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Saturday, March 29: Today in Gold and Silver

NEW YORK (TheStreet) -- It was another day where very little of anything happened in the gold price in the Far East.  The high tick on Friday came at the 8 a.m. GMT London open---and it was all down hill until the low was set at 9:45 a.m. in New York.  The price rallied sharply back to the $1,295 spot mark in less than 20 minutes---and then chopped sideways into the 5:15 p.m. EDT close.

The high and low ticks were recorded as $1,299.40 and $1,286.10 in the new front month, which is June.

Gold closed in New York at $1,294.90 spot, up $3.20 on the day.  Gross volume was around 238,000 contracts, but net volume was only 75,000 contracts---and most of the activity was in the new front month.

Silver rallied a bit right from the open in the Far East but, like gold, ran into not-for-profit sellers at the London open.  The low tick came about five minutes before the Comex open---and the subsequent rally ended at the same time as gold as well, shortly after 10 a.m. EDT.  From there, the price got sold down a dime before trading sideways for the remainder of the New York session.

The high and low, such as they were, were recorded at $19.92 and $19.62 in the May contract.

Silver closed the Friday session at $19.82 spot, up 13 cents from Thursday.  Volume, net of roll-overs, was only 30,000 contracts.

Platinum rallied about ten bucks during the Far East trading session---and then began to edge lower once London opened.  That 'sell-off' ended around 9 a.m. in New York---and from there, the platinum price rallied quietly into the close, finishing up 13 bucks on the day.

The palladium price didn't do much in Far East trading, but began to rally starting moments before London opened.  That lasted until shortly after the 1:30 p.m. EDT Comex close in New York---and from there traded flat.  Platinum finished the Friday session up $15---gaining back a large chunk of what it 'lost' on Thursday.

The dollar index closed late on Thursday afternoon in New York at 80.13---and then chopped basically sideways in a 10 point range either side of unchanged.  The index closed on Friday afternoon at 80.17.  Nothing to see here---please move along.

The gold stocks sold off few points at the open on Friday, but quickly rallied until 10:30 a.m. EDT.  After that, they didn't do much---and the HUI closed up 1.59%.

The silver equities followed a similar pattern---but Nick Laird's Intraday Silver Sentiment Index closed up only 0.88%.

The CME Daily Delivery Report for 'Day 1' of the April delivery month showed that 2,642 gold and 189 silver contracts were posted for delivery within the Comex-approved depositories on Tuesday.   In gold, JPMorgan was the only short/issuer of note, as they delivered 2,470 contract out of their in-house [proprietary] trading account---and another 170 of their client account.  The biggest long/stopper was also JPMorgan, with 505 in its client account.

In silver, JPMorgan was the short/issuer of 128 contracts out of its in-house [proprietary] trading account---and Jefferies came in second with 50 contracts.  The only long/stopper of note was Canada's Scotiabank with 164 contracts.

There were at least a couple of dozen stoppers involved in April's First Day Notice deliveries in gold---and yesterday's Issuers and Stoppers Report is worth studying for a minute or so---and the link is here.

March deliveries in the Comex-approved depositories ended the month as follows---84 gold and 2,113 silver contracts.  Of those amounts, JPMorgan Chase out of it's in-house [proprietary] trading account, issued 4 contracts and stopped 72 contract in gold.  In silver, they issued 74 contracts and stopped/took delivery of 1,313 contracts.  Those 1,313 contracts represents 62% of the total March deliveries.

Just for fun, I thought I'd check out palladium, as March was the latest delivery month for that metal as well.  There were 1,083 contracts issued and stopped.  Of those, JPMorgan Chase [out of both accounts] issued 839 contracts---and Goldman Sachs was a distant second with 102 contracts issued.  The big long/stopper was Barclays with 935 contracts.  Here's the year-to-date delivery report, current to the end of March, from the CME Group for all four precious metals [plus copper] so you can see for yourself who the most active bullion banks are.

There were no reported changes in GLD---and as of 9:40 a.m. EDT there were no changes in SLV, either.

There was a sales report from the U.S. Mint to end the week.  They sold 500 troy ounces of gold eagles---500 one-ounce 24K gold buffaloes---and 121,000 silver eagles.  Month-to-date the mint has sold 20,000 troy ounces of gold eagles---12,000 one-ounce 24K gold buffaloes---and 4,476,000 silver eagles.  Based on March's sales data to date, the silver/gold sales ratio checks in at a hair under 140 to 1.  Year-to-date that ratio stands at 62 to 1.  And, as matter of interest, the number of silver eagles sold year-to-date stands at 13,001,000.

