Tuesday, May 19: Today in Gold and Silver

NEW YORK ( TheStreet) -- The gold price didn't do much in most of Far East trading on their Monday.  There was a bit of spike starting shortly before 2 p.m. Hong Kong time, but that was capped shortly before the London open---and it chopped lower for the remainder of the Monday session both in London and New York.

For the most part, the gold price traded within a ten dollar price range, so the highs and lows aren't worth my time to look up.

Gold finished the Monday session in New York at $1,225.80 spot, up $2.30 from Friday's close.  Net volume was 101,000 contracts, with over a third of that coming before the London open, as it took "da boyz" a fair amount of paper to keep prices in line in Far East trading.

It was more or less the same story in silver, although once it rallied, there didn't appear that any attempt was made to push prices lower in New York---and prices chopped sideways in a fairly broad range for the entire Monday session.

The low and high ticks were recorded by the CME Group as $17.475 and $17.775 in the July contracts.

Silver finished the day at $17.68 spot, up 18.5 cents from Friday.  Net volume was higher than I would like to see at 34,500 contracts.

Platinum chopped sideways until COMEX trading began---and then it tacked on 10 bucks by 11 a.m. EDT before trading sideways into the close.  Platinum finished the day $1,175 spot, up 9 dollars.

It was much the same for palladium, except its rally at the COMEX open didn't last long, hitting its low tick at 4 p.m. EDT in electronic trading in New York, closing at $785 spot, down 6 bucks from Friday.

The dollar index closed late on Friday afternoon in New York at 93.26---and began rallying almost the moment that trading began in New York on Sunday evening.  The index chopped higher, hitting its 94.27 high tick around 3 p.m. EDT.  It traded flat from there into the close.  The index finished the day at 94.16---up 90 basis points from Friday's close.

Here's the 6-month dollar index showing yesterday's gain in relation to the big sell-off that's been underway since mid March.  I would expect that a major counter-trend rally in the USD index would not help the precious metal prices, or their respective equities.  Although their performance in light of that rally was fairly impressive yesterday, but I doubt it will last.

The gold shares opened in positive territory, but traded with no enthusiasm.  The high tick came precisely at 11 a.m. EDT---and they chopped lower until around 2:45 p.m. before trading sideways into the close.  For the third day in a row the gold stocks finished down on the day, this time by 0.40 percent.

Once again the silver equities turned in a better performance than their golden brethren.  Their high came around 11:15 a.m. before they chopped lower until shortly after 3 p.m. EDT---and from there they rallied a hair into the close.  Nick Laird's Intraday Silver Sentiment Index closed up 0.55 percent.

The CME Daily Delivery Report showed that zero gold and 124 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday.  The surprise short/issuer was ABN Amro with 109 contracts, with Jefferies in very distant second place with 10 contracts.  Not surprisingly, JPMorgan was the biggest long/stopper with 67 contracts---33 for its client account---and 34 contracts for its own account.  HSBC USA stopped 34 contracts.  The link to yesterday's Issuers and Stoppers Report is here---and it's worth a quick look.

The CME Preliminary Report for the Monday trading session showed that for the second day in a row there was no change in gold's open interest, which still stands at 141 contracts left in the May delivery month.  Silver's May o.i. actually rose by 84 contracts---and now sits at 424 contracts, minus the 124 mentioned in the previous paragraph.

There was another big withdrawal from GLD yesterday.  This time an authorized participant removed 182,174 troy ounces.  Since May 1, there has been 755,776 troy ounces removed from GLD.   With the current gold rally about four days old, one would assume that gold should be pouring into GLD, but that's certainly not the case at the moment.  Ditto for silver.  And as of 6:40 p.m. EDT yesterday evening, there were no reported changes in SLV.

But when I checked back just before 2 a.m. EDT this morning, I saw that---surprise, surprise---there was another chunky withdrawal from SLV as well.  This time it was 1,194,813 troy ounces of the stuff.  That makes 5.1 million ounces withdrawn in the last three business days---and a stunning 12.7 million ounces since April 27.  By whom---and for what reason?

Why on God's green earth isn't anybody except Ted Butler and myself talking about this???  Gold and silver 'analysts' of all stripes should be screaming about this from the rooftops.  Please make sure you read Ted's quote in The Wrap section below that I stole from his Saturday's column.

There was a sales report from the U.S. Mint yesterday.  They sold 500 troy ounces of gold eagles---1,000 one-ounce 24K gold buffaloes---and 250,000 silver eagles. 

There wasn't a lot of gold movement at the COMEX-approved depositories on Friday.  Only 4,500 troy ounces were reported received---and nothing was shipped out.

It was a pretty decent day in silver, as 300,442 troy ounces were shipped in---and 600,439 troy ounces were shipped out the door.  Most of the 'in' activity was at the CNT Depository---and the 'out' movement all came from Canada's Scotiabank.  The link to that action is here.

It was another busy day over a the gold kilobar COMEX-approved depositories in Hong Kong on their Friday---and both depositories were involved.  At Brink's, Inc. there were 7,110 kilobars received---and 4,278 were shipped out.  At the Malca-Amit Far East Ltd depository there were 630 kilobars received---and nothing shipped out.  The link to that activity in troy ounces is here.

I have the usual number of stories for you today---and I hope you'll find a few that interest you.

