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Saturday, February 8: Today in Gold and Silver

NEW YORK (TheStreet) -- By the time the jobs report came out at 8:30 a.m. EST in New York yesterday, gold was up about five bucks or so from it's closing price on Thursday.  The jobs number precipitated a down/up price spike---and the 'up' spike got hammered flat by JPMorgan et al within 15 minutes.

Once the London p.m. gold fix was out of the way, the gold price rallied a few dollars going into the London close---and then the gold price traded sideways into the 1:30 p.m Comex close.  Once electronic trading began, the gold price got bid up another five bucks by 3 p.m. EST---and after that it traded pretty flat into day's end.

The low and highs were recorded by the CME Group at $1,255.50 and $1,272.00 in the April contract.

Gold finished the Friday trading session at $1,267.10 spot, up $9.30 from Thursday's close.  Volume, net of February and March, was pretty decent at 145,000 contracts.

Here's the New York Spot Gold [Bid] chart, so you can see the Comex price action in far more detail---especially the shenanigans at 8:30 a.m. EST.

The price action in silver was similar to gold's, but not as volatile---and the price moment at the jobs numbers release is barely noticeable on the Kitco chart below.

The CME recorded the low and high ticks as $19.755 and $20.09 in the March contract.

Silver closed on Friday in New York at an even $20.00 spot, which was up 5.5 cents from Thursday.  Net volume was 33,500 contracts.

I'm including the New York Spot Silver [Bid] chart only to show you the cheesy attempt by "da boyz" to close silver back below the $20 spot price mark right at the 5:15 p.m. close of electronic trading.  They didn't quite make it, but the attempt is very obvious.

Platinum and palladium also got dealt with at the Comex open in a pattern that's all too familiar.  They aren't even trying to be subtle about it. Here are the charts.

The dollar index closed in New York late on Thursday afternoon EST at 80.90.  It traded sideways until 8:30 a.m. in London---and then popped up to 81.00 by 8 a.m. in New York.  From there it slid a bit into the jobs numbers, before falling down to 80.72 within a minute of the news.  It rallied to 81.85 at the London p.m. gold fix---and then headed quietly lower for the remainder of the Friday session, closing just off its 80.65 low of the day---at 80.67---down 23 basis points from Thursday.

The gold stocks rallied right from the open---and most of the gains were in by shortly after 11 a.m. EST. From there they traded flat until the 90 minute rally in the gold price began at the 1:30 p.m. Comex close.  They added another percent during that time period, before trading sideways into the 4 p.m. close of the equity markets.  The HUI finished up 2.72%.

And despite silver's anemic price performance, the silver stocks turned in a wonderful performance---rallying strongly at the open---and then more quietly after the 11 a.m. EST London close.  Nick Laird's Intraday Silver Sentiment Index closed up 3.51%.

The CME's Daily Delivery Report showed that 118 gold and zero silver contracts were posted for delivery within the Comex-approved depositories on Tuesday.  Canada's Bank of Nova Scotia---and JPMorgan out of its in-house [proprietary] trading account---were the two short/issuers of note, with 82 and 30 contracts respectively.  The only two long/stoppers of note were HSBC USA with 77 contacts---and Barclays with 32 contracts.  The link to yesterday's Issuers and Stoppers Report is here.

There were no reported changes in GLD on Friday---and as of 9:47 p.m. EST yesterday evening, there were no reported changes in SLV, either.

The U.S. Mint had a tiny sales report yesterday.  They sold 25,000 silver eagles---and that was all.  Month-to-date in February the mint has sold 6,000 troy ounces of gold eagles---5,000 one-ounce 24K gold buffaloes---and 850,000 silver eagles.  Based on these numbers, the silver gold sales ratio checked in at 77 to 1.

Because some or all of the silver eagles sales reported on Monday were probably from January, I expect the silver/gold sales ratio to drop by about 50% as the February sales month progresses.

Over at the Comex-approved depositories on Thursday, they reported receiving 39,826 troy ounces of gold---and shipped out 3,118 troy ounces.  Virtually all of the deposit ended up with HSBC USA.  The link to that activity is here.

But the big surprise was in silver, as an eye-watering 3,013,565 troy ounces of were deposited, with the lion's share disappeared into HSBC USA.  A total of 493,702 troy ounces were reported shipped out.  A big chunk of the in/out activity was a transfer of 489,842 troy ounces out of Scotia Mocatta and into the vaults of JPMorgan Chase.  The link to that action is here---and it's definitely worth a look.

The Commitment of Traders Report for positions held at the close of Comex trading on Tuesday, February 5 turned out to be quite a surprise.  The headline number in silver was the big one, as it showed that the Commercial net short position declined by a very dramatic 6,181 contracts, or 30.9 million ounces.  The Commercial net short position has now shrunk back down to 74.3 million ounces.

