It’s always the Commercials who will be going short against them

Gold rallied a bit in very early trading in the Far East—and then traded sideways until shortly after 2 p.m. Hong Kong time—and then the price began to fade along with the dollar index—and the low tick came about 11:20 a.m. EST.  From there it rallied back towards the unchanged mark, but didn't make it.

The high and low ticks were reported as $1,274.60 and $1,256.10 in the April contract.

Gold closed on Thursday in New York at $1,264.50 spot, down $4.40 from Wednesday.  Net volume was pretty light at 108,000 contracts.

The price path for silver was somewhat similar, but the low tick came at the noon silver fix in London—and the subsequent rally ran into the usual not-for-profit crowd minutes after the COMEX open.  The secondary low came at the same time as gold's low—around 11:20 a.m. EST.  The rally from that point was not allowed to get back above the unchanged mark either.

The high and lows in silver were recorded by the CME Group as $17.50 and $16.92 in the March contract.

Silver finished the Thursday trading session at $17.22 spot, down 11 cents from Wednesday's close.  Net volume was 32,000 contracts.

Platinum's high tick in the Far East came at the same time as gold and silver—and from there got sold down to its low, which came at the London p.m. gold fix.  The subsequent rally ended shortly before 3 p.m. in electronic trading—and the price did little after that.  Platinum closed at $1,250 spot, up ten bucks on the day.

The palladium chart was similar in most ways to the platinum chart, with the only real difference being the sell-off after that 3 p.m. high tick, as the metal was sold down to unchanged on the day—back at $790 spot.

The dollar index closed late on Wednesday afternoon at 94.57—it's absolute high tick of the Wednesday trading session—and it chopped lower from there during the Thursday session, with the 93.43 low tick coming minutes before 2 p.m. EST.  The index recovered a small amount from there, closing at 93.64—down 93 basis points from Wednesday's close.

Once again you should carefully note that the metals are being made to move independently of the the dollar index, because it's totally counterintuitive to see the gold price fall as the dollar index craters.  Yesterday wasn't the first time that happened, either.

The gold stocks struggled in the early going, but continued to chop higher as the trading day progressed—and the HUI closed up 0.94%.

The silver equities struggled a little harder, but finally broke into positive territory to stay about 2:45 p.m. in New York, as Nick Laird's Intraday Silver Sentiment Index closed up 0.68 percent.

The CME Daily Delivery Report showed that 57 gold and 67 silver contracts were posted for delivery within the COMEX-approved depositories on Monday.  There were no stand-out short/issuers or long/stoppers in gold.  But in silver, the two short/issuers were Jefferies with 47—and R.J. O'Brien with 20 contracts.  Canada's Scotiabank stopped 61 of them.  The link to yesterday's Issuers and Stoppers Report is here.

The CME Preliminary Report for the Thursday trading session showed that February gold open interest dropped by the 368 contracts that were scheduled for delivery today—and the total o.i. is now down to only 842 contracts.  In silver, open interest for February increased by 8 contracts to 92.

There was another very decent deposit in GLD yesterday.  This time an authorized participant added 172,838 troy ounces.  Since the low in GLD on January 15, authorized participants have added 2.11 million troy ounces of gold—and that, dear reader, is a huge amount.  This trend can't continue forever.

Over in SLV, there were no reported changes as of 10:02 p.m. EST yesterday evening.  Since January 15, authorized participants have withdrawn 4.68 million troy ounces—and the question why this is occurring is still begging an answer.

While on the subject of SLV, I see that Joshua Gibbons, the “Guru of the SLV Bar List” updated his website with the latest weekly activity over at iShares.com as of the close of business on Wednesday—and this is what he had to report.  “Analysis of the 04 February 2015 bar list, and comparison to the previous week's list:  1,013,089.3 troy ounces were added (all to Brinks London), no bars were removed or had serial number changes.

The bars added were from the following refiners: Solar Applied Materials (0.5M oz), Kazzinc (0.3Moz), and 6 others.

As of the time that the bar list was produced, it was overallocated 271.9 oz.  All daily changes are reflected on the bar list.

The U.S. Mint had a tiny sales report yesterday.  They sold 1,000 one-ounce 24K gold buffaloes—and that was all.

There was some decent in/out movement in gold over at the COMEX-approved depositories on Wednesday, as 62,304 troy ounces were reported received, but only 5,345 troy ounces were shipped out the door.  Once again there was virtually no movement in silver worth mentioning, as nothing was reported received—and only 6,141 troy ounces were shipped out.  This marked decline in silver activity over the last several weeks is something that Ted Butler may address in his weekly review to his paying subscribers tomorrow.

I'm only speculating here, but it's entirely possible that the precipitous decline in silver warehouse activity along with the monstrous decline in SLV stocks since December 1, 2014—may be events that are related in some way—and I await Monday's short interest report from the shortsqueeze.com Internet site with great interest.

Here's a chart that Nick Laird passed around last evening.  It shows gold imports and exports from Switzerland for all of 2014.

I have a decent number of stories today—and I hope you find a few that interest you, but do I have quite a number that are definitely worth your time.

