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.

Trader Dan