Precious metals won’t break out until JPMorgan Chase allows it to happen

I wouldn't read much into Monday's gold price action, as we are in the final forty-eight hours of rolling out of the August delivery month…and virtually all of yesterday's volume was associated with that event.

Gold closed at $1,327.20 spot…down $6.60 from Friday's close.  Gross volume was way up there at 254, 300 contracts, but once all the roll-overs are subtracted out, the net volume was a tiny 17,000 contracts.

The silver price action was a different story, however.  Silver was under pressure almost right from the Sunday night open in New York…and hit its low tick shortly after London opened there Monday.  From that low, silver began to rally nicely, but it was obvious from the price action that it was running into serious opposition the higher it rose…and the big rally going into the Comex open got sold down almost immediately, with the coupe de grâce coming at 9:00 a.m. EDT.  After that, the silver price behaved itself for the rest of the day.

The low tick, shortly after the London open, was around $19.60 spot…and Kitco recorded the high tick as $20.34 spot.  That came a minute or so after 8:30 a.m. EDT.  One can only imagine what silver would have closed the day at if the metal had been allowed to trade freely.

Silver finished the Monday session at $19.85 spot…down 14 cents from its Friday close.  Gross volume was around 35,000 contracts.

Here's the New York Spot Silver [Bid] chart on its own, so you can see the early morning price shenanigans for yourself.

Platinum and palladium both had decent days yesterday, but palladium went “no ask” shortly before noon in New York…so a willing seller appeared…and that was it for the day.  Platinum hit its peak shortly after the London p.m. gold fix.  Here are the charts…

For the day that was, gold closed down 0.49%…silver was down 0.70%…platinum was up 0.77%…and palladium was up 2.34%.

The dollar index action on Monday wasn't much to look at.  It closed late Friday afternoon in New York at 81.66…and then bounced off 81.53 a couple of times before 'rallying' into the close…finishing on Monday at 81.705…up only a handful of basis points.

Not surprisingly, the gold stocks chopped around in slightly negative territory for most of the New York trading session yesterday…and almost closed flat, except they got sold down about a percent in the last few minutes before the close.  The HUI finished the day off 1.02% from Friday's close.

The decline in the stocks that make up Nick Laird's Intraday Silver Sentiment Index was a bit more severe…and it closed down 1.57%.

(Click on image to enlarge)

The contents of Monday's CME Daily Delivery Report came as no surprise, as 3 gold and 134 silver contracts were posted for delivery within the Comex-approved depositories on Wednesday…the last day of the July delivery month for silver.  The big short/issuer was, as it has been all month, JPMorgan Chase out of its client account with 132 contracts.  JPMorgan Chase stopped 91 contracts in its in-house [proprietary] trading account…and Jefferies was the other long/stopper of note with 28 contracts…all for its in-house [proprietary] trading account.  The link to yesterday's Issuers and Stoppers Report is definitely worth a quick look…and the link to that is here.

Late tomorrow evening EDT, the CME Group will post the First Day Notice numbers for the August delivery month in gold…and as I've stated before, it will be interesting to see how much ends up in the proprietary trading arms of JPMorgan Chase.  I'll have these numbers for you in Thursday's missive.

For a change, there were no reported withdrawals or additions to either GLD or SLV.

The U.S. Mint had a very decent sales report yesterday…and if one uses the past as prologue, this may be the last sales report of the month.  They sold 10,500 ounces of gold eagles…4,500 one-ounce 24K gold buffaloes…and a very chunky 950,000 silver eagles.  Silver eagles sales this month so far total 4,406,500.  Only 65,000 ounces of gold eagles/buffaloes have been reported sold, so that puts the silver/gold ratio for mint sales at just about 68 to 1.  That's the biggest sales ratio number that I can remember posting.

Ted Butler is of the opinion that most of these silver eagles are heading overseas.

Friday was a very busy day for silver over at the Comex-approved depositories.  They reported receiving 1,792,734 troy ounces of the stuff…and shipped 1,237,851 troy ounces out the door.  JPMorgan took delivery of 598,075 troy ounces of that amount.  The link to that activity, which is worth a quick look, is here.

It was quieter in gold, as only 32,090 troy ounces were reported received…and nothing was shipped out.  Here's the link to that.

In my regular Friday afternoon Commitment of Traders Report phone call with Ted Butler, there was a 'surprise' in last week's COT Report that he 'forgot' to mention…and what a 'Golden' surprise it was!

