Thursday, May 7: Today in Gold and Silver

NEW YORK ( TheStreet) -- [NOTE: Sorry about no column on Wednesday, as I was rather ill on Tuesday.  Ed]

In the overall, the gold price activity on Wednesday was pretty much the same as it was on Monday and Tuesday.  The price rallies that began twenty minutes before the COMEX open got hammered withing minutes, as "da boyz" spun their algorithms.  And, like Monday and Tuesday, the price got sold down into the COMEX close regardless of the fact that oil was continuing to rally---and the dollar index continued to head south with a vengeance.  They even managed to close the gold price lower than it was on Tuesday.

The high and low ticks are barely worth the effort of looking up.  The CME Group reported them as $1,187.40  and $1,196.90 in the July contract.

Gold finished the Wednesday session at $1,191.20 spot, down $1.80 on the day.  Net volume was pretty light at only 91,000 contracts, so JPMorgan et al had an easy time of it.

The same can be said about silver for the week-to-date, as it was wasn't allowed to rally in the London open yesterday---and then got sold down until 1 p.m. BST, which was twenty minutes before the COMEX open.  The rally that began at that time got capped at the open---and spent thirty minutes being held at the $16.61 spot price mark, before getting sold down into negative territory by the London close.  It rallied a hair from there, but still was closed down on the day.

The low and highs in that  metal were reported as $16.385 and $16.65 in the July contract.

Silver finished the Wednesday session at $16.485 spot, down 2.5 cents from Tuesday.

Here's the New York Spot Silver [Bid] chart from yesterday showing the price action in detail from 8:00 a.m. EDT [1:00 p.m. BST] until the 5:15 p.m. EDT close of electronic trading---and you can see just how tight the control on the price was in the thirty minutes between open of the New York equity markets and the London p.m. gold fix.

The chart for platinum was similar: sell-off at Zurich open, rally twenty minutes before the COMEX open, price capped at the COMEX open, sold down until 12:45 p.m. in New York.  But it did manage to rally after that---and actually closed up a two bucks at $1,144 spot.

Palladium price action was tiny facsimile of what happened in palladium---and it closed unchanged at $789 spot.

The dollar index got trashed again yesterday, falling from just under the 96.00 mark on Tuesday---shortly after the London open---all the way down to 93.90 and its 10:30 a.m. EDT low yesterday afternoon.  It recovered a bit from there---and closed at 94.16.

From its low tick on Wednesday, that a bit over 200 basis points move to the downside in just over twenty four hours.  Both gold and silver closed barely above unchanged during that move.

Because I was too ill to write a column yesterday, I've included the 3-day USD chart so you can put yesterday's action in some context.

Here's the 6-month dollar index chart for comparison purposes.  The RSI indicator is now bouncing off its oversold mark for the second time in a week---and it wouldn't surprise me in the slightest if we had dollar rally in our future, manufactured or otherwise.

The gold stocks opened up, but within thirty minutes were in the red---and kept sinking for the remainder of the day, as the HUI barely finished off its low tick, down 2.96 percent.

It was just the same for silver stocks at the start of the day, but there was mid-day rally that ended minutes after 1 p.m.---and from there they headed lower.  But at 3:00 p.m. on the dot, they turned on that proverbial dime---and rallied into the close.  Nick Laird's Intraday Silver Sentiment Index closed down only 1.18 percent.

The CME Daily Delivery Report for Tuesday, my sick day, showed that zero gold and 308 silver contracts were posted for delivery within the COMEX approved depositories today.  The only short/issuer worth mentioning was Scotiabank with 307 contracts.  The two biggest short/issuers were JPMorgan with 103 contracts out of its in-house [proprietary] account and 98 contracts for its client account.  The other stopper was HSBC USA with 86 for its in-house account as well.

The CME Daily Delivery Report for Wednesday showed that zero gold and 15 silver contracts were posted for delivery within the COMEX-approved depositories on Friday.  Scotiabank issued 11 contracts---and JPMorgan stopped 11 contracts, 5 for clients and 6 contracts for itself.  The link to yesterday's Issuers and Stoppers Report is here.

