This was the HFT boyz and their algorithms putting the boots to the price

The gold price chopped quietly lower in fits and starts until the London p.m. gold fix was in.  At that point, the gold price was down about thirteen dollars.  Then a not-for-profit seller, algorithms at the ready, ground the gold price down by another twenty bucks, with the low tick coming minutes before the 1:30 p.m. COMEX close.  From that point the gold price crawled higher into the close of electronic trading at 5:15 p.m.

The high and low ticks were reported by the CME Group as $1,285.40 and $1,251.00 in the February contract.

Gold finished the Thursday trading session at $1,258.10 spot, down $25.20 from Wednesday's close.  Net volume was way up there at 255,000 contracts.

Silver traded more or less flat in Far East trading on their Thursday morning—and briefly penetrated the $18 spot price mark in early morning trading.  Then, starting at 1 p.m. Hong Kong time, “da boyz” showed up—and by 10:40 a.m. EST, they had the price down about 60 cents.  Then the HFT algorithms kicked in—and the low tick was printed about 12:20 a.m. EST.  Then, like gold, it rallied a bit into the close.

The high and low ticks were reported as $18.05 and $16.74 in the March contract an intraday move of over 7 percent.

Silver closed yesterday in New York at $16.915 spot, down $1.045.  Volume, net of February, was enormous at 85,000 contracts.

The palladium and platinum charts looked very similar to the silver and gold charts.  Platinum finished the Thursday session at $1,218 spot, down 31 bucks from Wednesday.  Palladium closed at $771 spot, down 21 dollars.  Here are the charts.

The dollar index closed late on Wednesday afternoon in New York at 94.63—and made it up to 94.80 by 1:00 p.m. Hong Kong time.  From there it chopped lower, hitting its 94.37 low tick the moment that the HFT boyz and their algos showed up around 10:30 a.m. EST in New York.  By 12:30 p.m. the dollar index had blasted up to its 95.00 high—and got sold down from there, closing the Thursday session at 94.68—up only 5 basis points on the day.

All of the the precious metal declines occurred while the dollar index was declining from 94.80 to its 94.37 low tick—and their subsequent rallies were in the face of a sizzling dollar rally.  As I've said on many occasions—and will repeat again here—what the dollar index is doing is almost totally irrelevant—with yesterday's price/dollar action an excellent case in point.  Movements in precious metal prices have everything to do with what's happening with the paper traders in the COMEX futures market.

So the next time you hear the brain-dead pundits saying the the precious metal rose or fell on what was happening in the currency markets, it's an excellent bet that you can reject those comments for the bulls hit that they are.

The gold stocks gapped down at the open, of course, but rallied into the London p.m. fix before turning lower when the assault on the gold price began shortly after.  Their low tick came when gold hit its low, which was shortly before the COMEX close.  They rallied sharply from there—and were in danger of breaking into positive territory before getting sold down a bit going into the close.  The HUI finished the Thursday session down only 1.48 percent.

The silver equities follows a similar price pattern but, not surprisingly, they didn't do as well as their golden brethren—and Nick Laird's Intraday Silver Sentiment Index closed down 3.43 percent.

Considering the carnage in both gold and silver yesterday, I consider the share price action to be a positive.  Let's hope it lasts through today.

The first of two CME Daily Delivery Reports showed that  12 gold and 2 silver contracts were posted for delivery within the COMEX-approved depositories today.  As I said in this space yesterday, the balance of January's open interest would have to go off the books by the close of business today—and here it is.

The January delivery month closed out as follows—95 gold contracts were delivered, but a chunky 453 silver contracts were posted for delivery, which is an impressive outcome to what is traditionally a non-delivery month.

Late yesterday evening the CME Group updated the Daily Delivery Report with the First Day Notice numbers for delivery into the February gold contract starting on Monday.  It showed that only 55 gold, along with an astonishing 288 silver contracts were posted for delivery within the COMEX-approved depositories on Monday.  Jefferies was the only short/issuer of note in both gold and silver—and the list of long/stoppers totalled about ten, with no standouts.  But that wasn't the case in silver, as Jefferies was the only short/issuer—and Canada's Scotiabank stopped 282 of them.  The link to yesterday's Issuers and Stoppers Report is here.

The Preliminary Report for the Thursday trading session showed zeros across the board for outstanding deliveries into the January contract, as per my previous comments.  The gold open interest for February shows a very high 8,494 contracts, but I expect that to drop precipitously in the days ahead, so don't use that number as guide.  The number in tomorrow's Preliminary Report will be a better guide.  In silver, the February o.i. shows 316 contracts, a goodly portion of which [288] were posted for delivery on Monday

There was another surprise deposit in GLD yesterday, as 182,454 troy ounces were shipped in by an authorized participant.  I would guess that this was being deposited to cover an existing short position.  As of 9:53 p.m. EST yesterday evening, there were no reported changes in SLV.

Joshua Gibbons, the “Guru of the SLV Bar List“, updated his website with the weekly report from the iShares.com Internet site—and here's what he had to say:  “Analysis of the 28 January 2015 bar list, and comparison to the previous week's list — 5,696,474.9 troy ounces were removed (all from Brinks London), no bars were added or had serial number changes.

The bars removed were produced by the following refineries: Handy Harman (1.8M oz), Britannia (0.9M oz), Hoboken (0.5M oz), Noranda (0.7M oz), Asarco (0.6M oz), and 23 others.

