Very deep pockets are buying this dip…and we’ve seen that in the precious metal shares over the last couple of weeks as well.

With the U.S. shut tight for Memorial Day yesterday, there wasn’t much excitement in the precious metals arena.  The gold price traded sideways until just before 2:00 p.m. Hong Kong time on Monday afternoon…and then rallied a bit heading into the London 8:00 a.m. open.  But just before that happened, someone showed up and capped the rally…such as it was…and it was all down hill into the close of trading at 1:30 p.m. Eastern time.

Gold closed at exactly the same price it did on Friday…$1,573.70 spot.  Net volume was a measly 15,000 contracts, give or take…and the roll-overs out of the June contract continue unabated, as gross volume was pretty heavy despite the fact that New York was closed.

It was pretty much the same story in silver…and the chart pattern was identical to gold’s.

Silver closed at $28.40 spot…down a dime from Friday.  Net volume was around the 10,000 contract mark.

The dollar index did about a 30 basis point face plant at the open, with the low [81.86] coming right at the 8:00 a.m. London open.  From there the index rallied back to around 82.23 by 2:20 p.m. BST…and then traded sideways into the close.

The gold price barely reacted to the 50 basis point drop in the dollar, but what gains it did manage when someone hit the buy dollar/sell gold button at the London, had all disappeared on the subsequent 35 basis point rise in the dollar index that followed.  But, with such light volume, I’m not prepared to read much into that.

Since there were no equity markets open in New York yesterday, there was no HUI or SSI to report on.  On the Canadian side of the border, the precious metals closed mixed in rather directionless trading.

Of course, there was no report from the CME, GLD, SLV, U.S. Mint…or the Comex-approved warehouses.

What I do have, is a couple of free paragraphs out of silver analyst Ted Butler‘s weekend commentary to his paying subscribers…

“I would calculate JPMorgan as holding 11,000 to 12,000 silver contracts net short on the COMEX currently. This is the lowest net short position that JPMorgan has held since taking over Bear Stearns in 2008. While JPMorgan and the other collusive commercials on the COMEX are crooked beyond description, the low level of current silver short holdings by JPM does raise the possibility that they will not add on the next rally. Several subscribers have indicated they expect JPMorgan to add shorts, as they always have and those subscribers may turn out to have been correct. Time will tell, but the question will only be known after silver prices rally, not before. In that sense, there is no harm and no foul in waiting to see, especially since we have no other choice. Certainly, there are new factors at play that suggest that JPMorgan may quit manipulating the price of silver.”

“On May 16, a judge heard oral arguments from JPMorgan to dismiss the class-action lawsuit filed against them for manipulating silver in 2008. (While I’m not involved in the lawsuit, it clearly follows my story line of manipulation). The argument advanced by JPM’s lawyers is that the outsized silver short positions could have been a hedge and as such, that would preclude manipulation. The judge will decide in due course. This is very similar to the fantasy that JPMorgan has tried to spread in their current credit derivatives debacle, namely, that the transactions in question were simply hedges and not propriety trading. This is clever, but deceitful on JPMorgan’s part. It’s all about parsing words to evade the truth.”

Here’s a precious metals related story that I thought I’d throw in at this point…

Gold Bar Demand in China Surged 51% to 213.9 Tonnes in 2011

A reminder of the sharp increase in demand for gold and silver, particularly store of wealth demand, in recent years was seen in the figures released by the China Nonferrous Metals Industry Association in Shanghai [yesterday].

China’s gold consumption rose 33% to 761 tons in 2011 and China’s silver consumption rose 6.8% to 6,088 tons last year.

China’s gold consumption rose 190 metric tons last year to 761 tons, Wang Shengbin, China Gold Association Vice Chairman, said in a speech in Shanghai as reported by Bloomberg.

China’s jewelry consumption jumped 28 % to 456.7 tons last year, gold bar consumption surged 51% to 213.9 tons and gold coin consumption gained 25% to 20.8 tons, Wang said

China’s silver consumption, including industrial use, jewelry and coins, rose 6.8% to 6,088 metric tons last year, the vice chairman said. The amount shows a surplus given China’s output of 12,348 tons last year, which gained 6.3%, Wang said.