It was a very busy day over at the Comex-approved depositories on Thursday.  In gold, they reported receiving 61,882 troy ounces of the stuff---and shipped out 29,957 troy ounces.  But in reality, the 29,957 troy ounces shipped out of Canada's Scotiabank warehouse, ended up as a deposit at HSBC USA.  So the real movement on Thursday was only 32,150 troy ounces [precisely one metric tonne] shipped into Scotiabank.  The link to that activity is here.

It was another breath-taking day of in/out movement in silver, as 605,679 troy ounces were reported received---and a very large 1,764,190 troy ounces were shipped out the door for parts unknown.  Almost all the silver shipped out came out of Scotia Mocatta's vault.  The link to that action is here.

Ted Butler mentioned that this past week was the biggest week of Comex silver activity that he can remember---and I just know that he'll have much more to say about it in his commentary to paying subscribers later today.

The Commitment of Traders showed improvement in the Commercial net short position in both silver and gold, but I was hoping for a bigger improvement than we got.

In silver, the Commercial net short position declined by 4,145 contracts, or 20.7 million troy ounces.  The Commercial net short position is now down to 159 million troy ounces.  The raptors, the Commercial traders other than the Big 8, bought 5,700 long contracts, but Ted said that the '5 through 8' largest short holders actually increased their short position by 2,200 contracts during the reporting week.  JPMorgan covered about 700 contracts of their short-side corner in the Comex silver market---and Ted says that their short-side corner is down to about 19,000 contracts, or 95 million troy ounces.  JPM's short position represents 60% of the total net short position in silver---which is preposterous.

In gold, the Commercial net short position declined by 18,313 contracts, or 1.83 million troy ounces.  The Commercial net short position is now down to 12.76 million troy ounces.  As the technical funds puked up their longs and/or went short---the raptors bought about 15,000 of these long contracts---and the Big 8 short holders covered about 3,500 contracts of their short position.  Ted said that JPMorgan added about 500 contracts to their long-side corner in the Comex gold market---and he pegs their current long-side corner at 40,000 contracts, or 4.0 million ounces.

As I said at the start, I was expecting/hoping for a bigger improvement than the numbers showed above.  It's obvious that we've had further improvement since the Tuesday afternoon cut-off for the above report, especially now that gold has closed below it's 50 and 200-day moving averages for two days in a row.

Ted pointed out the obvious on the phone yesterday, but he put my concern in concrete numbers.  He said that compared to the Commitment of Traders Report at the very lows in late December 2013, both gold and silver have miles to go [in number of contracts---and therefore price] before we get back to that level.  In contracts, it's around 15,000 in silver---and about 100,000 in gold.  How that translates in price is unknown, but it's a lot lower than it is now.

Don't forget that it was, as Ted Butler said, all technical fund buying that drove the price up---and it's now technical fund selling that's taking it back down again as JPMorgan et al game the tech funds for fun, profit---and price management.

However, a decent chunk of those contracts in both gold and silver have been covered since the Tuesday cut-off, but the sad truth of it is that if "da boyz" wish it, we have a along way to go to the downside.  But that may not be in the cards, however I just don't know how this is going to play out going forward.  I was expecting much more aggressive down-side price movements going into the April delivery month---and it just never materialized.

Will it materialize next month, or are we done to the downside?  Only JPM, the BIS et al, know where we're going from here---and they aren't talking.  And as Jim Rickards said in that Sprott interview posted in my column yesterday---"If I were running the manipulation, I would actually be embarrassed at this point because it's so blatant."

He would be right about that---and the three charts below are just another brick in the wall for the three big U.S. bullion banks.

Yesterday, the Office of the Comptroller of the Currency [OCC] updated their website with the 4th quarter 2013 derivatives report for all U.S. banks.  Of course it's only the precious metals that concern us---and it's the data from Table 9 on page 38 of this pdf file that all three charts below, are derived.

Except for a handful of readers, these charts are going to be difficult to grasp in their entirety---and to tell you the truth, even though I've been looking at these charts [or similar ones] for over a decade now---and understand them in the broad strokes, trying to describe them in layman's terms is tough.

The first chart shows the total derivatives positions held by all U.S. banks in dollars going back about 17 years.  There are only a handful of U.S. banks out of the 6,000 plus registered banks in the U.S.---a half-dozen at most---that hold 100% of all these gold derivatives---and well over 95% of them are held by JPMorgan Chase, Citigroup and HSBC USA.  Over 90% of the "Others" category on all three charts is composed of positions held by HSBC USA.  As the price of gold has risen, the dollar value of the derivatives written has also risen, which is why chart #1 and chart #3 have the left-to-right shape they do.

