Another devastating day for the precious metal equities. No change in GLD, but almost one million ounces added to SLV. A big silver eagle sales day at the U.S. Mint. Very decent movement in both gold and silver at the Comex-approved depositories on Thursday.
NEW YORK ( TheStreet) -- Well, you don't need me to tell you what happened in gold yesterday, as it's pretty much self-evident from the Kitco chart posted below. After the HFT boyz hit the price at 7 a.m. GMT in London on their Friday morning, the price traded pretty flat until the Comex open---and then more short selling appeared, with gold hitting its low tick a minute or so after 9 a.m. in New York. The price retested that low shortly after 11 a.m. EDT---and then rallied until shortly before the Comex close---and then chopped sideways for the remainder of the Friday session. The CME Group recorded the high and low tick as $1,202.40 and $1,160.50 in the December contract, which is the new front month for gold. Gold finished the day at $1,172.90 spot, down $25.90 on the day---and well off its low. Net volume was over-the-moon at 275,000 contracts. It was more or less the same chart pattern in silver, although there was a bit of rally around the noon London silver fix. That all vanished, as the low tick of the day came minutes after the open of Comex trading. From that low, the silver price chopped unsteadily higher into the close. The high and low were recorded as $16.515 and $15.635 in the December contract, an intraday move of a bit over 5 percent, which is the second day in a row that sort of intraday move has occurred. Silver finished the Friday session at $16.175 spot, down 28.5 cents from Thursday's close. Net volume was sky-high once again at 74,000 contracts, which was the same net volume as we had on Thursday. Platinum's price action on Friday was a mini version of what happened to gold and silver---and the low tick in that precious metal came after 9 a.m. EDT. From there it recovered a decent amount---and was only closed down 8 bucks on the day. After an up/down/up move that netted out to zero during early Far East trading, palladium also got hit at the Zurich open. From that low it rose quickly into positive territory---and rallied unevenly until shortly after 1 p.m. EDT---and from there it traded sideways for the remainder of the Friday session. Palladium finished up a very respectable 15 dollars on the day. The dollar index closed at 86.18 late on Thursday afternoon in New York---and then did nothing until around 12:35 p.m. in Hong Kong on their Friday afternoon. Then away it went to the upside in two separate rallies, with the second one starting at 8 a.m. in New York. The 87.11 high tick came about 11:15 a.m. in New York. By noon the index had sold off a bit---and from there it traded flat into the close. The index finished the day at 86.91---up another 75 basis points. Here's the 6-month dollar index chart---and looking at the price action vs. the RSI trace, I'd be hitting the bid at the open on Monday if I was long the U.S. dollar. The gold stocks gapped down 7.5 percent in the first few minutes of trading on Friday. They recovered a bit in the next half hour before chopping unsteadily sideways for the remainder of the day. The HUI finished down another 5.0 percent. Here's Nick's chart. It was more or less the same price chart for the silver equities---and Nick Laird's Intraday Silver Sentiment Index got creamed for 5.09 percent. The HUI has lost almost 17 percent during the last three trading days of the week. I haven't kept track of the loses for the silver equities, but I'm sure they're of the same magnitude. However, one serious question you should be asking yourself at this point is who the buyers are that are scooping up all these shares that John Q. Public and the mutual funds are selling in a blind panic? Whoever they are, they have very deep pockets---and I would guess that they own a large chunk of the outstanding shares of most precious metal mining companies by now. If not that, then at least almost all of the ' float' in each one---and it will be interesting to see how willing they are to sell on the next rally, if they sell at all. The CME Daily Delivery Report for Day 2 of the November delivery month showed that zero gold and 3 silver contracts were posted for delivery within the Comex-approved depositories on Tuesday. Nothing to see here. The CME Preliminary Report for the Friday trading session showed that November open interest in gold is down to 55 contracts---and silver's November o.i. is sitting at 119 contracts, down 45 contracts from Thursday's report, after subtracting out Monday's delivery. There were no reported changes in GLD---and as of 8:43 p.m. EDT yesterday evening, there were no reported changes in SLV, either. But when I checked back at 2:41 a.m. EDT this morning, I