Saturday, August 16: Today in Gold and Silver

NEW YORK ( TheStreet) -- There was little price activity or volume in gold up until around the noon silver fix in London on their Friday.  Once the 'fix' was done for the day, then everything changed---and within the space of a couple of hours, the gold price was down twenty bucks, and back below its 50-day moving average.  It remained down until about 10:30 a.m. EDT---and then rallied quite a bit, and back above it's 50-day moving average.  The rally got capped at 12 noon---and then sold off a few dollars by 1 p.m. EDT.  After that it didn't do a thing into the close.

The high and lows ticks were recorded by the CME as $1,316.50 and $1,293.00 in the December contract.

Gold closed on Friday in New York at $1,304.50 spot, down $8.40 on the day.  Volume, net of August and September, was way up there at 202,000 contracts.

Silver had it's usual down opening in New York on Thursday evening---and after that the silver price pattern, with some minor variations, was very similar to gold, with everything changing at the noon BST silver fix.  The really big difference was that the sell-off after the noon price capping in New York was much harsher.

The high and low ticks for silver were reported as $19.955 and $19.505 in the September delivery month.

Silver finished the Friday session at $19.55 spot, down 31 cents from Thursday's close.  Net volume was pretty chunky at 47,500 contracts.

The platinum chart looks suspiciously like the gold chart as well well, as that precious metals was closed down 8 bucks on the day.

The palladium price was in the plus column all through Far East and early Zurich trading on Friday---and the HFT boys showed up in palladium about the same time as they did in the other three precious metals.  Palladium's low came at 9 a.m. in New York---and the rally from that point blasted through Thursday's close with ease before it, too, got capped at noon in New York at $892 spot---and after that it traded sideways into the close.  Palladium close up an even ten bucks.

I shan't dwell on the issue, but just about all the price action yesterday was wall-to-wall HFT traders spinning their algorithms---and running the technical funds through their sell/buy stops, as there was nothing about supply/demand fundamentals that would cause all four precious metals to react in such a fashion if there were a free market in any of them.

The dollar index closed late on Thursday afternoon at 81.61---and then traded flat until around 2:30 p.m. Hong Kong time on their Friday.  From that point the index chopped lower for the remainder of the day, as it closed at 81.43, which was down 18 basis points from Thursday.

The gold stocks gapped down about 2 percent at the open, but came roaring back once the 10:30 a.m. EDT rally started.  In actual fact, the gold stocks followed the gold price around like its proverbial shadow while the New York equity markets were open on Friday.  The HUI finished down 0.91 percent---and considering the severity of the price action, it could have been worse.

The silver equities started of in a similar fashion to the gold equities, with their low tick coming about ten minutes after the equity markets opened in New York.  After that they blasted back into positive territory---and stayed higher until noon in New York, which is when 'da boyz' rolled over the prices of all four precious metals.  But the silver stocks didn't roll over very far, before crawling higher as the trading day drew to a close.  Nick Laird's Intraday Silver Sentiment Index closed down only 0.31%, which I consider to be a big win.

I'm wondering about Friday's counterintuitive price action in the silver shares, just like I'm wondering about the counterintuitive price action in the silver shares on Thursday---and wondering if they're related in any way.  I'm not about to draw any conclusions, but just thinking out loud, dear reader.

The CME Daily Delivery Report showed that 216 gold and 10 silver contracts were posted for delivery within the Comex-approved depositories on Tuesday.  The big short/issuer in gold once again was Jefferies---and the biggest long stoppers were JPMorgan in its client account with 122---and Canada's Scotiabank with 72.  JPMorgan has been taking delivery of a lot of gold contracts in its client account lately---and I'm not sure if anything should be read into that.  The link to yesterday's Issuers and Stoppers Report is here.

Checking Friday's Preliminary Report from the CME, I note that 330 contracts got shaved off of August's open interest in gold, of which 300 was the Comex delivery on Monday.  There are still 825 gold contracts left open in the August contract---and from that number you can subtract the 216 contracts mentioned above that are posted for delivery on Tuesday.

