Was yesterdays action the beginning of a major br

first_imgWas yesterday’s action the beginning of a major breakout…or just a one-day wonder? We’ll find out pretty quick I would think.The gold price was up a few dollars about half an hour before London opened yesterday morning…and from there, gold slid about twelve bucks going into the London a.m. gold fix at 5:30 a.m. Eastern.From the a.m. fix, the price drifted slightly lower, with the low of the day coming at the London p.m. gold fix at 3:00 p.m. local time, which was 10:00 a.m. in New York.  From that low, gold gained back about ten bucks…and just minutes before 12:30 p.m. Eastern time, gold was down about seven bucks from Tuesday’s close in New York.Then a not-for-profit buyer showed up…and in just over an hour, the gold price rose forty-five bucks…and by the close of electronic trading, gold was up over sixty bucks from its low at the London p.m. fix.Gold closed at $1,710.80 spot…up a whopping $44.40 on the day.  Gross volume was an immense 323,392 contracts.It’s my understanding that yesterday was options expiry for the February gold contract.  Well, if that’s the case, then a whole boatload of out-of-the money call options all of a sudden expired in the money.  It will be real interesting to see how many of these newly-minted [pardon the pun] in-the-money option holders will now convert to future contracts and stand for delivery next Tuesday.Silver’s price action was virtually identical to gold’s, except the low in silver came about 9:50 a.m. Eastern time…about ten minutes before gold’s low price tick.The silver price rose from there…and then blasted off at the same second that the gold price went ballistic, which was minutes before 12:30 p.m. in New York.Within an hour, silver was at $33.20 spot with just ten minutes left before the Comex closed…and electronic trading began.The silver price closed up $1.22 at $33.27 spot…but silver was up about $1.70 from it’s 9:45 a.m. Eastern time low.  It was quite a day…and net volume was a very heavy 47,000 contractsPlatinum and palladium also had big days yesterday as well, but their respective lows came much earlier…during afternoon trading in Zurich, long before New York opened.The dollar index didn’t do much until 3:30 p.m. Hong Kong time, which was half and hour before the 8:00 a.m. London open yesterday.  The rally peaked at 12:30 p.m. in London…and then drifted lower until about 12:20 p.m in New York, five hours later.At that point, the dollar index fell off the proverbial cliff, as the precious metals prices headed north at warp speed…and within an hour the index was down about 65 basis points  From there it rallied about 30 basis points, before falling to its low of the day at 79.40 at 3:40 p.m. in New York.Of course the gain in the precious metals was out of all proportion to the dollar’s decline, but we’ve seen the reverse of that so many times, that we’ll happily take it the odd time that it actually does go in our favour.The gold stocks opened down slightly when trading began at 9:30 a.m. Eastern time yesterday morning…but minutes before 12:30 pm…away went the gold price and their respective shares.  The HUI didn’t finish precisely on its high, but close enough, as the index closed up an eye-watering 6.62% on the day.It’s almost pointless to add that the silver shares put in a blistering performance yesterday as well…and Nick Laird’s Silver Sentiment Index closed up a chunky 5.44%.(Click on image to enlarge)The CME’s Daily Delivery Report showed that 61 gold and 43 silver contracts were posted for delivery on Friday.  And in silver it was the usual Jefferies/Bank of Nova Scotia/JPMorgan trio again…with Jefferies as the short/issuer…and the other two entities as the long/stoppers.  Here’s the link to the ongoing saga.So far in January…1,161 silver contracts have been delivered…which is an enormous number for what is traditionally a non-delivery month.  One has to wonder what it means…and did yesterday’s price action in silver have anything to do with that?  Beats me.The GLD ETF added 291,605 troy ounce of gold yesterday…after having about 165,000 ounces withdrawn on Monday.  There was no reported change in SLV.The U.S. Mint only reported selling 1,000 ounces of gold eagles yesterday…and nothing else.Tuesday was another busy one over at the Comex-approved depositories.  They reported receiving 596,695 troy ounces of silver…and shipped 209,942 ounces out the door.  The link to that action is here.Silver analyst Ted Butler has a few things to say about yesterday’s trading action in his mid-week report to his paying clients…and here are two paragraphs.“If JPMorgan is not selling but is, in fact, buying, then a very different scenario could develop, similar to how I have speculated in the past. If JPMorgan is buying and not the technical funds, then a very different and bullish scenario emerges. If JPMorgan decides not to put its head back into the lion’s mouth and withdraws from manipulating silver, then a new silver chapter may have begun. Let me be clear – there is no way of determining for sure who is buying and selling today and this past Friday; only future COTs will reveal that. If it turns out that JPMorgan is buying back more of its short position on these rallies that would suggest much higher prices to come and maybe real soon. This goes to the heart of the silver manipulation. Take away the big silver short and you should take away the manipulation itself. I’m not saying that is the case, just that it might be. I would play it, as I always do, like it may be the end of the manipulation, simply because if it is, there will be little likelihood of second chances to get on board easily.”