Will JPMorgan et al let them off the hook easy, or rip them new ones

The gold price traded pretty flat in the Far East on their Tuesday but rallied a bit the moment that London opened.  The rally got capped at that point, as the volume really blew out—and as I feared in my comments in The Wrap in yesterday's column, JPMorgan et al weren't going to let the price do much for the rest of the day, and they didn't.  Once Comex trading closed at 1:30 p.m. EDT yesterday, there was someone standing at the ready to bleed off most of the day's meager gains.

The low and high ticks, such as they were, were recorded by the CME Group as $1,203.00 and $1,214.10 in the December contract.

Gold closed on Tuesday in New York at $1,208.30 spot, up $1.50 from Monday's close.  Net volume was pretty decent at 135,000 contracts, with about a third of it coming before the London a.m. gold fix.

A small rally in silver developed early in afternoon trading in the Far East—but it, too, got cut off at the knees shortly before 9 a.m. BST in London trading.  Within two hours, all those gains plus more, had vanished—and the silver price chopped sideways for the remainder of the Tuesday session.

The low and high were reported as $17.085 and $17.625 in the December contract—and you can tell from the price at the high tick, that the silver price really wanted to fly, but wasn't allowed to.

Silver closed yesterday at $17.19 spot, down 16 cents from Monday's close.  Net volume was 41,500 contracts.

Platinum also rallied, but also ran into 'da boyz' shortly before 9 a.m. BST in London, but it never got sold down after that and traded almost ruler flat for the remainder of the Tuesday session.  Platinum managed to close up 15 dollars on the day.

Palladium had a mind of its own—and its rally began shortly before noon in London, but ran out of gas/got capped shortly before noon in New York—and its price finished up a healthy 23 bucks.

The dollar index closed late on Monday afternoon in New York at 85.77.  It rallied over the 86.00 mark twice during the first part of the Tuesday trading session, the last being around 11:30 a.m. in London.  From there it slid quietly lower for the remainder of the Tuesday session, finishing the day at 85.66—down 11 basis points from Monday's close.

The gold stocks opened in positive territory, but within minutes was in the red—and never looked back.  The HUI got creamed for 3.51%—and finished on its low of the day.

As bad as the gold shares got hit, the silver equities got it worse.  Nick Laird's Intraday Silver Sentiment Index shed another 4.27%.

The CME Daily Delivery Report showed that zero gold and 114 silver contracts were posted for delivery within the Comex-approved depositories on Thursday.  Once again it was Jefferies as the big short/issuer with 103 contracts.  They were also the biggest long/stoppers with 49 contracts, followed by Canada's Scotiabank and R.J. O'Brien with 43 and 21 contracts respectively.  The link to yesterday's Issuer and Stoppers Report is here.

The CME Preliminary Report for Tuesday showed that another 272 gold contracts disappeared out of the October contract—and that brings the total outstanding down to 1,320 contracts.  Open interest in silver went the other way, adding 48 contracts, with the new total outstanding in October now at 337 contracts, from which you have to subtract the 103 deliveries mentioned in the previous paragraph.

There were no reported changes in GLD yesterday—and as of 10:38 p.m. EDT yesterday evening, there were no reported changes in SLV, either.

The good folks over at Switzerland's Zürcher Kantonalbank updated their gold and silver ETFs with the data as of the close business on Friday, October 3—and this is what they had to report:  Both theses ETFs showed big withdrawals.  In gold, there was 187,677 troy ounces withdrawn—and in silver it was a huge 2,743,908 troy ounces.  Ted Butler said that it was probably associated with quarter-end investor book squaring. 

There was no sales report from the U.S. Mint.

Over at the Comex-approved depositories on Monday, there was 6,430.000 troy ounces of gold reported received—200 kilobars—and 32,182.150 troy ounces [1,001 kilobars] were reported shipped out.  With the exception of one kilobar, all the action was at Canada's Scotiabank—and the link to that activity is here.

As always, it was much busier in silver, as 1,201,948 troy ounces were received—and 212,245 troy ounces were shipped out the door.  The link to that action is here.

I have a decent number of stories again today—and the final edit is up to you.