There were no reported changes in GLD yesterday---and as of 8:54 p.m. EDT yesterday evening, there were no reported changes in SLV, either.

The good folks over at Switzerland's Zürcher Kantonalbank reported the changes in their gold and silver ETFs for the week ending on August 8---and this is what they had to say.  Their gold ETF had another withdrawal, this time it was 9,552 troy ounces.  Their silver ETF also declined, this time by 269,070 troy ounces.

The U.S. Mint had a very tiny sales report.  They sold 1,500 troy ounces of gold eagles---and that was it.

Month-to-date the mint has sold 15,500 troy ounces of gold eagles---4,500 one-ounce 24K gold buffaloes---and 1,180,000 silver eagles.  Based on these sales numbers, the silver/gold sales ratio for August so far is 59 to 1.

It was another fairly active day in both gold and silver at the Comex-approved depositories on Thursday.  In gold, there was 30,086 troy ounces of gold reported received---and all of it at Brink's, Inc.  The link to that activity is here.

In silver, there were 601,977 troy ounces shipped in---all into Brink's, Inc. as well.  There was 130,078 troy ounces shipped out, with most of that coming out the vaults of Canada's Scotiabank.  The link to that action is here.

Here's the 5-minute tick chart for gold on Friday.  The times on the bottom are MDT, so you have to add two hours for EDT.  Once you do that, you'll note that 95% of the volume occurred between 8 a.m. EDT [1 p.m. BST in London] and noon in New York.  I thank Brad Robertson for sending it our way.

Well, I was half right about the Commitment of Traders Report---and that is a failing grade as far as I'm concerned.  Even the part I was right about, was far bigger than I was expecting.

On the engineered priced drop in the silver price during the reporting week, the Commercial net short position declined by 4,477 contracts, or 22.4 million troy ounces.  The Commercial net short position is now down to 219 million troy ounces.  The brain dead/black box technical funds in the Managed Money category went in the opposite direction of course.  They increased their short position by 6,524 contracts as the Commercial HFT boyz with their trading algorithms engineered prices lower---and they were waiting with open arms to buy the long side of every trade.

But despite the fact that the Commercial traders were going long and covering short positions, Ted Butler says that JPMorgan increased their short side corner in the Comex silver market by about 1,000 contracts---and they now are short 19,000 Comex silver contracts.

In gold, it was exactly the opposite as it was in silver.  The Commercial net short position for the reporting week blew out by an astounding 29,045 contracts, or 2.90 million troy ounce of paper gold.  The Commercial net short increased to 16.07 million ounces.  On the other side of this were the brain dead/black box technical funds in the 'Managed Money' category, as they went long 14,538 contracts and covered 11,210 short contracts, for a total of 25,748 contracts.

Ted says that JPMorgan took the opportunity to sell 5,000 contracts of their 20,000 contract long-side corner in the Comex gold market.  They are now down to 15,000 Comex contracts.

As Ted has been saying for years now, it's the Commercial traders and their HFT antics that are running the technical funds in the Manged Money category through the sell and buy stops for fun, profit---and/or price management.  That was certainly evident this week, as gold was allowed to rally---and the silver price got engineered lower.

This is what drives prices in all four precious metals, plus copper---and has zero to do with supply and demand.  The CME Group, aided and abetted by the CFTC, are allowing a tiny group of Commercial traders to dictate world prices of these key commodities and, by extension, the prices of all commodities.

It's my opinion that this is deliberate---and is U.S. government policy---and is part of what is called the Wolfowitz Doctrine.  One can only imagine the number of countries in the world that would be prosperous beyond the dreams of Avarice if there was a free market in commodities.  This would put a quick end to the financial, economic and monetary dominance of the West in general---and the U.S. in particular.

The beauty of it is that both Russia and China know all about this---and if they wanted to, they could stick a pin in it if it suited them.  They just might if push really becomes shove.  [Note to Putin:  Feel free to do it at any time. Ed]

Another day---and another big pile of stories.  With this many to choose from, I'll happily leave the final edit up to you once again.