Ted says that JPMorgan decreased their net short position by around 3,000 contracts---and their short-side corner in the Comex silver market is down to around 14,000 contracts---about 70 million ounces---which he says represents around 12% of the entire futures market in silver on a net basis.  The raptors, the Commercial traders other than the Big 8, added 2,400 contracts to their long positions---and Ted also said that this is their highest net long position in a year.

And as an aside, the Big 4 traders in silver [which includes JPMorgan, of course] hold 38,931 Comex contracts short.  That translates into 194.6 million troy ounces, or just under 100 days of world silver production.

Before departing silver and moving on to gold, the 70 million troy ounce short-side corner held by JPMorgan represents 94% of the entire Commercial net short position in silver.  This sort of redefines the meaning of the word "concentrated"---doesn't it?

In gold, the Commercial net short position actually increased by 803 contracts for the reporting week---but under the hood, Ted Butler says that JPMorgan Chase actually increased their long-side corner in the gold market by another 4,000 contracts or so.  Their long side corner is now back up to about 66,000 Comex contracts, or 6.6 million ounces.  Ted says that JPMorgan's long-side corner in gold now represents 21% of the Comex futures market on a net basis basis.

I'll have more to say about this in The Wrap at the bottom of today's column.

The February Bank Participation Report, using data extracted from the Commitment of Traders Report, showed significant changes in both gold and silver---and there were decent changes in platinum as well.

In gold, 4 U.S. banks are net long the gold market by 43,721 Comex futures contracts.  That's an increase of 4,462 contracts from the January BPR.  Ted Butler said further up that JPMorgan is net long about 66,000 Comex futures contracts in gold---so that means that the other 3 U.S. banks must hold a combined net short position of around 22,300 contracts to make the BPR numbers add up properly.  Two of these three remaining U.S. banks are HSBC USA and Citigroup---and the short position of the fourth U.S. bank would be immaterial.

The situation in gold within the U.S. banking system certainly redefines the word "dichotomy".

In gold, 22 non-U.S. banks increased their Comex net short position in gold by an eye-watering 23,744 contracts, which was almost a 300% increase from the January BPR.  I would hazard a guess that this increase in Comex short position was taken on by only one or two foreign banks, but which ones?

Here's Nick Laird's 5-chart BPR set on gold.  Charts 4 and 5 are the pertinent ones on all four precious metals---and the 'click to enlarge' feature really helps here.

In silver, 3 or less U.S. banks are short 14,076 Comex silver contracts on a net basis.  But since Ted mentioned in his comments about silver in the COT Report further up, that JPMorgan's short side corner is now about 14,000 contracts on a net basis, I have to assume that the short positions of the other two U.S. banks---HSBC USA and Citigroup---are now zero, or effectively zero, as that's the only scenario that jibes between Ted's numbers and what the numbers in the Bank Participation Report say.  If that's the case, this is an amazing development---and I'll be talking to Ted about that later today to see if my take on this is close to being correct.

[I fired the above paragraph off to Ted late last night---and heard back from him about 4:30 a.m. EST this morning.  His reply was short and sweet:  "Yeah, that's basically correct."  So this is an amazing development---and it all happened in the month since the January Bank Participation Report was released.]

In silver, at least 13 non-U.S. banks are net short 14,137 Comex futures contract in silver.  That's an increase of 659 contracts from the January report, which isn't a lot.  And as I've been saying for quite some time now, the lion's share of this short position is most likely held by Canada's Scotiabank, although the CME's Daily Delivery Reports from 2014 certainly show that they are heading for the exits as fast possible.  The short position of the 12 remaining non-U.S. banks, when divided up more or less equally, are immaterial---well under 1,000 Comex contracts apiece.  Here are Nick's BPR charts for silver.

In platinum, the February BPR showed that '3 or less' U.S. banks were net short 13,298 Comex futures contracts.  That's an increase of a bit more than 20% from the January report.

Also in platinum, at least 14 non-U.S. banks were net short 3,625 Comex platinum contracts, which is a 100% increase from the 1,871 contracts they held short in the January BPR.

For a tiny market such as platinum, these changes are enormous, especially for the three U.S. banks---but not so much for the 14 non-U.S. banks, as their positions in the grand scheme of things are immaterial as well.  Here are Nick's chart for this precious metal.

In palladium, 3 or less U.S. banks were short 8,932 Comex futures contracts [they hold zero long positions].  That's a decline of 794 Comex contracts from the January BPR.

Also in palladium, at least 13 non-U.S. banks were short 2,484 Comex contracts, which is only an increase of 2% from the January BPR, which is immaterial.  Here are Nick's charts for palladium.

February's Bank Participation Report shows once again that it's only the positions held by the '3 or less' U.S. banks in all four precious metals that really matter.  Yes, there was an increase in the short positions held in gold by the 22 non-U.S. banks---and Canada's Bank of Nova Scotia still holds a significant Comex short position in silver---but the price management scheme when you look at the hard numbers in this BPR, points to these '3 or less' U.S. banks.  And the tallest hog at the trough---and getting taller all the time, is JPMorgan Chase.

