The liquidation process in gold continues unabated

The gold price flopped and chopped in a tight five dollar price range through all of Far East and London trading on Wednesday.  But thirty minutes after the Comex close—and at precisely 2 p.m. EDT, the price got smacked for five bucks as the HFT boyz spun their algorithms.  However, the gold price gained half that back by the 5:15 p.m. EDT electronic close.

The high and low ticks, such as they were, were reported by the CME Group as $1,299.30 and $1,288.70 in the December contract.

Gold closed in New York on Wednesday at $1,291.40 spot, down another $3.80 from Tuesday.  Net volume was very light once again at around 76,000 contracts.

Here's the New York Spot Gold [Bid] chart, so you can see the precise timing of the 2 p.m. EDT sell-off by 'da boyz'.  This precision extended into the New York Spot Silver [Bid] chart as well.

It was slightly different for silver.  After the obligatory down spike at the 6 p.m. open on Tuesday evening, silver also traded flat in a very tight range yesterday, but a discernible rally began at 1 p.m. BST, which was twenty minutes before the Comex open.  That rally met its match at, or just before, the London p.m. gold fix—and the price got sold down a dime or so by 10:30 a.m. EDT.  After that it traded pretty flat, although the price got hit for about ten cents at precisely 2 p.m. EDT as well.

The high and low price ticks were reported as $19.585 and $19.395 in the September contract.

Silver closed yesterday at $19.45 spot, up 4.5 cents from Tuesday.  Volume was pretty heavy because of roll-overs out of the September contract, but it all netted out to only 22,500 contracts.

Platinum traded flat until the Zurich open—and then it got sold off gently to its 3:30 p.m. [or thereabouts] low.  After that it gained a few dollars into the close.  Platinum got closed down another 12 bucks.

It was the same for palladium, although the sell-off at the Zurich open was a bit more intense.  The decline ended just before lunch in New York—and after that it traded flat, but lost another 14 dollars—and is now down twenty-five bucks off its Monday high.

The dollar index closed late on Tuesday afternoon in New York at 81.87.  Once it opened for trading again it traded flat until about 9:30 a.m. Hong Kong time.  After that it rallied quietly up until 2 p.m. EDT yesterday, then it jumped not quite 20 basis points in just a few minutes—and after that it didn't do much into the close.  The index finished the Wednesday session at 82.25—up a chunky 38 basis points.

The action at 2 p.m. appeared to be another 'ramp the dollar index/sell the precious metals' moment—just like what happened at the Comex open on Tuesday.

The gold stocks opened in slightly negative territory—and finally broke into positive territory just before lunch in New York.  At that point, the rally picked up a bit more steam, but that all ended the moment 'da boyz' hit the 'buy the dollar/sell gold and silver' button.  After trading in the red for an hour or so, the stocks managed to finish the day unchanged, as the HUI close up 0.02%.

The silver equities chart looked the same—and the precision of the 2 p.m. EDT sell-off is to be marveled at.  Nick Laird's Intraday Silver Sentiment Index closed basically unchanged as well, down only 0.07%.

The CME Daily Delivery Report showed that 268 gold and 1 lonely silver contract were posted for delivery within the Comex-approved depositories on Friday.  The only short/issuer of note was Barclays out of its in-house [proprietary] trading account.  The three largest long stoppers were JPMorgan with 151 contracts for its client account, 85 contracts for Canada's Scotiabank—and 29 contracts for Barclays in its client account as well.  I continue to be amazed by the number of gold contracts that are being delivered into JPMorgan's client account lately.  What do they know that we don't?  The link to yesterday's Issuers and Stoppers Report is here.

Much to my surprise, there was more gold added to GLD yesterday, as an authorized participant deposited 28,860 troy ounces of the stuff.  And I was even more amazed to discover that another 1,439,175 troy ounces of silver had been deposited into SLV.  Obviously JPMorgan is in some hurry to pay down its short position in that ETF.

Since August 4, there has been 8.44 million troy ounces of metal added to SLV—and it certainly wasn't deposited because the price of silver has been rising and silver investors having been buy SLV shares like mad.  Au contraire, the silver price has fallen just under 75 cents since that date.

The U.S. Mint had another sales report again yesterday.  They sold 1,000 troy ounces of gold eagles—1,500 one-ounce 24K gold buffaloes—and another 100,000 silver eagles.

There was no in/out movement in gold at the Comex-approved depositories on Tuesday, but silver more than made up for it, as 1,239,186 troy ounces were deposited—and a smallish 66,671 troy ounces were shipped out.  The link to that activity is here.

Since yesterday was the 20th of the month, the good folks over at The Central Bank of the Russian Federation updated their website with their July data.  It showed that they added 300,000 troy ounces of gold to their 'official' reserves.  Their reserves now stand at 35.5 million troy ounces—and Nick Laird's most excellent chart below reflects that change.

Try as I may, I just can't get the number of stories down to a manageable size, so I always have to wimp out and get you to edit it for me.  Today's list is no exception.

