Saturday, December 7: Today in Gold and Silver

NEW YORK ( TheStreet) -- There was a bit of gold price commotion on either side of the jobs numbers release, but the obligatory sell-off was met by aggressive buying, and it's hard to tell whether it was new longs being placed, or shorts being covered.

Whatever it was, the vertical spike in prices that started 10 minutes after the release of the jobs report, got capped less than a half hour later, and gold got sold back to around the Comex opening price by the London p.m. fix.  After that, it traded in a five dollar price range either side of $1,230 spot.

The CME recorded the high and low ticks as $1,245.00 and $1,210.10 in the February contract.  The high and low came within 30 minutes of each other and was obviously centered around the release of the jobs report.

Gold closed at $1,230.70 spot, which was up $5.60 from Thursday's close.  Net volume was pretty chunky at 185,000 contracts.

It was the same price pattern in silver as well, as the charts for both metals look identical.

The CME recorded the high and low ticks at $19.785 and $19.165 in the March contract.

Silver finished the Friday trading session at $19.54 spot, up 10.5 cents on the day.  Volume was pretty decent in silver as well, but not as over the top as the gold volume.  Silver's net volume was 45,000 contracts.

Platinum's price activity was a mini version of the gold and silver charts.  Only palladium was different, as it got sold off a bit around 7 a.m. in Zurich and then rallied sharply about 10 minutes after the jobs number was reported.  That rally got aggressively capped shortly after 9 a.m. EST.  From there, the palladium price got sold down for a small loss on the day.  Here are the charts.

The dollar index closed on Thursday afternoon in New York at 80.26, and the didn't do much until about 10 minutes before the jobs numbers were release.  At that point the index rallied sharply to its high of 80.56 right at 8:30 a.m. EST, before getting sold back to virtually unchanged by 9 a.m.  The index didn't do much after that, and closed flat on the day.

The gold stocks gapped up a percent and a bit at the open, and then chopped sideways until the 1:30 p.m. Comex close.  Then they sold down to flat on the day by shortly before 3 p.m., and that where the HUI finished, at 0.00% on the day.  In my many years of writing, I'm sure that this was the first time I reported no change in the HUI.

The chart pattern for the silver stocks looked similar to the HUI chart, but despite the fact that silver also finished in the plus column on Friday, Nick Laird's Intraday Silver Sentiment Index closed down 0.64%.

The CME's Daily Delivery Report for Day 6 of the December delivery month was a little quieter, as only 92 gold and 32 silver contracts were posted for delivery within the Comex-approved depositories on Tuesday.  In gold, the only short/issuer of note was Canada's Bank of Nova Scotia with 85 contracts, and it should come as no surprise that JPMorgan Chase took delivery of 90 contract in its in-house [proprietary] trading account.

In silver, there was no real stand-out as far as short/issuers were concerned, expect one of them was JPMorgan out of its client account.  And guess who the big long/stopper was?  There's no prize for the answer, as it was JPMorgan in its in-house account.

As Ted Butler mentioned on the phone yesterday, JPMorgan Chase has stood for delivery on over 95% of the gold and silver contracts in the first six days of the December delivery month.  And Ted was just talking about their in-house [proprietary] trading account.  If my memory serves me correctly, JPMorgan's own clients in these metals have been big losers so far this month, as JPMorgan has been been taking delivery of the lion's share of its own clients short positions as well, which they talked them into buying in the first place!  You couldn't make this stuff up.  Where the #%&$@ is the CFTC?  Can't they read?

Anyway, the link to yesterday's Issuers and Stoppers Report is here.

Much to my surprise there was no change in GLD yesterday, and as of 10:20 p.m. EST yesterday evening, there were no reported changes in SLV, either.

There was a smallish report from the U.S. Mint again yesterday.  They sold 125,500 silver eagles.  Because the 2013 silver eagles are being severely rationed during the last month of the year, the silver/gold sales ratio using the mint's weekly sales, doesn't mean much, and I'm not posting it today for that reason.

Over at the Comex-approved depositories on Thursday, they reported receiving a tonne of gold; 32,143 troy ounces to be exact.  Nothing was shipped out.  Most of the gold received was at the HSBC USA depository, and the link to that activity is here.

It was somewhat more active in silver.  Nothing was reported received, but 216,436 troy ounces were shipped out.  Virtually all of the activity was at Brink's, Inc. and Scotia Mocatta.  The link to that action is here.

Well, the Commitment of Traders Report in both silver and gold was pretty much as expected, as there were improvements in the Commercial net short position in both metals, with the biggest improvement coming in silver.

In silver, the Commercial net short position declined by a chunky 21.3 million ounces, and is now down to 60.8 million ounces, the smallest number I can remember it ever being.  Ted Butler figures, based on the companion Bank Participation Report, that JPMorgan's short position in silver is back down to the 10,000 contract mark, or 50 million ounces.  A simple division calculation shows that JPMorgan's short-side corner of the silver market represents 82% of the entire Commercial net short position.  How's that for concentration?

