A brutal sell-off still remains in our future

The gold price, which was up about six dollars by the London open on their Thursday morning, suddenly jumped higher shortly around 8:30 a.m. GMT.  That rally wasn't allowed to get far—and after that, the price chopped lower until 1:00 p.m. in New York—and from there it edged higher into the 5:15 p.m. EST close of electronic trading.

The low and high ticks were reported by the CME Group as $1,218.00 and $1,232.80 in the April contract.

Gold closed in New York yesterday at $1,221.70 spot, up $3.80 from Wednesday's close.  Net volume was very much on the lighter side once again at 96,000 contracts.

The silver price got sold down by about two bits in early morning trading in the Far East on their Thursday morning.  It rallied from there until 8:30 a.m. GMT in London, when it too blasted higher.  But the vertical spike got capped the moment that the $17.00 spot price mark was breached—and from there, followed a similar pattern to gold, which was down until lunch time in New York.

The low and high were recorded as $16.605 and $17.04 in the March contract.

Silver finished the Thursday session at $16.835 spot, up a nickel on the day—and it would have closed materially higher if allowed to do so, which it obviously wasn't.  Net volume was 27,000 contracts, which has been the net daily volume every day this week so far.

Both platinum and palladium had their tiny price spikes at 8:30 a.m. GMT as well—and neither metal did much after that.  Platinum closed up six bucks—and palladium closed up 7 dollars.  Here are the charts.

The dollar index closed late on Wednesday afternoon in New York at 94.92—and made it as high as 94.98 in late morning trading in Hong Kong.  From there it began to slide, but someone was there to catch the proverbial falling knife right at the 94.00 mark around 11:50 a.m. EST in New York.  It rallied about twenty basis points in the next hour and a bit, before chopping sideways into the close.  The index finished the Thursday session at 94.18—down 74 basis points.

As I keep reminding you, please remember that the price of precious metals is mostly determined by what's going on in the COMEX futures market—and not what is going on in the currencies.  If that was the case, we should have had a big up date in both gold and silver as the Thursday session progressed, but we didn't.

The gold stocks gapped up about a percent at the open, before quickly heading into negative territory.  However, that didn't last long—and the shares traded in a wide range—mostly in positive territory—before rallying decisively starting at the 1:30 p.m. EST COMEX close.  The HUI finished up 0.98 percent.

The silver equities spent the entire trading session in positive territory—and clearly outperformed their golden brethren, as Nick Laird's Intraday Silver Sentiment Index closed up 2.29 percent.

The CME Daily Delivery Report showed that 36 gold and zero silver contracts were posted for delivery on Monday within the COMEX-approved depositories. HSBC USA was the short/issuer on all of them—and JPMorgan out of its client account stopped 34 of them.

The CME Daily Delivery Report for the Thursday trading session showed that February gold open interest declined by 5 contracts yesterday, leaving 651 still open.  Of course the 36 contracts posted for Monday delivery in the previous paragraph must be subtracted out to get the true number.  Silver's February open interest is up another 13 contracts—and now sits at 36 contracts still open.

At last there was a withdrawal from GLD, as an authorized participant took out 57,607 troy ounces.  And as of 9:28 p.m. EST yesterday evening, there were no reported changes in SLV.

Since yesterday was Thursday, Joshua Gibbons, the “Guru of the SLV Bar List” updated his website with the goings-on inside the iShares.com Internet site for their reporting week that ended on Wednesday—and this is what he had to say.

Analysis of the 11 February 2015 bar list, and comparison to the previous week's list.  No bars were added, removed or had serial number changes.  As of the time that the bar list was produced, it was overallocated 271.9 oz.  All daily changes are reflected on the bar list.  A quiet week!

There was another sales report from the U.S. Mint yesterday.  They sold 2,500 troy ounces of gold eagles—500 one-ounce 24K gold buffaloes—and another 73,500 silver eagles.

Over at the COMEX-approved depositories on Wednesday, they reported receiving 40,126 troy ounces of gold, but didn't ship anything out.  All the activity was at HSBC USA—and the link is here.

In silver, nothing was reported received, but 643,602 troy ounces were sent out the door.  The link to that activity is here.

I have a decent number of stories for you today—and I'll happily leave the final edit up to you.

Let me make it easy for those who refuse to acknowledge the silver manipulation. Simply explain why 8 traders, mostly domestic and foreign banks, would hold short the equivalent of 40% of the world's annual production—and a third of all the silver bullion that exists—at prices below the average primary cost of production and nearly 70% below the price levels of four years ago.

