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TheStreet Open House

Wednesday, November 13: Today in Gold and Silver

NEW YORK ( TheStreet) -- Gold got sold down to its Far East low shortly after the smallish HFT-sponsored sell-off at 11 a.m. Hong Kong time.  From there it chopped slowly higher, hitting its high of the day shortly after 1 p.m. GMT in London, and about five minutes before the Comex open in New York.  For that brief moment, gold was actually up a few dollars from Monday's close.

And the rest, as they say, is history.

The HFT boys had a field day from thereon in, and the absolute low tick of the day came around 2:40 p.m. in electronic trading in New York, and the subsequent recovery didn't amount to much.

The CME recorded the high and low ticks as $1,285.40 and $1,260.50 in the December contract.

Gold closed at $1,266.20 spot, which was down $15.70 from Monday's close.  Net volume on Tuesday was double what it was on Monday, but that only amounted to 127,000 contracts, which I don't consider to be that heavy.

Not surprisingly, "da boyz" really went after silver once again.  The Hong Kong sell-off was bigger, and the silver price didn't recover a lot after that, but its high tick in London came at the precise same moment as the high tick for gold.

And, like gold, that was that for the rest of the day.

The high tick was the Monday close, and the CME recorded the low tick as $20.56 in the December contract. Silver's low tick occurred at the same moment as the gold's.  The smallish rally that developed off the low, came to an end at 4 p.m. EST, and not much happened price wise after that.

Silver closed at $20.70 spot, down 65 cents from Monday.  Net volume on Tuesday was around 40,500 contracts, a bit more than double Monday's volume.

Platinum didn't do much yesterday, and the price spike around 11 a.m. in New York wasn't allowed to get far.  Palladium's price pattern was very similar to gold and silver.  Here are the charts.

The dollar index closed late Monday afternoon in New York at 81.07 and when trading began on Tuesday morning in the Far East, the index rallied right to its high tick of the day [81.45] which came at 9:30 a.m. GMT in London.  The low tick of 81.02 came shortly before 10 a.m. in New York, and it certainly looked like a not-for-profit buyer was there to catch a falling knife once again.  The dollar rallied unsteadily after that, and the index closed on Tuesday afternoon EST at 81.14, up only 7 basis points from its close on Monday.

It should be obvious that what was transpiring in the currency markets had zero to do with what was going on in the precious metal markets.

The gold stocks made every attempt to rally into positive territory going into the 10 a.m. EST London p.m. gold fix, but couldn't make it.  Once the HFT boyz showed up, the stocks got sold down in sympathy.  The HUI closed lower by 2.32%.  It could have been far worse.

The silver stocks actually spent about an hour in positive territory yesterday before getting sold down as well.  And, like their golden brethren, closed slightly off their lows of the day.  Nick Laird's Intraday Silver Sentiment Index closed down 2.75%.  That could have been worse as well.

The CME Daily Delivery Report showed that zero gold and zero silver contracts were posted for delivery tomorrow.

There were no reported changes in GLD yesterday.  And as of 10:22 p.m. EST yesterday evening, there were no reported changes in SLV, either.

I see that the good folks over at the shortsqueeze.com Internet site updated the short positions for both SLV and GLD as of the end of October, and there were only minor changes in both.  The short position in SLV declined by 3.24%, and is now down to 17,775,400 troy ounces, a bit over 552 tonnes of metal that should be backing these shorted shares, but isn't.  In GLD, the short position rose a smallish 1.93%, and that ETF needs 2.40 million ounces of gold to make it whole. 

Over at Switzerland's Zürcher Kantonalbank they updated their gold and silver ETFs for the week ending Friday, November 8.  Both ETFs had withdrawals.  In gold, it was 17,959 troy ounces; and in silver it was 122,301 troy ounces.

As expected, the U.S. Mint had a sales report.  They sold 7,000 ounces of gold eagles; 4,000 one-ounce 24K gold buffaloes, and another 500,000 silver eagles.  In case you've forgotten, silver eagles are still being rationed.

There was virtually no gold movement within the Comex-approved depositories on Monday.  Nothing was shipped in, and only 228 troy ounces were reported shipped out.  The link to that activity, if you wish to dignify it with that name, is here.

In silver, nothing was reported received on Monday, but 709,778 troy ounces were shipped out to parts unknown.  The link to that action is here.

The November Bank Participation Report [for positions held at the close of Comex trading on Tuesday, November 5] showed up on the CFTC's website yesterday, and you'll get the usual Reader's Digest version of what the report said in all four precious metals.  The 5-in-1 chart that accompany each precious metal are a snap to read, and it's only charts 3, 4 and 5 that contain the real "juice".  Charts 1 and 2 fall in to the "nice to know" category and can be taken in at a glance.  The "click to enlarge" feature is useful here.

