Thursday, February 20: Today in Gold and Silver

NEW YORK ( TheStreet) -- [ Note: The Casey Research website was down for maintenance for a couple hours this morning.  So if you're looking for a reason why today's missive is late, that was it. - Ed]

The gold price was under HFT selling pressure almost right from the open of Far East trading on their Wednesday morning, with the low coming shortly after 1 p.m. Hong Kong time.  Volume up to that points was very heavy.  The subsequent rally, such as it was, latest until shortly before 9 a.m. GMT in London.  After that, the gold price chopped sideways until 2 p.m. in electronic trading in New York.

Then JPMorgan et al showed up---and within two hours had pealed ten bucks off the price in the very thinly-traded electronic market.  The price barely recovered off its low tick going into the 5:15 p.m. EST close of trading.

The CME Group recorded the high and low at $1,323.00 and $1,308.90 in the April contract.

Gold closed in New York on Wednesday at $1,310.90 spot, down $11.40 from Tuesday.  Volume, which had been very heavy up until 10 a.m. in London, quieted down substantially as the trading day wore on, but exploded once again at the 2 p.m. EST engineered price decline.  Volume, net of February and March was 122,000 contracts.  More than 50% of that volume came before the London open---and in the 2-hour period after the Comex closed on Wednesday.

It was virtually the same price pattern in silver, except JPMorgan et al took the silver price down over 2% between 2 and 4 p.m. EST in the thinly-traded New York Access market.  The silver price recovered about 15 cents off its low going in the close.

The CME recorded the high and low price ticks at $21.96 and $21.375 in the March contracts, an intraday move of 2.64%.

Silver finished the Wednesday trading session in New York at $21.535 spot, down 42.5 cents from Tuesday.  Net volume was very heavy at 38,000 contracts.  Like gold, the lion's share of that volume came during Far East and early London trading---and between 2 and 4 p.m. EST in electronic trading.  Outside of those hours, there was no volume to speak of.

Here's the New York Spot Silver Bid chart on its own, so you can see the handiwork of JPMorgan et al up close and personal.  As Ted Butler says, first "da boyz" set the price lower---and the technical fund selling follows.  This is Precious Metal Price Management 101.

JPMorgan et al dealt with platinum and palladium in a similar manner during Far East trading up until early afternoon Hong Kong time.  The subsequent rallies ran into sellers of last resort shortly before noon in New York---and the rest, as they say, is history.  Here are the charts.

The dollar index closed in New York late on Tuesday afternoon at 80.005---and after dipping down to around 79.94 in early afternoon trading in Hong Kong, it began to rally almost the moment that trading began in London at 8 a.m. GMT.  The rally, such as it was, was done like dinner by the New York close---and the index finished the Wednesday session at 80.21, which was up 20 basis points and change from Tuesday's close.

You should carefully note that the sell-offs in the precious metals during electronic trading in New York yesterday had zero to do with what the currencies were up to.

Not surprisingly, the gold stocks opened down yesterday, but did rally into positive territory briefly at the p.m. gold fix---and were holding their own pretty good until JPMorgan showed up at 2 p.m. EST---and that was that.  The HUI finished just off its low, down 3.02%.

The silver stocks followed a similar pattern to the gold stocks, rallying into positive territory at the London p.m gold fix.  After that, it was all down hill until noon EST.  From there they developed a slightly positive bias until "da boyz" showed up at 2 p.m.  Nick Laird's Intraday Silver Sentiment Index closed down a chunky 4.44%.

The CME Daily Delivery Report showed that 64 gold and a surprising 114 silver contracts were posted for delivery within the Comex-approved depositories on Friday.  In gold, Barclays was the largest short/issuer---and HSBC USA and Barclays were the two biggest long/stoppers.  The silver delivery came out of nowhere, as the February open interest was down to 11 contracts for the longest time.  The short/issuer here was JPMorgan with 110 contracts out of its in-house [proprietary] trading account---and the only long/stopper was Canada's Scotiabank with all 114 contracts.  The link to yesterday's Issuers and Stoppers Report is here.

I was amazed to see that there was another withdrawal from GLD yesterday.  This time it was a very chunky 181,373 troy ounces.  And as of 10:02 p.m. last evening, there were no reported changes in SLV.

The U.S. Mint had a tiny sales report yesterday.  They sold 5,500 troy ounces of gold eagles---and that was it.

There were no reported in/out movements in gold over at the Comex-approved depositories on Monday.

