London Trader Warns CFTC In Advance Of JPM's Silver Price Take-Down

Gold traded within a ten dollar range all day long on Wednesday… finishing up a few dollars on the day.  Nothing to see here, folks… except the usual downward pressure on the price during the New York trading session.

Silver's price action was slightly more well defined… rising into the New York open before getting sold off in the same old way going into the close of electronic trading at 5:15 p.m. Eastern time.  Silver's low price was around $17.52 in Globex trading before the Sydney open… and the high [around $17.84] was in London shortly before 1:00 p.m. local time.

Another point to be made on the silver graph above, is the big spike in  the silver price that occurred at the close of Hong Kong trading on Wednesday.  Silver rose move than 30 cents in a flash.  It wasn't that noticeable on previous silver graphs because of the scale.  Now that it has changed, it stands out like a sore thumb.  One has to wonder what that was all about.

The dollar was range bound as well… but set a new high for this move shortly before 5:00 p.m. Eastern time yesterday afternoon at 82.24.

It was all downhill right from the open in the precious metals stocks.  The HUI managed to stay in positive territory until 1:00 p.m. Eastern time… then, as 'da boyz' whittled away at the gains in both metals, the stocks finally caved in and the HUI closed down 1.67%.

Gold open interest on Wednesday fell 2,468 contracts.  I was expecting more.  Silver's open interest actually rose 291 contracts… which is a real surprise considering that the silver price was down almost 50 cents on Wednesday.  I would assume that the bullion banks were covering short positions and going long at the same time… as no other course of action would explain this positive number in the face of such a price decline.  Unfortunately this data will not be in today's Commitment of Traders report.  The COT report [for positions held at the end of trading on Tuesday] will be out at precisely 3:30 p.m. Eastern time… and the link for that is .

Some say that yesterday was options expiry… but some say it's today.  But it matters not, as all those lovely $1,100 gold call options, plus all the $17.00 silver options will finish out of the money and expire worthless regardless of which day it is.  But that's no surprise… is it, dear reader… as we've seen it all before.

The CME Delivery Report showed that 2 gold and 11 silver contracts were posted for delivery on Monday.  Deliveries are falling off rapidly as we approach first notice day in the April contract for gold next week.  GLD reported receiving another 146,857 ounces yesterday… and SLV was unchanged once again.  The U.S. Mint had no sales to report either… and the Comex-approved depositories reported receiving another 142,729 ounces of silver on Wednesday.

As has been the case lately, I have a fair number of stories today.  I'll deal with the non-gold ones first.

The reason for the high dollar lately has been the mad dash out of euros into the U.S.dollar.  That's what this first story is all about.  It's a Bloomberg piece headlined "Swap Spreads Plunge as Portugal Downgrade Boosts Risk". Ten-year swap spreads turned negative yesterday for the first time ever.  The interesting thing to watch will be when the dollar itself turns south.  Where will all the hot money go then?  I doubt it will go back into the euro.  Maybe a lot of it will head into the precious metals this time, as there are virtually no choices left.  I thank Florida reader Donna Badach for sending me the story… and the link is .

The next story, also courtesy of reader Donna Badach, comes from Thursday's edition of The New York Times.  The headline is sobering… "Social Security to See Payout Exceed Pay-In This Year"… "This important threshold was not expected to crossed until at least 2016, according to the Congressional Budget Office.  "Analysts have long tried to predict the year when Social Security would pay out more than it took in because they view it as a tipping point — the first step of a long, slow march to insolvency."  The link to the story is .

This next story is a Bloomberg piece that was sent along by reader Scott Pluschau.  It's about residential real estate and deserves your undivided attention.  The headline reads "Half of U.S. Home Loan Modifications Default Again".  This should come as no surprise to you, dear reader, as it's certainly no surprise to me.  Real estate as an asset class is becoming extinct.  I was hoping that 2013 would see the bottom of the residential real estate market in the U.S… but I may have to revisit that notion one of these day.  The link to this must read story is .

