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Thursday, May 15: Today in Gold and Silver

Stocks in this article: GLD SLV

NEW YORK ( TheStreet) -- The gold price drifted a few dollars lower in Far East trading, but was back to unchanged by the 8 a.m. BST London open.  Then, about 15 minutes after that, the price began to rally, hitting its high of the day at 8:30 a.m. EDT---ten minutes after the New York open.  Then JPMorgan et al stepped in---and that was it for the day.

The low and high tick were reported by the CME Group as $1,291.60 and $1,309.20 in the June contract.

The gold price finished the New York trading day at $1,305.70 spot, up an even $11.00 from Tuesday's close.  Net volume was 100,000 contracts, which wasn't a lot considering the price action.

It was the same story in silver, with the low and high coming at the same times.  The moment that the price broke above the $20 mark at 8:30 a.m. EDT, it ran into the usual sellers of last resort---and then got sold down to its New York low at 12:30 p.m.---and didn't do a thing after that.

The low and high prices were recorded as $19.51 and 20.005 in the July contract.

Silver finished the Tuesday session at $19.745 spot, up 21.5 cents from Wednesday and, like gold, it would have closed materially higher if allowed to do so.  Volume, net of May and June, was very heavy at 51,500 contracts.  There was 6,200 contracts worth of activity in the September and December delivery months---and whether that was roll-over from the July delivery month [a little early for that, one would think] the volume was still over the moon.

The platinum price rose slowly but steadily for the entire Wednesday trading session---and only ended at the close of Comex trading.  Palladium began to rally shortly before before Zurich opened---and obviously ran into a seller of last resort shortly before 1 p.m. EDT in New York, as the price had all the appearances of going vertical in what was quickly turning into a "no ask" market.  Here are the charts.

The dollar index closed late on Tuesday afternoon in New York at 80.12---and didn't do a thing for the entire Wednesday trading session.  But I did get the impression that the index was micromanaged all day long to prevent it from diving below the 80.00 mark.

The gold stocks gapped up at the open---and then sagged a little as "da boyz" sold the gold price down to its 12:30 p.m. EDT low.  Then they rallied anew, only to get sold down one more time starting around 2:30 p.m. in New York.  The HUI closed up 1.01%.

The silver equities rallied hard at the open---and then got sold down to unchanged by 10:30 a.m. in New York.  But by 2:30 p.m. had gained back all of their loses and were back at their high of the day.  But then, like gold, they got sold down into the close---and Nick Laird's Intraday Silver Sentiment Index closed up only 0.52%.

The CME Daily Delivery Report showed that 1 gold and 55 silver contracts were posted for delivery within the Comex-approved depositories on Friday.  Once again it was Jefferies as the short/issuer with 49 contracts, with "all the usual suspects" as long/stoppers once again.  The link to the Issuers and Stoppers Report is here.

I note from the CME's website that there are about 450 silver contracts still open in the May delivery month---and that's after subtracting the 85 deliveries today and the 55 deliveries posted for tomorrow.  It will be interesting to see who the issuers and stoppers are on these remaining contracts as the delivery month winds down.

There were no reported changes in GLD---and as of 9:27 p.m. EDT yesterday evening, there were no reported changes in SLV, either.

There was no report from the U.S. Mint yesterday.

However, I received an e-mail from California reader John DeWeese on Tuesday evening regarding the U.S. Mint's eagles sales for April---and here's what he had to say:  "I just noticed that the U.S. Mint page changed their April total for Silver Eagles.  In your May 6th issue, after coming back from vacation, you reported that number to be 4,590,500---and my own count kept at troyozgold.com concurred with yours as well."

"But now I see that the U.S. Mint page only shows 3,569,000.  Somehow, they decided that they didn't sell over a million Silver Eagles.  Any idea what actually happened"

I asked silver analyst Ted Butler if he had an explanation for this---and here's what he had to say about it in his mid-week column to paying subscribers yesterday afternoon: " The Mint reported shockingly higher sales of Silver Eagles [on Tuesday], so much so that it appears to me that perhaps a clerical reporting error is involved. (It appears the Mint added an extra million coins in May and subtracted that amount from April sale). Regardless, sales of Silver Eagles year to date (the best measure) have expanded to more than 104 to 1 compared to ounces of Gold Eagles sold. The data will undoubtedly change, but at the time of this article, there were 20.71 million Silver Eagles sold year to date vs. 198,500 oz of Gold Eagles."