¤ The Wrap

Please, don’t worry so much. Because in the end, none of us have very long on this Earth. Life is fleeting. And if you’re ever distressed, cast your eyes to the summer sky when the stars are strung across the velvety night. And when a shooting star streaks through the blackness, turning night into day, make a wish, and think of me. Make your life spectacular. - Robin Williams, from the movie " Jack"

Today's pop 'blast from the past' is one I posted within the last year, but unknown to me at the time was the fact that it was the short version of the piece---and here is the full version as released on iTunes in 2013.   So here it is again, but cut totally differently---and complete.

It's Ann and Nancy Wilson of Heart, along with Jason Bonham, playing Stairway to Heaven as a tribute to Led Zeppelin [who are in attendance] on Dec. 2, 2012 at Kennedy Center.  It's an absolute stunning performance---and it's impossible not to get carried away in the spirit of the moment.  Turn up your speakers, put it on full screen---and enjoy!  The link is here.

Today's classical 'blast from the past' is somewhat older.  It's Franz Schubert's Piano Quintet in A major---more commonly know by its popular name the Trout Quintet.  Schubert was 22 years young---and only had nine more years to live---when he composed this work in 1819---and it is a classic piece of chamber music from that era.  I just love the base line in the first movement.  This recording was done at the 15th Esbjerg International Chamber Music Festival in 2013 in Denmark.  The link is here.

Well, the high frequency traders had a lot of fun whipsawing the technical funds/Managed Money traders back below the 50-day moving average in gold---and then closing the gold price above it once again at day's end.  One wonders how much money they skinned them for with that little maneuver?

Of course, all four precious metals got pretty much the same treatment, except for palladium, which went on its merry way to the upside after it got sold down initially.  And as I said in yesterday's edition of The Wrap---" This was particularly true in gold and silver, along with palladium, another metal that would take off to the moon and stars if allowed to do so."

Here are the 6-month charts for both gold and silver.  The price of gold is going in one direction---and the price of silver in the other.  There's nothing free market about this---and at some point this dichotomy will resolve itself---and if forced to bet ten bucks, I'd guess it will be resolved to the downside.

The silver price, at least according to the Relative Strength Indicator [RSI], is approaching oversold territory, but that is of little comfort at the moment, because the Commercial net short position is still miles away in Comex contract terms from its old low---and it remains to be seen how low JPMorgan et al will have to engineer the silver price to get all the Managed Money technical funds to puke up the rest of their long positions, plus go short again.

Of course the Commercial net short position in gold is getting up there real good---and if 'da boyz' turn the HFT traders and their algorithms loose on gold, they'll use the engineered price decline in that metal to accelerate the down-side price action in silver.  Ted Butler pointed out that on many occasions in the past, the Commercial traders have used a declining gold price to beat down silver.  We'll see if that happens this time around---and all we can do is wait it out.

One thing I am somewhat happy about is the share price action.  Considering how badly both gold and silver got manhandled yesterday, they could/should have done worse.  That outcome may lay ahead, but for the moment they're hangin' in there pretty good.

Well, the new silver fix certainly isn't a hit---and as Goldcore's Mark O'Byrne [and others] made abundantly clear in this story posted further up, it's hardly transparent at all.  But as I mentioned in my discussion on Friday's Commitment of Traders Report at the top of this column, it's not only the fixes that are an issue---" It's the Commercial traders and their HFT antics that are running the technical funds in the Manged Money category through the sell and buy stops for fun, profit---and/or price management."

This has been going on for ages now, especially in gold, silver---and copper.  All aided and abetted by the CME Group and the CFTC.

If you're looking for some sort of guidance going forward, I don't have any---nor does anyone else.  There's always that black swan out there somewhere, along with the chances that JPMorgan et al are going to get over run, but I wouldn't bet the ranch on that outcome.

That's all I have for today---and the week.  I'll see you here 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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