Gold and Silver Snapped Up By Bullish Indians

The gold price didn't do much until shortly after 2:00 p.m. Hong Kong time in their Friday afternoon. At that point, a rally began that lasted until shortly after 9:00 a.m. in London.

Then the sellers showed up...and for the next seven and a half hours, the gold price worked its way lower by about ten bucks.

Around 11:40 a.m. in New York, it looked like the Comex long contract holders were selling into a 'no bid' market...as gold fell $21 in about fourty-five minutes. By 12:25 p.m. the bottom was in...and the gold price recovered about ten bucks going into the close of New York electronic trading at 5:15 p.m. Eastern time.

Silver's rally began around 3:00 p.m. Hong Kong time...with the high of the day coming shortly after 11:00 a.m. in London...and it was all down hill from there for the next six and a half hours...with the low in silver coming at the same moment as the low in gold.

The silver price recovered by more than a dollar going into the close of New York electronic trading.

For a change, the gold price followed the dollar around like a shadow yesterday...almost to the tick...which I found suspicious in and of itself. As I've mentioned before, some days the movements of the dollar matters to the gold price...and some days it doesn't. You have to ask yourself why that's the case...but yesterday was one of the days that it did matter.

The gold stocks pretty much mirrored the price action in gold itself on Friday. Here's the 5-day HUI chart for the week that was.

For the second day in a row the silver equities turned in a mixed performance...with the silver stocks closing closer to their lows of the day, than their highs...despite the fact that silver rallied strongly late in the day. Here's Nick's "Silver Sentiment Index" updated with Friday's number.

Friday's CME Daily Delivery report showed that only 14 gold contracts were posted for delivery on Tuesday.

Once again there was a decline in GLD. This time it was 29,241 troy ounces. For a change, the SLV ETF headed in the other direction...showing an increase of 585,255 ounces.

The U.S. Mint had a sales report on Friday. They reported selling 4,500 ounces of gold eagles...1,500 one-ounce 24K gold buffaloes...along with 85,000 silver eagles. Month-to-date, the mint has sold 85,000 ounces of gold eagles...6,500 one-ounce 24K gold buffaloes...and 1,506,000 silver eagles.

The Comex-approved depositories did not receive any silver on Thursday...but did report shipping a smallish 56,314 ounces of the stuff out the door.

The latest Commitment of Traders report...for positions held at the close of trading on Tuesday, May 10th...at least for silver, was not what I was expecting. Not even close. The Commercial net short position only improved by a rather insignificant 1,124 contracts...and stands at 206.7 million ounces...the lowest its been in many a moon.

The standout of this [and the prior COT report] is that the silver price fell almost $17 in seven business days...and there has been virtually no change whatsoever in the bullion banks net short position...as there was no corresponding tech fund long liquidation to speak of. This COT report also showed that their was no net change in the Non-Commercial category, either. As a matter of fact, Ted mentioned that the '4 or less' traders [read JPMorgan] actually added about 1,300 contract to their silver short position in the week that was.

Ted said that although there were no significant observable changes in the headline numbers in this report, there was a lot happening 'under the hood' that only the disaggregated COT report shows...and Ted is the only analyst on the Internet that I know of that knows how to read that. He'll have more to say in his weekly review later today...and I'll steal what I can for my Tuesday column.

The COT for gold was easy to understand...and was all tech fund/small trader long liquidation and bullion bank short covering. The bullion banks reduced their short position in gold by a chunky 18,521 contracts...1.85 million ounces...and the Commercial net short position is now down to 22.16 million ounces of gold.

The '4 or less' bullion banks are short 15.6 million ounces of gold...and the '8 or less' bullion banks are short 22.9 million ounces. Looking back over the last couple of years, Ted says that gold is almost back in bullish territory from a Commitment of Traders point of view.

Here's Ted Butler's "Days to Cover Short Positions" graph that's courtesy of Nick Laird over at sharelynx.com. You can see how much short covering has gone on in silver recently by the fact that the silver and gold lines are just about the same length. Up until recently, the silver "days to cover" stood out like a sore thumb. That's no longer the case.

