Saturday, September 6: Today in Gold and Silver

NEW YORK ( TheStreet) -- After "da boyz" took another small slice off the gold salami in the first hour of trading after the markets opened at 6:00 p.m. on Thursday evening, the gold price rallied back to slightly above unchanged---and stayed there until the 8:20 a.m. EDT Comex open.  There was a slight pop in the price, followed by an even bigger one at the release of the jobs number ten minutes later---but as you can tell from the Kitco chart below, that got hammered flat immediately by a not-for-profit seller.  From there the gold price drifted lower, with its low tick coming just before 1 p.m. EDT---and from there it drifted quietly higher into the 5:15 p.m. close of electronic trading.

The low and high ticks were recorded by the CME Group as $1,261.70 and $1,274.80 in the December contract.

Gold closed in New York on Friday at $1,268.40 spot, up $7.50 from Thursday's close.  Net volume was only 96,000 contracts, with about 15 percent of that amount occurring on the 8:30 a.m. EDT price spike.

Here's the New York Spot Gold [Bid] chart on its own so you can see the action around the jobs number in more detail.

The price action in silver was almost identical to gold's---including the salami slice to a new low for this move down in the first hour of the trading day, along with the hammered-flat price spike at the Comex open/jobs number data release.  But after the not-for-profit seller[s] had done their work, the price crawled unsteadily higher for the remainder of the day, finishing almost on its high tick.

The low and high were reported by the CME Group as $19.02 and $19.28 in the December contract.

Silver finished the trading session yesterday at $19.19 spot, up 13.5 cents from Thursday's close.  Net volume was pretty quiet at only 26,000 contracts.

Platinum and palladium didn't do much, with the former closing up $3---and the latter down $2.  Here are the charts.

After what appeared to be a frantic short covering rally on the interest rate cut in Europe on Thursday, the dollar index didn't do much of anything yesterday, as it closed down 9 basis points at 83.76 in very quiet trading.

For the second day in a row the gold stocks opened in positive territory---and then sold off into the red.  The low tick came just before 11:30 a.m. EDT---but by the end of the trading session had managed to rally back to just above unchanged, as the HUI closed up a tiny 0.27%.  I was underwhelmed, as the gold price dropped that amount on Thursday---and the HUI got crushed for 3.55%.

The silver equities put in a similar chart pattern, along with a similar gain.  The low tick for the stocks came minutes before 11 a.m. EDT---and the subsequent rally took Nick Laird's Intraday Silver Sentiment Index back into positive territory, as it closed up a tiny 0.58%.  Once again I was underwhelmed by the performance of the silver equities.

The CME Daily Delivery Report for "Day 5" of the September delivery month showed that a surprising 217 gold, along with 203 silver contracts were posted for delivery within the Comex-approved depositories on Tuesday.  In gold, the big short/issuer was Morgan Stanley with 215 contracts---and Canada's Scotiabank stopped all 215 of those contracts.  In silver, the two biggest short/issuers were ABN Amro with 137 contracts, followed by Morgan Stanley with 60 contracts.  Once again there were about a dozen long/stoppers, but nothing that really stood out in contract terms.  The link to yesterday's Issuers and Stoppers Report is here.

The CME's Preliminary Report for the Friday trading session showed that there are now 241 gold contracts, along with 1,085 silver contracts still open in the September delivery month.  And, as always, you need to subtract the Tuesday deliveries mentioned in the previous paragraph to get a true snapshot of what's left to deliver.

There were no reported changes in GLD yesterday---and as of 8:06 p.m. on Friday evening, there were no reported changes in SLV, either.

There was another sales report from the U.S. Mint yesterday.  They sold 6,500 troy ounces of gold eagles---500 one-ounce 24K gold buffaloes---and 100,000 silver eagles.

Over at the Comex-approved depositories on Thursday, they didn't receive any gold, but shipped out 39,488 troy ounces---with virtually all of it coming out of Brink's, Inc.  The link to that activity is here.

It was a much different story in silver, as 1,061,272 troy ounces were reported received---and 138,121 troy ounces were shipped out.  The link to that action is here.

The numbers from yesterday's Commitment of Traders Report for positions held at the close of Comex trading on Tuesday, were pretty much in line with what I expected to see.  Ted was happy with them, as well.

In silver, the Commercial net short position declined by a healthy 5,024 contracts, or 25.1 million troy ounces of paper silver.  The Commercial net short position now stands at 32,295 contracts, or 161.5 million troy ounces, which is still more than double what it was at the low in late May, so there's still miles to go to the downside from a total number of contracts perspective.

