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Wednesday, September 25: Today in Gold and Silver

Stocks in this article: GLDSLV

NEW YORK ( TheStreet) -- The gold price rose about five bucks in early Far East trading, before trading flat until just before 2 p.m. Hong Kong time.  At that point, the HFT selling began, with the low of the day [$1,305.30 spot] coming on a spike down that ended at 9 a.m. in New York right on the button.  But by 11 a.m. EDT, the gold price had gained back most of its New York losses, and then traded more or less sideways into the 1:30 p.m. Comex close.

At that point, the price spiked up about fourteen bucks in about half an hour, before getting sold down to almost where it closed on Monday.

Gold finished the Tuesday session at $1,323.00 spot, down 70 cents.  Net volume was pretty decent at 161,000 contracts, with a quarter of that coming by 10 a.m. BST in London.

Here's the New York Spot Gold [Bid] chart so you can see the action there in more detail.

After trading sideways for the first hour, silver headed higher in a hurry, and the price was not only north of $22 the troy ounce shortly after 9 a.m. in Hong Kong trading, but was in danger of going parabolic.

But, not to worry, as a seller of last resort appeared in the nick of time, and within an hour the price was back down below the $22 spot mark.  Then, just like in gold, the HFT crowd showed up shortly before 2 p.m. in Hong Kong trading, and that was pretty much it until the noon silver fix in London, which also appeared to be the low price tick of the day.

Silver rallied a bit after that, but also got taken down shortly after the Comex open, and its New York low [$21.35 spot] also came at 9 a.m. EDT right on the button.  After that it followed the gold price pattern, complete with the price run-up that began the moment that Comex trading ended, along with the sell-off into the 5:15 p.m. EDT electronic close.

Silver finished the trading day on Tuesday at $21.72 spot, up a whole 8 cents from Monday.

Here's the New York Spot Silver [Bid] chart on its own.  As you can see at a glance, the price pattern was very similar to gold's.

Both platinum and palladium also ran into the same Hong Kong seller as gold and silver, but after that, their price diverged not only from each other, but also from what gold and silver were doing as well. Platinum's low tick came shortly before 1 p.m. in New York.  Here are the charts.

The dollar index closed in New York late Monday afternoon at 80.45.  It spent all of Tuesday slowly chopping higher, and finished the day at 80.59, which was up 14 basis points from Monday's close.

The gold stocks were down two percent within 15 minutes of the open, but rallied back to just above unchanged by 10 a.m. EDT.  After that they chopped sideways in a sawtooth manner, before closing unchanged on the day, like in 0.00%.

The silver stocks opened down and stayed down for the rest of the Tuesday session, but their chart pattern was identical to the chart pattern for the gold stocks.  Nick Laird's Intraday Silver Sentiment Index finished lower by 1.82%.

The CME's Daily Delivery Report showed that 10 gold and 10 silver contracts were posted for delivery within the Comex-approved depositories on Thursday.  There were only 20 contracts in total, but JPMorgan Chase and Canada's Bank of Nova Scotia were the long/stoppers on every single contract.  The link to yesterday's Issuers and Stoppers Report is here.

There were no reported changes in GLD yesterday.  Both Ted Butler and I were sort of expecting a withdrawal from SLV, but one didn't materialize.  Instead, an authorized participant deposited 867,470 troy ounces.  Without doubt, that was done to cover an existing short position.

Based on the price action in silver since September 13, there should have been some decent withdrawals.  But as of yesterday's close in SLV, 4.24 million ounces has been deposited instead.  I would guess that the entity depositing silver has also been buying up most, if not all of the SLV shares that have been sold in the last ten trading days.  I would suspect that entity to be JPMorgan Chase.  Unfortunately, none of this activity will be in the next short report [which will be out later this week] from the good folks over at shortsqueeze.com, as the cut-off date for their upcoming report was probably the 13th as well.

About two hours after I wrote the above paragraph, I happened to check the shortsqueeze.com website, and lo and behold, it had been updated.  It showed that for the first half of September, the short position in SLV had only declined by 1.34%, from 15,880,700 shares/troy ounces, down to 15,668,000 shares/troy ounces.  That's a hair over 487 metric tonnes of silver.  It's obvious that the 4.24 million ounces of silver deposited since the cut-off will reduce the remaining short position by a huge amount.  As of this new report, the short position in SLV shares represents only 4.4% of the total number outstanding.

The short position in GLD declined by 17.90%, from 30,766,200 shares, down to 25,260,200 shares; or 2.526 million ounces, a bit more than 80 metric tonnes.  The short position in GLD is now down to around 8 percent of the total shares outstanding, which is an outrageous amount considering the fact that the shorted shares have no gold [or silver] backing them.

I expect that Ted Butler will have more to say about this in his mid-week commentary to his paying subscribers this afternoon, and I'll report on any comments he might have.

Over at Switzerland's Zürcher Kantonalbank bank for the week ending Friday, September 20, they reported small deposits in both their gold and silver ETFs.  Their gold ETF rose by 14,721 troy ounces, and their silver ETF had 40,478 ounces deposited.

The U.S. Mint had a tiny sales report yesterday.  They sold 1,000 troy ounces of gold eagles, and that was it.

It was a semi-eventful day in gold over at the Comex-approved depositories on Friday.  They didn't report receiving anything, but HSBC USA shipped a fairly chunky 173,358 troy ounces out the door.  The link to that activity is here.

In silver, Canada's Bank of Nova Scotia reported receiving 959,943 troy ounces, and nothing was shipped out.  The link to that action is here.

