Silver wasn’t allowed to close above the $22 spot price mark for the eighth day in a row
As I pointed out in The Wrap in yesterday's column, gold got hit for about 10 bucks shortly after 8 a.m. in Hong Kong on their Wednesday morning, but had recovered all of that loss within a couple of hours. After that, the gold price began to trade with a slight positive bias which lasted right into the Comex open.
After popping above the $1,300 spot price mark, gold traded more or less sideways until the London p.m. gold fix was in. Then a rally began that either ran out of gas, or got capped, shortly before the London close at 11 a.m. EDT. The high tick at that point was recorded by Kitco at $1,325.10 spot.
The price got sold down about ten bucks from there, before trading sideways for the rest of the New York trading session.
Gold closed at $1,316.30 spot, which was up $28.80 from Tuesday's close, but well off its high. Net volume was pretty chunky as well at 181,000 contracts.
The price pattern for silver was similar to gold's but with a bit more “volatility,” and the rally at the London p.m. gold fix got capped both times that it attempted to break above the $22 price mark. After that, the silver price got sold down in fits and starts into the 5:15 p.m. electronic close. Kitco recorded the high tick as $22.14 spot.
Like gold, silver got sold down well off its high, and every rally attempt after that met with the usual seller of last resort.
Silver finished the New York session on Wednesday at $21.73 spot, up 56.5 cents from Tuesday, but more than 2% below its high tick. Net volume was pretty decent at 43,000 contracts.
Here's the New York Spot [Bid] chart on its own so you can see the price action during the Comex and the New York Access Market in more detail.
Neither platinum or palladium prices did much of anything yesterday, as it was strictly a gold and silver show. Here are the charts.
The dollar index closed on Tuesday afternoon in New York at 80.18, and its high tick of 80.27 came around 8:30 a.m. Hong Kong time on their Wednesday morning. From there it chopped a bit lower until 8:30 a.m. EDT in New York. Forty minutes later the index was down to 79.81. It recovered a bit from there, but closed below the magic 80.00 mark at 79.916, which was down about 25 basis points from Tuesday's close.
There was no correlation between the dollar index and gold and silver yesterday either, as the rallies in both metals occurred long after the index hit its low tick of the day. Of course, this currency action had no impact on either platinum or palladium.
The gold equities rallied smartly into gold's high tick, which came a few minutes before the London close at 11 a.m. EDT. It was all down hill from there, and the HUI could manage a gain of only 0.46% by the close. I would guess that some entity such as a precious metal mutual fund was force to unload some shares yesterday. However that's pure speculation on my part.
The silver shares did even worse, and despite the solid gain in the metal price itself, quite a few of them actually closed down on the day, as did Nick Laird's Intraday Silver Sentiment Index, which finished in the red to the tune of 0.06%.
After a quiet “Day 2” delivery day from the CME on Tuesday, the Daily Delivery Report for “Day 3” yesterday made up for it, as 1,664 gold and 192 silver contracts were posted for delivery within the Comex-approved depositories on Friday.
In gold, the big short/issuer was Deutsche Bank out of its in-house [proprietary] trading account. In far distant #2 position was Barclays with 101 contracts issued. The biggest long/stopper was HSBC USA with 1,172 contracts, followed by JPMorgan Chase with 335 contracts in it's in-house [proprietary] trading account, and 137 contracts for its client account.
In silver, the one and only short/issuer was Jefferies. JPMorgan stopped/received 157 of those contracts; 117 for it's proprietary trading account and the other 40 for its client account.
The link to yesterday's Issuers and Stoppers Report is here, and it's worth a quick look.
An authorized participant withdrew 135,154 troy ounces from GLD yesterday. Over at SLV, a smallish 145,142 troy ounces was also withdrawn, which probably represented a fee payment of some kind.
The U.S. Mint also had a small sales report yesterday, it's third in as many days. They sold 3,000 ounces of gold eagles and 1,000 one-ounce 24K gold buffaloes, but no silver eagles.
Over at the Comex-approved depositories on Tuesday, they reported receiving 31,841 troy ounces of gold, all of it into HSBC USA. The link to that activity is here. As it almost always the case, there was much more activity in silver, as they reported receiving 576,912 troy ounces and shipped out 174,491 troy ounces. The link to that action is here.
Yesterday in this space I posted a couple of concentration charts for both platinum and palladium, and promised the same charts for gold and silver in today's column, and here they are.
