Friday, August 1: Today in Gold and Silver

NEW YORK ( TheStreet) -- The gold price didn't do a thing in Far East or most of the London trading day on their Thursday.  But as I pointed out in The Wrap in yesterday's column, if there was any serious price action coming our way, it would occur during the New York trading session---and that turned out to be the case.  Most of the technical fund selling/Commercial buying came at three different times of the day---including the rally in electronic trading after the Comex close.  If left to its own devices, gold would have probably closed up on the day.

The high and low tick were reported by the CME Group at $1,298.80 and $1,281.30 in the December contract.

Gold closed the trading day on Thursday in New York at $1,280.50 spot, down $14.00 from Wednesday's close.  Volume, net of August, was 152,000 contracts.

For the umpteenth day in a row, the silver price was spiked lower at the 6 p.m. open in New York on Wednesday evening.  From there, silver traded a bit differently than gold during the late Far East and early London trading day.  After doing nothing for most of Thursday in Hong Kong, the silver price began to rally shortly before 2 p.m. local time.  The rally topped out/got capped about an hour after London opened---and it was all down hill from there, helped along with an additional shove at the Comex open.  Silver hit its low tick at the 1:30 p.m. Comex close---and the subsequent rally in electronic trading met the same fate as gold---and at the same time as well.

The high and low for silver yesterday was recorded as $20.78 and $20.37 in the September contract, an intraday move of 2 percent.

Silver closed on Thursday afternoon in New York at $20.38 spot, down 23.5 cents from Wednesday's close.  Volume, net of August, was 44,000 contracts---of which about 2,700 were traded in the December contract.

The trading patters for platinum and palladium were similar, with the major sell-offs beginning at the Comex open in New York.  Platinum finished the day down 19 dollars---and palladium by 6 bucks.  Here are the charts.

The dollar index closed late on Wednesday afternoon in New York at 81.40---and traded flat until 2 p.m. Hong Kong time on their Thursday afternoon. The tiny rally that began at that point topped out at 81.56 at the 8:20 a.m. Comex open in New York.  It slid down to 81.42 just before the London p.m gold fix---and traded flat after that.  The index closed at 81.43---which was basically unchanged from Wednesday.

Not surprisingly, the gold stocks gapped down at the open---and then hit their low of the day at 1 p.m. EDT---and after that they didn't do much.  The HUI closed out the last day of July down 2.17%.

The silver equities followed a similar pattern, with their low tick coming a precisely 1:00 p.m. EDT as well.  But because the metal itself did so poorly, the silver equities closed down more, as Nick Laird's Intraday Silver Sentiment Index finished the day down 2.55%.

The CME Daily Delivery Report for Day Two of the August delivery month showed that 1,743 gold and 9 silver contracts were posted for delivery within the Comex-approved depositories on Monday.  The big short/issuer in gold was HSBC USA with 1,739 contracts---and the four biggest long/stoppers were JPMorgan with 548 contracts in its client account, Morgan Stanley with 462 in its in-house proprietary trading account, Barclays with 323 in its in-house trading account---and Canada's Scotiabank with 298 contract.  There were half a dozen or so small long/stoppers as well---and yesterday's Issuers and Stoppers Report, which is linked here, is certainly worth a look.

As I said in this space yesterday, I would be checking Thursday's preliminary report from the CME---and it showed that gold open interest for August only declined by 792 contracts from Wednesday's total, and is now down to 8,128 contracts.  I don't know what percentage of this will end up standing for delivery, but based on this number, there are still lots of gold deliveries left to go for August---and the only thing to watch for going forward, is how long a period of time the delivery process is stretched out over.

As Ted Butler has pointed out to me on many occasions, there's no advantage for the short/issuers to hold back on deliveries---unless they don't have the gold to deliver, of course.  I find that situation unlikely, but I'll be watching the daily deliveries with more than the usual amount of interest as the month progresses---and I'll keep you posted.

As far as silver is concerned, the August open interest dropped from 237 contracts down to 19 contracts.  Most of that decrease was the deliveries from the first day notice report on Wednesday, which was 225 contracts.  If you subtract out the 9 silver contracts posted for delivery on Monday that I spoke of a few paragraphs ago, there's not much left to deliver in silver for August---barring unseen/surprise delivery requests as the month progresses.

There were no reported changes in GLD yesterday---and as of 7:47 p.m. yesterday evening, there were no reported changes in SLV, either.

Joshua Gibbons, the " Guru of the SLV Bar List" updated his website with the internal goings-on over at the Internet site as of the close of business on Wednesday afternoon---and here's what he had to say: " Analysis of the 30 July 2014 bar list, and comparison to the previous week's list.  1,397,251.6 troy ounces were removed, 629,369.5 oz were added---and 189 bars had a serial number change."

"The bars removed were from: Henan Yuguang (0.9M oz), Krasnoyarsk (0.2M oz), Yunnan Copper (0.2M oz), and 7 others.  The bars added were from: Henan Yuguang (0.3M oz), Valcambi (0.2M oz), and 4 others."

"As of the time that the bar list was produced, it was overallocated 536.0 oz.  All daily changes are reflected on the bar list."  The link to Joshua's website is here.

