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Saturday, August 9: Today in Gold and Silver

NEW YORK ( TheStreet) -- After rallying a decent amount in Far East trading, the high of the day was in very shortly before the London open on their Friday---and as I pointed out in The Wrap yesterday, volume was very heavy.  The gold price then got sold down $5 or so off its high---and traded flat until the noon silver fix.  At that point the HFT boyz showed up---and the low of the day came at precisely 8:30 a.m. in Comex trading.  The tiny rally attempt after that didn't get far---and the price chopped sideways in a very tight range for the remainder of the Friday session.

The high and low ticks were recorded by the CME Group as $1,324.30 and $1,305.70 in the December contract.

Gold finished the Friday session at $1,309.10 spot, down $3.90 from Thursday's close.  Volume, net of August and September, was very decent at 163,000 contracts---and well over a third of that occurred before the morning gold fix in London.

After the obligatory down spike at the New York open on Thursday evening, the silver price traded flat until 10 a.m. Hong Kong time.  From there it rallied to its high of the day, which came about 30 minutes before the noon London silver fix.  From there, it suffered the same fate as the gold price, with the low of the day coming at 8:30 a.m. EDT sharp as well.  The price rallied about 15 cents off that low---and then traded flat before getting sold off a dime or so as electronic trading wound down for the weekend.

The high and low tick was reported as $20.185 and $19.845 in the September contract.

Silver closed yesterday at $19.915 spot, down 3 cents from Thursday's close.  Net volume was 32,000 contracts and, like gold, a third of it was transacted before the morning gold fix in London.

Platinum rallied a bit in Far East trading as well, with the high tick coming at the Zurich open.  After that it got quietly sold off for the remainder of the Friday session, closing down $3 on the day.

Palladium went on a bit of a roller-coaster ride yesterday---and it managed to finish up $5 on the day.

The dollar index closed on Thursday afternoon in New York at 81.53.  The 81.60 high came at 9:30 a.m. Hong Kong time---and it chopped lower from there, with the low tick of 81.27 occurring at 10:30 a.m. EDT in New York.  From there it rallied a bit into the close, finishing the Friday session at 81.40---down 13 basis points on the day.

The gold stocks rallied sharply in the first 35 minutes of the New York trading session---and then slowly began to give all those gains back as the trading session wore on.  The low, in slightly negative territory, came a few minutes after 2 p.m.---and from there the gold stocks managed to keep their heads above water for the remainder of the day.  The HUI closed up 0.27%.

The silver equities rallied 3% by around 10:45 a.m. in New York---and then spent the rest of the day giving back half of those gains, as Nick Laird's Intraday Silver Sentiment Index closed up 1.54%.

The CME Daily Delivery Report showed that 112 gold and zero silver contracts were posted for delivery within the Comex-approved depositories on Tuesday.  The only short/issuer of importance was Barclays [for the second day in a row] with a 100 contracts out of its client account---and four of the five "usual suspects" were long/stoppers.  The link to yesterday's Issuers and Stoppers Report is here.

There was a withdrawal from GLD yesterday.  This time it was 57,728 troy ounces.  And as of 7:54 p.m. EDT yesterday evening, there were no reported changes in SLV.

The U.S. Mint had another small sales report yesterday.  They sold 1,500 troy ounces of gold eagles---and 1,500 one-ounce 24K gold buffaloes.

Month to date, the mint has sold 12,000 troy ounces of gold eagles---4,000 one-ounce 24K gold buffaloes---and 955,000 silver eagles.  Based on these sales, the silver/gold sales ratio for August is a hair under 60 to 1.

There wasn't much in/out movement in gold over at the Comex-approved depositories on Thursday, as only 3,500 troy ounces were reported received---and a tiny 198 troy ounces shipped out.  In silver, it was quite a bit busier, as 524,544 troy ounces were reported received---and 15,423 ounces were shipped out.  The link to the activity in silver is here.

As expected, the Commitment of Traders Report showed improvements in the Commercial net short positions in both silver and gold during the reporting week.

In silver, the Commercial net short position dropped by a very chunky 8,380 contracts, or 41.9 million ounces of paper silver.  The Commercial net short position now sits at 241 million troy ounces, which is still a sky-high number.

Ted mentioned that all of the improvement came from the technical funds in the "Managed Money" category, as that category of traders in the Disaggregated COT Report sold 6,040 long contracts---and they also added 5,868 short contracts---almost 12,000 contracts in total---as the Commercial traders gamed them for fun, profit and price management purposes.

With the new Bank Participation Report in his hands, Ted was able to recompute JPMorgan's short-side corner in the Comex silver market, which is now down to 18,000 contracts, an improvement of about 1,000 contracts from the prior reporting week when they were short 19,000 Comex contracts.

