[Selene]

Silverman, I respect your fears, BUT......

Willie says "When December contracts in gold & silver are demanded to be satisfied via delivery of the metal, we could easily see the COMEX fail in delivery. A default is highly likely."

Ummm, with all due respect for Jim Willie's degree in statistics, speaking as a former (Refco) commodities trader myself - oils and gold - you should note that his critical thesis here is factually flawed and historically incorrect.

Better that 99.999% of all futures contracts never take delivery. They are not intended for that. Never. Ever. (What would you do if someone delivered 2,000 lbs of frozen pork bellies...on your lawn?)

The beauty of trading futures contracts on paper is that they remain entirely on paper. They're (hello?) speculative.

Sure, if everybody - or even some traders - decided to take delivery there'd be some mighty raised eyebrows. Especially because the entire contract would first have to be settled in cash in full....real bucks instead of just the deposit leverage you put down to open the contract. That would be impressive. And if you wanted the metal, why would you bother to trade the futures if you just wanted to buy in cash? The futures market can move against you bigtime, too. Trust me on that one, kiddies. If you wanted to buy bullion, you'd wait for a good (cheap) day in the cash market and place an order. There's no odds in waiting for a futures contract to get cheaper. (Son, that 's what 's called a "Texas Hedge": you buy the physicals and go long on the futures....truly dumb.)

And the drop in open interests? Puleeze - equal drop in technical trending. Any experienced trader knows to wait until a tradeable trend takes hold. About 80% of the time, most markets are "nontrending". And when cash is at a premium, any sane trader will put his money into the trending markets.

And it goes without saying that Kitco - which sponsors that blog - sells gold and silver coins, bullion, etc. Their bias has to be relentlessly bullish - buy now! Don't wait! etc. etc. They do have an interest here.

Read with caution. Don't get stampeded. Ain't likely to happen on this planet. (Which is not to say that the price of gold could not ever go up, but not for the reasons cited here by Willie.)

Sleep well tonight, my friends.

Cheers,
Selene