [and silver too] – in efforts to mitigate and to cover up their own debasement of fiat currencies.

Historically, when Central Banks or governments print more and more fiat money, precious metals prices RISE. The money printing is not only inflationary but when done to excess it can undermine confidence in faith based fiat currency regimes. Precious metal has no counterparty risk and cannot be printed – which is why it “is” and always will be money. Remember folks, gold is money, as evidenced by EVERY Central Bank in the world listing gold bullion on their balance sheet as an official reserve asset.

GATA has identified and documented that Central Banks utilize precious metals derivatives, and in particular swaps, as a primary method by with Central Banks rig metal prices.

In the presence of EXTREME money printing, it’s understandable why Central Banks and governments would want to suppress the price of gold [and silver] and be less than transparent about their nefarious activity in this regard. Knowledge and detail regarding these activities could undermine a nations’ currency, their credit rating and thus their ability to service their sovereign debt.

The following data set is taken from the June, 2010 Bank for International Settlements [BIS], Semiannual OTC Derivatives Report and it is compared to other data from the U.S. Office of the Comptroller of the Currency’s, June, 2010 Quarterly Report on Bank Derivatives Activities.

Relative comparison along with analysis within the data sets sheds new light on the scope of the precious metals price management scheme. Additional analysis is presented regarding the number and identities of other possible [or likely] players. It also illustrates how paper derivatives have become tools to determine/rig price instead of the intended and stated purpose of price discovery of the underlying physical asset.


Question: There are a total of 417 Billion notional in Gold derivatives outstanding – AND THE GOLD / SILVER Price RATIO is 49:1 – then WHY are outstanding notional silver derivatives 127 Billion???? These BIS numbers suggest that the proper gold / silver ratio should be roughly 3.3:1 or silver priced TODAY at 1,400 / 3.3 = 424.00 per ounce.

Now, let’s take a peek at what the U.S. Office of the Comptroller of the Currency tells us about “other precious metals” held by U.S. Commercial Banks:

source: U.S. OCC

OCC data tells us that J.P. Morgan and HSBC constitute 13.5 billion worth of the BIS’s reported total of 127 billion of derivatives in “other precious metals”. That’s about ONE TENTH of the total. WHAT ABOUT THE OTHER 90 % ??????

Note: Even if we compare the OCC totals for silver versus gold derivatives from the table above – OCC data is supportive of a “proper” gold / silver ratio of 131.6 / 13.6 = 9.7 This implies a silver price of 1,400 / 9.7 = 144.00 per ounce of silver.

Coincidentally, or perhaps not, COMEX open interest in gold futures is roughly 600K contracts @ 100 oz. per contract that is roughly 60 million oz of gold open interest. COMEX open interest in silver futures happens to be about 135k contracts @ 5,000 oz per contract which is roughly 650 million oz of silver open interest [note that silver open interest is not quite 11 times the open interest of gold]. So, again I ask, why is the gold / silver ratio at 48: 1?????

***For those who are not aware, silver naturally occurs in the earth’s crust approximately 7 – 10 times more frequently than gold.

Now, let’s take a look at ALL Derivatives of U.S. Commercial Banks as reported by the OCC:

source: U.S. OCC

Take note and remember that the breakout provided – above - by the OCC was for Commercial Banks ONLY.

Finally, let’s now look at the ONLY OCC data table depicting ALL Derivatives held by U.S. Bank Holding Companies:

source: U.S. OCC


  • The BIS tells us that total global outstanding “other precious metals” derivatives are 127 billion.
  • General market wisdom [gleaned from OCC Commercial Bank data] suggest that J.P. Morgan and HSBC are the two dominant players in silver [other precious metals]
  • Yet, the U.S. OCC tells us that J.P. Morgan and HSBC combined – make up 13.577 billion of the 127 billion BIS total [roughly 10 %].
  • The U.S. OCC tells us that Morgan Stanley and B of A and Goldman have an additional combined 70 TRILLION in derivatives – at the Bank Holding Company level – but they give us NO HINT as to what portion of these totals consist of precious metals activity. We are left to assume that this is because the OCC is only mandated to regulate Commercial Banks – while Bank Holding Companies fall under the purview of the Federal Reserve.
  • Unless J.P. Morgan and HSBC are LYING to regulators as to the extent of their silver market activity – there are other MASSIVE players in the silver price suppression game. Who ever these ‘players’ are – metaphorically, they MUST BE BLEEDING FROM EVERY ORIFICE with silver’s parabolic run up in price over the past few months.
  • Most likely among American entities are MORGAN STANLEY, B of A and Goldman Sachs – since together they are operating a 70 Trillion derivative “BLACK BOX” about which we know LITTLE to NOTHING as it pertains to precious metals.
  • Any way you slice it – precious metals data reporting on the part of American regulators is atrocious. Simple MATHEMATICS tells us a gold / silver ratio at 48:1 is EXTREMELY contrived and REEKS of manipulation on the part of the Federal Reserve and the Banks they are charged with regulating.

Got any physical Gold and/or Silver yet?


The BIS 3 weeks ago recorded that the total G10 banks and Switzerland had a derivative risk in silver of 127 billion dollars.  The BIS is only interested in risk and they net out all longs from the shorts.   They are only concerned with a risk of a failure to deliver.  The OCC which monitors all of the USA banks with respect to derivative risk  (and they report this to the BIS) reported just recently that JPMorgan and HSBC have a derivative risk of 13.557 billion dollars out of the 127 billion reported by the BIS.  The key question is: where is the remaining  114 billion dollars worth of derivatives for silver? And with a total market for silver of around 16 billion dollars, why on earth do we need 127 billion dollars in derivatives?
The bulk of the shortfall with respect to JPMorgan and HSBC are made up of forwards done at the LBMA.  This is the true short as they must supply the metal at a forward date in time. It seems that JPMorgan and HSBC has called upon their co-conspirator banking friends to quell silver's advance by underwriting massive calls without any backing at all.
We saw evidence of this in November when 4.5 million oz of options exercised for silver hit the floor of the comex.  This sent the comex scouring the planet for much needed silver to supply patient longs standing for delivery.  This was happening at the same time that Ireland was having problems with their debt and their banks, and the mints having record sales of silver. The Sprott silver fund PSLV finally got their licence to proceed to acquire the 22.3 million oz that is now in their possession.
The huge rise in silver has now caused our banks to bleed  profusely as silver has advanced 65% during these past 6 months  ($28.00 from$ 17.00) whereas gold has advanced only 15%  ($1380 from$ 1200).

This is the primary reason for the raid by the banking cartel.  They are trapped and cannot get out of their mess.  JPMorgan and HSBC have the bulk of the derivative forward risk.
The remaining banks have massive calls written on silver not owned by them.  The banking cartel have further problems with the huge paper silver deposits taken in all over the world by banks with no silver backing.  In gold, we are hearing that the banks are trying to get their hands on allocated gold to settle on very litigious longs that cannot get their desired physical.  (see KingWorld News..Jim Rickerts).

In London England we are witnessing gold and silver both go into backwardation as the spot owners refuse to risk their physical for a fiat gain. Collectively, they have determined that the physical supplies in silver and gold are extremely sparse.  A default will occur in London before it collapses on Comex.


The COT report came out on Friday and we did not glean anything special.

First the gold COT report:

Gold COT Report - Futures

Large Speculators

















Change from Prior Reporting Period


















Small Speculators






Open Interest















non reportable positions

Change from the previous reporting period


COT Gold Report - Positions as of

Tuesday, December 07, 2010


Note: those large speculators that were long continue to add to their positions to the tune of 3,680 contracts.
Those large speculators that were short lessened those shorts by 1464 contracts.
Those commercials that have been long gold also lessened their longs to the tune of 2642 contracts.
However, our hero JPMorgan and friends increased again their massive short positions by 5562 contracts.  They supplied the necessary un-backed paper.
The small speculators that have been long increased their positions by 3950 contracts and those that were short also added to their shortfall by 890 contracts.

