This might be JPMorgan’s last swing for the fences

The gold price didn't do much in Far East trading, but rallied a bit starting just before the London open, with that rally ending about 30 minutes later.  From there it drifted quietly lower until the noon London silver fix—and then it rallied to its high tick of the day which came a few minutes after the 4 p.m. GMT London close—11 a.m. EST in New York.  From that point it got sold down five or so dollars and then chopped sideways into the 5:15 p.m. close of electronic trading.

The low and high ticks were reported by the CME Group as $1,193.50 and $1,215.00 in the February contract.

Gold closed in New York yesterday at $1,209.60 spot, up $11.10 from Tuesday's close.  Net volume was 151,000 contracts.

The silver price followed the gold price tick for tick, but at a much more subdued price level.  Silver's low came around 1 p.m. Hong Kong time—and except for that outlier, the price traded within a two bit range for the entire Wednesday session. 

The low and high were recorded as $16.235 and $16.595 in the March contract.

Silver finished the Wednesday trading session at $16.43 spot, down 3.5 cents from Tuesday's close.  Net volume was 41,000 contracts.

Platinum and palladium followed similar price paths as gold and silver—and palladium's attempt to break above its 200-day moving average got turned back minutes after Zurich opened—and it was all down hill from there.  Platinum was closed up 9 bucks—and palladium was closed down 6 dollars.  Here are the charts.

The dollar index closed late in New York on Tuesday afternoon at 88.63—and then didn't do thing until shortly before 2 p.m. Hong Kong time.  Then it began to rally once again, topping out at 88.995 at the 1:30 p.m. EST COMEX close.  From there it drifted a handful of points lower, closing the Wednesday session at 88.96—up another 33 basis points on the day.

Here's the 6-month dollar index chart so you can see how this dollar rally has progressed since its low back on July 1.

The gold stocks gapped up a bit more than a percent at the open—and then climbed to their high of the day, which came minutes after 11 a.m. EST, as that was gold's high of the day as well.  From there they drifted quietly lower giving up a bit more than a percent of their gains going into the close—but the HUI still managed to finish up 2.79%.

Even though silver was down on the day, the silver equities mostly made up for their lousy performance on Tuesday.  They were up well over 5 percent by a few minutes after 11 a.m. EST, which was silver's high as well.  They hung in there until noon—and from there they chopped lower into the 4 p.m. market close.  Nick Laird's Intraday Silver Sentiment Index closed up 2.81%.

The CME Daily Delivery Report for Day 5 of the December delivery month showed that zero gold and 57 silver contracts were posted for delivery within the COMEX-approved depositories on Friday.  ABN Amro was the short/issuer on 36 of these contracts, with another 19 out of JPMorgan's client account.  The only long/stopper of note was HSBC USA with 47 contracts.  The link to yesterday's Issuers and Stoppers Report is here.

The CME Daily Delivery Report for the Wednesday trading session showed that December open interest in gold dropped 153 contracts—and is now down to 2,096 contracts still open.  In silver, December open interest is now down to 611 contracts, after dropping 117 contracts on Wednesday—and minus the 57 contracts posted for delivery tomorrow.  I'm somewhat surprised at the slow pace of December deliveries in gold—and one has to wonder what the short/issuers are waiting for, as there's zero benefit to them in withholding delivery.

There were no reported changes in GLD yesterday—but there was another big withdrawal from SLV, as an authorized participant sent 2,203,396 troy ounces out the door for parts unknown.  But if I had to bet ten bucks, I'd say that JPMorgan and their ilk own it, but had to remove it for reporting reason.  Ted Butler had lots to say about this to his paying subscribers yesterday—and because there was so much, I'd be embarrassed to cut and paste it all.

There was no sales report from the U.S. Mint.

There was decent in/out movement in gold at the COMEX-approved depositories on Tuesday, as 32,000 troy ounces were received—and 4,524 troy ounces were shipped out.  The link to that activity is here.

It was another monster day in silver, as 601,057 troy ounces were reported received—and 1,813,076 troy ounces were shipped out the door.  Of these amounts, the 601,057 troy ounces reported received, ended up in JPMorgan's depository as a transfer out of the CNT Depository.  The link to that action is here—and it's worth a quick look.

Here are a couple of charts that I lifted from Nick Laird's website in the wee hours of this morning.  They show the total inventory levels of both GLD and SLV since their respective inceptions, along with their respective prices over the same period.  The differences in inventory levels over time between GLD and SLV is nothing short of astonishing considering the price activity over the same period.

