Saturday, November 15: Today in Gold and Silver

NEW YORK ( TheStreet) -- The gold price traded pretty flat until 1 p.m. Hong Kong time---and at that time, it got sold lower to the tune of about twelve bucks or so.  From that point onward, it didn't do much---and the low tick came around 8:35 a.m. in New York, about 15 minutes after the COMEX open.  The price never looked back from there---and starting around the 9:30 a.m. open of the equity markets it began to rally with a vengeance.  The high tick came shortly before the 1:30 p.m. Comex close---and the price didn't do much after that.

The low and high ticks were reported as $1,146.00 and $1,192.90 in the December contract.

Gold closed in New York yesterday at $1,188.50 spot, up $26.60 from Thursday's close.  Net volume was sky high at 255,000 contracts.  Gross volume was well north of 300,000 contracts, so it was a very active day.

Here's the 5-minute tick gold chart.  It doesn't show the HFT trading before the London open, but it certainly shows the low tick around 8:40 a.m. EST.  Note the big volume spikes on each up-tick.  Don't forget to add 2 hours for EST, as the 'x' axis of this chart is MST.

As is normally the case, the silver price was under pressure right from the 6 p.m. EST open on Thursday evening in New York and, like gold, got hit by the HFT boyz around 1:30 p.m. in Hong Kong trading on their Friday afternoon.  It hit its $15.20 [spot] low tick an hour and change later.  From there it rallied a bit into the London open---and then traded flat before retesting the earlier low minutes after 1 p.m. GMT in London.  From there, like gold, the price never looked back, melting up to its high tick of the day around 1:15 p.m. EST---and 15 minutes before the Comex close.  And also like gold, the price traded flat from there into the 5:15 p.m. close of electronic trading.

The low and highs were recorded by the CME Group as $15.25 and $16.38 in the December contract, an intraday move of over 7 percent.

Silver closed yesterday at $16.325 spot, up 66 cents from Thursday's close.  Net volume was 71,000 contracts.

The platinum price didn't do much until shortly after 1 p.m. in Zurich.  At that point the price got sold down for a double bottom which occurred between 8:30 and 9:30 a.m. EST---and from there it rallied like gold and silver until 1:15 p.m.   From there it chopped sideways into the close.  Platinum closed up 16 bucks.

The palladium price chart was somewhat similar to the platinum chart, but the low price tick that came shortly after the COMEX open was rather vicious in nature---and the metal barely rallied back above unchanged by 12:30 p.m. EST.  From there it got sold down for a three dollar loss on the day.

The dollar index closed late on Thursday afternoon in New York at 87.77---and from there it rallied up to 88.07 at exactly 2 p.m. Hong Kong time, before selling down to 87.85 around 8:30 a.m. GMT.  The 88.23 high tick came in a spike that occurred around 8:30 a.m. in New York.  That was the high water mark for the dollar index---and the beginning of the rally in all four precious metals.  It all looks so co-ordinated, that it's hard to believe that it was accidental.

From that high, the index slid down to its 87.40 low tick shortly before 2:30 p.m. EST---and it recovered a handful of basis points going into the close.  The index closed at 87.55, which was down 22 basis points from Thursday's close.

Here's the 6-month dollar index---and it indicates, at least to me, that we've seen a major top.  I've mentioned a few times in the last week or so that it might be a good idea to hit the bid if you were long the U.S. dollar.

The gold stocks opened in the red, but didn't stay there long, as HUI powered higher all day long, closing up 6.93%---and just off its high tick of the day.

The silver equities, not surprisingly, did even better, as Nick Laird's Intraday Silver Sentiment Index closed up 7.86%.

After a surprising report on Thursday, the CME Daily Delivery Report for Friday had another surprise in store, as 462 gold contracts and 1 lonely silver contract were posted for delivery on Tuesday.   It was JPMorgan out of its client account again, this time with 385 contracts, along with ABN Amro with 69 contracts out of its client account as well.  The big stopper for the second day in a row was Canada's Scotiabank with 456 contracts.  Something appears to be up, but it's impossible to tell exactly what it is.  The link to yesterday's Issuers and Stoppers Report is here.

