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TheStreet Open House

Saturday, June 7: Today in Gold and Silver

NEW YORK ( TheStreet) -- It was another day when not much happened.  The 'reaction' of the precious metals at the 8:30 a.m. EDT release of the job numbers was a non-issue, but the rally that began at 1 p.m. BST in London [8 a.m. in New York] got dealt with in the usual manner shortly before the open of the equity markets in New York.  From that low, the gold price rallied back to slightly above unchanged before getting sold off for a small loss in the last five minutes of electronic trading, which I thought was pretty cheesy, because it certainly wasn't a legitimate trade.

With gold trading in a ten dollar price range, the highs and lows aren't worth looking up once again.

Gold finished the Friday session in New York at $1,252.30 spot, down 90 cents from Thursday's close.  Volume, net of June and July, was 117,000 contracts---with a goodly chunky of that occurring between 8 and 9:45 a.m. in New York.

The silver price trading pattern was very similar to gold's, so you don't need me to run through it again for this metal.

The up/down price movement between 8 a.m and 10 a.m. in New York was about 30 cents, so I shan't bother looking up the high and low ticks here, either.

Silver finished the trading day at $19.01 spot, down 2.5 cents from Thursday's close.  Volume, net of roll-overs out of the July contract, was pretty decent at 33,000 contracts.  Once again, a large chunk of that volume occurred with the up/down price movements during the times mentioned in the previous paragraph.

The platinum price rallied ten bucks the moment that Zurich opened for trading---and that pretty much it for the remainder of the day.  Platinum closed up 8 bucks.

The palladium price didn't do much until shortly before 1 p.m. in Zurich.  The rally from that point was cut short minutes before 9 a.m. in New York---and that was more or less it for the day.  Palladium closed up another 7 bucks.

The dollar index closed late on Thursday afternoon in New York at 80.36.  It rallied a bit [to 80.48] by 11 a.m. in London---and then rolled over and hit its 80.27 low shortly before 9 a.m. in New York.  The sharp spike rally after that made it up to 80.52 by 9:40 a.m. ---and it faded a bit into the close of trading, finishing the day at 80.425, up 6 basis points.  Not much to see here.

The gold stocks opened slightly in the black---and then headed south immediately, hitting their low of the day at precisely 10 a.m. in New York.  From there they rallied back to unchanged by shortly after 2 p.m. EDT---and chopped quietly sideways from there.  The HUI finished basically unchanged, down 0.01 %.

It was almost an identical chart pattern for silver, except the silver stocks were back to unchanged/slightly positive by shortly after 11 a.m. in New York---and Nick Laird's Intraday Silver Sentiment Index closed up a tiny 0.01%.

The CME Daily Delivery Report showed that 11 gold and zero silver contracts were posted for delivery within the Comex-approved depositories on Tuesday.  Nothing much to see here, please move along.

There were no reported changes in GLD---and as of 8:32 p.m. yesterday evening, there were no reported changes in SLV, either.

The U.S. Mint had a dinky little sales report again yesterday.  They sold 500 troy ounces of gold eagles---and 500 one-ounce 24K gold buffaloes.  For the week [and month-to-date] sales have been pretty quiet.  The mint has sold 11,500 troy ounces of gold eagles---3,500 one-ounce 24K gold buffaloes---500 platinum eagles---and 670,000 silver eagles.  Based on these sales, the silver/gold sales ratio stands at just under 45 to 1.

Over at the Comex-approved depositories on Thursday, there was no reported in/out movement in gold once again---and in silver, there was 112,467 troy ounces shipped in, and 131,224 troy ounces shipped out.  Most of the action was at Canada's Scotiabank.  The link to that activity is here.

Well, yesterday's Commitment of Traders Report---for positions held at the close of Comex trading on Tuesday---was everything that Ted and I were hoping/praying it would be.

It was another new record in silver, as the Commercial net short position declined by an eye-watering 4,590 contracts, or 22.95 million ounces.  This brings the Commercial net short position down to only 48.2 million troy ounces---a record low.

Ted was on the road when I spoke to him yesterday, so he didn't have much for me, but I thought I heard him mention that the non-technical fund long in the "Managed Money" category increased that position by about 1,000 contracts.  The technical funds went more mega short---and are at another new record short position, so it's a safe bet that the raptors [the Commercial traders other than the 'Big 8'] increased their long positions by a goodly chunk as well.

