first_imgOne should be on red alert for an engineered price declineIt was a zero day in gold on Friday, as the metal traded within a five dollar price range for the entire session, with a tiny rally into the close of electronic trading.  Gold closed on its ‘high’ of the day, such as it was.The low and  high ticks aren’t worth the effort of looking up.Gold closed on Friday at $1,339.00 spot, up $3.70 from Thursday.  Net volume was almost invisible at 67,000 contracts.The same can be said for silver, as it traded in about a 10 cent range all day long.  The highs and lows weren’t worth looking up, either.Silver closed yesterday at $21.445 spot, up 3 cents from Thursday.  Volume, net of July and August, was a pretty beefy 32,000 contracts, which is almost half of gold’s net volume.  Something under 20,000 contracts would have been closer to normal.As I’ve mentioned a few time over the last few months, silver’s net volume is now substantially larger that it ever used to be—and I’m wondering why that’s the case, especially relative to gold.Platinum traded flat as well, but palladium had a down/up rally that started at 10 a.m. in Zurich—bottomed shortly after the Comex open—and was back to a few bucks above unchanged shortly after 12 o’clock noon in New York.  Platinum closed unchanged—and palladium closed up two bucks.  Here are the charts. The overbought conditions in both metals has grown more extreme in the last couple of days.I’d like to point out one more time that the Commercial net short in silver is at, or very close to, it’s extreme all-time high of the last five years—and one should be on red alert for an engineered price decline at some point in the not-to-distant future.  My great concern, as I mentioned in the discussion regarding the COT Report, is that with silver is currently sitting at $21.45 spot—and only up about $2.75 from its $18.75 low of the first week of June—one has to wonder how low will JPMorgan et al be able to drive the price if they really put their shoulders into it as, once again, they ring the cash register on the technical funds for fun, profit and price management.I know it hasn’t happened yet—and it’s entirely possible that we could move higher from here for a while—but the COT numbers, using past as prologue, indicate otherwise.  All we can do is wait it out.That’s all I have for today.  Enjoy what’s left of your weekend—and I’ll see you here on Tuesday. The dollar index closed in New York late on Thursday afternoon at 80.12—and didn’t do much until 9 a.m. BST in London.  At that point it dipped down to 80.04 before being rescued up to the 80.23 level at 9 a.m. in New York.  It faded a small handful of basis points into the close, finishing he Friday session at 80.19—up 7 basis points from Thursday.I was happy to see the gold stocks bounce back, but they looked like they rallied strongly for the same reason that they got sold off on Thursday—and that was no reason that I could see.  The HUI closed up 2.35%.Ditto for the silver equities, as they gained back everything they lost on Thursday, plus a hair more—as Nick Laird’s Intraday Silver Sentiment Index closed up 3.07%.Here’s the long-term Silver 7 Index to show how little ground we’ve actually gained during the current rally.The CME Daily Delivery Report drew a blank yesterday, as no gold or silver contracts were posted for delivery on Tuesday.There were no reported changes in GLD on Friday—and as of 6:01 p.m. EDT yesterday evening, there were no reported changes in SLV, either.There was no sales report from the U.S. Mint on Friday.There a little bit of movement in gold over at the Comex-approved depositories on Thursday, as 3,000 troy ounces were reported received—and 225.4 troy ounces were shipped out.However, it was a monster day in silver, as 336,763 troy ounces were reported received—and a whopping 1,942,290 troy ounces were shipped out the door.  The link to that activity is here.And now for yesterday’s Commitment of Traders Report.  I said in The Wrap in Friday’s column—“Eye-balling the above charts its a tough call on both metals, but basically unchanged wouldn’t surprise me.”I wasn’t even close.In silver, the Commercial net short position blew out by an astonishing 6,063 contracts, or 30.3 million ounces.  The Commercial net short position is now up to 290 million troy ounces, a position we haven’t been at since December 2012 when silver was $34 the ounce.  Now we’re back at an almost 5-year high in the Commercial net short position—and silver is only $21 the ounce.  One wonders how low JPMorgan et al will drive the price when they pull the pin on the technical funds this time around?Ted said that this reporting week’s action was, once again, the technical funds buying back short positions and going long—and in the face of that, the raptors sold another 2,800 long contracts, the Big 4 [read JPMorgan] increased their short position by 2,500 contracts—and the 5 through 8 largest traders added about 800 contracts to their short position.  Ted pegs JPMorgan’s short side corner in the Comex silver market at 17,500 Comex contracts, or 87.5 million troy ounces.Here’s a chart that Nick Laird sent my way yesterday evening.  It shows the long and short positions of all three groups of traders in the COT Report.   Looking only at the center chart, you can see the the Non-Commercial/technical funds in red—and the the Commercials in blue—and the thin black line is the positions of the Nonreportable contract holders that’s visible behind the red bars.Just looking at the Non-Commercial category, in five weeks they’ve gone from a net long position of about 1,000 contracts all the way to a new record high of 48,000 contracts—and for what, dear reader?  A lousy two dollar plus move in the price of silver on the chart directly above it.If you look at the top price chart, we had a similar two dollar move in February and March on much smaller trading action between the technical funds and the Commercials.  