In gold, four U.S. banks were net long 49,734 Comex contracts.  That's a decrease of 8,273 contracts from the October report.  There was a decent gold rally in the latter half of October, and JPMorgan helped cap it by selling part of their long corner in the Comex gold futures market.  But since the engineered sell-off that began in very late October, which was still ongoing as of yesterday, I'm sure that JPMorgan has bought all those long positions back from the hapless technical funds that they just sold them to a few short weeks ago, and at a profit as well.  Don't forget, of these four U.S. banks, JPMorgan is the only one net long the market.  The other three are net short.

You can see that on graphs #4 and #5, the change six months ago from net short to net long by the U.S. banks.  That's the switch-over by JPMorgan Chase from net short the market, to net long.

Also in gold, 20 non-U.S. banks were net short 39,480 Comex gold contracts in the November BPR, an increase of 6,111 Comex gold contracts on the short side since the October BPR.  I would guess that around 40% of the total amount is held by Canada's Bank of Nova Scotia [starting with the October 2012 BPR], so if you divide up the remaining Comex contracts [about 23,700] between the 19 non-U.S. banks that are left, their positions on an individual basis are irrelevant.

In silver, three or less U.S. banks are net short 21,760 Comex silver contracts in the November BPR.  That's an increase in their short position of 2,854 Comex contracts from the October BPR.  Ted Butler mentioned last week that JPMorgan's share of this was around 17,000 Comex contracts.  That doesn't leave much left for the "2 or less" U.S. banks holding the balance.  I suspect those two banks to be HSBC USA and Citigroup.

As you can tell, the BPR lays the U.S. bullion banks stark naked for one day a month, and the short-side corner in silver held by JPMorgan Chase sticks out like the proverbial sore thumb that it is.

In silver, 12 non-U.S. banks are short 19,681 Comex contracts in the November BPR, an increase of 2,244 Comex silver contracts. It's my opinion that of these 19,681 contracts, about 70% of them are held by Canada's Bank of Nova Scotia.  The balance, divided up more or less equally between the remaining 11 non-U.S. banks, are immaterial in the grand scheme of things, especially along side the 17,000 contract short position that JPMorgan holds all by itself.

Note the blow-out in silver Comex short positions of the non-U.S. banks starting in October 2012 on chart #4 below.  The CFTC's home page for the Bank Participation Report has a notice that reads as follows: " The October 2012 Bank Participation Report includes COMEX gold and COMEX silver futures and options positions for a newly classified non-U.S. bank, based upon the entity’s self-description on its latest CFTC Form 40. Given the methodology of the Bank Participation Report, the entity’s most recent Form 40 submission results in all of its futures and options positions now being included within the report."  I highly suspect that it was Scotiabank's bullion trading arm, Scotia Mocatta that was forced to disclose their existing short positions in this manner.

In platinum, four U.S. bullion banks are net short 13,344 Comex contracts in the November BPR.  That's an increase of 2,073 Comex contracts on the short side since the October BPR.  The Comex short positions of these four U.S. banks represents 22.8% of the entire Comex futures market in platinum.

In platinum, 13 non-U.S. banks are net short 3,760 Comex contracts in the November BPR, a decrease in short position of 539 Comex contracts from the October BPR.  Thirteen banks divided into 3,760 contracts ain't a hell of a lot per bank, so we can call these positions immaterial as well.

But the goings on inside the palladium market will make your eyes water.

"3 or less" U.S. banks are short 12,260 Comex palladium contracts.  Note that I didn't say "net" short.  For the second month in a row these "3 or less" bullion banks have held zero long positions against their massive short positions.  The lack of Comex long positions by the U.S. bullion banks in the BPR reports over the months and years is obvious.  Just check chart #3 below.

In the October BPR these "3 or less" U.S. bullion banks were short 14,069 Comex contracts in palladium, so they've now less short by 1,809 palladium contracts than they were back then.

These "3 or less" U.S. bullion banks are short 30.5% of the entire Comex futures market in palladium.  You have to wonder how the %&*# they get away with that, and why the miners aren't screaming bloody murder.

Also in palladium, 12 non-U.S. banks are net short 4,621 Comex contracts in the November BPR.  That's an increase in short position of 1,695 contracts from the October report.  Again, once divided up between 12 banks, this 4,621 net short position in Comex palladium contracts are immaterial.

Except for the willfully blind, it is obvious that three or four U.S banks have total and absolute control of all four precious metals in the Comex futures market, where all prices are set.  And in gold and silver, Canada's Scotiabank adds an "international" flavour, especially in silver.

