This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Thursday, January 30: Today in Gold and Silver

NEW YORK ( TheStreet) -- Except for the quick sell-off at the New York open at 6 p.m. on Tuesday evening, the gold price didn't do much of anything until before the low tick was in shortly before 9 a.m. in London on their Wednesday morning.  The subsequent rally got capped just before 9 a.m. in New York, just as it  about to get out of hand to the upside---and after that the price didn't do much until the FOMC news came out at 2 p.m. EST.  At that point the price jumped around a little before rallying a bit into the close.

The low and high ticks were recorded by the CME Group as $1,248.50 and $1,270.60 in the February contract.

Gold closed in New York yesterday at $1,267.70 spot, which was up an even twelve bucks from Tuesday's close.  Gross volume was over the moon at 286,000 contracts, but once the roll-over were subtracted out, the net volume was only 12,000 contracts.

It was more or less the same chart pattern for silver, but the rally off the London low was far more impressive, especially once trading began on the Comex in New York.  JPMorgan et al dealt with that at the same time they dealt with gold---and had the price beaten back into submission before it could breach the $20 spot price mark and before the FOMC news came out.  Once the price gyrations around 2 p.m. were out of the way, the subsequent rally was obviously capped going into the 5:15 p.m. electronic close.

The low and high ticks for silver were reported at $19.45 and $19.965 in the March contract.

Silver finished the Wednesday trading session at $19.71 spot, which was up 15 whole cents from Tuesday's close.

Platinum and palladium followed similar, but much more subdued price patterns, than either gold or silver.  Platinum finished up a few dollars---and palladium down a few dollars.  Although their respective rallies were not as impressive, it's equally obvious that these rallies were halted at the same time and in the same fashion as the gold and silver rallies. Here are the charts.

It should be as obvious as can be that JPMorgan et al were at the ready to crush the rallies in all four precious metals shortly after trading began on the Comex in New York yesterday.  And it's equally as obvious that all four metals would have finished not only higher in price, but materially higher in price if the sellers of last resort hadn't put in an appearance when they did.  But that's what "da boyz" are there for---aren't they?

The dollar index closed at 80.67 late Tuesday afternoon in New York---and then proceeded to slide quietly down to 80.53 at 11 a.m. London time.  The subsequent rally peaked out at 80.80 shortly after 8 a.m. EST---and the fell down to its 80.45 low at the 9:30 a.m. open of the equity market in New York.  From there it chopped a bit higher into the close, finishing the day at 80.57 which was down 10 basis points from Tuesday's close.  The FOMC news hardly caused a stir in the dollar index chart.

The gold stocks gapped up more than 2% at the open---and then began to give some of that back as the trading day wore on.  And expect for a brief spike down at 2 p.m. EST on the FOMC news, the real low appeared to come at 1 p.m. EST.  Once the chopping and flopping was done just around the FOMC news, the gold stocks rallied solidly into the close, finishing on their high tick of the day.  The HUI closed up 2.66%.

Although the chart pattern for the silver equities was similar to the HUI, the rally off the low was much more muted, as the big silver price gains disappeared under the iron boots of JPMorgan et al shortly after the Comex open---and then again going into the electronic close.  Nick Laird's Intraday Silver Sentiment Index finished up only 1.22%.  The shares, like the metal itself, aren't being allowed to get very far at the moment.

The CME Daily Delivery Report showed that zero gold and 1 lonely silver contract were posted for delivery on Friday---and that should be a wrap on the January delivery month in both silver and gold.

But as a point of interest, I noted on the report that a very chunky 509 copper contracts were posted for delivery on Friday as well.  That represented over three quarters of all the copper contracts delivered on the Comex in the entire month of January.  One has to wonder why the short/issuers would wait until the very last second to post delivery to the longs.

For only the second time this year, there was addition to GLD.  It was only 67,488 troy ounces, but one can only hope that it's the start of a trend.  And as of 9:38 p.m. yesterday evening, there were no reported changes in SLV.  One has to wonder if JPMorgan is keeping the silver price under wraps so that nothing will be added to SLV---so they can get all the physical silver themselves and don't have to short SLV shares in lieu of depositing that metal.  Just so you know, that last sentence is wild speculation on my part.

For the first time since January 13, there was no sales report from the U.S. Mint.

Over at the Comex-approved depositories on Tuesday, there were no reported in/out movements in gold.

There wasn't much activity in silver for a change.  Nothing was reported received---and only 92,533 troy ounces were shipped out.  The link to that activity is here.

While on the subject of gold in the Comex-approved depositories, Bron Suchecki over at The Perth Mint had an interesting take on these in/out movements by JPMorgan over the last few days---and few months.  It's headlined " The story behind JPM's 10 tonne gold withdrawals"---and the link to that is here.  [Any question regarding what Bron has to say on this topic should be directed his way---and not to me. - Ed]

Ted Butler has something to say about this as well---and that's posted as today's quote in The Wrap section.

According to data I found on Wikipedia, at the end of 2012, there were 6,096 commercial banks in the United States.  Of those, only a tiny handful hold all the precious metal derivatives in the entire U.S. banking system.  I have named the three biggest ones on many occasions over the years.  They are HSBC USA, Citigroup---and JPMorgan Chase.