¤ The Wrap

Once again, the standout physical development [last week] was what occurred in the big silver ETF, SLV. After a one million oz deposit to start the week, close to 4.5 million oz were withdrawn from the trust (on Thursday and Friday). Particularly in light of the very high trading volume, mostly on Wednesday but extended into Thursday, the two days in which silver prices advanced the most, the big withdrawals must be considered shocking. I’ve been using the word counterintuitive to describe the unusual metal withdrawals from SLV on price strength and deposits on price weakness for a number of years now, but once again, that description is inadequate. Interestingly, the shocking two day withdrawal in SLV connects many things I’ve discussed recently, including my speculation that JPMorgan has amassed a mountain of physical silver.

Because of the unique open-ended feature of SLV (and GLD), when there is net new investor buying in SLV that causes the price to rise, the prospectus dictates that actual new metal must be deposited that day to match the amount of new net investor buying of shares. (Short selling may frustrate and prevent the deposit of new metal, but wouldn’t result in a withdrawal of metal.) To keep it simple – net new investor buying in SLV causes the price to rise and requires the appropriate amount of new metal be deposited to back up the newly created shares. If there wasn’t net new investor buying to begin with, it is very unlikely that prices would have risen, particularly on a repeated basis (as has been the case in SLV for the past few years). Therefore, even though I am the only one raising this issue, any observer of the silver scene should be asking out loud – how the heck can there be a massive withdrawal of metal in SLV on a high volume price advance.

Who would undertake such an unusual trading approach of buying shares in SLV and immediately converting those shares into metal and why? The only explanation I can come up with is a large entity seeking to accumulate silver without the accumulation becoming widely known. If the newly purchased shares of SLV weren’t quickly converted into metal then it would quickly be revealed by SEC reporting requirements for acknowledging large share ownership (over 5%). Leave it in the form of accumulated shares and the buyer would soon need to reveal ownership; convert the accumulated shares to metal and no revelation is required.  I continue to believe that the large buyer of shares of SLV which is quickly converting those shares into metal is JPMorgan. - Silver analyst Ted Butler: 15 May 2015

Monday was a nothing sort of trading day.  It showed potential in the Far East, but as I mentioned at the top of this column, the volume before the London open was pretty heavy, so JPMorgan et al used whatever COMEX paper necessary to put out those particular fires---and that was more or less it for the remainder of the day, as volume was pretty light after that.

I was somewhat relieved to see that the precious metals didn't get smoked in the face of that big dollar rally yesterday, but that's just more proof that precious metal prices are totally controlled by what's going on in COMEX paper trading---and not in the real world.  If all markets were allowed to trade freely, then the movements in the currencies would make a difference.  Under current circumstances where " there are no markets anymore, or only interventions"---it matters not.

Here are the 6-month charts for all four precious metals.

As I said in my Saturday column---and I saw nothing in yesterday's trading action to change my mind---it's my opinion that the current rallies in all four precious metals are done for the moment.  The only thing I don't know is how much backing and filling we'll be doing going forward, or how long "da boyz" might take to do it.

However, as I also pointed out on the weekend, we're nowhere near being overbought [except silver], but in a managed market such technical indicators are of dubious value, as these charts are all painted by JPMorgan et al---and they can [and do] paint whatever price charts they want.

And as I write this paragraph, the London open is about five minutes away.  Gold was under some selling pressure in Far East trading---and was down about six bucks at one point.  Not surprisingly, silver got it in the neck once again---and was down about 30 cents around 2:30 p.m. Hong Kong time on their Tuesday afternoon.  Platinum suffered the same fate---and palladium had a down/up move---and is back to almost unchanged.

Net gold volume is about 16,000 contracts, which is quite a bit for this time of day.  For a change, there's a decent amount of roll-over activity, but with only a week left to go before the big traders have to be out of the June contract on the COMEX, this should not be a surprise.  Silver's volume is getting up there at 7,000 contracts---and it's all of the HFT variety.

The dollar index has been chopping around all through Far East trading---and with London now open a couple of minutes, it's up 12 basis points.

Today, at the close of COMEX trading, is the cut-off for this Friday's Commitment of Traders Report and, unless there's been some jiggery-pokery going on under the surface that has been well hidden, I expect the report to be butt-ass ugly.  Of course today's price price/volume action should be included.  But as you already know, dear reader, not all of it may be reported in a timely manner---especially if it's a wild trading session.

And as I fire today's column off to Stowe, Vermont at 5:15 a.m. EDT, I see that the tiny dollar rally that began shortly before the London open has really caught fire---and is currently up 75 basis points---and appears to have leveled off [at least for the moment] just under the 95.00 mark.

In the face of that, all four precious metals got sold down some more.  At the moment, gold is down less than 3 bucks now---and well off its low.  Ditto for silver which is down 'only' 26 cents the ounce.  Platinum is lower by 10 bucks---and palladium by 2 dollars.

Gold's net volume is a bit over 30,000 contracts at this point---and silver's net volume is around 12,500 contracts.  No doubt the technical funds in the Managed Money category are pitching their newly-acquired long contracts from last week---and maybe going short a bit as well.  JPMorgan et al are, as always, on the other side of those trades.

As for the rest of the Tuesday session, I haven't the foggiest.  However, I'll be more than surprised if the bulk of the price/volume action doesn't occur during the COMEX trading session in New York.

That's all I have for today, which is more than enough---and nothing will surprise me when I check the charts later this morning.

See you tomorrow.

Ed Steer

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