The other standout of this graph is that virtually the entire net short position in silver is now held by the '4 or less' traders...as the '5 through 8' traders hold no short positions to speak of.

Here's a rather large snippet from silver analyst Ted Butler's mid-week commentary to his subscribers on Wednesday...

"Every previous dramatic sell-off in silver basically involved manipulative dirty trading tricks on the COMEX intended to scare out as many leveraged longs as possible. In the process, this allowed the commercial short holders the opportunity of buying back their short contracts. I had never seen any exception to this continuous cause and effect. You could almost set your watch on this pattern. A big silver sell-off always resulted in massive speculative long liquidation on the COMEX. But this time, there weren’t excessive speculative long contracts bought before the plunge...and there haven’t been many reported liquidated to date. I think future COT reports will show liquidation, but they haven’t yet. [And yesterday's COT report didn't show much, either. - Ed] So the reason behind every previous silver sell-off didn’t appear obvious in the latest decline. If the old reason wasn’t the cause for this sell-off, then what reason was?"

"This time, the silver manipulators had a different goal and objective. They did use every dirty trick imaginable to rig the price sharply lower on the COMEX, but the liquidation they were after was not primarily long COMEX contracts. The goal this time of the silver crooks was to get hold of silver in the big silver ETF, SLV. And they achieved their goal."

¤ Critical Reads

Dow sheds nearly 1pc as US inflation rises

Today's first story is from yesterday's edition of The Telegraph...and is courtesy of reader Roy Stephens.

Global economic uncertainty and anxiety over Europe's debt crisis saw US stock markets tumble nearly 1pc on Friday, as investors fretted over what Greece’s deteriorating finances mean for the future of the euro. The link is here.

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Inflation hits 2-1/2 year high, seen peaking

Gasoline and food prices hoisted U.S. inflation to a 2-1/2-year high in April, but there was little sign of a broader pick-up in consumer prices that would trouble the Federal Reserve.

Which means if you don't eat or drive a car...there's little inflation to worry about.

This 'don't worry...be happy' Reuters story is also courtesy of Roy Stephens...and the link is here.

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Greek crisis forces thousands of Athenians into rural migration

Debt, unemployment and poverty is causing mass unrest and thousands to seek a cheaper lifestyle outside the capital.

"Athens has failed its young people. It has nothing to offer them any more. Our politicians are idiots … they have disappointed us greatly," said Dikiakos, who will soon be joined by 10 friends who have also decided to escape the capital.

They are part of an internal migration, thousands of Greeks seeking solace in rural areas as the debt-stricken country grapples with its gravest economic crisis since the second world war.

I thank Swiss reader G.B. for sending along this story out of yesterday evening's edition of The Guardian...and the link is here.

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European Disunion: Rising Self-Interest Frays EU Spirit

An unusual number of crises -- from the Fukushima disaster to the Arab Spring -- have challenged what used to be called the "European spirit." The euroskepticism sparked by the euro crisis has become an epidemic. Experts warn of a retreat to nationalism.

This story certainly has a keen grasp of the obvious...and it's another Roy Stephens offering...this one from the German website spiegel.de. The link to this must read piece is here.

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Political Control of Money

Here's a piece from James Turk that's posted over at his goldmoney.com website.

While inferior money can appear anywhere around the globe, it always has one common characteristic. It is money that exists under political control. It is money for which decisions are influenced by politicians and not made by independent central bankers autonomous to the political process.

This short read is well worth your time...and I thank reader U.D. for sharing it with us...and the link is here.

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Miners pare their hedging positions as gold soars

Gold producers continued to head for the exits in the metals markets last year, bowing to pressure from investors who want to reap the full benefits of soaring prices.

Large gold producers began hedging in earnest in the 1980s, hoping to mitigate the effect of commodity price swings on their bottom line. But gold's sustained rise during the last decade forced companies to rethink their strategy, as investors punished miners holding years-old hedges that forced them to sell gold for less than current market prices.

This story appeared in yesterday's edition of The Wall Street Journal...and is posted in the clear in this GATA release. This short read is very interesting...and the link is here.