Ted said that the managed money/technical funds are now net short silver for the first time in his memory, and he can remember quite a bit.

In gold, the Commercial net short position declined by 594,000 troy ounces, and is now down to 2.23 million ounces, which is practically no short position at all.  Based on the latest Bank Participation Report, Ted pegs JPMorgan's long-side corner in the gold market at 7 million ounces.

The above COT comments are certainly the " Reader's Digest" version, and I know that Ted will have much more to say about this in his weekly review to paying subscribers later today.  I'll steal what I can for Tuesday's column.

But if the Commitment of Traders numbers for the week ending on Tuesday, December 3 were pretty much as expected, the same can't be said for the companion Bank Participation Report.  It was a stunning surprise, and one for the record books in my opinion.

As I mentioned in yesterday's column: "the monthly Bank Participation Report strips out the Comex futures positions of all the banks [both U.S. and foreign] and for that one Tuesday every month we get to see how dominant the U.S. banks really are in all four precious metals."

There were big declines by all banks in the short positions in all four precious metals in the December report.  The exception was gold, where the 'Big 4' U.S. banks [read JPMorgan Chase] have been net long the Comex futures market for over six months.

In gold, 4 U.S. banks increased their net long position from 49,734 Comex futures contracts in November, to 57,408 Comex futures contracts in the December report.  That's an increase of 7,674 Comex futures contracts, or 767,400 troy ounces.

The 4 U.S. banks, in total, are net long 5.74 million ounces of gold, and since Ted says that JPMorgan's long position is 7 million ounces, then by simple subtraction, the other 3 U.S. bullion banks holding Comex futures contracts must be net short 1.26 million ounces between them.

But it was the changes in the 18 non-U.S. banks that was the shocker.  In November, these banks were short 39,480 Comex futures contracts in gold.  In the December report, that had collapsed to 14,039 contracts, or 1.40 million ounces, a decline of 25,441 contracts in just one month! Amazing!

Canada's Bank of Nova Scotia probably owns a fair chunk of that 1.40 million ounces, but even if they don't, that 1.40 million ounces still held short, divided into 18 banks, is an immaterial amount compared to the 7 million ounce long position of JPMorgan Chase.

Here's Nick Laird's Bank Participation Report for gold with the latest data included.  Charts 3, 4 and 5 are the critical ones.  The 'click to enlarge' feature works wonders here.

As dramatic as the changes were in gold, they were just as incredible as the changes in silver.

In silver, 3 or less U.S. banks had a 21,760 Comex futures market net short position in the November BPR.  In the December report, that had fallen all the way down to 13,639 contracts, or 68.2 million ounces.  Don't forget that Ted Butler estimated JPM's short-side corner in silver at 50 million ounces, so the remaining 18.2 million ounces held short in the Comex futures market is held by the two remaining U.S. bullion banks, most probably HSBC USA and Citigroup.  How's that for concentration.

And as startling as those number were, what happened with the non-U.S. banks was even more amazing.

In silver, 11 non-U.S. banks had a Comex net short position of 19,681 contracts in the November BPR, but in the December BPR, it had been cut by 40 percent, down to 11,997 contracts held short.  I'm of the opinion that a huge chunk of that is held by Canada's Bank of Nova Scotia, but even if that turns out not to be the case at this point in time, the 11 non-U.S. banks, on average, are only short a hair over 1,000 Comex futures contracts apiece.  That's not a lot compared to the positions held by the '3 or less' U.S. bullion banks in general, or the 10,000 contract short position of JPMorgan Chase in particular.  Here's Nick Laird's chart which, like the gold chart, should be examined carefully.

The improvement is platinum and palladium weren't as impressive overall, but like gold and silver, the bullion banks all over the world are obviously covering short positions like there will be no tomorrow.

In platinum, 4 U.S. banks were net short 13,344 Comex futures contracts in the November BPR, and that number declined to 11,202 contracts in the December BPR.  I'd bet serious coin that JPM holds the lion's share of the short position in this metal, just like they do in silver, and HSBC USA and Citi hold the rest.

In platinum, 14 non-U.S. banks had a net short position of 3,760 contracts in the November Bank Participation Report.  That collapsed down to 1,765 contracts in the November BPR.  Divide that number by 14 and you get a bit over 100 contracts apiece, which is immaterial.

JPMorgan Chase, HSBC USA and/or Citigroup don't control the platinum market, they are the platinum market.

In palladium, 3 or less U.S. bullion banks held 12,260 Comex  contracts short in the November BPR.  In the December report, that had dropped to 10,815 contracts held net short.  Once again it was "all the usual suspects".

