Wednesday, December 10: Today in Gold and Silver

NEW YORK ( TheStreet) -- The gold price got sold down within a few bucks of the $1,200 spot price mark early in the Far East trading session on their Tuesday, but began to rally shortly before 2 p.m. Hong Kong time.  That tiny rally took the price back a few bucks above unchanged by 9 a.m. GMT in London.  The real action started the moment that the noon London silver fix was in---and the rally that began at that point got capped/ran out of gas shortly after 10:30 p.m. EST.  From its high tick it got sold down about ten bucks, before chopping sideways into the 5:15 p.m. close of electronic trading.

The low and high ticks were reported by the CME Group as $1,199.50 and $1,239.00 in the February contract.

Gold was closed in New York yesterday at $1,232.40 spot, up $28.20 on the day---and well of its high.  Volume, net of December and January, was an enormous 252,000 contracts.

Once again Brad Robertson sent us the 5-minute tick chart for gold---and you can see the big volume spikes that occurred while yesterday's rally was underway, with most of the big volume coming between 9:40 and 11:00 a.m. EST in the COMEX session.  Other that that, volume was pretty quiet.  Add two hours for EST---and use the 'click to enlarge' feature.

The price rally in silver was almost the same as the rally in gold, with the only real difference being the time of the high price tick.  In the case of silver, this occurred shortly after the London close, which came shortly after 11 a.m. in New York.

The low and high in silver were recorded as $16.29 and $17.23 in the March contract.

Silver finished the Tuesday trading session at $17.105 spot, up 73 cents from Monday's close.  Net volume was very heavy here as well.  Net of December and January, it was 69,500 contracts.

The rally in platinum was very similar to gold's rally.  It ended/got capped the same time as gold.  From its high, half its gains disappeared by noon in New York, as platinum finishing the Tuesday session at $1,242 spot, up 14 bucks from Monday's close.

Palladium's rally was a mini version of the other three precious metals---and every attempt to break above the $810 spot mark got turned back.  Palladium closed at $807---up 9 dollars on the day.

The dollar index closed late on Monday afternoon in New York at 89.12.  From there it 'rallied' to its 89.26 high tick of the day, which came shortly after 11:30 a.m. Hong Kong time on their Tuesday morning.  From that point it headed lower, with the decline really picking up steam once the London p.m. gold fix was in at 10 a.m. EST.  But a minute or so before 10:30 a.m. it appeared that 'gentle hands' showed up to save the dollar from a full-fledged crash, just as it knifed through the 88.20 level.  The index rallied back to around 88.75, before rolling over a bit into the close.  The index finished the Tuesday session at 88.67---down 45 basis points.

Of course you'll note that the rallies in gold, platinum and palladium all ended at the low tick in the dollar index.

The gold stocks gapped up at the open, hitting their high tick at, or shortly after, the high in gold.  Within half an hour of the high tick, the stocks gave up 2 percent of their gains before chopping sideways in a tight range into the close of trading.  The HUI finished up an even 5 percent.

The silver equities rallied until 2:15 p.m. EST, before getting sold down the same 2 percent into the close.  Nick Laird's Intraday Silver Sentiment Index closed up 5.25 percent.

The CME Daily Delivery Report showed that 1 gold and 72 silver contracts were posted for delivery within the COMEX-approved depositories on Thursday.  The two largest issuers in silver were Canada's Scotiabank and ABN Amro with 51 and 20 contracts respectively.  HSBC USA and Jefferies were the long/stoppers on 55 and 11 contracts respectively. The link to yesterday's Issuers and Stoppers Report is here.

The CME Preliminary Report for the Tuesday session showed that gold open interest in the December contract dropped by 848 contracts---and now sits at 1,087 contracts left.  In silver, December o.i. declined by only 12 contracts---and the balance outstanding is 575 contracts.

After a withdrawal on Monday, an authorize participant added 86,473 troy ounces of gold to GLD yesterday.  And as of 9:28 p.m. yesterday evening, there were no reported changes in SLV.

Late last night the folks over at the Internet site updated the short positions for both SLV and GLD for the two week period ending on November 28---and this is what they had to report.  The short position in SLV declined from 17.45 million shares/troy ounces, down to 15.41 million shares/troy ounces---which was a decline of 11.68 percent.

In GLD, the short position declined from 1.77 million troy ounces, down to 1.57 million troy ounces.  That was a decline of 11.29%.

These very similar declines for the period ending at the close of trading on November 28---were in sharp contrast to the very similar increases in short positions that were posted for the prior reporting period that ended on November 14.  The previous report showed that SLV's short position increased by 17.53%---and GLD's short position was up by 17.37%.

Much to my surprise, there was another 187,000 silver eagles sold by the U.S. Mint yesterday and, for the second day in a row, there was no gold sold.

There was almost no in/out activity in gold over at the COMEX-approved depositories on Monday.  Nothing was reported received---and only 3 kilobars were shipped out---96.450 troy ounces worth.

