All that matters from this point onwards, is what happens on the next rally in silver and gold. Will JPMorgan et al go short again?

The gold price declined about ten bucks by noon Hong Kong time during their Wednesday trading session.  From there, it recovered all that loss by shortly before 1:00 p.m. in London trading.

Then a sell-off began that took gold down to its low of the day…$1,530.10 spot…which was around 9:40 a.m. in New York.  The gold price recovered smartly from there…and around 2:30 p.m. Eastern time, the high was in at $1,570.80 spot.  From that point, the gold price traded quietly lower into the close of electronic trading at 5:15 p.m. Eastern.

Gold close at $1,562.70 spot…up $7.70 on the day.  Net volume was an immense 291,000 contracts.

Silver was under pressure all through Far East and early London trading yesterday, with the London low coming at the noon silver fix.  From there the price jumped about 30 cents, only to get sold down to its absolute low of the day…$27.32 spot…which came at the same 9:40 a.m. time in New York that gold hit its nadir.

And, also like gold, the silver price climbed smartly from there, reaching it’s high of the day [$28.29 spot] a few minutes after 2:00 p.m. in the New York electronic market.  From that point, silver got sold off almost 40 cents…and closed below the $28 mark at $27.93 spot…up a whole nickel from Tuesday.  Silver’s net trading volume was monstrous as well…around 48,000 contracts.  Once again silver had big intraday price move in New York.  This time it was 97 cents…3.43%.

The dollar index powered ever higher yesterday…and by the time Wednesday was done, it was up a hair over 50 basis points…closing at 83.03.

Here’s the 3-year dollar index for your viewing pleasure. It’s the most overbought its been in the last three years.  A bubble looking for a pin, perhaps?  Of course U.S. bond yields hit record lows as well.

The gold stocks gapped down at the open, but managed to make it safely into positive territory by about 11:30 a.m. Eastern time…and hit their zenith about 12:15 p.m. before gradually selling off a hair into the close.  The HUI finished up 0.32% on the day.

The silver stocks finished mixed yesterday…and Nick Laird’s Silver Sentiment Index closed down 1.20%.

(Click on image to enlarge)

The first CME Daily Delivery Report yesterday showed that there were no new deliveries for the May contract in gold or silver…and the few that were posted on Tuesday will be delivered today sometime.

The contracts for First Day Notice in the June delivery month were posted later yesterday evening.  There were only 24 silver contracts posted for delivery on Friday, June 1st, which is no surprise since June isn’t a big delivery month for silver.  But in gold, there were 1,204 contracts posted, with 1,100 of those contracts coming from JPMorgan’s proprietary trading [in-house] account.  The biggest long/stoppers were HSBC with 515…and JPMorgan in its client account with 314.  In distant third place was Deutsche Bank with 111 contracts stopped.  There were lots of smaller stoppers as well…and the Issuers and Stoppers Report is definitely worth the look…and the link is here.

There were no reported changes in the GLD ETF…but over at SLV an authorized participant added 776,232 troy ounces of silver.

Switzerland’s Zürcher Kantonalbank updated their gold and silver ETFs at the close of business on Wednesday the 29th.  Their gold ETF showed a decline of only 8,867 troy ounces, but their silver ETF showed an increase of 243,136 troy ounces.

The U.S. Mint had no sales report…and the Comex-approved depositories had such a small activity level on Tuesday that it’s not worth reporting.

Silver analyst Ted Butler posted his mid-week commentary for his paying subscribers yesterday…and here are a couple of free paragraphs…

“At the low point [yesterday], silver was down by more than a dollar from Friday’s close, while gold was down more than $40, before both came back somewhat. I’d attribute the decline to HFT manipulation and further attempts to induce speculators to sell into collusive commercial buying. Considering the dreadful news from Europe, I wouldn’t know what else to attribute the decline to. In a sense, I feel sorry for those who don’t believe in the manipulation premise, because if it wasn’t manipulation behind this decline, any other reason would sound hollow. Yes, I’m still living in a sort of twilight zone where world financial conditions are more conducive to strong gold and silver prices than at any time in my personal experience, yet those prices are weak instead.”

