Gold & Silver Daily

¤ Yesterday In Gold & Silver

The gold price was comatose until the HFT boyz showed up shortly after 9 a.m. Hong Kong time on their Thursday.  Then gold proceeded to chop sideways under the $1,300 spot price mark until the 9:30 a.m. EDT open of the equity markets---and at that point "da boyz" peeled some more off the price, with the low tick of the day coming minutes before 11:30 a.m. in New York.  It traded sideways from there into the 1:30 p.m. Comex close and then crawled higher during the entire duration of electronic trading.

The CME Group recorded the high and low ticks as  $1,305.60 and $1,287.50 in the August contract.

Gold closed the Thursday session at $1,293.90 spot, down $10.10 from Wednesday's close.  Not surprisingly, net volume was pretty decent at 139,000 contracts.

The silver price chart was similar, except the sell-off that began at 9:30 a.m. EDT was much more vicious---and the low tick didn't occur until minutes before 2 p.m. in electronic trading.  From there the price recovered a few pennies into the 5:15 p.m. electronic close.

The high and low ticks for silver were reported as $20.97 and $20.35 in the September contract.

Silver closed at $20.365 spot, down 54 cents on the day.  Volume, net of July and August, was just under 67,000 contracts.  But of the total volume, about 7,500 contracts was traded in December and March, so those may have been rolls out of the September contract.  It's a little early for doing that, but I suppose it is possible.  With or without the volume, it was a pretty busy trading day.

Platinum wasn't spared, either---and it closed down $15.  Palladium got a mini version of the same treatment, but managed to recover and only close down a buck.  Here are the charts.

The dollar index closed at 80.81 late on Wednesday afternoon---and chopped higher, with a 14 basis point down/up move thrown in between the London open and the London p.m. gold fix.  The index finished the Thursday session at 80.87---up 6 basis points on the day.

The gold stocks sold down right at the open---and chopped quietly lower for the remainder of the trading session, but rallied a hair in the last fifteen minutes of trading.  The HUI closed down 1.56%.

The silver equities followed an identical path, but sold off a bit more than the gold stocks.  By the end of the Thursday session, Nick Laird's Intraday Silver Sentiment Index closed down 1.89%.

The CME Daily Delivery Report drew a blank yesterday, as there were no gold or silver contracts posted for delivery within the Comex-approved depositories on Monday.

There was a fairly decent withdrawal from GLD yesterday, as an authorized participant withdrew 115,474 troy ounces---and as of 9:50 p.m. yesterday evening, there were no reported changes in SLV.  But when I edited today's column starting at 3:55 a.m. this morning, I noted that had updated their website and showed that an authorized participant had added 815,847 troy ounces of the stuff.

The good folks over at the Internet site updated their website with the new short positions in both SLV and GLD for mid July.  The increase in SLV's short position was only 7.41% or 1.41 million shares/troy ounces.  I was expecting a far bigger number than that.  I'm inclined to think that it's a reporting error---and I know Ted will have something to say about it when I talk to him later today.  I'll let you know what he says.  Anyway, the current short position in SLV as of July 15 now stands at 20,437,900 shares/troy ounces, or a bit over 635 metric tonnes.

The short position in GLD declined by a smallish 3.33%, or 50,600 troy ounces.  The current GLD short position [as of July 15] now stands at 1.47 million troy ounces, or just under 46 metric tonnes.

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

The gold movement at the Comex-approved depositories isn't worth commenting on, but it was another big day in silver, as 1,264,979 troy ounces were shipped out.  Nothing was reported received.  The silver came out of Canada's Scotiabank---and HSBC USA.  The link to that activity is here.

Once again I have a decent number of stories, most of them from Roy Stephens---and I hope there are some in the list below that you like.


¤ Critical Reads

U.S. new-home sales hit three-month low

The U.S. Commerce Department reported that sales of new single-family homes fell 8.1% in June to a seasonally adjusted annual rate of 406,000, with drops across the country.

June’s result missed expectations from economists polled by MarketWatch, who had forecast a rate of 475,000, compared with an originally estimated pace of 504,000 for May. On Thursday, the government reported a sizable downward revision to its May figure, estimating a pace of 442,000.

New-home sales in June were down 11.5% from a year earlier.