It was busier in silver, of course, as 391,778 troy ounces were received---and 846,875 troy ounces were shipped out the door to parts unknown.  The link to that activity is here.

The chart below is one that Nick Laird slid into my in-box just after midnight MST this morning---and its contents don't require any embellishment by me.

And here's a chart that I ripped out of Mark O'Byrne's column over at the Internet site yesterday.  It's headlined " Are Your Savings Safe From Bail-Ins?"  Use the 'click to enlarge' feature and look it over.  However, I wouldn't allow those assigned numbers to give you any comfort, as all the world's banks are toast on mark-to-market basis, even our beloved Canadian banks.  Mark's commentary about this is well worth reading---and is linked here.  It also posted in the Critical Reads section as well

I have a more reasonable number of stories for you today---and I hope you can find some in here that interest you.  There are two absolute must reads included.

¤ The Wrap

Being that futures trading is a zero sum game, the $400 million that the technical funds booked in profits on COMEX silver shorts (so far) was largely lost by the raptors---the Commercial traders other than the 'Big 8'. Technical funds closed out 22,000 short contracts at a profit---and some, but not all, raptors sold nearly 19,000 long contracts at a loss of close to $400 million. While the large gain will undoubtedly increase the technical funds’ financial war chest, the loss to the 10 or so raptors which sold contracts, is devastating. Because the loss was not only large but concentrated among so few raptors, it's reasonable to assume the losses have knocked those traders out of the silver game for good. No speculator can lose an amount equal to years’ worth of cumulative gains in any one trade and remain solvent, or continue as if nothing extreme has occurred.

Therefore, the relatively few raptors who got caught and sold the 19,000 long contracts in the downdraft from over $17 as recently as Oct 28---to $14 and $15---can no longer be, effectively, in business. It is highly unlikely that these traders will trade silver futures anytime soon. And it’s possible that the large selling by the raptors in gold [last] week may be related to the massive losses of the silver raptors. After all, how hard is it to imagine that the raptors who got caught flat-footed in silver were also long gold futures?  While the losses to the raptors in silver overshadowed what might have been lost on gold longs, what real difference does it make? A trader put out of business by silver losses isn’t going to trade gold as if nothing mattered. - Silver analyst Ted Butler: 06 December 2014

Although it was nice to see the precious metals rally, once again there has been absolutely no follow-through in Far East trading, or early London trading this morning.  In the last five weeks we've had four 'orphan' rallies with no follow through.  All of them can be easily classified as "key reversal" days---and every one has failed.  One wonders what the T.A. gurus have to say for themselves at this juncture.

However, having said that, every one of these out-of-the-blue one-day-wonder rallies has resulted in internal structure changes within the Commitment of Traders Reports that, as Ted Butler said on Saturday---" were so extreme as to potentially be a game changers."

Here are the 6-month charts for all four precious metals, plus WTIC.  Crude oil hit a new intraday low yesterday, but did not close there.

As you can see, the 50-day moving averages in both gold and silver got obliterated to the upside---and platinum also broke through, but with somewhat less authority.  Palladium continues to 'struggle' just under its 200-day moving average.

As I type this paragraph, the London open is less than ten minutes away---and at the moment, the prices of all four precious metals are up relatively decent amounts from their respective closes in New York yesterday.  Gold volume is just north of 28,000 contracts---and silver's volume is around 4,600 contracts.  Neither volume is exactly light.  The dollar index, which touched its 88.80 Far East high just before 10 a.m. Hong Kong time, is down 14 basis points from its Tuesday close as of this writing.

Since yesterday [at the close of COMEX trading] was the cut-off for this Friday's Commitment of Traders Report, all of that price/volume activity from Tuesday will be in it.  All that matters---and it's what Ted and I will both be looking for, is whether or not the 'Big 8' traders on the short side in both silver and gold increased their short positions on this rally.  On the surface it's looked ugly, but the last four weeks of COT Reports have show huge and positive changes, despite the headline numbers.  Ted is hoping we'll see more of the same in this Friday's report.  So do I---and so should you!

And as I fire today's effort out the door at 5:25 a.m. EST, I see that the tiny rallies in both gold and silver that developed an hour or so before the London open have reversed themselves---and both precious metals are now down on the day by small amounts.  Gold volume is just over 40,000 contracts, which is quite a bit all things considered---and silver's volume is getting up there as well, at just over 8,200 contracts.

Both platinum and palladium are still up on the day, but also trending lower as of this writing.  The dollar index hasn't changed much in the last couple of hours---and is down 7 basis points at the moment.

I note that crude oil is down $1.20 a barrel---and a new low for this move down.

Like yesterday, I won't hazard a guess as to how the remainder of today's trading session will unfold and, as usual, nothing will surprise me when I check the charts after rolling out of bed later this morning.

See you tomorrow.

Ed Steer

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