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Saturday, November 16: Today in Gold and Silver

NEW YORK (TheStreet) -- From a net volume perspective, it was a very quiet trading day yesterday, so not too much of anything should be read into yesterday's price action in gold.  Ditto for silver.

The tiny rally in early Far East trading wasn't allowed to bet far, and from there it got sold down to its low of the day, which came at, or just before, the London a.m. gold fix.

From there it rallied until precisely 12 o'clock noon in New York, and then chopped quietly sideways into the 5:15 p.m. EST electronic close.

The low and high were reported by the CME at $1,279.60 and $1,290.80 in the December contract.

Gold closed at $1,290.40 spot, up $3.10 from Thursday's close.  Net volume was fumes and vapours at only 76,000 contracts.

The silver price didn't do much until early afternoon in Hong Kong trading, and then got sold down to its low of the day which came shortly after the London open.  The subsequent rally got capped about twenty minutes after the Comex open, and the silver price did little of anything after that.

The CME recorded the low and high as $20.55 and $20.82 in the December contracts.

Silver finished the Friday session at $20.78 spot, up 3.5 cents from Thursday.  Net volume was a miniscule 20,500 contracts.

The highs for the day in platinum and palladium came in early morning Far East trading.  The HFT boys showed up in platinum immediately, and by 11:30 a.m. in New York, the low was in.  The subsequent rally didn't get far.  Palladium didn't get the same treatment until shortly before 9 a.m. EST.  It should be obvious, that the HFT boys were all over these two precious metals yesterday.  Here are the charts.

The dollar index closed on Thursday in New York at 81.03.  The price traded sideways in Far East trading up until 3 p.m. Hong Kong time.  The subsequent rally topped out at 81.15 about 9:40 a.m. in London, and then by 9:15 a.m in New York, the index had fallen down to the  80.81 mark.  The smallish rally after that didn't last, and the index closed at 80.84, which was down 19 basis points from Thursday.

The HUI opened in the green, but despite the fact that gold spent most of the New York trading day in positive territory, there was someone there to sell gold shares.  The HUI finished almost on its low of the day, down 1.63%.

The silver shares chopped around either side of unchanged for the entire New York trading session, and Nick Laird's Intraday Silver Sentiment Index closed down a tiny 0.13%.

The CME's Daily Delivery Report showed that zero gold and one silver contract were posted for delivery on Tuesday.

There were no reported changes in GLD, but there was a small amount of silver added to SLV, as an authorized participant deposited 385,264 troy ounces.

There was no sales report from the U.S. Mint.

There was very little in/out gold activity over at the Comex-approved depositories on Thursday.  395 troy ounces were reported received, and nothing shipped out the door.

As always, it was an entirely different story in silver, as 801,444 troy ounces were reported received, and 751,562 ounces were shipped out.  The link to that activity is here.

Yesterday's Commitment of Traders Report pretty much lived up to its advance billing, especially in gold.  But silver wasn't all that bad, either; although I was hoping/expecting slightly better numbers.

The Commercial net short position in silver decreased by 16.0 million ounces, and is now down to 113.1 million ounces.  Not surprisingly, the technical funds loaded up on the short side and sold some longs as well, as the high frequency traders in the Commercial category set prices lower at the start of the reporting week, and the technical funds followed the script like the brain-dead sheep that Ted Butler says they are.

The Commercial traders stood by and happily did the opposite.  The big surprise for me, was the substantial increase in the long position in the Nonreportable/small trader category.  One would have thought they they would have mirrored the actions of the technical funds, but that was not the case.  They increased their net long position by a chunky 2,662 contracts, or 13.3 million ounces.  I've never seen that before on any price decline, and neither Ted nor myself are sure of what to make of it.

The other surprise in silver was that Ted felt that JPMorgan's short-side corner in silver didn't decline by much, if at all, and still sits very close to his revised 75 million ounces based on the data from the latest Bank Participation Report that came out on Monday.  But, just doing the math, JPMorgan still holds about two thirds of the entire Commercial net short position in silver all by itself.  How's that for concentration?

In gold the Commercials traders decreased their net short position by an eye-watering 2.81 million [Comex paper] ounces, and all at the expense of the technical funds that sit in front of their computer screens buying and selling on the moving averages.  The Commercials played them like a fiddle again last week.