This article appeared on their website at 11:20 a.m. EDT on Thursday---and it's worth reading---and the chart is worth the trip all by itself.  I thank Roy Stephens for his first contribution to today's column.


Greenspan says bubbles can’t be stopped without ‘crunch’

Sitting in his office with a view of the Washington Monument in the distance, Greenspan is eager to share the insight distilled in his recent book, “The Map and the Territory,” due out in paperback this fall.

The interview has been edited for length and clarity.

MarketWatch: What is the biggest challenge facing the Fed?

Greenspan: How to unwind the huge increase in the size of its balance sheet with minimal impact. It is not going to be easy, and it is not obvious exactly how to do it.

MarketWatch: As the Fed is looking at the exit, do you think we can get through this without upsetting the economy?

Greenspan: I certainly hope so. I certainly think they will. But it is going to be difficult.

MarketWatch: Do you expect a sharp market reaction to the first hike?

Greenspan: Of course. Look what happened when the first indication of tapering occurred. Markets have always been sensitive. They reflect animal spirits.

I seem to remember Alan Greenspan saying that it was impossible to recognized a bubble when you were in one.  This 2-page interview showed up on the Internet site at 8:44 a.m. EDT yesterday---and it's the second story in a row from Roy Stephens.


David Stockman: C’mon Alan! Bubbles Are Caused By Central Bankers, Not “Human Nature”

Alan Greenspan just cannot give up the ghost. During his baleful 18-year reign, the Fed was turned into a serial bubble machine—and thereby became a clear and present danger to honest free market capitalism and an enemy of the 99% who do not benefit from the Wall Street casino and the vast inflation of financial assets which it has enabled.  His legacy is a toxically financialized economy that has extracted huge windfall rents from main street, and left it burdened with overwhelming debts and sharply reduced capacity for gains in real living standards and breadwinner jobs.

Yet after all this time Greenspan still insists on blaming the people for the economic and financial havoc that he engendered from his perch in the Eccles Building. Indeed, posturing himself as some kind of latter day monetary Calvinist, he made it crystal clear in yesterday’s interview that the blame cannot be placed at his feet where it belongs: "I have come to the conclusion that bubbles, as I noted, are a function of human nature."

Stockman rips Greenspan a new one, but Greenspan's legacy, if you wish to dignify it with that name, is a target-rich environment---and the interview in the previous story was like saying "sic 'em" to a dog---and David jumped right in.  This commentary showed up on his website yesterday---and it's the third contribution of the day from Roy Stephens.


M&M's, Snickers maker to raise chocolate prices 7 percent

Mars Chocolate North America, the maker of M&M's and Snickers, said on Wednesday that it will raise its prices by an average of 7 percent "to offset rising costs," its first increase in three years.

The price hike by Mars, which did not provide an effective date, follows Hershey Co, the No. 1 candy maker in the United States, which on July 15 raised its chocolate prices about 8 percent due to soaring commodity costs.

"In the three years since our last price increase, in March 2011, we have invested significantly in the category and have experienced a dramatic increase in our costs of doing business," a spokesperson said in an email to Reuters.

The cost of cocoa, a key ingredient in chocolate, has seen a meteoric rise in the past year, having climbed nearly 50 percent to a three-year high on Wednesday at $3,204 per tonne on ICE Futures. U.S. Dairy prices have also soared.

This short article put in an appearance on the Internet site at 3:50 p.m. Central Daylight Time on Wednesday---and I found it embedded in yesterday's edition of the King Report.


600 million Apple devices contain secret back doors, researcher claims

A security researcher considered to be among the foremost experts in his field says that more than a half-billion mobile devices running Apple’s latest iOS operating system contain secret backdoors.

Jonathan Zdziarski, also known by his online alias “NerveGas,” told the audience attending his Friday morning presentation at the Hackers on Planet Earth conference in New York City that around 600 million Apple devices, including iPhones and tablets, contain hidden features that allow data to be surreptitiously slurped from those devices.

During Zdziarski’s HOPE presentation, “Identifying Back doors, Attack Points and Surveillance Mechanisms in iOS Devices,” the researcher revealed that several undocumented forensic services are installed on every new iPhone and iPad, making it easier that ever for a third-party to pull data from those devices in order to compromise a target and take hold of their personal information, including pictures, text messages, voice recordings and more.

