Saturday, September 27: Today in Gold and Silver

NEW YORK ( TheStreet) -- Gold rallied unsteadily in Far East trading on their Friday---and the high of the day came with a capped price spike just a few minutes before the London open.  From there, every rally attempt got sold down---and the low of the day came at 10:15 a.m. EDT, which was either at, or just after, the London p.m. gold fix.  From there, the gold price rallied a bit into the close.

The high and low ticks for the day were reported by the CME Group as $1,232.70 and $1,212.80 in the December contract.

Gold finished the Friday session at $1,219.40 spot, down $2.50 from Thursday's close.  Net volume was not overly heavy at 123,000 contracts.

The silver price pattern was similar to gold's, except much more subdued---and the low tick came at 1 p.m. BST in London, which was twenty minutes before the Comex open.  Silver chopped higher for the remainder of the Friday session in New York---and closed on its absolute high tick.

The low and high were reported as $17.725 and $17.44 in the December contract.

Silver finished the trading day yesterday at $17.66 spot, up 16 cents on the day.  Net volume was 35,500 contracts.

Platinum rallied a bit in early Far East trading, but then got sold back down to unchanged and remained that way until shortly after Zurich opened.  Then down it went for the rest of the day, hitting its low tick---and a new low for this move down---about 2:30 p.m. in New York.  After that, the price didn't do much.  JPMorgan et al finally close platinum below the $1,300 mark at $1,297 spot, down another 12 bucks.

Palladium got it in the neck for the second day in a row---and I thought the smack-down just after the Zurich open on Thursday morning was egregious!  But Friday's price action was even more grotesque.  After hanging around the $800 mark for most of the trading session, the HFT boyz and their algorithms showed up---and the palladium price was down over $20 by 2 p.m. EDT.  Then just minutes before the 5:15 p.m. EDT close, they showed up once again and carved another seven or eight bucks off the price.  These guys have no shame, but they obviously have an agenda---and are just as obviously pressed for time as well.

Palladium was closed at $772 spot, virtually on its low tick of the day---and down a whopping $25 on the day---3.14%.  It almost goes without saying that this was another new low for this move down.

The dollar index closed at 85.18 late on Thursday afternoon in New York---and then didn't do a lot until around 11:30 a.m. BST in London on their Friday morning.  Then away it went to the upside, with the 85.67 high coming minutes before 2:30 p.m. EDT.  From there it slid a few basis points into the close, finishing the week at 85.64---up 46 basis points on the day.

The gold stocks gapped down a bit at the open---and continued to slide from there, with the low tick coming at 3 p.m. EDT---and the shares managed to cut their loses a bit, but the HUI still closed down another 1.46%.

It was more or less the same pattern in the silver stocks---and despite the fact that the silver price finished well into positive territory, the silver equities closed down another 1.35%.

The CME Daily Delivery Report showed that 1 gold and 17 silver contracts were posted for delivery within the Comex-approved depository on Tuesday.  The First Day Notice numbers for the October delivery month weren't forthcoming, so they'll be posted on Monday evening on the CME's website---and I'll have it for you on Tuesday.

The CME Preliminary Report for the Friday trading session showed that 1 gold and 17 silver contracts were still open in the September contract---and you will carefully note that they match the numbers in the previous paragraph precisely.  The September delivery month is now done.

There was another withdrawal from GLD yesterday, this time an authorized participant took out 38,463 troy ounces.  And in keeping with tradition, there was another deposit in SLV yesterday as 767,147 troy ounces were added.  The SLV mystery continues---and deepens. 

There was a sales report from the U.S. Mint yesterday.  They sold 3,000 troy ounces of gold eagles---1,500 one-ounce 24K gold buffaloes---and 250,000 silver eagles.

Month-to-date the U.S. Mint has churned out 51,500 troy ounces of gold eagles---13,000 one-ounce 24K gold buffaloes---and 3,050,000 silver eagles---and 600 platinum eagles.

Mint sales for September so far are light years ahead of August---up over 100 percent in gold eagles, 50 percent in buffaloes---and 50 percent in silver eagles---and I can tell you that sales this week at the bullion store where I work, have been very robust.