The standout feature in silver once again was the internal changes in the technical fund "Managed Money" category in the Disaggregated COT Report.  These brain-dead traders increased their short position by 7,396 Comex silver contracts during the reporting week, which is precisely what they would be doing as the silver price declined.  However, their long position actually increased by 854 contracts.  This is not what technical funds do on price declines.  They pitch longs and go short--- en masse.  And that's what they probably did---BUT---and it's a big BUT---if the technical funds were actually selling long contracts hand over fist, it was obvious that there was a non-technical fund buyer of longs in that category buying long contracts, also hand over fist---and in such quantities that it exceeded what the brain dead/black box technical funds were selling, to the tune of 854 contracts during the reporting week.  Ted discovered this/these non-technical fund long buyer[s] hiding in the bushes a year ago---and not only are they still there, but they're increasing their long contracts holdings at every opportunity.  One has to wonder who they are---and what their motives might be.

Ted said that JPMorgan's short position in silver declined a few hundred contracts during the reporting week---and he pegs their short-side corner in the Comex silver market at 17,000 contracts, down about 500 from the prior week's report.

In gold, the Commercial net short position declined by 19,841 contracts---and is now down to 10.37 million troy ounces.

Ted said that JPMorgan increased their long-side corner in the Comex gold market by 3,000 contracts during the reporting week---and it now sits at 23,000 contracts, or 2.3 million troy ounces.

Since the Tuesday cutoff, JPMorgan et al. have continued to slice the gold and silver salamis to the downside, although the slices have been pretty skinny.  Of course with every new low, technical funds continue to sell longs and go short---and "da boyz" continue to buy every long side of these trades that they can get their hands on.  Of course, in silver, there's those "bush sitters" in the Managed Money category that are also going long at every opportunity---and I'd be prepared to bet serious money that these "bush sitters," whoever they may be, are related to the "JPMorgan et al." crowd in some way.

Here's Nick Laird's " Days of World Production to Cover Short Positions" chart update with the latest COT date.

The latest Bank Participation Report [BPR] for September came out yesterday as well.  It contains the Comex futures long and short positions that are held by the world's banks as of the close of Comex trading on Tuesday.  This data is extracted directly from yesterday's Commitment of Traders Report---and for this one day a month we can see what the banks are up to in the precious metal markets---and they're always up to quite a bit.

In gold, "3 or less" U.S. bullion banks are net short 10,064 Comex gold contracts between them, which is a big improvement from the 17,032 contracts these same "3 or less" banks held net short in the August BPR.  Since Ted Butler pegs JPMorgan's long-side corner in the Comex gold market at 23,000 contracts, that means that the "2 or less" remaining U.S. bullion banks must be net short about 33,000 contracts to make these numbers work.  The "two or less" U.S. bullion banks would be HSBC USA and Citigroup.

Also in gold, "20 or more" non-U.S. banks are net short 60,925 Comex gold contracts, which is a slight improvement from the August BPR where these same banks were net short 63,049 contracts.  I'm still of the opinion that Canada's Scotiabank holds about 50% of this position all by itself, so if you divide up the remaining 30,000-odd Comex contracts more or less equally between the other "19 or more" non-U.S. banks, their positions are immaterial.

Here's Nick Laird's BPR chart for gold.  Note on Chart #4 that back in October 2012, there was a big blowout in the Comex short position of the non-U.S. banks.  That was when Scotiabank was forced to report their positions to the CFTC for the first time---and you can read about it on the front page of the CFTC's Bank Participation Report home page here.

In silver, "3 or less" U.S. bullion banks were net short 15,953 Comex silver contracts.  Back in the August BPR, the net short position of these same three traders was 18,447 Comex contracts, so there's been a bit of an improvement during the last month.  Ted Butler pegs JPMorgan's short-side corner in the Comex silver market at 17,000 contracts, so this means that the "2 or less" remaining U.S. banks that hold Comex futures contracts, must be net long around 1,000 contracts.  Just like in gold, those other two banks, if there are two banks involved, would be HSBC USA and/or Citigroup.

Also in silver, "11 or more" non-U.S. banks were net short 22,298 Comex contracts, which is an improvement from the 24,135 Comex contracts they held net short in August's BPR.  It's my opinion that the lion's share of this net short position is held by Scotiabank for the same reason as gold---they were forced to report their Comex futures positions to the CFTC back in October 2012.  It's also my opinion that Scotiabank's net short position in silver is around the 20,000 contract mark, which makes it even bigger than the short position held by JPMorgan.