In a nutshell:  same story as always.

And now for silver:

Silver COT Report - Futures

Large Speculators

































Small Speculators






Open Interest















non reportable positions

Change from the previous reporting period


COT Silver Report - Positions as of

Tuesday, December 07, 2010


Those large speculators that have been long continued to pile onto their positions to the tune of 1788 contracts.
Those large speculators that have been short added to their positions by 2853 and thus provided some of the paper shorts.
And now for our commercials:

Those commercials that have been long lessened their positions by a tiny 546 contracts.
Our hero bankers, JPMorgan and HSBC who have been perennially short did not like the looks of a rising silver price and they lessened their shorts by 1491 contracts.
The small specs are really not in the game.  Those that have been long increased their positions by 1200 contracts and those that were short increased those positions by 1080 and thus became the secondary supplier of the paper.




Yesterday, Bart Chilton dropped another bombshell.  He stated that during this year  ONE trader  ( and you can guess who that trader is) held 40% of the outstanding shorts at the comex in silver:

Bart Chilton in his speech yesterday during the public hearing on HFT dropped a bombshell. He revealed that one trader holds more then 40% of the short position on the silver market. We know by Bank Participation Reports and OCC Bank Derivative reports that this can only be JP Morgan Chase. In my opinion Chilton dropped this bombshell because the cartel was trying to torpedo his efforts for position limits. What better way to show that position limits are required than revealing that JPM owns the silver market. The same entity who has just corner the copper market on the LME. He also points out that some one holds 20% of the oil market. Isn’t it interesting that the mainstream press has ignored this comment just like the ignores Bill Murphy’s exposing the existence of a whistleblower at the March 25 public hearing.



Eric Sprott has delivered a great commentary on the silver market.  He had to refrain from commenting on silver until his PSLV started to trade on the NYSE.
Here is his great paper co-written by David Franklin:



Now let us go to the big economic stories that will have an influence on the paper side of things.

The bond prices continued to deteriorate with the 10 yr bond yield rising and finishing the day at a yield of 3.34%.

The long 30 yr bond also deteriorated with its final resting price at 121.59.  Here is a chart on its trading yesterday:

INO Markets

·         Markets

·         All Futures

·         Open Futures

·         Exchange List

·         Portfolio

121.59375 -0.53125 (-0.44%)

2010-12-10 17:03:04, 10 MIN DELAY

T-BONDS Mar 2011 (E) (CBOT:ZB.H11.E)


The weekend is going to be very worrisome for JPMorgan and friends as they now have a dual problem:

1. the massive shortfall in physical gold and silver.

2. the massive interest rate swaps underwritten and the massive losses if the long bond falls below 116.00

The Muni bond market is now in deep trouble due to the failure of the rating agencies.  (courtesy of Mark  Lundeen):

The situation in the US Municipal Bond Market is deteriorating. Muni-bonds provide tax free income, paid from local and state government revenues. For this reason, muni-bond of similar quality, compared to taxable corporate bonds, yield significantly less than taxable bonds – unless there is something terribly wrong in the municipal bond market. As we see in the chart below, currently, there is something terribly wrong in the municipal bond market.

The Green line marks the point where muni-bonds are paying the same income to taxable corp-bonds. Those times where the plot is above the green line shows when corp-bond paid * less *income than similar quality muni-bonds. Think of it, people are willing to pay more, for less yield, and taxable income at that.

Such occurrences are also markers for universal deteriorating credit quality in the bond markets. But in 1938 & the early 1980s, bond yields were high, and the positive spread marked the point in time where yields began to decline. These muni-bonds were great investments then, but I doubt they will be this time as this yield inversion occurred at the end of a 30 bull market in bonds. Yields in 2010 have only one way to go – up.