The CME Preliminary Report for the Friday trading session showed incredible internal action within the November delivery month in gold.  At the start of the trading day, November open interest had been as high as 942 contracts before Monday's deliveries were subtracted, so November o.i. was back down to 476 contracts once that happened---and once you subtract out the 462 contracts posted for delivery on Tuesday that are shown in the previous paragraph, the November open interest is back down to only 14 contracts.  One still has to wonder if there will be any more surprises, but the fact that such large deliveries are being made back-to-back in a non-delivery month is of great interest---and Ted Butler may or may not have something to say about it in his weekly review later today.  Silver's November open interest remained unchanged at 89 contracts.

There were no reported changes in GLD yesterday---and as of 10:30 p.m. EST yesterday evening, there were no reported changes in SLV, either.

It's a given that yesterday's price action will have brought out the GLD and SLV buyers in droves---and it will be interesting to see how much metal is deposited to meet this new demand.  And if the metal isn't there, the authorized participants will be forced to short the shares in lieu of, like JPMorgan has been doing all along in silver, as the quantity of physical metal needed just doesn't exist.

The U.S. Mint had a sales report yesterday.  They sold 10,000 troy ounces of gold eagles---and 1,500 one-ounce 24K gold buffaloes.

And as I mentioned yesterday, the mint will be back to selling 2014 silver eagles on an allocated basis starting on Monday.  It will be interesting to see how many they actually make---and for how long---as it's a given that every one of them will already have a willing buyer.

There wasn't much in/out movement in gold over at the Comex-approved depositories on Thursday.  Nothing was reported received---and only 4,496 troy ounces were removed.

There wasn't a lot of activity in silver either, as only 201,101 troy ounces were reported received---and 169,588 troy ounces were shipped out.  The link to that activity is here.

The Commitment of Traders Report for positions held a the close of trading on Tuesday was a very interesting report in both silver and gold.  Ted spent over half an hour on the phone with me yesterday going through the whole thing, but I'm just going to hit the highlights.

In silver, the Commercial net short position in the legacy COT Report blew out by 5,204 contracts, or 26.0 million troy ounces.  The Commercial net short position is now back up to 88.1 million troy ounces.

Under the hood in the Disaggregated Report, the traders in the Managed Money category sold 142 long contracts and covered 3,811 short contracts---and made a boat-load of money on those, which is what they did in the prior week's COT Report as well.  At that time I said that I was sure that JPMorgan et al wouldn't have been happy to see these traders flee their carefully-set trap with big profits in hand---and I'm sure they were even less happy with this weeks' report.

But the big news according to Ted was the fact that despite the blow-out in the Commercial net short position, there was no new shorting going on.   And to make things even more interesting, the 'Big 8' short holders actually d ecreased their overall short position in silver during the reporting week.  Ted now puts JPMorgan's short position at something under 8,000 contracts, which means that they are no longer the big silver short on the COMEX.  That crown now belongs to Canada's Scotiabank---and has for many months.  I estimate their net short position in silver to be in the 16,000 contract range, or maybe a bit more.

In gold, the Commercial net short position in the legacy COT Report actually declined by 5,283 contracts, or 528,300 troy ounces.  The Commercial net short position is now down to only 5.00 million troy ounces---and it has been many a moon since it's been that low.  I know that Ted will have that actual number in his column later today.

The Managed Money traders in the Disaggregated COT Report made the numbers look even better, as they sold 2,846 long positions---and went short an additional 5,344 contracts, a swing of almost 8,200 contracts.

Ted says that JPMorgan increased its long-side corner in the COMEX futures market in gold by about 1,000 contracts---and they are now net long about 21,000 contracts.

Without doubt there was overall deterioration in the Commercial net short position in all four precious metals since the cut-off---and the only thing unknown is to what degree it occurred, especially in gold and silver.

Ted said that there were actually two different trading days rolled into one yesterday.  The big sell-offs before the Comex open, where there was huge volume on the downside moves---followed by the short-covering rallies after that, with even bigger volume.  How it all netted out is unknown and, depending on what the price action is like on Monday and Tuesday, we may or may not find out in next Friday's COT Report, because market events on those two days may bury Friday's action.  So we wait.

Since this is my Saturday column, I get to empty my in-box into it---and that's precisely what I intend to do, so edit away!

¤ The Wrap

A little while back, I commented that I believed the big drop in the price of crude oil, by far the most important commodity in the world, was set off by futures positioning on the NYMEX and other derivatives trading exchanges. Specifically, I concluded that selling by technically motivated traders over the past few months was most responsible for the sharp drop in the price of crude oil, as well as the not coincidental price drops in silver, gold, copper, palladium and platinum.  I gave the documented quantities of contracts and equivalent amounts of material that were sold and can do so again on request.

