JPMorgan et al Pull the Pin

Tuesday's high price of around $1,187 spot was set early in the London trading session… and by the time that JPMorgan et al began to trade on the Comex in New York, gold was only down a couple of dollars from that high.


But from that point, the bullion banks began to sell… and then began pulling their bids shortly after 9:00 a.m. in New York… and the rest, as they say, is history.  The absolute low of the day [$1,156.80 spot] came shortly after 1:00 p.m. Eastern time… about 20 minutes before floor trading ended and electronic trading began.

Once this new low price for gold's move down was set, the sellers disappeared and gold gained back about five dollars of its losses before trading ended in New York at 5:15 p.m.

But, as usual, the metal that 'da boyz' were really after was silver… and it got the "Full Monty" yesterday.  Silver's high of the day in New York was set moments after the Comex open.  From that high, the selling began… and the bullion banks pulled their collective bids.  Two hours and change later, the bottom was in at $17.58 spot…. below silver's 200-day moving average once again…. and it closed right on its 200-day moving average at $17.67 spot.

I mentioned in yesterday's column that we probably wouldn't have long to wait to see if the bullion banks were after gold's 200-day moving average.  Six hours after I typed those words… 'da boyz' pulled the pin.

Yesterday was options expiry in the over-the-counter market… and today is options expiry in the Comex futures market.  So what are the odds that yesterday's take-down was engineered for the benefit of the bullion banks so that another big whack of call options would expire out-of-the-money?  No odds at all dear reader, as what you saw yesterday was pure collusion on the part of the bullion banks… with the CFTC and your gold and silver companies looking the other way.

The bullion banks were also on the hunt for every technical fund that was puking up what was left of their leveraged long positions as well… and they were right there gobbling up every contract that was pitched overboard, by either covering one of their own short positions or going long themselves.

How this shows up in the final open interest numbers when the CME posts them this morning remains to be seen.  Tuesday [at the close of Comex trading] was also the cut-off for Friday's Commitment of Traders report… and both Ted Butler and myself will be watching with great interest to see if any [or all] of yesterday's co-ordinated take-down will be in it… or will they withhold that data for the following Friday?  Time, as they say, will tell.

Once again, and only for entertainment purposes, I provide yesterday's U.S. dollar chart.  There was a bit of a dollar rally [around 50 basis points] for three hours and change starting at 8:00 a.m. Eastern time… but that was it.

The bullion banks began their work before the markets opened at 9:30 a.m. on Tuesday… and the stocks gapped down at the open… and stayed down, with the bottom coming at 11:30 a.m. Eastern.  There was almost no recovery worth mentioning after that… and it was mostly the big cap gold stocks that got in the neck.  The HUI finished down 3.38%.

Tuesday's CME Delivery Report showed that 56 gold and 68 silver contracts were posted for delivery on Thursday.  The link to this report is here.  The GLD ETF reported another withdrawal yesterday… this time it was 29,332 ounces.  There were no reported changes in SLV once again.  The U.S. Mint had no report either… and the Comex-approved depositories reported absolutely no changes in inventory levels on Monday.

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Yesterday I had a whole pile of stories/interviews for you… but today I have only a few… which suits me [and probably you, dear reader] just fine.

The biggest gold story I could find out there yesterday was this Reuters piece that was filed from Frankfurt and posted over at Kitco yesterday.  The European Central Bank reported that their gold reserves declined by €123 million last week. Gold holdings fell because gold sales by one euro zone central bank outweighed the purchase by another.  This net sale translates into a hair over 4 tonnes of gold, which is hardly a large amount.  The link to this very short story is here… but I've already hit the highlights.

What's really cute about this story is the time that it was dispatched byReuters… 9:10 a.m. Eastern time yesterday which, almost to the minute, was the time that the bullion banks pulled their bids in the gold market in New York.