“That’s not to say that the commercials will roll over and play dead. I sense a profound lack of true liquidity since the MF Global disaster, in which the HFT operators are now responsible for an even higher share of total volume than before. I think that the HFT share of silver volume has approached 100% at times recently, rendering the silver market to its most illiquid state in my experience. More than anything else, this low true liquidity environment is behind the price spikes of Friday and today. In such a low liquidity environment we must be prepared for more price volatility, not less. We must be prepared for whatever may come, but we must also hang on to silver positions like never before. Be prepared for volatility that will rattle your bones. But volatility is a two-way street and up is one of the ways. So is up big.”Here’s the silver equivalent to the gold charts that Nick Laird provided yesterday.  This shows the 5-year charts for silver for six different world currencies as of the close of trading yesterday.  The ‘click to enlarge’ feature is a must for these graphs.(Click on image to enlarge)I have the usual number of stories for you today…and I hope you have the time to go through them all.Well, Wednesday’s price action was a real yawner in both gold and silver until the blast off occurred just minutes before half-past lunchtime in New York yesterday afternoon.As Ted Butler pointed out, it’s not possible to know whether they were short covering rallies…or technical funds going long.  If it was a tech funds going long, it was certainly wasn’t done in a for-profit manner…and if it was a short covering rally [my guess] then why is the preliminary open interest in gold up by 12,000 contracts in gold, but down 194 contracts in silver?Of course with all the activity surrounding the February delivery month, it’s possible to hide just about anything in the open interest data…and even the final open interest number posted on the CME’s website later this morning may not be of much help.These big price spikes on all four precious metals happened on a Wednesday…and whatever open interest changes there are, won’t be in tomorrow’s Commitment of Traders Report, as the cut-off was on Tuesday afternoon.  So we’ll have to wait until next Friday’s report.The final open interest numbers for Tuesday’s trading showed a big drop in gold’s open interest…and no change at all in silver.  That doesn’t really surprise me, as all the activity is in gold at the moment…and we won’t see any activity in silver until we get closer to delivery into the March contract.  All the roll-overs and associated trading won’t really get underway in earnest until we’re well into February.Here’s a nifty graph that I check on every once in a while…and I thought it worth posting after yesterday’s big day in the precious metals.  It shows the year-to-date price gains and losses in a long list of commodities.  As you can see, silver is a strong second so far this year.  The ‘click to enlarge’ feature comes in real handy on a chart like this.(Click on image to enlarge)As per usual, gold’s high in Far East trading on their Thursday came late in the Hong Kong afternoon during the last hour of trading before the London open this morning.  Once London opened, both metals got sold off, but then spiked a bit shortly before 10:00 a.m. GMT…and as of 5:15 a.m. Eastern time, gold is up about five bucks and silver is up about 15 cents.  Volume is still pretty light in both metals at the moment, all things considered…and the dollar index is down about 40 basis points.Volume was very light all day yesterday until the big pop at 12:30 p.m. in New York…and then volume went supernova.  As I said above, it will be interesting to see what all of this volume and open interest data translates into…and even more important, was yesterday’s action the beginning of a major breakout…or just a one-day wonder?  We’ll find out pretty quick I would think…as the 50-day moving averages in gold and silver to the upside…and the dollar to the downside…have been taken out with real authority.As I said yesterday, I was expecting the rest of the month to be pretty quiet price-wise, but I’m equally delighted to be proven wrong.  It appears that something is going on under the hood…and all bets could now be off as to how prices go for the rest of the month.I’ll be watching the New York open with more than the usual amount of interest…and I’ll see you here tomorrow. Sponsor Advertisement Columbus Gold Closes Transaction to Acquire Paul Isnard, 1.9 Million Inferred Oz. Gold Project; Plans Drilling On June 30, 2011, Vancouver, Canada based, Columbus Gold (CGT: TSX-V) announced that it had closed its previously-announced transaction with Auplata SA, gaining the exclusive right to obtain up to a 100% interest in the Paul Isnard gold project in French Guiana, which includes the 43-101 compliant 1.9 million Inferred gold resource in the Montagne d’Or gold deposit. Columbus Gold now has fully satisfied the share issuances required to earn into the project, and can earn its initial 51% interest in the project by incurring $7 million in exploration expenditures, which it expects to complete by early 2012.  Upon Columbus Gold earning a 51% interest in the project, it will have an option to increase its interest to 100% (subject to an underlying royalty) by completing a bankable feasibility study. Drilling is planned to commence in August 2011.For additional information, please see Columbus Gold news release dated June 30, 2011, or contact the company at:Investor Relations 604-634-0970 or 1-888-818-1364 [email protected]last_img

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