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TheStreet Open House

Friday, July 25: Today in Gold and Silver

NEW YORK ( TheStreet) -- The gold price was comatose until the HFT boyz showed up shortly after 9 a.m. Hong Kong time on their Thursday.  Then gold proceeded to chop sideways under the $1,300 spot price mark until the 9:30 a.m. EDT open of the equity markets---and at that point "da boyz" peeled some more off the price, with the low tick of the day coming minutes before 11:30 a.m. in New York.  It traded sideways from there into the 1:30 p.m. Comex close and then crawled higher during the entire duration of electronic trading.

The CME Group recorded the high and low ticks as  $1,305.60 and $1,287.50 in the August contract.

Gold closed the Thursday session at $1,293.90 spot, down $10.10 from Wednesday's close.  Not surprisingly, net volume was pretty decent at 139,000 contracts.

The silver price chart was similar, except the sell-off that began at 9:30 a.m. EDT was much more vicious---and the low tick didn't occur until minutes before 2 p.m. in electronic trading.  From there the price recovered a few pennies into the 5:15 p.m. electronic close.

The high and low ticks for silver were reported as $20.97 and $20.35 in the September contract.

Silver closed at $20.365 spot, down 54 cents on the day.  Volume, net of July and August, was just under 67,000 contracts.  But of the total volume, about 7,500 contracts was traded in December and March, so those may have been rolls out of the September contract.  It's a little early for doing that, but I suppose it is possible.  With or without the volume, it was a pretty busy trading day.

Platinum wasn't spared, either---and it closed down $15.  Palladium got a mini version of the same treatment, but managed to recover and only close down a buck.  Here are the charts.

The dollar index closed at 80.81 late on Wednesday afternoon---and chopped higher, with a 14 basis point down/up move thrown in between the London open and the London p.m. gold fix.  The index finished the Thursday session at 80.87---up 6 basis points on the day.

The gold stocks sold down right at the open---and chopped quietly lower for the remainder of the trading session, but rallied a hair in the last fifteen minutes of trading.  The HUI closed down 1.56%.

The silver equities followed an identical path, but sold off a bit more than the gold stocks.  By the end of the Thursday session, Nick Laird's Intraday Silver Sentiment Index closed down 1.89%.

The CME Daily Delivery Report drew a blank yesterday, as there were no gold or silver contracts posted for delivery within the Comex-approved depositories on Monday.

There was a fairly decent withdrawal from GLD yesterday, as an authorized participant withdrew 115,474 troy ounces---and as of 9:50 p.m. yesterday evening, there were no reported changes in SLV.  But when I edited today's column starting at 3:55 a.m. this morning, I noted that iShares.com had updated their website and showed that an authorized participant had added 815,847 troy ounces of the stuff.

The good folks over at the shortsqueeze.com Internet site updated their website with the new short positions in both SLV and GLD for mid July.  The increase in SLV's short position was only 7.41% or 1.41 million shares/troy ounces.  I was expecting a far bigger number than that.  I'm inclined to think that it's a reporting error---and I know Ted will have something to say about it when I talk to him later today.  I'll let you know what he says.  Anyway, the current short position in SLV as of July 15 now stands at 20,437,900 shares/troy ounces, or a bit over 635 metric tonnes.

The short position in GLD declined by a smallish 3.33%, or 50,600 troy ounces.  The current GLD short position [as of July 15] now stands at 1.47 million troy ounces, or just under 46 metric tonnes.

For the second day in a row, there was no sales report from the U.S. Mint.

The gold movement at the Comex-approved depositories isn't worth commenting on, but it was another big day in silver, as 1,264,979 troy ounces were shipped out.  Nothing was reported received.  The silver came out of Canada's Scotiabank---and HSBC USA.  The link to that activity is here.

Once again I have a decent number of stories, most of them from Roy Stephens---and I hope there are some in the list below that you like.