But the other important point is that while the technical funds are selling in all these commodities with a reckless abandon, the commercials are buying with just as much abandon. Both in my mind and according to past history, you want to bet on the commercials to prevail in the end, particularly in silver. As bad and rotten and sickening as the price declines have been, the commercials have bought the whole way down. Prices only dropped because the commercials wanted to buy and declining prices are the only way that they can buy. In other words, I’m still convinced the next major move for silver and these others commodities is up (he says with blood dripping from his eyes).Silver analyst Ted Butler: 04 October 2014

As I mentioned in this space yesterday, I was rather afraid that the capping that took place in all four precious metals would be the end of the rallies for the day—and that certainly turned out to be the case in both gold and silver.  Platinum and palladium finished quite a bit higher, but would have really put on a price show if allowed to do so, which they obviously weren't.  So 'da boyz' are still there.

But Ted Butler says that the grotesque short positions held by the Managed Money in all six key commodities—the precious metals, plus copper and crude oil—are still very much in place.  But the question that still remains unanswered is this:  Will JPMorgan et al let them off the hook easy, or rip them new ones by standing back and not selling to them when they look to cover as the critical 50 and 200-day moving averages are penetrated to the upside.

Here are the 6-month charts for all four precious metals update with yesterday's data.

And as I write this paragraph, the London open is just under 15 minutes away.  Gold is up five bucks or so—as is platinum—and the other two white metals aren't doing much.  Volumes for this early in the trading day are already very decent, however—with gold at 20,000 contracts and silver at 8,000 contracts.  The dollar index, which had been sagging, hit its 85.54 low around 8:30 a.m. Hong Kong time on their Wednesday morning—and is now up 25 basis points.

Yesterday at the close of Comex trading was the cut-off for this Friday's Commitment of Traders Report—and I'll be more than interested in seeing what the numbers look like when they're posted on the CFTC's website at 3:30 p.m. EDT.  I'm still assuming that the big engineered price spikes to news lows in early Far East trading on their Monday morning were the absolute low ticks for this move down—and it's only what happened during the subsequent big rallies on the same day that would possibly lessen the impact of Friday's report.  So we wait.

Considering the price action in gold and silver yesterday, I was more than underwhelmed at the terrible performance of the precious metal shares.  It certainly isn't what I was expecting to see when I checked the HUI chart when I got up on Tuesday morning.  I guess one could blame the goings-on in the general equity markets, but that would only explain part of it.  But on the flip side of this, you have to ask yourself who have been buying the mining shares that the general public has been selling over the last couple of months, as it certainly hasn't been John Q. Public.

And as I sent this out the door this morning at 5:45 a.m. EDT, I note that all four precious metals are up on the day—and it remains to be seen how long this situation lasts before the HFT boyz and their algorithms show up.  The metals all still miles below any moving average that matters, including the 20-day—and as I said a few paragraphs ago, what JPMorgan et al do when these moving averages get penetrated, will determine the extent of these rallies.

Gold volume is just north of 38,000 contracts at the moment—and silver's volume is 13,000 contracts, so these rallies are not exactly going unopposed.  The dollar index, which had been up over 25 basis points at its 2:20 p.m. Hong Kong time high, has now turned into a decline of 10 basis points—and fast approaching its low tick of yesterday.  At that point a not-for-profit buyer stepped in to catch the proverbial falling knife—and it remains to be seen if that occurs again today.

I'm off to bed and, once again, nothing will surprise me when I check the charts later this morning.

I hope your day goes well—and I'll see you here tomorrow.

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The first photo is of Casey Research's illustrious CEO, Olivier Garret.  I took it at The Alamo in San Antonio at the Summit three weeks ago.  The sun is behind him—and fill flash would have helped, but with the temperature and the humidity in the stratosphere, it was the last thing I though about carrying around on a hot and sunny day.  I suppose I could have chosen a more appropriate background, but it was candid shot, so I didn't have a choice in the matter.

The next photo was taken inside the resort hotel.  Jim Rickards was kind enough to give me a bit over an hour of his time—and we had wide-ranging chat on many issues.  I brought my camera along—and asked if I could photograph him when we were done, which he had no problems with.  I took two—and the images that showed up on the screen on the back of the camera at the time were far from inspiring.  But once it was up on the computer screen back home—and because I shoot RAW images—I was able to adjust the colour and lighting—and crop the photo to what you see here.  The side light from the window really helped add character to Jim's face—and it's as good a portrait shot as you're likely to see, although if I had to do it over again, I would have used a different lens.  But, despite that, I was delighted with how it turned out.  So was Jim—and he asked for the exclusive rights to use it.  I was happy to oblige.

I posted a photo of a Monarch butterfly in this column last week that I also took in San Antonio.  Reader Mark O'Brien, who I met a the conference, sent along this photo he took in their Mexican wintering grounds—and I thought it worth sharing.