This Russia Today article showed up on their Internet site at 8:08 p.m. on Wednesday evening Moscow time---and it's another offering from Roy Stephens.


Stalled recovery leaves Europe defenceless against economic shock from Russia

Europe's economic recovery has stalled. The EMU policy elites took a fateful gamble that global growth alone would lift the eurozone off the reefs, without the need for serious monetary stimulus or a reflation package to ensure take-off velocity.

Their strategy has failed. The Bundesbank says German growth may have slumped to zero in the second quarter. French industrial output has fallen for three months in a row. French business surveys point to an outright contraction of GDP, with a high risk of a triple-dip recession.

Stagnation is automatically causing debt ratios to spiral upwards yet again across a large part of the currency bloc. The situation is doubly delicate since the European Central Bank is no longer able to serve as a lender-of last resort for Italy, Portugal and Spain.

This Ambrose Evans-Pritchard offering put in an appearance on the Internet site at 8:59 p.m. on Wednesday evening---and it's definitely worth reading.  It's another contribution of the day from Roy Stephens.


Cameron claims export licenses allowing U.K. arms sales to Russia don’t breach embargo

UK Prime Minister David Cameron says Britain has not breached an embargo by selling military equipment to Russia, following MP demands to clarify the government’s position on UK-Russian arms deals.

The embargo was enacted “with immediate effect” on March 18 by then-Foreign Secretary William Hague.

Heated criticism of British arms deals with Russia emerged after a group of MPs revealed over 200 licenses allowing the sale of British military equipment to the Russian Federation. These revelations surfaced in a report published on Wednesday, conducted by four separate House of Commons committees.

The Committee on Arms Export Controls’ hard-hitting review contradicted a public statement by David Cameron on July 21. The Prime Minister had indicated the government had enforced an absolute arms embargo against Russia.

The meaning of the word hypocrisy is here, dear reader.  This Russia Today story appeared on their website at 3:04 p.m. Moscow time on their Thursday afternoon---7:04 a.m. in New York.  I thank Roy Stephens for finding it for us.


Putin cronies get a week to pull their cash out of Britain as E.U. drags its feet

Russian oligarchs who are close to Vladimir Putin have a week to get their cash out of Britain before sanctions are imposed, it has emerged.

European Union officials started on Tuesday to prepare the list of businessmen and Moscow officials who will be targeted by the sanctions.

Philip Hammond, the Foreign Secretary, has made clear the Britain’s desperation to take action at those close to Mr Putin’s regime, saying "the cronies of Mr Putin and his clique in the Kremlin are the people who have to bear the pressure".

However, British sources disclosed that it will not be until the end of the month that all EU countries will have prepared their lists of individuals to be hit with the sanctions.

This article appeared on The Telegraph's website at 7:14 p.m. BST on Wednesday afternoon---and it's another story I found in yesterday's edition of the King Report.


Germany begins spying on Britain and America for the first time since 1945

Chancellor Angela Merkel has ordered her counter-espionage services to begin surveillance of British and American intelligence gathering in Germany for the first time since 1945 in response to a series of U.S. spy scandals which have badly soured relations between Berlin and Washington.

The Süddeutsche Zeitung and two-state funded German TV channels, WDR and NDR, quoted an unnamed Berlin government source who said Ms Merkel’s Chancellery and her interior and foreign ministries had agreed to launch counter-espionage measures against Britain and the U.S. for the first time.

“Right now we need to send a strong signal,” the Süddeutsche Zeitung quoted the source as saying. The extraordinary measures are a direct response to a series of embarrassing U.S. and British spying scandals in Germany which began last year with revelations that the US National Security Agency had bugged Ms Merkel’s mobile phone.

The Chancellor protested on several occasions that she was “not amused” by the disclosures.

This news item, filed from Berlin, was posted on the Internet site on Thursday---and I thank South African reader B.V. for sending it our way.


European rights court condemns Poland for hosting secret CIA prisons

The European Court of Human Rights (ECtHR) has ruled that Poland violated an international treaty to protect human rights by hosting secret CIA prisons on its territory.

The Strasbourg-based court ruled that Poland had contravened articles of the European Convention on Human Rights (ECHR) that cover torture, the right to liberty, and the right to an effective remedy for victims of crime.

