Saturday, December 13: Today in Gold and Silver

NEW YORK ( TheStreet) -- It was pretty much a nothing day in the gold market on Friday.  The tiny rally at the London open began to erode immediately---and the down/up price tick in the two hours surrounding the London p.m  gold fix was all the activity there was in new York.  The gold price continued to slowly sell off from there into the close of electronic trading.

The high and lows ticks are barely worth the effort to look up, but the CME Group recorded them as $1,228.90 and $1,214.80 in the February contract.

Gold finished the Friday session in New York at $1,221.80 spot, down $5.60 from Thursday's close.  Volume, net of December and January, was 130,000 contracts.

Silver traded a bit higher in Far East trading, but got sold down a dime around noon Hong Kong time---and the rally at the London open met the same fate as the gold price.  The silver price traded in a 20 cent range for the entire Friday session, so the high and low aren't worth looking up.

Silver finished the day at $17.035 spot, down 6 cents from Thursday.  Volume, net of December and January, was 32,000 contracts.

The platinum price didn't do much until the London open, but then rallied about six bucks to its high---and from there, it got sold down until the London p.m gold fix was done.  After that it chopped sideways in a $20 price range---finishing the day at $1,225 spot, down 12 bucks from Thursday.

Palladium closed the Friday session at $812 spot, down five bucks on the day.

The dollar index closed late on Thursday afternoon in New York at 88.55.  It's 88.62 high tick came at 3:00 p.m. Hong Kong time in their Friday afternoon, an hour before the London open.  From there it chopped down to its 88.12 low, which came minutes before 12 o'clock noon in New York.  It rallied back 10 basis points by 2 p.m.---and then traded flat into the close.  The index finished the Friday session at 88.335---down 21 basis points on the day.

The gold stocks opened down a bit, hitting their morning low minutes after the London p.m. gold fix, which came shortly after 10 a.m. in New York.  From there they rallied into positive territory, but that only lasted for fifteen minutes or so before they began to head quietly lower---and that trend continued right into the close, as the HUI finished down 1.71%.

Although gold closed up $30 on the week, the HUI closed down 0.4%.

The silver stock also opened down a hair, but turned on a dime after the gold fix was done---and by 11:30 a.m. they were up over 3 percent.  Sadly, that rally didn't last either---and by 2:45 p.m they were down about a percent.  From there they rallied back into positive territory by a hair, as Nick Laird's Intraday Silver Sentiment Index closed up 0.03%.

Although silver gained 75 cents during the prior week, the silver equities gained something less than 2 percent.

The CME Daily Delivery Report showed that 35 gold and 178 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.  In gold, JPMorgan issued 35 contracts from its client account---and stopped 31 of of them in its in-house [proprietary] trading account.  The theft from their clients continues.

In silver, the three largest short/issuers were Scotiabank with 104 contracts, along with Jefferies and JPMorgan both out of their client accounts, with 38 and 25 contracts respectively.  The two biggest long/stoppers were HSBC USA and Jefferies with 139 and 29 contracts respectively. The link to yesterday's Issuers and Stoppers Report is here.

The CME Preliminary Report for the Friday trading session showed that December gold open interest dropped by 163 contracts, and is now down to 881 contracts still open---minus the 35 posted for delivery on Tuesday.  In silver, the December o.i. went down by only 14 contracts---and December open interest now sits at 383 contracts---minus the 178 mentioned two paragraphs ago.

There were no reported changes in GLD yesterday---and I was astonished to see another withdrawal from SLV.  This time an authorized participant took out 1,341,037 troy ounces.  Since December 1, there have been 9.2 million ounces of silver withdrawn from SLV---and nothing deposited.

The good folks over at Switzerland's Zürcher Kantonalbank finally got around to updating their gold and silver ETFs for the week ending Friday, December 5---and this is what they had to report.  Their gold ETF declined by another 22,117 troy ounces---and their silver ETF shed 174,272 troy ounces.

The U.S. Mint sold another 100,000 silver eagles again yesterday, but no gold eagles or buffaloes once again.

