Nothing should be read into yesterday’s price action

The gold price was under sporadic and quiet selling pressure during the Wednesday trading session, as the big traders had to be out of their futures contracts by the close of COMEX trading yesterday afternoon.  The news, or lack thereof, from the FOMC meeting ended up manifesting itself as a small squiggle on the chart below—and that was all.

The high and low were reported by the CME Group as $1,293.30 and $1,279.00 in the February contract.

Gold finished the trading session in New York yesterday at $1,283.30 spot, down $8.80 from Tuesday's close.  Gross volume was over the moon at 344,000 contracts, but netted out to only 26,000 contracts.

After getting sold down its low tick shortly after 12 o'clock noon Hong Kong time, the silver price began to chop quietly higher—and was actually a few pennies above unchanged by the time the smoke went up the chimney at the Fed.  Then it got sold down about fifteen cents—and closed slightly lower on the day.

Silver traded within a 20 cent range all day long yesterday, so the high and low ticks aren't worth the effort of looking up.

Silver closed on Wednesday at $17.96 spot, down 7 cents from Tuesday's close.  Net volume was very quiet at only 22,500 contracts.

Platinum followed a similar chart pattern as silver—and was a buck or so above unchanged by the COMEX open.  But that was as high as the price got, as it was sold down from there in rather choppy trading.  The metal was closed on its absolute low of the day—$1,249 spot—and down 11 bucks from Tuesday.

Palladium also dipped a bit into the Hong Kong lunch hour—and its subsequent rally lasted until the 1:30 p.m. EST close of COMEX trading.  Then it got sold down a few dollars into the close of electronic trading.
Palladium added 14 dollars to its price yesterday, closing at $793 spot.

The dollar index closed late on Tuesday afternoon in New York at 94.09—and made it as high as 94.37 in early trading in the Far East.   Then it dipped down to its 93.99 low about 10:20 a.m. GMT in London—and from there it was up, up and away until around 4:20 p.m. EST in New York.  The index traded flat from there, closing at 94.63—up 54 basis points from Tuesday.

Th gold stocks gapped down about two percent at the open—and then made it back to almost unchanged once the London p.m. gold fix was done.  From there it chopped sideways until a minute or so after 2 p.m. EST when the Fed “news” came out—and the shares got sold down pretty hard from there, but rebounded a hair into the close.  The HUI got smacked for 3.60 percent.

The silver equities got sold off a bit more than two percent at the open yesterday—and they also chopped sideways until the same minute that the gold shares began to head south.  But the silver shares headed south faster—and Nick Laird's Intraday Silver Sentiment Index got lambasted for 5.55 percent, which was hugely out of proportion to the 7 cent loss in the silver price itself.

We're seeing a lot of counterintuitive moves in the precious metal stocks vs. the metals themselves these days, both up and down—and I must admit that I'm at a loss to explain it.

The CME Daily Delivery Report showed that 9 gold and 15 silver contracts were posted for delivery within the COMEX-approved depositories on Friday.  The link to yesterday's Issuers and Stoppers Report is here.

The CME Preliminary Report for the Wednesday trading session showed that January gold open interest increased by 17 contracts—and now sits at 21 contracts.  Silver's January o.i. increased from 15 to 17 contracts.  So despite the deliveries tomorrow that I mentioned in the previous paragraph, there are still some contracts left open in January.  But whether they're delivered into or not, they have to disappear by tomorrow's preliminary report.

There were no reported changes in GLD yesterday—and as of 9:49 p.m. EST yesterday evening, there were no changes reported in SLV.

The good folks over at Switzerland's Zürcher Kantonalbank updated their website with the activity in both their gold and silver ETFs as of the close of trading on Friday, January 23—and this is what they had to say.  Their gold ETF added 14,958 troy ounces—but their silver ETF went in the other direction, selling off a chunky 134,772 troy ounces.

There was a sales report from the U.S. Mint yesterday.  They sold 1,500 troy ounces of gold eagles—2,000 one-ounce 24K gold buffaloes—and another 161,000 silver eagles.

It was another day with no in/out action in gold at the COMEX-approved depositories on Tuesday and, surprisingly enough, there was absolutely no in/out activity in silver, either.  It's been a very long time since that's happened.

After two days in a row with a huge amount of stories, I have somewhat fewer stories in today's column, but a decent number are definitely worthy of your attention—and I hope you have time for them.

In SLV, there has been a big net reduction in metal holdings in the reporting period ending on January 15—also before and after—and the most plausible explanation is that shares are being shorted because physical metal is not freely available (along with the avoidance of a big buyer from crossing the SEC’s 5% share ownership reporting requirement). If there is one thing absolutely rotten about SLV (and GLD) it is the ability of short sellers, most likely Authorized Participants (AP’s) and including JPMorgan, to fraudulently and manipulatively short shares instead of depositing metal when net new buying occurs and as the prospectus demands. Actually, “rotten” is too mild of a term, unless preceded by the expletive of your choice.

