Saturday, May 16: Today in Gold and Silver

NEW YORK ( TheStreet) -- The gold price weakened a bit in Far East and early London trading on their Friday, with the low tick coming shortly after 11 a.m. BST.  It traded flat for a couple of hours---and began to rally shortly before the COMEX open.  And like what happened on Wednesday and Thursday, the price got stepped on shortly after the London p.m. gold fix.  The high tick of the day, such as it was, occurred minutes after the 1:30 p.m. EDT close---and the price didn't do much after that.

The low and high ticks were reported by the CME Group as $1,210.60 spot and $1,225.80 spot in the June contract.

Gold finished the Friday session at $1,223.50 spot, up $2.10 from Thursday's close.  Net volume was fairly decent at 117,000 contracts.

As is almost always the case, the silver price traded in lock step with gold, complete with the tap-down in price shortly after the London p.m. gold fix was in.

The low and high ticks were recorded as $17.205 and $17.585 in the July contract.

Silver closed yesterday at $17.495 spot, up a nickel on the day.  Net volume was very chunky at 45,500 contracts.

Ditto for platinum, which finished the Friday session at $1,166 spot, up 9 bucks from Thursday's close.  You'll note that the rally in that metal was stopped cold minutes after the London p.m. gold fix as well.

The palladium price didn't do a thing until 9 a.m. in New York---and then away it went to the upside.  The spike high at 1 p.m. EDT got hammered flat---and it traded sideways from there.  Palladium finished the day at $791 spot, up 11 dollars.

The dollar index closed very late on Thursday afternoon in New York at 93.39---and except for a 20 basis point up/down spike in the two hours proceeding the London open, it didn't do a thing in Far East trading on their Friday.  But the London trading session was another story.  It rallied from 93.39 up to its 94.00 high by 8 a.m. in New York---and hung in there for exactly one hour before heading lower.  Most of the decline was in minutes before London closed at 11 a.m. EDT---and it chopped slightly lower from there.  The 93.14 low tick came at 3 p.m. in New York.  The index finished down 13 basis points at 93.26---but had one hell of an intraday ride.

Of course the precious metals were trading [or were allowed to trade] like none of these currency machinations were going on at all.

Here's the 1-year dollar chart just so you can keep track of the longer term.

The gold stocks opened down, but quickly rallied into positive territory by the p.m. gold fix.  Their highs came at gold's high, which was moments after the 1:30 p.m. COMEX close---and from there they slid back into the red---as the HUI finished down 0.56 percent, its second losing session in a row.  I mentioned in yesterday's column that I was "underwhelmed" by Thursday's HUI action---and I was alarmed by yesterday's close.

The silver equities followed a similar price path, but didn't finish in negative territory after the COMEX close---and Nick Laird's Intraday Silver Sentiment Index closed up 0.11 percent, which was basically unchanged.

Nick mentioned that gold was up 3 percent on the week---and silver was up 6.7 percent.  The HUI closed up 3 percent as well---and the Intraday Silver Sentiment Index finished higher by only 8.8 percent.  So far this precious metal rally has not impressed me.

The CME Daily Delivery Report showed that zero gold and 2 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.  JPMorgan stopped one of them for its own in-house account.

The CME Preliminary Report for the Friday trading session showed that gold open interest in May was unchanged at 141 contracts---and silver's May o.i. fell by 4 contracts to 340.

There were no reported changes in GLD yesterday, but much to my amazement, another 1,624,968 troy ounces were withdrawn from SLV.  Ted Butler said that it's obvious what has been happening over the last few days as these big withdrawals continue---and that is a large entity with very deep pockets is buying SLV shares and redeeming them immediately for physical metal.  Ditto for gold so far this month as well.

Since April 27 there has been over 11.5 million troy ounces of silver withdrawn from SLV.

Yesterday [May 15] was the cut-off for the the mid-month short position report for the folks over at shortsqueeze.com and, without doubt, there will be big increases in the short position in both GLD and SLV, as no metal has been deposited all week---and after the rallies we've seen since Wednesday, both are owed decent amounts.  Unfortunately, we won't see that report for about ten days---but when the numbers are posted, I'll have them for you.

For the fourth day in a row there was no sales report from the U.S. Mint.  The one we get on Monday should be impressive, especially in silver eagles.

Month-to-date the mint has sold 8,000 troy ounces of gold eagles---3,500 one-ounce 24K gold buffaloes---and 1,058,500 silver eagles.  The silver/gold sales ratio based on these numbers works out to 92 to 1.

Thursday was another day where there was little in/out activity in gold and silver at the COMEX-approved depositories.  In gold, only 4,032 troy ounces were received---and 16 kilobars [514.400 troy ounces] were shipped out.  In silver, there was 7,971 troy ounces received---and 100,990 ounces shipped out the door.  Most of the 'out' activity was at Canada's Scotiabank.

It was quite a bit busier at the COMEX-approved gold kilobar warehouses in Hong Kong on their Thursday, as 6,816 kilobars were received---and 5,275 kilobars were shipped out.  The link to that activity in troy ounces is here.

As I mentioned in yesterday's column, Friday's Commitment of Traders Report for positions held as of the close of trading on Tuesday, was already "yesterday's news" before it was posted on the CFTC's website on Friday afternoon.

In a nutshell, the Commercial net short positions in both gold and silver increased by small amounts.  In silver it was 853 contracts, or 4.27 million troy ounces---and in gold it was 3,340 contracts, or 381,100 troy ounces of the stuff.

