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Saturday, November 2: Today in Gold and Silver

NEW YORK (TheStreet) -- The gold price didn't do much in Far East trading on their Friday, and was actually up three or four bucks about half an hour before the London open.  Then the high-frequency traders showed up, and that was it until the London p.m. gold fix.  The low of the day came at that point, but the subsequent rally got sold down beginning at 12:45 p.m. EDT.  After that, the gold price chopped sideways on very light volume into the 5:15 p.m. electronic close in New York.

The CME recorded the high and low as $1,327.30 and $1,305.60 in the December contract.

Gold finished the Friday session at $1,315.80 spot, which was down $6.90 from Thursday's close.  Net volume was pretty light at 126,000 contracts.

The silver price traded in a 25 cent range for most of Friday.  It got sold down a bit starting at the London open, and then rallied off it's 9:30 a.m. GMT low, right up to its New York high at 9:15 a.m. EDT.  After that, silver didn't do much of anything for the rest of the day.

The CME reported silver's high and low as $21.995 and $21.705 in the December contract.

Silver finished the day at $21.865 spot, down 4 cents from Thursday's close.  Net volume was around 33,000 contracts.

Both platinum and palladium got sold off a bit during the Friday session, but both recovered into the close and finished in positive territory.  Here are the charts.

The dollar index closed on Thursday in New York at 80.24, and the proceeded to trade more or less sideways until just before the 8 a.m. GMT London open.  The bulk of the subsequent rally was in by the London p.m. gold fix, and the index traded sideways from there into the close, finishing the Friday trading session up another 48 basis points to 80.72.

The gold stocks gapped down over 2% at the open, not helped by the horrific news out of Barrick.  And, with the exception of a small counter-rally between 11:15 and 12:45 p.m. when the gold price rallied after the p.m. fix, it was all down hill from there.  The HUI finished down 4.04%,  which was barely off its low tick of the day.

Nick Laird's Silver Sentiment Index turned in a slightly better performance, as it closed down only 2.81%.

The CME's Daily Delivery Report showed that zero gold and 3 silver contracts were posted for delivery on Tuesday within the Comex-approved depositories.

There was another withdrawal from GLD yesterday, this time an authorized participant took out 183,362 troy ounces.  And as of 9:59 p.m. EDT Friday evening, there were no reported changes in SLV.

The U.S. Mint had a smallish sales report for the first day of November.  They reported selling 3,000 ounces of gold eagles, and that was it.  For the month of October, the mint reported selling 48,500 troy ounces of gold eagles; 18,000 one-ounce 24K gold buffaloes; and 3,087,000 silver eagles.  Based on these sales figures, the silver/gold ratio for the month worked out to 46 to 1.  I have a very comprehensive story about October U.S. Mint bullion sales in the Critical Reads section further down.

For the fourth day in a row there was no reported in/out movement in gold at the Comex-approved depositories on Thursday.

Once again it was another big day for silver, as these same depositories reported receiving 1,116,963 troy ounces, and shipped out 603,063 troy ounces.  All the activity was at JPMorgan Chase and Canada's Bank of Nova Scotia. The link to that activity is here.

Well, the CFTC had a new Commitment of Traders Report [for positions held at the close of trading on October 22] loaded up on their Web site at 3:30 p.m. yesterday afternoon when I checked the site, and the changes I said would occur, were exactly as I predicted in both gold and silver.  And as Ted Butler said on the phone yesterday, when you can predict with certainty what the report will say in advance, it's just more proof that the markets are managed by just a few traders.

Here's what I said in The Wrap yesterday:  "If you check the 30-day gold and silver charts posted just above the Critical Reads section above, you will note that both metals rallied [nearly] every day in the October 16-22 reporting period that today's possible COT Report will cover.  It's a given it will show that the tech funds and small traders dumped their just-acquired short positions and maybe put some long contracts on as well.  On the other side of the equation, its a certainty that JPMorgan et al were doing the exact opposite, and getting set up for the next engineered price decline, which may have started at 2 p.m. on Wednesday with the FOMC news.  Aren't rigged markets just grand?"

In silver, this COT Report showed that the rally during the reporting week was driven by technical funds going long, and covering short positions.  In the process they added 3,323 long contracts and reduced their short position by 2,289 contracts.  In total, that's a swing of 5,612 contracts.  Of course, in lock-step against them the Commercial traders [JPMorgan et al] increased their net short position by the same 5,612 contracts, which is 28.1 million ounces.  They did this by selling 1,856 of their own long contracts and by buying 3,756 short contracts that were being offered for sale by the technical funds and small traders.

Ted says that JPMorgan's short position in silver [up to October 22] has now blown out to about 18,000 contracts, and they hold just under 18% of the short position in silver on the Comex futures market on a net basis.

What would the closing price of silver have been if JPMorgan et al hadn't stepped in as short sellers of last resort?  There's no law that says they have to trade exactly opposite the other two categories, but they do it in order to cap the price.  If they just stood idly by with their hands in their pockets instead, the technical funds and small traders would have to bid up the price to find a free-market short seller, or someone to sell them a long position.  If that ever happened, the silver price would be some rather large 3-digit number within a few hours.  We would experience a market-clearing event that would make your eyes water.