Over at the Comex-approved depositories on Thursday, there was another very decent withdrawal in gold, as 96,450.000 troy ounces were shipped out and, to the ounce, that number works out to exactly 3,000 kilobars.  The link to that activity is here.

It was another very busy day in silver as well, as 744,036 troy ounces were reported received---and 629,362 troy ounces were shipped out.  The link to that action is here.

The Commitment of Traders Report for positions held at the close of Comex trading on Tuesday were about what I was expecting in silver, but rather disappointing in gold.

In silver, the Commercial net short position declined by a hefty 6,792 contracts, or 34.0 million troy ounces.  The Commercial net short position is now down to 16,767 contracts, or 83.8 million troy ounces---and within spitting distance of its late May/early June record low.

For a change, it wasn't the Managed Money traders in the technical fund category going short that caused the decline, as they actually covered 1,638 of their short contracts during the reporting week.  It was the small traders [the Nonreportable category] that were involved, as their net long position declined by 4,702 contracts.  Ted says that it appears that the Managed Money is all full up on the short side---and all of this week's improvements came from these Nonreportable futures contract holders, plus Non-Commercial traders other than the technical funds.

Ted also mentioned that JPMorgan's short position in silver is now down to about 11,500 contracts, their lowest short-side corner in the Comex futures market since taking over the silver short position of Bear Stearns in 2008.  And not to be forgotten in all of this, is the equally extreme short-side corner in the Comex silver market held by Canada's Scotiabank.

In gold, the Commercial net short position only declined by 11,924 contracts, or 1.19 million troy ounces.  I was expecting around double that amount.  The Commercial net short position in that precious metal now stands at 6.43 million troy ounces.

The big changes were in the Manged Money category, as they sold an additional 3,232 long contracts---and bought 6,933 short contracts.  The small traders in the Nonreportable category also pitched 4,278 longs in addition to that.

Of course, standing there buying all the long positions offered in both metals, was JPMorgan et al.

Ted was rather surprised to see that there was no change in JPMorgan's long-side corner in the Comex gold market, as it remained around the 25,000 contract/2.5 million troy ounce mark.

Ted also remarked that the Comex futures market showed major improvements in platinum, palladium, copper and crude oil, as 'da boyz' continue to game the technical funds into extreme positions on the short side. The only big exception is the dollar index, where the technical funds are holding monster long positions---and JPMorgan et al are mega short.

And, without doubt, we've seen more improvements in the internal structure of the precious metals since the Tuesday cut-off---and also without doubt, we're back at, or below, the record lows set back in late May/early June.  And we've exceeded those lows in both platinum and palladium, as those two metals have been savaged during the latest engineered price decline.

Once again we have to contemplate the subsequent actions of JPMorgan et al, as all these shorts look to cover during the next rally---and in the dollar index, it's the opposite.  Will they let the technical funds off easy once again, or will 'da boyz' just put their hands in their pockets?

And as Ted Butler and I have said countless times that, and only that, will determine not only how high price rise from here, but how fast they get they get there as well.  Nothing else matters.

I have the usual number of stories for a weekend---and the final edit is up to you.

¤ The Wrap

There is no doubt in my mind that the technical funds are being herded onto the short side of COMEX silver, gold and copper by their counterparties, the collusive commercials which are buying every contract that the technical funds sell or go short. I have to stop here to make a point that has been bothering me lately.

As clear as the silver manipulation has become to increasing numbers of observers, it is important to recognize that it is not as simple (or complex) as some maintain it is. It is not commercial selling that is fueling the move to new lows, as the commercials have been buying hand over fist. Yes, the commercials get things rolling to the downside by HFT tricks and spoofing, but that’s only to get the technical funds to sell so that the commercials can buy. That’s spelled out without exception in the evolving COT data.

It’s too bad that many observers and commentators (not subscribers) have failed to grasp this manipulation basic because it then leads to unprovable conclusions, such as it’s the government driving gold and silver prices lower by having the bullion banks sell short. Perhaps there is government involvement is some way, but it is the technical funds selling short on price declines, not the commercials. The commercials only sell on price rises. All the data confirm this. - Silver analyst Ted Butler: 24 September 2014

Today's pop 'blast from the past' dates back to 1978---three years after the beginning of the permanent negative gold bias in London---and neither the artist, Billy Joel---nor the tune---needs any further introduction. The link is here.