Month-to-date the mint has sold 16,500 troy ounces of gold eagles---2,500 one-ounce 24K gold buffaloes---and 1,722,500 silver eagles.  Based on these sales, which are really skewed towards silver, the silver/gold ratio so far this month works out to 90 to 1.  With the new 2015 production year coming up hard, I can't see 2014 silver eagle sales continuing much longer, because at the rate they've been pumping out the 2014 silver eagles in December, it appears that they haven't yet begun to ramp up production for the new calendar year as of yet.

There was only 1 kilobar of gold shipped out of the COMEX-approved depositories on Thursday---and in silver, nothing was reported received, but 491,721 troy ounces were shipped out for parts unknown.  The link to that activity is here.

Well, yesterday's Commitment of Traders Report was about as bad as it could possibly be.

In silver, the headline number in the legacy COT Report was ugly, as the Commercial net short position blew out by 8,771 contracts, one of the biggest numbers I can remember---and I can remember quite a bit.  The Commercial net short position now stands at 35,357 contracts, or 176.8 million troy ounces, which is really getting up there.

On the other side of those 8,771 contracts, the raptors [the Commercial traders other than the Big 8] sold 5,200 of their long contracts, while the '5 through 8' Commercial traders added about 400 contracts to their short position---and the 'Big 4' blew out their short position by around 3,200 contracts.  Ted says that JPMorgan's short position in silver appears to be back up around the 10,000 contract mark, or 50 million ounces.

Under the hood in the Disaggregated COT Report, the technical funds in the Managed Money covered 4,976 of their short contracts---and added 594 long contracts.  Ted says that these technical funds have about 10,000 short contracts still on their books, which isn't very much rocket fuel left to sustain any kind of big rally in silver going forward---and I know that he'll have lots more to say about this in his weekly review to paying subscribers later this afternoon.

In gold, the headline number in the legacy COT Report showed that the Commercial net short position jumped by an eye-watering 27,193 contracts, or 2.72 million troy ounces.  The Commercial net short position in gold now stands at 116,601 contracts, or 11.66 million troy ounces.

On the other side of the 27,193 contract deterioration, the raptors, the Commercial traders other than the Big 8, sold about 28,600 contracts of their long position, while the '5 through 8' largest traders added around 6,700 contracts to their short position.  But the 'Big 4' traders swam against the tide---and actually covered about 8,300 contracts of their short position.  I think I remember Ted telling me that JPMorgan's COMEX long position in gold was now 10,000 contracts, which is down from the 12 to 14,000 contracts they were long last week.  But I didn't write it down, so I reserve the right to be wrong about that.

As in silver, Ted will have more to say about the gold situation later today---and I'll steal any pertinent bits as a quote for one of my columns next week.

Still, there's no way to sugar coat this, as this week's COT Report was a disaster.  There's no sign whatsoever that JPMorgan et al are softening their iron grip on silver and gold prices---and to make matters worse, a huge chunk of Ted Butler's rocket fuel [the short positions of the technical funds in the Managed Money category] has already been used up---at great profits to them, but at the expense of the next rally.

I'm happy to report that I don't have all that many stories today, but I do have a decent number that I've been saving for today's column, so I hope you have enough time in what's left of your weekend to read the ones that interest you.

¤ The Wrap

One must look away from the COMEX to understand how JPMorgan could be the world’s largest silver long (owner) since the data indicate that the bank still holds a short position on the exchange, albeit the smallest such short position in 7 years. The evidence suggests that JPMorgan used its control of silver prices by virtue of its dominant COMEX market share to depress prices, not only to accrue profits on its short position, but even more for the express purpose of accumulating physical silver on the cheap. What evidence?

