Did JPMorgan Cover More Short Positions Yesterday?

Well, that little dip in the gold price in the wee hours of yesterday morning didn't amount to much… although it did set the low [around $1,231 spot] for the Tuesday trading session. 

The price began to move up sharply shortly before Comex trading began yesterday… and was up $14 by the time the London p.m. gold fix rolled around at 10:00 a.m. Eastern time.  From that point, gold only tacked on another four bucks or so to its high of the day [$1,251.20 spot] around 2:00 p.m. in New York… and from there, gold slid a couple of dollars into the close of electronic trading at 5:15 p.m. Eastern time.

The silver price declined starting at 1:00 p.m. Hong Kong time… and hit its low [around $18.80 spot] shortly after lunch in London… about an hour before the Comex opened.  Then, in just over an hour, silver tacked on about 50 cents.  The silver price continued to rise, albeit mores slowly, and bounced off its high of the day [$19.43 spot] several times before closing at $19.40 spot.

When I spoke with Ted Butler yesterday, he was of the opinion that the initial price spikes [the ones in both silver and gold before 10:00 a.m. in New York] was JPMorgan covering short positions.  And, like Tuesday of last week, yesterday's big short covering rally occurred on the cut-off day for this Friday's Commitment of Traders report.  Last Tuesday's big short covering rally wasn't in last Friday's report… and I would be really surprised if yesterday's big price spike is in this Friday's report.  We'll have to wait and see, but I'm not holding my breath.

The dollar did nothing of consequence yesterday.  Here's the graph for entertainment purposes.

The precious metals stocks did well until around noon… and then began to slide… despite the fact that both gold and silver had not yet reached their highs of the day.  Then, like the rest of the equity markets, the HUI rolled over shortly after 2:00 p.m. in New York… and well over half of Tuesday's gains evaporated.  The HUI only finished up 1.15% on the day.  I must have admit that I was expecting better.

Yesterday's CME Delivery Report showed that 76 gold, 203 palladium and 408 silver contracts were posted for delivery on Thursday.  JPMorgan was the biggest stopper in silver… and the link to all the action is here.

I mentioned yesterday that I was surprised that there was such a low number of silver contracts posted for delivery on September 1st… and this makes it two days in a row.  Normally, the first couple of days of the delivery month are huge, as the issuers want to deliver and get their money and move on.  That hasn't happened so far.  Ted is of the same opinion.  We wonder what it means… if anything.

Both GLD and SLV had reports yesterday.  The GLD ETF added a rather large 127,059 ounces of gold… and SLV added 978,688 troy ounces.  And, surprisingly enough, the U.S. Mint had no sales report again yesterday… finishing off August as the slowest bullion coin sales month of 2010.  For the month of August… 41,500 ounces of gold disappeared into their gold eagle program… plus 15,500 24-K gold buffaloes… and 1,906,000 silver eagles were also sold.

Over at the Comex-approved depositories, the in-and-out action pretty much cancelled each other out… and there was a tiny net gain of 6,708 troy ounces of silver in their Monday report.  The link to that action is here.

I only have a small handful of stories today… and the first [courtesy of Washington state reader S.A.] is from last Thursday's edition of The New York Times.  This story has been in and out of the news for the last year or so… and I thought this issue had been settled, but obviously not.  The IRS said Thursday that it would drop a closely-watched civil lawsuit against the Swiss bank giant UBS after the Swiss government said it was on course to hand over details on thousands of American clients suspected of using their accounts to evade taxes.  The headline reads "I.R.S. to Drop Suit Against UBS Over Tax Havens"… and the link to the very short story is here.

Here's a story that I'd seen last week, but decided not to post, since it appeared on a website that I was not madly in love with… and I wasn't sure how true it really was.  But now that it's posted over at time.com… it's obviously credible.  The headline reads "The Government Can Use GPS to Track Your Moves".  Government agents can sneak onto your property in the middle of the night, put a GPS device on the bottom of your car and keep track of everywhere you go. This doesn't violate your Fourth Amendment rights, because you do not have any reasonable expectation of privacy in your own driveway – and no reasonable expectation that the government isn't tracking your movements.  Is that scary, or what, dear reader!  I thank reader Peter Handley for passing it along… and the link is here.