There was a tiny sales report to round out the month of July, as the U.S. Mint reported selling 50,000 silver eagles---and that was all.

For the month of July, the mint sold 30,000 troy ounces of gold eagles---5,500 one-ounce 24K gold buffaloes---and 1,975,000 silver eagles.  July was the slowest month for silver eagle sales for all of 2014 so far---and the same can be said for the 24K gold buffalo as well.

Over at the Comex-approved depositories on Wednesday, there was a decent amount of gold moved around---and it was a lot quieter in silver for a change.  In gold, there was 69,707 troy ounces reported received---and 5,146 troy ounces shipped out.  The link to that activity is here.  In silver, there was nothing reported received---and only 116,017 troy ounces were shipped out the door.  The link to that action is here.

Here's the 5-minute tick chart  for gold from 12:30 a.m. MDT time on Thursday morning, right up until the 3:15 p.m. MDT close.  Don't forget to add two hours for EDT.  Notice the huge volume as the HFT boyz hit the technical funds' sell stops on the first engineered price decline.  There was decent volume on the second decline just before 1 p.m. EDT/11 a.m. MDT---and almost no volume of the third one in the thinly-traded electronic market that followed the Comex close.  I thank reader Brad Robertson for providing this chart.

I have a far more reasonable number of stories for you today---and I hope there are some on this list that you find of interest.

¤ The Wrap

The prime disruptor to the continuing silver manipulation remains an eventual physical silver shortage. While its timing remains unknown, the preconditions necessary for such a shortage appear to be in place as seen in the extraordinary physical turnover in the COMEX-approved silver warehouses. Tight supply conditions, as is suggested by the silver warehouse turnover, can readily morph into outright shortage. After all, a shortage is nothing more than a tight physical market getting tighter to the point of noticeable delays in deliveries to buyers. A shortage doesn’t mean no material at any price; it’s more a case of an inability to deliver in a timely manner at then-prevailing prices to buyers. - Silver analyst Ted Butler: 30 July 2014

If Thursday's price action in New York was another engineered price decline, there certainly wasn't much volume associated with it considering that gold took out both its 50 and 200-day moving averages with some authority---and closed below them as well.  Silver hasn't broken either one to the downside just yet, but it's a chip shot for the HFT boyz if/when they decide to make their move.

Here are the charts showing yesterday's price action.

The question of how low the price might go from here is not the question one should ask.  As Ted reminded me on the phone yesterday, it's the number of contracts that counts.  If/when JPMorgan et al decided to pull the pin for real and flush the tech funds' long positions down the drain, it then depends on how many longs they can get the tech funds to puke up---and if "da boyz" press hard enough, how many short-side contracts they can get these same technical funds to load up on.

If they want to take back all of what the tech funds put on since the first week of June, then we have a long way to go to the downside, both from a contract and price perspective.  And when the Commercial traders can't wring out another long contract, or force the technical funds to go further short, then the bottom will be in, regardless of what the price is.

The price is incidental, but that's what everyone looks at---and as Bill Murphy over a is wont to say---" Price action makes market commentary."  He would be right about that.

This presupposes that everything will go JPMorgan's way, of course---and with the way events are unfolding in the world at the moment, I wouldn't bet the ranch on that outcome.   But with JPMorgan et al having captured the pricing mechanism in the Comex futures market for all four precious metals, plus copper---I wouldn't bet against them, either.

One thing that is absolutely a given, is that the Commercial traders---JPMorgan et al---will be buying every long that the technical funds sell in these metals---and will gobble up the long side of every short position that the technical funds place.

So we wait.

As I write this paragraph, the London open is twenty minutes away.  Gold and platinum are up a few bucks, palladium and silver are unchanged.  Gold volume, net of August, is a bit over 13,000 contracts---and silver's volume is a bit over 4,000 contracts.  That's pretty light volume.  And not that it matters, but the dollar index is a up a small handful of basis points.

Today, at 8:30 a.m. EDT, we should get the latest job numbers---and I'll be more than interested in how gold and silver react, or are allowed to react, when the news hits the street.

The other thing we get today is the latest Commitment of Traders Report for positions held at the close of Comex trading on Tuesday, July 29.  Just eye-balling the 6-month charts above, I'd guess we'll see some improvement in the Commercial net short positions of both metals, but it won't be a material amount if there is---and it certainly won't put a serious dent in the sky-high Commercial net short positions that currently exist in both metals.

As I mentioned earlier this week, there's an FOMC meeting on Tuesday and Wednesday of next week---and nothing will surprise me as far as gold and silver price action is concerned.  I'm mentally preparing myself for the worst---and I'm sure that JPMorgan et al won't disappoint if given the opportunity.

And as I hit the send button on today's offering at 4:45 a.m. EDT, I note that very little has changed now that London has been open for a bit over 90 minutes.  Gold is up a few dollars---and the other three precious metals are hovering around unchanged.  Volumes in both gold and silver have increased, of course, but still fall in the very light category---and the dollar index is still up the same small handful of basis points.

Once again I expect that all the significant price action will begin either at the Comex open, or ten minutes after that when the jobs number shows up---and I shan't hazard a guess as to how the remainder of the Friday trading day will end up.

Enjoy your weekend, or what's left of it if you live west of the International Date Line---and I'll 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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