Saturday, December 20: Today in Gold and Silver

NEW YORK ( TheStreet) -- The slight bump above the $1,200 spot price shortly after 3 p.m. Hong Kong time turned out to be the high tick of the day on Friday.  From that point, it took the rest of the London and New York trading sessions to shave about seven buck off the price.  The highs and lows aren't worth the effort of looking up.

Gold finished the trading day yesterday at $1,194.20 spot, down $3.70 from Thursday's close.  Net volume was very quiet at 74,000 contracts.

The silver price spent most of yesterday trying to break above the $16 spot price mark---and finally succeeded in a smallish rally that began the moment the London p.m. gold fix was done for the day.  After that it chopped sideways for the remainder of the New York trading session.

The low and high ticks were reported by the CME Group as $15.83 and $16.11 in the March contract.

Silver finished the day on Friday at $16.065 spot, up 19 cents from Thursday.  Net volume was 23,000 contracts.

Platinum did even less than gold, as it traded in a ten dollar price range for the entire session yesterday---and its attempt to breach the $1,200 spot price mark in afternoon trading in Hong Kong was somewhat less than successful.  Platinum closed at $1,196 spot, down 2 bucks from Thursday.

Palladium did even less from a price perspective, at least up until around 1 p.m. in Zurich---and then away it went to the upside.  The rally ended around 12:30 p.m. in New York---and didn't do much after that.  Palladium closed the day back above the $800 mark at $804 spot, up 13 dollars from Thursday's close.

The dollar index closed late on Thursday afternoon in New York at 89.23---and then didn't make a move of any significance until shortly before 10 a.m. in New York.  By 11:45 EST the index was at its 89.62 high---and traded virtually ruler flat after that, finishing the Friday session at 89.60---up another 37 basis points.

The gold stocks opened down a percent or so, but within fifteen minutes, they were in positive territory.  But starting shortly after 10:30 a.m. EST, they began to chop quietly lower---and they slid into negative territory to stay shortly before noon.  The HUI finished down 1.18%.

The silver equities started the trading session in a similar manner, but once in positive territory, stayed there.  At one point they were up well over 3 percent, but by the end of the day, Nick Laird's Intraday Silver Sentiment Index closed up only 1.31%.  We'll take it!

The CME Daily Delivery Report showed that 3 gold and zero silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.

The CME Preliminary Report for the Friday trading session showed that December's gold open interest declined by 156 contracts---and is now down to 584 contracts still open.  And for the third day in a row, December open interest remained unchanged at 101 contracts.

I was happy to see that an authorized participant added a decent amount of gold to GLD yesterday.  This time it was 96,069 troy ounces.  There was a withdrawal of 862,004 troy ounces from SLV.

Once again there was no sales report from the U.S. Mint.

There was little in/out movement in gold and the COMEX-approved depositories on Thursday.  Nothing was reported received---and 3,408 troy ounces were shipped out.  In/out shipments were far more substantial in silver, as 301,576 troy ounces were received---and 872,352 troy ounces were shipped out.

The Commitment of Traders Report, for positions held at the close of trading on Tuesday, wasn't anywhere near as good as either Ted or I were hoping for---but there's a decent possibility that not all of Tuesday's price/volume action was included in the report.  If that in fact is the case, then we'll have to wait for the next COT Report, which won't show up on the CFTC's website until Monday, December 29.

In silver, the Commercial net short position declined by only 1,360 contracts, or 6.8 million troy ounces.  The net short position in silver edged down to 170 million ounces, which is nowhere near bullish territory.

Ted says the Big 4 Commercial traders increased their short position by a smallish 300 contracts---and the remaining '5 through 8' big traders increased their short position by 600 contracts.  Ted says the JPMorgan's short position is still around the 10,000 contracts mark, or 50 million ounces.

Under the hood in the Disaggregated COT Report, the Managed Money added 3,740 contracts to their short positions---and sold 529 long contracts.  The raptors, the Commercial traders other than the 'Big 8', took the other side of all trades from the Big 8 and Managed Money traders.

In gold, the Commercial net short position declined by about the same number of contracts in silver.  In this case it was 1,510 contracts, or 151,000 troy ounces.   The Commercial net short position in gold now sits at 11.51 million troy ounces.

The Big 8 short traders continue to whittle away at their overall COMEX short position in in this metal---and that was the case again this week.  Their short position is now down to the lowest its been in almost five years.  Ted says that JPMorgan's COMEX long position in gold is still around the 10,000 contract mark.

Under the hood,  the Managed Money traders covered 4,239 contracts of their short position---but also sold 3,077 contracts of their long position.

In actual fact, there's not much to see in this report and, as always, it seems like we're waiting for the next report to add clarity to the one we've just been handed.

It came as no surprise to me that The Central Bank of the Russian Federation added more gold to their reserves.  Since the 20th of the month fell on the weekend, they updated their website with November's data yesterday---and it showed that they purchased another 600,000 troy ounces during that month.  This is close to one month of Russian gold production.  Here's Nick Laird's most excellent chart showing this.

My back-of-the-envelope calculation shows that Russia's central bank has purchased 152.4 tonnes of gold for their reserves so far this year.  Of course the big question will be what they do in December---add, sell, or stand pat---and we won't know until they update their website with December's data on Tuesday, January 20, 2015.

Now, if the Russian central bank could just be talked into buying all their silver production for the next five years, an action such as that would certainly be the talk of the town---and silver's current spot price would be history in a heartbeat.