The table of numbers below is something that I asked Nick Laird to whip up for us.  What it shows is the closing  price of all five Comex-traded metals on the day that gold hit its high price tick on January 21, 1980.  The second column of numbers shows the closing price of these same commodities as of the close of trading on Monday.  The third column shows the gains or losses in each metal since 33 years ago.

Based on the U.S. governments own inflation figures, John Williams over at shadowstats.com said several years back that silver should be somewhere north of $160 the ounce, and gold should be around $2,700/ounce.  John's projected prices for both gold and silver based on the true U.S. inflation rate would make your eyes glaze over, as they are several multiples of these numbers.

It's obvious from these numbers that the Fed, and others, have had great success in keeping commodity prices under control as they print the U.S. dollar into oblivion.

I don't have that many stories, but there are a number of longish interviews that will take a chunk of your time, so I hope you have some to spare.

¤ The Wrap

I have one new thought on JPMorgan’s alleged market manipulation in the London Whale derivatives trade and the ongoing gold and silver manipulation. There were no technical funds as counter parties to JPM in the London Whale trade; the counter parties were sophisticated hedge funds who took a position opposite to JPM on a valuation basis, not because of moving average price signals. The counter parties in the London Whale trade weren’t price fickle traders of the kind that represent the COMEX counter parties to JPMorgan in gold and silver. Therefore, JPMorgan couldn’t shake out the hedge funds in the Whale trade as this crooked bank can do on the COMEX. There will come a day when JPMorgan can’t trick the technical funds on the COMEX either, because the silly tech funds no longer exist or because more value oriented traders take them on in silver and gold. - Silver analyst Ted Butler: 21 September 2013

Yesterday was just another day when the Commercial traders had their way with prices in all four precious metals once again.  As Jim Rickards said in one of the interviews above, the Fed is manipulating every market in the world, including gold.  They aren't doing it directly, of course, but rather through their agents dealing on the Globex trading system, which includes the Comex in New York.

But they can't keep it up forever.

Yesterday in The Wrap I was mentioning that if we got through the Tuesday trading day with no big rally, then this Friday's Commitment of Traders Report would show further large improvements in the Commercial net short positions in both gold and silver.  Well, I got my wish; and this Friday's COT Report should be a sight to behold.

As Jim Rickards has been going on about for years, which is also the title to his new book, the current world U.S.-centric financial system is on its last legs.  Only the timing of its demise is unknown.  However, somewhere in the not-to-distant future, the U.S. dollar will breathe its last as reserve currency.

I would suggest/speculate that the powers that be will attempt to keep the precious metals/commodity prices under control as best they can until that event occurs.  It's also my opinion that they won't succeed, but until they decide to allow gold and silver to rally, we just have to endure the obvious price management scheme until it does end.

As British economist Peter Warburton said in the three most important paragraphs ever written way back in April of 2001, which is now almost twelve and a half years ago:

Central banks are engaged in a desperate battle on two fronts

What we see at present is a battle between the central banks and the collapse of the financial system fought on two fronts. On one front, the central banks preside over the creation of additional liquidity for the financial system in order to hold back the tide of debt defaults that would otherwise occur. On the other, they incite investment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, soft commodities or anything else that might be deemed an indicator of inherent value. Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the US dollar, but of all fiat currencies. Equally, they seek to deny the investor the opportunity to hedge against the fragility of the financial system by switching into a freely traded market for non-financial assets.

It is important to recognize that the central banks have found the battle on the second front much easier to fight than the first. Last November, I estimated the size of the gross stock of global debt instruments at $90 trillion for mid-2000. How much capital would it take to control the combined gold, oil and commodity markets? Probably, no more than $200 billion, using derivatives. Moreover, it is not necessary for the central banks to fight the battle themselves, although central bank gold sales and gold leasing have certainly contributed to the cause. Most of the world's large investment banks have over-traded their capital [bases] so flagrantly that if the central banks were to lose the fight on the first front, then their stock would be worthless. Because their fate is intertwined with that of the central banks, investment banks are willing participants in the battle against rising gold, oil, and commodity prices.

Central banks, and particularly the US Federal Reserve, are deploying their heavy artillery in the battle against a systemic collapse. This has been their primary concern for at least seven years. Their immediate objectives are to prevent the private sector bond market from closing its doors to new or refinancing borrowers and to forestall a technical break in the Dow Jones Industrials. Keeping the bond markets open is absolutely vital at a time when corporate profitability is on the ropes. Keeping the equity index on an even keel is essential to protect the wealth of the household sector and to maintain the expectation of future gains. For as long as these objectives can be achieved, the value of the US dollar can also be stabilized in relation to other currencies, despite the extraordinary imbalances in external trade.

The above came from his landmark essay " The Debasement of World Currency: It is inflation, but not as we know it".  Everything you need to know about how and why the world's economic, financial and monetary system is unfolding the way it is, is contained in those three paragraphs; including the price management scheme in the precious metals and all other key commodities.

So if the Fed really wants to stoke the inflationary fires, all they have to do is take their foot off the price of gold and silver for awhile and they'll get their wish.

Not very much happened in Far East trading on their Wednesday.  All four precious metals are basically unchanged from their closing prices in New York on Tuesday.  As I type this paragraph, London has been open exactly one hour, and volumes are pretty light in both gold and silver.  And, not that it matters, the U.S. dollar isn't doing much.

And as I hit the send button on today's column at 5:10 a.m. EDT, prices still aren't doing much, but trading volumes are getting up there, and the dollar index still isn't doing a thing.

I haven't got the foggiest notion as to how trading is going to unfold in New York today, so nothing will surprise me when I roll out of bed later this morning.

That's all I have.  I hope your Wednesday goes well, 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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