I’m scratching my head at Monday’s 3 million oz deposit into the big silver ETF, SLV, following a 4 million oz deposit in the previous week. Trading volume in SLV has been light and price action rotten, not the ingredients for the 7 million oz deposits being due to plain vanilla investment buying. The only plausible alternative explanation is that then deposits are intended to reduce the short position in SLV, last reported at 17.37 million as of July 30, although only the first 4 million oz deposit occurred before the next report on August 26. At least the combined 7 million oz deposit is within the confines of reducing a 17 million oz total short position. If the deposits are not intended to reduce the short position, then I am at a loss to explain why they occurred.Silver analyst Ted Butler: 20 August 2014

JPMorgan et al took another small slice off the golden salami yesterday—and although silver set a new low for this move down, it was only by a penny or so, so there wasn't much in the way of technical fund long liquidation in the 'Manged Money' category.  Once again, volumes were low in both metals.

Here are the 6-month charts for gold and silver once again.

The liquidation process in gold continues unabated, as it has much further to go than silver.  Silver took a bit of a breather yesterday, but I don't expect that happy situation to exist for long, as JPMorgan and the HFT boyz could slice another dollar off silver in a New York minute if that's what they decided to do.

And as I write this paragraph, the London open is twenty-five minutes away.  I see that the HFT boyz working for JPMorgan et al are busy slicing the salami in gold and silver to the downside once again, as they took a couple of five dollar slices out of the gold price during Far East trading, the last one starting at 2 p.m. Hong Kong time.  The price chart for silver looks similar—and silver was down over a percent at one point.  Platinum and palladium are basically unchanged.

I was quite taken aback by the gold volume figure, as it has exploded to 34,000 contracts net, as sell stops were hit as the 200-day moving average got penetrated to the downside about 15 minutes ago.  Net silver volume is much, much quieter at only 5,400 contracts, as any moving average of significance for silver was broken a long time ago.  The dollar index, which had been up as much as 10 basis points earlier, is now about unchanged.

Once again I feel I must comment on how well the precious metal equities are holding up in the face of these engineered price declines.  As a 'for instance', silver is down about $2.15 since it topped out back on July 10—which is a ten percent decline. According to Nick Laird, the silver equities are only down 2.2% over the same period.  I would guess that deep pockets are buying all the equities that John Q. Public is selling at the moment.

I was doing some reading over at the website just now—and Mark O'Byrne, the proprietor over there, had a few interesting things to say about 'peak gold'.

The decline in gold production in Australia has been blamed on royalties and gold’s falling price in recent years. Yet, there is a real possibility that Australia, like many other gold producing countries, may have reached “peak gold.”

Recently, the decline in South African gold production was attributed to national electrical issues, power outages and industrial unrest. However, the scale of the decline at a time when gold prices has risen since 2001 and there has not been a corresponding decline in base metals mined in South Africa suggests that geological constraints may be leading to lower gold production.

Peak oil is a phenomenon familiar in the popular consciousness – peak gold is a phenomenon yet to be understood.

Peak gold is the date at which the maximum rate of global gold extraction is reached, after which the rate of production enters terminal decline. The term derives from the Hubbert peak of a resource.

Peak gold has yet to be considered and analysed by the international financial community but there is a risk that it has happened or will happen soon. It should lead to much higher gold prices in time and gold’s inflation adjusted high of $2,500 per ounce remains a realistic long term price target.

The fact that peak gold may take place at a time when the world is engaged in a peak fiat paper and electronic money creation experiment, bodes very well for gold’s long term outlook.

You can read the rest of what Mark had to say over at the Internet site—and the link to his Wednesday commentary is here.

And as I hit the send button on today's missive at 5:05 a.m. EDT, I note that gold's current low of the day was set at the London open—and silver a few minutes after that—but both have recovered slightly.  Platinum and palladium have hit new lows as well—and palladium is actually up a few bucks from its New York close yesterday.

Net gold volume is now up to 47,000 contracts—and silver's net volume a bit under 8,000 contracts.  Obviously JPMorgan et al are continuing to harvest the technical funds for fun, profit—and price management purposes.  The dollar index is now down a hair.

It's a difficult situation to read at the moment, as there's still lots of room left to the downside in both gold and silver, but I'm also intrigued by the amount of metal being deposited in both GLD and SLV even as prices of the underlying metals continue to deteriorate.  I'm also watching the amount of gold contracts that are being delivered into JPMorgan's client account as well, as the amounts are not insignificant.  Then there's the matter of how well the precious metal shares are holding up—along with the current melt-up in the dollar index.

Is something afoot?  Beats me.  I've felt this way before—and it's always come to nothing.  But some day we'll wake up and things will be different—and as I am wont to say, only the timing is unknown.

For that reason I'll be watching the rest of August's price action with more than the usual amount of interest—starting with the New York open this morning.

That's all I have for today and, as usual, it's more than enough.

See you tomorrow.

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The next two photos are of scaups…probably Lesser Scaups.  The first photo is of the parents I took back on June 7.  The second photo is of Mom and the offspring, now fully fledged, which was taken less than three metres away from the first photo, but on August 17.  The log in photo one, is just out of frame on the left hand side in photo two.  Both pictures were cropped for maximum visual impact.  By the way, the third photo is of a baby Tasmanian Devil.