The precious metal market feels all washed out to the downside at this point
There was a bit of a rally in gold during early trading in the Far East on their Friday, but by early afternoon it had petered out. The gold price didn't do much after that until the London p.m. gold fix. That rally took the gold price back above the $1,200 spot price mark. At that point, either the rally got capped, or the buyer disappeared. Gold traded flat for the remainder of the Friday session in New York.
The CME recorded the low and high ticks at $1,188.00 and $1,206.90 in the February contract.
Gold closed on Friday at $1,203.50 spot, up $15.70 on the day. Net volume was pretty decent at 153,000 contracts.
Silver didn't do much yesterday, although it did participate in the rally at the London p.m. gold fix—and then, like gold, traded more or less flat into the close of electronic trading in New York. But as I mentioned in The Wrap in yesterday's column, the silver price did set a new low price for this move down shortly before the London open.
Silver's low and high price ticks were $19.13 and $19.52 in the March contract.
The silver price closed on Friday at $19.415 spot, up 16.5 cents from Thursday's close. Net volume, like in gold, was also pretty decent at 39,000 contracts.
Platinum rallied slowly and quietly right up until 11 a.m. in New York—and then traded flat for the rest of the day. The palladium price was comatose all day. Here are the charts.
The dollar index closed in New York at 80.65 on Thursday afternoon. When it opened in Far East trading on their Friday, it rallied in fits and starts until its 80.81 high, which came at 8:30 a.m. EST. Then down it went to its 80.44 low at around 10:40 a.m. in New York. From that low, it rallied a bit into the close. The index finished the Friday session at 80.56—which was down 9 basis points from its Thursday close.
The gold stocks opened on the weaker side, but rallied into positive territory on the back of the rally in the gold price after the London p.m. “fix” was in. What gains they had were pretty much gone by 1 p.m. EST—and the stock chopped sideways into the close, finishing down a tiny 0.05%. I was underwhelmed.
The silver equities did slightly better, as they finished in the green—and Nick Laird's Intraday Silver Sentiment Index closed up an equally tiny 0.33%.
The CME's Daily Delivery Report showed that 402 gold and 13 silver contracts were posted for delivery on Tuesday within the Comex-approved depositories. The two big short/issuers were Jefferies with 333 contracts and Canada's Bank of Nova Scotia with 57 contracts. Of course the only long/stopper of note was JPMorgan Chase with 385 contracts in its in-house [proprietary] trading account. The 13 silver contracts were stopped by JPM and Canada's Scotiabank. The link to yesterday's Issuers and Stoppers Report is here.
Much to my amazement, an authorized participant deposited 173,612 troy ounces in GLD yesterday. If you're looking for an explanation as to why that happened, I don't have one. And as of 6:41 p.m. EST yesterday evening, there were no reported changes in SLV.
While on the subject of SLV, Joshua Gibbons, the “Guru of the SLV Bar List”, updated his website with the numbers they reported as of the close of business on Wednesday—and here's what he had to say: “Analysis of the 18 December 2013 bar list, and comparison to the previous week's list—3,369,375.1 troy ounces were removed (all from Brinks London), no bars were added or had a serial number change. The bars removed were from: Nordeutsche (0.9M oz), Korea Zinc (0.6M oz), Met-Mex (0.5M oz), and 13 others. As of the time that the bar list was produced, it was overallocated 734.0 oz. All daily changes are reflected on the bar list.” The link to Joshua's website is here.
The U.S. Mint had another sales report. They sold 3,500 ounces of gold eagles and 1,500 one-ounce 24K gold buffaloes. They didn't report selling any silver eagles.
It was another busy day for gold over at the Comex-approved depositories on Thursday, but it was all intra-warehouse transfers, as 63,602 troy ounces were shipped out of HSBC USA and Scotia Mocatta—and into the vaults of JPMorgan Chase. The link to that activity is here.
It was equally busy in silver, but most of it came in the door, as 1,222,110 troy ounces were reported received—and a tiny 3,004 troy ounces were shipped out. The link to that action is here.
Well, yesterday's Commitment of Traders Report, at least in silver, wasn't what I was expecting.
In silver, the Commercial net short position actually increased by 1,713 contracts, or 8.6 million troy ounces. The Commercial net short position now stands at 96.2 million ounces. I asked Ted why the numbers weren't what we were expecting—and he said that it was probably the fact that some of the price/volume data from the prior reporting week's big rally in silver wasn't reported in a timely manner during that week. That data, which was obviously quite a bit, when added to the data from the current reporting week, resulted in the unhappy surprise when I first saw yesterday's COT Report. Ted also said that JPMorgan's short-side corner in the Comex futures market in silver didn't show much, if any, change—and still sits at around 13,000 contracts, or 65 million ounces.
