Tuesday, May 5: Today in Gold and Silver

NEW YORK ( TheStreet) -- NOTE:  There were some serious production issues with my Saturday column---and the last of them weren't dealt with until Monday evening.  Large chunks of Part 1 just weren't there, but the rest of the column was fine.  If you'd like to read that part of my Saturday column, the link to that section is here.

The gold price rallied about five bucks or so in morning trading in the Far East on their Monday, with the Hong Kong high coming shortly before London opened.  The price chopped quietly lower from there, before a buyer showed up shortly before 9 a.m. in New York.  That rally, which was allowed to last about five minutes, got capped, with the high tick coming at 10:30 a.m. EDT---and from that point onward, every rally attempt, no matter how tiny, got sold down.

The low and high ticks were reported by the CME Group as $1,176.60 and $1,192.10 in the June contract.

Gold finished the Monday trading session in New York at $1,187.80 spot, up $9.90 from Friday's close---and right on its 50-day moving average.  Net volume wasn't overly heavy at 102,000 contracts, the same as Friday's volume.

Here's the 5-minute gold chart courtesy of Brad Robertson---and you can see the volume spike on the rally, as JPMorgan et al went short against all comers.  I suppose it could have been a short covering rally, but I don't think so.  Add two hours for EDT---and the ' click to enlarge' feature works wonders.

The rally in silver was far more rambunctious---and it started at 1 p.m. in London, which was 20 minutes before the COMEX open.  But the big move, like in gold, started minutes before 9:30 a.m. EDT---and was capped minutes after 9:30 a.m. EDT.  It was all down hill from there until about ten minutes before the COMEX close---and it traded flat in electronic trading after that.

The low and highs were recorded as $16.125 and $16.765 in the July contract.

Silver closed yesterday at $16.37 spot, up 27.5 cents on the day, but would have obviously closed materially higher if allowed to do so.  The same with gold.  And because silver pierced its 50-day moving average and closed above it, net volume was pretty chunky at 42,000 contracts.

Although much smaller markets, the rallies in those two metals met the same fate---and at the hands of the same short sellers of last resort.  Platinum closed at $1,146 spot, up 17 bucks---and palladium finished the Monday session at $779 spot, up 7 dollars on the day.  Here are the charts.

The dollar index closed late on Friday afternoon in New York at 95.25---and the traded flat in early Far East trading.  Then shortly after 1:30 p.m. Hong Kong time, the index began to head south, but it appeared that "gentle hands" were at the ready about 45 minutes later, as it was about to take out the 95.00 mark to the downside.  As it was, the low was 95.04.  The subsequent rally to its 95.60 high tick lasted until 11:30 a.m. in London---and then at 1 p.m. in London, began to head south once more.  The secondary low at 95.20 ended minutes before 9 a.m. EDT.  It rallied 30 basis points from there, before chopping sideways for the remainder of the Monday session.  The dollar index closed at 95.42---up 17 basis points on the day.

The gold stocks opened on their highs---and were back to the unchanged mark by 11 a.m. EDT---and chopped sideways for the rest of the Tuesday session.  The HUI eked out a small gain of 0.06 percent, which was about the same amount that it lost on Friday.

The silver equities rallied to their highs shortly before 10:30 a.m. EDT---and although they faded from there, Nick Laird's Intraday Silver Sentiment Index closed up 1.75 percent.

By the way, Nick Laird was kind enough to send me the HUI and Silver Sentiment results for the week just past.  The HUI closed up 3.52 percent---and the Silver Sentiment Index by 2.22 percent.

The CME Daily Delivery Report for Day 3 of the May delivery month showed that zero gold and 3 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday.  Nothing to see here.

The CME Daily Delivery Report for the Monday trading session showed that gold open interest for May fell by 18 contracts, leaving 209 contracts still open.  In silver, o.i. declined by 148 contracts, leaving exactly 1,100 contracts till open in May.

There were no reported changes in GLD yesterday---and as of 6:33 p.m. EDT yesterday evening, there were no reported changes in SLV, either.

There was a decent sales report from the U.S. Mint yesterday.  They sold 2,500 troy ounces of gold eagles---1,000 one-ounce 24K gold buffaloes---and 427,000 silver eagles.

Over at the COMEX-approved depositories on Friday, they didn't report receiving any gold, but shipped out 33,484 troy ounces.  Virtually all of it came out of Scotia Mocatta's depository.  The link to that activity is here.

It was a pretty slow day in silver as well, as 34,821 troy ounces were received---and 60,139 troy ounces were shipped out the door.  The link to that action is here.

At the gold kilobar COMEX-approved depositories in Hong Kong on Friday, the received 3,901 kilobars---and shipped out 1,454 kilobars.  All of the activity was at Brink's, Inc.  The link to that activity in troy ounces is here.

Before getting into the stories for today, I want to take a minute to discuss Ted Butler's "just plain weird" Commitment of Traders Report in silver on Friday.  Ted gave me one explanation shortly after the report came out, but on sober second thought the next morning, he came up with a different and far more plausible explanation.