¤ The Wrap

In little longer than two or three weeks, gold jumped more than $80 and silver by more than $2, only to revert to a flat price pattern over the next 5 weeks or so, even though world events and tensions have rarely been as nerve wracking over the past month. The price pattern alone seems surreal and the explanation for the sudden lack of volatility seems to prove manipulation without a doubt. But, of course, there’s a lot more pointing to manipulation than the unusual price pattern alone.

The quick jump in price, followed by the flat line, also involved one of the most dramatic shifts in market structure in history. In round numbers, some 50,000 silver contracts and 100,000 gold contracts changed ownership on the COMEX, as technical funds bought and commercials sold. That’s the equivalent of 250 million oz of silver---and 10 million oz of gold. Rarely have such quantities of COMEX contacts changed ownership in such a short time, particularly in silver. In terms of magnitude, if I were describing an earthquake or a hurricane, I would use the maximum levels of strength to describe the COMEX ownership change. - Silver analyst Ted Butler: 23 July 2014

Well, you don't need me to paint you a picture, as you've seen this movie before.  The only questions remaining are how long will it take JPMorgan et al to slice the salami to the downside---and how low will that take the prices of the precious metals involved, silver in particular.

As Ted told me on the phone yesterday, it's not the final price at the bottom that's the issue, it's the number of long contracts puked up by the technical funds, along with the number of short positions that "da boyz" can coax these same brain dead technical funds into buying as they engineer prices lower.

Here are the 6-month charts for both gold and silver updated with Thursday's trading data.

As you can see, the price decline in gold broke through its 50-day moving average---and touched the 200-day moving average before rallying off that mark.

Silver touched its 200-day moving average, but did not break below it.

Unless the powers that be allow a rally to occur from here, it's only a matter of time before the remaining  moving averages are broken to the down side.  Then we'll see some major volume and price moves as the technical funds dump their long positions in a panic---and probably get set up on the short side once again.

Wash, rinse, spin, repeat.

As Ted mentioned in his quote above, in the five weeks since the gold and silver rallies began on June 5, the 50,000 Comex long positions in silver, along with the 100,000 Comex contracts in gold that the technical funds have bought, are now in the crosshairs as the Commercial traders ring the cash register for fun, profit---and price management.  We got a taste of what was in store for us on Monday, June 14---and again, but briefly, on the following day.  Now we got the next slice taken out of the salami yesterday.

So the question still remains---how long and how many contracts?  Only JPMorgan et al know the answer to that.

But could we blast higher from here?  Absolutely, but it won't be the forces of supply and demand that determines that, because as Ted Butler pointed out recently, the key Commercial traders have captured the price-setting mechanism for all four precious metals [plus copper] in the Comex futures market.  They---and they alone, will determine what happens going forward.

But there's still that black swan out in left field that could come along and bite the boyz on the ass---and it's a distinct possibility.  This week I reread Roger Lowenstein's classic tome from 2000: " When Genius Failed: The Rise and Fall of Long-Term Capital Management".   It was wall-to-wall black swans and fat tails in 1998---and when things come unglued now, it will make that incident a footnote to what's coming our way this time around.

And as I write this paragraph, London has been open for 45 minutes---and up until this point in Friday trading, not much has happened.  Gold is down a dollar or so, but the other three precious metals are all up a bit from Thursday's close.  Net gold volume is very light---and silver's volume is a bit heavier.  The dollar declined a handful of basis points up until a few minutes before the London open, but has rallied sharply back to unchanged on the day.

Today we get the latest Commitment of Traders Report for positions held at the close of Comex trading on Tuesday, July 22---and I'm not about to make any prediction as to what the report might contain.  But whatever the numbers are, I'll have them for you in tomorrow's missive.

And as I hit the send button on today's column at 4:55 a.m. EDT this morning, nothing much has changed with all four precious metals.  Prices have flat-lined, especially in gold and silver.  Platinum and palladium aren't doing much, either---and gold and silver volumes have barely budged since I reported on them about ninety minutes ago.  There's almost no trading going on at all---and I can't remember the last time I've seen it this quiet.  Does it mean anything?  Beats me.

That's all I have for today.  I hope your weekend goes well, or you enjoy what's left of it if you live west of the International Date Line---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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