There was no in/out movement in gold over at the Comex-approved depositories on Tuesday---and not much activity in silver, either---as nothing was reported received, and 126,763 troy ounces was shipped out.  The link to the silver activity is here.

I have a pretty decent number of stories for your reading pleasure again today---and I hope you find some of them of interest.

¤ The Wrap

The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation. - Vladimir I. Lenin

I was happy to see some positive price action in the precious metal yesterday, even though it was obvious that gold and silver price got capped 10 minutes after the open in New York---and the same thing happened to palladium shortly before 1 p.m. EDT as well.

Gold volume was pretty light overall, but as I mentioned before, the silver volume was really quite high---roll-overs notwithstanding.  I don't know what to make of that.  Not that it matters really, as yesterday's price action won't be in tomorrow Commitment of Traders Report anyway, but it's still worth noting, as the price was obviously capped before it could break back above the $20 spot price mark.

Here are the 6-month charts for both metals once again.  As you can see in gold, the price broke above---and closed above---its 200-day moving average.  But it was obviously stopped in its tracks before it could break above the 50-day moving average, which it would have done with ease if the usual not-for-profit sellers hadn't shown up when they did.

The 6-month silver chart shows that not only was the silver price prevented from breaking above $20 the ounce, but it was also prevented from breaking above its 50-day moving average as well.

There certainly wasn't much going on in Far East trading on their Thursday morning---and no follow-through whatsoever on any of the precious metals after yesterday's rallies in London and New York.  London has now been open for half an hour as I write this paragraph at 3:33 a.m. EDT---and all four precious metals are currently below their closing prices in New York yesterday.  Gold and silver volumes are on the lighter side---and the dollar index, which hadn't done a thing during Far East trading, tacked on 11 basis points the moment that London opened.

A couple of times a year I post what I consider to be the three most important paragraphs on the subject of price management when it comes to precious metals in particular---and all physical commodities in general.  It's from Peter Warburton's classic essay " The Debasement of World Currency:  It is Inflation, But Not As We Know It".  It was posted on the prudentbear.com Internet site way back in April of 2001---and it's still relevant today, than it was back then, if not more so.

If you haven't read them before, they're a must read---and if you have read them before, it's time for a refresher.  They're under a sub-heading that reads " Central banks are engaged in a desperate battle on two fronts"---

"What we see at present is a battle between the central banks and the collapse of the financial system fought on two fronts. On one front, the central banks preside over the creation of additional liquidity for the financial system in order to hold back the tide of debt defaults that would otherwise occur. On the other, they incite investment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, soft commodities or anything else that might be deemed an indicator of inherent value. Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the US dollar, but of all fiat currencies. Equally, they seek to deny the investor the opportunity to hedge against the fragility of the financial system by switching into a freely traded market for non-financial assets.

"It is important to recognize that the central banks have found the battle on the second front much easier to fight than the first. Last November, I estimated the size of the gross stock of global debt instruments at $90 trillion for mid-2000. How much capital would it take to control the combined gold, oil and commodity markets? Probably, no more than $200 billion, using derivatives. Moreover, it is not necessary for the central banks to fight the battle themselves, although central bank gold sales and gold leasing have certainly contributed to the cause. Most of the world's large investment banks have over-traded their capital [bases] so flagrantly that if the central banks were to lose the fight on the first front, then their stock would be worthless. Because their fate is intertwined with that of the central banks, investment banks are willing participants in the battle against rising gold, oil, and commodity prices.

"Central banks, and particularly the US Federal Reserve, are deploying their heavy artillery in the battle against a systemic collapse. This has been their primary concern for at least seven years. Their immediate objectives are to prevent the private sector bond market from closing its doors to new or refinancing borrowers and to forestall a technical break in the Dow Jones Industrials. Keeping the bond markets open is absolutely vital at a time when corporate profitability is on the ropes. Keeping the equity index on an even keel is essential to protect the wealth of the household sector and to maintain the expectation of future gains. For as long as these objectives can be achieved, the value of the U.S. dollar can also be stabilized in relation to other currencies, despite the extraordinary imbalances in external trade.

And as I send this out the door to Stowe, Vermont---I note that all four precious metals rallied a bit since the London open, but are now being sold down as I hit the send button at 5:01 a.m. EDT.  Volume is about "average" for this time of day---and the dollar index is now up 19 basis points.

I have no idea how the trading action will unfold as the New York session begins, but nothing will surprise me when I check the charts later this morning.

See you 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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