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Saturday, February 15: Today in Gold and Silver

NEW YORK (TheStreet) -- The gold price didn't do much in Far East trading on their Friday, but was up about six bucks by the time the London morning gold fix was done for the day at 10:30 a.m. GMT.  From that point, a more serious rally began that got sold down a bit at the noon GMT silver fix.  Another rally began at 8:45 a.m. EST---and that rally was brought to an end at the London p.m. gold fix, which was 10 a.m. in New York.  After that, the gold price traded quietly sideways for the remainder of the day.

The CME Group recorded the low and high ticks as $1,299.90 and $1,321.50 in the April contract.

Gold closed in New York late Friday afternoon at $1,319.10 spot, which was up $16.30 from Thursday's close.  Volume sans February and March, was very decent at 158,000 contracts.

As I mentioned in The Wrap in yesterday's column, silver jumped up about 40 cents starting around 9 a.m. Hong Kong time---and ran into the usual wall of selling by JPMorgan et al.  Then the price traded more or less sideways until shortly before 3 p.m. in Hong Kong---and at that point the price took on a positive bias which accelerated once the London a.m. gold fix was in.  The steady rally that began there [with a couple of tiny capped rallies along the way] continued for the rest of the Friday session---and the silver price closed on its high of the day.

The high and low ticks were recorded at $20.445 and $21.490 in the March contract.

Silver closed in New York at $21.505 spot, up $1.02 on the day.  Not surprisingly, net volume was extremely high at around 56,500 contracts.

Platinum and palladium traded flat until shortly after 1 p.m. Hong Kong time---and then rallied until lunchtime in New York.  After that they traded sideways.  Here are the charts.

The dollar index closed late in New York on Thursday afternoon at 80.30---and immediately began to sag as the trading day began on Friday in the Far East.  The low tick of 80.08 came shortly before 12:30 p.m. GMT in London.  The index bounced off that low a bit, but gave back most of it by the New York close---finishing the week at 80.14---which was down 16 basis points from Thursday's close.

The gold stocks gapped up a hair over 2% at the open---and hit their highs of the day just before 10:30 a.m. EST.  From there they gave up over half their gains by shortly after 12 o'clock noon in New York.  Then they proceeded to chop slightly higher as the trading day rolled on.  The HUI finished up 2.50%.

The silver equities hit their high of the day at the London p.m. gold fix---and then chopped sideways in a broad range, even though the silver price powered higher for the remainder of the day.  Nick Laird's Intraday Silver Sentiment Index only closed up 2.87%.  I was expecting better---and I'm sure you were as well.

The CME's Daily Delivery Report showed that 121 gold and 7 silver contracts were posted for delivery within the Comex-approved depositories on Tuesday.  There were four different short/issuers, with JPMorgan out of its in-house [proprietary] trading account with 64 contracts, being the largest---and the two biggest long/stoppers were HSBC USA and Barclays with 64 and 24 contracts respectively  There are still around 700 gold contracts open in the February delivery month---and only a handful of silver contracts.  The link to yesterday's Issuers and Stoppers Report is here.

I was very surprised to see that there were big withdrawals from both GLD and SLV yesterday.  With the price action we've been experiencing over that last week in both metals, one would have thought the opposite would be occurring.  The GLD ETF reported that an authorized participant withdrew 163,874 troy ounces---and in SLV, an authorized participants took out a chunky 1,923,884 troy ounces.  The only reason that I can think of why metal would be disappearing out of these two ETFs would be that it was more desperately need by their owners at some other location.  I will be watching the in/out moments of both these ETFs like the proverbial hawk during the next five business days.

Joshua Gibbons, the "Guru of the SLV Bar List", updated his website with the current in/out bar action over at SLV---and here is what he had to say in his comments on Thursday:  "Analysis of the 12 February 2014 bar list, and comparison to the previous week's list---1,442,942.6 troy ounces were removed (all from Brinks London), and no bars were added or had a serial number change."