How could such a concentrated short position be explained in legitimate terms and what would be its purpose? What effect would such a large short position have on the price of any commodity—and how do you see it being resolved if it wasn’t permanent?

I don’t expect any serious answers to such questions, as it appears to be easier to malign the questioner as a conspiracy theorist instead, but I know these questions have never been addressed in a straightforward manner by anyone who denies the silver manipulation. The funny thing about serious questions that can’t be answered is that they can lead to personal epiphanies, such as the type I experienced 30 years ago when Izzy asked me why silver prices were so low in the face of a deficit. One of these days the questions may be asked by someone in position to do something about it.Silver analyst Ted Butler: 07 February 2015

Except for the sudden rallies, followed by the equally forceful sell-offs shortly after London opened, it was another day where both gold and silver were under quiet selling pressure through all of London trading—and most of New York as well—even though both metals finished up a bit on the day.

And as I pointed out earlier, the face plant in the U.S. dollar index was not a factor in the precious metal prices yesterday, as their prices are set in the COMEX futures market—and whatever the Big 8 short sellers in both gold and silver decide, is where prices go.

Here are the 6-month charts for both gold and silver.

And as I write this paragraph, the London open is about twenty minutes away.  All four precious metals have been creeping higher during Far East trading on their Friday.  Net gold volume is a bit under 17,000 contracts—and silver's net volume is around 3,500 contracts.  The dollar index, which took a 20 basis points nose dive back below the 94.00 level starting around 11:30 a.m. Hong Kong time, is now back above it by a few basis points—and is currently down 13 basis points at the moment.

Today at 3:30 p.m. EST we get the latest Commitment of Traders Report figures from the CFTC—and as both Ted and I have mentioned, we'll see some pretty impressive improvements in the Commercial net short positions in both silver and gold.  But whatever improvements are shown, the report still remains in a major bearish configuration in both silver and gold.

Could we rally from here?  Sure, but the odds aren't in our favour in the medium or long term—and unless “da boyz” get over run, a brutal sell-off still remains in our future.  The only uncertainties are, is will it be quick—death by a single thrust—or the 'slicing of the salami' variety?  Stay tuned.

Of course supply and demand will manifest itself at some point, but when, is the $64,000 question.  I don't know, but the day it does become a factor, we won't have to ask, as the new prices will tell you everything you need to know.

And as I send this out the door at 5:15 a.m. EST, I note that the rallies in all four precious metals were turned lower at, or just before the London open.  Whether this trend continues for the remainder of the Friday trading session is unknown.  Net gold volume is just under 24,000 contracts—and silver's net volume is around 5,100 contracts.  Not a lot to see here—and the dollar index is hanging on to the 94.00 level by its proverbial fingernails.

That's all I have for today.  Enjoy your weekend, or what's left of it if you live west of the International Date Line—and I'll see you here tomorrow.

Ed Steer

First Majestic is a mining company focused on silver production in México and is aggressively pursuing the development of its existing mineral property assets. The Company presently owns and operates five producing silver mines; the La Parrilla Silver Mine, the San Martin Silver Mine, the La Encantada Silver Mine, the La Guitarra Silver Mine, and the Del Toro Silver Mine. Production from these five mines is anticipated to be between 11.8 to 13.2 million ounces of pure silver or 15.3 to 17.1 million ounces of silver equivalents in 2015.

These four photos were taken in the Painted Desert at the north end of Petrified Forest National Park in Arizona—and just north of Interstate 40/U.S. Route 66—and about 25 miles east of Holbrook.  They were taken about two hours after the photos I took in Snowflake that appeared in yesterday's column.  As usual, the 'click to enlarge' feature really helps here.

The building in the photo below is the historic Painted Desert Inn at Kachina Point—and I was able to get myself in a position where the picture didn't include the associated parking lot!

Part of the famous U.S. Route 66 used to pass through the Painted Desert at this point—and I couldn't resist.  I cropped it a bit to remove some offending power poles.  Here's the link to the original Route 66 song—and the theme from the TV series.

This last photo is just south of Interstate 40, but still in the park—and forms the transition zone between the painted desert and the petrified forest.  Not that they're different, as one is just an extension of the other.  Note the petroglyphs on the rock in the foreground.  There are lots of them in this area.