Rallies in both gold and silver have been halted at their respective 50-day moving averages
Note: Starting tomorrow, I'll be at the Vancouver Resource Investment Conference until Monday night. I will make every attempt to file all my columns on time, but it can't be guaranteed. The other thing to note is that they will be a short as I can possibly make them. I hope you understand, as I have other fish to fry while I'm there. Ed
There isn't much to report about yesterday's action. The gold price chopped quietly lower right from the New York open on Tuesday evening, with the low tick coming about 9:20 a.m. EST. The subsequent rally lasted until about 11:10 EST—and after that, the gold price didn't do much.
The high and lows ticks, such as they are, were reported by the CME as $1,244.60 and $1,233.50 in the February contract.
Gold closed in New York on Wednesday at $1,242.00 spot, down three bucks from Tuesday's close. Net volume was pretty light at only 91,000 contracts or so.
The chart pattern in silver was more or less the same as gold's. The only difference worth noting was that it appeared that the low price tick came just after 9:30 a.m. GMT in London—and not around 9:30 a.m. EST in New York.
The high and low in silver was $20.27 and $19.905 in the March contract.
Silver finished the day at $20.20 spot, down 5.5 cents from Tuesday's close. Volume, net of January and February, was a subdued 29,500 contracts.
There were similar looking rallies in platinum and palladium as well. It appeared that palladium really wanted to make a serious move, but it also appeared as if there was a not-for-profit seller standing by to make sure that the price didn't suffer from too much “irrational exuberance”. Here are the charts.
The dollar index closed 80.67 late on Tuesday evening in New York—and then began to rally starting at 9 a.m. Hong Kong time on their Wednesday morning. The rally topped out at precisely 9 a.m. EST in New York—and then faded a hair into the close. The index finished the Wednesday session at 81.03, which was up 36 basis points on the day.
The stocks gapped down a bit over a percent at the open, but didn't take long to rally back into positive territory. Most of the gains were in by 11:30 a.m. EST—and the HUI chopped sideways in a tight range for the remainder of the Wednesday session, finishing up 1.13%.
The silver equities follows a similar price path—and Nick Laird's Intraday Silver Sentiment Index closed up 1.95%.
The CME Daily Delivery Report for Wednesday showed that zero gold and 8 silver contracts were posted for delivery within the Comex-approved depositories on Friday.
There were no reported withdrawals in GLD—and as of 9:45 p.m. EST yesterday evening, there were no reported withdrawals from SLV.
The U.S. Mint had a tiny sales report yesterday. They sold 2,000 ounces of gold eagles and 28,500 silver eagles.
Over at the Comex-approved depositories on Tuesday, they reported that 89,756 troy ounces of gold were transferred out of Brink's, Inc.—and directly into JPMorgan's warehouse. The link to that activity is here.
As always, the big in/out activity was in silver. They reported receiving 478,438 troy ounces of the stuff—and shipped out 575,836 troy ounces. Of the amount reported received—475,440 troy ounces disappeared into JPMorgan's warehouse. The link to that action is here.
Just as a point of interest, the next deposit of silver into the JPMorgan warehouse will move them into top spot [ahead of HSBC USA] with the largest physical silver inventory of the six Comex-approved depositories. That's quite a feat considering the fact that on April 30, 2011—the day before the infamous drive-by shooting in silver—they didn't have one single troy ounce in their warehouse, either for themselves or their clients. And as I've said before on a number of occasions, that can't be a coincidence.
I have the usual number of stories for a mid-week column, so I hope you find some of the ones posted below to be of interest.
Why am I calling it highly unusual that JPMorgan added 7,000 short contracts in silver between December 3 and January 7?
The simple answer is because the price of silver didn’t move that much in the time period. Oh, silver did rally as much as $1.50 briefly during December, but basically finished the month little changed. In fact, that period was one of the tamest times for price volatility for the entire year. Further, during that one month, there was no penetration of the important 50 day moving average. To be fair, there was technical fund short covering of some 12,000 contracts during that time and when the technical funds buy, the commercials basically have to sell. There were commercials (which I call the raptors) who held 40,000 long contracts on December 3 and those raptors did sell 5,000 long contracts from their big net long position.
What was highly unusual was that JPMorgan sold 7,000 new silver contracts short to satisfy the rest of the technical fund buying at prices hovering around (but mostly below) $20. The last time JPMorgan sold a significant number of new silver contracts short was back in August when the bank sold 6,000 new contracts short as silver broke above the 50 day moving average on its way to the summer run to $25. I know I repeat myself when I say that the key on any silver rally is whether JPMorgan adds to shorts or not; but that is the key, pure and simple. – Silver analyst Ted Butler: 15 January 2013
With volume as low as it was yesterday, I'm not prepared to read too much into yesterday's price action in either silver or gold. I was just content to see the precious metal equities finish in positive territory despite the fact that the metals themselves finished in the red.
But we're certainly far from being out of the woods yet. The rallies in both gold and silver have been halted at their respective 50-day moving averages—and as Ted Butler alluded to in the above quote, it probably occurred because JPMorgan went short more Comex silver contracts and sold another chunk of their long-side corner in the Comex futures market in gold. That fact should be confirmed when the latest Commitment of Traders Report comes out on Friday afternoon.
Other than that, I don't have much to add to what I've already said further up in this column.
In Far East trading on their Thursday not much happened in any of the four precious metals up until shortly after 2 p.m. Hong Kong time. At that point all of them developed a negative bias—and are all down a bit now that London has been open about 45 minutes. Volumes aren't overly heavy for this time of day, so I'm not prepared to read too much into it at the moment, either. The dollar index has been trading flat since the market opened at 6 p.m. in New York on Wednesday evening.
And as I hit the send button on today's efforts, there hasn't been too much in the way of price changes since I wrote the last paragraph. Gold volume, net of roll-overs, is not overly heavy—and neither is silver's volume, even though its all of the HFT variety in the current front month. The dollar index is down about 10 basis points—and just below the 81.00 mark.
See you tomorrow—from Vancouver.
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