My next offering is courtesy of Roy Stephens.  It's an Ambrose Evans-Pritchard piece filed late yesterday afternoon in London… and is a follow-up to the stories on this subject that I posted in this column yesterday.  The headline reads "World splits in two as East tightens while West stays super-loose".  India has raised interest rates and issued a stark warning on inflation dangers, joining China, Brazil, and other tiger economies in concerted moves to tighten policy.  It's not an overly long story… and it's my opinion that it's worth the read… and the link is here.

My last two stories are both GATA releases from late last night.  The reason I'm using them is because Chris Powell has already done the heavy lifting by writing excellent preambles to both stories… so why should I should I rewrite them?

The first is headlined "Hinde Capital's Ben Davies talks gold price suppression on CNBC".  Davies had a brief interview [4:37] with Maria Bartiromo yesterday… and the link to that story CNBC headlined "Gold Down, But Not Out: Market Pro" is here.  It's definitely worth the listen.

Yesterday, as my final offering of the day, was Part One of a King World Newsinterview with Jim Rickards of Omnis Inc.  Late last night, Eric King sent me Part Two of the story, but before I could post in this column, Chris Powell posted it as a GATA release headlined "To Rickards, a bureaucratized, debt-ridden modern empire looks worse than declining Rome"… and his extensive introduction… plus the interview itself are a must read and a must listen… and the link ishere.

Bulgarian archaeologist Veselin Ignatov holds a gold-plated silver cup with an image of the Greek God of love Eros, found at a Thracian mound near the village of Karanovo, Bulgaria on November 17, 2009. A team of archaeologists led by Ignatov found a chariot, two silver cups, golden rings and jewelry, clay and glass artifacts dating back to the first century A.D. [REUTERS/Stoyan Nenov]

Well, I guess we shouldn't have been surprised by yesterday's price action.  It's now obvious that the bullion banks are going to complete the job they started and take out gold's 200-day moving average… and in the process, flush out as many tech fund longs as they can… and hopefully force them to go short, which they did in great numbers in the last Commitment of Traders report.  In fact, some of yesterday's price decline was probably the technical funds putting on fresh short positions.  And how many contracts they did put on, won't be known until the COT on Friday… if Tuesday's action is reported in a timely manner, that is.

The other thing to keep an eye on is how low they will take the price down below the 200-day moving average.  Right now, Ted Butler says that silver is pretty much cleaned out on the downside pricewise… and he was surprised to see all the liquidation that occurred in silver yesterday.  If you look at silver's RSI trace, you will see that it's well into the neutral area, even though the bottom is basically in.  Here's the 6-month chart.

Here's gold's 6-month chart.  We're about $20 away from breaking through gold's 200-day moving average.  Let's see how long it takes JPMorgan et al to get the job done.  As I've pointed out several times during July… we're in the 'summer doldrums'… so we shouldn't expect a lot of price activity to the upside.  But, as you are now aware, dear reader… these 'summer doldrums' are courtesy of the bullion banks… and have zero to do with real supply and demand issues.

Gold volume was very heavy again yesterday… but most of it was roll-overs and switches from the August contract into October… and especially December.  Last day of trading in the July contract is tomorrow, so I expect that trading activity will be 'volatile' in New York until then.

Silver's volume yesterday was extraordinary!  It was a monstrous 35,000+ contracts net of all roll-overs… and that, dear reader, is a lot!  And I'm sure hoping that the results of that will be in Friday's COT… and this morning's final report from the CME.

Nothing happened during Far East trading earlier this morning… and early London trading is a yawner as well.  But, as you're already beginning to figure out, it doesn't matter at all what happens in the rest of the world… as the market price is totally controlled by the New York bullion banks during the Comex trading session… with JPMorgan holding the title of capo di tutti capo.

There are three business days left in the week… and in the month.  I expect them to be educational. So pour yourself a glass of wine… and/or blow the froth off a cool one… and enjoy the show.

See you on Thursday.