Since this Bank Participation Report was for position held at the close of trading last Tuesday, things have obviously changed a lot since then, as the engineered price declines continue unabated.  The Commercial traders [JPMorgan et al] are covering shorts and going long; and the technical funds are pitching longs and going short.

And Ted Butler said in his quote in yesterday's column:

"I would have thought it would be crystal clear by now to the majority of precious metals observers (and not just subscribers) that gold and silver prices are rigged and artificially set on the Comex. The game is simple – big speculators that we call commercials (and are lead by JPMorgan) trick other speculators (mostly technical funds) into buying or selling futures contracts, by rigging short term prices through the means of computer algorithms (HFT). The commercials rig prices lower to induce the tech funds into selling so that the commercials can then buy and then reverse the process to the upside. That’s it; that’s the price rig.

Proving Comex price rigging is the mechanical process of artificial pricing is easy; all you have to do is look at the government-published trading data in the COT and Bank Participation Reports. On big price declines, the technical funds are always the sellers; and the commercials are always the buyers. On price jumps, the technical funds are always the buyers and the commercials are always the sellers. Because the commercials are always buying on sell-offs and selling on rallies, they appear to many to be operating legitimately. But when you glimpse slightly beneath the surface and see that the commercials control short term pricing, it should be clear that the commercials are nothing more than puppet masters; controlling how the technical funds will dance. - Silver analyst Ted Butler: 09 November 2013

I have a pretty decent number of stories for you today, so I hope you can find the time to read the ones that are of the most interest to you.

¤ The Wrap

It is difficult to get a man to understand something, when his salary depends upon his not understanding it. - Upton Sinclair  (1878-1968)

Well, JPMorgan et al took a pretty big slice out of the silver and gold salami yesterday.  Since JPMorgan has huge long-side corner in the Comex futures market in gold, they are still after their remaining big problem child, and that is silver, where they still have a short-side corner, which is obviously much improved since the engineered price decline that they initiated starting about a week ago.

If there is any good news from yesterday's price action, it's the fact that all of the price/volume data will be in Friday's Commitment of Traders Report, and it should show quite an improvement in the Commercial net short position in silver, and probably an increase in JPMorgan's long-side corner in the Comex gold market as well.

As I mentioned the other day, both gold and silver are pretty oversold, as is the U.S. dollar index.  Copper had a big move down yesterday as well, and JPMorgan et al may be massively long there too, even though the RSI on the chart below doesn't indicate it.  And as I pointed out a couple of times over the last week, "da boyz" have pretty much loaded up on the long side in crude oil as well.

Here are the six-month charts for all four commodities in question.

On the other side, the U.S. dollar index is approaching overbought.

What will happen when prices begin to reverse direction?  All the stars appear to be aligned for a major move in price, so if the central banks of the world are looking for a little inflation, letting these four commodities run to the upside for awhile, while the dollar index craters, may be just what the doctor ordered?  Or not.

I certainly have no crystal ball, but the confluence of forces here seems a bit more than coincidence.  Time will tell whether my take on this is correct, or whether JPMorgan et al will step in to prevent prices from running away to the upside once again.  As I said in my comments on the Bank Participation Report further up they, and three other banks, are 100% in control of the prices of these four key commodities.

The smallish rallies in all four precious metals going into the London open got quietly squashed, and as of 5:04 a.m. EST, all is quiet in the Globex futures market.  Gold volume is already very decent, and virtually all of it is of the HFT variety.  Silver volume is pretty heavy as well, but there are lots of roll-overs out of the December contract, so trading activity appears more "normal".  And as I hit the send button at 5:20 a.m. EDT, gold is up about nine bucks, and silver is up a dime.  Both platinum and palladium are basically flat.  The dollar index isn't doing a thing.

Don't forget, this is the last day to subscribe to BIG GOLD on the cheap.  As I said in this space yesterday, the price of BIG GOLD went up in October, and will stay up.  But until midnight Eastern Time today [Wednesday] you can still pick up a one-year subscription for $79, which is a steal in my opinion.  Three special reports will be included with this one-year subscription: 1] Bargain Buyer's Guide to Gold and Silver, 2] 2014 Gold Investor's Guide, and 3] Beginner's Guide to Investing in Silver.

You can find out everything you need to know about this by clicking here, and it costs nothing to look.  As always, of course, Casey Research's standard 90-day money-back guarantee applies.

I haven't the foggiest notion of what today's trading action in New York will be when the Comex opens.  I'm just hoping that it won't be a repeat of yesterday.  But if it is, we'll be a short chip shot away from the bottom when all is said and done by the 1:30 p.m. Comex close.

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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