Wednesday, February 26: Today in Gold and Silver

NEW YORK ( TheStreet) -- Gold got sold down a few dollars in Far East trading, which has been pretty much normal for the last few weeks, and then traded a bit above the $1,330 spot price until the low of the day, which came at [or shortly after] the noon London silver fix.  The subsequent rally added ten or twelve bucks to the price by 2:30 p.m. EST in electronic trading---which turned out to be the high---and then it got sold down a few dollars going into the close.

The CME Group recorded the low and high ticks as $1,331.20 and $1,343.80 in the April contract.

Gold finished the Tuesday session in New York at $1,341.60 spot, up an even five bucks from Monday's close.  Volume sans February and March was 132,000 contracts.

As is usually the case, the sell-off in silver was far more severe---and at its London silver fix low, it was down about 1.5% from its Monday close.  The high of the day came shortly before 1 p.m. in New York---and after that the price didn't do much.

The low and high ticks in silver were recorded as $21.67 and $22.025 in the March contract.

Silver finished the day at $21.89 spot, down 7.5 cents from Monday's close.  Gross volume was around 132,000 contracts, but net volume imploded to only 16,000 contracts, which was down almost 60% from the prior day.

It was more or less the same price path for platinum, except its high came around noon in New York.  Palladium was under some selling pressure right up until 15 minutes before the close of electronic trading in New York on Tuesday, before bouncing back a bit into the close.  You'd never guess from this price 'action' that most of South Africa's platinum and palladium production has been shut down for about five weeks.  If you follow the Bank Participation Report, you'll know that '3 or less' U.S. bullion banks hold a short-side corner in both these metals as well.  Here are the charts.

The dollar index closed in New York at 80.22 late on Monday afternoon---and from there began to slide the moment that trading began in the Far East on their Tuesday morning.  The low tick of 80.045 came just after the equity markets opened in New York---and just before the London p.m. gold fix.  Then, at precisely 10 a.m. EST, a buyer of last resort showed up to rescue the index before it fell below the 80.00 mark, which it would have surely done within the hour without 'divine intervention'.  The ensuing 20 basis point spike crashed and burned---and the index was back almost to its low at precisely 11 a.m. EST.  From there it rallied a bit into the close, finishing the day at 80.135---down about 8 basis points from Monday.

The gold shares struggled all day---and managed to make it into positive territory by around 1 p.m. EST. But once the gold price turned lower off its 2:30 p.m. high, the gold stocks got sold down in sympathy---and despite the fact that the gold price finished in positive territory once again, the HUI closed down 1.22%, it's second losing day in a row.

And as bad as the gold stocks got sold down, the silver equities fared far worse---and for the second day in a row the shares got hit hard, as Nick Laird's Intraday Silver Sentiment Index closed down 2.88%.

The CME's Daily Delivery Report showed that 93 gold and zero silver contracts were posted for delivery within the Comex-approved depositories on Thursday.  JPMorgan was the only short/issuer of note with 92 contracts---and Barclays stood for delivery as long/stopper on 69 of them.  The link to yesterday's Issuers and Stoppers Report is here.

There isn't much left to delivery in the February contract in gold---and what little there is should be posted on the CME's website this evening EST.  There are no silver deliveries outstanding for February.

Another day---and another deposit in GLD.  This time an authorized participant added 67,470 troy ounces.  And as of 9:38 p.m. EST yesterday evening, there were no reported changes in SLV.

The U.S. Mint had another sales report.  The didn't sell any gold, but did report selling another 346,000 silver eagles.  The mint has reported selling 1.17 million silver eagles so far this week----and you have to ask yourself who the buyers of this quantity of silver eagles is.  The silver/gold sales ratio for the mint, which I reported on Saturday as being 70 to 1---has now blown out to 102 to 1.  Ted Butler says that this is the highest silver/gold sales ratio in U.S. Mint history.

There wasn't a lot of gold activity over at the Comex-approved depositories on Monday, as only 353 troy ounces were received---and 32 troy ounces were shipped out.  In silver, there were 207,306 troy ounces reported received---and 106,941 troy ounces shipped out.  The link to the silver activity is here.

I have a far more reasonable number of stories today---and I hope you have enough time to read/watch/listen to the ones that interest you the most.

¤ The Wrap

In Comex silver futures, the net 10,400 contract increase in the total commercial net short position, to 32,900 contracts, was among the largest on record and pushed the total commercial net short position to its highest level in almost a year. Just to put this [past] week’s increase into proper perspective, the 10,400 contract increase is the equivalent of 52 million oz, or three and a half times the amount of silver produced by all the world’s mines for a full week.

Throw in the previous reporting week’s 7,600 contract increase in the commercial net short position and the two week selling equaled 18,000 contracts, or the equivalent of 90 million ounces of silver. That’s the equivalent of six full weeks of total world silver mine production. There doesn’t appear to have been any participation on the Comex by real silver producers or consumers – just speculators. - Silver analyst Ted Butler: 22 February 2014

I'm not prepared to read too much into yesterday's price action, as we're in the final days of the roll-overs out of the March delivery month.  March isn't a regular delivery month for gold, but it certainly is in silver---and the gross volume in it has been over the moon during the last week.  I expect the same today and, to a certain extent, on Thursday as well.  It will be interesting to see who the issuers and stoppers are when the CME posts the numbers on their website late on Thursday evening EST.

Even though I'm not reading much into yesterday's price action in either gold or silver, I'm less than happy with the price action of the shares, as they stink to high heaven.  My concern is that they portend a engineered price decline in the metals themselves.  As to when that might occur, I really don't know, except for the fact that it will---and I must admit that I'm looking at the share price action as precursor to the event itself.

Yesterday at the close of Comex trading was the cut-off for this Friday's Commitment of Traders Report---and just eye-balling the charts for the 5-day reporting period, I'm expecting further increases in the Commercial net short position as JPMorgan et al continue to go short or sell long long positions into these rallies, which certainly appears to be running out of gas.

Here are the three-year charts for both silver and gold---and they put their respective rallies in some sort of perspective when you look at the Relative Strength Indicators of both metals.

There wasn't a lot of price action in Far East trading on their Wednesday, although prices were a tad softer in the morning---and recovered a bit as the London open approached.  London has been open about 10 minutes as I write this paragraph---and prices aren't doing much there, either.  Gold volume is about average---and virtually all of it is of the HFT variety.  Silver's volume is immense, but the lion's share of that is roll-overs out of March---and into May and beyond.  It's very unusual to see this amount of roll-over activity at this time in the trading day.  The dollar index isn't doing a thing.

It's now 5:10 a.m. EST---and nothing worth mentioning has changed in the last two hours since I wrote the above paragraph.  Volumes are higher in gold, of course, but not by a lot.  The same can be said for silver.  Gross volume is about 18,500 contracts, but once the roll-overs and switches are subtracted out, net volume collapses to around 5,000 contracts.  The dollar index is unchanged from its close in New York yesterday.

I'm off to bed.  See you here 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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