I didn't get the data on JPMorgan's 'new and improved' short-side corner in the Comex silver market, but whatever the amount is, it probably represents well over 150% of the entire Commercial net short position of 48.2 million troy ounces.

In gold, the Commercial net short position declined by another substantial amount---15,194 contracts, or 1.52 million troy ounces of the stuff.  The Commercial net short position is now down to 6.34 million ounces. The technical funds in gold bought up another 14,200 contracts on the short side.  And I don't know what JPMorgan did during the reporting week, but I wouldn't be surprised if they increased their long-side corner in the Comex gold market by a substantial amount.

I await Ted Butler's weekly commentary to his paying subscribers with more than the usual amount of interest when comes out later this afternoon EDT.

Here's the " Days of World Production to Cover Comex Short Positions" for all physical commodities traded on the Comex.  If it wasn't for JPMorgan's long-side corner in the gold market, all four precious metals would occupy the entire right-hand side of this chart.  Just to give you some idea of the changes from last week's chart, the short positions of the 8 largest traders in silver has declined by 9 days of world production.

Now for the Bank Participation Report for June.  This data is extracted directly from the above COT Report---and shows the Comex trading positions of all banks---U.S. and foreign for everything that's traded on the Comex---from soup to nuts.  Of course we're only interested in the precious metals

And since the data comes from the COT Report, the cut-off for the BPR is also at the close of trading on the prior Tuesday---and in this case it's June 3.  The report is issued once a month---and on the first Friday of the month where the cut-off date for the report falls in the current month.

And most importantly of all, because one report comes from the other, for this one day a month we can see what the banks are up to vs. the other traders.

In gold, '3 or less' U.S. banks were net long the Comex gold market by 8,982 Comex contracts, which is a decrease from the 12,159 Comex long contracts that '4 or less' U.S. banks were short in the May BPR.

I don't know JPMorgan's latest long position, because Ted is on the road, but it was 34,000 contracts last week--and I expect that it will be a bigger number in this week's report.  This means that the other 2 U.S. banks in this category have to be massively short [at least 50,000 contracts] to make these number work out.  I would guess that the two U.S. banks that are massively short are HSBC USA and Citigroup.

Also in gold, '20 or more' non-U.S. banks are net short 32,818 Comex contracts---and I would guess that close to a third of this position is held by Canada's Scotiabank.  So once you take out 12,000 contracts for Scotiabank, the remaining contracts, divided by equally between the other 19 non-U.S. banks, become immaterial, as it's around 1,000 contracts apiece for each bank.

Here's Nick Laird's Bank Part Participation Report For Gold in chart form, with every month's BPR plotted going all the way back to January 2000.  Note the blow-out of the non-U.S. bank short position in Chart #4 back in October of 2012.  That's when the CFTC forced Scotiabank's to report its Comex trading positions---and you can see the big change in both the long and short-side positions in that one month.  By the way, the 'click to enlarge' feature works wonders here.

In silver, '3 or less' U.S. banks are net short 13,324 Comex silver contracts in the June BPR, which is an improvement from the 16,485 Comex silver short position they held in May.  Since it's a known fact that JPMorgan's short position is larger than 13,324 Comex contracts, it means that the other two U.S banks [it might be only one bank] are actually net long the Comex silver market.  And if it is two U.S. banks, I expect they would be HSBC USA and Citigroup as well.

Also in silver, '11 or more' non-U.S. banks are net short 10,704 Comex silver contracts.  That's an improvement from the 13,108 contracts they collectively held in the May BPR.  I'm prepared to be a serious amount of money that about 90% of this 13,108 contracts are held by Canada's Bank of Nova Scotia.  That means that the positions held by the other 10 non-U.S. banks are immaterial in the extreme.

