The Metals: Gold traded about 1% higher in Asia and London and then fell to see a $7.05 loss at $831.05 at the New York open before it quickly rebounded to see a $17.70 gain at $855.80 by about 10AM EST, but it then fell back off for most of the rest of trade and ended with a loss of 0.2%. Silver climbed 14 cents to $11.09 in Asia and fell to $10.15 at the open in New York before it rebounded back to about $10.50 for most of the rest of the day, but it then fell back in the last minutes of trade and ended near a new session low with a loss of 7.67%. Euro gold rose to about €619, platinum lost $62 to $962, and copper fell over 18 cents to about $2.22. Gold and silver equities fell throughout the day along with the major indices and ended with over 10% losses. The Economy: Tomorrow at 8:30AM EST brings CPI for September expected at 0.1%, Core CPI expected at 0.2%, and Initial Jobless Claims for 10/11 expected at 470,000. At 9AM is the Net Foreign Purchases report for August, at 9:15 are Capacity Utilization for September expected at 78.0% and Industrial Production expected at -0.8%, and at 10AM is the Philadelphia Fed survey for October expected at -5.0. The Markets: Oil fell to a 13 month low to under $75 as OPEC slashed its demand forecasts. Inventory data is delayed until tomorrow due to Columbus Day this past Monday. The U.S. dollar index rose and treasuries fell despite much worse than expected Retail Sales data as the prospect of the government needing to sell more debt to try and solve the financial crisis weighed on bonds while the dollar rose on significant euro weakness. The Dow, Nasdaq, and S&P fell about 1% at the open on poor economic data and then continued to fall on worries over the credit market. While no actual developments were announced today, apprehension about what may come next certainly seemed to put a damper on stocks as all three indices closed with about 8% losses. Among the big names making news in the market today were Delta, AMR, Coca-Cola, Wells Fargo, JPMorgan, Schwab, and Bayer. The Commentary: “Dear CIGAs, It was more of the same type of price action that we have been seeing in gold for some time now. The market is torn between continued deleveraging from speculative players on account of redemption requests from clients moving to cash versus safe haven buying. It has been interesting reading the comments about this market in the financial press of late. The majority of gold pundits for the most part seems to be reading the same talking points which as usual are utterly and completely wrong. To hear them say it, gold as a safe haven is finished, over, kaput, pushing up daisies, swimming with the fishes, surfing its last wave, worm food, ad infinitum, ad nauseaum. What these mindless robots seem unable to grasp is that the Comex is NOT the gold market. It is a paper market which has been the recipient of large speculative buys by commodity index funds. These funds take large positions in an entire gamut of commodities based on the weightings of those particular commodities in the various commodity indices that they use as a benchmark. It some cases it might be the Goldman Sachs commodity index. In others it is the Reuters/Jefferies CRB index; it still others it is the Dow Jones Commodity Index. That means they buy gold, silver, crude oil, corn, wheat, nat gas, sugar... etc... in the same percentage terms as they are weighted in those indices. For example, if the weighting in one of these indices for gold happens to be 5%, then for every million dollars of client money invested, they are required to buy $50,000 worth of gold futures contracts at the Comex. When these funds get redemption requests from clients, who now want out of the commodity sector, they are forced to sell FUTURES across the board to generate the cash needed to send back to their clients. That is why, for the most part, the entire commodity complex is sinking whether it is corn or soybeans or wheat or platinum, etc. If $20 million of cash is required to meet client redemption requests, then $20 million of commodity futures must be sold REGARDLESS OF THE FUNDAMENTALS IN THAT PARTICULAR MARKET. In other words, it is FORCED liquidation on account of redemption requests. That has NOTHING TO DO with the real physical gold market where demand remains at unprecedented levels, levels so high that it is producing serious shortages of bullion for would-be buyers. This is what is producing the increasing dichotomy between the Comex and the real gold market. I would go as far as saying that we are for all practical purposes seeing a BLACK MARKET in gold beginning to develop. Having said all that, it should still be noted however that while every single commodity futures market is in the red today on account of this forced selling, GOLD IS STILL RELATIVELY STABLE! Hey, you dimwitted pundits who