Another Gold Analyst Strives to Miss the Point

Gold didn't do much in Far East trading on Tuesday but, like Monday, began to turn down at 4:00 p.m. in Hong Kong trading. The price was down about $6 by the time New York opened... and then the price 'fell' another seven or eight bucks during the first half-hour of Comex trading. The low of the day [$1,107.60 spot] was at the end of that sell-off at exactly 8:45 a.m. From there, a rally of sorts started that added about $17 to the price. The rally ended at 12:00 noon right on the button and, from that point, gold traded sideways into the New York close at 5:15 p.m. Eastern time. The high of the day occurred in New York... and was reported as $1,125.80 spot.

The silver chart looks similar... but more 'volatile'. The only minor differences that I could see were that the silver price bottomed at 8:30 a.m. vs. 8:45 a.m. for gold... and the peak silver price occurred at 1:00 p.m. [vs. noon for gold] in New York trading. Silver's low was $16.86 spot... and it's high was $17.43 spot... which is quite a range.

Gold and silver rose and fell with the movement of the dollar... but the rises and declines in both metals were out of all proportion to the rise and fall of the dollar itself which, at best, rose and then fell 35 basis points between 3:00 a.m. Eastern time [4:00 p.m. in Hong Kong]... right up until 1:00 p.m. Eastern time.

The precious metals shares seemed oblivious to the budding precious metals rally that began at 8:45 a.m. New York time... as they didn't catch a bid until after 11:00 a.m... which was shortly before the rally peaked. They did manage to hang in positive territory for a few hours... but gave up the ghost at 3:00 p.m. and sold off with the rest of the equity markets. The HUI closed down 0.61%.

With the large waterfall declines in both metals during New York trading on Monday, it was no surprise that gold's open interest was down. It fell 6,594 contracts on volume of 164,460 contracts. But silver's price decline produced an increase in open interest of 331 contracts. I'm guessing that the bullion banks went long more contracts than they covered. Volume was 30,067 contracts. All this data will be in Friday's Commitment of Traders report... as will all of yesterday's trading. It will be interesting to see if yesterday's rally included any short covering... and we won't know that until the open interest numbers are out later this morning.

The CME's Daily Delivery report showed that exactly 200 gold and exactly 100 silver contracts were put up for delivery tomorrow. The link to all the action is here. There were no reported changes over at GLD yesterday... but in the SLV ETF there was another large mystery withdrawal... the second in the last four business days. This time it was 1,961,964 troy ounces. As Ted Butler would say, this decline was the result of the silver being desperately needed elsewhere, so the unit holder redeemed their shares and took delivery. It had nothing to do with the current price action... as it's been largely positive for the last few weeks. To give you an idea of the dichotomy that exists between these gold and silver ETFs right now, dear reader, let me point out the following to you. Since late February, GLD has added about 300,000 ounces of gold as the price rose. But over at the SLV, 4.0 million ounces of silver have been removed during the same period.

Any questions?

The U.S. Mint finally had a report. One-ounce gold eagle sales have risen another 16,000 to 31,000 for the month... and silver eagles sales are up another 750,000. Their monthly total is already at 1,175,000... and year-to-date 6,817,500 have been sold. In the spirit of things, the Comex-approved warehouses indicated that another 432,252 ounces of silver were withdrawn from their collective inventories on Monday. It was a busy day for all of the depositories... and Monday's Comex warehouse activity report is linked here.

The usual New York gold commentator pointed out yesterday that... "The European Central Bank weekly statement of condition indicated no change in "gold and gold receivables" for the 5th week running."

Today's first story was sent to me by California reader, Joseph Weiler. It's a piece that's currently posted over at zerohedge.com. The headline should be no surprise to anyone reading this column... it says "State Tax Revenues Plummet By $87 Billion, Biggest Year Over Year Decline In History; Record State Tax Hikes In Progress". It's not a long read... and there are a couple of nifty graphs... and the link is here.

The next story is posted over at news.bbc.co.uk. I note that Greece's prime minister is blaming speculators for worsening Greece's problems... and President Obama has "responded positively" to calls to clamp down on market speculators. They are talking about credit default swaps [CDSs]... a financial instrument that the world could nicely live without... in any of its various guises. The headline reads "Greece welcomes Obama support on speculators". I thank Australian reader Wesley Legrand for sending it along... and the link is here.

