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Tuesday, April 22: Today in Gold and Silver

NEW YORK (TheStreet) -- [Note: After three years without a break, I'll be taking some time off.  There will be no Gold and Silver Daily next week.  Ed]

The gold price got sold off a few dollars the moment that trading began at 6 p.m. in New York on Sunday evening.  Then two hours later at exactly 8 a.m. in Hong Kong on their Monday morning, a rally began that got met by usual not-for-profit sellers the moment it broke above $1,300 spot---and two hours later, gold hit its low tick of the day.  Volume by lunchtime in Hong Kong was north of 32,000 contracts, a spectacular amount. From there the price began to recover, but at a snail's pace---and the rally that began at the 8:20 a.m. EDT Comex open, ran into the usual sellers of last resort.  The snail's pace rally then continued into the close.

The CME Group recorded the high an lows ticks as $1,302.50 and $1,281.80 in the June contract.

Gold closed in New York on Monday afternoon at $1,290.30 spot, down only $4.30 on the day.  Volume, net of April and May, was 104,000 contracts---and as I pointed out above, over 30% of that occurred before lunch in Hong Kong.

The silver price action was a virtual carbon copy of what happened to the gold price.  The low was in at 10 a.m. Hong Kong time, with a secondary low at 1 p.m. BST London time---20 minutes before the Comex open---and the subsequent rally from there got chopped off at the knees minutes after 9 a.m. EDT in New York.  From there it got sold down a bit---and then traded flat from about 10:30 a.m. until a smallish rally began at 3:45 p.m. in electronic trading.

The high and low ticks were recorded as $19.705 and $19.23 in the May contract---an intraday move over a bit more than 2%.

Silver finished the Monday trading session at $19.44 spot, down 21 cents from Thursday's close.  Net volume was pretty light at only 22,000 contracts. Gross volume was 32,000 contracts, with an incredible 11,000 of those contracts being traded by noon in Hong Kong.

Platinum's vertical price spike at the Sunday night open immediately ran into a wall of sellers of last resort---and that forced the price to chop around within a five dollar range of its Thursday close, even though it was obvious that the price want to rally strongly as well.  The Far East low came shortly after 10 a.m. Hong Kong time---and from there it chopped its way higher until shortly before 10 a.m. BST London time.  The selling pressure began once again at that point---and the price went into a slow decline until 12:30 p.m. in New York.  From there it traded sideways, with three attempts to force the price lower after that, but all of them failed.

Palladium took off to the upside at the open on Sunday night as well---but the moment it got a sniff of the $800 spot price, a not-for-profit seller was there to put a quick end to that rally attempt.  By the Comex open, palladium was down a bit more than a percent.  But the HFT boyz showed up at, or just minutes after, the London p.m. gold fix---and palladium got creamed for another 2% in very short order.  From there it rallied a bit into the close.

The dollar index closed at 79.85 late on Thursday afternoon in New York last week.  And even though the gold markets were closed, the dollar index did trade on Friday, but didn't do much.  It got as high as 79.92 in early Far East trading on their Monday morning---but began to sell off almost immediately, with the 79.80 low of the day, such as it was, coming at 10 a.m. in London.  From there the index 'rallied' as high as 79.98 shortly before noon in New York---and slid a hair into the close.  The index closed at 79.95---up ten basis points from Thursday's close, but the scale of the chart makes the 'action' appear far more impressive than it really was.  However, it is interesting to note that the rally---such as it was---failed to break back above the 80.00 mark.

As has been the case lately, the gold stocks opened in positive territory, only to get sold down into the red almost right away---and as you can tell, this was the procedure again yesterday.  The low of the day came shortly after 1 p.m. EDT in New York---and the HUI rallied for the remainder of the day, cutting its loss to only 0.23%.

And as has also been the case, the silver stocks stunk up the place once again.  Even though the HUI and Nick Laird's Intraday Silver Sentiment Index had the same chart pattern, the silver stocks closed down 1.23%.

The CME's Daily Delivery Report showed that 68 gold and zero silver contracts were posted for delivery within the Comex-approved depositories on Wednesday.  Jefferies was the only short/issuer of note with 66 contracts---and it was the usual two suspects as long/stoppers---JPMorgan and Canada's Scotiabank.  The link to yesterday's Issuers and Stoppers Report is here.

