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Wednesday, October 23: Today in Gold and Silver

NEW YORK (TheStreet) -- As has been the case for what seems like forever, there was no price action in gold in Far East trading on their Tuesday.  The low of the day came at 10 a.m. BST in London, right on the button, and then didn't do much until the 8:20 a.m. EDT Comex open.

At that point it began to rally immediately, and then really took off at the 8:30 a.m. release of the job numbers.  That vertical rally lasted for less than a minute before either the buyer disappeared, or the not-for-profit sellers put in an appearance.

But within an hour or so, gold began to rally once again, with the high tick of the day coming a few minutes after 11 a.m. EDT, which coincided with the close in London.  After that, the gold price gave up a bit more than five dollars of its gain, before trading mostly flat for the remainder of the day.

The CME recorded the low and high ticks as $1,309.50 and $1,344.70 for the December contract.

Gold closed the Tuesday session in New York at $1,341.20 spot, which was up $24.60 from Monday's close.  Volume, less October and November, was pretty decent at 176,000 contracts.

The silver price followed a more or less similar price pattern.  Silver got sold down below the $22 spot price a few times yesterday, but left that figure in the dust the moment that the Comex opened.  The rally got capped about five minutes later by a seller of last resort, and from there it got sold down over 30 cents in less than half an hour.

But, like gold, it began to rally anew starting at 9 a.m. EDT, with the high tick coming at 10:30 a.m. EDT.  Also, like gold, silver got sold down a bit after the high was in, and then didn't do much for the rest of the Tuesday trading session.  In most respects, the price action in both gold and silver were carbon copies of each other.

The low and high for silver from the CME's website for the December contract were $21.985 and $22.830.  Silver closed at $22.705 spot, up 47 cents from Monday.  Volume, net of October and November, was around 47,500 contracts.

Here's the New York action on its own, so you can see it in more detail.

The price patterns in platinum and palladium were derivatives of the what was happening in gold and silver.  The biggest difference was that the highs for the day in these two metals came at the 1:30 p.m. EDT Comex close, which was long after gold and silver put in their respective highs.  Here are the charts.

The dollar index closed late Monday afternoon in New York at 79.69.  It's high tick of 79.79 on Thursday came shortly before lunch in Hong Kong, and from that point it developed a very slight negative bias going into the job numbers report in New York.

Then at 8:30 a.m. the index did a face plant of about 35 basis points, rallied a hair, and then headed lower.  The low tick came at the 1:30 p.m. Comex close, and the rally off that low is hardly worth mentioning.  The dollar index closed at 79.26, which was down 43 basis points from Monday.

There's no doubt that the precious metal price action and the currency move were related yesterday, but it doesn't totally explain why silver's high was at 10:30 a.m. and gold's was at 11:03 a.m., when the rallies in both platinum and palladium continued until the dollar index low at the Comex close.

Not surprisingly, the gold stocks gapped up at the open, and then climbed to their high of the day by 11 a.m. in New York.  From there they chopped sideways into the close.  The HUI finished up a very decent 4.42%., which was on top of the 2.33% rally on Monday when gold closed down 80 cents on the day.

The silver stocks rallied as well but, for the second day in a row, they didn't do as well as their golden cousins, as Nick Laird's Intraday Silver Sentiment Index closed up only 2.80%.

The CME's Daily Delivery Report showed that 50 gold and one lonely silver contract were posted for delivery on Thursday within the Comex-approved depositories.  The short/issuers were mostly composed of the smaller trading companies, and it was mostly the same in the long/stopper category as well.  The link to yesterday's Issuers and Stoppers Report is here.

I was pleasantly surprised to see an increase in GLD yesterday, as an authorized participant added 212,338 troy ounces.  But SLV went in the other direction, as an a.p. withdrew 770,793 troy ounces.  Based on the price action in silver, there should be metal going into the SLV, not coming out.  I would guess that this chunk of silver was desperately needed elsewhere.   Based on that, one has to wonder if JPMorgan is back to its old tricks of shorting SLV shares in lieu of providing real metal, since there obviously isn't enough to go around.