The Commercial net short position is down to 6.58 million ounces.  This is not the lowest it has ever been, but it's darn close.

In the process, the non-Commercials sold 4,969 long contracts and bought an astounding 24,815 short contracts, for a total of 2.98 million [Comex paper] troy ounces.  The Commercial traders happily did precisely the opposite.  But, as in silver, the small traders in gold also ended the week increasing their net long position.  It wasn't much, only 1,669 contracts, but it should have been a decrease as well. 

I've never once mentioned copper in my COT comments, but I will today, as Ted Butler has mentioned it in his report from time to time, and it was the same story there as well.  The Commercials tricked the tech funds into selling longs and buying short positions, while JPMorgan et al loaded up on the long side.  The Noncommercial/small trader went long for the reporting week as well.

I look forward to hearing what Ted has to say about all this in his weekly report to his paying subscribers later today, and if I find something I think you might be interested in, I'll steal it for my Tuesday column.

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

Since JPMorgan has a long-side corner in the Comex futures market in gold, their positions won't be found on this chart.

The important take-away from this chart is the monstrous short positions held in all four precious metals, along with the fact that the four largest traders hold the lion's share of the short position in all, to the point where the holdings of the next '5 through 8' traders are almost immaterial.

I have a decent number of stories for your weekend reading pleasure, including a few that I've been saving for today's column.

¤ The Wrap

The deliberate nature of the current price decline is good news for future performance because it provides the explanation for why we have dropped so much in silver. We went down in price this year because JPMorgan and other commercial traders tricked the technical funds into selling on progressively lower prices on numerous occasions. The technical funds did well for some time early in the year as prices continued to fall, benefiting initial sales, but the choppy price action over the past few months has hurt the tech funds. But tech fund performance is moot; what is important is that Comex positioning caused the price decline, as is confirmed in COT and Bank Participation Report data.

The reason this is also good news is because not only does it explain the decline, it rules out other reasons that would have been much more problematic. Let’s face it, had the big silver price decline been due to widespread investment selling, or collapsing industrial demand or a dramatic surge in mine or recycling output, that would temper future bullish expectations. But as far as I can tell, none of those things occurred; the clearest and most plausible explanation for the silver price decline was the rigging of price on the Comex. - Silver Analyst Ted Butler: 13 November 2013

Today's pop 'blast from the past' is 37 years young, hailing from 1976.  It's amazing where all the times goes.  This pop classic was a one-hit wonder for a singer/song-writer named Henry Gross; but what a hit it was!  The astonishing story behind this song was that he wrote it about the death of Beach Boy Carl Wilson's Irish Setter of the same name.  You couldn't make this stuff up! The link is here.

Camille Saint-Saëns composed Carnival of the Animals in 1886 shortly after his disastrous concert tour of 1885/86.  It's a humorous musical suite of fourteen movements, and was written for private performance by an ad hoc ensemble of two pianos and other instruments.

Saint-Saëns was adamant that the work would not be published in his lifetime, seeing it as detracting from his "serious" composer image. He relented only for the famous cello solo The Swan, which forms the penultimate movement of the work, and which was published in 1887 in an arrangement by the composer for cello and solo piano.

Most of the time you hear this played as an encore piece when there's a cellist as featured soloist, along with the harpist from the symphony orchestra involved.  But for purists, the piano/cello duet is the only version worth your while.  It's a miniature masterpiece, and everyone has heard it in one form or another sometime in their lives.  The link to the youtube.com video is here.  Enjoy!

There's not much to discuss regarding yesterday's price action in both gold and silver, but there was obvious price interference going on in both platinum and palladium.

But as the Commitment of Traders Report so admirably showed, JPMorgan has covered as many short positions as they can in silver, and Ted Butler's raptors are drowning in their almost-record long positions, and JPMorgan et al are also massively long the gold market, and in copper as well.

But where we go from here, and the timing of that event, is only known to a handful of people.  Until then, nothing will be allowed to happen price-wise.  But the moment that policy changes, it will become immediately obvious in the price, and you won't have to ask if "this is it" or not, as it will be self-evident.

So all we can do until then is twiddle our thumbs and wait it out.  That's all I'm doing.

I have nothing else for you today, and I'll see you here 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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