Wednesday, December 17: Today in Gold and Silver

NEW YORK ( TheStreet) -- The gold price began to rally the moment that trading began in New York on their Monday evening, but barely got a sniff of the $1,200 spot before getting capped---and then chopped sideways within a five dollar price range until about 8:30 a.m. GMT in London.  Then things got a big friskier---and once the noon silver fix was in, gold blasted higher like a homesick angel.  The HFT boyz and their algorithms were there within minutes to cap the rally---and then they really went to town once the London p.m. gold fix was in---and by the time they were done forty minutes later, they not only had the price back below $1,200---but also below Monday's closing price in New York as well.  The price bounced back, but got capped around noon EST---and it chopped quietly sideways with very light volume into the 5:15 p.m. electronic close.

The high and low ticks were reported by the CME Group as $1,223.90 and $1,187.80 in the February contract.

Gold closed in New York yesterday afternoon at $1,195.00 spot, up $1.50 on the day.  Volume, net of December and January, was huge at 250,000 contracts.

Here's Brad Robertson's 5-minute gold tick chart showing just how busy a day it was---starting at 2 p.m. MST.  Don't forget to add two hours for EST---and the 'click to enlarge' feature is very useful here.

The price path in silver was similar, as were all the inflection points, so I shan't repeat myself.  The high and low price ticks were recorded as $16.665 and $15.54 in the March contract.

Silver finished the Monday trading session in New York at $15.715 spot, down another 47 cents from Monday's close.  Volume, net of the December and January was very close to 80,000 contracts.

Platinum also rallied at 6 p.m. on Monday evening and, like gold and silver, wasn't allowed to get very far.  A rally began at noon in Zurich, hit its high tick at the London silver fix---and that, as they say, was that---as platinum got sold down 32 bucks from its high.  A buyer at the $1,188 spot mark showed up at the COMEX close---and that's as low as 'da boyz' could get the price.  From there it rallied a few dollars into the close, finishing the day at $1,192 spot, down 7 bucks from Monday.

The palladium price chart is a mini version of the platinum chart---with the high and low coming at the same time.  Palladium was closed down 16 bucks on the day at $780 spot.

The dollar index closed late on Monday afternoon in New York at 88.43---and chopped quietly lower until London opened on their Tuesday morning.  By minutes before 8 a.m. EST five hours later, the index was down to its 87.67 low tick before begin rescued.  The last gasp of the counter-trend rally after that came around 2:35 p.m. EST---and the 88.13 level---and from there it chopped quietly lower into the close, finishing the day at 87.97---down 46 basis points from Monday.

The gold stocks gapped up a bit over 2 percent at the open---and chopped lower in a broad range for the remainder of the New York trading session.  They closed just off their low tick, as the HUI finished down 1.81%---its fifth losing session in a row.

The silver equities gapped down at the open, but rallied into positive territory by a bit almost immediately.  But that was the high for the day---and by 10:45 a.m. EST, they were down a bit over 4 percent.  They rallied strongly for the next hour, but once they rolled over the second time, there was no looking back---and Nick Laird's Intraday Silver Sentiment Index closed down 3.96%.

The CME Daily Delivery Report showed that 7 gold and 72 silver contracts were posted for delivery within the COMEX-approved depositories on Thursday.  The short/issuer of note was Deutsche Bank with 68 contracts.  HSBC USA stopped 60 contracts.  The link to yesterday's Issuers and Stoppers Report is here.

The CME Preliminary Report for the Tuesday trading session showed that December open interest in gold declined by 30 contracts---and is now down to 771 contracts still open.  Silver's December o.i. declined by another 14 contracts---and currently sits at 180 contracts, from which you must subtract the 72 contracts mentioned in the preceding paragraph to get a true and current picture of December silver o.i. at the moment.

There was another withdrawal from GLD yesterday.  This time an authorized participant took out 57,643 troy ounces---and as of 10:44 p.m. EST yesterday evening, there were no reported changes in SLV.

I continue to be amazed that the U.S. Mint is still producing 2014 silver eagles---as they reported selling another 151,000 of them yesterday.  But what is equally amazing, as I've been alluding to for the last week or so, is the fact the mint hasn't sold a gold ounce of anything, either eagle or buffalo, in the last two weeks.  Not one.  As Ted Butler pointed out yesterday, normally sales are brisk this time of year because of Christmas.

And as Ted pointed out in his weekly review on Saturday, the mint hasn't sold any platinum eagles for more than two months now.