Since I'm talking about delivery, there are still a huge number of silver contracts in the May contract---58,529 as of this writing---that have to been sold or rolled by the end of next Monday's trading day.  Whoever isn't out by that time is obviously standing for delivery.  But with only five trading days left between now and then, the activity in the May contract month will be fast and furious up until then.

Another day---and another withdrawal from GLD. This time an authorized participant took out 96,327 contracts.  And as of 7:20 p.m. EDT yesterday evening, there were no reported changes in SLV.  But when I checked back there at 9:35 p.m.----I was astonished to discover that an authorized participant had deposited 1,729,976 troy ounces.   Based on current price activity, this deposit must have been used to cover an existing short position, as no other explanation is possible under the circumstances.

The U.S. Mint had a sales report.  They sold 691,500 silver eagles---and that was it.

Over at the Comex-approved depositories on Friday, they reported receiving 16,557 troy ounces of gold---and shipped out 32,092 troy ounces.  All the activity was at Brink's, Inc. and HSBC USA.  The link to that is here.

There wasn't much activity in silver, as nothing was reported received---and only 104,747 troy ounces were shipped out the door.  All the activity was at CNT---and the link to that activity is here.

The Commitment of Traders Report [for positions held at the close of Comex trading on Tuesday, April 15] was more or less what I was hoping to see---as it appeared most, if not all, of the volume from Tuesday's big price hit in both gold and silver showed up in the numbers.  There will most likely be some spill-over into this Friday's report, but it shouldn't be a huge amount.

Because I didn't have a column on Saturday, I'm "borrowing" a decent amount of stuff from Ted Butler's COT commentary to his paying subscribers on the weekend, which is a luxury I can't remember ever enjoying before.

In silver, the Commercial net short position declined by a chunky 5,611 contracts, or 28.1 million troy ounces.  The Commercial net short position now sits at 116.5 million troy ounces.  Ted says that JPMorgan covered 1,700 short contracts---and pegs JPMorgan's concentrated net short position around 20,000 contracts, or 100 million troy ounces.  JPMorgan's short position represents about 86% of entire short position in the Commercial category.

Ted mentioned last week that there was obviously a 9-10,000 contract "value investor" embedded on the long side of the Managed Money/Technical Fund/Non-Commercial category that has been there since October of last year---regardless of what was happening price wise---up or down.  Even after last Tuesday's big sell-off, that long position was still intact in this report.

Unless "da boyz" can force the holder[s] of this position to liquidate, Ted feels that the bottom in silver is within a handful of contracts of being in---and that should most likely be confirmed by this coming Friday's COT Report.

In gold, the Commercial net short position declined by 14,138 contracts, or 1.41 million ounces.  The Commercial net short position is now down 87,605 contracts, or 8.76 million troy ounces.  Ted said that the eight largest Commercial traders bought back 3,200 contracts---and their net short position is now the lowest in nearly a year---and that JPMorgan purchased "up to" 2,000 new long contracts---and their long-side corner in the Comex gold market is up to 38,000 contracts, or 3.8 million ounces.

About gold's current situation, silver analyst Ted Butler had this to say---"Looking under the hood in the disaggregated report at the managed money category of gold and comparing the current technical fund position with historical levels, there doesn’t appear to be much room for further technical fund long liquidation; no more than 5,000 to 10,000 contracts of gross long liquidation compared to previous record low readings."

Ted also said that "The concentrated net short position in silver is the largest of any regulated commodity by a wide margin at the equivalent of nearly 320 million troy ounces, or 40 percent of world's yearly silver production---and it remains an oddity that the concentrated short position in Comex gold is closer to its historical low, while the concentrated short position in silver is nearer the high."

Here's Nick Laird's "Days of World Production to Cover Comex Short Positions" chart updated with Friday's numbers.  In silver, JPMorgan's current Comex short position is 50 days of world silver production in both the red and green bars.  How's that for concentration?

Ted's comments about the oddity of the the short position of the Big 8 in silver and the Big 8 in gold being at such extremes is very noticeable in this chart.

