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Saturday, September 14: Today in Gold and Silver

NEW YORK (TheStreet) -- As I mentioned in The Wrap yesterday, the smallish rally in gold in early Far East trading ran into a not-for-profit seller about thirty minutes before the London open, and it was more by good luck than by good management that I manged to file Friday's column at the precise low of the day, which came at 10:15 a.m. BST, which was 5:15 a.m. EDT.  With the benefit of 20/20 hindsight, this might have been an early a.m. London gold fix.

After that, the gold price recovered into the Comex open, but once the London p.m. gold fix was in, gold got sold down again, hitting its New York low of $1,306.60 at 2 p.m. EDT in electronic trading.  The subsequent rally ended on its high of the day at the 5:15 p.m. close, which is a chart pattern I don't ever recall seeing on a Friday.

Gold finished the day at $1,327.90 spot, up $6.90 from Thursday's close.  Net volume was around 175,000 contracts.

It was virtually the same chart pattern in silver, with the only difference being the timing of the New York low price tick.  That came just minutes before the 1:30 p.m. EDT Comex close.  Then, like gold, it was up, up and way into the 5:15 p.m. electronic close.

Silver finished the Friday session on its high tick as well, at $22.265 spot, up 53 cents on the day.  Net volume was way up there at around 51,000 contracts.

The price patterns for platinum and palladium were very similar to gold and silver.  Their respective low ticks were at 10:15 a.m. in London, with their subsequent rallies also lasting until around 9 a.m. in New York, where they got capped until Zurich closed for the day.  The rallies after that lasted right into the New York electronic close as well.  Here are the charts.

The dollar index closed in New York on Thursday afternoon at 81.52.  It's high at around 1:30 p.m. Hong Kong time was 81.73.  After that it traded in a broad 40 basis point range, closing on Friday at 81.50, basically unchanged from it started the day.  The dollar index  also closed unchanged on Thursday as well.

The gold stocks opened unchanged, rallied a bit into the London p.m.  gold fix, and then got sold down into negative territory at the New York low tick.  But as soon as gold began to rally at 2 p.m. EDT in electronic trading, the shares followed suit.  The HUI finished up 1.37% on the day.

The silver stocks mirrored their golden brethren almost exactly, but the Nick Laird's Intraday Silver Sentiment Index closed up only 0.66%.

(Click on image to enlarge)

Undoubtedly the shares would have done better on the day, but the equity market closed well before trading ended in the precious metals market in New York.

The CME's Daily Delivery Report showed that 6 gold and 17 silver contracts were posted for delivery within the Comex-approved depositories on Tuesday.  The link to the Issuers and Stoppers Report is here.

There were big withdrawals from both GLD and SLV yesterday, most likely a direct response from the hammering that the two precious metals took on Thursday.  An authorized participant withdrew 193,116 troy ounces from GLD, and an AP withdrew 2,210,826 troy ounces of silver out of SLV.

The U.S. Mint had a tiny sales report.  They sold 32,000 silver eagles, and that was it.

There wasn't much activity in gold over at the Comex-approved depositories on Thursday.  They didn't report receiving any, and only shipped out 6,318 troy ounces of the stuff.  The link to that activity is here.

It was a bit busier in silver, as nothing was reported received, and 636,040 troy ounces were shipped out the door.  The link to that action is here.

I was certainly happy with the Commitment of Traders Report that came out yesterday, as there was real decent improvement in the Commercial net short position in silver, and the Commercial net short position in gold decreased by as well.

In silver, the Commercial net short position declined by 19.3 million ounces and currently sits at 117.5 million ounces.  According to Ted Butler, the Big 4 traders improved their position by 13.0 million ounces out of the total 19.3 million ounces.  Ted pegs JPMorgan's short position around 75 million ounces, which is a hair under 16% of the entire Comex futures market in silver on a net basis basis.

In gold, the Commercial net short position improved  by a bit over 12,200 contracts, or 1.22 million ounces, and is now down to 8.02 million ounces.  Of that improvement, Ted said that JPMorgan appears to have added 2,000 contracts to their long-side corner, which now sits at just under 19% of the entire Comex futures market in gold on a net basis.