“This has not been an easy time for silver (and gold) investors, mainly due to this counterintuitive and debilitating price action. My own view is that none of this price weakness is accidental or coincidental. I sense the recent takedowns have been designed to break the spirit of silver and gold investors. Sadly, I fear the manipulators, led by JPMorgan, have succeeded in demoralizing some investors, all under the lie of hedging and market-making. I suppose this is as it must be in a manipulated market. I can only speak for myself in that I wouldn’t think of selling here and I know that the ingredients for an explosive rally are in place. I don’t know the timing or circumstances of that explosive rally to come, so I am not going to dwell on that aspect.”

On the subject of extreme charts, whether it be gold, silver, the  U.S. dollar, 10-year U.S. bonds…here’s the 3-year chart for copper.  Ted mentioned it got pounded pretty good yesterday as well…and it did.

But that’s nothing compared to this crude oil chart that reader Dean Acheson sent me yesterday.  It, like a few other commodities, is more oversold than its been in three years.  Extreme conditions like that can’t last too long in anything…and they won’t.

I have the usual number of stories, for you today…and if you are a John Embry fan, you’ll love today’s selection of precious metal stories.

Everybody, sooner or later, sits down to a banquet of consequences. – Robert Louis Stevenson

Well, all four precious metals got one last swift kick in the teeth from JPMorgan et al…and platinum set a new low for this move down.  With the June contract now off the board, it will be interesting to see what develops going forward from here.

Can ‘da boyz’ engineer prices lower? Yes, I suppose, but what purpose would it serve?  The number of spec longs left to liquidate in either the Non-Commercial or Nonreportable category is next to nothing…and unless new lows are set in gold and silver for this move down, the technical funds won’t be putting on more short positions.  We are done to the downside.  Any more downside price pressure won’t mean much in the grand scheme of things.

All that matters from this point onwards, is what happens on the next rally in silver and gold.  Will JPMorgan et al go short again?  That is the long and the short of it…and we’ll just have to wait it out.  It’s too bad that yesterday’s price action won’t be included in tomorrow’s Commitment of Traders Report…which I’m really looking forward to seeing.

I was quite happy that the precious metals shares did well in the face of the big decline in the rest of the equity markets yesterday…and I’m certainly hoping that trend will continue.

Just to show you how badly the precious metals markets have been beaten up over the last four years or so…here are two charts that Nick Laird just sent me that are worth spending some time on.  The first is the XAU/Gold Ratio…and the second is the Silver 7/Silver Ratio.  The Silver 7 Ratio is another name that Nick uses for the Silver Sentiment Index which I post daily in this column.

(Click on image to enlarge)

(Click on image to enlarge)

Gold did nothing all through Far East trading during their Thursday…but silver got sold down about twenty cents by 1:00 p.m. Hong Kong time.  With June basically off the board, the volume in both gold and silver has fallen dramatically…and as of 4:04 a.m. Eastern time, is pretty light.  As I hit the ‘send’ button at 4:30 a.m. Eastern time, both gold and silver are pretty much unchanged in early London trading.  The dollar index has rolled over a bit…down 15 basis points as of this writing…and is trading a bit below the 83.00 mark.

As Ted Butler pointed out to me on the phone yesterday, this engineered price decline is now a bit over three months old…and hopefully we’ve seen the end of it.  I await this morning’s Comex open with the usual amount of interest.

See you here on Friday.

Sponsor Advertisement

MAX Resource Corp. (TSX:MXR) is focused on a newly-defined copper/silver/gold porphyry system at Majuba Hill in Nevada that is highly prospective for a bulk-tonnage, open pit deposit.  MAX recently completed a Phase II core drilling program and additional soil sampling in a step-out drilling program at the DeSoto discovery near the past producing Desoto silver mine at Majuba.

Drilling earlier in the year encountered long intervals of high-grade silver and copper near surface in five of eight holes, as well as significant gold intercepts, such as 44.2 m of 71.0 g/t Silver, 0.15 g/t Gold and 1.14% Copper.  Further assay results and soil geochemistry are expected in February/March 2012. Permitting is underway for an extensive Phase III delineation drill program at Desoto to begin in the spring of 2012.

For more information: or [email protected]