It was a very quiet day in both gold and silver at the COMEX-approved depositories on Monday.  Only 700 ounces of gold was reported received---and nothing shipped out.  And in silver, nothing was reported received---and only 29,825 troy ounces were shipped out the door.

Here's a chart that Nick passed around last evening---and it's an update on the 30-day Russian Rouble/Gold situation that was posted in this space yesterday.  As you can tell, it was a wild day for gold priced in roubles on Tuesday.

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

¤ The Wrap

Another physical silver related issue that remains overlooked is the deposit/withdrawal pattern of metal in the big silver ETF, SLV, the world’s single largest holding of metal. Despite the two best price weeks recently and on higher than normal volume, over that same time a significant amount of silver has been redeemed from the trust; more than 9 million oz. There’s no way of me knowing if the metal was physically shipped out of the London warehouses, or stayed in place as a result of a conversion of shares to physical metal ownership, a simple process for those who may be involved. In either event, the reduction in reported metal holdings in SLV is serious food for thought.

For one thing, the redemptions in SLV are completely counterintuitive to what normally occurs when prices rise and trading is heavy. Usually, net investment demand increases on strong buying and higher prices, necessitating the deposit of metal to correspond with the increase in new shares created by the investment demand. The best current example is in GLD, the big gold ETF.

While the redemption pattern in GLD has been pronounced over the past two years as investors sold on declining gold prices, there have been three straight days of metal deposits into GLD on the recent price strength and higher trading volume. In other words, the deposit pattern in GLD this week was completely normal; whereas the redemptions in SLV on the same or greater price strength and trading volume was as cockeyed as it gets. - Silver analyst Ted Butler: 13 December 2014

Yet none of the so-called 'precious metal analysts' anywhere on Planet Earth---lunatic fringe or otherwise---will talk about this dichotomy, let alone try to explain it if they do.  You have to ask yourself why this is.

It was a wild day where all four precious metals wanted to do their versions of a NASA space launch at the London silver fix, but JPMorgan et al---and their HFT buddies---were having none of it.  The charts say it all---so I shan't beat this to death any further here.  Even the most brain dead could see that yesterday's price action had zero to do with supply and demand---and everything to do with price management in the face of all the uncertainty going on at the moment.  I would also guess, as I pointed out in The Wrap yesterday, that there's a certain amount of illiquidity in the gold and silver futures markets at the moment as well.

Posted below are the 6-month charts for all four precious metals, plus WTIC.  Crude oil traded at a new low yesterday, but didn't close there.

Although gold didn't close at a new low for this engineered price move down, that certainly wasn't the case for the other three precious metals, as they got smoked for the second day in a row.

Yesterday was the cut-off for this Friday's Commitment of Traders Report---and pretty much all of yesterday's volume should be in it.

As I type this paragraph, the London open is fifteen minutes away.  As occurred on Monday, gold rallied a bit at the New York open on Tuesday evening, but the moment it got within spitting distance of the $1,200 mark once again, that was it---and it traded just under that price point for the remainder of the Far East session on their Wednesday.  At the moment, it's up 4 bucks.  Silver was up over 20 cents at one point---and it, too, has been trading quietly in the Far East and is still up 15 cents or so.  Platinum and palladium's rallies also ran out of gas after small gains---and both are up about 5 bucks at the moment.

Gold volume is a bit over 15,000 contracts, but silver's volume is already pretty decent at 6,300 contracts.  The dollar index is up 14 basis points.

Today the kiddies at the Fed say their thing, as the FOMC meeting ends today---and we'll find out how badly the precious metals get hit at 2 p.m. EST.  And if they do take off on whatever news is released, then I don't expect the rallies to be allowed to last for long.  I'd love to be spectacularly wrong about this, of course.

So we wait some more.

And as I send this out the door at 4:45 a.m. EST, I note that gold poked its nose above the $1,200 spot mark just before London opened---and promptly got sold down below that mark the second that it did open.  Silver is trading sideways, but still in positive territory---platinum is up 10 bucks---and palladium rallied until 10 a.m. in Zurich before getting sold down a few bucks, and is currently up 7 dollars at the moment. Gold volume is around 22,500 contracts, which isn't a lot---and silver's volume is now a bit over 8,000 contracts, which is quite a bit.  The dollar index is up 26 basis points from its close in New York late yesterday afternoon---and up 59 basis points from its 8 a.m. low in New York yesterday morning.  Crude oil is currently down another 74 cents a barrel.

All eyes should be on what happens at 2 p.m. EST today, even before Yellen opens her yap.  I'm not expecting good things, but you just never know.

Whatever happens, I'll have it for you in tomorrow's column---and I'll see you then.

Ed Steer

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