The only gold-related story was one I discovered posted over at Bloomberg early yesterday morning shortly after I'd filed my Tuesday column.  I must have had at least a half a dozen copies of it in my in-box by the time I got up in the morning… and I thank everyone that was thoughtful enough to send it to me.  The amazing thing about this story is the fact that there isn't a dissenting voice anywhere in the article… not even the Tokyo Rose of the gold world got quoted in this one.  The headline reads "Gold Rallying to $1,500 as Soro's Bubble Inflates"…. and it's a must read from one end to the other.  The link is here.

Lastly today is a story that was all over the Internet yesterday.  I got even more copies of that in my in-box, than the previous Bloomberg gold story.  Reader S.A. from Washington state was the first one through the door with this article.  It's another Bloomberg piece… and this one is headlined "JPMorgan Said to Close Prop Trading Desk to Meet Volcker Rule".  Proprietary trading involves transactions made on behalf of the bank rather than its customers… and all the big banks do it.  I call it insider trading… and you can call it what you want, dear reader.  If true… and if you can believe anything coming out of JPMorgan these days… then it means a sea change in the commodity markets, as that's the first thing to go is JPM's proprietary trading desks in commodities.  This isn't a long story… but it's a must read for sure… and the link is here.

Since JPMorgan is the ring-leader of the gold and silver price suppression scheme, one has to wonder if that means they will be getting out of that as well… or are the Fed, the U.S. Treasury and the Plunge Protection Team [PPT] considered 'clients' for the purposes of the 'Volker Rule'?  Who knows.

But over at zerohedge.com, Tyler Durden is much more cynical in his comments on this matter.  The headline reads JPMorgan Pretends To Shut Down All Prop Trading Desks, In Latest Smoke Screen Act Of Volcker Rule "Compliance".  I suggest you read this very short piece as well… and I thank reader 'David from California' for sharing it with us.  The link is here.

When I brought this matter up with Ted yesterday, he was very happy about it… as he's been on Jamie Dimon's case about that very thing for years.  I desperately want to believe that JPM will do the right thing but, as you already know, dear reader… I don't trust those bastards at JPM one bit.

It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so. – Mark Twain

It was a good day in the precious metals market yesterday… although I was less than enthusiastic about the performance of the shares.  I see that the President's Working Group 'saved' the Dow from closing under the 10,000 mark for the umpteenth time.  Too bad their largess didn't extend into the precious metal shares.

The early action in New York yesterday morning looked like JPMorgan covering short positions [or buying longs].  Ted Butler also pointed out that there was certainly further deterioration in the short positions for both silver and gold, as there was some tech fund buying on Tuesday as the day wore on.  Volumes, according to the preliminary report from the CME, were pretty decent [but not monstrous] in both metals.  And as I mentioned before, it remains to be seen how much of Tuesday's action ends up in Friday's COT report.  It's all supposed to be there… but it probably won't be.

Nothing much happened in Far East trading during their Wednesday… but both gold and silver are trending a bit higher now that London is open for trading.  Volume is quite a bit stronger than it was on Monday or Tuesday… but nothing really out of the ordinary.

We are now entering the strongest months for gold and silver… and it will be interesting to see how it turns out this year.  Here's the 3-year gold chart… and you can see from looking at it that the upcoming months are the best… although in 2009, the bullion banks deliberately pulled the pin on December 1st.  I remember it all too well, dear reader.  That's why I'm always on the lookout for 'in your ear'.  The years 2007 and 2008 look more normal.  Regardless of what happens, I'm still 'all in'.

Click here to enlarge.

It could be another interesting day in New York when trading begins in a bit… but the long weekend is approaching… and it's entirely possible that we could see trading in both metals begin to wind down for the week.  We'll find out soon enough.

See you on Thursday.