Using the last 18 years of data from the OCC's Quarterly Report on Bank Trading and Derivatives Activities, Nick Laird was kind enough to make up these charts for us, that shows all this.

The three charts below are for gold only---and go back to the last quarter of 1995.  The first chart shown is the raw data right from Table #9 of the OCC's quarterly report---and includes the derivatives positions [in U.S. dollars] of all the U.S. banks that have had in gold over the last 18 years.  Some of these positions are so tiny that they don't even show up on this chart, but this data is the basis of the two charts that follow this one, so I though it important that you see what the raw data looks like before proceeding to charts two and three.

Not including the "Others" category, there are 18 U.S. banks that have held gold derivatives of varying maturities [one to five years] over the time span of this chart---and as I said in the previous paragraph, most are so tiny they are invisible---literally.

The data on all three charts is as of the end of Q3 2013.  It will be a month or two before the data for Q4 2013 becomes available.  The big spike/top came in Q4 of 1999 when the Washington Agreement on Gold was signed on September 26 of that year.  Naturally, all the paper gold written to put out the fire at that time showed up in the final quarter of that year.

I've been studying these charts closely ever since Reg Howe dug them up over a decade ago---and although I didn't understand them much at the time, I have more of a grasp of them now.  The above chart shows two things worth noting.  The first is that as the gold price has risen, the dollar value of all derivatives written against them has also risen.  This makes perfect sense.  The other thing that this chart shows is the obvious one---and that is the "Big 3" U.S. banks, especially during the last decade, hold 99% of all the gold derivatives held by the U.S. banking system.

In Chart #2, Nick takes the derivatives positions of all the banks, other than the "Big 2", and sticks them in the "Others" category.  But just looking at Chart 1 you can tell that the vast majority [my guess is 90+ percent] of the "Other" category has always consisted of HSBC USA.  At one time, the OCC Derivatives Report showed the top derivatives position of the "Big 7" U.S. banks---but after the financial crisis of 2007/8---they only show the "Big 4".  When HSBC's position falls below that, it automatically drops into the "Others" category---but it's still there.

Here's Chart #2 which, as I said above, is the " Reader's Digest" version of Chart #1.

And lastly, Nick whipped up this chart that shows the derivatives positions in tonnes rather than U.S. dollars---and it's an eye-opener.  Both Nick and I were amazed.

My interpretation of this chart is that, slowly but surely, the U.S. banks are heading for exits and, without doubt, the Q4 data will confirm this, as a major low was set at the end of December of last year.

I will have the silver, platinum and palladium charts for you tomorrow.

Once again I have a fair number of stories for you again today---and I hope you find some in here that interest you.

¤ The Wrap

I’d like to raise an issue about JPMorgan that I’m not sure I discussed before. That issue is whether JPMorgan has been working against the interests of U.S. investors for the benefit of China. There have been numerous stories and commentary about the flow of gold from the West to the East. Just yesterday, another 321,500 oz was removed from the JPMorgan’s Comex warehouse, the second such reduction in four days. Basically, all the gold that JPMorgan took delivery of against the Comex December futures contract and that was deposited into JPM’s Comex warehouse has now been removed.

The added fact that the metal was in kilo form (rather than in 100 oz bars) prompted many to conclude this gold was destined for China, since that is the form most preferred there. It’s hard to argue with the reasoning and anecdotal evidence that a massive gold flow from West to East has occurred. The problem is that the circumstances over the past year paint an even uglier picture of JPMorgan than I have alleged so far. While I am convinced that the bank has manipulated gold and silver prices, I had not previously alleged that JPMorgan was working against the interests of U.S. investors specifically. But the facts point in that direction. - Silver analyst Ted Butler: 29 January 2014

Whatever the cause, it was obvious that all four precious metals wanted to rally yesterday---and it was equally obvious JPMorgan et al were at the ready when required.

I was expecting a rather quiet trading day, with yesterday being the last day for the large traders to extricate themselves from the February contract, so it was obvious that there were other forces at play in the precious metal markets yesterday.  How long "da boyz" can hold them off is a question for which I have no answer.

At the 1:30 p.m. close of Comex trading this afternoon, the February contract goes off the boards---and at that point we await the First Day Notice action in the CME's Daily Delivery Report.  As I mentioned in this space yesterday, it will be posted on their website relatively late in the evening in New York---and I'll have all the details for you in Friday's column.

In Thursday trading in the Far East, all four precious metals were under selling pressure once again---and in the last hour of trading before the London open, silver really got hammered by the HFT boyz----and more than ten bucks got peeled of the platinum price as well.  Prices have recovered sightly now that London has been open about 90 minutes as of this writing.  Gold volume, on a net basis, is pretty light, as most of the volume is now in the new front month, which is April.  Silver volume is pretty decent---and that's not surprising, as JPMorgan et al obviously went after the tech funds in a big way in the hour before the London open.

The big down ticks in all four precious metals was accompanied in lock-step with a 25 basis point rally in the dollar index that began precisely one hour before London opened.  Here's the chart showing that---and you just know that this wasn't a coincidence.

And as I hit the send button on today's column at 5:25 a.m. EST, not much has changed in London.  All the metals are still well below where they closed in New York yesterday---and it will be interesting to see how they 'perform' when trading begins in New York at 8:20 a.m. EST.

That's more than enough once again---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.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs