Tuesday, December 2: Today in Gold and Silver

NEW YORK ( TheStreet) -- After getting smacked for almost thirty bucks by the HFT boyz and their algorithms at the 6 p.m. EST open on Sunday evening, the gold price traded ruler flat until just after 2:30 p.m. Hong Kong time.   Then the gold price rallied in fits and start until reaching its high of the day minutes after the COMEX close.  From there it got sold down about ten bucks by around 3 p.m. EST in electronic trading---and from there traded flat into the 5:15 p.m. close of electronic trading.

The low and high ticks of the day were reported by the CME Group as $1,141.70 and $1,221.00 in the February contract---which is now the new front month---an intraday move of 80 bucks.

Gold finished the Monday session in New York at $1,212.80 spot, up $44.30 on the day.  Volume, net of December and January, was a gargantuan 361,000 contracts.

After ticking down at the open---and trading sideways for a bit, the HFT boyz peeled a buck off the silver price in a minute or so.  Within a couple of hours the price was back around the $15 spot mark.  Like gold, silver began to rally shortly after 2:30 p.m. Hong Kong time---and the vertical spike just before 9 a.m. GMT in London got dealt with in the usual manner.  But once the noon silver fix in London was out of the way, the price rallied anew, hitting its high tick a minute or so before 1 p.m in New York.  From that point it got sold down about two bits---and didn't do much after about 2:30 p.m. EST.

The low and high ticks  $14.155 and $16.81 in the March contract, an eye-watering intraday move of 15 percent.

Silver closed yesterday at $16.46 spot, up 88 cents from Friday's close, but was up well over a dollar at its high.  Net volume was also gargantuan at 125,000 contracts.

Platinum wasn't overlooked by the HFT boyz, as it got hit at the New York open on Sunday evening as well, retested that low a couple of time before the Zurich open---and then rallied, with its high tick coming at the same time as gold's, just minutes after the 1:30 p.m. EST COMEX close.  Then it got sold down as well into the close of electronic trading at 5:15 p.m. EST.  Platinum finished up $37 on the day.

Palladium wasn't spared at the Sunday night open either, but the HFT boyz dropped the price to its low tick shortly after 3 p.m. Hong Kong time, which was less than an hour before the 9 a.m. Zurich open on their Monday morning.  The ensuing rally didn't/wasn't allowed to get far---and for the third day in a row it was closed at exactly $805 spot---and just below its 200-day moving average once again.  What are the chances that those were random events?

The dollar index closed late on Friday afternoon in New York at 88.28.  From there it rallied to its 88.43 high a couple of times.  The first was in very early Far East trading---and the second time was a minute or so before the London open.  From there it fell unsteadily, hitting its 87.81 low tick minutes before 10 a.m. EST, which probably corresponded with the London p.m. gold fix which occurred at that time.  From there it chopped unsteadily higher into the close, finishing the Monday session at 87.98---down 30 basis points on the day.  Anyone who can read a correlation between the currency move yesterday---and the precious metal price action is dreaming in Technicolor.

Of course the gold stocks put on quite a show yesterday, as the HUI finished up a chunky 7.92%.  But they didn't recover all their losses from Black Friday.

The silver equities had a bit of a roller coaster ride, but the did alright for themselves in the end, as Nick Laird's Intraday Silver Sentiment Indicator closed up 7.92% as well.

The CME Daily Delivery Report for Day 3 of the December delivery month showed that 1,150 gold and 174 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday.

In gold, there were only two short/issuers that mattered---Canada's Scotiabank and JPMorgan out its client account with 600 and 501 contracts respectively.  The only two long/stoppers that mattered were HSBC USA with 548 contracts---and JPMorgan out of its in-house [proprietary] trading account with 587 contracts.  Once again JPMorgan stuck it to its clients for the benefit of the company.

In silver, the three largest short/issuers were Jefferies, Morgan Stanley---and ABN Amro with 61, 60 and 24 contracts respectively.  The biggest long/stopper by far was HSBC USA with 137 contracts---and in distant second was Barclays with 19 contracts.

The link to yesterday's Issuers and Stoppers Report is here---and it's worth a quick look.

The CME's Preliminary Report for the Monday trading session showed that December open interest in gold fell by 925 contracts---and is now down to 3,611 contracts---and one also has to subtract the 1,150 contracts posted for delivery tomorrow that were mentioned a few paragraphs ago.  Barring any big surprises, there are about 2,500 gold contracts still open in the current delivery month.  December open interest in silver dropped by 809 contracts---and now sits at 926 contracts remaining, minus the 174 contracts posted for delivery tomorrow.   All things being equal, the vast majority of December deliveries will be done by the end of this week, which is about normal.

There were no reported changes in GLD yesterday---and as of 7:40 p.m. EST yesterday evening, there were no reported changes in SLV.  But when I was putting the finishing touches on today effort at 4:11 a.m. EST, I saw that iShares.com had updated SLV---and it showed that 2,203,529 troy ounces of silver had been added.

The U.S. Mint had a decent sales report to start off the new month.  They sold 14,500 one-ounce gold eagles---500 one-ounce 24K gold buffaloes---and an amazing 523,000 silver eagles.

Here's a snippet I stole from Ronan Manly's commentary over at the goldcore.com website yesterday regarding sales at The Perth Mint.

"The Perth Mint's silver sales in November climbed to their highest since January as lower prices attracted retail investors, while gold sales fell to a three-month low. The Perth Mint runs the only gold refinery in Australia, the world's second biggest gold producer after China. Silver coin sales jumped to 851,836 ounces in November from 655,881 ounces in October, data on the mint's website showed."

There was no gold reported received at the COMEX-approved depositories on Friday, but 40,600 troy ounces were reported shipped out.  The link to that activity is here.  In silver, 982,620 troy ounces were received---and nothing was reported shipped out.  The link to that activity is here.

The Commitment of Traders Report, for positions held at the close of trading on Tuesday, November 25---delayed because of the Thanksgiving holiday in the U.S.A.---came out yesterday, and here is what the report showed.  [And as interesting or boring as this report may be, the contents of it are mostly "yesterday's news" because of the price action on Friday and Monday.]

In silver, the Commercial net short position increased by a chunky 3,676 contracts, or 18.4 million troy ounces.  The Commercial net short position now sits at 110.2 million troy ounces---and off its lows of a few weeks ago by quite a bit.

In the Managed Money category, the traders there covered 6,776 short contracts at a huge profit.  This short covering by the Managed Money traders was all rocket fuel that Ted Butler says won't be there on the next rally, which may be underway.  The 'non-blinking' non-technical funds in the Managed Money category blinked a bit, as they sold 1,652 contracts of their long position.

Here's what Ted had to say about all of this to his paying subscribers yesterday.

" In COMEX silver futures, the headline total commercial net short position increased by a not insignificant 3,700 contracts, to 22,000 contracts total. By commercial category, it was mostly a raptor affair as these smaller commercial traders sold 3,300 additional longs, reducing further their net long position to 26,800 contracts. The big 8 short traders added about 350 new shorts, following weeks of short covering, but the amounts are low enough not to set off the air raid sirens."

" The “bad” news was that the technical funds, just like the gold technical funds, bought back a chunky 6776 short contracts, torching a good amount of rocket buying fuel. I say bad news with a sense of genuine surprise that the technical funds did what I didn’t think they could do, namely, buy back this many short contracts at very great profit and representing a very big portion (40%) of the new shorts they added since the price top in July. I’ve never seen the technical funds do this previously and certainly not to this extent. Then again, please know that it makes no difference to me if the tech funds best the commercials or vice versa. My gripe is that these two groups of speculators are setting the price."

"Offsetting the bad news is the very good news is that it has been mostly raptor [Commercial traders other than the Big 8] selling of long positions behind the technical fund short covering almost to the contract.  Since Oct 28, the technical funds have bought back 15,000 contracts of the 38,000 new shorts they added from the top in July and the raptors have sold a bit over 15,000 contracts. The loss of buying power was completely offset by the loss of selling pressure. This balances out the COT structure in a way I never imagined would occur."

In gold, there was a slight reduction in the Commercial net short position of 2,512 contracts, or 251,200 troy ounces.  The Commercial net short position now stands at 6.85 million troy ounces.

Under the hood in the Disaggregated COT Report, the Managed Money covered 11,617 shorts for big profits---and the 'unblinking' non-technical funds in the M.M. category also peeled off 5,567 contracts of their long position.

Here are Ted's comments on gold---

"In COMEX gold futures, the total commercial net short position (the headline number) was reduced by 2,500 contracts, to 68,500 contracts. This is still a very low commercial short position and since there is no compelling evidence to the contrary, this bullish structure was most likely the catalyst behind today’s price surge. It was mostly a Big 4 short buying affair, as these traders bought back a little over 4,000 short contracts."

"Oddly enough, considering the commercials were buyers on balance, the technical funds in gold did buy on balance as well, including the hefty buyback of 11,617 short contracts, but they sold 5,567 longs to somewhat minimize the loss of short covering rocket fuel. This week, the traders in the other reportable category (of the disaggregated report) were the big counterparties to the commercials. Back to the commercials, JPMorgan appears to have liquidated another 4,000 long gold contracts, to perhaps less than 14,000 gold contracts net long, but it’s getting really hard for me to tell because JPM’s position is so small (I think by definite intent).

As I said, this above information is very nice, but has all been wiped out by Friday and Monday's price/volume action.  Hopefully this Friday's COT Report---and companion Bank Participation Report, will add some clarity to the current situation.

Here's a chart that Nick Laird passed around on Saturday.  It's the " U.S. Debt & Debt Limit vs. Gold"---and it's pretty self-explanatory.

I have a very decent number of stories for you today---and I'll happily leave the final edit up to you.

¤ The Wrap

We can dismiss any thought of a developing pattern of Friday rallies, as Friday’s plunge in gold and silver and most other commodities is already being referred to as Black Friday. As a result of heavy futures trading, prices crashed during what is usually a quiet holiday period; with gold falling $35 (2.9%) for the week and silver ending lower by a full dollar (6.1%). As a result of silver’s steeper percentage decline, the silver/gold price ratio widened out to 75.5 to 1, the cheapest silver has been relative to gold in more than five years.

Because the Thanksgiving holiday period is always such a slow business time in the U.S., there was little activity in physical metals dealings, wholesale and retail. That there was such frantic volume and price volatility in precious metals and copper underscores a consistent theme of mine that has become increasingly more obvious – prices are set on the futures market and not in the actual world of supply and demand. Besides being strictly against the intent of commodity law, this illegal market perversion has now reached the point of threatening global financial stability. - Silver analyst Ted Butler: 29 November 2014

There wasn't a thing in Monday's price action in any of the 'Big 6' commodities that was supply/demand related.  It was all paper trading on the Globex/COMEX.  JPMorgan and their algorithms did the dirty just after New York opened on Sunday evening---and the short covering rally that began in the early afternoon in the Far East, and ended around the Comex close in New York yesterday afternoon was more paper being traded.

This had zero to do with the Swiss gold referendum, as the polls showed a week ago that the 'no' side was going to win.  But it was too good an opportunity to pass up, with the action starting on the thinly-traded Black Friday session when 'da boyz' were the only game in town.

It was a wild trading day in the 'Big 6' commodities yesterday---and I've thrown natural gas in here as well.

Gold blasted through, and closed above its 50-day moving average---but silver and platinum broke through, but were closed just below their respective 50-day moving averages---and palladium either couldn't, or wasn't allowed to break above its 200-day moving average.

If you're a T.A. freak, we had huge key reversals to the upside in the three of the four precious metals.  So big, in fact, that even Stevie Wonder could have seen them.

Of course we've had these key reversals painted for us before---and all have ended in tears.  It remains to be seen if this particular trend reversal is allowed to have any legs.  As is 100 percent the case, it all depends on what JPMorgan and the other big traders do.

As silver analyst Ted Butler said in his Commitment of Traders commentary to his paying subscribers yesterday: " As for Monday’s price action, I can’t imagine how it can be explained in non-manipulative terms. It can’t be clearer that prices are controlled on exchanges owned and operated by the CME Group because nothing else can explain why silver fell so sharply overnight, only to rally $2.50 from the lows. The only question is how much, if any, new short selling was by the JPM and the Big 8. We should know by the next COT Report [on Friday] ."

So we wait some more.

And as I write this paragraph, the London open is about 25 minutes away.  The gold price got sold down about five bucks in the first of hour trading in New York on Monday evening---and has done precisely nothing since then.  Silver's price hasn't done much, either---and is down about a dime as of this writing.
Ditto for platinum and palladium.  Net gold volume at the moment is pretty chunky at 33,000 contracts---and silver's net volume is a hair under 10,000 contracts, which certainly falls into the heavy category as well.  The dollar index, which did nothing during most of the Far East trading session, rallied a bit over 10 basis points starting at 2:30 p.m. Hong Kong time---and is currently up 14 basis points at the moment.  Nothing to see here.

Today, at the close of COMEX trading, is the cut-off for this Friday's Commitment of Traders Report---and all of Friday's and Monday's spectacular price/volume action should be in it.  We also get the companion December Bank Participation Report---and that will be helpful as well.

If you're looking to me to give you an indication of where we go from here price-wise in all four precious metals, plus the other two commodities, copper and WTIC---you're asking the wrong person.  As I said, what you're looking at in the price action is all paper trading, not supply/demand fundamentals, so the question should be put to Jamie Dimon & Co.---as they and their ilk control prices on the GLOBEX/COMEX.

In some ways, Monday's price action can be compared to the big rallies we had in gold and silver back on the first two Friday's in November.  Both came like a bolt of lightning out-of-the-blue that was all paper trading once again, as there was no news to account for those rallies.

Here's the 30-day gold chart so you can see these rallies for yourself.  The silver chart looks similar.  There was no news to account for the big sell-offs on this chart, either.

And as I hit the send button on today's column at 5:45 a.m. EST, I see that all four precious metals are down from their earlier highs in late Tuesday afternoon Far East trading---and most are down substantially from Monday's closes in New York.  Net gold volume is just north of 58,000 contracts---and silver's net volume checks in at 17,000 contracts.  The rally in the dollar index is still ongoing---and is now up 26 basis points.

Once again, at least for the moment, there has been no overnight or London follow-through to the big short covering rallies that occurred yesterday.  This has always been the case after key upside reversals like we saw yesterday---and have seen in the past.  I certainly don't want to prejudge this one but, at the moment, it looks like the same old, same old.

I await the COMEX trading session with some interest.

That's more than enough for today---and I'll see you here tomorrow.

Ed Steer

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