There Are No Markets Anymore...Only Interventions

With the exception of silver, the other three precious metals were sharply higher when trading began in the New York access market at 6:00 p.m. on Sunday night. This is early morning in the Far East, and at least an hour before Tokyo opens...and during this hour, the New York bullion banks can have their way with the market prices...and that's precisely what they did.

As silver analyst Ted Butler said in a private note to clients yesterday..."In a 12-minute time window early Sunday evening, silver prices plunged as much as $6 in Comex/Globex electronic trading, on exceedingly low volume. That's more than a 13% drop in minutes. I'm not aware of any other silver market open at that time, especially as markets in London [Bank Holiday] and Asia were closed for the day. In a very literal sense, this was all a Comex affair. As such, this proves the exchange is at the heart of the silver manipulation. The intent behind this contrived sell-off seems simple to me...it was designed to flush out any resting stop-loss orders placed below the market...and that it did."

"The commercials [read JPMorgan and the rest of the bullion banks] are pulling out every dirty trick in their manipulative bag of tricks to shake every leveraged long speculator possible from the market. First, as indicated in the COTs, they aggressively bought back on new high prices over the past few weeks. Now they have given the silver apple tree another good shake to the downside to rid any speculative long hangers-on. As a result, there remains very little leveraged long silver fruit to shake off. This shakeout greatly improves a market structure that was great to begin with. It may not feel so at the time, but these flush-outs are constructive towards higher silver prices."

Of course, all the other precious metals 'fell' pretty good as well...especially palladium, which got almost the same treatment as silver.

Once the smack-down was over, the prices of all metals recovered up until about 11:20 a.m. Eastern time and, except for silver, all the precious metals were back in positive territory. Then the not-for-profit sellers showed up one more time...and took all four precious metals lower. Silver was singled out for special treatment here as well. Volume in both gold and silver was very heavy.

Here are all four precious metal charts...and none require further embellishment from me.

Just as a matter of interest, here's the 1-minute silver chart from Sunday night. No shades of grey here. If you're looking for a chart that shows a not-for-profit seller in action, this would be it.

The dollar was all over the map...and after JPMorgan et al were through with the precious metal markets on Sunday night, gold pretty much followed the dollar through the rest of the trading day. But I would guess that the dollar was a managed commodity yesterday as well...and the huge swings in the precious metals prices themselves were out of all proportion to the tiny moves in the dollar, both down and up.

The gold stocks pretty much mirrored the price action...and just as the HUI was about to break into positive territory at 11:20 a.m...the not-for-profit seller showed up in the nick of time to make sure that didn't happen. It was all down hill from there...with the HUI finishing almost on its low tick of the day...down 3.21%.

The silver stocks got it in the neck again...although I did have one stock that finished up...and another that was flat.

The CME's Daily Delivery Report showed that 2 gold, along with 77 silver contracts, were posted for delivery tomorrow. JPMorgan [as the short holder] issued 75 of those contracts...and there was quite a variety of stoppers...including JPMorgan themselves. The link to the action, which is worth a quick look, is here.

There were no reported changes in GLD yesterday...and a smallish withdrawal of 243,921 ounces of silver from SLV. This might have been a fee payment, but it's impossible to tell.

There was no further update in April eagle sales yesterday...so the numbers I gave on Saturday are the final ones. There were no sales reported for May, either.

The Comex-approved depositories on Friday showed that 603,607 troy ounces of silver were deposited...and 223,703 ounces were removed...for a net increased of 379,904 ounces.

For the third time in a week, the exchange has hiked margin requirements for trading silver futures contracts. New margin requirements rise to $16,200 from $14,513. Maintenance margin moves up to $12,000 from $10,750. I thank reader Charley Orr for sending that info along...which came from over at Dan Norcini's website.

The CME is certainly making it expensive for the small trader to play this game. However, Ted Butler says they should be higher anyway...and he "wouldn't be upset if silver margins were set at 100%." I suppose, but the CME is supposed to be raising them as prices rise, not after they allow JPMorgan to hammer the snot out of the silver price first.

¤ Critical Reads

Niall Ferguson: The great inflation of the 2010s

Sticker Shock! The Fed may deny it, but Americans know that prices are rising. Inflation is back.

“I can’t eat an iPad.” This could go down in history as the line that launched the great inflation of the 2010s.