This data came from the goldcore.com website yesterday…and Roy Stephens sent it to me yesterday evening…and the link to the hard copy is here.

The real reason for a column today was the fact that I have the usual number of stories for you today…and I’d have twice that if I didn’t have a column until tomorrow.

They still think that the system as it stands can be “fixed”. It cannot. It can only be drastically revised by bringing Gold back as the circulating currency. Unless and until that happens, the Gold “price” will go on making higher highs (and higher lows) in its inexorable move upwards. The longer the attempt is made to make the unworkable work, the higher the ultimate “high” is going to be. But we will only know that it is approaching when Gold becomes widely seen by ALL the investment markets for what it actually is – the ultimate RISK OFF financial holding. We are a LONG way from that point. – Bill Buckler, Gold This Week, 27 May 2012

Well, there’s nothing to talk about in yesterday’s price activity in either gold or silver.

Today, at the close of Comex trading, is the cut-off for this Friday’s Commitment of Traders Report…and I’ll be very interested in seeing how the trading action progresses in New York today, now that ‘da boyz’ are back from The Hamptons.

A lot of people wonder [and rightly so] why the price of gold and silver aren’t responding to the fact that the world’s financial system…especially the euro…is so obviously circling the drain.

As Ted Butler hammered into me years ago…the price of all precious metals is set in the Comex futures market…and a rising price is primarily driven by the technical funds pouring back in on the long side once important moving averages are broken to the upside.

Well, we are so far below any of the important moving averages in any of the precious metals, that these black box/moving average/brain-dead traders will sit on their respective hands until they do.  And as I’ve said before, we could trade at these price levels for the next two or three months, regardless of what’s going on in the real world, as any rally attempt will be met by the short sellers of last resort…JPMorgan et al.

At least that’s always been the case in the past…and it remains to be seen if this will be the case going forward.

The other thing going on is the final roll-overs out of the June contract.  All futures contract holders for June have to have sold or rolled by the end of the trading day tomorrow.  All those that are left will stand for delivery on First Notice Day on Thursday, May 31st.  I’m sure that ‘da boyz’ will want to keep things quiet until these events have passed.  Then we’ll see what happens from there.

Of course what is going on in the physical market is an entirely different matter, as very deep pockets are buying this dip…and we’ve seen that in the precious metal shares over the last couple of weeks as well.  Even the retail investors are starting to stick their toes back in the physical metal market…and I hope that you are getting your share, dear reader.

After twelve years of this, you’d figure that I’d be getting somewhat impatient.  I suppose I am in a way, but sooner or later this price management scheme [which Bill Buckler over at The Privateer has put better than anyone else] will end.  And when it does, it will be with a bang, not a whimper.

Here’s what Bill has to say on this issue…

“In any discussion of the future of Gold, or of the price of Gold, the first thing that must be realized is that Gold is a political metal. In the true meaning of the word, its price is “governed”.

“This is so for the very simple reason that Gold in its historical role as a currency is fundamentally incompatible with the modern worldwide financial system.

“Up until August 15, 1971, there has never in history been an era when no paper currency was linked to Gold. The history of money is replete with instances of coin clipping, printing, debt defaults, and the other attendant ills of currency debasement. In all other eras of history, people could always escape to other currencies, whose Gold backing remained intact. But since 1971, there is no escape because no paper currency has any link to Gold.

“All of the economic, monetary, and financial upheaval of the past 40 years is a direct result of this fact.

“The global paper currency system is very young. It depends for its continued functioning on the belief that the debt upon which it is based will, someday, be repaid. The one thing, above all others, that could shake that faith, and therefore the foundations of the modern financial system itself, is a rise (especially a sharp rise) in the U.S. Dollar price of Gold.”

Not much is happening, or is being allowed to happen, in overnight trading.  London has been open about two hours as I write this paragraph at 5:01 a.m. Eastern time…and both gold and silver, after a brief rallies, are now back to about unchanged from yesterday’s close. The CME is still on vacation, as its not showing any of Tuesday’s volume figures at the moment.  The dollar index, which reached a high of 82.37 in mid-morning trading in the Far East, has now rolled over and is down about 25 basis points from that high.

I await the start of the Comex trading session in New York with great interest.

See you on Wednesday.

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