Here's Nick's Bank Participation Report for silver.  Two things are worth noting---and I point them out every month.  In both Charts #4 and #5---note the blow-out of the U.S. banks short position in silver back in August 2008.  That's when JPMorgan took over the silver short position of Bear Stearns.  Before that, they were barely [if at all] involved in the Comex silver market.  Also note in Chart #4, the blow-out of the short [and long] positions of the non-U.S. Banks in October 2012.  This is when Scotiabank/Scotia Mocatta was outed---and as you can tell, up to that point the non-U.S. banks were mostly market neutral in silver.  That's why I can state with some impunity that 90% of the non-U.S. banks' short positions in silver are held by Scotiabank.

In platinum, 4 U.S. banks are net short 11,640 Comex contracts, which is basically unchanged from the 11,782 Comex contracts they were short this metal in the May BPR.  These 4 U.S. banks are short 16% of the entire Comex market in platinum.

Also in platinum, 12 non-U.S. banks were net short 7,316 Comex contracts.  In the May BPR, these same 12 non-U.S. banks held 5,559 Comex platinum contracts short, so you can see that they've increased their short position in this metal by 1,757 contracts---and if I had to finger the non-U.S. banks that holds the lion's share of this short position, it would be Barclays---and maybe Deutschebank as well.  But compared to the short positions of JPMorgan Chase and the other 3 U.S. banks, the positions held by the non-U.S. banks don't matter much.

In Palladium, '3 or less' non U.S. banks are short 9,053 Comex contracts, basically unchanged from the 9,006 contracts they held short in the May BPR.  But these '3 or less' U.S. banks are short 22% of the entire Comex palladium market on a net basis.

There also wasn't much change in the '11 or more' non-U.S. banks that held 4,424 Comex contracts between them.  Their short positions were also unchanged from May at 4,373 contracts.  Nothing to see here.  Barclays is the tallest hog at the trough of the 11 non-U.S. banks.

It should be obvious that this precious metal price management scheme is 100% " Made in the U.S.A."---with a little help from Canada's Scotiabank in both gold and silver.

I have a lot of stories for you today---and there are a couple of absolute must reads that are not to be missed.

¤ The Wrap

Certainly, it took a specially constructed silver price decline to create the record technical fund short position; it wasn’t created by happenstance. Prices had to fall in a manner most likely to result in maximum technical fund response. The progressive nature of this silver price decline, where continuous new price lows were created is what prompted the record technical fund short position. The debilitating silver price action was like waving a red flag to get a bull to charge; successive new price lows gets technical funds to sell, period. - Silver analyst Ted Butler: 04 June 2014

Today's pop "blast from the past" was another hit for Tommy James and the Shondells.  I posted a piece by them, along with their incredible story, a few weeks back---and I thought I'd revisit the band one more time.  This is one of their last big hits---and it's from 1971.  The link is here.

Today's classical "blast from the past" is a composition by Max Bruch.  I posted his violin concerto earlier this year, but here's one of his other famous work, the Scottish Fantasy in E-flat major, Op. 46.  It was completed in 1880 and dedicated to violin virtuoso Pablo de Sarasate.  Korean violinist Kyung-Wha Chung and the Seoul Philharmonic do the honours---and the link is here.

It was another day where not much should be read into the price action---although I duly noted that the tiny rallies in gold and silver that began shortly before the job numbers were posted, met the usual fate.  Without doubt, all four precious metals are being held in lock-down by the powers that be, at least as best they can considering the current circumstances.

Once again, here are the 6-month charts for both gold and silver showing the 25 and 50-day moving averages.

As you can see, we're nowhere near any moving average that matters in gold to the mega short technical funds, but the price kissed the 20-day moving average in silver.

Nick Laird updated his website with China's gold imports through Hong Kong in April---now that the numbers have been 'officially' posted on the appropriate website.  It was only 67.04 tonnes, but it's a lead pipe cinch that gold imported through channels that are out of sight of the public would put April imports in the 100 tonne range with little stretch of the imagination, or wild-ass speculation on my part.

Where we go from here is unknown, but with the COT set-up we have---and the very interesting Ben Davies KWN interview, along with Alasdair's commentary further up---absolute nothing would surprise me.  It may not happen right away, but it's hard to shake the feeling that something is afoot.

Of course I've felt that way before and nothing happened, so we'll just have to wait and see.

It's already 3:09 a.m. MDT as I write this paragraph---and I must admit that after nine hours of writing, I'm beat.  I still have another hour's worth of work to do on this column before I can hit the send button, so 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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