JPMorgan et al Slam the Precious Metals Again

As one would expect under the current financial circumstances, gold began a steady rise in early Far East trading on Monday… this despite an 80 basis point surge in the U.S. dollar that was happening at the same time.  Since the big dollar rally didn't slow down gold's advance one iota, 'da boyz' had to resort to something else.

So, moments before midnight in New York… 1:00 p.m. in Hong Kong trading… the selling pressure began, even though the dollar had reached it's Monday high 90 minutes before that… and was in steady decline from that point on.  Gold hit its London low just minutes before New York opened… and once New York opened, a rally began that lasted right up until the London p.m. gold fix was in… and that was all she wrote, as the gold 'fell' another $17 into it's low of the day [$1,218.20 spot] at precisely 4:00 p.m. Eastern time.  Gold closed about four bucks off that low.  Gold's high of the day was around $1,243 spot shortly before 1:00 p.m. in Hong Kong.

Silver's price path was basically similar to gold's… but the price moves were more violent… for reasons that you, dear reader, already know all about.  Silver's high price also occurred in lunch hour trading in Hong Kong… around $19.40 spot… before it, too, ran into heavy selling pressure.  Silver's low in London trading [around $19.05 spot] was also moments before New York opened.  The subsequent 30 cent rally also ended at the London p.m. gold fix at 10:00 a.m. New York time.  Then the New York bullion banks [most likely led by JPMorgan] pulled their bids… and the price fell like a stone to its absolute low of the day of $18.72 spot.  From this low, silver recovered 20 cents and closed at $18.95 spot.

Platinum and palladium were not spared either.  Both got hit the hardest the moment the London p.m. gold fix was in… and all the damage was done by noon… two hours later.  What, dear reader, are the chances that these were all random events?

The dollar was amazing yesterday.  Gold had its big rally in Far East trading while fighting off an 80 basis point rise in the dollar.  From its zenith of 87.06 about 10:30 p.m. Sunday night… to its nadir of 86.05 at the London p.m. gold fix at 10:00 a.m. in New York… the dollar fell 101 basis points… while gold and silver got sold off.  Then a two hour long 65 basis point rally ensued… and all the precious metals got slaughtered during that time period.  Then the dollar proceeded to lose 60 basis points of that rally… but the precious metals barely moved off their lows.  The bullion banks aren't even trying to be subtle anymore.

The shares more or less followed the general stock market trend yesterday… with the low for the shares coming just before noon.  And, despite the fact that more blood was spilled in the gold market up until [and including] the on-the-button 4:00 p.m. gold low, the shares managed to stage a mild recovery as the day wore on.  Considering how bad it could have been, the shares appeared to [once again] shrug off this full-blown bear raid by the U.S. bullion banks.  The HUI finished down 2.24%.

And make no mistake about it… what we saw yesterday was a full scale frontal across-the-board assault on the precious metals markets… especially in the two hour time from the London p.m. gold fix at 10:00 a.m. Eastern [3:00 p.m. in London]… until 12:00 noon Eastern time.  That's when that big dollar rally showed up out of nowhere.

Friday's big down day in gold resulted in a huge drop in open interest and pretty big volume.  Open interest fell 12,984 contracts… and volume was 279,380 contracts… less about 75,000 roll-overs.  Silver's big down day on Friday was on volume of 50,761 contracts… less around 10,000 roll-overs.  But open interest only fell 402 contracts.  You can bet your last nickel that JPMorgan was going long to hide their tracks… and that's why this o.i. change is so small.  Whatever they did, won't be seen until Friday's Commitment of Traders report is released.

And, without a doubt, open interest in both gold and silver dropped another bunch yesterday… but it remains to be seen whether it was pure liquidation… or were the bullion banks hiding their actions by going long instead of covering shorts?

In Friday's interview with Eric King over at King World News… Ted Butler was astonished that the '4 or less' traders in silver reduced their net short position by 6,839 contracts… "the largest one week reduction by the Big Four in history."  Due to sloppy work in the wee hours of Saturday morning, I accidently linked the Hathaway interview in the place of Ted Butler's interview… and I will make amends for that right now.  If you haven't heard what Ted had to say about last week's silver action… and Friday's COT report… drop everything and click here.

The CME's Delivery Report on Monday showed that 32 gold and 199 silver contracts were posted for delivery on Wednesday.  The list of issuers and stoppers is noteworthy… and the link is here.

The usual New York gold commentator pointed out that Russia's central bank [according to its annual report submitted to parliament on Monday] "bought 142.87 tonnes of gold, increasing its holdings of the metal by 30% during 2009."  And that amount, dear reader, is reasonably close [within 40 tonnes] to being everything that Russia's gold miners dug out of the ground last year.  And, according to what they've bought so far this year, the Central Bank of Russia will be way ahead of that number when they close the books on 2010 gold purchases.  The CBR will report their April gold purchases on Thursday… and I'm looking forward with great interest to see how much they've added to the 21.3 million ounces they already hold.  The Reuters story is linked here… and the above quote is in the 8th paragraph.