The evidence lies in the intentionally poor price performance of silver over the past nearly 4 years and the fact that the world has produced as many as 300 million ounces of new silver that has been excess to total fabrication demand. This extra silver had to be bought by the world’s investors and those investors did not appear to be aggressive buyers. In other words, someone had to buy the silver and since the world’s investors did not appear to be ready buyers, the metal was most likely bought by a non-traditional buyer. JPMorgan most closely fits that description for two reasons. One, buying physical silver was the most practical and efficient manner of closing out JPM’s documented COMEX short position and two, the silver purchases would be kept confidential since no reporting requirements attach to physical ownership. By buying physical silver, JPMorgan could cover its massive COMEX short position absent prying eyes. - Silver analyst Ted Butler: 10 December 2014

Today's pop 'blast from the past' comes from an American rock band that formed in L.A. back in 1977.  This was their first big hit during the winter of 1978/79---reaching #5 on the U.S. Billboard Charts.  The link is here---enjoy!

Today's classical 'blast from the past' is an old Christmas chestnut that I drag out every year---and since there are only two weekends left before Christmas, I better stick it in here, as I have something else for next weekend already.  Despite the fact that this work was composed for a bass voice, here's now- Dame Emma Kirkby singing what I consider to be the definitive version of " But who may abide… " from Handel's Messiah, which he composed back in 1741 A.D.  It's 4:07 minutes of pure heaven on earth.  What a voice!  The link is here.

It was a pretty quiet day in the precious metal markets yesterday, but with the world's economy, particularly in the emerging market economies, in the initial stages of melt-down, it may not remain quiet much longer.  However, the 'orphan' rally that we had in the precious metals on Tuesday, along with yesterday's COT Report that covered it, was an indication that 'da boyz' are not going to let things get out of hand to the upside, at least for the moment.

Here are the 6-month charts for all four precious metals, plus WTIC, which hit a new low for this move down yesterday.

Although both gold and silver blasted through their respective 50-day moving averages like a hot knife through soft butter on Tuesday, they haven't been allowed to get anywhere since---and with the short positions of the technical funds whittled away to next to nothing, it's hard to see how the next rally will develop, unless these same funds start pouring onto the long side.  And if that's the case, JPMorgan et al will most likely meet them head on like they did on Tuesday.  And even though the Commercial net short positions in both gold and silver are now ripe for an engineered price decline, Ted Butler wonders whether these same technical funds that just covered most of their short positions at big profits, will stick their heads back in the lion's mouth by going back on the short side if 'da boyz' can make it happen.

So we wait.

Along with the U.S. provoking Russia at every turn---and oil prices at a level that is about to wreak financial and economic havoc in all oil-producing nations, other than a few in the Persian Gulf region---the stage is certainly set for some sort of crisis.  And if it doesn't unfold right away, the effects of both are certain to intensify dramatically in the not-too-distant future.

It's hard for me to believe that Russia/Ukraine situation is happening in isolation from what now has all the appearances of a credit market and financial implosion which, as Doug Noland pointed out earlier, is now firmly established in the emerging markets---and is now starting to infect the "Core Bubble Dynamics" as he so eloquently puts it.

Casting back to an Earnest Hemingway quote that has graced this column far too often, but which is worthwhile resurrecting at this particular juncture---" The first panacea for a mismanaged nation is inflation of the currency; the second is war.  Both bring a temporary prosperity; both bring a permanent ruin.  But both are the refuge of political and economic opportunists."

Here's a chart that Nick Laird sent me in the wee hours of this morning.  It's the " Major Markets Composite Index" going back to 1970---and it certainly doesn't require any explanation on my part, as the chart says it all.  The market swoon of the last few weeks---and this past week in particular---barely register on the far-right side of this graph, but the potential size of the down move from here is terrifying---and that's being kind.

No amount of money printing will do any good now---and I see nothing but very hard times ahead.

Somewhere in all of this, the precious metals should do well, but what event will trigger it, is hard to tell, as the powers-that-be in the COMEX futures market in gold and silver et al are still on the job.

And as I've said before recently, I'm comforted by the fact that Alan Greenspan has gone on record that at some point in the future, the price of gold will trade "materially" higher than it is now---and also by the fact that certain entities are buying massive amounts of physical silver in all forms, which will ensure that someday, silver will certainly become the new gold.

On that cheery note, I'm done for the day---and the week.

See you on Tuesday.

Ed Steer

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