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Saturday, December 28: Today in Gold and Silver

NEW YORK (TheStreet) -- Despite the big decline in the dollar index, there was almost no sign of that in the price action for gold in Far East and early London trading on their Friday.  The smallish rally in late-afternoon Far East trading got dealt with in the usual manner at the London open---and the gold price was back below the Thursday New York close by the London morning gold fix.

After that, the gold price didn't do a lot until around 8:45 a.m EST in Comex trading.  Then, in less than five minutes, the gold price popped six bucks or so, but that rally got cut off at the knees at 9 a.m.  By around 12:15 p.m. most of that gain had vanished---and after that the gold price chopped sideways in a very tight range into the 5:15 p.m. EST electronic close.

The CME recorded the low and high as $1,208.50 and $1,218.90 in the February contract.

Gold closed in New York on Friday afternoon at $1,213.80 spot, which was up $2.60 from Thursday.  Volume was pretty light at 88,000 contracts, net of December and January---but it was about 40% higher than Thursday's volume.

It was almost the same price pattern in silver.  The only noticeable difference was that once the price got capped at 9 a.m. EST in New York on Friday morning, silver traded within a ten cent price range for the remainder of the day.

The high and low were recorded as $19.75 and $20.105 in the March contract.

Silver finished the Friday session above the twenty dollar mark at $20.075 spot, which was up 27.5 cents from Thursday's close.  Net volume was about 24,000 contracts, about 20% more than Thursday's volume.

Platinum rallied quietly for most of the Friday session.  Palladium did as well, but that rally became far more robust once trading began on the Comex at 8:20 a.m. EST yesterday morning.  Then it appeared that a willing seller showed up around 10:30 a.m.---and that, as they say, was that.  Here are the charts.

The dollar index closed late on Thursday afternoon in New York at 80.51---and then traded sideways until 9 a.m. in Tokyo on their Friday morning.  At that point it began to head south with a vengeance.  It cut through the 80.00 mark like the proverbial hot knife through soft butter---but someone was standing by to catch that falling knife about 11:35 a.m. GMT in London, as it appeared that the dollar's decline was about to become terminal.  The low at that point was 79.75.  From there the index "recovered" back up to the 80.37 level before trading more or less sideways into the close.  The index finished the Friday session at 80.33---which was down only 18 basis points from Thursday.  At its low, the index was down 76 basis points, so the "rally" off that low was quite a save.

The dollar index would have most certainly crashed if a buyer of last resort hadn't put in an appearance.  Here's the 3-day chart so you can see the whole move in some sort of perspective.

The gold stocks spent virtually the entire Friday session in the green---and then rallied a bit into the close.  The HUI finished up 0.71%.

The silver equities started off in the red, but quickly rallied back into positive territory.  Nick Laird's Intraday Silver Sentiment Index closed almost on its high tick of the day, up 1.89%.  We'll take it.

The CME's Daily Delivery Report was a bit of a surprise in gold.  I was only expecting a handful of contracts, but 108 were posted for delivery on Tuesday.  The big short/issuer was Canada's Bank of Nova Scotia with 99 contracts---and the only long/stopper worth mentioning was JPMorgan Chase in it's in-house [proprietary] trading account with 105 contracts.  As Ted Butler pointed out in his column last Saturday, JPMorgan Chase has stood for delivery on more than 96% of the 6,493 gold contracts issued so far in the December delivery month.

In silver, there 19 contracts posted for delivery---and JPMorgan stopped 6 of those.  For the December delivery month, JPMorgan Chase has taken delivery of just about 61% of the all the December deliveries in silver, which comes to 2,015 contracts, or 10 million troy ounces in total.  That's five days of world silver production.  The link to yesterday's Issuers and Stoppers Report is here.

Another day---and another withdrawal from GLD.  This time an authorized participant withdrew 96,435 troy ounces.  There was also a withdrawal from SLV as well, but that wasn't reported on the ishares.com Internet site until well into Friday evening EST.  This time they reported a withdrawal of 1,636,397 troy ounces.  In the last three business days there has been about 5.8 million troy ounces withdrawn from SLV---and in retrospect, none of this looks like "plain vanilla" liquidation to me, as it appears that the silver was more desperately needed elsewhere.  I'll be very interested in Ted Butler's take on this in his weekend commentary coming out later this afternoon.