Silver analyst Ted Butler is the only person that has an explanation for this dichotomy—and if anyone else does, I haven't seen it on the Internet anywhere.

I have the usual number of stories for a weekday and, as always, the final edit is yours.

[Speculative] position limits were fought by JPMorgan over the past five years because such an enactment would have been a disaster for the bank, which held a massively concentrated short position in COMEX silver during this time.  If JPMorgan was forced to buy back its silver short positions in excess of proposed limits, or even if the bank were prevented from adding new shorts to cap the price, the price of silver would have soared. Now that JPMorgan no longer holds a massive concentrated short position in COMEX silver—as I hope I have conveyed—the enactment of position limits could very well benefit the bank (if I am anywhere near close on how much physical silver the bank has acquired). Silver analyst Ted Butler: 03 December 2014

It was another day where not much happened, although it was obvious that the rallies in both gold and silver that began at the London silver fix got capped minutes after the London close, which occurred at 11 a.m. EST yesterday.

Gold closed back above its 50-day moving average yesterday, albeit barely, but any follow-through rally was obviously being capped.  Silver and platinum are being held below their respective 50-day moving averages—and palladium is now comfortably below its 200-day moving average after being capped the moment it touched it, which came minutes after Zurich opened on their Wednesday morning.

And as an aside here, the largest short position [relative to total open interest] held in any of the four precious metals is palladium, as 15 banks are net short 35% of the COMEX futures market in that metal.  I'd bet serious coin that JPMorgan holds well over 50 percent of that short position all by itself. The new Bank Participation Report comes out tomorrow—and I'll be interested to see if that has changed much over the last month.

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

And as I write this paragraph, London has been open about five minutes.  At the moment, gold is still down on the day by a few bucks, but the other metals are up a bit from yesterday's close in New York.  Gold volume is just under 19,000 contracts—and silver's volume is just over 4,500 contracts.  The dollar index, which strayed above the 89.00 level by a couple of basis points during Far East trading, is now down a couple of basis points on the day.

Well, a resolution of the speculative position limits in all commodities on the COMEX, especially the four precious metals, would certainly change things.  The only questions remaining are:  will it happen, what the new limits will be—and what date they become effective on.  If/when it does happen, how much 'adjusting' will all affected parties have to do, both on the long side and short side of each market—and how much time will they have to do it in?

JPMorgan isn't out of the woods yet, as it still has a substantial—although greatly reduced—short position in silver, plus a decent long position in gold.  I'd also bet their short positions in platinum and palladium would make your eyes glaze over as well.

Including the mega-short positions in gold and silver held by Canada's Scotiabank in the COMEX futures market, the only other two banks, either U.S. or foreign, that might be affected in any position limits the CFTC might impose in the precious metals would be HSBC USA and Citigroup in gold.  But if my educated guess that Scotiabank is as exposed as it is, it could get really ugly for them—unless there are some 'gentle hands' around.

With the third key reversal to the upside in a row [in gold and silver] that has failed over the last thirty days, I'm of the opinion, especially after the price action last Friday—and again on Monday—that this might be JPMorgan's last swing for the fences, or one of their last swings for the fences, now that speculative position limits are back on the table at the CFTC.  This position limit notification is something that JPMorgan would have known was coming for a long time before it was finally announced on Monday.

When I spoke with Ted yesterday, I told him that it wouldn't surprise me if Friday's Commitment of Traders Report, along with the companion Bank Participation Report, weren't quite what we were expecting, but in a good way.

We'll see.

And as I send today's column off to Stowe, Vermont at 5:29 a.m. EST, I see that gold is down 5 dollars from yesterday's close, silver is still up a bit on the day, platinum is now up 15 bucks—but how long this rally is allowed to last remains to be seen.  Palladium is up 2 bucks—after trading above the $800 spot price shortly after the Zurich open.

Gold volume is just north of 24,000 contracts, which isn't a lot—and silver's net volume is around 6,200 contracts.  The dollar index, which had been flirting with the 89.00 mark a few hours ago, is now down a couple of basis points on the day.

With the speculative position limit issue back on the table over at the CFTC, I shan't hazard a guess as to what prices will do in any of the precious metals going forward, but I am on the lookout for another engineered key reversal to the upside, as JPMorgan tries to rid itself of the last of its silver short position in the COMEX futures market—and as HSBC USA and Citigroup attempt to do the same in gold.

That's all I have for today, which is more than enough.

See you tomorrow.

Ed Steer

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