It remains to be seen just how much of this ‘bang the close’ volume in silver will be included in Friday’s Commitment of Traders Report.

With the benefit of 20/20 hindsight, the gold price was under pressure right from mid-morning trading in the Far East yesterday morning…and it wasn’t until about five minutes after Comex trading began in New York yesterday morning, that the bottom was in.  Kitco reported the low as $1,640.50 spot…down twenty-three bucks from Monday’s close.

From that low, the subsequent rally got cut off at the knees just minutes after the London close, which came at 11:00 a.m. Eastern time.  From there it more or less traded sideways until about fifteen minutes before the Comex close…and then gold got dropped another nine bucks.

From that low, gold rallied about six dollars into the close of electronic trading.  Gold closed at $1,650.80 spot…down $12.70 from Monday.  Considering the size of the sell-off, I was surprised that net volume wasn’t higher.  The CME reported it as 126,000 contracts.

Silver’s price path was very similar but, as you have come to expect, ‘da boyz’ really hit it pretty good…especially after the London close…and then the take-down in the last fifteen minutes of Comex trading was quite breathtaking…and on monster volume to boot.

The actual low for silver [$31.67 spot] came about ten minutes after the Comex close.  From there, silver rallied back over 50 cents into the close of the New York Access Market.

From the close on Monday, to the absolute low at 1:40 p.m. Eastern on Tuesday afternoon, silver was down $1.25…an intraday swing of 3.8%.  Of course there was nothing in the real world of supply and demand that caused this.  It was only JPMorgan et al doing what they do in the Comex futures market.  Since they hold a short-side corner on the market, they can pretty much set the price wherever they want to…and they do.

Silver closed at $32.16 spot…down 76 cents on the day.  Like gold, silver’s net volume wasn’t overly heavy, either…about 34,000 contracts.  About 10% of that came in the last fifteen minutes of the Comex trading session.

The dollar index didn’t do much of anything until shortly after London opened.  Then a 35 basis point rally commenced that ended at precisely 8:00 a.m. in New York.  During the next two hours of trading, the dollar index crashed back within a handful of basis points from its London open starting point…and the decline ended at precisely 10:00 a.m. in New York.  How’s that for free market forces at work?

From that 10:00 a.m. low, the dollar index added on about ten basis points…and by the close of trading at 5:15 p.m. Eastern, the dollar index showed a net gain of less than 20 basis points.

You will carefully note that despite the fact that dollar didn’t do much on a net basis, neither gold nor silver were allowed to gain back all their losses on the day, but would have if not-for-profit sellers hadn’t shown up shortly after 11:00 a.m. and 1:15 p.m.

The gold stocks gapped down at the open, with the low coming about 9:45 a.m…and from there it was onward and ever upward.  I was amazed to see the HUI finish up on the day…rising 3.0% off it’s 9:45 a.m. low.

I’m always of two minds when I see this sort of counterintuitive share price action to the upside when the metals themselves are down.  The perma-bull in me says that insiders are buying this dip because the precious metals are going to blast off from here…and they know that and what to make some big bucks.  The ‘born in Missouri’ part of me says that ‘da boyz’ are loading the boat with these beaten-down shares to sell into any forthcoming rally to keep the HUI from getting out of hand to the upside.

Up until Monday the HUI was down seven days in a row, even though gold and silver prices were up on Thursday, Friday…and Monday.  Why was that?  After watching the gold market very closely for twelve years, I’ve come to the above-mentioned conclusion…and so have many others, of which John Embry is one.

Year-to-date the HUI is down about 4.5%…even though the gold price is up 5.6%.  This should not be…and wasn’t up until the drive-by shooting on February 29th.

The HUI closed at 476.33…up 0.54% on the day.

The silver shares finished mixed as well…and Nick Laird’s Silver Sentiment Index closed up 0.15%.

Nick just informed me that even though silver [the metal] is up 15.4% so far this year…the SSI is actually down 3.7%.  And the day before the drive-by shooting on February 29th, the SSI was up 15.8% on the year, as silver was up about 33% year-to-date on the February 28th.

(Click on image to enlarge)

I suppose that with the lousy price action, that a lot of silver and gold stockholders have decided to just throw in the towel and say to hell with it.  They may, or may not, be back…and if they are back, it won’t be until the shares cost them a lot more than they just sold them for.

The CME’s Daily Delivery Report showed that only 14 gold contracts were posted for delivery tomorrow.  The CME shows only a handful of gold contracts left open for March delivery…but 330 silver contracts are still open at the moment.  They have to be either sold, rolled…or delivered into by next Friday.  I have a hunch that all of those silver contracts will stand for delivery…and that Jefferies will be the big short/issuer on virtually all of it.

Only 2,000 ounce of gold eagles, along with 15,000 silver eagles were reported sold by the U.S. Mint on Tuesday.

The GLD ETF reported that an authorized participant withdrew 97,143 troy ounces of gold yesterday…and there were no reported changes in SLV.

The Comex-approved depositories took in 315,817 troy ounces of silver on Monday…and shipped 339,882 ounces out the door.  All of the activity was at Brink’s Inc.  The link to that action is here.

I note that Endeavour Silver just came out with their 2011 year-end earnings…and imbedded in their press release was this little tidbit…”In Q4, 2011, Endeavour elected not to sell a significant portion of its metal production on the basis that the gold and silver prices were experiencing a major correction [This is the company’s cute way of saying that they know the silver price is managed to the downside. – Ed] and the Company would be better served [by holding] the unsold metal in inventory until such time as the metal prices rebounded. Therefore the following year-end financial results do not reflect the sale of full 2011 metal production. Metal prices did rebound in Q1, 2012 and management subsequently sold most of the metal held in inventory at prices significantly higher than the December prices.”