Under the hood in the Disaggregated COT Report, it was almost all the technical funds in the Managed Money category covering shorts and going long---and JPMorgan et al in the Commercial category doing the opposite.  Not a gold or silver producer, or end user of these products in sight.

Ted mentioned that the Big 4 traders in silver increased their net short position by 1,200 contracts, but he's rather reluctant to pin it all of JPMorgan at the moment---and will probably reserve judgement until next Friday's COT Report.

Of course, once the cut-off for Friday's COT Report was past on Tuesday, the price fireworks really started---and none of that big price action is in this latest report.  That will be hidden until next Friday's report.  And as I said yesterday---and many times over the past ten years---the fact that all this happened after Tuesday's cut-off was no accident.  It has occurred countless times in the past when "da boyz" want to hide what they're doing from the public's prying eyes for as long as possible.

Here's Nick's now-famous " Days of World Production to Cover COMEX Short Positions" for the Big 4 and Big 8 short holders for all physical commodities updated with yesterday's COT data.

Nick Laird was kind enough to send around the chart showing the withdrawals from the Shanghai Gold Exchange for the week ending May 7---and it showed that 37.093 tonnes were taken out during that reporting week.  In his covering e-mail Nick made mention of the fact that " The weekly average withdrawal since the start of 2013 is 43.405 tonnes."

I'm happy to report that I don't have all that many stories for you today---but I do have a decent number that I've been saving for today's column, so I hope you can find the time for them.

¤ The Wrap

Every week I usually report that the interplay between the managed money traders and the commercials makes up the bulk, if not all of the net change in positioning. Almost always, when the managed money traders buy, prices have advanced during the reporting week and fall when these traders are net sellers. Some might say this is coincidental to price movements, just like some used to say the sun orbits the earth. The fact is that managed money buying causes prices to rise and managed money selling causes prices to fall. Leaving aside that the commercials control short term prices moves through HFT and spoofing and therefore control managed money buying and selling, it is wrong that managed money speculators are causing prices to move. In fact, it’s more than wrong; it’s illegal according to commodity and interstate commerce law.

On this specific issue, the three main culprits behind the silver manipulation, JPMorgan, the CME and the CFTC are silent.  There’s a good reason for their silence – there is no legitimate explanation that can refute that the main, if not sole influence on silver pricing is COMEX positioning between managed money traders and the bookmakers we call commercials. - Silver analyst Ted Butler: 13 May 2015

Yesterday brought the sad new of the passing of guitar and blues legend B.B. King---and many thoughtful readers sent stories and musical suggestions to honour him.  I'm happy to do so.  The first is linked here---and the second one is here.

Last week's classical "blast from the past" was Antonín Dvořák's " Serenade for Winds"---and this week I thought I'd post his equally famous " Serenade for Strings in  E major Op. 22".  He composed the entire work in just two weeks in May of 1875---so the work is exactly 140 years old this month.  Happy anniversary!  The link is here.

Excuse me for thinking this, but the price action of the last couple of days has all the hallmarks of a top [hopefully temporary] in these rallies.  In addition to the cooling off in the precious metal prices themselves, their associated equities have not exactly been roaring to the upside.  The charts below look toppy to me, as does the HUI.

Not that I want to hedge my comments above, but the RSI traces in these metals [or the stocks] certainly hasn't reached the overbought stage by any stretch of the imagination---and there's no reason that they couldn't continue to rally for a while longer.

But unless JPMorgan et al have changed their spots since trading began on Wednesday, these rallies look almost done to me, as the deterioration in he COMEX short positions in both gold and silver has most likely been massive.

I'm being coy about all this because of something that Ted Butler and I have discussed on numerous occasions over the last decade or so---and that's how JPMorgan might slide out from underneath their silver short position in the COMEX futures market and leave the rest of the shorts  [mostly Canada's Scotiabank] to burn in hell as the prices blew sky high.  That could only occur if JPMorgan could arrange [privately/quietly?] with the raptors [the Commercial traders other than the Big 8] who are long the COMEX silver market, to sell their long positions to JPM on the sly.

Could they do it? Beats the hell out of me.  But if the attempt were going to be made, a rally such as we've had since the COT cut-off on Tuesday would be the perfect cover.  Both Ted and I were hoping that JPMorgan would have tried sooner, but they obviously haven't.

Have they done it now?  I don't know, but the possibility, however small, does exist.  I wouldn't bet any money it, but its something that Ted has spoken about before in past commentaries---and I'm mentioning it here again today.

I have no reason to doubt Ted's supposition that JPMorgan [and maybe others] have amassed 350+ million troy ounces of physical silver over that past four years.  And I'm still looking for any explanation as to why a very deep-pocketed buyer would be buying truckloads of SLV and GLD shares in the last week or so---and redeeming them for metal.  In the case of silver, that's 11.5 million troy ounces in less than 3 weeks---and almost 600,000 ounces of gold since the first of May.

Then there's the matter of all the silver deliveries that JPMorgan has taken for its in-house [proprietary] trading account since the beginning of March.

Something stinks to high heaven here---and one wonders how long this will last before there's some sort of resolution.  It's coming at some point, but nobody knows how big and bad it's going to be when it does arrive.

I look forward to next week's trading action with great interest---starting with the Sunday evening open in New York.

I'm done for the day---and the week.

See on Tuesday.

Ed Steer

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