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Shanghai in third silver margin hike in month

Here's a one-paragraph story that I lifted from yesterday's King Report...and was posted over at marketwatch.com on Thursday.

The Shanghai Gold Exchange said Thursday it will raise margin requirements for silver futures as part of risk-control measures, its third round of increases in less than a month.

The link to the rest of this tiny story, is here.

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Shanghai Gold Exchange cuts silver margins, volumes soar

This next Reuters story was filed from Shanghai on Friday...and says exactly the opposite of what's in the above story from marketwatch.com.

SHANGHAI, May 13 (Reuters) - The Shanghai Gold Exchange (SGE) will cut silver margin requirements to 18 percent from 19 percent from May 13 settlements if there is no sharp movement in prices, it said on Friday.

News of the margin decrease helped push the SGE silver forward contract up by 2.4 percent to close at 7,845 yuan ($1,207) per kilogram.

I once again thank reader U.D. for sending me this story...which is posted over at the South African website sharenet.co.za...and the link is here.

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For illegally withholding gold information, Fed pays GATA

The Federal Reserve System this week paid GATA $2,870 in attorney's fees and costs for illegally withholding a gold-related document GATA sought in its federal freedom-of-information request and lawsuit against the Fed in U.S. District Court for the District of Columbia.

While the judge in the case, Ellen Segal Huvelle, allowed the Fed to withhold most of the gold-related documents GATA sought (here.

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Gold timers finally throw in the towel: They are in denial no longer

The “they” are the gold timers I monitor. The last time I wrote about them, just one week ago, I wrote that they were in denial, having for the most part stubbornly held on to their bullishness despite a breathtaking drop that caused an ounce of bullion to lose nearly one hundred dollars.

That they have finally rushed for the exits increases the likelihood that some sort of trading bottom has been formed in the gold market.

I thank reader Geoff Ruttan for sending this marketwatch.com story along...and the link is here.

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Gold and silver snapped up by bullish Indians

Here's another GATA release...and this one publishes a story from yesterday's Financial Times in the clear.

The sharp drop in gold and silver prices has stimulated a surge in buying from India in a sign that consumers in the world's largest gold-buying country retain faith in the decade-long bull story for precious metals.

Bankers have been surprised by the strength of Indian demand in the past week, when gold dropped below $1,500 a troy ounce and silver tumbled below $35 a troy ounce. UBS and Standard Bank, two large bullion dealers, have enjoyed some of the strongest days of sales to India this year, according to analysts at the banks, while others reported a similar surge.

This sounds like a carbon copy of what's happening at my bullion dealer's store. This is a must read...and the link is here.

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Jim Rickards Interview With King World News

Eric popped this audio interview into my in-box in the wee hours of Saturday morning. I've had no time to listen to it...but Eric says that Jim "covers gold quite a bit"...and the link is here.

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The People vs. Goldman Sachs

Here's one of your two long reads of the day, which I've been saving for my Saturday column. Washington state reader S.A. sent it to me earlier this week.

They weren't murderers or anything; they had merely stolen more money than most people can rationally conceive of, from their own customers, in a few blinks of an eye. But then they went one step further. They came to Washington, took an oath before Congress, and lied about it.

Thanks to an extraordinary investigative effort by a Senate subcommittee that unilaterally decided to take up the burden the criminal justice system has repeatedly refused to shoulder, we now know exactly what Goldman Sachs executives like Lloyd Blankfein and Daniel Sparks lied about. We know exactly how they and other top Goldman executives, including David Viniar and Thomas Montag, defrauded their clients. America has been waiting for a case to bring against Wall Street. Here it is, and the evidence has been gift-wrapped and left at the doorstep of federal prosecutors, evidence that doesn't leave much doubt: Goldman Sachs should stand trial.

It's a Matt Taibbi offering from the May 26th edition of Rolling Stone magazine...and, as usual, Matt really socks it to them in his usual pithy prose...and the link is here.

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The Fall of the U.S. Empire and the Breakup of the Geopolitical Matrix

Here's a long interview with Richard Maybury that appeared in a recent edition of The Casey Report...and I'm glad to see that it has finally been published in the public domain, as it's a fabulous read.

