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Saturday, August 17: Today In Gold And Silver

Stocks in this article: GLD SLV

NEW YORK ( TheStreet) -- Compared to Thursday, it was pretty quiet price wise for gold on Friday.  Gold's low of the day came shortly after the London morning gold fix at 10:30 a.m. BST.  The subsequent rally got cut off at the knees at 9:30 a.m. in New York, but then it rallied anew beginning at 12:30 p.m. EDT.  A not-for-profit seller showed up again at 2:15 p.m. in electronic trading, and once they were done, gold rallied again into the close.

The high tick at 2:15 p.m. EDT was recorded by Kitco at $1,381.00 spot, and the low, both in New York and London, just a hair below $1,360 spot.

Gold finished the Friday trading session at $1,377.20 spot, up $11.10 from Thursday.  Volume, net of August and September, was very heavy at 189,000 contracts.  That's huge for a day with such a small trading range, and a sign that the HFT boys were all over this market.

Here's the New York Spot Gold [Bid] chart showing the New York session on its own.  It was unusual to see this kind of price action on a Friday afternoon, especially in the electronic market.  Note the 9:30 a.m. sell off.

The price action in silver was similar to gold's, right down to the two sell offs in New York at 9:30 a.m. and 2:20 p.m.  The low in London appeared to come around the morning gold fix as well, about $22.80 spot.  The high tick in New York was recorded $23.53 spot.

Silver closed at $23.255, up 24.5 cents on the day, and well off its high.  Net volume was monstrous at 55,000 contracts.

Here's the New York Spot Silver [Bid] chart on its own,

The unusually high volume activity that occurred in Far East and early London trading that I spoke of in The Wrap in yesterday's column, obviously continued for the rest of the day, and was particularly prevalent during the Comex trading session.  On a daily basis, about 80% of silver and gold volume is done in New York.

Platinum and palladium didn't do much, and both closed down a dollar or so.  Here are the charts,

The dollar index didn't do much yesterday either, except for a spike down with the low of the day coming at precisely 9:30 a.m. EDT, the same moment that the rally in gold and silver got cut off at the knees in New York.  Someone obviously hit the buy the dollar index/sell gold and silver buttons at the same moment.  As GATA's Chris Powell would say, "There are no market anymore, only interventions."  The dollar index closed up 11 basis points from Thursday, finishing the Friday session at 81.28.

The gold stocks opened two percent higher, but with gold getting hit at the precise moment that the stock markets began to trade in New York, a willing seller showed up immediately, and sold the stocks down three percent into negative territory, a five percent swing in less than forty-five minutes.

From that point, a willing seller showed up every time the HUI headed higher.  What should have ended as a positive day for stocks, was turned into a negative.  The HUI finished down 1.93%, even though gold traded in positive territory from 12:30 p.m. EDT onward.

The silver stocks fared no better, and Nick Laird's Intraday Silver Sentiment Index closed down 1.89% despite the fact that the silver price finished well above its Thursday close.

(Click on image to enlarge)

Yesterday I didn't have the CME's Daily Delivery Report for you, but here it is now, and I thank California reader Jon De Weese for helping me out on this one.  It showed that 52 gold and 11 silver contracts were posted for delivery on Monday.  In gold, it was Canada's Bank of Nova Scotia that was the short/issuer on all 52 contracts, and JPMorgan Chase was the long/stopper on 47 of those contracts, all out of its in-house [proprietary] trading account.  JPMorgan was the short /issuer on all 11 silver contracts.  The link to Jon's webpage is here, and you'll be as amazed as I was when I clicked on the link for the first time last night.

Surprisingly enough, there was no gold or silver posted for delivery in Friday's CME Delivery Report.

I note that there are still 1,143 gold contracts open in August, and I await their fate with great interest.  I suspect that they will all be delivered into, but I'm wondering out loud why the short/issuer is being so shy, and dragging this out so long into the delivery month.

Over at GLD, an authorized participant finally deposited some more gold.  This time it was 77,272 troy ounces, and as of midnight last night, there were no reported changes in SLV.  Without doubt, the ETF is owed silver, but it remains to be seen if any more silver is forthcoming, or will the APs have to short the shares in lieu of depositing physical metal?

It's been a while since I've heard from Switzerland's Zürcher Kantonalbank, but I received something from them yesterday.  For the week ending August 9th, they reported that their gold ETF declined by 49,309 troy ounces, and their silver ETF declined by a smallish 109,674 troy ounces.

Once again there was no sales report from the U.S. Mint.  Month-to-date the mint has  sold only 2,500 ounces of gold eagles, 4,500 one-ounce 24K gold buffaloes, and 1,596,000 silver eagles.  The silver eagles sales seem normal, but I've never seen gold sales this low since I can't remember when.  Based on these sales, the silver/gold ratio is way up there at 226 to 1, about the same ratio as last week. I said last week that such a ridiculous sales ratio couldn't last, but here it is again one week later.

Over at the Comex-approved depositories on Thursday there was no reported gold transfers, either in or out.

There was a lot more activity in silver, as 771,257 troy ounces were added to their depositories, and 1,006,267 troy ounces of the stuff were withdrawn.  The link to that activity is here.