Here's Nick's BPR chart for silver.  Along with the above-noted change in the non-U.S. bank position [ Chart #4] in October 2012---you should also note the blowout in the U.S. bank's short position [ Chart #4 and #5] back in August of 2008 when JPMorgan put Bear Stearn's Comex futures positions in silver on its books.

In platinum, "3 or less" U.S. banks are net short 8,354 Comex platinum contracts. [Note: They only hold 27 long contracts between them!]  In the August BPR, these same banks were net short 11,197 contracts of the stuff, so they've cut their collective net short positions by a bit.

Also in platinum "12 or more" non-U.S. banks were net short 6,338 platinum contracts, an improvement from the 8,408 Comex contracts they were short in August---and except for maybe Barclays, the September net short position, divided up more or less equally, doesn't amount to much when you consider the short positions of the "3 or less" U.S. banks.

But, having said all that, these 15 banks are net short a bit over 20% of the entire Comex futures market in this metal---and the "3 or less" U.S. banks are short almost 13 percentage points of this amount all by themselves.

In palladium, "3 or less" U.S. banks were net short 10,643 Comex contracts, which is an increase from the 9,299 Comex contracts they held in the August BPR.

Also in palladium, "13 or more" non-U.S. banks were net short 5,937 Comex contracts, which is also an increase from the 4,694 Comex contracts they held short in August.  But also with the exception of Barclays, their positions, more or less equally divided, don't mean a lot compared to the "3 or less" U.S. banks.

What these data show is that on the big rally that palladium had during the reporting month, the banks of the world were going short against all comers, because based on these numbers, the "3 or less" U.S. banks are net short 24% of the entire Comex palladium market---and the 16 banks in total are net short almost 38% of the entire Comex futures market in palladium.

In conclusion, it's always the "3 or less" U.S. banks that run the show, with a lot of help from Scotiabank in both gold and silver.  But calling the shots at the top, it's always JPMorgan Chase.

I have a very decent number of stories for you today---and a fair number that I've been saving for my Saturday column.

¤ The Wrap

The difference between stupidity and genius is that genius has its limits. -- Albert Einstein

Today's pop blast from the past is my most favourite piece of popular music of all time.  It's a Jimmy Webb tune that Richard Harris turned into a classic back in 1968---and you can learn more about the history of this piece of music here and here.  The youtube.com video of " MacArthur Park" is here.

Today's classical 'blast from the past' is a joyful bit of nonsense by Russian composer Nikolai Rimsky-Korsakov.  It was written as an orchestral interlude for his opera The Tale of Tsar Saltan in 1899, but every one knows it as the " Flight of the Bumblebee."   I don't know what orchestra is playing this, but I certainly recognize Maestro Zubin Mehta with baton in hand.  I'd like to have posted a better recording, but this was the only one I could find---and the link to the youtube.com video is here.

Another day---and another tiny slice out of the gold and silver salamis to the downside.  When does it end?  Beats me.  I'm still not a happy camper about the Commitment of Traders Report, as the potential exists for much more downside pain as far as price is concerned.  But, as Ted Butler always points out, its the number of contracts that matters---and as I said in my commentary on the COT Report, we've still got miles to go.

But, having said that, I'd guess that we may not revisit those lows of late May, as they were extreme in every sense of the word, but it wouldn't surprise me in the slightest if we got one more good kick in the gonads to the downside before we head higher---and it's just a matter of when JPMorgan et al.---along with their HFT algorithms---get the word to go.

So we wait.

Here are the six-month charts for gold and silver so you can see the lay of the land at week's end.

Nick Laird sent along this chart showing Chinese gold imports through Hong Kong in July.  This will be the last month that I post this chart, because with China now importing gold through both Shanghai and Beijing, the Hong Kong data is no longer any sort of proxy for Chinese gold imports---and that's more than obvious from the chart below.

I don't have much to add to what is already a very long column.  JPMorgan et al started off September on a negative note, but there are still lots of days left in the month.  But never, ever forget that supply and demand mean nothing in the precious metals, as it's obvious from the Bank Participation Report that all four [plus copper] are being actively controlled for fun, profit---and price management purposes.

In case you need a reminder, I respectfully request that you reread the last item in today's Critical Reads section--- " Another smoking gun of market rigging, but Warburton saw it all back in 2001"---and go through Peter Warburton's three most famous paragraphs once again, as Chris Powell picked a perfect time to remind everyone about them.

That's it for the day---and the week.

See you on Tuesday.


 
This is an abbreviated version of Ed Steer's Gold & Silver Daily Sign-up to have to the complete market review delivered to your email inbox each morning for free.

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