The case was filed by two men, Saudi-born Abu Zubaydah, and Saudi national Abd al-Rahim al-Nashiri, who charge they were taken to a secret CIA black site in a Polish forest and subjected to treatment which amounted to torture. The men said at a hearing in December they had been brought to Poland in December 2002 with the knowledge of the Polish authorities. Both are now detainees at the U.S.-run Guantanamo Bay prison camp in Cuba.

This news item showed up on the Russia Today website at 8:29 a.m. Thursday morning Moscow time---and it's courtesy of Roy Stephens.


Ukraine's Government Collapses, PM Yatsenyuk Resigns

As if Ukraine was not struggling through enough turmoil currently, Bloomberg reports that thefragile coalition government has collapsed after two parties quit. The UDAR and Svoboda parties said they’d leave the government and seek a snap parliamentary ballot. Tempers have been fraying recently as numerous brawls have broken out in parliament ahead of President Poroshenko's pledge to call elections this year. All we have to do now is find out who Washington would like to see in power?

The end result: Prime Minister Yatsenyuk just resigned. The big question now is what will the IMF do about the remaining tranches of its loans?

This story appeared on the Zero Hedge website at 3:36 p.m. EDT on Thursday---and I thank reader M.A. for finding it for us.  There was also a story about this on the RIA Novosti website.  It's headlined "Ukrainian Prime Minister Yatsenyuk Announces Resignation"---and it's from Roy Stephens.


Ukrainian crisis will not split Russia and Europe - Medvedev

The Russian Prime Minister has acknowledged that relations with the E.U. have become more complicated, but assured foreign trade representatives that the situation in Ukraine would not become a barrier between Russia and Europe.

Despite the current crisis and the sanctions against Russian citizens and companies, Moscow is interested in further development of mutually beneficial relations with European nations, Dmitry Medvedev said in a speech on Wednesday.

This is true that the Ukrainian crisis has complicated our relations with the European Union. Sometimes these events are called a dividing ridge between Europe’s past and future. But this is not true for our country – the EU will remain our major trade partner for a long time and we value our reputation as a reliable supplier,” the Russian Prime Minister stated.

At the same time, Medvedev emphasized that Russia would use all lawful means to protect its business interests in the current complicated conditions.

This is another article from the Russia Today website.  This one was posted there at 1:44 p.m. Moscow time on their Wednesday afternoon---and the stories from Roy just keep on coming.


State Dept. accuses Russia of firing artillery into Ukraine, refuses to provide any evidence

Government officials in the United States said Thursday that Russia is firing artillery across the border into Ukrainian territory, but refused to provide any evidence when grilled by an Associated Press reporter.

Matthew Lee, a veteran AP journalist known for his frequent showdowns with spokespeople during US State Department briefings, raised questions about the latest claims during Thursday’s scheduled press conference.

“We have new evidence that the Russians intend to deliver heavier and more powerful rocket launchers to the separatist forces in Ukraine, and have evidence that Russia is firing artillery from within Russia to attack Ukrainian military positions,” State Department spokeswoman Marie Harf told reporters during the Thursday afternoon briefing.

When asked by Lee for any evidence, however, Harf said the State Department is unwilling at this time to disclose further details because doing so could expose the secret intelligence operations involved in making such claims.

This Russia Today story showed up on their Internet site at 7:09 p.m Moscow time on Thursday evening---and I thank Roy Stephens once again.  It's worth reading.


Russian Investigators Pledge to Hold Ukraine's Avakov, Kolomoyskyi Responsible for Crimes

Ukrainian Interior Minister Arsen Avakov and oligarch Ihor Kolomoyskyi will bear responsibility for their crimes, Russian Investigative Committee chief Alexander Bastrykin said Thursday.

“Avakov and Kolomoyskyi aren’t going anywhere. Sooner or later they will be held accountable for their criminal responsibility according to the norms of international law,” Bastrykin said.

As events in Ukraine continue to unravel, Russia is launching criminal cases against both individuals. The Russian Investigative Committee identified 2,700 victims in the criminal cases in the Ukrainian crisis, accusing Ukrainian Interior Minister Arsen Avakov and Dnipropetrovsk Region Governor Ihor Kolomoyskyi of organizing unlawful massacres.

This brief RIA Novosti news item, filed from St. Petersburg, was posted on their Internet site at 2:25 p.m. Moscow time on Thursday afternoon.  It's also courtesy of Roy Stephens.