was amazed to see that an authorized participant had added 958,452 troy ounces of silver to SLV. Just think about that for a second. Since its $17.40 spike high at the Comex open on Tuesday morning, to its $15.80 spot low around 8:25 a.m. EDT Friday morning, the silver price has been clubbed for $1.60. Not only was no silver been removed from SLV during that time period---but the above amount was added. We'll see what SLV has to report on Monday and Tuesday, as there's always some delay. It was another big sales day over at the U.S. Mint yesterday. They reported selling 8,000 troy ounces of gold eagles---and 425,000 silver eagles. Assuming that October's sales numbers aren't revised on Monday, the U.S. Mint sold 67,500 troy ounces of gold eagles---21,000 one-ounce 24K gold buffaloes---5,790,000 silver eagles---and 400 platinum eagles during the month just past. Based on these sales figures, the silver/gold ratio stands at 66 to 1. By the way, the 5.79 million silver eagles sold last month is the highest sales month of the year, at least so far. Ted's big buyer[s] has been gorging itself/themselves because, as I said the other day, these sales in no way represent actual consumer demand, which still remains quiet. But, having said that, our bullion store had one of its biggest sales day of the year on Friday. I'm sure that was a scenario repeated all across North American during the last day or so. It was another decent day for gold over at the Comex-approved depositories on Thursday. They reported receiving 75,100 troy ounces of the stuff---and shipped out only 3,547 troy ounces. The big receipt was at the HSBC USA depositories. The link to that activity is here. In silver, there was nothing reported received, but 419,317 troy ounces were shipped out the door for parts unknown---and three quarters of that was out of the JPMorgan depository. The link to that action is here. The Commitment of Traders Report, for positions held at the close of Comex trading on Tuesday, was more or less what I expected, as there was slight improvement in the Commercial net short positions in both gold and silver. In silver, the Commercial net short position in the legacy COT Report declined by 436 contracts, or 2.18 million troy ounces. The Commercial net short position now sits at 70.8 million troy ounces. Ted Butler said that JPMorgan's short-side corner in the Comex silver market remained more or less unchanged during the report week at 12,500 contracts, or 62.5 million ounces---which represents almost 90 percent of the total Commercial net short position. Under the hood in the Disaggregated COT Report, the Managed Money increased their record short position in silver to another new record, as they added 1,161 short contracts during the reporting week. The unblinking non-technical funds that also reside in the Managed Money category, added another 344 contracts to their long positions, which now totals 40,577 contracts. In gold, the Commercial net short position in the legacy COT Report improved by 6,034 contracts, or 603,400 troy ounces. Their short position now sits at 9.89 million troy ounces. Ted said that it appeared that JPMorgan added about 2,000 contracts to their long-side corner in the Comex gold market---and they are now net long 18,000 contracts. Under the hood in the Disaggregated COT Report, the traders in the Managed Money category actually covered 1,994 contracts of their short position in gold, but they also sold 4,415 long contracts which more than made up for it. There were no changes in the Managed Money in palladium---and in platinum the Managed Money sold 1,196 long contracts and added 530 short contracts. As I said in The Wrap in yesterday's column, whatever minor improvements that appeared in Friday's COT Report, would pale into insignificance compared to what that report would show if it were generated at the close of Comex trading yesterday. Without doubt we're at a new record high short position in silver in the Managed Money category, along with improvements in the Nonreportable/small trader category as well. But, as Ted pointed out on the phone yesterday, the really big changes will show up in gold, as these same Managed Money traders dumped what was left of their long positions---and went massively to the short side. If we get past the Tuesday cut-off without a price incident to the upside, next Friday's COT Report, along with the companion Bank Participation Report, should be one for the record books. So we wait. I don't have all that many stories for you today---and some of which I've been saving for today's column. Some of the best absolute must read stories that I had been saving, ended up in the Critical Read section of my Friday missive, so if you didn't get the opportunity to read them all yesterday, you have the remainder of the weekend to make amends.
