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Tuesday, May 6: Today in Gold and Silver

Stocks in this article: GLD SLV

NEW YORK ( TheStreet) -- The gold price didn't do a thing at the open in New York on Sunday evening.  But the price went vertical around 9 a.m. Hong Kong time---and "da boyz" had to throw a decent amount of Comex paper at it to stamp out that rally, such as it was.  From that point the price traded flat until the 8 a.m. London open---and at that time the price began to rally a few dollars more.  From it's 10 a.m. BST high, it got sold down a few bucks until 1 p.m. BST.  The smallish rally that developed at that point got capped shortly after 8:30 a.m. in New York---and a big chunk of what little gains there were, had vanished by shortly before noon EDT.  The price traded almost ruler flat from there into the close of electronic trading at 5:15 p.m. in New York.

The lows and highs were recorded by the CME Group at $1,299.70 and $1,315.80 in the June contract.

Gold closed in New York yesterday at $1,309.70 spot, up $9.10 from Friday's close.  Net volume was pretty light at 96,000 contracts, so you shouldn't read too much into yesterday's price action.  However, having said that, about 15% of that volume occurred in a one hour period beginning when gold spiked at 9 a.m. Hong Kong time.  That was JPMorgan et al showing up as short sellers of last resort once again.

The silver price action was similar---and the 8:30 a.m. EDT price capping even more obvious in silver than it was in gold---with most of London's gains disappearing by 10:15 a.m. in New York trading.  The silver price didn't do much after that.

The high tick in the July contract yesterday was reported as $19.745---and the low tick was recorded as $19.485.

Silver finished the Monday session at $19.585 spot, up only 12.5 cents from Friday's close.  Volume, net of May and June, was decent at 28,500 contracts.

It should be obvious that both gold and silver would have finished much higher in price if allowed to do so.

The platinum price chart looks similar to both gold and silver---but after having its rally capped in Far East trading on their Monday, palladium managed to rally a bit into the close.

With the strike in South Africa now in its 15th week, one would think that supply/demand fundamentals would be more obvious that they are.  But it should be just as obvious that JPMorgan et al are keeping their respective prices in check as well.

The dollar index did absolutely nothing yesterday---and finished flat at 79.50.  Here's the current chart, which includes Friday's activity.

The gold stocks opened up a bit over a percent---and then began to slide right away---hitting the unchanged mark just minutes before noon in New York.  They rallied a bit from there---and manged to close in the black, as the HUI finished up 0.36%.

The silver stocks also opened up a percent, but they slid a lot more---falling to their lows by around 11:30 a.m. EDT---and the tiny rally from that point vanished by the close.  Nick Laird's Intraday Silver Sentiment Index closed down 0.83%---despite the fact that silver finished in positive territory.

The CME Daily Delivery Report for Monday showed that 11 gold and 9 silver contracts were posted for delivery within the Comex-approved depositories on Wednesday.  Not much to see here.

While I was away, First Day Notice for delivery in the May silver contract came and went---and here are the hi/low lights.  There were 1,658 silver contracts posted for delivery, of which JPMorgan posted the lion's share with 1,072 contracts out of it's in-house [proprietary] trading account---about 65% of the total.  Jefferies, Scotiabank---and JPMorgan out of its client account---posted 336, 184 and 66 contracts respectively.  The long/stoppers were Credit Suisse, Jefferies, ABN Amro, HSBC USA and JPMorgan out of its client account.  The contracts involved were 353, 332, 187, 151 and 232 respectively.

In gold on the same day, the big short/issuer was Scotiabank with 407 contracts---and the largest long/stopper was JPMorgan out of its in-house [proprietary] trading account with 421 contracts.  In total, there were 428 gold contracts issued, so you can see that it was two of the biggest Comex crooks involved here.

On Day 2 of the silver delivery month JPMorgan out of its client account posted 119 contracts for delivery---and Scotiabank stopped 63 of those.

On Day 3 there was little action in silver---but in gold, Scotiabank issued 160 gold contracts and JPMorgan stopped 149 of them in its in-house [proprietary] trading account.

