Wednesday, May 27: Today in Gold and Silver

NEW YORK ( TheStreet) -- The gold price chopped quietly lower in Far East trading on their Tuesday---and the HFT boyz and their algorithms/spoofing showed up around 2:15 p.m. Hong Kong time.  Once they were done, the price drifted quietly lower until the London morning gold fix was done at 10:30 a.m. BST.  It rallied a hair into the COMEX open, but JPMorgan et al were laying in wait once again---and within thirty-five minutes had gold down another ten bucks to its low tick of the day.  The gold price didn't do much after that.

The high and low ticks were reported by the CME Group as $1,108.20 and $1,184.80 in the June contract.

Gold closed on Tuesday in New York at $1,187.80 spot, down $18.10 from Monday's close.  Not surprisingly, gross volume was sky-high at 345,000 contracts, but it only netted out to about 142,000 contracts.  And once you take out the 21,000 net contracts from Monday, net volume yesterday wasn't overly heavy at 121,000 contracts.  On a $20 engineered price decline, that's not a lot.  I'll have more on this in The Wrap.

Here's the 5-minute gold tick chart courtesy of Brad Robertson.  Note the lack of volume on the engineered price decline in Hong Kong vs. the volume on the engineered price decline at the COMEX open.  The grey line is midnight EDT---and you need to add two hours to this chart for EDT, as it's scaled for Denver time.  The ' click to enlarge' feature is a must.

"Da boyz" laid the same lumber on silver---and the only real difference was that the metal rallied sharply off its 9 a.m. EDT low---and that was summarily dealt with.  From around 12:30 onward it traded pretty flat.

The high and low tick in that precious metal was recorded as $17.18 and $16.645 in the July contract.

Silver finished the Tuesday session at $16.72 spot, down 35.5 cents from Monday's close.  Net volume was pretty decent at 45,000 contracts.

Platinum got hammered as well---and in the same way---closing at $1,123 spot, down 25 bucks on the day.

Palladium was also affected, but mostly as an afterthought, as it closed down 8 dollars at $778 spot.

The dollar index closed late on Monday afternoon in New York at 96.37---and began to rally almost the moment that trading began in the Far East on the their Tuesday morning.  It was above by the 97.00 mark by the London open---and dipped to 96.82 at exactly 8:00 a.m. EDT.  From there it rallied up to about 97.35 just after 3 p.m. before sliding a bit into the close.  The dollar index closed on Tuesday at 97.22---which was up 85 basis points on the day.  Here's the 2-day chart so you can see the complete move over the last twenty-four hours.

Here's the 6-month dollar chart so you can see the progress of this counter-trend rally.

The gold stocks gapped down over 2 percent at the open---and never looked back.  The low tick came around 1:45 p.m. in New York---and they barely crawled off the floor after that, as the HUI closed down 3.71 percent.

The silver equities turned in a very similar performance---right down to the timing of the low tick.  Nick Laird's Intraday Silver Sentiment Index closed down 3.80 percent.

The CME Daily Delivery Report showed that only 1 gold and 66 silver contracts were posted for delivery on Thursday.  The big short/issuer in silver was the Japanese bank Mizuho.  HSBC USA stopped 23 contracts---and JPMorgan stopped 38 contracts---15 for clients, and 23 for its own account.  The link to yesterday's Issuers and Stoppers Report is here.

The CME Preliminary Report for the Tuesday trading session showed that gold open interest in May dropped another 6 contracts, leaving 76 open---minus 1 whole contract mentioned in the previous paragraph.  Silver May o.i. fell by 35 contracts down to 254---minus the 66 above.

As I mentioned in yesterday's column, I was expecting all the remaining May open interest to be posted for delivery in the above Preliminary Report, but they weren't.  That leaves the rest to be delivered on Friday---First Notice Day---and one way or another May's remaining open interest in gold and silver has to be zero in tomorrow's report.  They have to be delivered into---or sold.  There are no other options.  So we wait.

There was movement in both GLD and SLV yesterday.  In GLD, an authorized participant deposited a tiny 19,181 troy ounces.  In SLV an authorized participant withdrew 1,003,544 troy ounces.

There was no sales report from the U.S. Mint yesterday---and that was a bit of a surprise.  It appears that Ted was right.  JPMorgan, the big buyer, has stepped away from the table this month, probably for the same reason they did last year---and that was because they knew they were about to hammer the silver price into the dirt, so why buy expensive when you can buy cheaper later at a price they set themselves.  What a racket!

Of course the other reason Ted gave was that they may have stopped buying silver eagles altogether, but that fact won't be knowable for months, either.  So we wait.

There was little in/out activity in gold at the COMEX-approved depositories on Monday---3,500 troy ounces in---and 101 troy ounces out.  There was little activity in silver either, as only 19,496 ounce were received---and 5,192 shipped out the door.