But it was another busy day in silver, as these same warehouses reported receiving 600,066 troy ounces---and 337,605 troy ounces were shipped out.  The link to that activity is here.

Despite my best efforts, I still have a lot of stories for you again today.

¤ The Wrap

Since there is always risk present in any investment, silver’s current low risk is a positive, as is the reason for that risk, namely, price fixing on the Comex. What could possibly be positive about price-fixing on the Comex? The answer is that more are becoming aware of that price-fixing every day and, at some point, the awareness will “out” the price-fixing and end it. I don’t know if silver prices will surge or sag in the short term; but I do know prices should surge and if they do sag it will be due to the same Comex price fixing that has caused every previous price decline. I’m choosing my words carefully here – I don’t think there has ever been a silver price decline not caused by price-fixing on the Comex. - Silver analyst Ted Butler: 19 February 2014

I must admit that I wasn't entirely surprised about the HFT price take-downs in Far East trading on their Wednesday morning, as this has been going on during this time period for the entire week.  And looking at the engineered price declines in all four precious metals in the New York Access Market after the 1:30 p.m. EST Comex close yesterday, that shouldn't have come as much of a surprise either, as we've seen take-downs during this very thinly-traded time period before.  And you know that it has to be JPMorgan et al, as no profit-maximizing seller, would ever sell in a manner such as this into an illiquid market---ever.

As I said in this space yesterday, it was obvious that "da boyz" were trying to cap these rallies in gold and silver once they had broken above their respective 200-day moving averages---and yesterday's efforts were a good start.  We'll just have to wait it out and see how many technical fund longs they can get to puke up their positions, as that will determine how low the prices go.  The only thing not know for sure is how long a time period this engineered price decline will last.  I've gone on record as saying "not very low---and not for long", but you just never know---as Ted Butler is wont to say---how long will "da boyz" take to slice the salami this time.

One thing I do know for sure is that since this price/volume action happened on a Wednesday, the day after the cut-off for tomorrow's Commitment of Traders Report, we won't know what happened yesterday until the following Friday, the last trading day of February.  As long-term readers already know, this is one of "da boyz" favourite ways of hiding their tracks when they're about to make a major foray to the downside.  They don't use this trick all the time, but often enough over that last decade that the pattern is more than obvious, at least to me.  In some ways, actually, I'm surprised they didn't start after the close of Comex trading on Tuesday.

I made a comment in a story I posted in the Critical Reads section---and I want to add to it in The Wrap, so here it is again:  " Well, dear reader, I keep meticulous records on inflows and outflows from both GLD and SLV---and I can tell you the following without a word of a lie, that despite the fact that the gold price is up over a $100/troy ounce since the end of 2013, the amount of gold held in GLD [as of the close of business yesterday] is 83,937 troy ounces less than it was on December 31."

What I wanted to add to the above statement concerns SLV.  Since the end of December 2013, the price of silver is up about is up two bucks, give or take a few pennies---and as of yesterday there has been 6.17 million troy ounces of silver added to SLV since the beginning of 2014.

Why the dichotomy?  Beats me, as what's going on inside the physical precious metal world is a closely guarded secret---and maybe we'll find out some day.  Then again, but maybe we won't.

The precious metal trading action in the Far East on their Thursday has been rather choppy---and [with the exception of gold] after getting sold down a bit earlier in their morning, the metals are rallying a hair going into the London open, which is 30 minutes away as I type this paragraph.  Volumes are about average in gold---and higher in silver than I'd like to see. Virtually all of this volume is of the HFT variety, as usual.

Traders have six business days left to roll out of the March delivery month, which is a big one in silver---and I expect the switching action to pick up substantially after London opens, as it has been pretty heavy so far this month.  And, not that it matters, but the dollar index is down 12 basis points as of this writing---and hanging onto the 80.00 mark by its proverbial fingernails once again.

And as I send this off to Vermont at 5:15 a.m. EST, all four precious metals aren't doing much, or aren't being allowed to do much.  Volumes are pretty high, but not as high as they were this time yesterday.  All the volume in gold is still of the HFT variety, as is most of the silver volume, but there is some roll-over activity showing up now.  The dollar index began to rally about 30 minutes before London opened---and is now about 20 basis points off it's low and up slightly from its close in New York yesterday.

With JPMorgan et al now making their presence felt in a meaningful way, nothing will surprise me as far as price action is concerned when I get up later this morning.

I'm off to bed.  See you tomorrow.

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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