Nick also passed around two other charts that involve Russia's gold reserves.  One shows their value in U.S. dollars over the years---and the other in Russian roubles.  These charts are current as of the end of November---and both of them would looks substantially different if month-to-date data for December could be added in.  No further proof is necessary to show that gold protects against currency debasement.

I have a decent number of stories for a Saturday, including a reasonable number that I've been saving for length or content reason.

¤ The Wrap

From the close on Friday, December 12 through Tuesday’s low, the price of silver fell $1.50, or close to 9%. No other commodity, including crude oil, fell as much as silver did over that time. Generally, such a large percentage decline in any world commodity in less than two trading days is a pretty big deal and would only occur if there was some easily documented major supply/demand development. I follow silver pretty closely---and not only was I not able to uncover any major change in silver’s actual supply/demand situation, I couldn’t find even a minor development that would have accounted for the sudden large price decline. I would ask you to think about that for a moment.

Any investor or analyst of any world commodity must be able to account for and rationalize a 9% price move in less than two trading days; otherwise he or she couldn’t possibly understand the dynamics of that commodity. Yet I received virtually no requests to explain the price drop. The facts are clear – the price of silver did decline by nearly 9% and there were no actual supply/demand developments to explain the decline. Therefore, something else had to account for the sudden silver price decline and judging by the lack of readers questioning why, the actual cause of the decline must have been fairly widely known.

Of course, the only possible explanation for what would normally be a massive price drop in any world commodity is trading activity on the COMEX. While this is nothing new to subscribers, my sense is that COMEX price rigging has reached such an incredibly dominant influence over the price of silver (and other commodities, like gold and copper) that it is more widely understood than ever before. I believe it has gotten to the point where it is impossible to even attempt to offer an alternative plausible explanation for large price moves in silver and other metals apart from COMEX trading without looking like a fool. I also believe that the growing and widespread recognition that prices are set on the COMEX greatly undermines the life expectancy of continued future price manipulation. - Silver analyst Ted Butler: 17 December 2014

Today's pop 'blast from the past' is one that has graced this column before, but it's been a year or so.  The group---and the tune from 1977---need no introduction.  Turn up your speakers and enjoy.  The link is here.

I thought I'd throw a Christmas song in here from the movie " Home Alone".  I didn't like the movie at all, as I've obviously outgrown that sort of humour.  However, the musical score by John Williams has outlived it, as has this Christmas piece which is now a classic---at least at our house---and it gets a fair amount of air time on the local radio stations here in Edmonton this time of year as well.  I hope you enjoy it---and the link is here.

Every year at this time I post Handel's " Messiah".  If you took a vote amongst audiophiles and ancient music affectionados of the world, of which I am one, this recording by Christopher Hogwood and the Academy of Ancient Music is definitive.  I've owned the CD of this concert since 1991 when it was first released in that medium.  The Emma Kirkby piece I posted last Saturday is taken from this work.  No matter which version you listen to, it's not a short piece.  This one runs 2:16:23---and I hope you enjoy however much you choose to listen to.  The link is here.

Except for silver and palladium, there was hardly a creature stirring in the precious metal market yesterday---and the volumes certainly reflected that.  I'm getting the impression that with the Christmas season now upon us, it may be rather quiet in the precious metals for the remainder of the year---barring something out of left field, of course.

I shall dispense with the 6-month charts for any of the precious metals, as there really isn't much to look at.  However, here are the 2-year charts for natural gas and crude oil.  It appears that crude oil has found a bottom, at least temporarily---and natural gas got sold down to a low not seen since November 2013.

I must admit that the year is ending sort of up in the air for the precious metals.  As you already know, if it wasn't for the powers-that-be, we'd be looking at precious metal---and all commodity prices---many orders of magnitude higher than they are now.

Someday, as Alan Greenspan has alluded to recently, this will be the outcome.  But when, is the question.  All four precious metals are basically in a structural deficit---and have been for some time, so sooner or later this will manifest itself in the price.  At that moment, it certainly isn't being allowed to show up in the COMEX futures market.

However, in an unpublished article on silver that I've got stashed away on my hard drive, I had this to say---

"In one form, the price management scheme in gold and silver, along with copper and crude oil, is a just another kind of imperialism that ' s being practiced by the Anglo/American financial alliance against the 'producer' class.  Along with other kinds of force, they are now using the COMEX futures market [ along other financial instruments] to prevent the commodity-producing nations from becoming economic powers that could individually, or as a group, challenge the supremacy of the 'West' in general, or the U.S.A. in particular ---"rich nations which insist on being poor"---as Gold Anti-Trust Action Committee's secretary/treasurer Chris Powell so eloquently put it some years back---and most recently in this September video interview on The Larry Parks Show in New York."

"Gold manipulation, silver manipulation or price management of the entire commodities complex---call it what you will.  But if the nations that comprise the "hewers of wood---and drawers of water" on Planet Earth ever decided to rise up against the current Western fin ancial establishment---and put their markers down on this 21st century form of enslavement, there will certainly be a New World Order, but it won't be the one that the current powers-that-be have in mind."

It's within the power of Russia and/or China to bring it all crashing down if they so choose---and as other commentators besides myself have said---all they have to do is play the gold/precious metal card---and it would be all over in an instant.

And as I've said before, if push really becomes shove in today's economic, monetary and political environment, it may come to that.

Enjoy what's left of your weekend---and I'll see you on Tuesday.

Ed Steer

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