For a moment, it looks like Niall Ferguson has found economic religion. This short essay, which I stole from a GATA release yesterday, is well worth the read...and the link is here.

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Alasdair Macleod: Bernanke is boxed in

Here's another story that I lifted from a GATA release. I've borrowed Chris Powell's preamble as well.

Economist and former banker Alasdair Macleod, who will speak at GATA's Gold Rush 2011 conference in London in August, reviews Federal Reserve Chairman Ben Bernanke's press conference and concludes that the markets figure that the Fed has opted for inflation to save the banking system.

This short piece is posted over at goldmoney.com...and the link is here.

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Doug Casey: The dollar decline, gold price, phony stats and the wild ride ahead

Here's an interview with Doug Casey that's posted over at the mineweb.com...and I thank reader Ray Wiberg for sharing it with us. As per usual, anything that Doug has to say is well worth your time. This is a bit of a read...and the link is here.

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75,000 Applied for 2,000 Local McJobs

Here's a story that I borrowed from yesterday's King Report...and the headline says it all.

Some called the large-scale hiring day a stunt to make hires McDonald's would have made anyway, but the company said the 50,000 jobs represent an upswing in employment opportunities after turnover slowed in recent years.

It's a short read...and the link is here.

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James Turk Forecasts 'Waterfall Decline' in US Dollar

Here's a 12:49 minute interview with James Turk posted over at the bullsource.com website...and I thank Peter Handley for sending it along.

“Given that the politicians in Washington are continuing to spend like there’s no tomorrow, that debt has to be financed somewhere and it’s going to be financed by the printing press. That’s very, very inflationary.”

Needless to say, they spend some time talking about the precious metals...and the link is here.

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Only central bank intervention makes precious metals volatile, Turk tells King

Here's another GATA release where Chris Powell has done all the heavy lifting for me.

Interviewed yesterday by King World News, GoldMoney founder and GATA consultant James Turk remarks that the precious metals really aren't naturally volatile in markets, but are made so by frequent and surreptitious central bank intervention. In any case, Turk discerns a bullish flag pattern developing in the silver price chart. From Turk's lips to the Great Market Manipulator's ear -- and we don't mean Bernanke. An excerpt from the interview with Turk is headlined "Silver Forming Another Bullish Flag Formation" and the link to this must read blog is here.

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Richard Russell - China on Massive Gold Accumulation Program

Here's another King World News blog...this one was sent to me by reader Scott Carpenter yesterday.

With gold closing at an all-time high, silver hitting new 31-year highs this week and the US dollar continuing its plunge, the Godfather of newsletter writers, Richard Russell had this to say in his latest commentary, “One of the questions that I'm most frequently asked is this: ‘Russell, do you think the US government will call in all the privately-held gold, just as Roosevelt did in 1933?’

You'll find out his answer when you click here.

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Is this the Bernanke gold market?

A spectacular if frustrating week for the gold bugs. But they’re still confident.

The extremely serious, but usually modulated, Australian gold-watching service The Privateer was adamant this weekend — headlining its weekly commentary: “We’re Getting Very Close To A BIG Breakout.” The Privateer takes the U.S. financial situation very seriously. It considered gold’s response to Wednesday’s Bernanke press conference highly significant: “In the words of one financial analyst, the entire thrust of Mr. Bernanke’s remarks pointed to only one conclusion: The ‘free money’ party is going to continue, and that’s going to drive gold higher.”

This quote was taken from a column posted over at marketwatch.com yesterday...and it's well worth your time...and the link is here. I thank reader Nitin Agrawal for sharing it with us.

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With Silver Soaring, Attics Give Up Small Fortunes

Here's a story about silver that appeared in yesterday's edition of The New York Times...and I thank reader Phil Barlett for sending it along.

As investors send prices soaring for not only gold, but now also silver, consumers have been unearthing ancient stashes of silverware, teapots and jewelry from long-discarded beaus, and trading them in at pawn shops or selling them on eBay for cash. More and more cash, in fact, as weeks go by.

It's a longish read...and the link is here.

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Eric Sprott Explains/Defends Selling His Silver Units

There was a great hue and cry...plus gnashing of teeth about the fact that Eric sold some of the units of PSLV. I spoke to John Embry on the phone yesterday...and I brought up the issue. His explanation was what I expected...and this is dealt with in this blog over at thefundamentalview.blogspot.com. If you have concerns, this a must read...and I thank Alberta reader B.E.O. for sending it along...and the link is here.

