Our old friend, John Brimelow, sent along the following bit of information:

The CME Final for Wednesday indicates that on volume as presaged of 306,684 lots (11.19% above estimate and the 2nd heaviest since late October) open interest leapt 8,299 lots, 25.81 tonnes or 1.94%, to 435,998 lots. Gold of course was down 3.57% basis the stock market close. Silver’s open interest was up 4.34% while silver was down 6.07%.

In other words, during the most violent sell off we can recall in gold in many, many years… and this may have been the single largest sell off in COMEX history, but we are not able to know that for certain and so we shall simply say it is the worst in our memory, but then again our memory can be at times as faulty as is Mr. Corzine’s apparently… the longs not
only did not liquidate, they added to their trades and the shorts not only did not cover, they increased their positions! This is astonishing really, and one has to ask oneself which side is in control at the moment. Certainly it is not the bulls and if they did not liquidate Wednesday, we suspect that they did not liquidate yesterday either, leaving them vulnerable and rather very so.

If the lows seen yesterday… essentially the same lows made amidst panic Wednesday… are taken out early next week, we fear that one more cascade to the downside is not only possible but likely. We shall then begin to look again at buying gold, for by then the late longs will hopefully have been washed out of their positions and stronger hands shall begin once again to prevail. That, however, can be left to next week; for now, the sidelines still look wonderfully inviting.