Sooner or later the forces of nature—and the markets—will not be denied
There wasn't a lot of price action in gold yesterday. What action there was occurred between the noon silver fix in London—and the Comex close in New York.
The high and low tick are barely worth the effort of looking up—and the CME Group recorded them as $1,242.10 and $1,232.00 in the December contract.
Gold finished the Friday session at $1,238.20 spot, down 70 cents from Thursday's close. Net volume was very much on the lighter side at only 109,000 contracts.
The price chart in silver looked very similar to the gold chart—and silver traded in a two bit range for the entire day.
The high and low in silver were recorded as $17.44 and $17.22 in the December contract.
Silver closed in New York yesterday at $17.27 spot, down 9.5 cents from Thursday's close. Net volume was pretty light at only 25,000 contracts.
Platinum rallied right from the moment that the markets opened in New York on Thursday evening, but that ended/got capped just after 10 a.m. Hong Kong time. It got sold down a bit going into the Zurich open—and then didn't do much for the remainder of the day. Platinum closed up 12 bucks.
Palladium also rallied in the early going—and then developed a negative bias around noon Hong Kong time—and slid a hair until about 10:15 a.m. in Zurich. Then it rallied anew until noon Europe time—and then traded pretty flat for the remainder of the Friday session, closing up 13 dollars.
The dollar index closed late Thursday afternoon in New York at 84.96—and then chopped around before sliding to its 84.77 low at precisely 8 a.m. in New York. The subsequent rally topped out at 85.23 around 11:25 a.m. EDT—and it didn't do a lot for the rest of the day. The index finished back above the 85.00 mark at 85.20.
The gold stocks spent all of two minutes in the black at the open of trading at 9:30 a.m. EDT yesterday—and it was all down hill from there, as the HUI closed virtually on its low tick of the day, down 3.47%. This sell-off was out of all proportion to the tiny loss in the metal itself.
And as bad as the gold shares performed, the silver equities got shelled, as Nick Laird's Intraday Silver Sentiment Index closed down an eye-watering 4.62%. There was no reason for this magnitude of sell-off either.
The CME Daily Delivery Report showed that 230 gold and 72 silver contracts were posted for delivery within the Comex-approved depositories on Tuesday. In gold, it was the strangest thing, as Barclays was the only short/issuer with 230 contract out of its in-house [proprietary] trading account. They were also the biggest long/stopper with 228 contracts in their client account. One has to wonder what that was all about. In silver, the two short/issuers were Jefferies and ABN Amro with 52 and 20 contracts apiece. There were four different long/stoppers, but Jefferies stopped 26 of them. The link to yesterday's Issuers and Stoppers Report is here.
The CME Preliminary Report for the Friday trading session showed that gold's open interest in October declined by 129 contracts, and is now down to 837 contracts. Silver's October open interest was unchanged at 174 contracts. From these numbers, one must subtract the deliveries mentioned in the previous paragraph.
There were no reported changes in GLD yesterday—and as of 7:44 p.m. EDT yesterday evening, there were no reported changes in SLV. But when I was editing at 5:02 a.m. EDT this morning, I see that the folks over at the iShares.com Internet site showed a withdrawal from SLV of 1,150,380 troy ounces.
There was another sales report from the U.S. Mint. They sold 6,000 ounces of gold eagles—2,000 one-ounce 24K gold buffaloes—and 50,000 silver eagles.
Month-to-date the mint has sold 42,500 troy ounces of gold eagles—17,000 one-ounce 24K gold buffaloes—3,100,000 silver eagles—and 400 platinum eagles. Based on these sales, the silver/gold sales ratio stands at 52 to 1.
There was a small amount of gold shipped out of the Comex-approved depositories on Friday, as 2,411 troy ounces were withdrawn from Scotiabank's depository.
Of course, things were a lot different in silver. Nothing was reported received, but a huge 1,716,910 troy ounces were shipped out the door—and the link to that action is here.
The Commitment of Traders Report, for positions held at the close of Comex trading on Tuesday, October 14, was pretty much what I was expecting to see in both silver and gold.
