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TheStreet Open House

Wednesday, December 11: Today in Gold and Silver

Stocks in this article: GLDSLV

NEW YORK ( TheStreet) -- The gold price didn't do much of anything in Far East trading on their Tuesday.  However, about an hour or so before the London open, a smallish rally began that ended in a melt-up at 1 p.m. GMT in London, 20 minutes before the Comex open.

The volume associated with that vertical price spike was enough to trip the CME's circuit breakers for ten seconds, and after that gold continued to rally, albeit at a somewhat slower pace.  The gold price [along with the price of the other three metals] got capped at the 9:30 a.m. EST open of the New York equity markets, and then edged slightly lower as the trading day wore down.

The CME recorded the low and high price ticks as $1,237.40 and $1,267.50 in the February contract.

The gold price closed in New York at $1,262.00 spot, up $21.60 from Monday's close.  The net volume of 153,000 contracts wasn't overly heavy, but it wasn't exactly light, either.

The silver price action was a carbon copy of the gold price action, so there's no need to provide any further commentary.

The CME's low and high for silver were $19.74 and $20.43 in the March contract.  I was happy to see the $20 spot price ceiling finally get left in the dust, and I hope it's for good.

Silver closed at $20.43 spot, which was up 59 cents from Monday.  Net volume was pretty heavy at 55,500 contracts.

The platinum price action was somewhat similar to gold and silver's, and it was obvious that there was a "Do not Pass the $741 spot price" sign out for the palladium price, at least looking at the Kitco chart.  And after getting sold down hard starting at 9:30 a.m. in New York, palladium barely made it back into positive territory.  Here are the charts.

The dollar index closed in New York late Monday afternoon at 80.16--and when it opened in Far East trading on their Tuesday morning, didn't do much until about half-past lunchtime in London.  Then it broke through the 80.00 mark to the downside in very short order, hitting its 79.88 low at 10 a.m. EST right on the button.  The index rallied weakly into the close from that point onward.  The index finished at 79.98--which was down 18 basis points from it's close on Monday.

The gold stocks gapped up a bit over 3 percent at the open, and edged up to their respective highs a few minutes after 12 o'clock noon EST. From there, the stocks gave up about a percent  going into the close.  The HUI finished up a very respectable 4.23%.

With some minor differences, the silver equities followed their golden brethren very closely, and Nick Laird's Intraday Silver Sentiment Index closed up 4.48%.

The CME's Daily Delivery Report showed that 414 gold and 93 silver contracts were posted for delivery on Thursday within the Comex-approved depositories.  The two largest short/issuers were UBS, and JPMorgan Chase out of its client account.  They issued 150 and 250 contracts respectively.  And, not surprisingly, it was JPMorgan Chase in its in-house [proprietary] trading account that scooped up 401 contracts as the largest long/stopper by far.  This is the second time in the December delivery month that JPM was actively trading against its own clients' best interests--giving one set of investment advice to them, but knowing that it was going to do precisely the opposite as a company.

In silver, there were quite a few short/issuers, but the biggest one was HSBC USA with 37 contracts.  JPMorgan and Canada's Bank of Nova Scotia stopped 63 and 18 contracts respectively.

The link to yesterday's Issuers and Stoppers Report is here and, like Tuesday report, it's also worth a look.

There were no reported changes in GLD on Tuesday, but a big chunk of silver was withdrawn from SLV by an authorized participant, as 3,081,085 troy ounces were shipped off for parts unknown.  Judging by the price action over the last five or six business days, it's my guess that it had nothing to do with the price activity--and everything to do with the fact that someone needed their silver more desperately in another location.

The U.S. Mint had a sales report yesterday, as they sold 3,500 troy ounces of gold eagles and 222,000 silver eagles.

There was very little activity in gold over at the Comex-approved depositories on Monday.  Nothing was reported received, and a tiny 225 troy ounces were reported shipped out.  The link to that 'activity' is here.

Of course it was an entirely different story in silver, as 655,584 troy ounces were reported received, and a smallish 27,111 troy ounces were shipped out the door.  All the receipts were at the CNT Depository.  The link to that action is here.

Silver analyst Ted Butler allowed me to take four full paragraphs out of his weekly commentary to his paying subscribers on Saturday, as he had a few things to say about JPMorgan's grotesque long position in the Comex futures market as brought to light by last weeks Bank Participation Report.  Rather than use it as a big quote in The Wrap, I thought I'd post in here.

