¤ The WrapThere’s a very good reason why gold and silver prices (along with other CME metals) don’t respond to developments as most would imagine. The reason is because the price-setting mechanism, which is the COMEX, doesn’t have anything to do with supply or demand or world events. Instead, the COMEX sets gold and silver prices on its own terms, namely, by who is zooming who among an incredibly small circle of traders isolated from the rest of the world or any influence from actual metal supply and demand.
I'm not telling you anything new here, but it is amazing how gold and silver pricing has become so effectively captured by a private club of paper traders that anyone who follows the market could fail to see it. The rally early [last] week was exclusively the result of technical fund buying/commercial selling and the sell-off on Thursday and Friday was the reverse. There was no other explanation or real world influence on price this week or any other week. And for certain, future price action will be due to positioning by the traders in the COMEX’s private club. - Silver analyst Ted Butler: 17 May 2014 It was another trading day where the gains of the Far East and London sessions were crushed under the heels of the trading algorithms of "da boyz" as the critical $1,300 price point---and the 50-day moving average in gold were both penetrated to the upside again yesterday. For the moment, it doesn't seem that they are going to allow any excitement in the precious metals, as the 50 and 200-day moving averages in gold are being strongly defended. Here's the 6-month gold chart. [In silver, it's the 20 and 50-day moving averages that are in play. And as we've already discovered this year---and every other year since 2011---is that even if these moving averages are broken, JPMorgan et al are there to snuff out any rally before they can get far. Will this time be different? Who knows. As Ted Butler has pointed out on many occasions, that although there's little room to the downside in silver, the potential exists for further downside price movement in gold, as the COT Reports of late have show that the technical funds are not loaded up on the short side as they were last year when an important price low was reached. It remains to be seen whether the powers that be still have that in store for us. Of course, if that is in the cards, they will certainly use the opportunity to pound the other three precious metals as well because, as we already know, supply/demand fundamentals mean nothing when "four or less" U.S. bullion banks have short-side corners in silver, platinum and palladium. JPMorgan controls the gold market with its long-side corner---and as Ted also pointed out in his Saturday commentary, they sold 5,000 contracts of that long positions, leaving him " with the distinct impression that JPM capped gold prices single-handedly during the reporting week." With about five minutes to go before the London open, I see that all four precious metals got sold down a bit during the lead-up to the open---and it will be interesting to see what happens as the Tuesday trading session unfolds in both London and New York. Gold volumes are already pretty decent, but silver volume is very light---and the dollar index is barely above the 80.00 mark. And as I send this out the door to Stowe, Vermont at 5:05 a.m. EDT, I see that both silver and gold are chopping lower. Platinum and palladium are attempting to rally, but each attempt, no matter how tiny, is being sold off. Net gold volume has just topped the 30,000 contract mark, which is pretty heavy for this time of morning---and silver's volume is nothing special. The dollar index is up 8 basis points. I note that Casey Research has a limited-time offer [it ends at midnight EDT on Friday, so you don't have a lot of time] on their Casey Extraordinary Technology subscription service. Alex Daley is all pumped up about the successes they've had over the last year, with an average return of 47%. The commentary is rather provocatively headlined " Gold is Dead: Long Live Tech". It costs nothing to check it out, which I urge you to do when you have a spare minute. The link is here---and Casey Research's usual 3-month guarantee applies. That's all I have for today---and I'll see you here tomorrow.