¤ The Wrap
We are set up for violent price reversals to the upside for silver and for all the COMEX/NYMEX metals. Maybe the setup can get stretched out a little longer, but it looks stretched out enough to me by historical standards. We’ve gone too low in price on too many important commodities as a result of this stupid and manipulative machine trading. There’s a payback and a counter-reaction to the price distortions we’ve witnessed and it seems to me that the payback is at hand. I think the technical funds have been lulled into a sense of complacency, particularly in silver, by how easy the commercials have let them off the hook when they held extreme short positions recently. But just because the commercials have let the technical funds buy back shorts at prices close to upside penetrations of important moving averages previously, doesn’t mean that will always be the case. Just because the technical funds think they will be able to buy back silver shorts near the $18 mark, that doesn’t necessarily make it so. The commercials can demand much higher prices before selling. There will come a day when the commercials won’t be nearly as accommodative to the technical funds as they had been previously and that will be a great day for silver investors. That day seems at hand to me. - Silver analyst Ted Butler: 29 October 2014 Today's pop 'blast from the past' is from 1967---Canada's centennial year---and I remember that event and this tune like it was yesterday, even though both happened 47 years ago. Linda Ronstadt does the honours---and it was her first big hit. The link is here. Today's classical 'blast from the past' is something that I've posted before, but it's been awhile, so I thought I'd revisit it today. It's the Élégie, Op. 24 composed by Gabriel Fauré back in 1880. It was originally written for cello and piano---and the orchestral version of the work was premiered in 1901. It was a smash hit. Unfortunately, I couldn't find a great video of it in either iteration, so I had to settle for the one linked here. It's the youtube.com video I posted last time, with Julian Lloyd Webber and Peter Pettinger. The video quality isn't great, but the audio track is wonderful. Enjoy! Well, unless I'm entirely off base, we should be done to the downside in the precious metals. Both gold and silver were taken down to lows that I, quite frankly, didn't think were possible---especially in silver. But as long as the Managed Money in the technical fund category are prepared to go short, that kept the down-side pressure in place---and that has certainly been the case since 2 p.m. on Wednesday afternoon. And if silver prices remain low for any length of time, it's Ted Butler's opinion that a lot of primary silver producers will be out of business, despite whatever gold, zinc, lead and copper credits they're getting. Here are the 6-month charts for gold, silver---and WTIC As you can tell, we're back to being oversold in both these metals---and in crude oil, it appears that all attempts to break the price much below the $80/barrel mark haven't been overly successful. I would suspect that we've seen an important bottom in the price of WTIC as well---as Ted Butler pointed out in his quote above. As I ponder the big silver deposit that was made in SLV yesterday, which I just stumbled upon before I started on this paragraph, I thought it might be worthwhile to take a look at the tonnages held vs. the share prices of both GLD and SLV over the last six years. Of course I thank Nick Laird for the charts. The prices of both have very similar structures over that period of time, but look at the big difference in tonnages held. In gold, the tonnage held topped out at the very end of 2012---and has been falling ever since. Silver tonnage bottomed out just before mid-2012---and has been increasing ever since. You have to ask yourself why this is the case in silver---and who is depositing all this metal? Then there's the record U.S. Silver Eagle/Canadian Maple Leaf demand so far this year in the face of a less-than-robust investor/retail market. I know this to be true, because I work in it three days a week. Ted Butler's 'Mr. Big' has been buying every coin in sight and, once again you have to ask yourself why this is happening. Then there's the "unblinking" long holders in the Managed Money category of the Disaggregated COT Report. Ted says that, at least in silver, they've been building this long position for a bit over a year now---and at the moment it's a hair over 40,000 contracts, or 200 million ounces---something I mentioned in my COT commentary further up. But these "unblinking" long holders exist in all four precious metals in the Managed Money category---and one wonders how deep their pockets have to be to withstand the margin calls they must be getting. Once again the question---who are they and why are they doing it? Then there's the little matter of the over-the-top and manic in/out movements in silver at the Comex-approved depositories for the last three and half years. And as I mentioned in my discussion of the HUI and Silver 7 charts, you have to wonder who was buying all the mining shares that have been falling off the table lately. As Ted Butler pointed out in his quote today, the stars appear to be all lined up to resolve these dichotomies---and maybe answer some of the questions asked---with a violent move to the upside, as the Comex table is set. The only thing missing is some sort of triggering event---and whatever it is, it will most likely be ugly. So we wait some more. That's all I have for the day---and the week. See you on Tuesday.