“Metal held in inventory at 2011 year-end included 980,000 ounces (oz) silver and 5,400 oz gold, compared to 127,000 oz silver and 957 oz gold at 2010 year-end.”

I’d like to see them [and every other silver producer] hold onto a portion of their silver production until they break the back of this JPMorgan-sponsored silver price management scheme, but at least it’s a move in the right direction.  Maybe they [and others] will step up to the plate on the next Sprott PSLV offering, as that’s the equivalent of taking silver off the market themselves.  They all have the cash to make a huge difference it they decide to go that route.

If they want to be beloved by us shareholders…the real owners of these companies…this is a path they could all choose.  Endeavour Silver has found out just how profitable this can be in the short term…and their shareholders love them for it.  A bigger win/win/win situation in the short, medium and long term for everyone, I cannot possibly imagine.

I had several e-mails from reader Scott Pluschau yesterday about the silver price action…particularly the ‘banging the close’ feature at the end of Comex trading yesterday.  A more text-book case of that could not be found anywhere.  Scott’s blog on this issue is a must read…and the graphs are worth the trip all by themselves.  The link is here.

Well, The Central Bank of the Russian Federation updated their website for February yesterday, just as I said they would.  But I was surprised to see that instead of adding to their gold reserves, they actually sold 100,000 ounces in February…the first time they’ve done that since way back in 2008.  I’m not sure what that means in the grand scheme of things.  Here’s Nick Laird’s most excellent chart.

(Click on image to enlarge)

Here’s a graph that Washington state reader S.A. sent my way yesterday…and I have no idea what the source document was that he ‘borrowed’ it from.  I’d say that the Golden State is in permanent state of financial and economic decline.  Not good…but not a surprise, either.

I don’t have a lot of stories today…and that suits me just fine.

I think yesterday’s price action in both gold and silver would qualify for a “Be-Careful-What-You-Wish-For” award for your humble scribe.  I was sort of hoping that neither metal would do much on Tuesday, not realizing how badly it was going to get hammered starting shortly after I hit the ‘send’ button early yesterday morning.

From its New York high minutes after the London close, to the close of Comex trading two and a half hours later, silver got nailed for about 90 cents…and gold for less than a percent.  So it’s obvious that silver was the metal they were after, which is most often the case.

Now it remains to be seen just how much of this ‘bang the close’ volume in silver will be included in Friday’s Commitment of Traders Report.  I’m still not sure whether the cut-off is at the close of Comex trading or electronic trading.

Here are yesterday’s gold and silver charts which obviously include yesterday’s price action.

(Click on image to enlarge)

(Click on image to enlarge)

We’re still well below the critical 50 and 200-day moving averages in both silver and gold.  And, as Ted Butler pointed out in our daily phone conversation yesterday, we did not take out the old low from last Wednesday, so he’s not sure how much more spec long liquidation there was yesterday…maybe just those that came into the market on Thursday, Friday and Monday.

Volumes in both metals on Tuesday were slightly elevated, but not large by any standard, so nothing much may have happened in either metal.  Besides which, the Relative Strength Indicators [RSI] in both metals are still a long way off oversold.

So nothing has been proven one way or another…and it’s not possible to figure out whether we’ve hit a bottom or not.  However, the positive price action in the shares was rather counterintuitive.  We’ll just have to wait it out…and I doubt that much will change until we get past First Notice Day next Friday.  But who really knows for sure?  I certainly don’t.

In overnight trading, the gold price wandered around slightly above Tuesday’s closing price for the most part…and is now rallying a bit now that London has been open a couple of hours.  Silver is pretty much following the same price path as gold.

Initially, gold and silver volumes reported from the CME [if they are to be believed] were very light…with the emphasis on ‘very’…right up until the London open.  They’ve picked up substantially since then, so it’s obvious that even these smallish rallies are not going unopposed by the JPMorgan et al…and the dollar index is down 30 basis points from Tuesday’s close.

As I hit the ‘send’ button at 5:16 a.m. Eastern time, gold is up about seven bucks…and silver is up a dime.

Without doubt, I expect it will be another interesting trading day in London…and equally as interesting when the Comex opens at 8:20 a.m. Eastern time.

That’s all I have for today.  I hope your Wednesday goes well…and I’ll see you here tomorrow.

Sponsor Advertisement

Foundation Resources is a mineral exploration company focusing its efforts within the Coldstream Gold Property, located 115 Km North West of Thunder Bay, Ontario. The Company has a NI 43-101 resource estimate with 860,000 ounces of gold (763,276 ounces gold inferred and 96,400 ounces gold indicated) on the Osmani deposit, which represents one of five highly prospective targets that expands over a 16 km long gold trend. In addition to its Canadian projects, the Company is also exploring the San Rafael gold-silver property in Mexico which is located approximately 150 km northwest of Durango.

These most recent drill results from Span Lake emphasizes the blue sky potential the Coldstream Property possesses and continues to demonstrate the impact that Foundations management team brings to the project. Over the remainder of the year Foundation plans to aggressively drill and expand the current resource on the Osmani Deposit and explore the numerous gold anomalies previously identified within the Coldstream Property. We look forward to providing our shareholders and the public with an updated NI43-101 in Q4 of 2012, which will include 15 holes and 4000 metres of drilling completed last year on the Osmani Deposit, that wasn’t included in the resource calculation. Please visit our website to sign up for continued updates.