The Daily Gold and Silver Report

Gold closed down by $16.20 to $1366.00 (comex closing time).  Silver fell by 8 cents to $21.67  (comex closing time)

In the access market at 5:00 pm, gold and silver finished trading at the following prices :

gold: 1367.10
silver:  $21.67

At the Comex, the open interest in silver rose by a rather large 2408 contracts to 150,968 contracts despite silver‘s fall in price yesterday.  The silver OI is still  holding firm at these highly elevated levels. As I mentioned to you yesterday, the bankers will try and do everything possible to remove as many longs from the silver arena as possible. They must know something is up!!

The open interest on the entire gold comex contracts fell  by 4081 contracts to 372,950 which is still extremely low. There is no question that all of the weak speculators in gold have now departed. The number of ounces which is standing for gold in this June delivery month  is 940,500 or 29.2 tonnes.The number of silver ounces standing in this non active month of June  remained constant at 705,000 oz

Tonight, the Comex registered or dealer inventory of gold remained the same at  1.434 million oz or 44.60 tonnes.  This is still dangerously low.  The total of all gold at the comex also remained the same  at 7.706 million oz or 239.68 tonnes of gold.

JPMorgan’s customer inventory shows no  change and rests tonight at its nadir of 136,380.611 oz or 4.24 tonnes.  Its dealer inventory remains at 413,526.284 oz but it still must settle upon contracts issued in the June delivery month which far exceeds its inventory.

The total of the 3 major bullion dealers, Scotia , HSBC and JPMorgan have in the Comex dealer account only 30.02 tonnes of gold

The GLD  reported a loss in inventory of 1.51 tonnes of gold inventory. The SLV inventory of silver  remained firm with no losses or gains in inventory.

In physical stories we have reports from, Bill Holter and Chris Powell of GATA on the departure of Gary Gensler and maybe others at the CFTC.

On the paper side of things,we have Ron Paul tackling USA involvement inside Syria, Reuters, Matt Scuffham on the bail-in of the UK’s Co Op Bank, Ambrose Pritchard Evans on what will happen to the world if Bernanke “tapers” and finally Michael Snyder of Economic Collapse Blog as he discusses the plight of Detroit and the USA in general.

We will go over these and many other stories but first…………………

Let us now head over to the comex and assess trading over there today.
Here are the details:

First Richard Russell, on gold trading last night :

*Richard Russell last night…

“It looks like the great gold rip-off is completed and over. A few of the banks (JPM) spread the rumor that gold was heading for $1,000 and that the bull market in gold was toast. This set off a panic in gold and silver, which served the perpetrators well.

As the metals swooned, the crooks, who had sold the metals short, made a tidy fortune as the metals collapsed. At the same time, they loaded up on cheap gold and silver. In all, quite a play, during which a good many duped investors dumped their silver and gold.

I understand that there is now a huge speculative short position in gold on the Comex. This position will have to be covered. This means driving the shorts out of the market. Thus, the manipulators will have cleaned up — first by selling the metals short, and then by loading up on the metals at the bottom of the panic in preparation for (hopefully) the ride up.

My guess is that China and Russia soaked up a good deal of the bargain-priced gold near the bottom of the panic. China waits patiently while the US spends its way into bankruptcy. Which reminds me, there’s still lots of talk about the true amount of gold owned by the US. Then why the hell doesn’t the government or the Fed finally audit our gold holdings and put an end to the rumors? From what I understand, neither the Fed nor the US government want an audit. If the gold is really there, then why don’t they put an end to all the rumors? For heaven’s sake, let’s have an audit — or is there really something to hide?

I feel we are besieged with rumors, secrets, lies and manipulations. I’ve felt this way before, but I’ve never felt this strongly that we (Americans) are being lied to and manipulated. What’s to hide? Jesus told us that we must know the truth, and the truth will make us free. Then for God’s sake, start telling us the truth! My intuition tells me that if it’s a secret, it’s probably evil. Ultimately, good or bad, everything comes to light– although it may take time.” – Richard Russell.