"The bars removed were from: Handy Harman (0.3M oz), Solar Applied Materials (0.3M oz), Noranda (0.2M oz), Degussa (0.2M oz), and 12 others.  As of the time that the bar list was produced, it was overallocated 581.9oz. 1,442,970.0 troy ounces were added Tuesday, but not yet reflected on the bar list."  The link to Joshua's website is here.

The U.S. Mint had a small sales report yesterday.  They sold 2,000 ounces of gold eagles---2,000 one-ounce 24K gold buffaloes---and only 25,000 silver eagles.  Month-to-date the mint has sold 13,000 ounces of gold eagles---9,500 one-ounce 24K gold buffaloes---and 1,750,000 silver eagles.  Based on these sales, the silver/gold sales ratio work out to 77 to 1.

There was very little in/out activity in gold within the Comex-approved depositories on Thursday.  They reported receiving 2,199 troy ounces---and shipped nothing out.  The link to that activity, such as it was, is here.

There was more action in silver, of course, as 553,557 troy ounces were reported received---and 175,262 troy ounces shipped out.  All of the activity was at the CNT Depository---and the link to that action is here.

[Note: the Delaware depository is back.  If I'd just read the remarks at the bottom of the page, that would have explained part of it… "One or more depositories were not able to report changes today due to weather conditions on the East Coast."  That makes sense, but only up to a point, as there was no reason I could see that they would remove the entire depository data from Thursday's report.]

The Commitment of Traders Report was another strange one, as there was a clear dichotomy once again between what was going on in silver vs. gold---at least on the surface.  But it's what Ted Butler found under that hood that should make us stand up and take notice.

After a terrific COT Report in silver during the prior week, it was exactly the opposite with yesterday's report, as the Commercial net short position in silver blew out by a huge 7,565 contracts, or 37.8 million troy ounces.  The Commercial net short position in silver is now back up to 112.1 million ounces.

Ted said that 100% of the short covering by the technical funds was covered by raptors [Commercial traders other than the Big 8] selling 10,000 long Comex contracts at a profit during the reporting week.  The big surprise was that JPMorgan used the opportunity to cover another 1,000 contracts of its short-side corner in the Comex futures market, which is now down to 13,000 contracts.  I mentioned yesterday that one of my concerns during this short-covering rally was the JPMorgan was going to go even further short the silver market.  The numbers show that my fears were unfounded---as in actual fact, JPMorgan did exactly the opposite.  If you think that this turn events may be bullish for silver in the long term, you would be right about that---if JPMorgan continues down this path.

In gold, the Commercial net short position increased by a very small 6,872 contracts, or 687,200 troy ounces.  Not only was the small increase a surprise considering the price activity during the reporting week, Ted Butler says that there was virtually no short covering by the technical funds!  It was all the Big 8.  And in the fray, Ted said that JPMorgan managed to increase their long-side corner in the Comex gold market from 66,000 contracts to 68,000 contracts!  JPM's long-side corner in gold still sits at 21% of the entire Comex futures market on a net basis.

We've had three rally days in a row in gold and silver since the Tuesday afternoon Comex cut-off for yesterday's COT Report.  I'm sure that next Friday's Commitment of Traders Report won't make for happy reading on the surface.  However, in the last two COT Reports, it's what Ted has found under the surface that really shows what's going on, as JPMorgan has been covering silver short positions---and going further long the gold market.  They appear to heading for the exits as quietly as possible under the cover of the first decent rally in the precious metals in years.  You couldn't make this stuff up!

I've taken an axe to today's list of stories---and I've chopped them back to what I consider to be a reasonable number for a weekend column.