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Sydney Morning Herald cites silver short-selling, quotes Ted Butler

Here's another story that I stole from a GATA release yesterday. It's a story that appeared in the Sunday edition of the SMH.

Silver has also been massively short-sold through futures and options contracts, according to the leading silver analyst in the US, Theodore Butler.

''Silver has the largest short position that's ever existed in anything,'' he says. As well as short-sold futures contracts, the deficiency arises from forward selling, leasing and ''the cumulative issuance of un-backed silver bank certificates''.

This is a must read...and the link is here.

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The clear fact is that there was no price discovery in the smack down of silver on Sunday night. There was no news or no supply/demand developments to account for the silver price movement. There was no physical trade in silver, only electronic games. This was purely illegal price setting on a crooked exchange by a handful of manipulative commercials. - silver analyst Ted Butler, 02 May 2011

There are no markets anymore...only interventions. - Chris Powell, GATA

With all the shenanigans that JPMorgan et al were up to in the precious metal markets yesterday, it's no surprise that gold volume was heavy...about 200,000 contracts net of all roll-overs. The preliminary open interest number showed an increase of 3,148 contracts...but that should decline substantially when the final o.i. numbers are posted on the CME's website later this morning.

Gold's final open interest number for Friday showed a smallish decline of 754 contracts. The preliminary o.i. number showed an increase of 4,704 contracts...so the final number is quite positive.

Silver's net volume was around 155,000 contracts...which is very large...and the preliminary open interest number shows a rather surprising increase of 2,861 contracts. The final o.i. number will be of interest.

Friday's final open interest figure showed an increase of 2,488 contracts...which was a surprise considering the fact that silver closed down on the day. The preliminary o.i. number for silver was posted as 5,451 contracts. But it's impossible to tell from the final number what really happened during Friday's trading day. The only good thing about it, is that everything that happened in the gold and silver markets on Friday, Monday...and today, is going to be in this Friday's Commitment of Traders report...and it should be a barn burner. Today [at the close of trading] is the cut-off for Friday's report. Let's hope that 'da boyz' report everything in a timely manner.

Also issued in conjunction with this COT report on Friday, is the April Bank Participation Report...and this will certainly give us an idea of how hard JPMorgan has shaken the silver tree since a month ago. Ted and I are both expecting to see a big decline in their short position...as all the data in the last month indicates that the bullion banks are pulling out all the stops to cover their shorts...with what happened in the silver market yesterday being a case in point.

May open interest in silver showed another chunky decline...down 461 contracts to 1,057 contracts still open for delivery in May. Well under 100 contracts have been delivered so far...and it's obvious that a lot of contract holders that stood for delivery last Friday, are now selling those positions rather than take physical delivery. Based on what I see here, I doubt that there will be any problems associated with the May delivery month...but it ain't over 'till it's over, as Yogi Berra used to say.

Silver is in only in contango by a few pennies in the nearby months...and is in complete backwardation from March 2012 onward. The backwardation is now up to 97 cents from May 2011 until the December 2015 delivery month.

Here's the 1-year silver chart. As bad as it looks, you must remember that this chart is painted. There is nothing free-market about anything you see here. Since August, it's a chart of the bullion banks buying longs to cover their short positions, which is what's caused this price rally...and then covering their shorts on their engineered sell-offs, by tripping sell stops and forcing the long holder that are left [and there are fewer with each passing day] to sell their longs which the bullion banks happily accept. This is as criminal as it gets.

Not much happened in the gold market last night. Gold is basically unchanged in early morning trading in London...and silver is up about 90 cents as 4:35 a.m. Eastern. Volume in both is pretty decent.

So what happens from here, is entirely up to JPMorgan et al. They're going to pound away until they cover every short position that they can...and, as Ted Butler said at the top of this column, they'll do it by any crooked and illegal method necessary, as there is no one to stop them.

But, as Ted also pointed out, they can only get the silver price as low as the last leveraged long is prepared to sell at. Then the bottom is in. They can still use the gold price as a battering ram to kick the crap out of silver even more...but there is a limit...and even 'da boyz' know that.

Once the bottom is in for the silver price, the bullion banks are going to have to cover shorts by buying longs...and away the price will go again to the upside...and the new upside price will blast through $50 like it wasn't even there.

So, until that time, always remember that this, too, shall pass.

See you on Wednesday.