In gold, there actually was an improvement in the Commercial net short, but it was a smallish 1,863 contracts, or 186,300 troy ounces. The Commercial net short position in gold is now down to 2.71 million ounces. Ted says that it appear that JPMorgan Chase expanded their long-side corner in the Comex gold market by about 3,000 contracts during the reporting week, and their long position right now is around 68,000 contracts, or 6.8 million troy ounces.
If the markets don't blast off on either Monday or Tuesday, the full effect of the engineered price declines in both silver and gold on Wednesday and Thursday will be apparent in the next COT Report which, because of Christmas Day, won't be posted on the CFTC's website until Monday, December 30. So, once more, we wait.
Since yesterday was the 20th of the month, The Central Bank of the Russian Federation updated their website with their November data—and for the fourth month in a row they showed no change in their gold holdings, which still stand at 32.6 million ounces. As I opined last month, it wouldn't surprise me in the slightest of they were pulling a “China”—buying their own production, but not reporting it. That's pure speculation on my part, but it would certainly fit everything else that's going on in the gold world at the moment. Here's Nick Laird's updated chart.
I have the usual number of stories for a Saturday column, plus a few extras because of the subject material or length, that I've been saving just for today.
For 30 years, the price of silver has either stagnated over long periods of time (years) or actually declined; only to experience powerful bursts in price more extreme than in any other commodity. On five separate occasions, in 1987, 1997-98, 2006, 2007-08, and in 2011, the price of silver doubled in a matter of weeks or months. I suppose many would contend that this price pattern is normal in silver without giving it much further thought. I would agree it is normal price behavior for silver, but for a very good reason – that this proves silver has been manipulated in price.
Let’s face it – silver, like any metal, is produced and consumed 24/7 on every single day of the year and decade. Further, silver is one of the oldest metals in human history and is truly universal in recognition and awareness. With that background, why should it be normal for the price to stagnate for years, only to erupt and then collapse again in remarkably short periods of time? What legitimate free market forces could possibly explain the highly unique price pattern in silver? Save your time and energy and the use of your grey cells – there is no legitimate explanation. There is an explanation, all right, but it sure isn’t legitimate. – Silver analyst Ted Butler: 18 December 2013
Today's pop “blast from the past” dates from late 1984—and was this band's only number one hit just about everywhere on Planet Earth in 1985. The rock band—and the song—require no further introduction, and the link is here.
Since this is my last “Saturday” column before Christmas, I thought it appropriate that I post something in the way of a musical selection that reflected the true meaning of the season. It's a Sacred Oratorio by George Frideric Handel, Messiah. It was recorded at Westminster Abbey in London back in the very early 1980s. The baroque orchestra is the world renowned Academy of Ancient Music with Christopher Hogwood conducting. I note that Simon Preston is the organist, someone whom I've had the pleasure of listening to in concert here in Edmonton many years ago.
I also note that Emma Kirkby is one of the sopranos, and I posted a piece of hers in this space last week, and it was an excerpt from this very performance. This is the only version of this work that I own, and I've had the CD since the moment it became available in that format, so it's almost as old as this performance itself, and it gets regular air time in our house every Christmas. I consider this recording to be definitive. The performance runs for 2:16 hours, and the link is here.
I don't have too much to add to what I've already said about the precious metals at the top of today's column. Now that we are in the countdown for the holiday season—and year end, I expect things to get pretty quiet from now until the New Year. However, there's nothing that could possibly come out of left field during this period that would surprise me, either.
Here are a couple of charts that show the Comex warehouse stocks of both gold and silver going back 20 years. The charts are courtesy of Nick Laird, of course—and I hope you find them of some value.
Ted Butler feels—and I totally agree—that the precious metal market feels all washed out to the downside at this point. If we're not at record lows in the Commercial net short positions in both gold and silver, then we're within spitting distance once again. And as I said in yesterday's column, how high and how fast the precious metals rally from here when the next one begins, is 100% dependent on what JPMorgan does with their long-side corner in Comex gold—and their corresponding short-side corner in Comex silver.
That's all I have for the day—and the week. I'll have one more column before Christmas—and that will be on Tuesday, December 24—and I'll see you then.
Right on the Money, a new book by Doug Casey
Doug Casey’s new book Right on the Money will hit the shelves December 16. This follow-up to his wildly popular Totally Incorrect book focuses mostly on topics such as the economy, investment strategies, speculation, and how to be a contrarian… as usual in Doug's inimitable, irreverent style.