Today's first gold-related story is posted over at marketwatch.com.  "Gold reached a record high Friday and then recoiled. But this seems not to have bothered the gold bugs a bit: They seem cheerfully confident of new highs to come."  The headline reads "Gold Bugs Rampant"… and the link is here.

Here's another story about German gold demand.  This is a story that I 'borrowed' from yesterday's King Report.  There's nothing in this article that surprises me in the slightest.  The headline of this must read story from London's Financial Times states "Germans lead gold rush frenzy"… and the link is here.

My last gold-related story comes from this morning's edition of the Financial Post in Toronto… and I found it posted over at Kitco.com.  All these 'cash for gold' companies out there now have some serious competition.  The headline reads "Sears, Kmart to offer customers cash for their gold, silver jewellery".  It's just another step on the road to re-monetizing the precious metals… and the link to the one-paragraph story is here.

Here's a story from yesterday's edition of The Telegraph in London that was sent to me in the wee hours of this morning by reader Roy Stephens.  It's an Ambrose Evans-Pritchard offering headlined "Banks dump Greek debt on the ECB as eurozone flashes credit warnings".  Foreign holders of Greek and Portuguese debt have seized on emergency intervention by the European Central Bank to exit their positions, leaving eurozone taxpayers exposed to the credit risk.  It's just another brick in the wall for the EU and the euro, dear reader… and the link is here.

Iceland's Eyjafjallajökull volcano is still in the news.  Here's a piece that was in the evening edition of the Daily Mail from London yesterday.  It's a longish article… but there are some great photos in it… and I urge you to run through it.  The headline is longish as well… and reads "Britain's airspace reopens…. but passengers STILL face travel chaos caused by volcanic ash cloud".  The link is here.

I know a thing or two about plate tectonics, sea floor spreading and volcanology… and I can tell you that if Eyjafjallajökull volcano's companion, Katla, makes up its mind to erupt… like it has in the past… air travel in the northern hemisphere as we know it today… could become non-existent for years.  Here's a story from the April 24th edition of The Telegraph that I've been saving… and it's worth very careful reading.  The headline reads "Iceland volcano: eruption 'could just be rehearsal' for worse ash chaos if Katla blows"… and the link is here.

It is difficult to get a man to understand something when his salary depends on his not understanding it. – Upton Sinclair

I see that both gold and silver are under 'pressure' once again by a not-for-profit seller.  In gold, this started at 3:00 p.m. in Hong Kong trading… and it peeled more than $15 off the gold price.  As for silver, 'day boyz' pulled their bids around 4:00 p.m. in Hong Kong… which is 3:00 a.m. New York time.  Silver dropped more than 25 cents in just a few minutes  Both metals caught a bid at the London open… but how long that lasts remains to be seen.  I also note that there has been little price movement in either platinum or palladium to match what's happening in gold so, for the moment, 'da boyz' are concentrating on silver and gold.

It would appear that the bullion banks are going all out to flush out all the spec longs in both silver and gold as they can… using gold to beat the living crap out of the silver price.  As Ted Butler has said for years… silver is at the center of the bullion banks' universe… and after the surprise reduction in the '4 or less' trader open interest last week… it appears that Friday's and Monday's decline is about to be followed by a Tuesday decline as well.  It remains to be seen what happens when New York opens… but the pattern looks pretty clear to me at the moment.

Gold volume [net of roll-overs] in Far East and early London trading is a pretty chunky 35,000 as of 5:44 a.m. Eastern time… and silver's volume is right up there as well at 5,100 contracts net of roll-overs.

Could this be the beginning of the final flush-out before the bullion banks cut their losses and run?  Beats me… but I'm not selling one share or one ounce of anything.  I know who's doing it… and why they're doing it.  What I don't know is where the bottom is.  But no matter how low it goes… or how long it takes… I fully intend to wait these bastards out.

Every day of price declines is a new opportunity to buy physical on the cheap.  I have done so… and will continue to do so.

I believe that the end of this game is just about upon us.  Ted Butler was of the opinion that the silver price management scheme would end in 2010… and with events proceeding as they have been so far this year… I have no reason to doubt that.

Volume's in both gold and silver on Monday were much lighter than Friday's.  But what really matters is the changes in open interest when they're published later this morning.  And whether they tell us anything or not, you have to know that there was more spec long liquidation… and more bullion bank short covering… or long buying.  These numbers, too, should be in this Friday's COT report.

I'm only guessing, but it will probably be an interesting day when the Comex opens for business this morning.

See you tomorrow.