Before heading into today's stories, here's a chart from Nick Laird showing December imports into China through Hong Kong. It's old news now, as the data was leaked to Bloomberg and Reuters a couple of weeks ago, but Nick's chart is still a wonder to behold now that the "officially" released import figures are added to it---and it gets more wonderful with each passing month.

I have a decent number of stories for you today---and I hope you have enough time over what's left of your weekend to read the ones that interest you the most.

¤ The Wrap

It also seems clear to me that the reason JPMorgan is not abandoning gold and silver is because the bank holds such a dominant and controlling market share in every aspect of gold and silver that it can’t depart without severely disrupting these markets. JPMorgan has grown to be such an integral factor in gold and silver pricing that its departure would necessarily create a price upheaval that will be welcomed by gold and silver investors. In fact, I believe JPMorgan (and the Feds) recognize this and that is why JPM has amassed such a large long position in COMEX gold and in physical silver; so that the inevitable price violence works for one last time in the bank’s favor.

When that day of upheaval will come is impossible to know, although it must be closer than ever before. In the interim, we must be prepared for whatever the COMEX and JPMorgan throw at gold and silver investors. In that sense, today’s [Wednesday] early price rig to the upside must be treated as both a fake-out designed to end at some point in induced selling; as well as a first step to the coming price violence to the upside. - Silver analyst Ted Butler: 05 February 2014

Today's pop "blast from the past" is thanks to Casey Research's own Doug Hornig.  I received an e-mail from him on Sunday, admonishing me for a glaring oversight---and this is what he had to say: "I'm shocked you didn't honor Pete Seeger this past weekend in your blast from the past."  I'd heard the story about his passing on the CBC News here in Edmonton, but then forgot all about it when I wrote last Saturday's column.  It took the proverbial two by four across the side of the head from Doug to remind me of that oversight.  Here's a tune he wrote back in the late 1950s that was a smash hit for the folk rock band The Byrds back in 1965---and I remember it all too well.  So should you.  The link is here.

Today's classical 'blast from the past' is the longish violin concerto by Sir Edward Elgar.  The work is being performed by the Edmonton Symphony Orchestra a month from now---and I already have tickets.  This concerto took many years to grow on me---but is certainly in my 'Top 5' list of violin concertos now.  If you love this piece as I do---and have a spare 54 minutes---the link to the youtube.com video is here.  Nigel Kennedy does the honours with the BBC Concert Orchestra at The Proms.  I met Nigel and heard him play when he was just getting started---and the ESO could afford his fee.  He was a different breed of cat back then---and he's even more so now, as the first 30 seconds of this video makes abundantly clear.  But the crowds love him---and rightfully so, although he's not my favourite violinist.

If you note the Kitco gold chart at the top of the page, you'll see the same price pattern every day for the last three days.  That extends all the way back to the first of the week, except you can't see it on this chart.  It was obviously the same pattern once again on Friday, as all four precious metals rallied into the Comex open, only to get smashed by JPMorgan et al shortly after.  My comments regarding Stevie Wonder still apply.

Ted and I got into a discussion yesterday after we'd both had a look at the COT Report, the Bank Participation Report---and the stunning in/out movements in silver at the Comex-approved depositories so far this year---along with the goings-on inside the SLV ETF.  All this frantic movement in silver, and to a lesser extent, gold---has to mean something---and can't continue like this forever.

It appears that something may be afoot.  It's out in public view with all the numbers were looking at, but it doesn't tell us precisely what's going on under the hood.  I would appear that we may be looking at the final death throes of the precious metal price management scheme---and only the exact timing is unknown.  I know that Ted will have much more to say about this in his column to paying subscriber later today.

To top it off, I've always been wondering why "da boyz" have been so in-you-face obvious about containing the rise in precious metal prices lately---especially during the New York session.  That goes for the share action as well, especially what I've observed during the first four trading days of this past week.  It's still my opinion that the powers that be in this world own every single solitary gold and silver mining stock that has been sold by the public during the last two and a half to three years---and that the float out there is not particularly large.  Ted thinks that they've been doing that with the physical metal [especially silver] as well---and I totally agree.

It appears that "da boyz" want as few public investors as possible on board when this thing finally flies.  The only thing left in JPMorgan's way is their big 14,000 Comex contract short-side corner in silver.  For years Ted Butler and I have been discussing the possibility that the record long positions held by the raptors [the Commercial traders other than the Big 8] may be the ticket out of JPM's short position, as I'm sure that it would be easy to arrange that enough raptor long positions get sold to JPMorgan to cover them---and it could happen quickly---within hours under the right pricing conditions.

This is all speculation on my part, but I can't shake the feeling that long before the 2014 calendar is out, we'll be looking at precious metal prices that we only dreamed about. 

That's the happy part.

As I and others have stated in the past, the world that exists when precious metal prices are that high may leave a lot to be desired so, to a certain extent, we should be careful what we wish for.

However, after all we've been through since May 1, 2011---I'll be happy to take that chance---and I suspect you feel the same way.

That's it for the day---and the week.

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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