There were no reported changes in GLD yesterday---and as of 10:16 p.m. EDT yesterday evening, there were no reported changes in SLV, either.  But when I was editing today's column at 3:55 a.m. EDT this morning, I noted that SLV had reported receiving another big chunk of silver.  This time it was 2,262,091 troy ounces.  There was also big in/out action in both ETFs while I was away---and I'll just steal the goings-on/commentary on this from silver analyst Ted Butler last Saturday, as I don't have the time to wordsmith this on my own right now.

Another hard metal fact at odds with depressed silver prices, both on an absolute and relative basis is the movement in the metal holdings in the big silver ETF, SLV. On Wednesday, April 30th, I described my surprise at the big 3.3 million oz withdrawal following the strong, high volume price action the previous week. I was actually more surprised by an even larger 4.2 million ounce deposit into SLV following a high volume price decline earlier this [past] week. Has the world gone mad – metal withdrawals on price strength and deposits on weakness?  I think there is an alternative explanation in conformity with my previous findings.

Previously, I explained the big withdrawal on price strength as related to a large buyer’s desire to avoid hitting SEC reporting requirements that a 5% share ownership would mandate. Converting shares to metal accomplishes the avoidance of reporting. Having reduced SLV share ownership (but not silver metal ownership), the large buyer was free to buy shares again without having to report to the SEC.

Since there are more than 347 million shares of SLV outstanding, a 5% stake would amount to more than 17 million shares. As long as a large entity keep its share ownership below that level, it would not have to report under the 5% mandate. I believe the previous withdrawal reduced the large buying entity’s share ownership sufficiently lower that it was able to buy more than 4 million new shares without breaching the 5% reporting cap. If there is an alternative explanation, it escapes me.

When considering the activity in GLD, the big gold ETF, the activity in silver stands out even more. Where the SLV had a huge deposit on price weakness this [past] week, GLD has had nothing but the steady drip of metal withdrawals on price weakness. I don’t believe GLD will be significantly drained further, but the big deposit in SLV does stand in stark contrast and points to someone desiring to own more silver and knowing that can be more easily accomplished by manipulating prices lower.

Of course the 2.26 million troy ounces posted on the iShares Silver Trust website late last night does nothing to demystify the situation.

Before leaving SLV---here the weekly report [from last Thursday, May 1] from Joshua Gibbons, the " Guru of the SLV Bar List".  Here's what he had to say:  "Analysis of the 30 April 2014 bar list and comparison to the previous week's list---3,362,808.5 troy ounces were removed (all from Brinks London). No bars were added or had serial number changes.

The bars removed were from Degusa (1.1M oz), Handy Harman (0.8M oz), Noranda (0.5M oz), Asarco (0.2M oz) and 15 others.  As of the time that the bar list was produced, it was overallocated 705.1 oz.  All daily changes are reflected on the bar list."  The link to Joshua's website is here.

The U.S. Mint reported the last three sales days of April as follows.  They sold 7,000 troy ounces of gold eagles---3,500 one-ounce 24K gold buffaloes---and a whopping 915,500 silver eagles.

The April sales stats are as follows:  38,500 troy ounces of gold eagles---17,500 one-ounce 24K gold buffaloes---and 4,590,500 silver eagles---along with 1,200 platinum eagles.  Based on these numbers, the silver/gold sales ratio for April works out to 82 to 1.  That's amazing!  Year-to-date the silver/gold sales ratio from the U.S. Mint works out to 70 to 1.

And lest I forget, so far in May, the U.S. Mint has sold only 500 ounces of gold eagles---1,500 one-ounce 24K gold buffaloes---and 171,000 silver eagles.

I'd been checking the Royal Canadian Mint's website every day [including weekends] for the last couple of months waiting for their 2013 annual report and, of course, it came out last Friday while I was on holidays.

Here, in a nutshell, is what they said in the Management Discussion and Analysis section on Page 25 of that report--- Sales of bullion exceeded the historic records established in 2011. Sales of Gold Maple Leaf (GMLs) coins increased 47.7% to 1,140,400 troy ounces compared to 771,900 troy ounces in 2012 while sales of

Silver Maple Leaf (SMLs) coins increased 55.8% to 28.2 million ounces from 18.1 million ounces in 2012. The

Mint continues to maintain a leading market share of the global investment bullion coin market.