Here's an item that appeared in Bloomberg in the wee hours of this morning.  It's just more of the same Wall Street insider price management.  The headline reads "JPMorgan, Lehman, UBS Named as Conspirators in Muni Bid-Rigging".  I thank Russian reader Alex Lvov for bringing it to my attention… and now to yours.  The link is .

There were a lot of different takes on how the CFTC hearings on position limits in the precious metals market went yesterday.  I have five stories on this…

1. Reuters
2. Yahoo
3. Bloomberg
4. Kitco News
5. Kitco News

We won't know for a while what the CFTC will do about position limits in the precious metals [if anything] for quite some time I would imagine.  They know what the problem is, the bullion banks that are at the heart of it… and how to fix.  But they still haven't dealt with the Ted Butler-instigated 18-month old silver price manipulation investigation that's still on-going… so we'll just have to twiddle our thumbs until they make a decision on all this.  But the whole issue is now in the public domain for all to see… and that has to be a good thing, as they can't say they weren't warned when the silver situation finally blows up in their faces.

One of the most interesting stories to come out of yesterday's hearings was this "Deep Throat" trader out of London that I mentioned briefly yesterday.  He warned the CFTC in a series of e-mails about an upcoming decline in the silver market that JPMorgan instigated.  He wanted to speak at the CFTC hearings, but was denied.  The series of e-mails he sent to the CFTC is contained in a GATA dispatch bearing the headline "A London trader walks the CFTC through a silver manipulation in advance".  What's in these e-mails should be no surprise to anyone… as it pretty much describes what both Ted Butler and GATA have been saying for years about the actual process itself… and you've certainly seen me talk about it in this column on many occasions as well.  Now we have solid confirmation that this is all true.  This is a must read… and the link is .

I wish we could implement a gold standard.  Global Credit systems and economies are in dire need of a mechanism that would work to promote at least a semblance of stability.  Regrettably, at this stage of massive global debt and synchronized global inflationism, a gold-based monetary regime is implausible.  As such, I am a proponent of sound central banking – the kind that doesn’t exist today.  It’s our last resort.  And it’s in this vein that I am so frustrated with Mr. Greenspan.  He just refuses to address the dangerous flaws of contemporary central banking. – Doug Noland, prudentbear.com, 19 March 2010

As I mentioned yesterday, I'm not sure how many legs this dollar rally has left in it… but if I had to bet $10 on it… I'd say that we're close to a top of some sort.  I'm not a technician, but the RSI is not confirming this new high price point in the dollar… as it's showing a lower high.  It's a bad sign when we see it in gold or silver… so I would assume that it's a bad sign for the dollar as well.  The only thing we don't know is whether or not this is an interim top… or something more terminal in nature.  We will, as they say, find out in the fullness of time.  Here's the 3-year dollar chart once again.

As of 5:02 a.m. Eastern time, the dollar is down about 40 basis points… and both precious metals are in the plus column… with silver up a very respectable 27 cents as I write this, and gold knocking on the $1,100 price door.  If options expiry is today [and not yesterday, like some have said] then we could see an interesting fight between the long holders and the bullion bank shorts in New York this morning.  If that turns out to be the case, I will guess in advance that we might see a surprise dollar rally to help the bullion bank's cause.  I'm not going to bet any money on it, as I'm just thinking out loud as to how this may unfold if the New York bullion banks get really serious.

At the moment, gold volume for April is about 10,300 contracts net of spreads… which is a very small number considering the fact that London is well into morning trading.  May volume in silver [net of spreads] is about 3,400 contracts.

The preliminary volume numbers for Thursday's trading have been posted over at the CME's website… and they show total volume traded in gold at a whopping 223,287 contracts.  But somewhere between 50-60,000 of that is roll-overs into the June contract, which is the next delivery month for gold after April.  Silver's preliminary volume numbers yesterday showed that 30,889 contracts traded… of which a hair over 27,000 were traded in May… silver's next big delivery month.

It could be another exciting day in the gold and silver markets when New York starts trading today.

I hope you have a great weekend… and I'll see you on Saturday.