Wednesday, September 3: Today in Gold and Silver

NEW YORK ( TheStreet) -- The HFT boyz didn't leave us guessing long, as they showed up right from the open of trading in New York on Monday evening, with the low tick of the day coming about 10:30 a.m. EDT---and from there, the gold price recovered a small handful of dollars into the 5:15 p.m. close of electronic trading.

The high and low ticks were recorded by the CME Group as $1,290.90 and $1,264.10 in the December contract.

Gold finished the Monday trading session in New York at $1,265.80 spot, down $21.40 from last Friday's close.  Net volume, including Monday's volume, came in around 175,000 contracts.

Reader Brad Robertson sent the 5-minute gold price/volume chart for the time period starting about 2 a.m. MDT [add 2 hours for EDT] and it's easy to see that the big volume came when HFT boyz spun their algorithms---and prices plunged as sell stops were hit---and the technical funds in the 'Managed Money' category puked up longs and went short en masse.

The Kitco silver chart looks similar, but the low came much later in the trading session, about 15 minutes before the Comex close.

The high and low ticks in silver were reported as $19.565 and $19.11 in the December contract.

Silver finished on Tuesday at $19.145 spot, down 31.5 cents from Friday.  Net volume for both Monday and Tuesday trading sessions was reported as 53,500 contracts.

Platinum got its just deserts as well, but it was palladium that really got it in the neck.  Platinum was closed down $18 bucks, palladium got hammered for $29.  Here are the charts.

On the day in percentage terms, gold got closed down 1.66%, silver down 1.62%, platinum down 1.27%---and palladium was the 'star' of the day down 2.55%.

The dollar index 'closed' on Monday at 82.77---and began to rally shortly after trading began in the Far East on their Tuesday morning.  The 83.02 high tick came shortly before 10:30 a.m. EDT in New York---and then slid a handful of basis points into the close.  The index finished the Tuesday session at 82.97, which was up 20 basis points on the day.

As you already know by now, the gold stocks gapped down a bit over 2 percent at the open---and headed lower from there, with the HUI closing on its absolute low tick, down 3.60%.

It was more or less the same for silver, except their equities rallied back quite a bit in the early going before succumbing to selling pressure---and the silver equities closed slightly off their lows.  Nick Laird's Intraday Silver Sentiment Index closed down 'only' 2.25%.

The CME Daily Delivery Report for 'Day 2' of the September delivery month showed that only 25 gold and 39 silver contracts were posted for delivery within the Comex-approved depositories on Thursday.  Nothing to see here, which I found rather surprising---and the link to yesterday's Issuers and Stoppers Report is here.

The CME Preliminary Report for Monday and Tuesday price action showed that there are 149 gold and 1,513 silver contracts still open for delivery in September.  Subtracting the Thursday deliveries posted in the paragraph just above, doesn't change these numbers by much.  I'll be very much interested in seeing which bullion banks are the short/issuers on the remaining 1,500 or so contracts still outstanding.

There was another withdrawal from GLD, as an authorized participant removed 57,712 troy ounces on Tuesday.  And as of 9:35 p.m. EDT, there were no reported changes in SLV.  But when I checked back at 2:40 a.m. EDT this morning, I was stunned to see that another deposit had been made into that particular ETF.  This time it was an eye-watering 1,918,632 troy ounces.  Is this another deposit being used to pay down the current short position in this metal?  Beats me, but this deposit won't be in the report next week.

What makes this deposit even more remarkable is an e-mail I got from Joshua Gibbons, the " Guru of the SLV Bar List" late yesterday afternoon, several hours before I began to work on today's column---and this is what he to say:  " I'm sure you'll find out soon, but I wanted to give you a heads-up that iShares just reported a withdrawal of 9,550,217.3 ounces today (a couple hours earlier than they usually report).

I don't know what to make of it yet, but the updated bar list later this week might provide some clues, as well as any changes to the number of SLV shares that are short."

Then, about three hours later---and just as I was starting on today's missive---Joshua sent me this follow-up e-mail---" It looks like iShares goofed -- they are now showing 331,528,167.8 oz again, where it had been earlier today.  SLV had 321,977,950.5 oz on July 24, so it sounds like they accidentally reverted to that number for a couple hours. All is normal in the SLV world."

So, if my surprise at the 1.92 million ounce deposit yesterday sounded a little over the top, now you know why.

There was no sales report from the U.S. Mint.

There was a fairly serious gold withdrawal from the Comex-approved depositories on Friday, as JPMorgan shipped out 160,750.000 troy ounces.  I thought that the even number looked suspicious, so I took out my calculator and divided it by 32.15, which is the number of troy ounces in a kilobar---and lo and behold, that amount converted to exactly 5,000 kilograms, so it's obvious that all the gold was in kilobar form.  There was a tiny withdrawal of 289 troy ounces from Brink's, Inc. as well.  The link to that action is here.