Sanctions 'wrong signal amid Kiev's punitive' military op - Ambassador

Russia’s ambassador to the UK hit out at planned sanctions on Moscow today, saying that they would be ‘illegal, unreasonable and counter productive’.

He said that sanctions would not serve the interests of he countries concerned, including the U.S., and would "trigger a long anticipated endgame of the present global crisis".

Speaking at a press conference in London on Friday, Alexander Yakovenko told the media that imposing sanctions would send the “wrong message to Kiev’s continued “punitive operation” in Eastern Ukraine.

He said there was ‘no evidence that Russia supplied weapons to separatists, adding that Ukraine and the West’s suggestions on who was responsible for the crash of flight MH17 ‘don’t hold water’.

This is another news item from the Russia Today website.  This one appeared on their Internet site at 2:30 p.m. Moscow time on Thursday---and is definitely worth reading, especially the contents of the second paragraph highlighted above.  One wonders what he meant by that?  I thank Richard Cashmore for bringing it to our attention.


$200 per barrel oil if Russia sanctions escalate: Oxford Economics

If the standoff with Russia and the West reaches a point where the E.U. has to completely cut trade with Russia, oil prices could soar above $200 per barrel, sparking a global economic crisis, says Adam Slater, senior economist at Oxford Economics.

Cutting off trade with Russia, the world’s second largest oil exporter, would create a shortage in global energy supplies, which would have spillover effects into Europe, Slater told The Guardian.

The E.U. buys 84 percent of Russian oil exports, and 76 percent of natural gas exports. About a quarter of European countries completely rely on Russia for gas or oil supplies.

As of yet, Russia hasn’t halted European gas supplied through politically unstable Ukraine, but this event itself could trigger “stage three”, or trade-specific sanctions.

This commentary put in an appearance on the Russia Today Internet site at 10:16 a.m. Moscow time on Wednesday morning---and it's the final contribution of the day from Roy Stephens, for which I thank him.


No One Wants Russia to Host the 2018 World Cup

Peter Beuth, interior minister of the German state of Hesse, has said, "If Putin doesn’t actively cooperate on clearing up the plane crash, the soccer World Cup in Russia in 2018 is unimaginable." Michael Fuchs, a senior leader in Angela Merkel's Christian Democrats party agreed, saying, "FIFA football association should think about whether Moscow is an appropriate host if it can’t even guarantee safe airways." 

This comes just days after six players of the Donetsk soccer team refused to leave France after a match and board a plane back to Ukraine.

The Netherlands Football Association is also suggesting the 2018 World Cup could be moved.

This is all getting rather childish---Russia guilty without a shred of evidence.  You'd think that grown men would know better, but obviously not.  This article appeared on Internet site at 3:21 p.m. EDT on Wednesday---and I thank reader Victor George for sharing it with us.


9 Things We Just Learned About Vladimir Putin's Life

A new article in Newsweek provides quite a bit of insight into Russian President Vladimir Putin's daily routine and private life.

The writer, Ben Judah, spent three years interviewing those close to Putin for his book "Fragile Empire: How Russia Fell In and Out of Love with Vladimir Putin."

Judah's insights into Putin's life come from former prime ministers, current ministers, regional governors, senior bureaucrats, close advisers, and personal aides to the president.

This very interesting commentary showed up on the Internet site at 11:18 a.m. EDT on Wednesday morning---and I thank Harry Grant for sending it our way.


Japan Trade Deficit Expands After Exports Unexpectedly Drop

Japan’s exports unexpectedly fell in June to swell the trade deficit more than forecast, dragging on an economy squeezed by a sales-tax increase in April.

Exports shrank 2 percent from a year earlier, the finance ministry said in Tokyo today, compared with a median forecast of a 1 percent rise in a Bloomberg News survey of 29 economists. Imports rose 8.4 percent to leave a shortfall of 822.2 billion yen ($8.1 billion), surpassing a 643 billion yen projection.

Exports fell 1.7 percent by volume, showing the yen’s 16 percent drop against the dollar since Prime Minister Shinzo Abe came to power in December 2012 has failed to boost outward shipments. They remain 23 percent lower by value than a peak in March 2008, in contrast to the U.S. where they grew 25 percent over the same period.