The total gold comex open interest fell  by 4081 contracts from  377,031 down to to 372,950 with gold falling by $4.20 yesterday. The front active month of June saw it’s OI fall by 437 contracts from  1382 down to 945. We had 414 deliveries served upon our longs on Monday.  We thus lost 23  contracts or 2300 oz that will not stand in this delivery  month of June. The next delivery month is the non active July contract and here the OI fell by  68 contracts down to 651.  The next active delivery month for gold is August and here the OI fell by 4083 contracts from 212,754 down to 208,671. The estimated volume today was bad at 123,017 contracts.    The confirmed volume yesterday was atrocious at 82,551. It seems that the many now realize that the Comex is a crooked game so investors are seeking other means to acquire gold.

The total silver Comex OI surprisingly rose  despite as silver‘s fall  in price by 20 cents yesterday. It’s total OI is up by 2408  contracts to 150,968. The longs in silver remain resolute, willing to take on the criminal bankers who today threw a tantrum with their raid, as their object of the exercise was to remove some of those stubborn longs from the silver open interest. I doubt very much if today’s raid would have any effect on the total OI.  The front non active June silver contract month shows a loss in OI  of 4 contracts resting tonight at 25. We had 4 notices filed yesterday so in essence we neither gained nor lost any silver contracts. The next big delivery month is July and here the OI fell by only 437 contracts down to 57,686. We are less than  two weeks away from first day notice (June 28.2013) and judging from the relatively high OI in July, we may see some fireworks in silver.  The estimated volume today was good coming in at 57,686 contracts.  The confirmed volume on Friday was  good at 43,115.

Comex gold/May contract month:

June 18/2013

the June contract month:

Withdrawals from Dealers Inventory in oz
Withdrawals from Customer Inventory in oz
202.48 oz (Scotia)
Deposits to the Dealer Inventory in oz
Deposits to the Customer Inventory, in oz
12,178.435 (Scotia) oz
No of oz served (contracts) today
 11 (1,100  oz)
No of oz to be served (notices)
934 (93,400 oz
Total monthly oz gold served (contracts) so far this month
8471  (847,100  oz)
Total accumulative withdrawal of gold from the Dealers inventory this month
78,856.579 oz
Total accumulative withdrawal of gold from the Customer inventory this month
259,153.01 oz
We again had no activity at the gold vaults
The dealer again  had 0 deposits and no  withdrawals.

Gold Crush Started With 400 Ton Friday Forced Sale On COMEX

The gold futures markets opened in New York on Friday 12th April to a monumental 3.4 million ounces (100 tonnes) of gold selling of the June futures contract in what proved to be only an opening shot. The selling took gold to the technically very important level of $1540 which was not only the low of 2012, it was also seen by many as the level which confirmed the ongoing bull run which dates back to 2000. In many traders minds it stood as a formidable support level… the line in the sand.

Two hours later the initial selling, rumoured to have been routed through Merrill Lynch’s floor team, by a rather more significant blast when the floor was hit by a further 10 million ounces of selling (300 tonnes) over the following 30 minutes of trading. This was clearly not a case of disappointed longs leaving the market – it had the hallmarks of a concerted ‘short sale’, which by driving prices sharply lower in a display of ‘shock & awe’ – would seek to gain further momentum by prompting others to also sell as their positions as they hit their maximum acceptable losses or so-called ‘stopped-out’ in market parlance – probably hidden the unimpeachable (?) $1540 level.

The selling was timed for optimal impact with New York at its most liquid, while key overseas gold markets including London were open and able feel the impact. The estimated 400 tonne of gold futures selling in total equates to 15% of annual gold mine production – too much for the market to readily absorb, especially with sentiment weak following gold‘s non performance in the wake of Japanese QE, a nuclear threat from North Korea and weakening US economic data. The assault to the short side was essentially saying “you are long… and wrong”.