As interesting as that chart is, the dollar figures don't tell you a lot.  But if you convert the dollars to tonnes of gold that the amounts represent, then you get a chart that looks like the one below---and it's much more meaningful.  It shows the monstrous derivatives positions held by the banks when gold hedging/forward selling was at its peak---and as the gold miner's hedge book has been closed out over the years, the derivatives written against what left of the gold hedge book has declined as well.  And, as Nick Laird just mentioned---"With the hedge book basically unwound, what's left are the derivatives that are not involved in hedging".  Remember that it cost Barrick Gold $10 billion to extricate itself from its hedge book loses.  Virtually all of the $10 billion went to JPMorgan Chase, as they were Barrick's bullion bank.

Back on June 27, 1999---when gold hedging/forward selling was at its peak, silver analyst Ted Butler wrote an essay entitled "The Death of Hedging".  It falls into the must read category---and I urge you to read it now before continuing, as it will help you understand these OCC charts a little better.

The third chart is similar to the first one.  The OCC doesn't provide a break-down of derivatives held for silver, platinum and palladium separately, but just puts them all in one category---and for that reason you can't have a tonnage chart like the one for gold above, as all these metals are at different prices---and tonnages mined.

The take-away on all this, at least in the broad strokes, is that '3 or less' U.S. bullion banks control every aspect of the precious metal markets, with JPMorgan firmly in charge.  They run the show on the Comex---and in the OTC derivative market that these charts represent.  Yes, there are derivatives written by other foreign banks and probably some large brokerage firms as well [Morgan Stanley comes to mind], but they are spread out over such a large number of players that they're overall impact is minimal.  It's JPMorgan et al all the way, both at home and abroad.

I have very few stories for you today, which suits me just fine as I'm at least two hours behind where I normally am at this time of morning.

¤ The Wrap

I think it is absolutely crazy that we have allowed our markets to evolve into such a state where a small (less than 100) group of specialized trading entities (mostly not trading their own money) are determining prices for the rest of the world. Some will be quick to say that the COMEX or CBOT are not the only markets in the world, but that’s naïve. These markets set the price of metals and grains, period. Everything is based off these exchanges. This creates problems, since the traders setting the price (the technical funds) are completely distinct and separate from the real producers and consumers of commodities.

What makes technical funds technical is that they are only concerned with price change and not anything else; this is what separates them from the real producers and consumers who must contend with mining costs and profit margins. The technical funds only consider the price and not the underlying fundamentals. This is what makes the stories about pending economic weakness being signaled by lower copper prices ironic, because those who are creating the lower prices (the technical funds) don’t consider economic activity at all. - Silver analyst Ted Butler: 26 March 2014

Today's pop "blast from the past" is one I've posted before, but it's been a few years.  It's a tribute to George Harrison of the Beatles.  He was no longer with us when this tribute was performed---but his son Dhani was---and he looks just like his dad! The tune is a classic---as are the all-star musicians.  Prince is awesome---and the link is here---and it's definitely worth the trip!

Today's classical "blast from the past" is a composition by little-known composer and piano virtuoso Henry Charles Litolff.  He was born in London in 1818---and died near Paris in 1891.  About the only music of his that still survives to this day is the Scherzo from his Concerto Symphonique No. 4 for piano and orchestra in D minor, Op. 102.  It's a virtuoso piece that shows up mostly on recordings these days---and hardly ever in the concert hall.  Too bad, as it's extraordinary---and the crowd just eats it up.  The link to this 8:21 minute 2006 recording posted over at the youtube.com Internet site, is here.  Enjoy.

Another day with not much happening from a price perspective anywhere on Planet Earth yesterday.  I've already discussed my COT/price concerns at length in my commentary on the Commitment of Trader Report at the top of today's column, so I shall not revisit the issue here at any length.

Once again I'll post the 6-month gold and silver charts to indicate how this engineered price decline is proceeding.

Can we go lower in price from here?  You betcha---but that's entirely up to JPMorgan et al.  Can we rally strongly from here?  You betcha---that's also entirely up to JPMorgan et al.  Forget supply---and forget demand.  As Ted Butler has been saying for decades---and I happily agree---it's the technical funds being run up and down through buy and sell stops that sets the price---and when when JPMorgan wills it, the engineered price decline begins and they ring the cash register for fun, profit---and price management purposes.

That's not just for all four precious metals and copper, it's all Comex-traded commodities that "da boyz" have hijacked.  How did it come to this?

But that's only part of the attempt by the powers that be to keep the whole world's economic, financial and monetary system from coming unglued---and they can't keep it up forever.  But when the end comes, it will probably be ugly.  At that time the precious metal will shine, but the world we live in after that will probably leave a lot to be desired.

And on that happy note, I'm done for the day---and the week.

Enjoy what's left of your weekend---and I'll see you here 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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