This short Bloomberg news item, filed from Tokyo, showed up on their website at 1:31 a.m. Denver time on Thursday morning---and it's the third and final story that I 'borrowed' from yesterday's edition of the King Report.


Four King World News blogs/audio interviews

1. Egon von Greyerz: "Shocking Charts Show That Gold is Set to Skyrocket"  2. William Kaye: "Marc Faber, Gold, Silver---and the Horrific Endgame For Markets"  3. Hugo Salinas Price: "Elites Plan to Control Humanity"  4. The audio interview is with Michael Pento

[Please direct any questions or comments about what is said in these interviews by either Eric King or his guests to them, and not to me. Thank you. - Ed]


Lawsuit charges that half of Chicago futures are illegal 'wash' trades

Since March 30 of this year when bestselling author, Michael Lewis, appeared on 60 Minutes to explain the findings of his latest book, Flash Boys, as “stock market’s rigged,” America has been learning some very uncomfortable truths about the tilted playing field against the public stock investor.

Throughout this time, no one has been more adamant than Terrence (Terry) Duffy, the Executive Chairman and President of the CME Group, which operates the largest futures exchange in the world in Chicago, that the charges made by Lewis about the stock market have nothing to do with his market. The futures markets are pristine, according to testimony Duffy gave before the U.S. Senate Agriculture Committee on May 13.

On Tuesday of this week, Duffy’s credibility and the honesty of the futures exchanges he runs came into serious question when lawyers for three traders filed a Second Amended Complaint in Federal Court against Duffy, the Chicago Mercantile Exchange, the Chicago Board of Trade and other individuals involved in leadership roles at the CME Group.

From watching and listening to what Mr. Duffy has had to say over the years, it has convinced me that he's not the sort of person that you would want to leave your pet, or a small child with, for any length of time.  This commentary was showed up on the website yesterday---and falls into the must read category.  I found it posted on the Internet site yesterday.


A Chinese Gold Standard?

While the 70th anniversary of D-Day last month received a lot of attention, another event, in July 1944 — the Bretton Woods conference, named for the mountain resort in New Hampshire where it was held — was perhaps even more significant in shaping the modern world. It not only led to the creation of what are now the International Monetary Fund and the World Bank, but it also confirmed the central position of the United States dollar in the international monetary system.

Why does this matter for us now? Just as America displaced Britain as the world’s pre-eminent economic power in the interwar period, so, too, the large debts and fiscal pressures confronting the West, and the rise of China and other economic powers, challenge us to think about the future of finance.

For most of the 19th century the British pound had been the world’s “reserve currency,” the currency in which trade and finance were denominated. “As sound as a pound” became a widely used expression. The pound was pegged to gold at a fixed rate of just under £4 per ounce.

At the outbreak of World War I, Britain abandoned the gold standard. You could no longer exchange pounds for gold. The gold standard was reintroduced in 1925, but this, as John Maynard Keynes observed, proved to be an economic mistake.

This opinion piece, filed from London, showed up on The New York Times website yesterday sometime---and I thank Phil Barlett for sending it our way.


Zero Hedge pokes excellent fun at Peter Hambro

The ongoing transition of gold price manipulation from conspiracy theory to conspiracy fact just escalated as Bloomberg reports, Peter Hambro, chairman of Russia's 2nd largest gold producer Petropavlovsk Plc, said he was "horrified" by the manipulation of the London fix given its importance to the industry. One wonders just how many of these individuals, involved in the manipulation, Hambro is dinner-party friends with?

While we believe Hambro is right to be "horrified;" after 10 years of manipulation (downwards at least two-thirds of the time in six different years between 2004 and 2013. In 2010, large moves during the fix were negative 92 percent of the time), we suspect he knew something was going on...

I posted the Bloomberg story on which this ZH piece is based in my Wednesday column---and here is what I had to say about it then---"Hambro is more than aware of the price management scheme in gold and the other precious metals, so his comments are certainly disingenuous---and that's being kind."  He, like every other precious metal mining executive, is complicit by their silence.  But it's my opinion that he's more complicit than most.

This Zero Hedge item appeared on their website at 7:04 p.m. EDT yesterday evening---and it's a must read for sure.  I thank GATA's Chris Powell for the headline, but the first reader through the door with the story was Phil Barlett.