This is what Ted Butler had to say about it on Saturday---and I'm in full agreement with his assessment of the situation:

However, a new report on sales of Silver Maple Leafs from the Royal Canadian Mint indicates surging silver sales are not confined to U.S. coins, as new records were established in Canadian [bullion] coins in 2013. As was the case with Silver Eagles, it does not appear that plain vanilla retail buying was responsible for the surge in Silver Maple Leafs. By process of elimination, that leaves a big buyer being behind the silver coin sales surge.

Over at the Comex-approved depositories on Friday, they reported receiving 110,056 troy ounces of gold---and all of that went into the vault over at HSBC USA.  The link to that activity is here.

In silver, 777,994 troy ounces were reported shipped in---and only 65,618 troy ounces were shipped out.  All of the activity was confined to CNT and Scotiabank.  The link to that activity is here.

That was only last Friday's activity---and I made no attempt to keep up with the in/out activity in these warehouses while I was gone, so [with permission, of course] I'm borrowing more commentary from Ted's weekly review to his paying subscribers that he posted on his website on Saturday.

Let’s look at the turnover or movement of metal into and out from the COMEX-approved silver warehouses. Please keep in mind that this is as physical (and not paper) as it gets; every bit a reflection of actual metal as would be the mining and fabrication of silver. This [past] week (after two weeks of “average” movement), more than 5 million oz of silver flowed into and out from the various COMEX warehouses, as total inventories fell again, to 173.1 million oz, down a significant 3 million oz for the week. Again, it’s not the ocean, it’s the motion.

While I am virtually alone in my focus on this easily verifiable daily data series, I remain convinced of its importance and the message it is sending. No one moves this quantity of metal without good reason. This [past] week’s 5 million oz turnover equates to 250 million oz on an annual basis, a truly staggering amount. As I explained [last] Wednesday, after subtracting the amount of silver that is owned by investors (and therefore would not be involved in the turnover), there may be a core working inventory of 35 million oz or much less in the COMEX silver warehouses. This week’s turnover is staggering compared to total inventories; compared to the true working inventory, it is almost beyond description. Tightness, hand to mouth supply conditions or any other depiction is inadequate to explain this phenomenon. That this physical turnover exists against a backdrop of chronically weak prices is other-worldly; with that other world being price manipulation in COMEX futures trading.

You're going to get the Reader's Digest version of last week's Commitment of Traders Report, but you're not missing much, as it was a fairly quiet week.

But before getting to that, I made an error in silver in the COT Report from the prior week in my column on April 26.  I incorrectly stated that the Commercial net short position in silver had increased by 521 contracts.  In fact it had decreased by 521 contracts.  I apologize for that mistake---and I thank Connecticut reader Marty Wetter for pointing out the error of my ways.

And now for the COT Report for positions held at the close of Comex trading on Tuesday, April 29.  In silver, the Commercial net short position increased by only 583 contracts, or 2.92 million ounces---more than negating the prior week's small improvement  The Commercial net short position now stands at 116.8 million troy ounces.  Ted says that JPMorgan's short-side corner in the Comex silver market appears unchanged at 20,000 contracts, or 100 million troy ounces.

In gold, the Commercial net short position increased by a healthy 6,645 contracts, or 664,500 troy ounces.  The Commercial net short position now stands at 9.72 million troy ounces.  Ted mentioned that JPMorgan's long-side corner in the Comex gold market is also unchanged at around 38,000 contracts, or 3.8 million troy ounces of gold.

Here are a couple of comments about last week's COT Report that I stole from Ted as well.

The biggest difference between gold and silver is that the 8 largest shorts in gold are holding an historically low short position, while the big 8’s silver short position is historically large at more than 320 million oz. The difference can be explained by JPMorgan having been successful in getting to be the biggest long in gold, while remaining the largest short in COMEX silver. The fact that the actions of one bank can explain the difference also makes it easy to point to JPMorgan as the prime market crook in COMEX gold and silver.

Under the hood, there also was a surprise with technical fund positioning in silver (as was the case in gold) in that they increased their gross short position by more than 1800 contracts. This is unabashed good news as it puts the technical fund gross short position over 30,000 contracts and close to the historical high water mark. Aside from the role that JPMorgan plays, a real standout in COMEX gold and silver is the technical funds’ gross short positions in each market.