The CME Preliminary Report for Tuesday showed that gold open interest in May dropped by 5 contracts to 204 contracts left open---and in silver the o.i. fell by 6 contracts, down to 1,095 contracts.

The CME Preliminary Report for Wednesday showed that gold o.i. dropped another 8 contracts leaving 196 open---and in silver it fell by 319 contracts, as the big 308 contract delivery posted on Tuesday, gets delivered today.  This leaves 776 open, minus the 15 mentioned above that will be delivered tomorrow.

There were no reported changes in GLD either on Tuesday or yesterday, but on one of those days, probably yesterday, an authorized participant withdrew a very chunky 2,142,804 troy ounces.  Based on the price action over the last week, one wonders what that was all about.  But since April 27 authorized participants [read JPMorgan most likely] have withdrawn 5.1 million troy ounces out of SLV.

The folks over at Switzerland's Zürcher Kantonalbank updated their website with their gold and silver ETF data as of the close of business on Thursday, April 30.  Their gold ETF added another 5,054 troy ounces, but their silver ETF dropped by 88,645 troy ounces.

For the second day in a row, there were no reported sales from the U.S. Mint.

Well, the people at the Royal Canadian Mint that I was having an e-mail exchange with last week, told me at the time that their 2014 annual report wouldn't be posted on their Internet site until the end of June.  I checked their website at 7 p.m. EDT yesterday evening---and there it was!  I've stolen a few paragraphs from page 29 and 31 of that report, which is linked here.

The Mint’s refinery supports the production of the Mint’s bullion and numismatic coins with refined precious metals. In 2014, the volume of precious metals refined declined 14.0% from 5.5 million ounces in 2013. The volume of scrap gold and rough gold deposits from the mining industry declined 6% while silver deposits declined 44% in the face of aggressive competition in the refining industry; the supply of bullion scrap is much diminished due to the drop in bullion prices. Weaker global demand for bullion bar products has also depressed sales of gold kilo bars and 100-ounce silver bars. [Emphasis is mine - Ed]

Sales of Gold Maple Leafs (GML) declined 37.8% to 709,200 troy ounces from 1,140,400 ounces in 2013 while the average price declined 10.2% to US$1,266.40 per ounce in 2014 from US$1,411.23 per ounce in 2013.

In sharp contrast, sales of Silver Maple Leaf (SML) coins increased to 29.2 million ounces from 28.2 million ounces in 2013, establishing a record volume of sales for the second consecutive year. While the volume of coins sold increased 3.5%, the average silver price declined 19.7% from $US23.8 per ounce in 2013 to $US19.1 per ounce in 2014. Although activity in the silver and gold bullion markets tend to correlate, demand for silver in North America and Europe did not diminish throughout 2014 buoyed in part by expectations that industrial demand for the metal could strengthen on an economic recovery. [Don't believe that last sentence for one minute. - Ed]

The Mint also sold 13.1 thousand ounces of Platinum Maple Leaf coins in 2014 compared to 19.3 thousand ounces in 2013.

Over at the COMEX-approved depositories on Monday they reported shipping out 578 troy ounces of gold---and received nothing.  In silver, they took in 615,550 troy ounces---and shipped out only 9,491 troy ounces.  In the HONG KONG depositories there 9,491 kilobars shipped in---and 5,280 shipped out.

Over at the COMEX-approved depositories on Tuesday they reported receiving 68,995 troy ounces of gold---and shipped out 1,695 troy ounces.  Virtually ever ounce of in/out activity was at HSBC USA.  The link to that activity is here.

In silver, nothing was received---and 539,710 troy ounces were shipped out.  The link to that action is here.

There wasn't much activity at the COMEX-approved depositories in Hong Kong on Tuesday and, as usual, the activity there was at Brink's, Inc., as 448 kilobars were shipped in---and 530 were shipped out.  The link to that activity, in troy ounces, is here.

Here's a chart that Nick Laird sent our way last night---and I thought it worth sharing.  It's the Dow/Gold ratio going back 200 years.  Along with the chart, Nick made this comment " Here I speculate that the Dow/Gold ratio is going to repeat a similar trend as seen in 1977-1980 where after a bounce, the Dow/Gold ratio then fell from 10:1 down almost to a Dow/Gold ratio of 1:1". [We're all praying that's the way it's going to turn out after this counter-trend rally has run its course. - Ed]

With no column yesterday, I've really had to hack and slash to get the Critical Reads down to a manageable size today.