¤ The Funnies

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¤ The Wrap

In little longer than two or three weeks, gold jumped more than $80 and silver by more than $2, only to revert to a flat price pattern over the next 5 weeks or so, even though world events and tensions have rarely been as nerve wracking over the past month. The price pattern alone seems surreal and the explanation for the sudden lack of volatility seems to prove manipulation without a doubt. But, of course, there’s a lot more pointing to manipulation than the unusual price pattern alone.

The quick jump in price, followed by the flat line, also involved one of the most dramatic shifts in market structure in history. In round numbers, some 50,000 silver contracts and 100,000 gold contracts changed ownership on the COMEX, as technical funds bought and commercials sold. That’s the equivalent of 250 million oz of silver---and 10 million oz of gold. Rarely have such quantities of COMEX contacts changed ownership in such a short time, particularly in silver. In terms of magnitude, if I were describing an earthquake or a hurricane, I would use the maximum levels of strength to describe the COMEX ownership change. - Silver analyst Ted Butler: 23 July 2014

Well, you don't need me to paint you a picture, as you've seen this movie before.  The only questions remaining are how long will it take JPMorgan et al to slice the salami to the downside---and how low will that take the prices of the precious metals involved, silver in particular.

As Ted told me on the phone yesterday, it's not the final price at the bottom that's the issue, it's the number of long contracts puked up by the technical funds, along with the number of short positions that "da boyz" can coax these same brain dead technical funds into buying as they engineer prices lower.

Here are the 6-month charts for both gold and silver updated with Thursday's trading data.

As you can see, the price decline in gold broke through its 50-day moving average---and touched the 200-day moving average before rallying off that mark.

Silver touched its 200-day moving average, but did not break below it.

Unless the powers that be allow a rally to occur from here, it's only a matter of time before the remaining  moving averages are broken to the down side.  Then we'll see some major volume and price moves as the technical funds dump their long positions in a panic---and probably get set up on the short side once again.

Wash, rinse, spin, repeat.

As Ted mentioned in his quote above, in the five weeks since the gold and silver rallies began on June 5, the 50,000 Comex long positions in silver, along with the 100,000 Comex contracts in gold that the technical funds have bought, are now in the crosshairs as the Commercial traders ring the cash register for fun, profit---and price management.  We got a taste of what was in store for us on Monday, June 14---and again, but briefly, on the following day.  Now we got the next slice taken out of the salami yesterday.

So the question still remains---how long and how many contracts?  Only JPMorgan et al know the answer to that.

But could we blast higher from here?  Absolutely, but it won't be the forces of supply and demand that determines that, because as Ted Butler pointed out recently, the key Commercial traders have captured the price-setting mechanism for all four precious metals [plus copper] in the Comex futures market.  They---and they alone, will determine what happens going forward.

But there's still that black swan out in left field that could come along and bite the boyz on the ass---and it's a distinct possibility.  This week I reread Roger Lowenstein's classic tome from 2000: "When Genius Failed: The Rise and Fall of Long-Term Capital Management".   It was wall-to-wall black swans and fat tails in 1998---and when things come unglued now, it will make that incident a footnote to what's coming our way this time around.

And as I write this paragraph, London has been open for 45 minutes---and up until this point in Friday trading, not much has happened.  Gold is down a dollar or so, but the other three precious metals are all up a bit from Thursday's close.  Net gold volume is very light---and silver's volume is a bit heavier.  The dollar declined a handful of basis points up until a few minutes before the London open, but has rallied sharply back to unchanged on the day.

Today we get the latest Commitment of Traders Report for positions held at the close of Comex trading on Tuesday, July 22---and I'm not about to make any prediction as to what the report might contain.  But whatever the numbers are, I'll have them for you in tomorrow's missive.

And as I hit the send button on today's column at 4:55 a.m. EDT this morning, nothing much has changed with all four precious metals.  Prices have flat-lined, especially in gold and silver.  Platinum and palladium aren't doing much, either---and gold and silver volumes have barely budged since I reported on them about ninety minutes ago.  There's almost no trading going on at all---and I can't remember the last time I've seen it this quiet.  Does it mean anything?  Beats me.

That's all I have for today.  I hope your weekend goes well, or you enjoy what's left of it if you live west of the International Date Line---and I'll see you here tomorrow.