Leaving aside my speculation that JPMorgan has used the depressed price of silver over the past four years to amass the largest physical silver stockpile in history (which I still believe), there is a more compelling explanation for why the concentrated short position in COMEX silver has remained the largest (in terms of annual production) of all commodities, no matter what the price may be.  The real reason for the continued existence of the concentrated short position in COMEX silver is because it can’t be dissolved without fireworks to the upside. In simple terms, the big shorts are stuck—and have been stuck for many years, even as they continued to rake in profits.

That doesn’t mean that these big 8 shorts won’t engineer a sharp sell-off in which they buy back and cover a good number of newly shorted contracts; based upon past experience, that has to be the odds on favorite short term outcome. But John is asking, in essence, the most important question, namely, why do these 8 big traders remain so heavily short? The answer is that they have no choice. Forget about them buying to the upside causing silver prices to explode, even if they simply refrained from adding new silver shorts on price rallies, the price would explode.

That’s why I have been so repetitive over the years, whenever silver prices have declined and the 8 big shorts have bought back a good number of their short positions, that all that matters on the next rally is whether the big shorts then add to their concentrated short position or not. On more occasions than I care to remember, it always came down to the price would get capped if they did add shorts or explode if they didn’t. Unfortunately, these crooks, led by JPMorgan, always did add shorts and succeeded in capping the price and prolonging the manipulation. And, as I have remarked previously, the additional concentrated short selling has occurred on lower and feebler rallies. This last burst of concentrated short selling occurred below the average primary cost of production, emphasizing the uneconomic and manipulative nature of the selling.Silver analyst Ted Butler: 04 February 2015

Wednesday was another down day for both gold and silver, even though the dollar index did another face plant.  As I keep saying, it matter not what the currencies do, it only matters what the Big 8 short holders are doing in the COMEX futures market—as Ted Butler makes all too clear in his quote above.

That's all there is—there ain't no more.

Here are the 6-month gold and silver charts updated with Thursday's price and volume data.

And as I write this paragraph, the London open is about twenty minutes away.  With the exception of silver of course, the other three precious metals are up a hair on the day—but all four are trading without much direction.  Net gold volume is microscopic at around 12,200 contracts—and silver's net volume is 2,700 contracts, so nothing should be read into the current price action.  The dollar index isn't doing much either—and is up about 6 basis points at the moment.

Today we get two reports—the weekly Commitment of Traders Report, along with the companion Bank Participation Report.  Both will be ugly, even if there is an improvement in the COT Report during the last reporting week, which ended at the close of COMEX trading on Tuesday.

Can we move higher in price from here regardless of the monstrously large short positions in both silver and gold?  Sure, but as the speculators and technical funds go long, it's always the Commercials who will be going short against them, thus driving the cumulative short positions in both metals to even more obscene extremes.

As Ted says so clearly in the quote above, the 'Big 8' have no choice, because if they weren't there as sellers of last resort, the prices of all four precious metals would explode to the outer edges of the known universe in very short order.

And as I send today's column out the door at 5:15 a.m. EST, I see that there still isn't much going from a price perspective in any of the four precious metals.  Net gold volume is barely over 17,000 contracts—and silver's net volume is at the 4,000 contract mark. The dollar index is back to unchanged on the day.  Nothing to see here.

Before heading off to bed, I've got a Casey Research offering that might interest those of you who have VERY deep pockets.

Casey Research is opening Casey's Club to new members through February 20. This is our annual opening and we won’t likely open it again in 2015.

All of our markets have taken a beating of late, but that’s not the time to back away.  On the contrary, it means many incredible companies are extremely undervalued and selling for a fraction of their worth. This is a great time to buy into the right junior resource stocks at bargain prices—and we’re opening Casey’s Club with a special report that outlines our top 11 undervalued companies to get started with. Membership in Casey’s Club gives members access to all the sectors we cover and they’ll get updates on these 11 companies, as well as others, as the markets do begin to recover and prices go up.

It costs absolutely nothing to check this out, dear reader, which you can do so by clicking here.

Today is Friday—and I have no idea what may happen in the precious metal market for the remainder of the day.  We got a surprise to the upside last Friday—and hoping for a repeat may be wishful thinking this time around, but you just never know.

But whatever does happen, either up or down in price, will have nothing whatsoever to do with free markets, as it will just be more paper games on the COMEX.

That's all I have for today.  I hope you have a good weekend, or what's left of it if you live west of the International Date Line—and I'll see you here tomorrow.

Ed Steer

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The first two photos below are of a male and female Gambel's quail—and I found these rather shy birds wandering around the Desert Botanical Garden in Phoenix on the same day that I took the other wildlife photos I've been posting the last few days.  I first assumed they were California quail, as that's the only quail I know, but the on-site ornithologist set me straight when I asked him.

The other thing of note about these photos is the composition of the desert floor.  When one hears the word desert, one assumes lots of sand.  That's certainly not the case in Arizona, as these photos show—and a walk in the desert in this state is definitely not like a walk in the woods!  I'll have more on that some other day.