In the gold chart below, you can see back in the early years of this century, the Big 4 and Big 8 Comex futures traders did not have an overly large number of days of world gold production held short. The maximum was around 35 days and the minimums were less than 20 days. As you can tell, that began to change as the bear market in gold came to an end. At their peak in the last few months of 2010, the Big 4 and Big 8 were short 100 days and about 135 days of world production in gold. Since then, they've been whittling it down, and as of last week's COT Report, the Big 4 and Big 8 largest traders are short 45 and 59 days of world production respectively. The rapid fall-off in the last 12 months was due to the fact that JPMorgan Chase switched from a short-side corner to their current long-side corner, which Ted Butler places around 7 million ounces as of this writing.
Not surprisingly, the silver concentration of the Big 4 and Big 8 looks totally different from the other three precious metals. There have been few days over the last thirteen years where they, collectively, have been short less than 100 days of world silver production between them, and most of the big spikes show cumulative short positions of more than 180 days [6+ months] of world silver production.
As the chart points out, the days of world production that the Big 4 and Big 8 hold as of last week's Commitment of Traders Report shows that they are short 86 and 120 days of world silver production respectively. Only recently have platinum and palladium joined silver at these obscene “Days to Cover Short Positions” levels. These are obviously the U.S. bullion banks and New York investment houses [along with Canada's Bank of Nova Scotia] going short against all comers in the Comex futures market in order to prevent the prices of these three precious metals from blowing sky high, which is exactly what they would do the moment they withdrew from the market, or tried to cover these short positions.
I've decided to include the platinum and palladium charts as well, so you can compare all four at once.
It's just too bad that there won't be a Commitment of Traders Report or a Bank Participation Report from the CFTC tomorrow, as it would show the current short positions of the Big 4 and Big 8 in all four precious metals, along with the short and long position of the U.S. bullion banks broken out separately in the BPR.
I don't have that many stories today, but the final edit is up to you.
A few more words about the price action on Tuesday and Wednesday. Tuesday’s big price smash looked like a text book COMEX jam job, and took prices to two month lows in gold and silver on heavy volume. Undoubtedly, there was big commercial buying on Tuesday, and tech fund selling (most likely new short selling). Yesterday we came back substantially in price on not as heavy volume as the day before. Tuesday was much more emotional in that investors seemed to be disgusted in the manner and timing of the sell-off. That the U.S. Government actually shut down is counterintuitive to what 99% of observers would have expected. The only reason for the sell-off was a price take-down on the COMEX that enabled JPMorgan and other commercials to buy gold and silver contracts. – Silver analyst Ted Butler, 02 October 2013
It's hard to know if yesterday's rallies in both gold and silver that began at the London p.m. gold fix were new longs being placed, or shorts being covered. But what I do know is that both rallies, whatever their cause, were halted in their tracks before they could get far. And as I noted before, silver wasn't allowed to close above the $22 spot price mark for the eighth day in a row. The $22 price mark is also a hair below silver's 50-day moving average, so it's entirely possible that “da boyz” are preventing the price from breaking out by not allowing it to close above that price level. Here's the three-month silver chart.
I just took a quick peek at the CME's Web site, which is still up and running, and the preliminary open interest numbers for both gold and silver for the Wednesday trading session show as unchanged. I'm not sure what to read into that, but it's certainly better than seeing some real big increases after a rally of that size. Hopefully the next Commitment of Traders Report will shed more light on the situation.
As I mentioned earlier, the COT Report and the concurrent Bank Participation Report won't be issued at their usual times on Friday afternoon. The CFTC announced that fact yesterday, and it's obvious that we won't see another one until the government gets back to “work.” The only saving grace of not having them, is that it will save me over an hour of time in my Saturday column. But if I'd rather have the data and do the work. Needless to say, both reports would show big improvements in the Commercial net short positions in both metals, and reduced short positions in silver by the U.S. bullion banks, and a big increase in JPMorgan's long-side corner in the gold market.
With the Far East mostly shut down for the “Golden Week,” there sure hasn't been much in the way of price activity over there on their Thursday. London has been open for about 30 minutes as I write this, and nothing is happening there, either. Volume is non-existent in both metals, and the dollar index is still hovering just under the 80.00 mark, and I wouldn't read anything into any current price action; either up, down or sideways.
And as I hit the send button at 5:20 a.m. EDT, London has been open a bit more than two hours, and there's still nothing happening price wise, although gold volume has picked up a bit. Silver's volume is still extremely light, and the dollar index is basically unchanged as well.
After the price action on Tuesday and Wednesday, it's a mug's game to make any attempt to call the New York price action today. And as I said yesterday in this space: “Nothing will surprise me, and it shouldn't surprise you either.”
See you tomorrow, and I wish all my readers west of the International Date Line a safe and fun weekend.
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