And, not surprisingly, there was no sales report from the U.S. Mint on Friday.

And also not surprisingly, there wasn't much in/out activity in gold at the Comex-approved depositories on Thursday.  Only 8,503 troy ounces were reported received---and 225 troy ounces were shipped out.  The link to that activity is here.

It was somewhat busier in silver, as 370,292 troy ounces were reported received [all into Scotia Mocatta]; and 1,960 troy ounces were reported shipped out.  The link to that action is here.

As I mentioned in Tuesday's column, because of the Christmas holiday, the Commitment of Traders Report won't be posted on the CFTC's website until 3:30 p.m. EST on Monday.

And as I mentioned in yesterday's column, I don't have that many stories for you today, so I hope you have the time over the weekend to read the ones that interest you the most.

¤ The Wrap

Against stupidity, the gods struggle in vain. - Friedrich Schiller

I only have one 'blast from the past' for you today---and it's from Broadway, sort of.

Chess is a musical with music by Benny Andersson and Björn Ulvaeus, formerly of ABBA, and with lyrics by Tim Rice. The story involves a romantic triangle involving two chess grandmasters, an American and a Soviet, fighting over a woman who manages one and falls in love with the other—all in the context of a politically-driven, Cold War-era tournament between the two men. Although the protagonists were not intended to represent any specific individuals, the character of the American was loosely based on Bobby Fischer, while elements of the story may have been inspired by the chess careers of Russian grandmasters Viktor Korchnoi and Anatoly Karpov.

The musical didn't last long, only three years in London's West End in 1986---and two months on Broadway in 1988.  However, the music itself has outlived the musical in which it was embedded.  I've had the CD ever since it was released 30 years ago in 1984---and it still gets a fair amount of air time around my house.

Here's the second most famous song on this double CD set.  It's a duet sung by Elaine Paige and Barbara Dixon, and the link to that youtube.com video is here.  If you get the impression that you've heard a more recent version of that duet---you probably have.  Elaine Paige sings it with Britain's Got Talent superstar Susan Boyle more than 25 years later, and the pertinent bits of the story [along with the duet] start at the 1:35 minute mark in this next youtube.com video.  It's a must watch/listen---and the link to that is here.

It was the second day in a row where precious metal prices took off like a NASA space launch at the start of the Comex trading session---and the second day in a row where prices were capped within a few minutes of the start of these rallies. There's nothing free market about this, as no "for profit" seller would ever sell their position in such a way that would not only stop these rallies cold, but reverse the price trend in the process.  Never happen---ever!!!

So JPMorgan et al are still at it.

But, having said that, with volumes as low as they've been over the last few days, Ted Butler is not sure if much damage has been done in the Comex futures market structure, as he feels that the vast majority of the short positions in both silver and gold are still firmly in the hands of the technical funds.  Unfortunately, the price action on both Thursday and Friday won't be in Monday's COT Report.

No significant moving averages in gold have been penetrated to the upside during the current rally, but the 20-day moving average in silver has been well penetrated---and the 50-day moving average beckons.  Here are the one-year gold and silver charts with the 20 and 50-day moving averages embedded.

The Comex structure is still locked and loaded for a gigantic move to the upside in all four precious metals if JPMorgan et al wish it---or are instructed to stand aside and let it happen.

The gold/silver highlights for me over the last 12 months was Her Majesty's visit to the Bank of England gold vaults last December, Germany's repatriation request from the New York Fed in January--and the ongoing massive amounts of gold disappearing into China this year, and now the vaults of JPMorgan Chase.  We should be getting China's import figures through Hong Kong for the month of November any day now.

How long this situation can be kept under control from a price perspective is hard to fathom, however it's obvious that all four precious metals are being kept on a tight leash, at least for the moment.  But as Ted Butler has said several times during December, there's never been a better time for "da boyz" to step out of the market for good.

All we can do is wait it out, which is what we were doing this time last year as well.  However, it's obvious to me that this price management scheme in the precious metals is on its last legs---and as I've said before, only the timing of the end game is unknown, and unknowable.

That's all for today---and I'll 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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