Agoracom's chief market commentator, Peter Grandich, was interviewed from the floor of the PDAC conference in Toronto by Howard Green of the "Market Call" program of Canada's Business News Network. Grandich mentioned the U.S. Commodity Futures Trading Commission's consideration of position limits in the precious metals futures markets and silver market analyst Ted Butler's work on the issue. The interview is about 23 minutes long and you can watch it in two parts at BNN's Internet site. The link to part one is here... and part two is here.

Here's a story out of this morning's edition of the Financial Times in London. It's a piece in which CFTC chairman Gary Gensler gets some serious ink. The lead paragraph reads... "A leading US financial regulator on Tuesday called for the prices of derivatives trades to be disclosed in the same way as stock prices, saying only large Wall Street banks benefited from the current lack of transparency." I wish him well... and hope that he's just as diligent about these issues when it comes to the hearings about position limits in the silver and gold markets on March 25th. Time will tell. The headline reads "CFTC urges end to derivatives secrecy"... and the link to this must read story is here.

Here's another story about CFTC chairman Gary Gensler that showed up in yesterday's edition of The Wall Street Journal. The headline for this article reads "CFTC Warns Against Exempting Energy Contracts". The lead paragraph in this story says that "The head of the U.S. futures watchdog agency warned lawmakers Tuesday against excluding some energy contracts from pending legislation, fueling an ongoing turf war between federal regulators." This story is also worth reading... and I thank reader S.A. from Washington state for bringing it to my attention... and the link is here.

And lastly comes this GATA dispatch that was posted late last night. It bears the headline "Another Gold Analyst Strives to Miss the Point". It's incredible the number of so-called experts in the precious metals market have no clue [or pretend to have no clue] when it comes to the huge and manipulative short positions held by the '4 or less' U.S. bullion banks in both silver and gold. One wonders [at least I do, dear reader] if they are ignorant... or just plain stupid. Anyway, regardless of 'all of the above'... this dispatch is well worth the read... and the link is here.

Who says that the Russians have no sense of humour....

Translation... courtesy of reader Alex Lvov... "Purchase of brand new BMW will not bring as much joy as crushed neighbour's one"

However, as time has gone by, more and more people are becoming convinced that silver is manipulated. Once you take the time to study the facts and come to understand the silver manipulation, you will never be able to lose that understanding. The only possible conversion is from being a skeptic into understanding the manipulation. This is strictly a one-way conversion process. The facts demand it. - Ted Butler, March 9, 2010 [butlerresearch.com]

As Ted Butler mentioned in private commentary to his clients yesterday... you must have concentration for price manipulation in any commodity. And that is something, dear reader, we have in spades in the silver market. The explanation below is so simple, that even Stevie Wonder could see it.

Looking at last Friday's Commitment of Traders Report [linked here]... the short position in the Commercial category shows 71,974 contracts held short by 32 different traders. '4 or less' traders [bullion banks] held 47,950 of those contracts... and '8 or less' traders [bullion banks] held 58,100 contracts short. On a straight percentage basis, the '4 or less' bullion banks hold 66.6% of the entire gross short position... and the '8 or less' traders hold 80.7% of the gross short position of 71,974 contracts.

By simple subtraction, this leaves 24 traders holding the balance of the Commercial short position... which is around 13,874 contracts... or 19.3%. Straight division shows that each of these 24 traders, on average... wait for it... holds 578 contracts!

Who controls the silver price? The '8 or less' traders... of which JPMorgan [all by themselves] makes up almost half of the total short position held by these '8 or less' traders... who hold 80.7% of the entire Commercial short position. Or is it the other 24 traders each of whom hold 0.8% of the Commercial short position? You decide. This isn't rocket science.

I note that there wasn't much activity in Far East and early London trading earlier today. Both metals are up a hair... but nothing worth mentioning. Gold volume [as of 4:49 a.m. Eastern time] in the April contract is a very light 17,101 contracts... and silver's volume in May is 3,543 contracts traded. Considering the volumes traded during the New York session... what goes on overseas earlier in the trading day [as far as price and volume is concerned] hardly matters in the grand scheme of things.

For whatever reason, the CME did not post preliminary volume figures for gold and silver trading on Tuesday... so I/we will just have to wait until they post the final numbers in a couple of hours from now.

That's it for today. This week has been very interesting in the precious metals market so far. I'm just guessing, but I would think that today's activity should be more of the same.

See you Thursday.