Yesterday in Gold and Silver

Gold was up about five bucks four hours after trading began in the Far East on Wednesday morning. From that point, the price didn't do much until 9:00 a.m. in London, when it began to rise in stair-step fashion. This rally lasted until around 10:45 a.m. in New York… then gold basically traded sideways for the rest of the New York session.

The silver price rose about two bits between the Far East open and the New York open at 8:20 a.m. local time. Then a rally of substance got underway that lasted until minutes before 1:00 p.m. in the New York afternoon. By the time the dust settled, the silver price was up a buck.

Without a doubt, this was a short covering rally in both metals… and JPMorgan was doing the buying. As I said yesterday, they are leaving no stone unturned [even in light volume trading days] to cover as many shorts as they can. Their buying was driving prices upwards yesterday. In a note to clients yesterday morning about Monday's COT report… and before the real price move in silver started… Ted Butler said that the price action over the last week or so "offers further proof that JPMorgan has been manipulating the price of silver… and has not been involved in a legitimate hedging operation. There would be no rush to buy back and cover shorts if this was a legitimate silver hedge." Ted wasn't writing about what happened yesterday… but he might as well have been.

The world's reserve currency had a very interesting day on Tuesday. The dollar lost 35 basis points shortly after trading began in the Far East on Tuesday morning… and then lost another 40 basis points between 3:00 and 6:40 a.m. Eastern time. From that low, the dollar rose 85 points… reaching its zenith at 11:30 a.m. in New York… then traded sideways for the rest of the day.

I don't see any trace of the dramatic dollar moves in either the gold or silver charts from yesterday.

The precious metal stocks gapped up… and stayed up. After gold's rally topped out at 10:45 a.m… the stocks [along with the metal] traded sideways for the rest of the day… with the HUI closing up 2.61%. As a group, the silver stocks did much better than that. If both gold and silver hold [or add to] their Tuesday gains going into this morning's open, we should see some pretty big pops in the prices of most of the junior silver companies once Toronto starts trading again after the Christmas holiday.

Here are two graphs that you've seen before… both courtesy of Nick Laird over at sharelnyx.com. The first is the PM Funds Index… and, as Nick said in his covering e-mail… "These two charts look well rested and ready to head higher." I couldn't agree more.

And here's the Silver Seven Stock Index

The CME's Delivery Report on Tuesday showed that 111 gold and 49 silver contracts were posted for delivery on Thursday. In gold, JPMorgan was the big issuer out of its client account… and Deutsche Bank was the biggest stopper/receiver from its proprietary [house] trading account. In silver, JPMorgan was the big issuer… and, as usual, The Bank of Nova Scotia was the biggest stopper. The report is worth looking at… and is linked here.

The GLD ETF reported another withdrawal again yesterday… this time it was a smallish 29,284 ounces. The amount of gold contained in GLD has not changed significantly for seven straight months. In the same period of time, SLV has added about 54 million ounces.

There was no sales report from the U.S. Mint.

Because of the inclement weather in the New York area on Monday, the good folks over at the Comex-approved depositories had two days worth of data for us yesterday… Thursday, December 23rd and Monday, December 27th. During those two days, they reported a decline in silver inventories of 623,301 troy ounces. Comex warehouse stocks are now down to under 105 million ounces… and it's been many years since its been that low. The warehouse activities are linked here… and are also worth a look.

I have one housekeeping item to take care of at this point… and that has to do with Monday's Commitment of Traders report. I reported in this column yesterday that the Commercial net short position in gold had declined by 2,381 contracts during the prior week. That was a gross error on my part, as I subtracted two numbers instead of adding them. The actual number should have been 16,327 contracts… or 1,637,270 ounces, instead of the 238,381 ounces I reported. So, despite the rather tepid pre-holiday price action, the bullion banks [read JPMorgan] really covered a lot of short positions in gold during the early part of December.