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Thursday, September 19: Today in Gold and Silver

NEW YORK ( TheStreet) -- The HFT sell off in gold in early Far East trading came to an end at 10 a.m. Hong Kong time.  From there it rallied until shortly after the London open, before selling off gently until noon in New York.

From that point it developed a positive bias that accelerated as the FOMC announcement approached.  And then a minute or two before the actual announcement was made, the gold price blasted off, reaching an interim high about fifteen minutes later.  From there it traded sideways for thirty minutes before heading higher once again.  The price topped out shortly before 4 p.m. EDT, before trading sideways into the 5:15 p.m. electronic close.  The high tick of the day was reported by Kitco as $1,368.70 spot.  And the low December tick in Hong Kong was reported by the CME Group as $1,291.50.

The gold price finished the Wednesday trading session at $1,365.30 spot, which was up $55.30 spot.  This is the biggest one-day dollar price gain for gold that I can remember.  Nick Laird sent me an e-mail just before I hit the send button on this column and said that his "End of Day" trading data shows that this was the fourth largest up-move in gold ever.  Net volume was over the moon at 247,000 contracts.

Not surprisingly, the silver chart looks almost identical to the gold chart, except that the sell offs and the rallies were more substantial on percent basis than in gold; especially the decline between 9 a.m. in London and noon in New York, and the big two hour rally after the FOMC news.

Silver's low tick came shortly before noon EDT, and not at 10 a.m. in Hong Kong like gold.  Silver also got sold down 30 cents off its 3:45 p.m. EDT time high as well, whereas gold only got sold down a couple of bucks.

According to the settlements data on the CME's website, the highs and lows for silver in the December front month were $23.250 and $21.225 respectively.  That's an intraday move of over two bucks [10 %] to the upside, another phenomenon I don't remember seeing before.

Both platinum and palladium got sold down to their respective lows of the day at 10 a.m. in Hong Kong, just like gold and silver.  After that they chopped gently higher and didn't react to the FOMC news at all.  Then shortly before 4 p.m. in New York both metals went vertical for a few minutes, with palladium leading the way, as these events did not occur simultaneously.  This had all the hallmarks of short covering rallies.  Here are the charts.

The dollar index closed on Tuesday afternoon at 81.15 and then rallied to its 81.22 "high" of the day shortly after 9:30 a.m. Hong Kong time on their Wednesday morning.  From there it drifted gently lower until it reached the 81.00 mark at precisely 2 p.m. in New York.  By 4:30 p.m. the index was down a hair over 90 basis points before recovering a tiny bit of that loss going into the close.  The index finished the day at 80.27 which was down 88 basis points from Tuesday.

I don't consider the rally in gold and silver to be related to what happened to the dollar index in any way, shape, or form.  You can if you wish, dear reader, but if you do, please explain the sell offs in all four precious metals in Far East trading based on a less than 7 basis point rally in the dollar index.  And as soon as you've done that, please explain why platinum and palladium prices didn't react until almost two hours after gold and silver blasted off.

The gold stocks followed the gold price to the letter yesterday, andand the HUI finished up an eye-watering 9.58%.  That's the biggest one-day percent move in that index I've ever seen.

Double-digit gains were the order of the day for most silver stocks yesterday, especially the junior producers, andand all the constituent components of Nick Laird's Intraday Silver Sentiment Index didn't do badly either, as it finished up 9.68%.

It appears that that nearly everything gold and silver equities lost during the month of September was recouped in one fell swoop yesterday.  Let's hope this trend continues.

The CME's Daily Delivery Report showed that zero gold and 47 silver contracts were posted for delivery within the Comex-approved depositories on Monday.  The two biggest short/issuers were Jefferies [once again] and ABN Amro, with 22 and 21 contracts respectively.  Canada's Bank of Nova Scotia was the long/stopper on 26 contracts, and JPMorgan Chase stopped 11 contracts in its client account.

I've noted that JPMorgan has not been active in it's in-house [proprietary] trading account since last week sometime, and everything they've been involved in recently, even though it hasn't been large amounts, has been as the long/stopper for their clients.  I don't know what it means, if anything, but I just thought I'd point it out.  The link to yesterday's Issuers and Stoppers Report is here.