The amazing thing about yesterday's report was the fact that of all the selling done by the technical funds and small traders in both gold and silver, only 1,041 silver contracts of the total amount [5.2 million ounces] was added by the way of fresh shorting by the technical funds, and none in gold at all.  As silver analyst Ted Butler said in his quote in Friday's column:

If the commercials succeed in causing technical traders and other momentum type traders to sell, then the commercials will likely continue to rig prices lower so that they (the commercials) can continue to buy. In retrospect, this was why we fell so steeply in the first half, namely, the technical funds not only sold and liquidated long positions, they established record or near record new short positions as well on the dramatic decline in price. Throw in the massive liquidation in GLD and that’s why we dropped so much in gold (and silver). Since the technical funds kept selling, the commercials kept lowering the price and kept buying. This is how JPMorgan came to hold a long market corner in COMEX gold futures.

The reason I’m narrowing it down to a question of new short selling by technical funds is because data from the Commitments of Traders Report indicates that there has been virtually no build up of technical fund or other speculative new long positions on the rally in gold and silver prices to over $1,400 in gold and $24 in silver.  There can be no selling of new long positions that don’t exist. Of course, there could be some selling from old long positions, but logic would hold not massive amounts.

As for the price action since the Tuesday cut off, it's impossible to tell how much of the price decline in both gold and silver was caused by long liquidation versus new short selling by the technical funds and small traders.   The one thing that we do know with absolute certainty is that the Commercial traders continued doing what they did during the last reporting week; gobbling up every long that was being sold, and also taking the long side of every short sale that was being transacted.  Unfortunately, none of this will be known to us until next Friday's Commitment of Traders Report.

As I've said a few times in the past, it always seems like I'm waiting for the next COT Report.

I have quite a number of stories for a Saturday column, and some of them I've been saving for today for content reasons.  I hope you can find the time over what's left of the weekend to read the ones that interest you the most.

¤ The Wrap

But can this manipulation ever be obvious enough for the mainstream financial news media, gold and silver mining companies themselves, and the World Gold Council to notice it and say something about it? Those are the parties that could stop it. - GATA's Chris Powell commenting on Lawrence Williams' article from Friday headlined "Gold Knocked Down Again, and Again".

Today's pop "blast from the past" certainly needs no introduction, and neither does the artist.  It was his first big hit back in 1970, and I remember spinning the 45 RPM single on 50-watt FM radio station CHAR in Alert, N.W.T. [now Nunavut] in Canada's [very] high arctic back in the early 1970s when I was stationed there over forty years ago.  Where the hell has all that time gone?  The link is here.  Enjoy.

Mozart's unfinished opera Zaide, K. 344, was started in 1779 and then abandoned.  The tender soprano air, "Ruhe sanft, mein holdes Leben" is the only number that might be called moderately familiar, and you'd have to be an opera junkie to know it.  But, having said that, what an aria it is!  It was resurrected in its most well-known form today from the  Miloš Forman film, Amadeus, and if you haven't seen this movie, you owe it to you to do so.  Here's the recording from the original soundtrack, and it's a piece I listen to frequently.  It's with the Academy of St. Martin-in-the-Fields with Sir Neville Mariner conducting.  The soprano soloist is Dame Felicity Lott, and she is incredible.  The link is here.

So, are we done to the downside yet?  Beats me.

I was somewhat surprised that JPMorgan Chase et al didn't press their advantage during the Comex trading session in New York yesterday, as they had it all set up to do exactly that after the pounding gold and silver took in advance of, and during, the early London trading session.  The sell-off appeared to hit a down-side crescendo just before, or at, the London a.m. gold fix at 10:30 a.m. BST.

Comments made by Eric Sprott in his latest interview over at King World News yesterday may be very apropos at this point.  Eric raised the possibility that gold had been knocked down in preparation for the Federal Reserve's cancellation of its plans to "taper" its bond buying, so that the resulting increase in gold will come from a lower base.

That wouldn't surprise me in the slightest, as we've all noticed the fact that the gold price is smacked in advance of any negative news that is about to be released, with the monthly jobs report coming to mind as a "for instance".

Of course we won't know until they draw back the curtain after the FOMC meeting this coming week.  Whatever the news, it will be interesting to see how gold "reacts" to it, or is allowed to "react".  Time will tell.

Here are the 6-month gold and silver charts updated with yesterday's price action.  As you can see, the gold price punctured its 50-day moving average, but only briefly; and the silver price just touched its 50-day moving average.

(Click on image to enlarge)

(Click on image to enlarge)

But does all this really mean anything in the grand scheme of things?  I'm sure that by this time next week, there will be some clarity, but at the moment, everything is just one big question mark.

But until we hear the FOMC news, I suggest one blue pill a day might be necessary.  But after the "news" the red pill may be just what the doctor ordered.

That's it for the day, and the week.

Enjoy what's left of your weekend, and I'll 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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