¤ The Wrap

I understand some wanting to make excuses for JPMorgan’s undeniably large market shares in gold and silver. There is an instructive message here as well – since JPM’s market corners can’t be denied, all that’s left is trying to explain it away any way possible. The excuses confirm that the market shares held by JPM exist and need explaining. Oh, and one last flimsy excuse is needed to explain, if these outsized market corners are so normal, why is there only one bank atop the gold and silver market heap? If this market making is such a legitimate business – why aren’t other banks offering competition? I have a better question - why is JPMorgan so entrenched in gold and silver trading, when they are withdrawing from every other commodities business? (I say because they can’t exit quietly as they are the market). - Silver analyst Ted Butler: 12 February 2014

Today's pop/folk "blast from the past" was sent to me by reader David Mancini last Saturday---and I thought it worth sharing.  This singer/songwriter is a living legend in Canada---and neither he, nor the tune, needs any introduction whatsoever.  The performance datesfrom 1974---40 years ago this year---and the link is here.

Today's classical "blast from the past" is a short work---and the only well-known composition of Italian composer and cellist Luigi Boccherini.  You'll know it instantly---and the link to the youtube.com video is here.

It was encouraging to see such positive precious metal price action on a Friday---and I certainly hope that this is a harbinger of things to come.  It certainly should be, as all the precious metals are many orders of magnitude lower in price than they would be if their respective prices weren't being managed in the Comex futures market by JPMorgan et al.

I really stood up and took notice of the actions of JPMorgan in the latest COT Report that came out yesterday.  As I mentioned further up, it showed that, for the second week in a row, they had decreased their short-side corner in the Comex silver market---and increased their long-side corner in the gold market.  I was impressed that it happened in the prior week's COT Report, but when it happened twice in row in the current price environment, I must admit that I'm really paying attention now.

As I said recently in this space, for many years both Ted Butler and myself had mused about the possibility that JPMorgan may step in front of the raptors as they sold their long positions in silver to the short-covering technical funds as silver prices rallied, but the last two weeks COT Report shows that this actually happened.  I'm now looking at the precious metal rallies of the last three days since the cut-off in a whole new light.  I'm wondering if JPMorgan was pulling the same trick during those three days as well---especially with Friday's huge volume.  It would be easy to hide that sort of activity behind the skirts of a price move like we had in silver yesterday.  Of course we'll have to wait until next Friday's COT Report to see if this was, in fact, the case.

As you can see from the 6-month charts in both gold and silver posted below, we are now in overbought territory in both metals---and it wouldn't surprise me in the slightest if "da boyz" engineered a price decline at some point in time in the near future.  On top of the short positions in silver that JPMorgan has managed to cover during the last week, not to mention the ever-increasing long-side corner in gold, it would be the perfect opportunity to cover even more short positions during such an event.  When it might occur is unknown, but it's a certainty that it will.  You can bet on it.

Once that "correction" is behind us---and JPMorgan is fully out of their Comex short position in silver---it could get interesting to the upside.  We'll find out pretty quick I would think.

I was also amazed by the withdrawals from both GLD and SLV yesterday.  It's entirely possible that the silver may have been needed elsewhere, but that certainly doesn't explain the withdrawal in gold.  And after Friday's big day in all four precious metals, it's a safe bet that just about every precious metal ETF on Planet Earth is now owed a very decent amount of metal.  One has to wonder where it will all come from, especially silver.

Here's Nick Laird's Total PMs Pool chart updated as of the end of this week.  Both lines are heading in the right direction, but both have a long way to go to get back to where they once were.  But get there, they will.

As I head off to bed, I can't help but marvel at the events of the last two weeks.  I can't say for sure when the price management scheme in the precious metals will come to an end, but based on the evidence I'm looking at right now, it's days are definitely numbered.

I look forward to next week's price action with more than the usual amount of interest, starting with the New York open on Sunday night EST.

By the way, with what appears to be the start of a major up-trend in the precious metals, it might be worth your while to jump back in, or increase your exposure to the precious metals once again, as the HUI is already up over 22% year-to-date.  Your best bets for that are Casey Research's monthly BIG GOLD newsletter---and Casey Research's flagship publication---Casey International Speculator.  If you go for Casey International Speculator, it includes a subscription to BIG GOLD at no extra charge. It costs nothing to check them out---and Casey Research's 90-day money back guarantee applies to both.

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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