What I have seen unfold over the past 40 years has been a steady progression of futures trading overwhelming actual supply and demand as the prime influence on price. I’m not suggesting that actual supply and demand don’t matter to price, just that they have been pushed aside for extended periods by the influence of derivatives positioning. I discovered it in COMEX silver nearly three decades ago and have seen it creep into most markets currently. What I am saying is that in the “old days” (30 to 40 years ago) it was strictly supply and demand that determined price; but that we have evolved into a modern era of derivatives trading overwhelming actual supply and demand as the prime price influence. - Silver analyst Ted Butler: 12 November 2014

Today's pop 'blast from the past' dates back to November of 1963---and I had just turned 15 years young in October of that year, so this song made a huge impression on me, as did her other big hits that followed.  Songwriting duo Burt Bacharach and Hal David took Dionne Warwick's incredible voice and turned her into the superstar she rightfully deserved to be.  It was her first Top 10 hit---and the link to the video is here.

Today's classical 'blast from the past' was composed by one Johann Nepomuk Hummel---a name that won't ring too many bells for classical music lovers, but two of his piano concertos are masterpieces---and very much of the Mozart/Chopin crossover period of the very late 1700s and very early 1800s.

He possessed a formidable musical pedigree, as his teachers included Haydn, Clementi and Mozart---and Beethoven and Mendelssohn were amongst his pupils.  I still remember where I was when I first heard one of his concertos on the radio---and within 24 hours I had the Stephen Hough recording of them in my collection.  This recording is of the B minor Op. 89 piano concerto No. 3 that he composed in Vienna in 1819.  The Stephen Hough recording is the one featured on the video linked here---and the link to the A minor piano concerto can be found in the right sidebar.  Both are equally wonderful. 

I was more than happy to wake up late on Friday morning and find the big rallies staring me in the face when I powered up my computer---especially considering the negative price action and big volume that had preceded it before the London morning gold fix.  Here are the charts for the 'Big 6' commodities.

Note the new intraday low ticks for both platinum and WTIC.

As I mentioned in my comments below the Commitment of Traders Report further up, Ted said that there were actually two different trading days rolled into one yesterday.  The big sell-offs before the Comex open, where there was huge volume on the downside moves---followed by the short-covering rallies after that, with even bigger volume.  How it all netted out is unknown and, depending on what the price action is like on Monday and Tuesday, we may or may not find out in next Friday's COT Report, because market events on those two days may bury Friday's action.

Checking the changes in total open interest in the CME's Preliminary Report for the Friday trading session, I note that total o.i. in gold only increase by 6,168 contracts---and silver's o.i. actually declined by 1,832 contracts---which are not the sort of changes one would expect on such a volatile trading day.

However, I've learned from hard experience---and then getting smacked across the side of the head by Ted Butler---that it's not wise to trust these preliminary volume numbers, as only the COT Report tells all.

I remain cautiously optimistic about all of this, of course, but I'm not going start bouncing off the walls, or breaking out the party favours just yet, as the question still remains unanswered as to whether JPMorgan et al are going to cap these rallies at the major moving averages---those being the 50 and 200-day.  We've been down this road twice already this year, so I urge you to cool your enthusiasm until the picture becomes clearer.

I'll wait until we've got a few more trading days under our belts before I'll be a believer---and it goes without saying that I'll be watching the Sunday night open in New York with great interest.

And referring back to the COT Report once again, Ted was very happy that there was no Commercial shorting in silver during the reporting week---and he was really happy that the 'Big 8' COMEX silver shorts actually covered some of their short positions, led by JPMorgan.  He also happily pointed out that their current short position is at a new low since being forced to take over Bear Stearns at gunpoint back in March of 2008.  That leaves Canada's Scotiabank as the 'King Short' in the COMEX silver market---and probably the COMEX gold market as well, specifically in the non-U.S. bank category.

I must admit that I was expecting November to be a rather quiet month, but after yesterday's outbursts and the price volatility last week---along with the big deliveries in gold that were posted in the last couple of days---it could end up being anything but.

So we wait some more.

That's all I have for the day---and the week.

See you on Tuesday.

Ed Steer

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