I will quote a few paragraphs, rather than try explaining it myself.

The big, but very welcomed surprise was that the short position in the managed money category grew by a sharp 5,441 contracts to 37,724 contracts despite the price close above the 50-day moving average into the Tuesday cutoff. The most plausible explanation (assuming no reporting error) was that the short position was much larger before the rally into Tuesday. That the technical funds would hold such a large short position, the largest since last fall, while surprising, is unabashedly bullish because this is the rocket fuel of buying that comes when the moving averages are penetrated to the upside once again. And I can only conclude that more technical fund shorts were added on the late week sell off.

Just to put this into the perspective of equivalent silver ounces, the technical funds sold short an additional 27 million oz in the reporting week, increasing what is a purely speculative short position by definition to over 188 million oz. I’d like to see anyone try to explain how this could not be an artificial price depressant and how the CFTC and CME should not be put out of business for allowing it. That it will ultimately be bullish for price is almost beside the point.

So large was the increase in the short holdings of the technical funds that it initially sent me in an analytical direction that proved false and that I spent hours writing about before realizing I was headed in the wrong direction. In fact, I wrote paragraph after paragraph before recognizing my error. I was all about to tell you how the 8 biggest commercials drastically increased their concentrated short position until I recognized it wasn’t the commercials but the technical funds. I am assuming that the report is correct and I am handling the data accordingly. If there are big revisions, that is beyond my control.

I was all set to tell you how the commercial categories changed this week, but I’m throwing all of that out. Yes, the concentrated short position of the 8 largest shorts grew markedly, to nearly 350 million ounces, the largest level in years. But because the trader count on the short side of managed money dropped so much (from 36 traders in the previous week to 28 traders this week) and the gross short position of these traders increased so much (by 5441 contracts) it now seems clear that a number of managed money shorts have entered into the ranks of the 4 and 8 largest traders, something rarely observed. Usually, this is a commercial only group, but that can’t be the case this week.

Therefore, I won’t venture a guess as to what the commercial categories did this week. I just now uncovered this and in my conversation with Ed Steer yesterday, I hadn’t realized yet any of this and what I told him was markedly different than what I think now. That’s one of the hazards of on the spot analysis since we usually discuss the COT report literally minutes after the report is released. Thus whatever Ed reports in his column today will be much different than what I am reporting now and all the blame for that is on me, not him. I did tell him when we discussed the report that I really had to think about it more because it was so strange. How strange, I only came to comprehend moments ago . - Silver analyst Ted Butler: 02 May 2015

Here's a chart that Nick Laird passed around on Sunday evening.  It shows the foreign "Earmarked"gold holdings of the U.S Federal Reserve Bank---and as you can tell, the amount of gold shipped out has been picking up quite a bit since February of 2014.  I have a Zero Hedge story about "Earmarked Gold" in the Critical Reads section further down, but if you can't wait, the link to that is here.

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

¤ The Wrap

Another rally in four all four precious metals that were stopped in their tracks by JPMorgan et al and their HFT buddies.  When will it end, you ask?  Beats the hell out of me.  Here are the 6-month charts for all four precious metals---and you don't need to be a rocket scientist to figure out what happened today.

There wasn't much deterioration in gold, because for the most part it stayed below its 50-day moving average, but silver was another story.  It broke above and closed above its---and it was obvious that the technical funds in the managed money were either going long or selling shorts---or a combination of both.  On the other side of the trades were "da boyz"---selling longs and buying whatever shorts necessary to kill these rallies stone cold dead.  And, for the most part, it was "Mission Accomplished".

If they hadn't been there, you can let your imagination run wild as to where prices for all four precious metals would be at the moment.  But that's why they're there, dear reader.  The banks say that they're there to add "liquidity" to the markets,  but the fact of the matter is that they're only there for marked rigging purposes.

And as I write this paragraph, the London open is fifteen minutes away and all four precious metals are currently trading around the unchanged mark from Monday's close.  Net gold volume is just under 10,000 contracts, which is pretty light.  Silver's net volume is a hair under 2,900 contracts---and the dollar index, which hadn't been doing a thing up until around 2:15 p.m. Hong Kong time, blasted 25 basis points higher in just a few minutes.

Today at the close of COMEX trading is the cut-off for this Friday's Commitment of Traders Report---and its companion Bank Participation Report---and I'll be more than interested in what precious metal prices do, or are allowed to do, during the New York session today.

I'm heading off to bed early tonight---and as I write this paragraph at 3:45 a.m. EDT, I see that all four precious metals are down a hair from Monday's close.  Gold's net volume is just under 13,000 contracts, which is still pretty light---and silver's net volume is just under 3,900 contracts.  The dollar index is now up 27 basis points---and a bit off it's earlier high.

After yesterday's price action, I have no idea what to expect during the COMEX trading session today, so nothing will surprise me when I check the charts later this morning.

See you tomorrow.

Ed Steer

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