Here's another chart from Nick Laird.  This is for silver only---and is the same data that appears in the "Days to Cover" chart above.  The only difference being that it shows the short positions of the Big 4 and Big 8 traders going back seven years---and not just the current week as the "Days to Cover" chart does.  And as Ted has pointed out, as silver's price has declined, the short positions of the Big 4 and 8 traders has blown out as well, which makes no sense at all.  It's exactly the opposite in gold---and I'll have those charts for you tomorrow.

Here's a chart that skipped my mind in my Friday column.  Since the 20th of the month fell on a weekend, The Central Bank of the Russian Federation updated their website with their March data---and it showed no change in their gold reserves which still sit at 33.5 million troy ounces.  Here's Nick Laird's most excellent chart.

Since it was four days since my last column, I have a large number of stories for you today.  I've already hacked and slashed more than I wanted to, so I'll happily leave the final edit up to you.

¤ The Wrap

There is potentially more substantial capacity for new technical fund short gold contracts to be added before we hit historical extremes. Therein lies the only real threat to lower gold prices, namely, can the commercials lure the technical funds onto the short side of COMEX gold? I don’t have the answer to that question but I can assure you that if we do go lower in the gold price in the immediate future, this will be the only explanation for the decline. - Silver analyst Ted Butler: 19 April 2014

Well, it was pretty much the usual hatchet job by JPMorgan et al in the precious metal markets again yesterday.  Gold, as Ted Butler mentioned, is still 5-10,000 contracts off its low point---and it remains to be seen if they can, or will, finish the job in the days ahead.  I noted that despite the pounding that silver took in early Far East trading on their Monday morning, that it did not take out its Thursday low---and as Ted has said, that metal is pretty much done to the downside, unless "da boyz" can blow out that 9-10,000 long position in the Managed Money category.

And as I noted further up, there are still about 58,000 silver contracts still open in the May contract, so there have to be some serious roll-overs between now and the end of trading next Monday.  I'll be interested in seeing what sort of price action accompanies that activity.

Here are the 6-month charts updated with Monday's data.

With all the 'stuff' going on in the world at the moment, it's amazing to watch how easily that JPMorgan et al can still control world prices in all four precious metals.  The world's financial, economic, monetary---and now political---situations are well into the ditch.  And that doesn't include the ongoing strike in South Africa which is fast approaching its 11th week.  It's obvious that if the powers that be weren't ridding shotgun on these market 24/7---that the rush to precious metals would be on in earnest.  This is obviously a situation that they don't want to happen---and if there is a way out, it would be the simultaneous repricing of all four precious metals at a time when no one was able to react.  The Easter weekend would have been a terrific time fore that, but if it's in the cards at all, it's obvious that the event is still in the future at some point.

Not much happened in Far East trading on their Tuesday---and most of the lows of the day, at least up until now, came in early afternoon trading Hong Kong time.  I note once again that silver did not breach its Thursday low.  Once these lows were in, all the metals rallied a bit going into the London open, but are now all of their highs of the day.  Both gold and silver are down a bit from Monday's New York close---and platinum and palladium are up.  Gold and silver volumes are pretty light for this time of day---and light years away from where they were this time yesterday.

Today is the cut-off for this Friday's Commitment of Traders Report.  The previous Tuesday we had a huge engineered price decline in both gold and silver, but most of that volume/price data was in last Friday's COT Report---and whatever data didn't make it by the cut-off will be in this Friday's report.  I'm hoping that we won't see a repeat of a week ago during the New York session today, but you just never know with both options and futures expiry coming up hard in the next day or so---and still more down-side work in the gold price left unfinished.

And as I hit the send button on today's column at 5:30 a.m. EDT, I see that gold is rallying a bit---and is a dollar or so above yesterday's close in New York---and silver is back to yesterday's closing price as well.  Platinum and palladium are still up on the day. Gold volume is about 'normal'---with virtually all of it in the current front month. 

Net volume in silver is not very heavy, with decent roll-over activity already in progress.  The dollar index has rolled over a bit---and is down 6 basis points at the moment.

I haven't a clue what the rest of the trading day will be like, but I'll be watching the trading activity for the rest of the week with great interest.

That's all I have for today, which is more than enough---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.

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