And that's precisely what JPMorgan et al are in the futures market for; to subvert the free-market pricing mechanism.  Because if they weren't there, the new prices of all four precious metals [plus every other commodity on Planet Earth] would be over the moon in just a few days, if that.

Some would say that JPMorgan et al provide "much needed liquidity" to the precious metal markets.  That's the biggest pile of b.s. imaginable.  They have inserted themselves in the chain of events to control the price, nothing more.  They do that, plus make a profit on the side by skinning these brain-dead technical funds as "prices" rise and fall.  What a scam!

But, I digress.

The rally in gold during the October 16-22 reporting week showed that the technical funds and small traders bought 8,678 long contracts and sold 8,646 short contracts.  This combination of buying and selling by the brain-dead technical funds [for the most part] is what cause the rally during the reporting week.

But standing in the Commercial category right beside them, JPMorgan et al happily sold them the longs they wanted and bought all the short contracts offered for sale.  By inserting themselves as "sellers of last resort" they control the price that the technical funds buy and sell at, and thus the "free market" price in the process.

As I said about silver, the mind boggles at what the real "free market" price of gold would be if  JPMorgan et al weren't providing "badly needed liquidity."

Ted said that, based on his calculation, JPMorgan Chase is long about 72,000 Comex contracts, or 7.2 million ounces as of the cut-off for the October 22 COT Report.  All 10,000 contracts that they bought from the technical funds and small traders during the prior week's engineered price decline, were sold back to them at a profit during this last reporting week as prices "rallied."  Ted figures they made a cool $50 million on that trade, and that JPM is net long about 22% of the entire Comex futures market in gold.

Here's Nick Laird's "Days of World Production to Cover Short Positions" for all physical commodities traded on the Comex updated with the COT data as of October 22.

Of the green and red bars for silver, JPMorgan's share of the short position is 43 days of world production. It's my opinion that about 90% of the rest of those bars are made up of HSBC USA, Citigroup and Canada's Scotiabank, and the same amount, if not more, can be said about the platinum and palladium short positions.

I have a decent number of stories for you today, some of which I've been saving for today's column.

¤ The Wrap

China may actually be surreptitiously building its gold reserves ahead of a future global reserve currency power play at some unspecified time in the future. - Lawrence Williams, mineweb.com, 01 November 2013

Today's pop "blast from the past" is from 1972, and I remember spinning the 45 r.p.m. record on CHAR-FM radio in Alert, N.W.T. way back then.  That was 41 short years ago.  Where has the time gone?  The link is here.

Today's classical "blast from the past" comes from the late 18th century.  I must admit that Mozart's violin concertos aren't my favourites, but they were written at the end of the baroque era, and concertos for violin back then weren't the fire-breathing monsters that came along later in the classical and romantic periods.

But, having said that, I have no trouble picking my absolute favourite, which is the No. 3 in G major, K. 216, which Mozart composed in Salzburg in 1775 when he was only 19 years young, and it's a beauty.  It's played here by the delightful Hilary Hahn with the Stuttgart Radio Symphony Orchestra, all under the baton of Venezuelan-born Gustavo Dudamel.  Pope Benedict XVI was in attendance for this concert that was performed in Vatican City in 2007.   The link to youtube.com video is here.  Enjoy!  [On a personal note, I'm not at all familiar with the cadenzas in any of the movements, so maybe she composed them herself, as soloists of this caliber do at times.]

Friday was just another day when "da boyz" went about "slicing the salami" as Ted Butler has been saying for a decade now.  They shave a little bit off the price each day until they figure that they've squeezed every long position out of the technical funds and small traders that they can.  And if they drive the prices even lower, they can entice these same funds into going massively short.  Of course JPMorgan et al ring the cash register on the ensuing rally, and the process repeats over and over.

But one day it won't.  We just don't know which day that will be.  Jim Rickards gave us a clue in his interview posted further up.

The Commitment of Traders Report that the CFTC posted on their Web site yesterday, still leaves one more COT Report left to go before they're caught up.  That's the one for the October 23 - 29 reporting period.  And that's the one that should have come out yesterday, so we'll get it next week.  Monday hopefully, but I don't really know for sure.

It's a pretty safe bet that the report will show a further increase in the Commercial net short positions in both gold and silver, as they were still in a bit of a rally mode going into the FOMC meeting.  But as I said late last week, or was it on Tuesday, it appeared that prices weren't going to allowed to move above their respective 50-day moving averages, and except for the big spike in silver on Wednesday, which got hammered flat within hours, this has turned out to be the case.

It was easy to see it coming, and the six-month charts below certainly confirm it, as the topping patterns were obvious.  The only thing we don't know is where JPMorgan et al will set the low for this move down.  And as I said yesterday in this space, we won't know for sure until we see that event in the rear-view mirror.

Before heading out the door, here's Nick Lairds' "Total PMs Pool" chart updated with Friday's numbers.  As you can see, despite the fact that a lot of ETFs are heading lower, the total PMs have just ticked higher.  It's a good bet that this is happening because of the amount of silver being deposited both in the Comex-approved depositories, and in SLV during the last week or so.

That's all I have for the day, and the week.

See you 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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