In palladium, 12 non-U.S. banks held 4,621 Comex contracts net short in the November report, and that dropped down to 3,317 Comex contracts in the December BPR.  Twelve banks into 3,317 contracts is vapour, and immaterial compared to the Comex short position of the "3 or less" U.S. banks.

As always, this Bank Participation Report shows the total domination of the precious metal markets by JPMorgan Chase and a couple of other bullion banks as "also rans".

But the other thing that this particular BPR shows is that the bullion banks individually, and also as a group, are getting out of their Comex short positions in all four precious metals just as fast as they can.  What do they know that we don't, at least not yet.

I don't have a whole lot of stories for you today, and I hope you find the time to read the ones you like.

¤ The Wrap

Statism survives by looting. A free country survives by producing. -- Ayn Rand

Today's pop "blast from the past" was an international hit by a Canadian rock group called Loverboy back in 1980.  It's one of those pounding rock beats with killer vocals that will be around for generations to come.  I've posted this before, but it was years ago.  The link to the official Sony Music video is here.

Today's classical "blast from the past" is from the baroque era, although the actual composition date/year of this 18th century oboe concerto by Georg Philipp Telemann [1681-1767] is not known with absolute certainty.  After the violin and piano, the oboe is my most favourite orchestral instrument.  I have a recording of this piece in my collection and it gets a fair amount of air time.  This is his Concerto in E Minor for oboe, strings and basso continuo.  It's a short work, and the link is here.

As I said in this space yesterday, nothing would surprise me regarding precious metal price activity around the release of the job numbers on Friday morning in New York.  I'm sure that silver and gold prices would have closed higher if the rally hadn't been capped at 9 a.m. EST, and I was somewhat surprised by the heavy volume associated with yesterday's price action.

The data from Friday's price action, along with the volume data from Wednesday's short covering rally, won't be know for sure until next Friday's Commitment of Traders Report.

But it was the big changes in both the COT Report, and the companion Bank Participation Report that caught my eye.  The numbers in the COT Report were pretty much as expected, and show that the stage is set for a monster rally in all four precious metals if and when JPMorgan is given the word to let 'er rip.  All the internal readings within each category are at, or close to, multi-year extremes; and some of them are new records.

The Bank Participation Report was a two by four across the side of the head for me.  Ted Butler pointed out that JPMorgan actually decreased their long position between the November BPR and the December BPR… and it's a good bet that the fact that JPMorgan had a well-advertised long-side corner on the gold market [courtesy of Ted] that made them stand back this time, and I'm sure that it was equally obvious to JPM as well.  That gave the foreign banks a chance to cover short positions, and probably allowed the three other U.S. banks to follow suit.  And almost the same can be said for what happened in silver during the prior month as well, but JPMorgan was covering short positions as well.

As I pointed out, it's the positions of the '3 or less' U.S. bullion banks in all four precious metals that really matter, as the Comex short positions held by the large number of foreign banks, when divided up more or less equally, are immaterial in the grand scheme of things.  However, this may not entirely be the case for Canada's Scotiabank, as they held a decent sized short position in gold and a mega short position in silver, and I doubt very much that their in the same enviable position as the other foreign banks.

Except for JPMorgan's sore thumb long-side corner in the gold market, the '3 or less' U.S. bullion banks are the major short holders in all four precious metals.  They are the market, with JPMorgan way out in front.

And with off-the-charts numbers in the current COT Report, its very doubtful whether JPMorgan et al can engineer prices lower from here.  I won't stick my neck out and say that we're at the bottom, but there's not much blood left in these particular stones.

If there was ever a time for JPMorgan to stand aside, this would be it, as it's obvious that all the bullion banks are heading for the hills in all precious metals as fast as their bandy little legs will carry them.

If this event does occur, I can only envision two possible scenarios.  First, a bank holiday, or a repricing on a weekend before the Sunday night open in Tokyo.  Second, a natural market-clearing event where JPMorgan et al just put their hands in their pockets and let the markets do what is necessary with a market-clearing event for the ages.  This would be wonderful, of course, but I can't shake the feeling that if this event is allowed to occur, it will be intertwined with something else that's going on at the same time, whether it be financial, economic, monetary or, perish the thought, military.

One thing is absolutely certain, and that is that things can't continue as they are now for much longer with China [and perhaps Russia] bleeding the world dry of every good delivery bar they can get their hands on, including their own production.  Besides which, with the world's central banks in mortal fear of deflation, a little inflationary pressure would help.  And as I've said on many occasions over the years, rapidly rising precious metal prices would be the trigger for that, as once they start to fly, all the commodities will rise as well, and that bakes inflation into the cake almost instantly.

And the action of the world's bullion banks over the last 30 days speaks volumes, at least to me, and as I said very recently, only the timing and circumstance are unknown, and are unknowable.

I'm done for the day, and the week.

See you on Tuesday.

This is an abbreviated version of Ed Steer's Gold & Silver DailySign-up to have to the complete market review delivered to your email inbox each morning for free.

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