Congress’s “affordable housing program” aka: the sub-prime mortgage fiasco has devastated local government’s tax-base in all 50 states. With current bond yields near 30 year lows, this chart is flashing a warning that the worst is yet to come. We should anticipate the Fed monetizing the US muni-bond market sometime in the future, so this chart has significance in the potential future gains in gold and silver.


Moody's is set to lower the ratings on Portugal: (courtesy James Sinclair)

Moody’s: May Downgrade Portugal Banks


DECEMBER 10, 2010, 4:55 P.M. ET


LISBON—Portugal’s banks received another blow Friday when Moody’s Investors Service became the second ratings firm in a week to threaten a downgrade over their continued reliance on funding from the European Central Bank.

Many analysts say the problem is likely to persist until the Portuguese government shores up its finances. Shares in Spanish banks also came under pressure, as investors continued to see parallels between the situations in the fiscally frail Southern European economies.




November had a terrible month as far as receipts were concerned as the deficit grew to 150 billion dollars.  The usa will without a doubt come in with an annual deficit of 1.4 trillion dollars this fiscal year.  Here is the story courtesy of Jim Sinclair: and the Associated Press.  The author is Martin Crutsinger  from the AP.

November federal budget deficit highest on record

Treasury says deficit hit $150.4 billion last month, largest November imbalance on record

Associated Press

Martin Crutsinger, AP Economics Writer, On Friday December 10, 2010, 3:56 pm

WASHINGTON (AP) — The federal budget deficit rose to $150.4 billion last month, the largest November gap on record. And the government’s deficits are set to climb higher if Congress passes a tax-cut plan that’s estimated to cost $855 billion over two years.

The Treasury Department says November’s budget gap was 25 percent more than the deficit in November 2009.

For the first two months of the current budget year, which began Oct. 1, the deficit totals $290.8 billion. That’s 2 percent less than for the same period a year ago. And economists had been estimating that the full-year deficit would decline after two years of record highs.

But analysts say the tax deal President Barack Obama reached with Republicans this week will give the 2011 budget year the largest deficit in history — $1.5 trillion, according to economists at JPMorgan Chase. It would mark the third straight year of trillion-dollar-plus deficits.



The only noteworthy economic statistic released by the USA yesterday was the trade figures:  (courtesy of Reuters)

Trade gap narrows more than expected in October

WASHINGTON (Reuters) - The U.S. trade deficit narrowed much more than expected in October, as exports rose a robust 3.2 percent and imports declined slightly in the face of slackening demand for industrial and petroleum products, a Commerce Department report showed on Friday.

The trade gap totaled $38.7 billion, down from a revised estimate of $44.6 billion for September. Analysts surveyed before the report had expected the October trade deficit to narrow just slightly to about $43.60 billion.

The smaller-than-expected deficit could boost estimates of U.S.

fourth-quarter economic growth because it implies a larger share of U.S. demand is being met by domestic production.

However, on an annual basis, the trade deficit has widened sharply this year and could surpass $500 billion when final figures for 2010 are available. Last year, in the midst of the global financial crisis which put a squeeze on world trade, the U.S. trade gap narrowed about 46 percent to $374.9 billion.

Record exports to China and Mexico in October helped push the overall export tally to $158.7 billion, the highest since August 2008. Exports to the European Union and Japan also showed growth.

Overall U.S. imports fell 0.5 percent to $197.4 billion, led by drop in imports of industrial supplies and materials and the lowest petroleum imports since November 2009.

Despite the overall drop, imports from Mexico were the highest on record and imports from Japan and the European Union were the highest in two years.

Imports of advanced technology products also set a record.

Despite record exports to China in October, the U.S. trade deficit with that country in the first 10 months of this year was $226.8 billion, up 20.3 percent from the year-earlier period.


It seems that exports picked up a bit but imports fell which indicates the consumer is a little strapped for cash.

That about does it for today.

I hope you all have a grand weekend, and I will see you Monday evening.

all the best














































































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