Silver's Mini Flash Crash: Same Time, Same Place

Gold's high [such as it was] of the Tuesday trading day came in the early afternoon in the Far East...and then went into a gentle decline for the rest of the day in London and New York.

During the Comex session, every attempt that gold made to rise above Monday's closing price ran into selling...and, like Monday, the New York top was in about 11:20 a.m. Eastern. Then, once the Comex closed at 1:30 p.m. Eastern, there was a seller there to sell gold down about a percent in the thinly-traded New York access market. The low of the day was minutes before 3:00 p.m...and the gold price recovered somewhat into the close of electronic trading at 5:15 p.m. Volume was heavy.

Silver also had its high of the day in early afternoon trading in the Far East...and only began to decline around 10:00 a.m. in London, with an intermediate low at 1:00 p.m. London time...which was 8:00 a.m. in New York. The silver price began to recover from there, but the moment that it stuck its nose above Monday's closing price at 11:20 a.m. Eastern...the same not-for-profit seller appeared...and that was it...with the ensuing slaughter extending in to the thinly-traded N.Y. electronic market.

Like gold, the selling stopped about one minute to 3:00 p.m...and silver recovered about a dollar into the close. Not surprisingly, volume was extremely heavy.

Yesterday, gold closed down 0.55%...platinum down 0.32%...palladium was unchanged...and silver was down 5.17%. Since the shenanigans on Sunday night...and right through the shenanigans last night in the New York access market, silver is down about 15.8%. This is compared to maybe one or two percent in the other three precious metals.

The dollar flopped around about twenty-five basis points on either side of 73.00 yesterday...and, during the New York session, the gold price pretty much followed what the dollar was doing from the Comex open until its 1:30 close. But, for the second day in a row, the precious metals price moves were much larger than the corresponding dollar moves...especially in silver.

The gold shares followed the gold price around like a shadow yesterday...but the sell-off in shares was out of all proportion to the smallish decline in the gold price...with the HUI down a chunky 3.37%. But, like the gold price itself, the HUI did not finish on its low of the day.

Most of the silver shares didn't do well yesterday, either...but, for the second day in a row, a couple of companies I own were well into the green. The buy-the-dip crowd was out in force, as weak hands sold into strong hands once again.

The CME Daily Delivery report showed that 108 gold contracts, along with 26 silver contracts, were posted for delivery on Thursday. The link to the action is here.

There was fairly big action over at the ETFs yesterday. GLD shed another 165,719 ounces...and SLV had another monster withdrawal. This time it was 3,365,965 troy ounces. Once again this was probably the case of an authorized participant needing the silver somewhere else, rather than liquidation because of the decline in silver prices over the last couple of days.

The U.S. Mint had their first sales report of May...and it was a rather impressive one. They started off the month selling 19,500 ounces of gold eagles...2,000 one-ounce 24K gold buffaloes...and 654,000 silver eagles. I hope you're buying this dip and getting your share.

The Comex-approved depositories reported receiving 16,518 ounces of silver on Monday...and shipped 300,836 ounces out the door, for a net decline of 284,318 troy ounces. Th link to yesterday's action is here.

¤ Critical Reads

No truth behind 'sell in May' adage

No more than half of the May-to-September periods over the last three decades saw equities fall. Slumps took place in just 10 of the 30 years in the US, 12 in the UK and 15 in Europe. "The success of 'sell in May and go away...' rests on a few key recessionary years," said analysts at Evolution Securities.

I thank reader Roy Stephens for this story that was posted in yesterday's edition of The Telegraph...and the link is here.

View full GSD edition

Frank Introduces Bill to Concentrate Fed Power in DC

U.S. Rep. Barney Frank (D., Mass) Tuesday introduced a bill that would let interest rates be set only by Federal Reserve officials picked by the government, a new attempt to move power away from regional Fed officials chosen by the private sector.

Frank’s bill faces significant hurdles to clear Congress, where Republicans are likely to resist centralizing Fed powers in Washington. There’s also no similar proposal in the Senate yet. Frank, though an influential member of the House Financial Services Committee, is in the Democratic minority, reducing his ability to push legislation through the House.

This story was posted in The Wall Street Journal yesterday...and I thank Washington state reader S.A. for sharing it with us...and the link is here.

View full GSD edition

Julian Assange: Facebook Is 'Appalling Spy Machine'

In an interview with Russia Today, he said the following..."Here we have the world's most comprehensive database about people, their relationships, their names, their addresses, their locations, their communications with each other, their relatives, all sitting within the United States, all accessible to U.S. intelligence."

The imbedded RT video runs for 13:10...and the story, posted at the Huffington Post on Monday, is courtesy of Roy Stephens...and is linked here.

View full GSD edition

Risks of Economic Overheating: German Boom Fuels Inflation Angst

The German economic boom is fuelling inflation, and prices are expected to keep rising because of Europe's one-size-fits-all monetary policy. The European Central Bank can't raise interest rates aggressively enough to curb German price pressures because that would hurt the weaker euro-zone economies.

This is another Roy Stephens offering...and this one was posted over at the German website spiegel.de. The link is here.