In silver, there was 381,142 troy ounces reported received---and only 60,393 troy ounces shipped out.  The link to that activity is here.

I have somewhat fewer stories for you today, at least at the moment, and I hope you can find the time to read the ones that interest you.

¤ The Wrap

It is against the backdrop of an eventual dramatic silver price resolution to the upside that I must, figuratively, pick up nickels and dimes in front of a steamroller in calculating the weekly changes in market structure – waiting for the all clear signal of maximum technical fund selling to occur before overloading the boat, all the while knowing silver could blow up without proper COT advance notice due to a thousand other reasons.

Sticking to the probabilities, we don’t look completely washed out to the downside in gold and silver (and copper). With gold having moved up above its 200-day moving average after the Tuesday cut-off, there was likely tech fund buying on the higher prices that may need to be liquidated (in addition to older tech fund longs). What am I saying – there was likely tech fund buying on higher prices? In COMEX gold, silver and copper, prices only go higher because of tech fund buying, which the commercials arrange and sell into; and only go lower because the technical funds sell, which the commercials also arrange and buy into. Think like a criminal. - Silver analyst Ted Butler: 30 August 2014

The co-ordinated attacks in all four precious metals should leave little doubt in anyone's mind that yesterday's price declines were engineered by JPMorgan et al---and also with an unknown amount of help from the central banks of the world.

Here are the 6-month charts for both gold and silver.  As you can see at a glance, we made new lows for this move down in both metals.

I was always under the impression that the central banks worked through bullion banks, which I'm sure they do for the most part, but the possibility now exists that they may be acting independently at times---or maybe all the time.  There's just no way of knowing.

Anyway, there was no negative precious metal news---and no activity in the currency markets, the dollar index specifically---that would have accounted for yesterday's co-ordinated and rather dramatic sell-off.  It was just 'da boyz' and their algorithms---and the technical funds in the 'Managed Money' category doing what these price movements tell them; puking up longs, going short---or both---with 'da boyz' buying the long side of every trade offered.  The effect of this is a falling price.  JPMorgan et al set prices lower---and then the technical fund selling begins.  That, as Ted Butler keeps saying, is all there is to it---and I agree totally.

As I write this paragraph, the London open is 40 minutes away.  Gold traded flat up until just before 1 p.m. Hong Kong time---and at that point the gold price began to develop a positive bias.  Silver got sold down a bit, but is now back to unchanged.  Platinum and palladium are a few dollars above unchanged as well.  Net gold volume is right at the 13,000 contract mark---and in silver it's 3,150 contracts---very quiet across the board.

And, not that it matters, but the dollar index is basically unchanged after printing a marginally new high tick just before lunch Hong Kong time.

While on the subject of the dollar index, here's what the 3-year chart looks like---and as you can see this dollar 'rally,' either real or manufactured, is getting very long in the tooth.  However, there's nothing to say that this condition can't continue for a while longer.  But, having said that, its fall from grace could be rather ugly when it does occur, or when it's allowed to occur.  There are no market anymore, only interventions.

Are we there yet?

How many times have we heard that plaintive cry coming from the back seat in our lifetimes?  You can be forgiven if you're thinking the same way about the bottom of this engineered price decline in the precious metals.

As I said before, it remains to be seen how many long contracts JPMorgan et al can force the technical funds to puke up---along with how many short positions they can coax these same funds into buying.  When the last contract is sold, or bought, as the case may be---then the bottom is in.  What the price happens to be at that time is irrelevant, but it's always painful.

We'll have a better idea with Friday's Commitment of Traders Report, as the cut-off for it was at the close of Comex trading yesterday.  The only thing unknown is how much of yesterday's price/volume will have been reported to the CFTC in time to make it into that report.  But it certainly was a considerable amount in both gold and silver, because as I mentioned earlier, both metals punched out new lows for their respective moves down---and the technical funds would have responded accordingly.  There will be big improvements in their Commercial net short positions, it's just a matter of how much improvement there was---and how much more there might be to go.

And as I fire today's column off into cyberspace at 5:20 a.m. EDT, I see that there was more HFT activity in all four precious metals staring shortly after 9 a.m. BST in London.  All four metals were taken to new lows for this move down which, of course, means more technical fund long selling/short buying---and more short covering by JPMorgan et al.

Net gold volume has exploded to 39,000 contracts---and a hair under 8,000 contracts in silver, so it's a good bet that we're a lot closer to the bottom of this engineered price decline, especially in gold, than we were just before the London open.

The sell-offs didn't last long, as they are all recovering rather aggressively off these lows, at least for the moment.  The dollar index is now down 13 basis points from its close in New York yesterday---and 21 basis points from its pre-noon high tick in Hong Kong on their Wednesday morning.

That's all I have for today---and no price scenario will surprise me when I check the charts later this morning when I finally crawl out of 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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