Not surprisingly, the Commitment of Traders Report [for positions held at the close of Comex trading on Tuesday] did not make for happy reading.  The Commercial net short position in silver blew out by almost 10,000 contracts, or 50 million ounces, and the total Commercial net short position doubled in a week to a bit over a 100 million ounces of silver.   According to silver analyst Ted Butler, the Big 4 [read JPMorgan] sold short another 3,500 silver contracts, the '5 through 8' largest traders sold short another 1,000 or so contracts, and the Raptors [the Commercial traders other than the Big 8] sold 5,500 contracts of their record long position.

Ted is of the opinion that JPMorgan's short position in silver now sits around the 16,000 contract mark, or 80 million ounces.

In gold, the headline number showed virtually no change in the Commercial net short position, and that's because the big error from last week's report [28,400 contracts] automatically corrected itself on the rally during the reporting week, if that makes any sense.  If I'm understanding Ted correctly, the Commercial net short position for the week that was, deteriorated by the exact same amount as the error from the prior week.  Of that amount, the Big 4 [mostly JPMorgan] sold 8,000 contracts of its long position, 800,000 troy ounces, which Ted now figures is down to the 7.7 million ounce level, down from 8.5 million ounces in the prior week.

What these numbers show is that the Commercial traders are back to their old tricks and, without doubt, were even more aggressive in their selling since the Tuesday cut-off.  Next week's COT Report won't make for happy reading either.  It's obvious, especially from the heavy volumes all week, that JPMorgan et al are throwing quite a bit of Comex paper at these rallies, and although it's possible we could move sharply higher from here, the odds don't favour that, at least in the very short term.

I'd love to be proven wrong, but I've seen this movie too many times before over the past decade, and I have to use the past as prologue.  I suppose this time it might be different, and they might let the prices run, but why didn't they do that a few weeks back when they were maximum long in gold, and minimum long in silver, as they've given back a lot of their ill-gotten gains since then.

I'll be interested in what Ted has to say later today, as he normally doesn't tell me everything when we're talking on the phone.  If there's anything more to be gleaned from yesterday's COT Report, I'll steal if for my Tuesday column.

I have the usual number of stories for a Saturday, which is a lot, including quite a few that I've been saving for today.

¤ The Wrap

Hastiness and superficiality are the psychic diseases of the 20th century… and more than anywhere else, this disease is reflected in the press. - Aleksandr Solzhenitsyn

Today's pop 'blast from the past' needs no introduction whatsoever… and neither does the performer. He is, without doubt, one of the best male vocalists of all time… and was all over the pop charts in the 1960s.  I remember him well… and the women loved him… throwing panties and hotel room keys on the stage whenever he performed in Las Vegas The link is here.  Enjoy!

Today's classical 'blast from the past' was composed by Wolfgang Amadeus Mozart in 1779 while he was on a 2-year tour of Europe that included Mannheim and Paris.   It's his Sinfonia Concertante in E-flat major for violin, viola and orchestra, K. 364.  Itzhak Perlman [violin] and Pinchas Zuckerman [viola] do the honours with Zubin Mehta conducting the Israel Philharmonic Orchestra.  I've heard both these artists live and in concert with the Edmonton Symphony Orchestra… and they are beyond awesome… especially Itzhak Perlman.  The recording looks to be at least 30 years old, but the video and audio quality are still pretty good.  The link is here.

Judging by the huge volume figures for both gold and silver yesterday, I'd guess that both metals were kept on a pretty tight leash… and that goes for the shares as well.

As I mentioned on several occasions during the last couple of weeks, the volume numbers have really started to blow out, even on quiet days… and it was obvious at the time that the budding rallies in all four precious metals were not going unopposed.  That has certainly turned out to be the case from what was in yesterday's COT Report… and what has probably occurred since the Tuesday cut-off.

But will this pattern continue?  I don't know… and it's a mug's game trying to call this market on a short-term basis, as anything can happen.  We're getting pretty overbought in silver… and gold is getting close… and it wouldn't surprise me in the slightest if we got some sort of engineered price correction at some point.  Of course we can stay in overbought territory for quite some time, just like we did in oversold territory… but using the past as prologue, I'd say that this rally is on borrowed time.

However, once this presumed correction is out of the way, there's no reason that I can think of why we shouldn't continue to power higher.  The current prices of all four precious metals are at ridiculous and artificially low levels… and the economic, financial and monetary state of the world is beyond repair.  And as Mike Maloney pointed out in his video in the 'Critical Reads' section, a new monetary system will make an appearance at some point and, without doubt, gold will play a role.  Even Jim Rickards concedes that.

It's just that the road to that end will be bumpy… and strewn with potholes… unless we get an over-the-weekend price revaluation.   That remains a distinct possibility… and could come at any time, despite what the COT Report has to say.

Before heading out the door, here's Nick Laird's " Total PMs Pool" chart updated with this past week's data… and as you can tell, we are on the mend both in total ounces and in price.  As far as I'm concerned, it's only a matter of time before we're back at new highs… and not too much time I would think.

(Click on image to enlarge)

But until then… I, like you… will just have to wait it out.

That's it for the day… and the week.

See you here on Tuesday.

This is an abbreviated version of Ed Steer's Gold & Silver Daily Sign-up to have to the complete market review delivered to your email inbox each morning for free.

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