View full GSD edition

Portugal Agrees to a $116 Billion Bailout

On Tuesday, Portugal agreed to accept an international aid plan of €78 billion ($116 billion) that the country’s caretaker prime minister, José Sócrates, suggested would involve more lenient conditions than those imposed on Greece and Ireland in return for similar bailouts.

This story appeared in yesterday's edition of The New York Times...and I thank reader Phil Barlett for bringing it to my attention...and the link is here.

View full GSD edition

Ben Bernanke’s Lone Positive Legacy: A Return To The Gold Standard

Here's an op-ed piece that was posted over at forbes.com yesterday. I stole this story from a GATA release.

"I’ll make two predictions with utter confidence. The first is that one day Federal Reserve Chairman Ben Bernanke will be ridden out of town on a rail, joining Arthur Burns in that special circle of hell reserved for monetary debauchers. The second is that in the aftermath of our pending inflationary disaster we will see the gold standard return."

It's not an overly long read, but worth your time if you have it...and the link is here.

View full GSD edition

Ralph Benko: Fort Knox vs. Fort Fed

Here's a blog that Eric King sent me last night that also ended up as a GATA release shortly thereafter, so I'm just going to steal Chris Powell's most excellent preamble...and then post the link.

There's been some controversy over Canadian fund manager Eric Sprott's sale of some shares of his company's spectacularly successful physical silver fund, PSLV. In an interview yesterday with Eric King of King World News, Sprott remarked that the sale was small, that the proceeds were entirely reinvested in silver-related assets, that he continues to expect silver's price to return to a 16-1 ratio to gold's price, and that he now owns more silver than ever.

Here you have it from the man himself...and the link to this must listen audio interview is here.

View full GSD edition

And Now For Today's Mini Silver Flash Crash: Same Time, Same Place

A cursory glance at Kitco's silver chart at the top of this column will show the mini-silver crash that occurred around 6:30 p.m. Eastern time last night in the New York access market. This was at precisely the same time as the dirty was done to silver on Sunday night. This event did not go unnoticed over at zerohedge.com...and I thank Dr. Dave Janda over at WAAM Talk 1600 in Ann Arbor, Michigan for sending me this story late night.

The graph itself is worth the trip...and the link to this absolute must read story is here.

View full GSD edition

The price action in gold yesterday gave no hint of the huge volume involved, as just under 200,000 contracts [net of all roll-overs] traded in the Comex futures market yesterday. The preliminary open interest number showed a very tiny increase of only 873 contracts...and I will bet that this translates into a huge o.i. decline when the final number is posted on the CME's website later this morning...fingers crossed!

I was certainly happy with Monday's final open interest change for gold, as it showed a healthy decline of 3,998 contracts, as the preliminary o.i. number showed an increase of 3,148 contracts. I'm always glad to see that.

Silver's net volume yesterday was in the neighbourhood of 145,000 contracts...which is a huge number. The preliminary open interest number was an unpleasant surprise...as it increased by 7,389 contracts. But this could represent an increase in spread trades to hide what the bullion banks are doing, or even new shorting...and I'm not going to speculate further until I see the final o.i. number.

Silver's final open interest change for Monday's massive hammering in the price was a rather small decline of 1,633 contracts...this against a preliminary o.i. number of +2,861 contracts. I was expecting a bigger decline than this...but maybe all of Monday's trading action wasn't reported in a timely manner...and might show up in Tuesday's final o.i. number, which I await with even more interest now.

Not that it matters anyway. All will be known on Friday, as these final open interest numbers for Monday and Tuesday's trading day will be in the Commitment of Traders Report...and April's Bank Participation Report as well.

The volume in the May delivery month in silver is imploding...as May open interest is now down to a very small 696 contracts. It was over 2,000 last Friday. It's a surprise to see this many contracts disappear out of the current delivery month without standing for delivery. Of the 2,000+ silver contracts posted on First Notice Day, only 113 have actually been delivered...and only 696 remain, so over 1,300 contracts have fled the scene...which is a very high percentage of the entire delivery month. I don't know if it means anything, but it is certainly strange.

The backwardation situation is even more precarious now than it was on Monday. The December 2011 delivery month shows a two cent premium, but every other nearby month has a premium of a small fraction of a penny...and the backwardation from May 2011 out to December 2015 has now jumped up to $1.24. Yesterday it was only around 90 cents. Something appears to be afoot...and we won't have long to wait to find out if it means anything.

Here's the 1-year silver chart once again. The RSI has made a precipitous decline in the last few days...and it remains to be seen whether the bullion banks can get enough long contracts to liquidate to hit silver's 50-day moving average. In order to do that, they would have to take the price below the 6:30 p.m. New York time take-down that they engineered last night...and the above zerohedge.com story referred to.

Both gold and silver were down a bit during the Far East trading day...but both are up nicely now that the London trading day has begun. Volume in gold is nothing special...and silver volume is a bit higher.

It could be another interesting trading day in New York this morning...and we'll find out soon enough what the New York bullion banks have in store for us.

See you on Thursday.