Another 2.15 Million Ounces of Silver Disappear From the SLV ETF

Not much happened in the gold market yesterday. However, I note that Thursday was the third day in a row that the gold price was gently but firmly shoved back every time it tried to breach the $1,160 spot price. Gold's high tick of the day was $1,162.70 spot.

Silver's activity [or lack thereof] was similar to gold's. Silver broke through $18.50 on a spike just after 11:00 a.m. in New York, but ran into enough selling to get it back below that price. Then the price was basically a flat line for the rest of the trading session. Silver's high tick was $18.54 spot.

The dollar didn't do much yesterday either. There was a 60 basis point price rise from 2:40 a.m. to 5:40 a.m. Eastern time yesterday morning... but it had almost no effect on the price of either gold or silver. After that, the dollar did nothing.

The weakness of the shares wasn't much of a surprise, but why they took a bit of a hit starting around 11:30 a.m. in New York sure beats me. But that's the second day in a row that the shares have been down a bit, even though the gold price has finished higher each day. The HUI finished down 1.00%

Gold's open interest for Wednesday's trading showed a decline of 1,983 contracts. Volume was 135,879 contracts. However, silver's open interest went the other direction... up 1,967 contracts on volume of 45,578 contracts, about a third of which were roll overs and probably some spreads. Ted Butler figures that a spread trade was the reason why o.i. rose in silver... as there was nothing in the price action on Wednesday to indicate a jump in o.i. of this size. Today's Commitment of Traders report will be released at precisely 3:30 p.m. Eastern time... and the link to that report is here.

The CME Delivery Report showed that 76 gold and zero silver contracts have been posted for delivery on Monday. The GLD ETF showed no changes yesterday...but, once again, the silver ETF stole the show, as the boys and girls over at SLV reported another huge withdrawal... the second in as many days. This time it was 2,157,100 ounces. Since February 26th... 16.7 million ounces of silver have been withdrawn in ten consecutive tranches. That's 5% of SLV's silver removed by 'authorized participants'... almost ten days of world silver production. What entity [or entities] needed silver that badly, or in such a hurry... and how tight must the supply line be if they have to resort to getting it from SLV? I can tell you this, dear reader, if the silver users who have withdrawn this metal from SLV had to source it from the Comex... I can absolutely guarantee that the price of silver would not be $18.50 spot right now!

Talking about silver disappearing... the U.S. Mint updated their April sales figures yesterday. They reported that 21,500 gold eagles and another 749,500 silver eagles were sold. This brings April one-ounce gold eagle sales up to 33,500... and silver eagle sales up to 1,147,000. The Comex-approved depositories reported a net inflow of a very tiny 17,950 ounces on Wednesday. But there was a lot of in-and-out movements associated with that small change... and you can view all the action here.

Yesterday I ran the story about the IMF expanding its lending ability by about US$500 billion. Well, Ron Paul had something to say about it to Ben Bernanke yesterday as well. The video is about 6 minutes long... and if anything Bernanke says in his replies to Ron makes any sense to you... please let me know. The story is posted over at zerohedge.com... and is headlined "Ron Paul Grills Bernanke On The Massive Expansion To The IMF's New Arrangement To Borrow". I thank Australian reader Wesley Legrand for sending it along. It's well worth watching... and the link is here.

Today's next story is posted over at cnn.com and is courtesy of reader Scott Pluschau. The headline reads "More pain coming: State budget gap is $89 billion". "States will have to find a way to close an $89 billion budget gap before their 2011 fiscal year begins in July, according to a report from the National Conference of State Legislatures released Wednesday." It's not just that revenues are declining... but spending is increasing as well. It's not a happy situation... and the link to the story is here.

The next item is a Bloomberg story sent to me by reader Brian Clark. There are more explosive financial problems showing up in Europe as derivatives time bombs are beginning to go off. The first one exploded in France. The headline reads "Saint-Étienne Swaps Explode as Financial Weapons Ambush Europe". This is a European version of what JPMorgan did to Jefferson County... except this time Deutsche Bank AG is the culprit. It's my opinion that Deutsche Bank is one of the '4 or less' traders that's massively short both gold and silver on the Comex. This is a very long read... but it's a must read... and the link is here.