In silver, the Commercial net short position was virtually unchanged, as it only declined by 20 contracts, which isn't even a rounding error. The Commercial net short position still sits at 16,260 contracts, or 81.3 million ounces.
But under the hood in the Disaggregated COT Report, things were a little different, but in a good way. The Managed Money in the technical fund category sold another 572 long contracts and went short an additional 1,226 contracts. That, I believe is a new record short position in the Managed Money category, so the rubber band is stretched about as tight as it can get in silver.
Ted Butler said it appeared that JPMorgan covered another 500 contracts of their short-side corner in the Comex silver market, which is another new low since they inherited that gargantuan short position from Bear Stearns back in 2008. They now hold 10,000 contracts net short, or 50 million ounces, which is a sizeable chunk of the total Commercial net short position which, from two paragraphs ago, worked out to 81.3 million troy ounces.
In gold, the Commercial net short position increased by a rather chunky 15,416 contracts, or 1.54 million ounces of paper gold—and that's all because of the rally in gold during the reporting week. The Commercial net short position in gold is now up to 7.88 million troy ounces.
The traders in the Managed Money category accounted for most of the buying as they went net long to the tune of 12,333 contracts.
Ted said that JPMorgan sold another 3,000 contracts of their long-side corner in the Comex gold market—and their long position is now down to 18,000 contracts, or 1.8 million ounces.
And because of last week's rally in gold, Ted's concern now is that gold has become vulnerable to a sell-off, as the Commercials may attempt to engineer a decent price decline in order to force these newly minted long contract holders into puking up all these long contracts they just bought.
As it stands three days after Tuesday's cut-off, the traders in the Managed Money category are pretty much maximum short in all of the 'Big 6' commodities now, except for gold. 'Da boyz' may certainly be tempted to make it six out of six.
Since this is my Saturday column, I get to unload my in-box—and I have quite a few for you today that I've been saving from earlier in the week.
While both fell about the same percentage over the past few months, some important distinctions between oil and silver are that silver is at record extremes of managed money short selling—and well below the cost of production for primary producers. Crude oil prices may have fallen enough to reverse upward here or soon, but silver is more advanced on both counts. Plus, there are continued signs that the supply/demand situation is relatively tighter in silver than they are in crude oil.
Lastly, silver is a natural as a safe haven demand in what are increasingly tenuous financial times. Yes, it’s true that silver has been underperforming just about everything under the sun for some time, but that has only resulted in it becoming more of an outstanding undervalued asset. Silver investment demand has, can, and will turn into a torrent at a moment’s notice and if ever there were a time for it to soar, that time would appear to at hand. – Silver analyst Ted Butler: 15 October 2014
I've got two pop 'blasts from the past' for you today—and both by the same group, as they were the only two big hits they had back in the late 1970s—but what hits they were! It's been more than a year since I posted them last, so it's time for a revisit. The group is 'The Babys'—and although the name may not ring a bell, the tunes are classics. The lead singer, John Waite, as wonderful as he is, is bested by the girls singing back-up vocals. They're just terrific. The link to the first recording is here—and the second one is linked here.
Today's classical 'blast from the past' was first performed in what is now called Oslo in Norway back on 24 February 1876. It's the incidental music from Henrik Ibsen's 5-act play, Peer Gynt. The play is not performed often in North America; but the music, written by Norway's legendary composer Edvard Grieg—who composed this music in his very early 30s—has found a permanent home in the classical repertoire—and rightfully so.
I, for one, never tire of listening to it. This youtube.com video was uploaded on 05 May 2013—and has already had 675,000 hits, which is a monstrous number for a classical work. The quality of the audio and video is first rate—and best watched 'full screen'. The Spanish Radio and Television Symphony Orchestra [based out of Madrid] do the honours here—and the performance is as good as it gets. Guillermo Garcia Calvo conducts. The link is here.