keep pooh-poohing the yellow metal’s safe haven status because it is not trading at $1000, take note. Even in spite of the forced liquidation, gold is hanging in there precisely because there are enough buyers to offset a great deal of this continued forced liquidation. And this is in the arena of the futures market. In the real world, gold is fetching $1000 an ounce out there in some instances. Premiums for one ounce gold bullion coins are running anywhere from $65 - $100 above the quoted spot price and certainly above the phony price quoted on the Comex. Last year at this time you could buy all the one ounce gold bullion coins you wanted for $20 - $30 over the spot price. Meanwhile back in Fairy Tale land at the Comex, open interest registered a bit of an increase in yesterday’s session moving up nearly 2,500 contracts. I suspect that come this Friday, when we review the Commitments of Traders report, we are going to see increases in the fund SHORT category with a sharp drop in the fund long category alongside of short covering by the bullion banks who have been using the forced selling to cover their shorts in order to capture their paper profits allowing them to hit the metal on the next rally and do the same thing all over again. To put things in perspective about this open interest decline – we are down to levels last seen in November 2006. Let’s state this in terms that perhaps convey what I have been trying to say for some time now. NEARLY ALL OF THE SPECULATIVE INTEREST THAT HAS BEEN DRIVING PAPER GOLD HIGHER FOR THE LAST TWO YEARS HAS NOW DISAPPEARED due to this forced liquidation. This is incredible when you think about it a bit. So much deleveraging in gold has already occurred, that nearly all the buyers from the last two years are gone from this market. And yet, in spite of this, gold is still sitting above the $800 level. Back in November 2006, front month gold closed at the price of $646.90. Today, we are nearly $200 higher than that and yet nearly all of the speculative long side interest going back to that date is gone. Someone is buying gold because they see value in it and that buying has been sufficient to hold the price relatively firm compared to nearly every other commodity out there. What can be said about gold cannot be said about any other single commodity out there. If you doubt this, pull up the continuous price charts of corn or soybeans or platinum or copper, etc., and just look at them. Look at the chart of crude oil. Look also at the gold/crude oil ratio which has shot up strongly in favor of gold. (By the way, this alone is the reason why many of the gold mining outfits with quality mines, good management and good balance sheets are going to show some strong profits and continue to be sold down to levels that are extremely undervalued). Gold is even outperforming even longer dated Treasuries right now. To sum up, as the equity markets fall off the cliff thumbing their noses at the monetary authorities, expect further risk aversion to occur which means further forced liquidation in commodities. Watch the Euro/Yen cross and the Yen itself to get a sense of when the bulk of this will abate. The Yen as well as the Swiss Franc are benefiting from the unwinding of carry trades and will tend to be the stronger currencies out there (along with the US Dollar) as long as the risk aversion play is in vogue.”- Dan Norcini, JSMineset.com “December Gold closed down 0.5 at 839. This was 5 up from the low and 17 off the high. December Silver finished down 0.88 at 10.18, 0.38 off the high and 0.03 up from the low. Wednesday might have been another trading session in which the flight to quality bulls in the gold market were really disappointed with the magnitude of the strength in gold prices. Certainly a rally in the Dollar put the gold market off balance and certainly the fear of significant slowing drifted back into the markets consciousness and therefore the muted strength in gold wasn't totally surprising. In fact, with the gold market basically the only physical commodity market attempting to hold in positive ground, it wasn't surprising that gold gains were restrained. However, given the sharp slide in equity prices, the flight to quality crowd was probably seeing their resolve strengthen instead of weaken. The silver market tried to correlate with the gold market early in the trading session but in the end the sharp downward liquidation in a host of physical commodity markets was too much for the silver bulls to withstand. In fact, with a higher Dollar, sharply lower copper prices and a sharp slide in energy prices, silver was facing a number of outside market negatives. In the end, the silver market acted like a classic physical commodity market facing a severe slowdown of the global economy.”- The Hightower Report, Futures Analysis and Forecasting

Source