In the current disaggregated COT report, the technical funds’ gross short position in silver is actually slightly larger than these funds’ gross short positions in gold; something that I believe has not occurred previously. It’s not so much that the gross short position of the tech funds is slightly larger in silver than it is in gold, but more the fact that COMEX gold is two and a half times or more the size of the COMEX silver market in contract terms. For silver to be larger in any category compared to gold must be considered highly unusual.

I have the usual number of stories today---and I hope you can find time to read the ones that interest you.

¤ The Wrap

The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists. - Earnest Hemingway: " Notes on the Next War: A Serious Topical Letter" first published in Esquire (September 1935)

Except for the appearance of the sellers of last resort in gold in early Far East trading on their Monday morning, it was pretty quiet in the precious metals yesterday.  It's obvious that serious interest in any of the four precious metals, despite the overwhelming demand fundamentals, is being held in check by the actions of JPMorgan et al in the Comex futures market.  There is enough bad news out their on the economic, financial and monetary scene to sink a good-sized aircraft carrier, but this is not being allowed to manifest itself in the price of the precious metals.

Ted Butler is of the opinion that we are, one again, "locked and loaded" for an upside price move in silver---and most likely all the other precious metals as well.  I totally agree.  But the age-old question always rears its ugly head at times like this---and that is whether the sellers of last resort will put in an appearance when these rallies begin.  So far, with the last three business days being the latest examples, even the slightest attempt by any of them to break free have been met with resolute selling by JPMorgan et al---and I have to wonder if these rallies, when they finally do manifest themselves, will meet the same fate or not.  Time will tell.

But one of these days it certainly will happen---and as I've speculated before, it will most likely come on a price reset of biblical proportions that will be concurrent with some other event, so that the 'powers that be' can point at it and say that that was the reason.  The repricing will be hidden by a false flag operation of some description---and certainly won't happen as a result of admitted wrongdoing.  All bets will be off after that.  All the "stuff" that is going on behind the scenes buried deep within the Commitment of Traders Report, the Comex warehouse stocks, SLV and GLD inventories---and silver eagle/silver maple leaf coin sales, is [I suspect] just the table being set in advance for just this kind of event by the powers that be that know what's coming.  Only the day of reckoning is unknown.  And as I've also stated before, when it does occur, it will be ugly.

I mentioned in my column dated April 25 that I was " quite comfortable putting my marker down" that we'd seen the low for silver [and gold] prices for this move down that occurred on April 24.  I still am, but "da boyz" outdid themselves on May 1 while I was away and took the silver price down even lower than that.  The low tick on that date set a new low that was only bested by the low that occurred way back at the end of June 2013.  Can we go lower from here?  I suppose, but there isn't much left for "da boyz" to pick up in the way of long liquidation or new shorting by the technical funds or small traders.  There's still room left in gold to the downside if they decide to push the issue---but can they, or will they?  Beats me.

Here are the 3-year charts for both silver and gold so you can see the macro picture.  But don't forget that these charts are a total fabrication---a paint-the-tape job by JPMorgan et al from one end to the other.  They really don't mean much.  All that matters is what the sellers of last resort do when the technical funds begin to cover their monster short positions that they've been suckered into placing.

Not much happened during the early going in Far East trading on their Tuesday, but rallies of some description began around 1 p.m. Hong Kong time---and are still ongoing now that London has been trading just under an hour.  Volumes had been very light up until the rallies began, but have picked up a bit in both gold and silver.  But the price action, along with the associated volume, is nothing to get overly excited about at this point.

Today, at the close of Comex trading, is the cut-off for this Friday's Commitment of Traders---along with the companion May Bank Participation Report---which is compiled from data extracted from the COT Report.  And as I say at this juncture every month, it's the one time we see what the world's bullion banks are up to in general---and JPMorgan Chase in particular.

And as I hit the send button on today's efforts, I note that the tiny rallies in all four precious metal vanished about an hour after the London open---and only silver is clinging to a small gain.  Gold is unchanged---and platinum and palladium are both down from their closing prices in New York yesterday.  Volumes are still on the lighter side, except for silver, which is now up quite a bit.  Based on the first two hours of the London trading day, it appears that nothing has changed, as "da boyz" are still there.

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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