Maybury states the following..."There are two big things going on: One is the fall of the U.S. Empire, and that is leading to the second, which is the breakup of the geopolitical matrix. In the case of the latter, I am referring to the many relationships the governments of the world have with each other and with their own people.

This matrix of relationships and political structures are called countries, most of which have existed for a long time, but that's breaking up now, in part because, in most cases, the borders between these countries were drawn a long time ago by people who knew nothing about the local populations.

While the breakup is starting in North Africa, I think it's going to spread across most or all of Chaostan. And it will have effects even in North America and South America. While it's almost impossible to predict exactly how, it’s my view the world that we grew up in is going away, and it will be replaced by some new political matrix.

This is a must read from one end to the other...and I thank reader 'Charleston Voice' for bringing it to me attention...and the link is here.

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Here's a cute music video that reader Dave Delve sent me a while back. There are five Asian kids, none look to be over 7 years old, all playing classical guitar together...and doing one hell of job. I don't think I could tie my own shoelaces at that age. So turn up your speakers...and then click here.

Gold traded a bit over 145,000 contracts net of all roll-overs yesterday...but the preliminary open interest number showed an eye-watering increase of 12,279 contracts. Hopefully this will be much reduced when the final number is posted on Monday morning.

Gold's final open interest number for Thursday's trading day showed a smallish increase of 2,602 contracts. I was much relieved to see this number, as the preliminary o.i. report showed a monstrous increase of 12,347 contracts...almost identical to Friday's preliminary o.i. number above.

In silver, the net volume there was around 102,000 contracts...and the preliminary o.i. number showed a rather chunky rise of 6,536 contracts. I'll be really interested in seeing what this number declines to on Monday as well.

Silver's final open interest number for Thursday showed another decline...down 1,908 contracts. This was also a relief, as the preliminary number showed a real chunky increase of 5,842 contracts. I'm hoping that Friday's large preliminary open interest numbers will disappear in the same fashion as Thursday's numbers did...and we'll find that out late Monday morning.

The silver backwardation situation on Friday was about the same as Thursday's numbers...and there are currently 303 May silver contracts still open that are most likely awaiting delivery from the short holders.

Like you, I'm sitting here waiting for JPMorgan et al to get finished doing whatever they have to do in the silver market, before we blast off to new highs. I must admit that the lack of technical fund long liquidation in the face of this $17 drop in the silver price over seven business days has me baffled.

I know what Ted Butler has said about it...and I suppose that it's entirely possible that there are no tech fund longs left to liquidate...which means the silver market is totally cleaned out to the downside. But I'm also suspicious enough that I must consider the fact that the bullion banks are withholding data from the daily and weekly COT numbers. However, I'll wait until next Friday's COT report before passing judgment. As Ted said further up in this column, this has not been your garden-variety liquidation cycle...and there's lots going on under the hood that we just can't see...or know about. So we'll just have to wait it out.

One thing I will be watching is what happens on the next major rally...once the bullion banks allow silver above its 50-day moving average for real. Will they, as Ted has said on many occasions, put their hands in their pockets and do nothing...and watch the price explode? Or will they be back on the short side as short sellers of last resort, as has always been the case in the past? I don't know, but the price action when that day does arrive, will tell us all we need to know.

Here's the 1-year dollar chart. As you know, we're in the middle of a 'dead cat bounce' in the dollar at the moment...which came along at the precise moment that the silver market was hammered last week. That's too much of a coincidence for me...but I would guess that when this dollar rally breaths its last, the precious metals will respond instantly.

There's still time left to either readjust your portfolio...or get fully invested in the continuing major up-leg of this bull market in both silver and gold...and I respectfully suggest that you take a trial subscription to either Casey Research's International Speculator [junior gold and silver exploration companies], or BIG GOLD [large producers], with all our best [and current] recommendations...as well as the archives. A subscription to the International Speculator also includes a free subscription to BIG GOLD as well. And don't forget that our 90-day guarantee of satisfaction is in effect for both publications.

That's all for today...and for the week. Enjoy what's left of the weekend...and I'll see you here on Tuesday.