"The big surprise to me was in the Bank Participation Report on gold. I’ve been dithering the last few weeks trying to pinpoint JPMorgan’s long market corner in gold, varying between 70,000 to 80,000 contracts. My last guess was 80,000 contracts and, I was even expecting more privately. Unless JPMorgan has figured a way to put long gold contracts in a foreign subsidiary, the new BPR indicates the bank holds no more than 70,000 long gold contracts as of Tuesday. True, 10,000 contracts are only 12.5% off my 80,000 contract guess, but there was something else that jumped out at me.

"Since Oct 29, the commercials have purchased almost 85,000 net contracts on the $130 gold price decline, thanks largely to net selling by the technical funds of a near identical 88,000 net contracts. Yet over that same period, JPMorgan actually reduced its long market corner in gold by 5,000 contracts to 70,000 contracts. Let me state it a different way; Over a 5 week period in which the gold price was rigged $130 lower (by the commercials) and in which the commercials absolutely gorged themselves in buying 85,000 net contracts from technical funds, the largest gold long in Comex history didn’t buy a single contract and, in fact, sold 5,000 contracts. Huh?

"To my mind, JPMorgan could and should have bought 20,000 to 30,000 gold contracts on the engineered price drop. Easily. Instead, it didn’t buy any, even though it is taking 95% of December gold deliveries. When something occurs that is this outside expectations, it is natural to ask why. JPMorgan has accounted for more than 75% of the 200,000 gold contracts bought by the commercials over the past year. Why would they not buy more during the super-attractive buying circumstances over the past month? I think the correct answer to this question could be the key.

"I can’t help but believe that the reason JPMorgan didn’t join in on the commercial buying festival is because its long market corner in gold had become too well known. I can’t know if the pressure not to add to JPM’s gold market corner came from regulators, the exchange or from within the bank itself; but something prevented JPM from adding when it was most advantageous for them to add long positions. Since I discovered the gold market corner in the first place and have been shouting about it from the hilltops, it’s possible the sending of my articles to JPMorgan actually woke them up.

I have the usual number of stories for a mid-week column, and the final edit is all yours.

¤ The Wrap

Diversification is a protection against ignorance. - Warren Buffett

It wasn't too hard to spot the moment that JPMorgan et al showed up in the precious metal market yesterday in New York, as they all got capped and began to slide lower at exactly 9:30 a.m. EST.  It's hard to believe that they could be this blatant, but they are, and obviously don't care, as there are no adults [CFTC] in charge anymore, and this new Volcker Rule doesn't kick in for another 18 months or so, if then.

As I mentioned in yesterday's column, Tuesday was the cut-off for this Friday's Commitment of Traders Report, and I must admit that after yesterday's price action, I'm not optimistic about what it's going to show.

I would suspect, because of their long-side gold corner in the Comex futures market, that JPMorgan et al has been selling long positions at a profit over the last couple of days in order to cap the price.

In silver, it's obviously different, as JPMorgan still has a [much-diminished, but still market-controlling] short-side corner in the Comex silver market.  And as Ted Butler keeps pointing out, correctly I might add, it's whether or not JPMorgan piles back in on the short side that will determine the fate of the current rally in that precious metal.  However, there's no doubt in my mind that the raptors [the small commercial traders other than the 'Big 8'] will be selling part of their grotesque long position and taking profits as this rally unfolds and the technical funds look to cover their record short position.  But in the end, the how far, fast and high the silver price rises, rests solely with JPMorgan's conduct going forward.

I guess I should just wait until I actually see the COT Report on Friday before I trash it, but I was just thinking out loud in the last few paragraphs.

By the way, in case you missed it, I posted a 4-paragraph quote from Ted Butler just above the Critical Reads section in today's column.  If you didn't read it, I urge you to do so.

There was very little price activity in either gold or silver during the Far East trading day on their Wednesday, and this price pattern is continuing now that London has been open for an hour.   All four precious metals are a bit lower than they were at the New York close yesterday, but volume levels are pretty light, so I wouldn't think it wise to read too much into them.  The dollar index is trading in a very tight range either side of the 80.00 mark.

And as I send today's missive off to Stowe, Vermont at 5:15 a.m. EST, I note that all four precious metals have ticked up in price, volumes are still relatively light, and the dollar index isn't doing much either.

That's all I have for today, which wasn't a lot.

I hope your Wednesday goes/went well for you, depending where on Planet Earth you live, 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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