Today's classical 'blast from the past' is one I heard on CBC-FM yesterday as I was driving around the city running errands.  It's Frédéric Chopin's Piano Concerto No. 2 in F minor, Op. 21 that he composed in 1830 when he was around 20 years old.  In this video, Russian pianist Evgeny Kissin does the honours---and the Warsaw Philharmonic Orchestra accompanies, with Antoni Wit conducting.  The link is here.

Well, it was only platinum and palladium that set new low price tick for this move down on Friday---and it took brute force to engineer that price decline in palladium during the Comex trading session in New York.  Like everything else that's been going on in the precious metals, it was more than obvious that there was nothing free market about it.  And as I mentioned at the top of this column, it looked like it had an air of desperation about it as well.

Here are the 6-month charts in all four precious metals.

I mentioned the circumstances surrounding the next rally in the precious metals---and other commodities---in my comments regarding the Commitment of Traders Report, so I shall not repeat them here.

Yesterday I posted a chart regarding the " London Gold Price Bias"---which has been negative every year since 1975.  Here's the chart once again, along with my comments---and I've added others to it to complete the picture.  This is ' THE JUICE' of today's column---and I urge you to spend more than a few minutes on it.

"Here's the 5-year chart of that bias using the LBMA's own data.  It actually begins about 40 minutes before the London open, which is about 2:20 p.m. in the Hong Kong trading session---and the negative bias continues until the London p.m. fix at 3 p.m. BST, or 10 a.m. EDT.  After that, the price rallies until 2:45 p.m. Hong Kong time the following morning.  This is the 5-year average---and using a 2-minute tick and about 1,100 trading days, it removes all the 'noise'---and leaves the trend stripped naked for all to see."

Here's another chart based directly on LBMA price data going back 44 years.

In theory, and without considering commissions, what the above charts shows in plain English is that if you invested a hundred bucks at the London a.m. gold fix on January 2, 1970---and sold your position at the London p.m. gold fix the same day---and then reinvested the proceeds the next day at the London a.m. fix---and sold at the p.m. fix---and did that every business day for 44 years, you would the have the magnificent sum of $12.87 cents in your trading account as the closing of trading on September 10, 2014.

For the first four years on the above chart, the bias was positive [low morning fix and a higher afternoon fix], so you made money---from $100 up to around $330. The bias was deliberately turned negative in London beginning on January 2, 1975---and that's plain to see on this chart, especially when you see how the gold price performed as the years progressed.  If you 'bought high and sold low' every business day for 39 years, your $380 at the peak turned into $12.87.

Then Nick Laird took the same $100---bought the London p.m. fix and sold the position at the London a.m. fix the following day and re-invested the proceeds just as he did before, for the same 44 year period---and this is what that chart looks like.  Your initial hundred bucks would have turned into $27,711 on September 10, 2014.

Of course you would have done infinitely better ex-London if you'd sold your position at 2:20 p.m. in Hong Kong---and then invested the proceeds at the p.m. fix the same day in London.

And here's another chart that hits you between the eyes.

It shows that between 1999 and 2012---during the biggest bull market in gold in history, London [the red bars] was down every year.  That's the 'negative price bias' in action.

This pattern wouldn't exist in a free mark market---which it isn't!

So when they talk about rigging the gold market in London, it's not the individual fixes that matter, it's the negative bias between the morning and afternoon gold fixes that is the "fix"---and it's been negative for 39 years in a row.  It's a good bet that around 90 percent of all the volume in gold [or any other commodity for that matter] occurs between 2:45 p.m. in Hong Kong---and the 3 p.m. BST gold fix in London.

Before heading off to bed, I'd like to quickly remind you of the 40th Annual New Orleans Investment Conference from October 22-25, 2014.  That's less than four weeks away!  If you're interested, you can find out everything you need to know by clicking here.

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

See you on Tuesday.

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