And if you go back to August 2012, the price of silver rallied to $34 from $27 by the first week of October—a seven dollar move.  This time—and in a much shorter time period, only five weeks—and on bigger buying volume by the technical funds, silver is only up two bucks and change.In his weekly review on Saturday, July 5, silver analyst Ted Butler had this to say about the above situation: “I have come to believe that the main cause behind the diminishing nature of progressive silver rallies is a willful intent on the part of the regulators and key commercials on the COMEX to snuff out any silver rally before it generates sufficient investment demand that could lead to a physical shortage. More than any alternative explanation that possibly comes to mind, I believe there is a conspiracy between the CFTC and other parts of the U.S. Government, along with crooked private interests on the COMEX, to not let silver go too far on the upside. Further, while this may also be true to some extent in gold, it is in silver where the situation is most critical.”By the way, Ted’s essay “The Silver Conspiracy” will be posted in the clear sometime next week—and you can rest assured that it will appear in this column the moment it shows up in the public domain.There was also deterioration in gold in the COT Report as well, as the Commercial net short position increased by 5,548 contracts, or 554,800 troy ounces.  The Commercial net short position now stands at 16.60 million troy ounces.  Once again it was the technical funds/Non-commercial traders that covered shorts and went long—and the Commercials of all stripes sold longs, or went short against them.  Ted said the JPMorgan sold another 1,000 contracts of its long-side corner in the Comex futures market—and is now down to 2.5 million troy ounces.You’d have to go back to March of 2013 to see the Commercials holding this big a net short position in gold.  It was from that point in March of last year where gold got clocked for $400 the ounce by the end of July.  One wonders what fate “da boyz” have in store for us in gold going forward?  One would have to presume that it would be similar to the fate that awaits silver.By the way, the small traders in the Nonreportable category never have any influence over the price.  It’s the interplay between the mechanically-driven technical funds and the Commercials that drives the price up and down as moving averages are broken in either direction.Here’s the equivalent chart for gold that I posted just above for silver.And, without doubt, that big out-of-the-blue rally in both gold and silver in London trading on their Thursday morning will have driven the Commercial net short positions in both these metals to new extremes, but we’ll have to wait until next Friday to find out just how bad it was.I have a decent number of stories for you today—and I hope you can find time in what’s left of your weekend to read the article that interest you the most.With silver prices so low—and at or below the primary cost of production, there has rarely been a more inopportune time for any producer to be hedging and locking in current prices. This is confirmed by the fact that silver (and gold) miner hedging is at multi-decade lows. Yet the concentrated silver short position of the eight largest traders (all commercials) on the COMEX is near its highest level in years, meaning that the concentrated short position is not legitimate since it doesn’t involve bona fide hedging.At the same time, the concentrated short position of the 8 largest COMEX shorts is near record highs, JPMorgan’s share has rarely been lower, according to the COTs. The only explanation that makes sense is that those involved in the conspiracy are trying to take the attention and heat off of the crooks at JPMorgan by shifting some of the short position from JPMorgan and placing it in other large short accounts. There is no legitimate reason why the 5 thru 8 largest traders on the COMEX hold an all-time record short position at a time of record low miner hedging. As distasteful as I’ve always found the word “conspiracy” to be, I can’t find a more apt description for what has transpired on the COMEX. – Silver analyst Ted Butler: 09 July 2014Today’s pop “blast from the past” dates from this American Rock Band‘s 1981 triple platinum album “Paradise Theatre”.  The group—and the tune—are instantly recognizable—and the link is here.Today’s classical blast from the past is courtesy of Wolfgang Amadeus Mozart.  For me, my two favourite instruments are the piano and violin—and the vast majority of the well-known concerto repertoire of the last two hundred years or so, was written for these two instruments.  If those two instruments, along with all their associated music vanished from the face of the earth overnight, my next favourite instrument is the oboe.  Mozart’s Oboe Concerto in C major, K314 is probably the most well known.It was originally composed in spring or summer of 1777 for oboist Giuseppe Ferlendis (1755–1802) from Bergamo, then reworked by the composer as a concerto for flute in D major in 1778. The concerto is a widely-studied piece for both instruments—and is one of the more important concerti for the oboe.There are no credits given in this youtube.com clip, but it’s quite good.  It’s the only complete performance I could find—and the link is here.There’s nothing to discuss regarding yesterday’s price action in either gold or silver.  The only thing that I continue to note is that the high trading volume in silver continues unabated, regardless of the price action.Here are the 6-month charts for both gold and silver updated with yesterday’s price and volume data.last_img

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