In gold, the Commercial net short position dropped by 17,290 contracts, or 1.73 million troy ounces of Comex paper gold.  The new Commercial net short position is now down to 13.16 million troy ounces.

Once again it was all brain-dead black-box technical fund selling in the "Managed Money" category of the Disaggregated COT Report that drove the price change, as these traders sold 11,905 long contracts---and they added 6,046 contracts to their short position at the same time which, in total, is 17,951 contracts worth of price pressure to the downside, all engineered by JPMorgan et al.

Ted Butler puts JPMorgan's long-side corner in the Comex gold market at 20,000 contracts, which is down 3,000 contracts from the prior reporting week.  Ted also mentioned that this is their smallest long-side corner in gold in a very long time.

Just looking at the numbers in this week's COT Report, Ted felt that everything that should have been reported in this week's report, was there---as there was some concern whether all the data from Tuesday's big down day would be be reported---and it appears that it was.

That's the good news.

The bad news is that the big rallies in both metals that occurred on Wednesday and Thursday, the day after the Tuesday cutoff for yesterday's COT Report, basically reversed "all of the above" improvements in gold, which broke back above its 50-day moving average.  Silver is still well below both its 50- and 200-day moving averages---and Ted figures that technical funds in the "Managed Money" category didn't reverse their positions to the same extent as they did in gold.

Of course we won't know for sure until next Friday's COT Report---and there are still two more trading days left in the reporting week.

Along with the Commitment of Traders Report came the companion August Bank Participation Report.  This report strips out the Comex long and short positions for all the banks on Planet Earth that hold positions in the Comex futures market---and for this one day a month we get to see these guys naked as jaybirds.

In gold, "3 or less" U.S. banks increased their net short position from 12,334 contracts in the July BPR, to 17,032 contracts in the August BPR.  Since Ted says that JPMorgan is long 20,000 Comex contracts, then this means that the other two U.S. banks must, by simple arithmetic, be short about 37,000 contracts between them.  These other two U.S. banks would be HSBC USA and Citigroup.

Also in gold, 21 non-U.S. banks are net short 63,049 Comex contracts, which is an increase in short position of 1,000 contracts since the July BPR.  I would guess that around 50% of the 63,000 contracts is held by Canada's Scotiabank---and the remaining 30,000 contracts split up more or less equally between the other 20 non-U.S. banks would border on the immaterial.

Here's Nick Laird's BPR chart for gold.  In this five-chart sequence, it's charts #4 and #5 that are the critical ones.  Note the blowout in the Comex short position in gold for the U.S. banks back in August of 2008---and the blowout in the non-U.S. banks in October of 2012.  The August 2008 blowout occurred when JPMorgan took over the gold short positions of Bear Stearns---and the October 2012 non-U.S. bank short position blowout was when Canada's Scotiabank was forced to declare the Comex positions held by its wholly owned Scotia Mocatta subsidiary, which you can read about about it on the Bank Participation Report home page linked here.

In silver, "3 or less" U.S. bank are net short 18,447 Comex contracts, which is an increase of about 1,000 contracts from the July BPR.  From the Commitment of Traders Report, Ted says that JPMorgan's short-side corner in the Comex silver market is 18,000 contracts, so it's pretty much a given that virtually the entire position shown above belongs to them---with maybe HSBC USA and Citigroup holding small net long positions.   As you can see, the silver price management scheme, from a U.S. bank perspective, is 100% run by JPMorgan.

Also in silver, "10 or more" non-U.S. banks are net short 24,135 Comex contracts, which is about a 25% increase/blow-out from the July BPR.  I'm of the opinion that Canada's Scotiabank probably hold 75% or more of this Comex short position.  If that's the case---and I'm totally convinced that it is [see the next paragraph], then the remainder of that short position, divided up more or less equally between the remaining "9 or more" non-U.S. banks is, like gold, pretty much immaterial.

Here's Nick's BPR chart for silver.  And, like gold, please cast your eyes on August 2008 and October 2012 once again---and for the same reasons.  In August 2008, JPMorgan took over the gargantuan short position held by Bear Stearns---and in October 2012, Canada's Scotiabank was forced to disclose its Comex positions in silver as well.  It's this data point that gives me the confidence to finger Scotiabank as the second-largest silver short on Planet Earth.

In platinum, "3 or less" U.S. banks are net short 11,197 Comex contracts, which is a 16% increase in their short position since the July BPR.  They hold virtually no long positions at all [see chart #5], so it's a good bet that these position are being held for price management purposes.  These "3 or less" U.S. banks are short almost 17% of the entire Comex futures market in platinum---and it's the safest bet in the world that JPMorgan holds the lion's share of that position.