The U.S. Mint had another sales report yesterday.  It sold a chunky 9,500 ounces of gold eagles; 500 one-ounce 24K gold buffaloes; and another 237,000 silver eagles.

There wasn't much action in gold in the Comex-approved depositories on Monday.  They reported receiving 1,200 troy ounces of the stuff in total, and didn't ship any out.  The link to that activity is here.

Of course it was much busier in silver, as 604,302 troy ounces were shipped in, and 207,063 troy ounces were shipped out.  The link to that action is here.

I have the usual number of stories for a mid-week column, and I hope you have the time to read the ones that interest you the most.

¤ The Wrap

The Bank Participation Report rarely shows more than 3 or 4 U.S. banks dealing in Comex silver and the OCC report only names two U.S. banks in OTC precious metals derivatives (and not much different in gold). That strikes me as odd. If it is so normal for JPMorgan to be dealing in COMEX silver and gold, then why aren’t more banks doing so? If it was such a good and legitimate banking business, then why is there no competition from the banking community? After all, there must be scores, if not hundreds and maybe thousands of U.S. banks capable of doing so. This also goes for non-banks as well, as in if it was such a good clean business of shorting COMEX silver contracts, then why are there not more competitors on the short side so that JPMorgan wouldn’t hold such large concentrated positions over the past five and a half years? I ask myself these questions, but I am never able to answer them. -- Silver analyst Ted Butler;  19 October 2013

I must admit that I'd forgotten that the jobs report was coming out yesterday at 8:30 a.m. EDT, or I would have certainly mentioned something about it in my column on Tuesday.  So once I factored in that data, the price action yesterday fit the usual jobs number pattern quite nicely.

But as Ted pointed out on the phone yesterday, all the action that took place in the precious metals, particularly in gold and silver, was all paper trading on the Comex.  Very little physical metal was bought and sold during the price shenanigans during early Comex trading in New York.

Gold pierced its 50-day moving average briefly, but closed under it.  As for silver, it closed slightly above its 50-day moving average.  Now we have to wait and see what happens from here.  However, there's no doubt in my mind that JPMorgan et al were very active yesterday, as volumes were quite high, at least compared to the thin trading volume we experienced on Monday.  Here are the six-month charts in both metals.

I just checked the preliminary volume/open interest report for yesterday's trading as posted on the CME's website in the wee hours of this morning.  It showed that total gold open interest increased by around 8,800 contracts, and silver's open interest was up by 2,300 contracts.  I expect the final numbers to be somewhat less than that when they're posted on the CME's website later this morning.

Hopefully all of this volume will show up in Friday's Commitment of Traders Report, as yesterday at the close of Comex trading, was the cut-off for it.

There wasn't a lot of price movement in Far East trading on their Wednesday.  One should have expected some sort of follow-through after the big up day in New York yesterday, but it's like it never happened.  London has been open about an hour as I type this paragraph, and not much of anything is happening there at the moment, either.  All four precious metals are down slightly from their respective closes yesterday, but volumes are extremely light, so I wouldn't read a thing into the current price action.  The dollar index appears to have hit some sort of low around noon Hong Kong time, and now is rallying a bit.  It's up over 20 basis points from that low at the moment.

And as I hit the send button on today's column at 5:20 a.m. EDT, gold is down ten bucks, and silver is down about fifteen cents.  Platinum has given back most its gains from yesterday, and palladium has given up all its gains, plus a few dollars more.  Volume has picked up in both gold and silver, but is not overly heavy for this time of day, and the dollar index hasn't changed much from the last time I checked it.

I haven't the foggiest notion of how the precious metals will trade for the rest of the day, but I do know that JPMorgan et al are still in complete control of pricing, so nothing will surprise me.

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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