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Tuesday’s high gold price [around $1,411 spot] came about two hours after trading began in the Far East.  From that high, gold slid to its low of the day, around $1,393 spot, which was close to the London a.m. gold fix at 10:30 a.m. GMT.

Gold then rose back up to unchanged by 11:15 a.m. in New York before getting sold off about ten bucks.  From there it traded sideways into the close of electronic trading at 5:15 p.m. Eastern time.  Not much to see here.

To say that the silver price was ‘volatile’ yesterday, would be an understatement.

For the first half of the trading day, silver pretty much followed the same flight path as gold…with the high [around $34.40 spot] and low [around $32.40 spot] coming almost at the same time as gold’s high and low.  That’s a two dollar intraday move!

From silver’s low in London, the price rose about a dollar until 9:30 a.m. in New York before the price got smacked for almost 70 cents in less than an hour…then rising over 60 cents in the following fourty-five minutes.  Then silver got sold back down 60 cents by 1:00 p.m…before rising 50 cents by 2:00 p.m. Eastern in electronic trading.  What a rollercoaster ride!

As silver analyst Ted Butler said in his weekend commentary…which I quoted in this column yesterday…”we must be prepared for increased price volatility.  That means sharp price movements both up and down.”  Yep, that pretty much sums up Tuesday’s trading day in silver.

I’ll discuss silver backwardation in ‘The Wrap’.

  

Gold was only down 0.54% on the day…and silver down 2.51%.  But platinum got smoked for 3.36%…and palladium got thumped by 6.43%.  Silver’s intraday move was in the 6% range.  A lot of the grains…along with cotton…were locked limit down yesterday…but oil was up a bunch.

As I mentioned yesterday, the dollar blasted off around 7:00 p.m. New York time on Monday night…which was early Tuesday morning in the Far East.  By the time the dollar reached its zenith around 8:30 a.m. in London…it was up about 60 basis point.  Then it proceeded to lose 70 basis points by 11:30 a.m. in New York before recovering into the close.  One would have to be dreaming in Technicolor to find any correlation between the precious metals prices and the world’s reserve currency action yesterday.

  

The gold stocks came roaring out of the gate at the beginning of equity trading in New York yesterday.  However, a combination of a declining gold price, plus a big drop in the Dow saw a large chunk of those gains disappear by the end of the trading day in New York at 4:00 p.m.

The silver stocks blasted off to the moon at the open yesterday, only to fall back as the day wore on.  But, for the most part, a lot of them seriously outperformed their golden counterparts.

  

The CME’s Delivery Report showed that 141 gold along with 30 silver contracts were posted for delivery tomorrow.  All the ‘usual suspects’ were involved…and the link to the action is here.

The GLD ETF reported another withdrawal yesterday.  This time it was 156,086 troy ounces.  But over at the SLV ETF there was a massive drawdown…as a knee-wobbling 5,663,804 troy ounces were shipped out the door.  Obviously the silver was desperately needed elsewhere…maybe the Comex for March deliveries next week?  We’ll find that out soon enough.

The U.S. Mint had a sales report yesterday.  They sold 1,500 ounces of gold eagles…along with a very chunky 777,000 silver eagles.  Month-to-date the mint has sold 76,500 ounces of gold eagles, along with 2,599,500 silver eagles.

Up here in Edmonton, I can report that my coin guy is selling silver hand over fist…and delivery times for just about everything is a month, or longer.  The other thing that I’ve noticed over there is the type of buyer that’s starting to show up more and more frequently…and that’s the new buyer…the first-timers.  You know that the bullion banks are done for when the buyers on the margin start to show up.

The Comex-approved depositories reported that a very small 16,370 troy ounces of silver were withdrawn from their collective warehouses on Friday.

One thing that I forgot to report over the weekend was the January update to the Central Bank of the Russian Federation’s gold reserves.  They updated their numbers on Friday…and for the first time since December 2009, they did not add a single ounce of gold to their reserves…which currently sits at 25.4 million ounces.  No need to post the graph for that.

For whatever reason, the CME [as of 3:16 a.m. Eastern] has not updated their website with Monday and Tuesday’s preliminary trading data.  It still shows the final volume numbers from last Friday…which I reported on in my Saturday column.

The only thing I can report on is the changes in open interest.  Both metals came in pretty close to what I expected.  Open interest in gold was up a further 6,286 contracts…which is quite a bit considering the fact that there was little price action, but it could have been spread related.

In silver, I expected a decline in open interest…which is exactly what happened…as o.i. was down 455 contracts.  I was expecting more…but beggars can’t be choosers.  This is pretty major news, as it indicates that Friday’s huge silver rally was short covering…something I haven’t seen for many a moon.

Based on this data, I’ll be more than interested to see what Tuesday’s final open interest numbers are in silver…as they will contain Monday’s data as well.

Fortunately, all this data will be in Friday’s COT report, as yesterday was the cut-off.  I’m just hoping that the bullion banks reported everything in a timely manner for both days.  As you know, they are experts at withholding data when it suits them…and this might be one of those times.

One of the things that the CME’s report will show when it’s finally posted this morning, is a huge drop in March silver open interest…which, according to the final Friday numbers, is still north of 50,000 contracts.  Both Ted Butler and I are really interested in seeing how many contracts are posted for March delivery next Monday when all is said and done.

After filing my column at 4:50 a.m. Eastern time, I discovered that the CME had finally updated their website with Monday and Tuesday’s preliminary trading numbers in gold and silver.

In gold, around 215,000 contracts traded net of all roll-overs.  Preliminary open interest numbers show a massive increase of 26,859 contracts.  That’s the biggest preliminary o.i. number I’ve ever seen in gold…and, based on my past guesses, the final open interest number might be very ugly when it’s posted later this morning.  I’m guessing it should be at least half that number, but hope I’m wrong.

In silver, net volume over the last two trading days was a whopping 90,000 contracts…give or take.  But, to my surprise, the very big drop in March open interest that I was expecting, failed to materialize. March o.i. fell by only 4,118 contracts…and shows 46,730 contracts still open.  Maybe the total o.i. number for March will show more of a decline when the final figures are posted later this a.m…but I doubt it.  This is getting really interesting.

Silver is still in backwardation…and settled yesterday with a difference of 0.6 cents from the March to May 2011 contract.  Going out to December 2011…silver is in backwardation by 4.5 cents. The December 2015 contract [which only traded three contracts on both Monday and Tuesday combined] is quoted at $31.837.  That’s a backwardation of $1.03 from March 2011. Here are the numbers for silver futures.  Check out the ‘Settle‘ column.

Now compare that to what’s happening in gold.  Gold, as I mentioned yesterday, is in contango.  The final settlement for the December 2011 contract was quoted at $1,406.80…and the December 2015 gold contract is quoted at $1,660.10.  That’s a contango of $259 from the April gold contract…the front month for gold.  Here are the numbers for gold futures.  Check out the ‘Settle‘ column here as well.

Nick Laird over at sharelynx.com makes it easy for us all.  The final settlement numbers [discussed above] for both gold and silver futures yesterday are on the two graphs below.  The difference between backwardation and contango is obvious at a glance. We thank you, Nick!

  

  

Gold and silver prices didn’t do a whole heck of a lot during Far East trading during their Wednesday…and aren’t showing too many signs of life now that London is open, either.  Volume is light in both.  In silver, there are lots of roll-overs from the March contract into the May contract.  These roll-overs should start showing up in the CME’s volume report immediately…as there are only three business days left until First Notice Day.

I expect it to be another wild and woolly trading session in New York once again.

See you on Thursday.

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