As of the time that the bar list was produced, it was overallocated 390.7 oz.  All daily changes are reflected on the bar list.

As has been common, over 99% of the bars removed recently had been in SLV for many years. I do not know if they are being 'hand picked' (e.g. COMEX-approved brands), or if this is just a coincidence (e.g. entering the vault from the back entrance to remove bars, for those vaults with multiple entrances!).

The U.S. Mint had a tiny sales report yesterday.  They sold 1,000 troy ounces of gold eagles—and another 111,500 silver eagles.

Once again there was no in/out activity in gold at the COMEX-approved depositories on Wednesday—and there was very little activity in silver, as nothing was reported received—and only 36,027 troy ounces were shipped out.

I have another whole raft of stories for you again today—and I'm happily leaving the final edit up to you once again.

You certainly don't need me to read you chapter and verse on what happened yesterday, as we've been down this particular road together many times before.  Once again the price action had ZERO to do with supply/demand issues—and ZERO to do with what the currencies were doing.  This was the HFT boyz and their algorithms putting the boots to the price in the COMEX futures market, a paper market, allowing them to cover part of their grotesque short positions.

They weren't just content with the four precious metals, they kicked the crap out of copper, natural gas and crude oil as well.  You can't have investors running to hard assets when paper assets of all descriptions require constant support—like the Dow and the bond market for instance.

Here are the 6-month charts for the Big 6 commodities—and I've included natural gas as well.

Looking at the gold chart above, you'll note that the price broke below its 200-day moving average by a small amount, but did not close there.  Silver was only allowed to touch its 200-day moving average on the latest rally—and came within a few pennies of its 50-day moving average on the way down yesterday.

Platinum and palladium were closed below their respective 50-day moving averages, but with the chart patterns they have, I wouldn't read a thing into that.

So, are we done to the downside?  Perhaps—for the moment.  But if forced to bet ten bucks, I'd bet that JPMorgan et al are far from through.  Even though there was big down-side price/volume action yesterday, the Big 8 short holders still hold an historically large short position in both silver and gold—and only the timing of the next engineered price decline remains in doubt.  It could be today, next week, or next month—but it's coming.

Could they get over run?  Sure, but these guys have hijacked the price mechanism so thoroughly that it matters little as to what might happen in the real world.

The one thing that should be pointed out, is that the big price smashes yesterday should have come as no surprise to anyone who reads this column on a daily basis, as both Ted Butler and I have just been sitting and waiting for “da boyz” to pull the trigger—because as I said in Wednesday's missive “the danger flags are snapping in the wind“.

And as Ted pointed out on the phone yesterday, you have to wonder how long the precious metal miners are prepared to put up with this price management scheme, as it's even more obvious now than it was a year ago.  But the World Gold Council and The Silver Institute will certainly put an end to any attempt by the mining industry from asking the CFTC and the CME Group any embarrassing or incriminating questions.

And as I write this paragraph, the London open is about twenty minutes away.  All four precious metals are up a bit from their respective closes in New York late Thursday afternoon.  Net volume is gold is around 19,000 contracts, which is mostly in the new front month, which is April—and in silver net volume is around 5,500 contracts.  The dollar index, which kept creeping lower all through Far East trading on their Friday, is currently down 4 basis points.  All is quiet at the moment.

Today we get the new Commitment of Trader Report for positions held at the close of COMEX trading on Tuesday—and without even seeing the report, it can already be classified as “yesterday's news,” because what happened after the cut-off on Wednesday and Thursday has already rendered it irrelevant—and we'll have to wait until next Friday's report to get an idea of what happened yesterday and the day before.  We also have three more trading days in the reporting week to add to next week's COT Report—and anything can [and probably will] happen between now and then.

So we wait some more.

The one positive note yesterday was the muted reaction of the precious metals shares.  Considering the pounding that both gold and silver took, I was much relieved to see share prices rebound quickly.  Will that continue?  Beats me, but I don't expect we'll have to wait long to find out.

One thing I will be watching closely over the next week, is just how much gold is withdrawn from GLD because of the price action over the last couple of days.  As far as SLV is concerned, this price smash would certainly allow JPMorgan to cover some or all of their short position in that ETF, because there has only been one deposit in SLV since December 1—and that was 1.1 million troy ounces that was added on January 22.

Since December 1, just over 30 million ounces of silver has been withdrawn from SLV—and not a soul, except for Ted Butler, is saying a word about it.  The SLV ETF was obviously owed a lot of silver, but since nothing was deposited during the previous rally, the authorized participants , with JPMorgan being the chief culprit, was shorting the shares in lieu of depositing real metal.  Now they're covering.

And as I hit the send button on today's column at 5:25 a.m. EST, I see that the gold price is still inching higher—and is currently up 8 bucks.  Net volume is around 29,000 contracts, which isn't a lot. 

Silver is back over the $17 mark.  Just twenty-four hours ago it was just above $18 spot.  Net volume is 7,800 contracts. Platinum and palladium are up as well, but their respective “rallies” got sold down a hair—and the dollar index hasn't changed much from about three hours ago, and is currently down 6 basis points.

Today is the last day of the week—and the month—and absolutely nothing will surprise me from a price perspective when I check the charts later this morning.  It shouldn't surprise you, either.

Enjoy your weekend—and I'll see you here tomorrow.

Ed Steer

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