This has all the hallmarks of an engineered price decline

The gold price traded flat until 1:30 p.m. Hong Kong time on their Wednesday afternoon and, as you already know, it was all down hill from there.  The low tick of $1,384.10 spot was printed around 12:40 p.m. in New York.  The subsequent rally ran into a seller shortly before 4 p.m. in electronic trading, and from there got sold down about five bucks into the close.

Gold finished the Wednesday session in New York at $1,391.60 spot, down $20.60 on the day.  Net volume was pretty decent, around 145,000 contracts.

It was more or less the same in silver, although the selling pressure began to manifest itself shortly after 9 a.m. in Tokyo.  The rally attempt going into the London open went nowhere, and after that the price kept declining until the same time as gold; 12:40 p.m. in New York.  The absolute low of $23.28 spot came at precisely 2:30 p.m. in electronic trading and, like gold, the tiny rally after that didn’t get far.

Silver closed on Wednesday at $23.455 spot, down 82.5 cents from Tuesday’s close.  Net volume was close to 50,500 contracts, which was pretty heavy.

Here’s the New York Spot Silver [Bid] chart on its own, so you can see the Comex price action in more detail.  Note the 2:30 p.m. spike low.

Platinum traded flat in Hong Kong, but began to drift lower the moment that London opened.  The real price pressure showed up at 1 p.m. BST, which was 8 a.m. in New York, and the real price drop occurred shortly after Comex trading began.  It was all over by 9 a.m. EDT, and platinum traded flat after that.

The palladium price didn’t do a thing until noon in Zurich, with the low coming shortly after the 1:30 p.m. EDT Comex close.  Then, like gold and silver, the price didn’t recover much.

The dollar index closed on Tuesday in New York at 82.38.  It’s high on Wednesday came shortly after 2 p.m. in Hong Kong trading, and it began to slide a bit from there.  Except for a brief rally in early morning in New York, the dollar kept heading lower, hitting its nadir of 82.08 at 11:30 a.m. in New York.  The subsequent rally didn’t get far, and the index closed at 82.16, down 22 basis points.

It’s a pretty easy call to say that there was no correlation whatsoever between the currencies and the precious metal price action yesterday.

The gold share price action was a big surprise.  Although they gapped down at the open, very strong hands with deep pockets showed up immediately.  Every time the HUI swooned, there was a buyer there to not only support them, but lift them gently higher.

Then when the gold price popped going into the 4 p.m. close of the equity markets in New York, the gold stocks jumped into positive territory, with the HUI finishing up 0.83%, almost on its high of the day.

The chart pattern was similar for silver, but because of the severity of the price decline in that metal, the stocks never had a hope of closing in the green.  However, Nick Laird’s Intraday Silver Sentiment Index only finished down 0.85%.

(Click on image to enlarge)

Well, dear reader, there are only two possible explanations for the share price action in both gold and silver yesterday.  The first one is that a smart buyer, with unbelievably deep pockets, was in the market buying everything that was falling off the table because they know that prices will soon be materially higher than they are now.  The second explanation is that “da boyz” were replenishing their inventory of precious metal stocks, as they’d used them all up during the last three weeks to suppress the HUI and Nick’s Silver Sentiment Index.  It has to be one of those two scenarios, so you choose which one you find the most believable.

The CME’s Daily Delivery Report showed that 6 gold and 50 silver contracts were posted for delivery within the Comex-approved depositories on Friday.  In silver, it was HSBC USA as the sole short/issuer, and the two largest long/stoppers were Canada’s Bank of Nova Scotia with 23; and JPMorgan Chase with 11.  There were six other stoppers as well.  Yesterday’s Issuers and Stoppers Report is linked here, and it’s worth a quick peek.

There were no reported changes in GLD yesterday, but there was a very small withdrawal from SLV.  This time it was 128,365 troy ounces.  I would guess that this would represent a fee payment of some kind.

Over at Switzerland’s Zürcher Kantonalbank for the week ending 30 August, they reported a decline of 24,816 troy ounces in their gold ETF, but their silver ETF went in the other direction, as 237,176 troy ounces was added.

Not surprisingly, there was no report from the U.S. Mint yesterday.

Over at the Comex-approved depositories on Tuesday, they reported receiving only 771 troy ounces of gold, and I’m not even going to post the link to that action.

It was a different story in silver, as these same depositories reported receiving 611,372 troy ounces of the stuff, and shipped 785,322 troy ounces out the door.  JPMorgan Chase was not involved in any of these transfers.  The link to that activity is here.