Also in platinum, "12 or more" non U.S. banks are net short 8,408 Comex contracts, which is an improvement of about 5% from the short positions they held in this metal in July.  If there's a "Mr. Big" in the non-U.S. banks, it would probably be Barclays and maybe Scotiabank as well.  But, having said that, that many contracts divided by 12 banks doesn't amount to much when you consider what the "3 or less" U.S. banks hold.  It's a pretty safe bet that most of the non-U.S. banks positions are immaterial as well.

Note how the banks have increased their presence in platinum in the last five years.  Before that, they were virtually nowhere to be found.  This applies to palladium as well.

In palladium, "3 or less" U.S. banks are net short 9,229 Comex contracts, which is a 7% increase from the July BPR.  These U.S. banks are net short a hair more than 20% of the entire Comex palladium market.

Also in palladium, "12 or more" non-U.S. banks are net short 4,694 Comex contracts, which is exactly unchanged from the July BPR.  I doubt very much if any non-U.S. bank holds a material enough position to affect prices in the Comex futures market---and 4,694 divided by "12 or more" is a very small number, so their positions are immaterial as well.

Well, dear reader, this isn't rocket science, as it's all government data from the CFTC that proves beyond a shadow of a doubt, that "3 or less" U.S. banks---along with Scotiabank in silver and gold---run the price management scheme, and all under direction of the capo di tutti capi---JPMorgan Chase.

Here's another chart courtesy of Nick Laird.  It's the Chinese Gold Imports Through Hong Kong updated with June's import data.  As you can see, imports through H.K. are falling precipitously, as China is now hiding its tracks by importing more through Shanghai and Beijing.  Unless something changes before year's end, it's my opinion that this chart will no longer serve any useful purpose---and I'm posting it here now for informational purposes only.

I have a lot of stories for you today---and I hope you have enough time in what's left of your weekend to read the ones that interest you.

¤ The Wrap

While it’s not guaranteed that the commercials will flush the technical funds from the long side in Comex gold, silver and copper on lower prices, the probabilities point that way. Even if we bounce in the very short term, it is likely to involve the commercials setting up the technical funds for an eventual clean out.  I don’t enjoy reporting at times like this and hope that my guesstimate of the probabilities turns out to be wrong. However, this has nothing to do with my long term expectations for silver. - Silver analyst Ted Butler: 06 August 2014

Today's pop "blast from the past" is 38 years young.  The audio quality on this youtube.com video is not the best, but it doesn't take away from the spirit of the performance one bit.  It's a rock classic for sure---and the link is here.

Today's classical "blast from the past" dates from 1881.  It's Brahms' Piano Concerto No. 2 in B-flat major---and was composed 22 years after his first piano concerto.  Although I like the first piano concerto, it's hard not to argue the second is by far the most popular---and certainly my favourite of the two.  It's a monster four-movement work---and Daniel Barenboim and The Munich Philharmonic Orchestra do it right.  The link is here.

It was sort of a nothing day in the precious metal market yesterday, but I'm still wondering about the huge volume in both gold and silver that occurred before the morning gold fix in London.  As I said in The Wrap on Friday, it's very unusual to have that level of volume with little price action to go along with it.

It's always possible that all the precious metals were trying to rally more than the charts showed---and that JPMorgan et al. were leaving nothing to chance by bombing the market and preventing any form of rally at all from manifesting itself in any of the precious metals.  That's the only explanation I can think of, as there's no other reason for volume to be that high at that time of day.

Here are the six-month gold and silver charts.

Well, with the situation in Ukraine really starting to come off the rails---and the real reason that flight MH17 crashed is almost of no importance now, as the West has tried the case already, found Russia guilty---and then ordered an immediate hanging---all without a shred of evidence to back it up.  The contents of the flight recorders are still nowhere to be seen.

I think the piece by Paul Craig Roberts in the Critical Reads section pretty much sums up the state of world affairs today, as the black swans are everywhere now.  Throw in the Ebola situation in Africa---and if you're not scared to death, you obviously don't understand the gravity of the situation.

With each passing day, I'm becoming more convinced that the current economic, financial and monetary system will be a deliberate casualty of whatever goes 'bump' in the night from this point forward---as the powers that be don't want the system to crash and burn without being able to point to some reason it all happened---and why it wasn't their fault.

If I were you, I wouldn't wait around to get your financial/monetary affairs in order.  I've done all I can---and I'm hoping/praying that it will be enough.

And as I've mentioned before, I expect the precious metal price management scheme to be one of the casualties as well---and at that the time that occurs, what the Commitment of Traders Report says will be totally irrelevant.  When it does blow up, I expect everything else to melt down in the process.

So we wait.

That's all I have for the day---and the week---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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