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TheStreet Open House

Tuesday, August 27: Today In Gold And Silver

NEW YORK ( TheStreet) -- The gold price rallied sharply in the early going in Tokyo trading on their Monday morning, and the sellers of last resort didn't wait too long before hammering the price back down again, as volume was immense in the first couple of hours.

After that, the  price traded flat, with every rally attempt that took it close to the $1,400 spot price mark being turned back in the usual fashion in Comex trading in New York, with the low tick of the day [around $1,390 spot] coming about 12:15 p.m. EDT.  From there, gold didn't do much until about 2:45 p.m. in electronic trading, then away it went over $1,400, closing virtually on its high tick, which Kitco recorded as $1,406.10 spot.

Gold closed the Monday session at $1,405.00 spot, up $7.20 from Friday's close.  Gross volume on the day was 108,000 contracts net of August and September, with more than a quarter of that volume occurring in the first couple of hours of trading in the Far East.  After that, volume was very light, with the emphasis on "very".

Silver's rally in early Far East trading met with the same response as gold got, as volume was huge.  But by the time the 8:20 a.m. EDT Comex open rolled around, the silver price was only down a dime or so, and then away it went to the upside.  The high tick, which Kitco recorded as $24.45 spot, came shortly after London closed for the day, and after trading sideways for an hour and a bit, the price got hammered back below the $24 spot price mark.

But, like gold, silver began to rally at 2:45 p.m. in the after-hours market, before getting sold off a bit at precisely 4 p.m. EDT.  After that it traded flat into the 5:15 p.m. electronic close.

Silver finished the day at $24.33 spot, up two bits on the day.  Net volume was only 31,500 contracts with over a third of the that coming in the first couple of hours of the Far East trading day.  After that, the volume died off to virtually nothing for the rest of the day.

The small rallies in platinum and palladium also ran into a willing seller in early Far East trading, and after that their respective prices diverged, as the graphs below illustrate.

The good folks over at ino.com were obviously having some problems with their U.S. Dollar Index charts, as it was M.I.A. from noon onwards in Hong Kong trading, so I have nothing to report in that department.  However, they did have the chart up and running by midnight last night, but all of Monday's trading data was conspicuous by its absence.

With the gold price barely holding its own yesterday, the shares chopped around on either side of unchanged for most of the New York trading session, but rallied back into positive territory to stay once the gold price began to head higher at 2:45 p.m. EDT.  The HUI closed up 0.82% on the day.

It was pretty much the same story with the silver stocks, which should have done better, but didn't.  Nick Laird's Intraday Silver Sentiment Index closed up a tiny 0.10%.  But a few of the junior producers did very well indeed.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that 46 gold and 1 lonely silver contract were posted for delivery tomorrow within the Comex-approved depositories.  Jefferies and Canada's Bank of Nova Scotia issued all 46 gold contracts, and JPMorgan Chase stopped 42 of those in its in-house [proprietary] trading account.  No surprises there.  The link to yesterday's Issuers and Stoppers Report is here.

There were no reported changes in GLD yesterday, and as of 9:58 a.m. EDT there were no reported changes in SLV, either.

The good folks over at shortsqueeze.com updated their website with the short positions in both SLV and GLD for the period ending on August 15.  The short position in SLV increased a miniscule 0.16%, which is virtually no change at all, and certainly not what I was expecting  And the short position in GLD was only up 5.01%.

However, the U.S. Mint had a pretty decent sales report to start off the week.  They sold 4,000 ounce of gold eagles, 1,000 one-ounce 24K gold buffaloes, and 1,179,000 silver eagles.  I would guess that JPMorgan Chase is the proud owner of most of those silver eagles, as Ted Butler figures that's who's buying them.

There wasn't much movement in gold over at the Comex-approved depositories on Friday.  JPMorgan Chase shipped 10,539 troy ounces out of their depository, and that was it.  The link to Friday's action in gold is here.

The only activity in silver on Friday in these same depositories was 500,700 troy ounces shipped out of Canada's Bank of Nova Scotia to parts unknown.  The link to that activity is here.

Here's a chart that I stuck on my Desktop last Friday and promptly forgot about until silver analyst Ted Butler mentioned it in his Saturday column.  As Ted said, " the relative outperformance by silver pushed the silver/gold ratio down another point, to 58 to 1. This is the strongest silver has been to gold since early April. But the real story in the ratio is how sharply it has moved this month, falling from 67 to 1 at the start of August. As I’ve described previously, sharp moves in the silver/gold ratio are most always caused by sharp moves in silver and this month’s sharp move is no exception. Longer term, I can’t see how silver doesn’t outperform gold handily; so even after the sharp contraction in the ratio this month, it’s wise to switch gold positions to silver."

(Click on image to enlarge)

My Tuesday report always has a few more stories that normal, and today's column is no exception to that rule.

¤ The Wrap

I f there is one window of silver tightness inviting a closer view presently, it has to be the lack of deposits into the big silver ETF, SLV. Based upon my running daily calculations, this trust was due 10 million oz of silver as a result of the heavy buying and price gains of the week prior. After [Friday's price action], another couple of million o unces or more is “owed” to the SLV. The lack of silver metal deposits into the trust suggests a jump in short interest and the report, due late Monday, will be as of August 15 which includes two big up days. Regardless of what this short report shows, more shorting in SLV came in since August 15.Silver analyst Ted Butler, 24 August 2013

Except for the rally in early Far East trading on Monday, which was accompanied by big price-capping volume, it was a very quiet day in the precious metal market yesterday, and I wouldn't read much into yesterday's price action in either London or New York.  Any trader with a few thousand contracts and an agenda could push prices either up or down, and that's pretty much what happened.

I was amazed that there was no change in SLV's short interest number in the August 15th report.  Since silver began to rally on August 7, its price has risen almost four bucks the ounce, and only about 4.1 million ounces of silver have been added to SLV during that period.  And as Ted Butler said in the quote above, by his calculations, the fund is owned a bit over ten million ounces.  So if the silver hasn't been deposited, and the shares weren't shorted by the authorized participant [read JPM] during that time period, then where is it?  Here's the 30-day silver chart.

(Click on image to enlarge)

The other thing I have my eye on is the overbought conditions in both metals.  Here are the 3-year charts for silver and gold.  I posted the 6-month charts in Saturday's column, but thought a little historical perspective was needed at this juncture.  We're still way overbought in silver, and getting there in gold.  But what it means in the short and medium term is still up in the air, as JPMorgan is still very much in the driver's seat in the precious metals.

Having said that, what happens in the short to medium term is not overly relevant, as the long-term trend is up, way up.

(Click on image to enlarge)

(Click on image to enlarge)

Not much happened in Far East trading on their Tuesday, and the same can be said for opening price action in morning trading in London as well.  But in gold, that all ended at 9 a.m. BST, as gold spiked up ten bucks or so in just minutes. Volumes were nothing out of the ordinary in both silver and gold up to that point, but really blew out in both metals after that.  Although the spike in gold looked like a short covering rally, the big jump in volume says otherwise.  The dollar index, which had been flat as a pancake all night long, also jumped up over 20 basis points when gold spiked up, which certainly isn't the normal dollar index trading pattern that occurs around such an event.  And, except for gold, which is up about seven bucks as I hit the "send" button on today's column at 5:15 a.m. EDT, the other three precious metals are trading about unchanged from Monday's close in New York.

Today at the 1:30 p.m. EDT Comex close, is the cut-off for this Friday's Commitment of Traders Report, and what happens in New York up to that time, will be of great interest to me because of that fact, and I await the Comex open with some interest.

That's more than enough for one day, and I'll see you here tomorrow.

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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