Yesterday’s volume numbers were, for the second day in a row, not what I wanted to see

The gold price traded almost ruler flat through most of Far East trading on their Thursday, but began to show signs of life about 1:45 p.m. Hong Kong time.  That ‘rally’ lasted until ten minutes after the COMEX open—and then gold rallied sharply before getting cut off at the knees around 10:30 a.m. in New York.  It crawled higher from there, but got sold down once COMEX trading was done for the day—and the electronic session yesterday looked like a duplicate of the electronic trading session on Wednesday.

The low and high ticks were recorded by the CME Group as $1,211.90 and $1,227.70 in the June contract.

Gold finished the Thursday session in New York at $1,221.40 spot, up $6.30 from Wednesday’s close.  Net volume was very chunky at 159,000 contracts.

With some minor variations, the silver price action was similar to gold’s, so I shall spare you the play-by-play.

The low and high ticks were reported as $17.07 and $17.585 in the July contract.

Silver closed yesterday at $17.445 spot, up another 33.5 cents.  Net volume was an eye-watering 60,000 contracts.

As has been the case lately, the platinum price mirrored gold and silver prices closely once again.  That white metal finished the Thursday session at $1,157 spot, up 10 bucks on the day.

After chopping mostly sideways in Far East and Zurich trading yesterday, the palladium price got sold down during the exact same time-frame that the other three precious metals were rallying.  Palladium’s low tick came at the the other precious metal’s high ticks.  It rallied a bit after that, but still closed down 4 dollars at $780 spot.

The dollar index closed late on Wednesday afternoon in New York at 93.62—and then chopped quietly lower to its 93.15 low tick, which came minutes before lunch in London.  The subsequent rally lasted until shortly before 11:30 a.m. in New York.  It then slid quietly lower until the equity market closed—and it traded flat from there.  The index closed at 93.39—down another 23 basis points.

The gold stocks gapped up a bit the open—and hit their highs at gold’s 10:30 a.m. EDT high tick—and then sold down into negative territory by 2:30 p.m. before chopping quietly sideways into the close of the equity markets in New York.  The HUI finished down 0.28 percent.  I was underwhelmed—and hoping its not a harbinger of things to come.

The silver equities fared far better, as their initial rally was much stronger—and the high in that precious metal came at 10 a.m. EDT.  Although they chopped lower from there, they rallied a bit during the last ninety minutes of trading, as Nick Laird’s Intraday Silver Sentiment Index closed up 1.28 percent.

The CME Daily Delivery Report showed that zero gold and 14 silver contracts were posted for delivery within the COMEX-approved depositories on Monday.  JPMorgan stopped 3 of them for clients and 6 of them for its company account. The link to yesterday’s Issuers and Stoppers Report is here.

The CME Preliminary Report for the Thursday trading session showed that gold open interest fell by 4 contracts, leaving 141 left open—and silver’s o.i. declined by 31 contracts, leaving 344 left—minus the 14 mentioned in the prior paragraph.

I was gobsmacked by the changes in both GLD and SLV yesterday, as both showed major withdrawals.  In GLD, an authorized participant took out 141,895 troy ounces—but in SLV there was another over-the-moon withdrawal, as 2,867,610 troy ounces was taken out by an authorized participant.

Just as a matter of interest, in GLD since May 2, there have been three withdrawals [no deposits] totalling 573,542 troy ounces.  In SLV since April 27 there have been five withdrawals and only 1 deposit.  During that period the amount of silver in SLV has declined by 9.9 million ounces.  No price action during these times periods warranted these kind of withdrawals of physical metal.

With a 3-day rally in both gold and silver under out belts, it will be interesting to see how much of these two metals will be deposited in the next few days, as it’s a good bet that both ETFs are owed a decent amounts of both.  And as I said yesterday, it remains to be seen if these authorized participants resort to shorting the shares in lieu of depositing real metal.  I’ll have more on this in tomorrow’s column.

Since yesterday was Thursday, Joshua Gibbons, the Guru of the SLV Bar List, updated his website with the goings-on over at the Internet site as of the close of business on Wednesday—and here is his report.

Analysis of the 13 May 2015 bar list, and comparison to the previous week’s list: 3,823,878.2 troy ounces were removed (all from Brinks London), no bars were added or had serial number changes.

The bars removed were from: Degussa (0.7M oz), Handy Harman (0.6M oz), Krasnoyarsk (0.5M oz), Britannia (0.4M oz) and 25 others.  As of the time that the bar list was produced, it was overallocated 16.0 oz.

All daily changes are reflected on the bar list, except a 955,880 oz deposit Wednesday.

For the third day in a row, there was no sales report from the U.S. Mint.

There wasn’t a lot of in/out activity at the COMEX-approved depositories on Wednesday.  In gold, there was no in/out movement at all—and in silver, nothing was received—and only 107,072 troy ounces were shipped out.  All of it came out of Canada’s Scotiabank.