There were no reported changes in GLD yesterday, and as of 10 p.m. EDT last evening, there were no reported changes in SLV, either.  I will be more than interested in what deposits are [or are not] made in both GLD and SLV as a result of yesterday's price action.  This is particularly true of SLV, as large quantities of the metal just aren't available, and it will be interesting to observe if the authorized participants [read JPMorgan Chase] short the shares in lieu of the real metal, which is what they've been forced to do in almost every big rally since shortly after the inception of SLV.

Over at Switzerland's Zürcher Kantonalbank for the week ending on Friday, September 13, they reported that their gold ETF declined by 17,483 troy ounces, and their silver ETF showed a decrease of 377,514 troy ounces.

There was no sales report from the U.S. Mint yesterday.

Once again there were no significant changes in the gold stocks at the Comex-approved depositories on Tuesday.  Like Monday, only a couple of kilo bars were moved, but this time they got shipped out from Brink's, Inc., and not in.  Here's the link to that activity, or lack thereof.

But, as Ted Butler has pointed out for a couple of years now, the real frantic action has been in silver, and Tuesday's warehouse activities were no exception.  They reported receiving 1,355,985 troy ounces of the stuff, but only shipped out one good delivery bar that weighted 1,056 troy ounces.  The link to that activity is here.

Here's a chart that Nick Laird sent my way at midnight local time [MDT] here in Edmonton.  As the chart title states, it consists of 17 global indices with a 41% weighting to the USA.  As you can see, we are back to the old record highs of 2007.  Are we going higher or lower from here?  Place your bets.

With all the news from yesterday, I have a decent number of stories for you today.

¤ The Wrap

Comparisons between the London Whale derivatives trade and JPMorgan’s activities in COMEX gold and silver are revealing. The Whale trade is over; COMEX gold and silver manipulation is still a crime in progress. Which is more deserving of priority attention from the CFTC? Additionally, the CFTC only learned about the Whale trade after it blew up, and that’s when JPMorgan’s potential manipulation came into focus. With silver and gold, the agency reports the proof weekly in its reports on market concentration. - Silver analyst Ted Butler: 18 September 2013

With the big volume associated with yesterday's jump in gold and silver prices, the sobering question that must always be asked is this:  Who was going long gold and silver in the Comex futures market?  And even more important; which traders were going short against them, as there didn't appear to be much short covering going on.  Since yesterday's action conveniently occurred on a Wednesday, the day after the cut-off for tomorrow's Commitment of Traders Report, we won't have a clue until next Friday's report, which comes out on September 27. I'd give a days wages to know who did what in the gold and silver markets yesterday.

I took a quick peek at the CME's preliminary volume and open interest numbers for yesterday, and they were rather surprising.  It showed that gold's total open interest only rose just under 3,700 contracts, and silver's open interest rose just under 3,000 contracts.  Ted Butler mentioned on the phone yesterday that there appeared to have been much more going on under the hood than met the eye in New York trading yesterday, and he could be right, as these volume numbers suggest that.  We'll see. 

I thought I'd toss in the 6-month gold and silver charts.  As you can tell, gold has blasted through its 50-day moving average again, and silver barely got below its, before it took off as well.

I have to agree with Ted Butler that the lows we saw at 10 a.m. in Hong Kong on Wednesday morning were probably the last gasp of the bullion banks before we more materially higher from here.  But never forget that JPMorgan Chase is still in charge, as they still hold a long-side corner in the Comex futures market in gold to go along with their decreased, but still short-side corners in silver, platinum and palladium, so they are still very much in the driver's seat going forward.

I note that, once again, there was absolutely no follow-though in Far East trading on their Thursday.  The volumes in both gold and silver, up to the London open, were nothing out of the ordinary and were mostly of the high-frequency trading variety.  London has been open about twenty minutes as I write this paragraph, and all four precious metals have popped a bit.  The dollar index is flat.  It will be interesting to see how trading goes for the rest of the session in Europe.

And as I hit the send button on today's column at 5:06 a.m. EDT, the tiny rallies I spoke of in the previous paragraph have been snuffed out, and all four precious metal prices are back near their Wednesday closes in New York.  Volumes are getting up there; around 42,000 contracts in gold and 10,000 in silver, and it's still mostly high-frequency trading.  The dollar index is now down about 17 basis points.

Based on the lack of follow-through in both Far East and early London trading, one has to wonder what JPMorgan et al have in store for us during the Comex session in New York today.

See you 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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