Tuesday, November 18: Today in Gold and Silver

NEW YORK ( TheStreet) -- As has been the case for a while now, the gold price got sold down the moment that trading began in New York on Sunday evening.  The rally that began at 9 a.m. Hong Kong time got dealt with in the usual manner as it headed towards the $1,200 spot price mark with a certain amount of vengeance.  After that, the price didn't do much---or wasn't allowed to do much---you choose.

The high and lows ticks weren't worth looking up, but here they are anyway.  The high tick was $1,193.60 and the low tick was $1,180.80 in the December contract.

Gold finished the Monday session in the New York at $1,187.20 spot down $1.30 from Friday's close.  Gross volume was well over 200,000 contracts once again, but it all netted out to 159,000 contracts---and about 53,000 contracts of that amount was traded before the London open, which is an immense number, so I get the impression that JPMorgan et al had to throw a fair amount of paper at that little price spike in Hong Kong.

The silver price action was identical, complete with with the sell-off at the New York open, along with the 9 a.m. Hong Kong time price spike.  After that, the price got sold down about 20 cents in the two hours prior to the London open.  Then it traded virtually ruler flat for the remainder of the Monday session.

The high and low ticks were reported by the CME Group as $16.35 and $16.05 in the December contract

Silver closed yesterday at $16.145 spot, down 18 cents from Friday.  Net volume was huge once again at 47,500 contracts.  Silver's net volume going into the London open was very chunky as well, a bit over 10,000 contracts.

Platinum---and particularly palladium---also had price spikes at 9 a.m. Hong Kong time, but both were dealt with in the usual fashion.  Platinum was closed down 10 dollars---and palladium closed in the plus column to the tune of 5 dollars, but would have done infinitely better if left to its own devices.  The same can be said of the other three precious metals as well.  Here are the charts.

The dollar index closed at 87.55 late on Friday afternoon---and began to head lower the moment that trading began in New York on Sunday evening.  The low tick/'gentle hands' rescue came at 9 a.m. Hong Kong time---which was, not surprisingly, the high tick for the price spikes in the precious metals.  The rally that commenced from there was all done at, or shortly after, the London p.m. gold fix---and from there the index traded flat for the remainder of the day.  The index closed at 87.995---which was up 44 basis points from Friday's close.

The gold stocks opened down, but began to chop higher almost immediately---and were back in positive territory to stay by 1:15 p.m. EST, as the HUI closed up a respectable 1.92%.  I was happy to see this, as the HUI got crushed last Monday after its big gains on the previous Friday [Nov 7].  Let's hope that yesterday's price action is a harbinger of things to come.

Almost the same can be said of the silver equities, however they didn't do quite as well, but Nick Laird's Intraday Silver Sentiment Index still managed to close up 1.08% despite the fact that the metal itself, like gold, finished in the red.

The CME Daily Delivery Report showed that zero gold and zero silver contracts were posted for delivery within the Comex-approved depositories on Wednesday.

The CME Preliminary Report for the Monday session showed that, after the two surprise sessions last Thursday and Friday, gold open interest is now back down to 19 contracts still open in the November delivery month.  Silver's o.i. fell one contract to 88 contracts.

Not surprisingly, there was a decent amount of gold added to GLD yesterday, as an authorized participant deposited 76,882 troy ounces yesterday.  And as of 5:13 p.m. EST yesterday afternoon, there were no reported changes in SLV.

True to its word, the U.S. Mint had some silver eagles to sell yesterday, as they reported sales of 1,012,000 of them.  How many more of the 2014 year they mint remains to be seen, but I would guess that it won't be a lot.  As Ted Butler said on the phone yesterday, they could have sold many millions more of them this year if they'd had the blanks and/or the production capacity.  Those that the public didn't buy would have been happily gobbled up by JPMorgan and their ilk.

There wasn't much movement in gold over at the Comex-approved depositories on Friday.  Only 9,645 troy ounces were reported received---and nothing was shipped out.  The receipt was at Canada's Scotiabank.  It was another big in/out movement day in silver, as 536,933 troy ounces were received---and 909,736 troy ounces were shipped off to parts unknown.  Only JPMorgan and HSBC USA weren't involved---and the link to that action is here.

Despite my best efforts, I have a boatload of stories for you today, so I'm more than happy to leave the final edit up to you.

¤ The Wrap

The real message in [Friday's Commitment of Traders Report were] the extraordinary changes among the commercial traders. On the plunge to four year silver price lows over the past two reporting weeks, the raptors [the Commercial traders other than the 'Big 8'] sold 9,700 long contracts and the 'Big 8' bought back more than 6,300 short contracts (with the Big 4’s share of that being 4,000 contracts). Never have the commercials, usually thick as thieves, gone in such different directions. Heretofore, it was always the commercials behaving as the three musketeers – you know, all for one, and one for all. Not this time.

From the data, here’s what I think occurred. The big commercial shorts (JPM) knew that some raptors were stretched thin on margin on a massive long position in silver that totaled 42,400 contracts two weeks ago. When the price of silver suddenly plunged an additional two dollars, the margin calls were overwhelming for a number of the raptors and they were forced to liquidate almost 10,000 of their long contracts. A two dollar adverse move on 10,000 contracts means coming up with $100 million on, quite literally, a moment’s notice. If you don’t have the $100 million to deposit immediately, you are sold out immediately.

Since the biggest beneficiaries of the price plunge (apart from the technical funds, which, no matter what, are not running the show like the commercials) were the biggest shorts (including JPMorgan) which bought back 6,300 shorts at immense profits; it stands to reason that these big shorts orchestrated the whole damn thing. Otherwise, I suppose you would have to believe that the commercials are such clean good guys that someone from above rewarded them. Looking at the almost daily settlements for price manipulation [in other areas] by the big banks, it’s not possible they are innocent good guys in any way. - Silver analyst Ted Butler: 15 November 2014

Except for the 9:00 a.m. Hong Kong time spikes in all four precious metals, Monday was a nothing sort of day from a price perspective---and I'm still trying to figure out why volume was so heavy, particularly the volume going into the London open.  I suppose part of it involved hammering gold and silver back to unchanged, but certainly not all of it.  There was roll-over activity out of the December contract yesterday, of course---but it wasn't overly heavy.

Here are the 6-month charts for gold and silver once again, as there's not much to see in the other four of the 'Big 6' commodities---and there's not much to see in silver or gold, either.

The 50-day moving averages in both precious metals continue to slide lower by the day---and the 200-day moving averages are miles away at the moment.

And as I type this paragraph, the London open is about thirty minutes away.  After dipping down a bit in early trading in the Far East on their Tuesday morning, all four precious metals are back to unchanged.  Gross gold volume is a bit over 17,800 contracts, including about 800 roll-overs, so it nets out to a hair over 17,000 contracts.  In silver, the gross volume is a bit over 4,900 contracts, less 200 roll-overs, so netted out, the volume is 4,700 contracts.  The dollar index fell out of bed right at the open of trading in New York yesterday evening---and is currently down 19 basis points.

If we get through the Tuesday trading session today without too much price activity, then this Friday's Commitment of Traders Report will show exactly what happened during last Friday's trading session, because it will have been the only day during the reporting week that had any price/volume activity worth mentioning.  As Ted pointed out, there were two trading days rolled into one on that day---the down moves with big volume in both gold and silver in the Far East and early London session, before the even bigger rally and volume that came after the COMEX open.

I wouldn't be at all surprised if the 'Big 8' short holders engineered it, just like they did during the prior reporting week, so the could cover more of their short positions during that particularly trading session, with the raptors as the patsies once again.  If that is indeed what happened, then it will be readily visible in the new COT Report.

So we wait.

Just reading the highlights of the precious metal-related stories in today's column, it's easy to see that the demand for gold has become ferocious.  Silver demand is even greater, as India imported almost a record amount in October---and China, in the Bloomberg story mentioned above, says they want to increase solar panel production by a factor of ten next year.

Then there's the 40+ million silver eagles sold [mostly to JPMorgan] this year---and add to that the counterintuitive amount of silver heading into SLV---along with the manic in/out silver activity at the COMEX-approved depositories for the last number of years.  I'm sure that when the Royal Canadian Mint reports 3rd quarter results later this month, they will show record sales in silver maple leafs as well.

This Swiss gold repatriation looms large---as the vote on that is less than two weeks now.  And not to be forgotten in all of this is the story above that mentions that the ECB may buy gold to boost inflation.

Sooner or later---and sooner rather than later, I would think---something has got to give.

And as I send this off to Stowe, Vermont at 5:18 a.m. EST, I see that all four precious metals began to rally almost the moment that I had finished my prior commentary a half hour before the London open.  The rallies haven't been allowed to get far, as their prices are obviously being capped by JPMorgan et al.

Net gold volume is now around 49,000 contracts, with very few roll-overs, so it's obvious that this is almost exclusively composed of high-frequency trading.  Silver's net volume is just under 11,000 contracts, with no roll-overs there to speak of, either.  The U.S. dollar is now down 43 basis points---and the decline appears to be accelerating at the moment.

As for what might happen during the remainder of the Tuesday session, I haven't a clue---but I'm not overly happy to see such huge volumes associated with this level of price activity, although gold has now broken above the $1,200 spot price mark as I hit the send button, with silver and platinum putting on the same sort of show.  Based on what I'm looking at right now, absolutely nothing will surprise me when I check the charts later this morning.

Here's the Kitco gold chart as I fire today's column out the door.

See you tomorrow.

Ed Steer

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