Shorting shares in a hard metal ETF, like SLV, instead of securing and depositing actual metal, is cheating in its purest form, a Wall Street end around gimmick that hurts all silver investors, not just those in SLV. As such, silver (and gold) investors should be united against it. How does it hurt all silver investors and not just SLV investors? By not having to bid up silver prices by securing metal when it is not freely available, the free market forces of supply and demand are circumvented to the short sellers’ advantage and to all silver investors’ detriment. This is the reason shares are shorted – so actual metal prices can be kept low.

I’m not suggesting that the shorting of SLV shares is at the heart of the silver manipulation, as Manipulation Central is still firmly ensconced on the COMEX. After all, the eight big shorts on the COMEX are short 310 million oz, while total SLV shorts are in the 20 million oz range. But the shorting of SLV shares is an important additional means of control for crooks like JPMorgan and a way to short circuit free market supply and demand. Silver analyst Ted Butler: 28 January 2015

With the big traders heading for the exits out of the February futures yesterday, particularly in gold, nothing should be read into yesterday's price action in any of the four precious metals.  But I must admit that I was far from amused about the price action of their associated equities—and I'm wondering out loud as to what would motivate sellers to dump their positions in such a manner, particularly on such small price movements in the underlying metals.

But as I said further up, this counterintuitive price action in the equities is becoming more frequent all the time—but that still doesn't explain it.

Here are the 6-month charts for both gold and silver updated with yesterday's price/volume data.

To further expand on what Ted had to say in the quote above, I was just looking at the deposits into GLD since since its low on January 15.  On that date, GLD held 22.75 million troy ounces—and as of the last deposit on January 27, GLD now holds 24.20 million troy ounces.  That's 1.45 million ounces in just twelve days.  Even if there are no deposits for the remainder of the month, that's still a lot of gold.

With China, India and Russia already buying more gold that is currently being mined, the logical question to ask at this point is not only where is the gold that the rest of the world is using, coming from—but where is the gold going to come from to feed GLD and every other gold ETF on Planet Earth if prices continue to rise throughout the year?

As logical as that question is, an even larger issue is where will the silver come from to feed the world's ETFs if silver's rally continues?  JPMorgan, the custodian of SLV—and also an authorized participant—doesn't even have the silver to deposit that the prospectus says they must, even with this piddling little rally in silver that we have now.  And as Ted Butler keeps pointing out, they're obviously shorting the shares in lieu of depositing real metal.

How long this can go on is anyone's guess, but I thought I'd draw your attention to it at this time.

Of course, with a Commitment of Traders Report structure as ugly as we have currently, it's entirely possible that JPMorgan et al will engineer a vicious sell-off in both metals in order to retrieve the gold that's just been deposited in GLD—and also allow them to cover their short positions in SLV while they're at it.  This makes the problem go away temporarily, but it does—as Ted noted—totally “short circuit” the underlying supply/demand fundamentals that would ordinarily drive silver [and gold] prices higher.

And as Lawrence Williams pointed out in his essay further up, with Goldman Sachs and Barclays bearish long term in gold, theirs may be an attempt to talk the market down and discourage the big money on Planet Earth from buying the metal, thus ameliorating the physical demand woes that currently face the central banks, because that has to be only source of all the extra gold that's being consumed in the world at the moment.

It smacks of desperation by the “powers that be”—and with the way events are unfolding in the world today, this could all blow up in their faces without warning.

So we wait.

And as I type this paragraph, the London open is just under 15 minutes away.  There's not much happening in any of the precious metals, although gold, silver and platinum are all down a tad from yesterday's close in New York—and palladium is up a buck.

With today being the last day for traders to exit the February contract in the COMEX futures market [except those standing for delivery] it should be another busy day for roll-overs, but not as frantic volume-wise as Wednesday, as only the smaller traders are involved today.  At the moment, net gold volume is around 19,000 contracts, with almost all of it now trading in the new front month which is April.  Net volume in silver is already pretty hefty at 6,500 contracts.

The dollar index, which had been up about 15 basis points in early afternoon trading in the Far East, is now down 2 basis points.

Two hours have passed since I wrote the above paragraphs—and as I fire this out the door at 4:56 a.m. EST, all four precious metals are under renewed selling pressure—and it should come as no surprise that silver is getting hit the hardest.  Gold is down over ten bucks now—and silver is down more than 40 cents—and here's the chart.

Platinum is now down ten bucks as well—and palladium is down six dollars.

Net gold volume is now 29,000 contracts—and silver's net volume is now 9,000 contracts.  Because of the 15 minute delay in reporting on the CME's website, the volumes have probably blown out more than that.

The dollar index is basically unchanged, so what you're looking at is all paper trading on the Globex—and it's hard to tell whether this is the start of something more serious.  By the time I check in later this morning, we should have more clarity.

That's all I have for today—and I'll see 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.