Despite my best efforts at hacking and slashing, I have a lot of stories for you today, and I’ll happily leave the final edit up to you.

In wartime the truth is so precious that it must be accompanied by a bodyguard of lies. – Winston Churchill

Yesterday’s price “action” had nothing to do with supply, demand, the dollar index, or Syria.

This is what silver analyst Ted Butler had to say about it in his mid-week commentary to his paying subscribers yesterday: “Most likely, the sell-off today involves the fleecing of leveraged speculators who bought on the price jump on Monday and Tuesday. The crooks at JPMorgan work around the clock, sometimes patiently positioning for weeks and months, sometimes cashing in on much shorter time frames. I certainly didn’t predict the rally on Monday and Tuesday or the sell-off today; but I know the explanation has to be close to what I’ve outlined and that no actual free market supply/demand fundamentals played a role.

The other thing I looked at was the fact that the take-down occurred on a Wednesday, the day after the cut-off for tomorrow’s Commitment of Traders Report, so what happened yesterday won’t be included in that report.  For long-time readers of this column, this is an event that has occurred countless times over the years, as what JPMorgan et al do between the Tuesday 1:30 p.m. EDT and the following Tuesday at the same time, doesn’t show up until the following Friday, which in this case is September 13.

Of course not to be forgotten in all of this was the fact that both gold and silver were in “overbought” territory, and as I pointed out on several occasions over the last week or so, there would be a “correction” of some sort in the wings, and it appears to be upon us now.  However, there are no free-market forces at work here, as this has all the hallmarks of an engineered price decline, with the bullion banks hitting the precious metal prices starting in the thinly-traded Far East market when prices are easier to move in the desired direction.  And once the sell stops are hit, it feeds on itself, with “da Boyz” helping it along as required.

Then we have the little matter of the jobs report tomorrow at 8:30 a.m. EDT.  Almost without fail, the U.S. bullion banks take the opportunity to hammer the gold and silver prices at that time, and it’s a pretty safe bet that they’ll do it again, so watch for it.

Along with the COT Report on Friday, we also get the September Bank Participation Report, and I’ll be more than interested in what that set of numbers contains.  Too bad yesterday’s price action won’t be in it.

I must admit that I’m looking at the situation regarding Syria with growing concern.  It doesn’t appear that the U.S. will be stopped in its attempt to extract its pound out of that little country, congressional approval notwithstanding.  I have the fear that there is something deeper and darker buried in all of this, and I’m not talking about Iran, I’m thinking in terms of blow back, either real, or premeditated.

But maybe I’m looking for black bears in dark rooms that aren’t there.  I sure hope that’s the case, but I can’t shake the feeling that something more sinister is lurking unseen.  I hope I’m wrong.

Not much happened in Far East trading on their Thursday until just before 1 p.m. Hong Kong time.  Then the high-frequency traders showed up and had both gold and silver down by a fair amount in less than an hour.  Gold’s net volume is just about 19,000 contracts, and silver’s net volume is just under 8,000 contracts, and virtually all of it is of the HFT variety. These are pretty big numbers, and the London open is still thirty minutes away as I write this paragraph.

And as I write this paragraph, the London market has been open for a bit more than two hours.  Gold and silver prices have recovered off their lows and are back to their Wednesday closes in New York.  Volumes have dropped off considerably as well, so I wouldn’t read too much into the current price action.   And as I hit the send button at 5:20 a.m. EDT, the dollar index is up 12 basis points.

Between now and the time the cruise missiles start to fly, it hard to be optimistic about the prices of both silver and gold based on the last thirty hours of trading, as this price “correction” will probably have to run its course.  Of course anything can happen going forward, so it’s best to just take this one day at a time.  As I said before, it’s a mug’s game trying to predict what’s going to happen next.

Before heading off to bed, I’d like to alert you [for the last time] to another one of Casey Research‘s FREE on-line video events.  This one is entitled “America’s Broken Promise: Strategies for a Retirement Worth Living“.

Casey Research has an expert panel, featuring the following speakers:    John Stossel: Host and Commentator, FOX Business Network, David M. Walker: Former United States Comptroller General, Jeff White: President and CEO, American Financial Group, Dennis Miller: Editor, Miller’s Money Forever, David Galland: Partner, Casey Research.

This free video will air on September 5th at 2 p.m. Eastern Daylight Time, that’s today, and it will be available for viewing after the initial stream for those who have schedule conflicts.

That’s it for today, and I’ll see you here tomorrow.  I hope that all my readers living west of the International Date Line have a good weekend.

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