Gold and silver daily

Here’s the 10-minute silver chart for Friday courtesy of reader Steve C.  You can see the big 3,300 contract spike in volume at the London close, as it stands out like the proverbial sore thumb.

The world’s reserve currency opened around 78.20 at the beginning of Far East trading on Friday morning…and then rallied about 45 basis points.  That rally came to an end at 11:00 a.m. in London…and then declined to its New York low price at precisely 11:00 a.m. Eastern…the close of the London gold market.  That was also the exact time when the silver price [and gold as well, if you check closely] got hit by an avalanche of selling, as the dollar spiked higher.  Coincidence?  Not likely.

Until the 11:00 a.m. smack-down in both gold and silver…the gold stocks were well into positive territory.  But precisely at 11:00 a.m. at the London close…and the dollar’s low tick…the stocks got sold down…then basically traded sideways for the rest of the New York session.  The HUI closed down 0.56%.

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Here’s the 5-day HUI to give you an overview for the week that was.

The CME’s Daily Delivery report showed that 160 gold and 2 silver contracts were posted for delivery on Tuesday.  The issuers and stoppers in gold were all the ‘usual suspects’…and the link to the action is here.

There was no activity reported in either the GLD or SLV ETFs yesterday.

The U.S. Mint had another sales report.  This time they reported selling another 12,500 ounces of gold eagles…along with another 49,500 silver eagles.  Month-to-date the mint has sold 39,000 ounces of gold eagles and 986,500 silver eagles.

The draw-downs continue from the silver stocks over at the Comex-approved warehouses.  On Thursday they reported receiving only 2,154 ounces…and shipped 425,230 ounces of silver out the door.  The link to that action is here.

As silver analyst Ted Butler said on the phone yesterday…Friday’s Commitment of Traders report was a “good news/bad news” kind of story.  The good news being that the ‘4 or less’ bullion banks did not increase their short positions in either silver or gold for the reporting period.  The bad news was that the ‘raptors’…as Ted calls them…liquidated a huge portion of their long positions and took profits from the recent run-up in price.

As Ted has mentioned before, whenever the Raptors take profits by selling long positions, it has the effect of increasing the Commercial short position because that’s the category these traders are located in.  This is also the category that the ‘4 or less’ bullion banks hide out…but they were not a factor in the week that was.  It was mostly the smaller traders that weren’t in the ‘8 or less’ category.

In silver, the Commercial net short position increased a huge 6,316 contracts, or 31.6 million ounces of the stuff.  In gold, the Commercial net short position increased a very chunky 16,714 contracts, or 1.67 million ounces of gold.

The good news is, that since these Raptors have taken their profits by selling out the bulk of their long positions, they won’t be there to sell into the next rally, as they are effectively out of the market on the long side…although they do have small residual long positions left that will be sold at a later date. But that shouldn’t affect the prices of either metal by much when it does happen.

Here’s Ted’s “Day of Production to Cover” graph that’s courtesy of Nick Laird over atsharelynx.com.

THE WRAP

Today’s ‘blast from the past’ was composed by Sergei Rachmaninoff in 1901.  It’s his Prelude in G minor, Op.23, No.5…and he performed it in public for the first time in Moscow on February 10, 1903.  Here is the electrifying performance of this piece by Ukrainian-born pianist Valentina Lisitsa when she played it as her third encore at a concert in Seoul, South Korea a number of years back.  She is good…so turn up your speakers and then click here.  Enjoy!

After watching the bullion banks do the dirty in New York yesterday, I’m still wondering what they’re really up to at the moment.  I know that covering their short positions is at the very top of the ‘4 or less’ traders ‘To Do’ list…but they are certainly going about in what I consider to be strange fashion.  This entire week’s trading activity sort of fits into that pattern of marking time…but for what reason?  We’ll see if they have some sort of grand plan…or are they just making it up as they go along at this stage?

Volume in gold yesterday was pretty decent…at least compared to prior days this week.  The CME reported that around 130,000 contracts net of all roll-overs was traded on Friday.  The preliminary open interest number indicates that gold’s o.i. will decline when the final numbers are posted late Monday morning Eastern time.

Silver’s volume was around 61,000 contracts net…and I’m not impressed one iota by the preliminary open interest number that was posted, as we may have an increase in o.i. when all is said and done on Monday morning.

Final open interest numbers for Thursday’s trading day showed a smallish 572 contract increase in gold’s o.i…and an eye-watering 4,835 contract increase in open interest in silver.

I didn’t see a thing in silver’s trading activity on Thursday [the red trace in the silver chart at the top of this column] to indicate why there would be any increase at all.  Ted speculated that it must have been a spread trade that was put on.  That seems like the most logical explanation…but we won’t find out for sure until next Friday’s Commitment of Traders report.

While I’m on the subject of silver, I want to briefly discuss the silver backwardation issue…where the front month [March] is selling at a premium to the May contract…and beyond.  When I was looking at the silver futures trading on Friday, I didn’t see any premium at all between March and May.  As a matter of fact, the May contract was selling for about 2.5 cents more than the March contract, which is not backwardation at all.

To find silver selling at a discount to the March silver contract, I think I had to go out to the September 2012 contract to find any sign of backwardation…and even then it was only a penny cheaper than the March contract.

There’s no question that we are on the cusp of backwardation…but we have not arrived at that point just yet…but we are very close.  And it deserves watching every day from hereon in.

To give you an idea how tight and how close we are to real backwardation.  March silver is quoted at $29.995 the ounce.  If you go out to December 2015…silver is quoted at $29.875 the ounce.  That is true backwardation…but who would want to sell silver in March hoping to get it back in December 2015 and save themselves 12 cents the ounce?  Nobody, that’s who.

Here’s the silver futures page from the CME.  If you check ‘Prior Settle’ price column, you can see for yourself just how tight this market really is going all the way out to December 2015.  Compare all the prices to the March contract, which is the front month for silver.  It’s in contango all the way out until September 2012…before slipping into backwardation.  The link is here.

There was mention in one of the Financial Times stories earlier on that five different silver miners had sold forward production…and that had exacerbated this backwardation issue.  I don’t know how much truth there is in that, but when I find out, you’ll be the first to know.

Both Ted and I get the impression, based on what’s been happening in the silver market since the beginning of the year, that this is the last gasp of the silver price-fixing scheme.  The activity in the futures market is unprecedented.  Something’s up…but when it will happen, or what form it will take, is not yet known by anyone.

Every time I purchase physical silver, I always wonder if that is the last time that I’ll be able to buy it on the cheap.  I don’t know when all this is going to end, but when it does, I don’t want to look back with regret that I didn’t buy every ounce that I could right up until the bitter end.  So, I’m going to stay ‘all in’ until the silver market hatches into something….and it just might do that…and soon.

There’s still time 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.