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Friday, November 8: Today in Gold and Silver

NEW YORK (TheStreet) -- All was calm in Far East and early London trading on their Thursday, but shortly after 12:30 p.m. GMT in London, the news of the European rate cute hit the tape, and the dollar index spiked higher in a heartbeat.  The index was up 50 basis points in minutes.  But gold didn't make its move until about 15 minutes after that, and it's vertical spike ran into a seller of last resort just minutes before 1 p.m. GMT, which was 8 a.m. in New York.

By the 8:20 a.m. EST Comex open, gold's gain had been cut by ten bucks, and then at 8:30 the high-frequency traders/not-for-profit sellers smacked the price for another twenty dollars in less than two minutes.

The subsequent rally that began at 8:32 a.m. last until 10:30 a.m., and that was pretty much it for the day.

The CME recorded the high and low as $1,326.00 and $1,296.00, a thirty dollar intraday move.

Gold closed on Thursday at $1,307.60 spot, which was down an even ten bucks from Wednesday.  Not surprisingly, gross trading volume was very high, but with the roll-overs out of December subtracted out, net volume was only 151,000 contracts.

Here's the New York Spot Gold [Bid] chart on its own, and you can see where the HFT boyz smacked the price at precisely 8:30 a.m.

The silver chart for Thursday looks similar to the gold chart, except the 8:30 a.m. EST not-for-profit sellers did an outstanding job of running the stops, and they had silver down over 2% in two minutes flat.

The subsequent price rally off the engineered price decline recaptured some of the loses, but that rally ran out of gas shortly after 10:30 a.m. EST, and that was it for the remainder of the New York trading session.

The CME recorded the high and low tick as $22.015 and $1.375 in the December contract, an intraday move over almost 3%.

Silver closed the day at $21.67 spot, back under $22, and down 13.5 cents from Wednesday.  Gross volume was pretty big as well, and net volume was around 38,000 contracts.

Here's the New York Spot Silver [Bid] chart so you can see the New York action on its own.  The chart is a virtual twin of the same chart for gold posted above.

The charts for platinum and palladium were mini versions of the gold and silver charts.

The dollar index barely budged off the 80.50 mark during Far East and early London trading, which is where it closed at on Wednesday afternoon in New York.  But at 12:40 a.m. GMT [7:40 a.m. in New York] the euro rate cut sent the index up to 81.07 in two minutes or less.  From there it added another 5 basis points or so until 8:25 a.m. EST, which was five minutes after the Comex open, and then blasted up to its 81.41 high tick by 8:30 a.m.

It was all down hill from there until the New York low tick of 80.67 around 1:45 p.m. EST, and from that point it recovered a hair into the close. The dollar index finished the Thursday session at 80.86, which was up 36 basis points from Wednesday's close.

Two things to note here: the first spike in the dollar index preceded the spike in the gold price by about 15 minutes or so; and the not-for-profit seller did not show up in New York until the the dollar index was up about 90 basis points.  There was nothing free-market about what happened with gold, silver or platinum between 8:30 and 8:32 a.m. EDT yesterday.

The gold stocks opened down, but rallied into positive territory until the rally in the gold plrice ended at 10:30 a.m. EST.  From there, they sold off right into the close, and the HUI finished virtually on its low of the day, down 2.42%.

The silver stocks gapped down and never looked back. Nick Laird's Intraday Silver Sentiment Index got crushed to the tune of 3.87%.

The CME Daily Delivery Report showed that zero gold and one lonely silver contract was posted for delivery on Monday.

There were no reported changes in GLD, and as of 10:01 p.m. EST, there were no reported changes in SLV, either.

Joshua Gibbons, the "Guru of the SLV bar list", updated his website yesterday with the latest goings-on over at SLV.  This is what he had to say: "Analysis of the 06 November 2013 bar list, and comparison to the previous week's list.  145,322.7 troy ounces was removed (all from Brinks London, except 1 bar from JPM London V), no bars were added or had a serial number change."

"The bars removed were from: KGJM (0.1M oz), Tongling Nonferrous Metals (35,706 oz) and OJHSC (919 oz). As of the time that the bar list was produced, it was overallocated 8.8 oz. All daily changes are reflected on the bar list."  The link to his Web site is here.

The U.S. Mint had a small sales report yesterday.  They sold 3,500 ounces of gold eagles, and 500 one-ounce 24K gold buffaloes.

There was a little bit of activity in gold in the Comex-approved depositories on Wednesday.  They reported receiving 19,687 troy ounces, and shipped 1,700 troy ounces out the door.  The link to that activity is here.