The memories of the potential for a global meltdown in all things paper—and the melt up in all things physical everywhere on Planet Earth on Wednesday—is almost a distant memory now. There were lots of voice out there saying that everything was fine—and that there was “nothing to see here, folks—please move along.” But, as Doug Noland pointed out in his weekly Credit Bubble Bulletin in the Critical Reads section, The Truman Show continues—as “this past week did offer further evidence that history’s greatest financial Bubble is at significant risk.”
That would be an understatement.
Since that event, the gold and silver prices have been mostly in lock down, even though JPMorgan et al continued to engineer the price lower on platinum, palladium, copper and crude oil, which continued up until trading ended on Thursday in New York.
Here are the 6-month charts for all the 'Big 6' commodities. Copper matched its Thursday low tick in Friday trading—and platinum, palladium and copper all finished off their low ticks of Thursday.
Looking at the precious metal equities, the price action yesterday was out of all proportion to the intraday and closing price of these two metals—and that's not the first time that we've seen this counterintuitive share price action lately.
As I mentioned earlier this week, John Embry has always suspected [as have I] that the powers-that-be were actively intervening in the precious metal equity markets—and yesterday's share price action seemed to fall into that category as well.
Looking back at the week, it's a certainty that if it hadn't been for the Plunge Protection Team's active intervention in the markets at 9:40 a.m. EDT on Wednesday, it would certainly be a different world today.
Doug Noland put it this way: “I find the backdrop surreal. And the more everyone acts as if it’s all business as usual, the more worried I get. As crazy as I know it sounds, I am these days reminded of my bewilderment when studying the period leading up to the 1929 stock market crash. How could they not have seen it coming? How could everyone remain so bullish (“a permanently high plateau”) considering what in hindsight was an obvious – and quite ominous – deterioration in the market and global economic outlook. I also think often of a quote from that period: “Everyone was determined to hold their ground, but the ground gave way.” Can the world’s central bankers hold everything up?”
Who knows for sure, dear reader, but they've been at it in the U.S. ever since the PPT intervened in the crash of 1987—and 27 years later, the bubble in all thing paper has become global in scope. The attempt by the world's stock markets to return to their intrinsic values on Wednesday was, once again, thwarted—but Jim Rickards' snowflakes continue to fall.
Sooner or later the forces of nature—and the markets—will not be denied. At that point the Fed will get buried—and the ball will be in the IMF's court, SDRs in hand. It's my bet that they'll be backed by gold—and the gold price used to back them will be many orders of magnitude higher than it is now.
Before heading off to bed, I'm excited to announce the premiere of Casey Research's documentary-style film on the only way for American’s to legally minimize their taxes without leaving the U.S. in America’s Tax-Free Zone, a FREE online video – which premiered on Thursday to the International Man audience.
This documentary runs almost half an hour and features a discussion of the current tax situation in Puerto Rico and, generally, how to take advantage of it—with guest commentators, Doug Casey and Peter Schiff, as well as several others. You can check it out by clicking here.
That's all I have for the day—and the week. I hope you enjoy what's left of your weekend—and I'll see you here on Tuesday—Wednesday if you live just west of the Dateline.
Bayfield Ventures Corp. (TSX-V: BYV) is exploring for gold and silver in the Rainy River District of northwestern Ontario.
Bayfield owns 100% of the mineral rights to its flagship “Burns” Block gold-silver project located in the Richardson Township, Rainy River District of northwestern Ontario. The Burns Block is surrounded by New Gold's (TSX: NGD) Rainy River project and adjoins the immediate east of New Gold's multi-million ounce ODM17 gold-silver deposit and adjoins the immediate west of New Gold's expanding Intrepid gold-silver zone.
Notable drill results from Bayfield's 100,000 metre drill program include 60.05 grams per tonne gold and 362.96 grams per tonne silver over 11.2 metres in hole RR11-71, as well as 35.93 grams per tonne gold and 359.65 grams per tonne silver over 10.0 metres in hole RR10-18 located approximately 350 metres to the south with numerous high grade holes drilled in between. Please visit our website for more information.