Over at the COMEX-approved gold kilo depositories in Hong Kong on their Monday, they received 1,866 kilobars and shipped out 3,977 kilobars.  All of the activity was at the Brink's, Inc. warehouse---and the link to that action, in troy ounces, is here.

I don't have all that many stories again today---and I'll leave the final edit up to you.

¤ The Wrap

It occurred to me that it has come down to JPMorgan and other big banks being found guilty of manipulation in most of the markets they deal in, except for a very few; even though their behavior was the same in all markets. It took me a while to figure out why the banks could be found guilty in most markets, but not in others. The difference is that in the markets where the banks were found guilty were all markets where the chance of pile-on civil litigation was virtually non-existent.

OK, the banks conspired and colluded in LIBOR and foreign exchange, for instance, but who was damaged was very hard to prove and this virtually eliminated waves of follow on civil litigation. Plus, there were no strong public allegations of manipulation beforehand that I am aware of – just a sudden finding that the banks did something wrong and they agreed to settle. It was almost like the authorities and banks agreed that something was done wrong to throw everyone off the real trail.

In contrast, in the markets where the banks’ manipulation is clear, like silver, gold, copper and elsewhere, neither the Justice Department nor the CFTC would dare bring charges for fear of the avalanche of civil lawsuits that would follow. Let’s face it, it would be pretty easy for many thousands of market participants and investors to prove they were damaged by the silver manipulation were the regulators to level charges against the banks along the lines of what I write about weekly. In addition to subjecting JPMorgan and the CME to endless and unlimited litigation, it would necessarily end the manipulation in an instant and send silver prices to the heavens. - Silver analyst Ted Butler: 23 May 2015

There should be no doubt in your mind as to what's going on---and who is behind it.  JPMorgan et al took a decent chunk out of all four precious metals yesterday, but the thing that didn't impress me was the lack of net volume, something I mentioned at the top of today's column.  With the 50-day moving average taken out to the down-side in gold, I was expecting much more than we got.  Silver didn't take out any of its moving averages, but I was still expecting higher net volume there as well.  This does not bode well for precious metal prices going forward.

Here are the 6-month charts for all four precious metals so you can see the slices that "da boyz" took off the prices yesterday.

As to how bad it could get---it is, as Ted Butler keeps pounding into me, the number of contracts---not the price.  And based on yesterday's volume, there are still a boatload of long contracts left in the Managed Money category that have to puked up---and that doesn't include how far the powers-that-be can get these same traders to go on the short side.

As to how long this might take, as I said yesterday, it will either be death by a thousand cuts, or a couple of massive slices.  Their usual procedure is to slice thinly over a long period time, but make no mistake, the process started yesterday.  Just look at the 6-month gold and silver charts above and take a look at the length of time between the tops and the bottoms.

Of course the critical 50-day moving averages are much closer, and we're already through gold's, but with the Commitment of Traders numbers what they are at the moment, JPMorgan et al could engineer prices much, much lower.  Just eye-balling the above charts, I'm guessing that it could be as bad as $40 in gold---and $1.25 in silver.  Maybe more.  Ted was surprised that they didn't go after the precious metals even harder than they did yesterday, but I guess 'thinner slices' are back in vogue.

So we wait.

And as I type this paragraph the London open is just under ten minutes away, the gold price is crawling higher, silver is about unchanged, platinum is up a few bucks---and palladium is up six.  Net gold volume is very light at the moment, a bit under 10,000 contracts---and silver's net volume is around 3,300 contracts.  All is quiet at the moment, but this state of affairs won't last.

The dollar index topped out in mid-morning trading Hong Kong time---and is currently down 26 basis points.

As I said in Saturday's column---and Tuesday's as well---with all futures traders [except those standing for delivery] having to be out of the June contract by the close of COMEX trading tomorrow, roll-over volumes will be huge---and they have been.  But its the net volumes I'm not happy with.

Yesterday was the cut-off for this Friday's COT Report---and because of the high volume, most of which occurred during the New York trading session, it's doubtful that all of Tuesday's data will be reported in a timely manner.

And as I send today's column out the door at 5:20 a.m. EDT, I note that gold and silver are trading very flat---and basically unchanged. Platinum and palladium are up a bit.  The dollar index is down 20 basis points.

Not surprisingly, gold's gross volume is very high, as all the large traders have to be out by the end of the COMEX trading session today. But net volume is just under 14,000 contracts, which is very light. Silver's net volume is just under 5,000 contracts.  Nothing to see here.

It's obvious that the HFT boyz and their algorithms are not around at the moment---and it's entirely possible that they may not put in an appearance again until next week, when the June contract is off the board.  However, I wouldn't bet the ranch on that.

Whichever way it turns out, we're not out of the woods yet by any stretch of the imagination.

And on that cheery note, I'm off to bed---and I'll see you here tomorrow.

Ed Steer
This is an abbreviated version of Gold Smuggling in India Rises 900% to Record, from Ed Steer's Gold & Silver Daily. Sign-up to have to the complete market review delivered to your email inbox each morning for free.

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