As always, it was much busier on the silver side of things, as these same depositories reported receiving 245,958 troy ounces and shipped out 434,167 troy ounces.  The link to that action is here.

I have very few stories today, and I hope you find the odd one that interests you out of the short list below.

¤ The Wrap

At current levels of total open interest (including spread positions); the formula would call for an all months combined position limit in Comex silver of less than 5,000 contracts, or the equivalent of 25 million oz. In Comex gold, the formula would dictate less than 12,000 contracts as the most a speculator could hold long or short. Lost in industry criticism of position limits is how few traders would be affected by position limits; by my estimate no more than 5 or 6 in silver and maybe double that in gold. Allow me to point out that, by extension, these are the only true opponents to position limits; hardly a broad constituency.

The problem is that JPMorgan is holding (at last count) 18,000 contracts short in Comex silver, well in excess of the current 5,000 contract proposed limit and 72,000 contracts long in Comex gold, six times more than the proposed 12,000 contract limit in gold. Will JPMorgan be forced to comply with the proposed position limit rule just approved and, if so, what impact will that have on the price of silver and gold? - Silver analyst Ted Butler: 06 November 2013

All of yesterday's price action occurred in less than a three hour time period between 7:40 and 10:30 a.m. EDT.  Part of the trade happened before the Comex open, and the engineered price decline that followed came 10 minutes after the Comex open.  But it was all paper precious metals on the Globex trading system.  Not one ounce of physical metal exchanged hands during this event.  As Ted Butler says, the price discovery mechanism in all four precious metals has been hijacked by the HFT boyz, and JPMorgan et al.  I would guess that they're one in the same.

Nobody knows what the free-market price is for any of the four precious metals, and the survival of the economic, financial and monetary system [in its present form] depends on the fact that this event is never allowed to occur.

But if the financial system is looking to feed a little inflation into the system to prevent the deflationary collapse that the world's central banks have been fighting for the last 20 years or so, a significantly higher gold price [along with other commodity prices] would be a sure-fire way of getting the ball rolling.  If this is what they have planned, all we await is a start date.

Not that I wish to beat this to death, but British economist Peter Warburton's three most famous paragraphs are worth reading again at this point, even though I posted them in this space a couple of weeks ago.  They're from his April 2001 essay "The debasement of world currency: It is inflation, but not as we know it".

"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.

So here we sit, just waiting.  But waiting for what, and when?  I don't know if these masters of the universe, if you wish to dignify them with that name, really have a plan or not; but quite recently many of these people have said that a certain amount of inflation would be good for the financial system.

I suppose, but if/when we do get it, how much will we get, and will the powers that be be able to control it once it builds up a head of steam?  A question with no answer at the moment.  One thing is for certain, though, and that's that inflation will decimate the large portion of the population that doesn't own precious metals.

And as I've said before, all we as bystanders can do is wait it out.  No faction of the U.S. government is prepared to do anything about the current price management scheme in the precious metals, and the two "organizations" that are tasked with looking out for the best interests of the gold and silver miners, the World Gold Council and The Silver Institute, are all corrupt [by design] at their highest levels.  They are there solely to insure that the current situation exists as long as it's deemed useful, or necessary.

And as Sprott Asset Management's John Embry so succinctly put it about a decade ago; "the miners are either ignorant, naïve, or complicit."  They also lack a certain amount of moral courage as well, plus they have a total lack of interest in the well-being of their shareholders, who are the real owners of the company that they just happen to run on our behalf.

How did it come to this?

Very little happened in Far East trading on their Friday, and the price action during the first 45 minutes of London trading isn't exactly setting the world on fire, either.  Volumes are microscopic, with gold net volume at 14,000 contracts and silver's net volume just under 3,500 contracts.

Today is Friday, east of the International Date line of course, and I'm always on the lookout for "in your ear" when it comes to what happens to precious metal prices once New York opens for business later this morning.  Whatever does happens, I'll report on it tomorrow.

We also get the latest and finally-up-to-date Commitment of Traders Report today for positions held at the close of Comex trading on Tuesday.  As I said yesterday, I'm expecting some improvement after the engineered price decline that followed the FOMC meeting last Wednesday.  I'll report on that tomorrow as well.

And there should be a new Bank Participation Report, so I won't run out of things to talk about in Saturday's missive.

And as I hit the "send" button on today's column at 5:10 a.m. EST, there still isn't much happening in London trading.  Volumes are very low, and a fraction of what they normally are this time of day.  The dollar index is trading as flat as the proverbial pancake.

I await the New York open with great interest.

Enjoy your weekend, or what's left of it, 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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