¤ The Wrap

One thing I would like to point out is that I sense that no true liquidity exists in silver (or gold). Because the technical funds and commercials both act in unison, it has gotten to the point where there are only two traders in the market – technical funds on one side and commercials on the other side.

There may be 30 different technical funds and a like amount of commercials on either side of the COMEX silver market, but if they are each operating in conformity with the other traders in their group, that means we have, in effect, one buyer and one seller. It can’t get more illiquid than that. Great moves usually occur in illiquid markets and with silver prices in the gutter, it would seem certain that the biggest move must be to the upside. - Silver analyst Ted Butler : 02 May 2015

It should be reasonably obvious that despite the rapidity of the decline in the U.S. dollar index in mid-March, which has been accompanied by an impressive 40+ percent rise in the price of oil, that JPMorgan et al are not about to allow precious metals to rise just yet.

Here are the 6-month charts for all four precious metals, plus WTIC and the U.S. dollar index.

As I mentioned earlier when talking about the U.S. dollar at the top of this column, we might be close to the beginning of a counter-trend rally.  If it does occur, it's a near certainty that 'da boyz' will use the opportunity to put the technical funds in the Managed Money category back on the maximum short position that they held last Friday.  The only redeeming feature about that, is that the engineered price decline needed to do the dirty, won't result in a lot of price damage, as we're barely off the bottom as it is.  However, the precious metal equities are acting like this event is imminent---and nothing will surprise me, especially when the job numbers come out tomorrow at 8:30 a.m. EDT.  So we wait some more.

As I write this paragraph, the London open is about ten minutes away, and I note that after rallying a few bucks in early Far East trading on their Thursday morning, it appears that the "da boyz" along with the algorithms are at it once again.  Ditto for silver.  Platinum and palladium are mini versions of what's going on in gold and silver at the moment.  Gold is down five bucks---and silver is down 15 cents

Gold net volume is approaching 16,000 contracts---and silver's net volume is 3,500 contracts, so the HFT traders/spoofers are having an easy time of it.  98 percent of this volume is of the HFT variety.  So they, not legitimate producers and consumers, are setting the price.  The dollar index, which has been trading basically unchanged in early Thursday trading---and just above the 94.00 mark---is currently down 6 basis points.

I would guess that we'll see some improvement in the Commercial net short position in gold in tomorrow's Commitment of Traders Report, but what it will show in silver is much harder to define.  It looks like a wash based on the 5-day Wednesday-to-Tuesday reporting week on the 6-month silver chart above, but I wouldn't bet the farm on that call.

And as I send this off to Stowe, Vermont at 5:25 a.m. EDT, I see that gold made a new low for this current 2-day move to the downside shortly after 10 a.m. BST---and at the low, was down a bit more than ten bucks from its New York close.  It's rallied a hair since then, but I'm not looking forward to what JPMorgan et al do with the price once COMEX trading begins this morning.  Silver's current low came minutes before 9 a.m. in London---and has rallied vigorously off it since then.  It only a matter of time before that rally gets capped as well.  Platinum is having it's usual mini move in the same direction---but palladium is trading back at almost unchanged.

Net gold volume has exploded to just about 31,000 contracts---and silver's net volume is now sitting at 9,000 contracts.  These are big numbers.  The technical funds traders are selling longs and adding to their short positions in both metals, while "da boyz" in the Commercial category do the opposite.  Please re-read Ted Butler's quote about this, that's posted above.  The dollar index is still heading lower---and is currently down 22 basis points---and back below the 94.00 mark.

Everything appears to be unfolding as I suggested it might just a few paragraphs ago---and the real proof will come with the lay of the land at the COMEX close today.  Of course we get the 1-week delayed job numbers tomorrow at 8:30 a.m. EDT and, for the most part, "da boyz" have not made it a happy moment for the precious metals.

That's all I have for today, which is more than enough---and I'll see you here tomorrow.

Ed Steer

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