Last Friday's COT Report showed that the Commercial net short position blew out by 1.0 million ounces…a fact that I mentioned in my Saturday column.  But that masked an increase in the long position of the 'Big 4' traders…and here are two paragraphs from silver analyst Ted Butler's weekly commentary on Saturday that lays it all out…

That surprise was the large increase in JPMorgan’s massive net long COMEX gold futures position. The data indicate JPMorgan may have increased its net long position in gold by almost 9,600 contracts to bring that position close to 85,000 contracts. What data? There is only one data point, but it’s a very hard number. The percentage of the Big 4 net long position (which JPMorgan must reside in) jumped to the highest ever at 32.4% and when multiplied against total open interest of 434,750 contracts results in a hard net number of 140,859 contracts held by the big 4 longs. This represents an increase in the Big 4’s net long position of 9,655 contracts from the previous week.

I’m alleging that JPMorgan accounted for the entire one-week increase in the Big 4 category and that the bank now holds 85,000 contracts of the 140,859 contracts held net long by the Big 4. Certainly, if JPMorgan or the CFTC dispute my calculations, then they can set the record straight. I further allege that JPMorgan holds, once all spreads are removed from total open interest, more than 23.6% of the entire net open interest in COMEX gold futures, up from 20.6% in the previous week. Never has any entity held such a large concentration in COMEX gold futures, to my knowledge. Certainly that is something the CFTC should respond to, as the implications for manipulation in gold has never been clearer.

Ted mentioned that it was always a possibility that there was an error in the reporting…and it might be “corrected” in this Friday's report…but I'll bet that it stands, as this is the kind of legerdemain  that JPMorgan Chase excels at…and that's another reason why I'm very curious to know how much gold they take delivery of next month.  They may be sitting in the bushes over there as well.  We'll get a pretty good indication of that by Friday.

Because it's a Tuesday column, I have a very decent number of stories for you today…and I hope you can find the time to read all the ones that interest you.

There are no markets anymore…only interventions. – Chris Powell, GATA

Even though net trading volumes in all four precious metals were pretty low yesterday, it was obvious that at least three or four really wanted to fly to the upside…and were well on their way until a willing seller made an appearance.  There are just no legitimate short sellers left in this market…and if it wasn't for JPMorgan et al, all PM prices would have been over the moon decades ago.

But with 48 hours left in the July delivery month…along with the final roll-overs out of the August gold contract…I'm still not expecting any major fireworks to the upside, even though it's obvious that this is what Mr. Market would like to do if given the opportunity to do so.

The precious metals won't break out until JPMorgan Chase allows it to happen…and as you are already more than aware, the fundamental laws of supply and demand have nothing to with it…and never have.

But when this break-out does occur, I'll be prepared to bet big money that it won't happen in a vacuum, as JPMorgan will have some cover as to why the precious metal prices are exploding to the upside.  The only unknown is whether its origin will be economic, financial, political…or some 'other' event/black swan…or a combination of these.  Whatever it is, it won't be  a coincidence that it's occurring.  These crooks may have been born at night…but it wasn't last night.

The other question that needs an answer is…how soon?  Beats me, but the day it happens, you won't have to ask “Is this it?”…as it will be self-evident.

Checking the CME's web site for yesterday's preliminary volume figures I note that gold's open interest for August is falling precipitously…and is now down to just under 21,000 contracts.  There are still 134 contract showing as being open in the July delivery month…but all of them were reported by the CME as being posted for delivery tomorrow, so silver is done for the month.

All four precious metals were under a bit of selling pressure in Far East trading on the their Tuesday…and they all got swatted shortly after the London open…but are recovering a bit as I write this paragraph at 4:06 a.m. EDT.  Gold volumes are not overly heavy…and most of the trading activity is now in the new front month, which is December.  Silver's volume is about average for this time of day.  The dollar index isn't doing a thing.

And as I hit the “send” button on today's column at 5:20 a.m. EDT, the precious metals haven't recovered too much from their lows of earlier in the London trading session.  Gold is down about five bucks…and silver is down around two bits.  Net gold volume is still pretty light…and silver's volume is 'average' for this time of day.  The dollar index is still flat.

I haven't the foggiest as to what the rest of today will bring…but whatever it is, it should all be in this Friday's Commitment of Traders Report…and it will be more than interesting to see if JPMorgan has any more surprises for us like they did in last Friday's report.

That's more than enough for today…and I'll see you here tomorrow.

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