For the last ten days or so, I've had the pleasure of working with my good friend Nick Laird over at sharelynx.com. We've been working [he did the work... I did the cheering!] on a new gold chart that shows the obvious price manipulation in the gold market during the last four-year period. Borrowing heavily from the previous work of German researcher, Dimitri Speck... Nick has come up with a similar, but more detailed offering.

A full-screen version of this amazing graph is linked here.

The price plot on the top half of the charts shows the intraday average for the last 4 years... a 2-minute, tick 24-hours a day... from March 2006 to March 2010. Approximately 1,000 days all averaged... which makes it easy to find any impositions on the price plot. Of note is the active manipulation at 10:00 a.m. in New York that coincides with the London p.m. gold fix [3:00 p.m. GMT] is the same as seen here in an earlier study. A cursory glance will show that there are other price points of interest as well.

If you click here, you can see the individual months and years that make up the database for the entire graph. Just scroll down further. Here you can see many random months where the markets can be seen rising, steady... or falling. But through all the clutter are the outstanding price declines on each of the London gold fixes. These are the times when the greatest manipulation takes place. Gold is now traded around the clock... on electronic trading as well as open outcry. Demand is active all hours of the day across the globe.

The bottom half of the plot shows the countries with trading exchanges that settle their futures contracts in physical as well as cash. These trading exchanges are the world's major trading exchanges that add to price discovery around the clock. They trade in volume and delivery to such an extent that they add to the price discovery that goes on 24 hours a day around the globe. There are plenty of other exchanges offering cash settlement only futures, but generally their volumes are low and it's likely that most of these exchanges add little to price discovery. Singapore, Sydney and Zurich have all stopped trading gold futures and now deal OTC for clients and, as such, are no longer included as they don't offer price discovery.

Along the bottom are two time lines. One shows New York [Eastern] time... and the other London [GMT] time. Readers in both the USA and the rest of the world should find that one or other of these time lines will meet their needs. I urge you, dear reader, to copy the graph... or bookmark the link.

Lastly today, is this item... In New York yesterday, to ring the bell of the New York Stock Exchange on behalf of the new Sprott Physical Gold Trust (PHYS), Sprott Asset Management CEO Eric Sprott was interviewed for almost 8 minutes on CNBC by business news anchor Maria Bartiromo. Sprott argued the virtues of PHYS over other gold exchange-traded funds and noted that gold has risen for a decade despite unfriendly selling by central banks. The link to the video, which is well worth watching, is here.

Let one state in the U.S. be free of government... and overnight you would have an economic powerhouse. - James Cook

As I mentioned yesterday, I'm not overly happy with what's been transpiring in the gold and silver markets since this current rally began a couple of months ago... and that includes the share price action during the last couple of days as well. Yes, we've broken out to the upside on the gold [and silver] chart... but we're also looking at sky-high open interest numbers once again... almost what they were back in early December when gold hit $1,210 spot. The only difference now is that gold is about $60 lower than that at the moment. Sure, the price can go higher and set a new high price... but at what cost in open interest? As I've said several times in the last couple of weeks, this rally is NOT going unopposed. Only JPMorgan appears not to be involved in increasing their short position in either metal at the moment... but the '7 or less' bullion banks that are left, appear more than happy to take up the slack.

However, it will be interesting to see if these banks can trigger a sell-off on their own... or will JPMorgan help them out to slam the gold and silver prices once again? That's the big unknown at the moment, but nothing I see out there suggests that things will be different this time. We can only wait it out and see what happens. But these movements out of the SLV ETF certainly means that something is afoot in the silver market. It's just a matter of how [and when] it will manifest itself.

I note in Far East and early London trading that both metals are down a bit... but are attempting to rally as I write these lines at 5:20 a.m. Eastern time. Gold volume is about 22,500 contracts... and silver's volume is around 3,700 contracts... net of spreads. The U.S. dollar isn't doing a thing at the moment.

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And lastly, the preliminary volume numbers for Thursday's trading have been posted at the CME's website. They show that gold traded a smallish 109,795 contracts... and silver traded 31,570 contracts, of which about 5,000 were roll-overs or spreads.

I hope you have a great weekend... and I'll see you here on Saturday.