It was reasonably quiet over at the COMEX-approved gold kilobar depositories in Hong Kong, as only 88 kilobars were reported received—and 994 were shipped out.  The link to that activity in troy ounces is here.

I have the usual number of stories for a week-day column—and I’ll happily leave the final edit up to you.

Every week, or even more frequently, I explain how position changes on the COMEX between two distinct groups of speculative traders set the price of silver and gold and other commodities. On one side are the technical funds in the managed money category of the CFTC’s Disaggregated COT Report—and on the other side are commercial traders who take the opposite position of whatever the managed money traders do. If the managed money traders buy, then the commercials sell and vice versa. It never varies.

In fact, if the managed money traders didn’t behave like Pavlov’s dogs to the stimuli of buying on upside penetrations of the moving averages and selling on downward penetrations, there would be no manipulation possible in silver or any other market. If the commercials couldn’t maneuver the technical funds in the managed money category both ways, up and down, there would be no ongoing silver manipulation, just a one-time spike up or down.

The managed money traders are, by CFTC and CME classification, purely speculative traders with absolutely no legitimate bona fide hedging purpose behind their trading. That doesn’t make them illegitimate traders or bad people, just that they are pure speculators and not hedgers. The commercials are thought of as legitimate hedgers by many, but in reality they, too, are pure speculators as they are more akin to bookmakers looking to profit when the managed money traders reverse positions; just like a bookie hopes to profit when someone bets on a basketball game of a horse race and loses. These commercials are banks and financial institutions, with nary a legitimate miner or industrial consumer in their ranks. Besides, what legitimate miner or industrial user would engage in a hedging strategy based exclusively upon making book with speculative traders with no regard to internal company requirements?Silver analyst Ted Butler: 13 May 2015

It was another day where gold, silver and platinum were allowed to rally a bit, but it was obvious from the charts that any time they got too “irrationally exuberant” to the upside, a willing seller appeared.  That was particularly noticeable shortly after 11 a.m. in London—and also at 10:20 a.m. in New York in all three metals.  Considering the fact that all three have wildly different supply/demand fundamentals, these obvious joined-at-the-hip price movements had nothing to do with free markets.

Gold traded above, but did not close above, its 200-day moving average, although silver did—and platinum has now broken above and closed above its 50-day moving average.

Where we go from here is up in the air.  The RSI traces aren’t even close to being in wildly overbought territory, so we could certainly rally from here—and I’d be happy to see it.

However, yesterday’s volume numbers were, for the second day in a row, not what I wanted to see—and it’s a certainty that the Commercial traders were taking on all comers in the Managed Money category as they sold short positions and went long.  And as I mentioned in yesterday’s column, unless there’s some hidden jiggery-pokery going on that I’m unaware of, there was big deterioration in the Commercial net short positions once again.  If a COT Report came out showing the effects of the last two trading days, it would mostly likely show that there’s been shocking deterioration in the Commercial net short positions in both gold and silver.  So, for the moment, it looks like the same old, same old.

And as I write this paragraph, the London open is about fifteen minutes away.  Gold sold down a few bucks in very quiet trading in the Far East on their Friday—and is currently a hair off its low tick.  The same can be said about silver, which is currently down a dime or so.  Platinum is trading flat—and palladium is currently up three dollars.

Net volume in gold is approaching 14,000 contracts—and about 95 percent of that is of the HFT variety.  Silver’s net volume is a hair over 7,000 contracts.  These are big numbers for such tiny overnight price moves—and I must admit that it doesn’t bode well for the remainder of the Friday session.  The dollar index, which had been flat through most of Hong Kong trading, began to rally shortly before 1 p.m. local time—and is currently up 18 basis points.

Today we get the latest Commitment of Traders Report for positions held at the close of COMEX trading on Tuesday—and it’s already yesterday’s news.  As I said above, the price action of the last three days trumps whatever this report has to say.  I’ll be talking about it in tomorrow’s column, but only in the most general terms.

And as I sent today’s column out the door at 5:00 a.m. EDT, there isn’t much going on even though London has been open a couple of hours—and things are pretty much unchanged since I wrote the previous paragraph on the situation.

Gold volume is now up to just about 24,000 contracts—and silver’s net volume is just below 10,000 contracts.  These are huge volumes for little or no price movement—and it’s virtually all of the HFT variety.  There’s not a producer or consumer of the metal anywhere to be found in these numbers, so supply/demand fundamentals are being trumped by the HFT boyz and their algorithms.

The dollar index is currently up 34 basis points.

I have no idea what may happen during the remainder of the Friday session, but as you already know it’s only what happens during the COMEX trading session that matters—and JPMorgan et al aren’t leaving any clues.  I’m expecting a down day, but would love to be spectacularly wrong.

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