Futures trading is performed on a margined basis – that is to say you have to stump up about 5% of the actual cost of the gold itself making futures trades a highly geared ‘opportunity’ of about 20:1 – easy profit and also loss ! Futures trading is not a product for widows and orphans. The CME’s 10% reduction in the required gold margins in November 2012 from $9133/contract to just $7425/contract made the market more accessible to those wishing both to go long or as it transpired, to go short. Soon after we saw the first serious assault to the downside in Dec 2012, followed by further bouts in January 2013 – modest in size compared to the recent shorting but effective – it laid the ground for what was to follow. One fund in particular, based in Stamford Connecticut, was identified as the previous shorter of gold and has a history of being caught on the wrong side of the law on a few occasions. As baddies go – they fit the bill nicely.

The value of the 400 tonnes of gold sold is approximately $20 billion but because it is margined, this short bet would require them to stump up just $1b. The rationale for the trade was clear – excessively bullish forecasts by many banks in Q4 seemed unsupported by follow through buying. The modest short selling in Jan 2013 had prompted little response from the longs – raising questions about their real commitment. By forcing the market lower the Fund sought to prompt a cascade or avalanche of additional selling, proving the lie ; predictably some newswires were premature in announcing the death of the gold bull run doing, in effect, the dirty work of the shorters in driving the market lower still.

This now leaves the gold market in an interesting conundrum – the shorter is now nursing a large gold position and, like the longs also exposed – that is to say the market is polarised between longs and shorts and they cannot both be right. Either the gold bulls – like in a game of tug-of-war – pull back and prompt the shorters to panic and buy back – or they do nothing, in which case the endless stories about the “end of gold” will see a steady further erosion in prices. At the end of the day it is a question of who has got the biggest guns – the shorts have made their play – let’s see if there is any response from the longs to defend their position.

On Inventories…

Via Mark O’Byrne of Goldcore,

Gold futures with a value of over 400 tonnes were sold in hours and this is equal to 15% of annual gold mine production. The scale of the selling was massive and again underlines how one or two large banks or hedge funds can completely distort the market by aggressive, concentrated leveraged short positions.

It may again be the case that bullion banks with large concentrated short positions are manipulating the price lower as has long been alleged by the Gold Anti Trust Action Committee (GATA). The motive would be both to profit and also to allow them to close out their significant short positions at more advantageous prices and possibly even go long in anticipation of higher prices in the coming weeks.

Those with concentrated short positions may also have been concerned about the significant decline in COMEX gold inventories.

The plunge in New York Comex’s gold inventories since February is a reflection of increased demand for the physical metal and concerns about counter party risk with some hedge funds and institutions choosing to own gold in less risky allocated accounts.

Comex gold bullion inventories have slumped 17% already in 2013, falling to just 286.6 metric tons of actual metal on April 11, the lowest since September 2009.

This means that futures speculators on Friday sold a significant amount of more paper gold, in an hour or two, then the entire COMEX physical gold bullion inventories.

Interestingly, the drop in Comex inventories would be the biggest for a whole year since 2001, when bullion began its secular bull market.

Absolutely nothing has changed regarding the fundamentals of the gold market and bullion owners are advised to again focus on the long term and the vital diversification benefits of owning gold over the long term.

Although some Federal Reserve policy makers said that they probably will end their $85 billion monthly U.S. bond purchases sometime in 2013. The key word is ‘probably’ and it remains unlikely that the Federal Reserve will stop their debt monetisation programmes any time in 2013 or even in 2014.

Even if the Fed did end them, ultra loose monetary policies and negative real interest rates are set to continue as are competitive currency devaluations and currency wars – two other fundamental pillars supporting the precious metal markets.

Buyers are now presented with another very attractive buying opportunity. We always caution against trying to “catch a falling knife” and buyers should hold off until we get a few days of higher closes or a weekly higher close. Alternatively, they should consider dollar, pound or euro cost averaging into a position at these levels.

Sellers should consider holding off as if contemplating selling they may have missed their opportunity and if they have to sell they may be best placed holding off until prices bounce or recover. Sellers are now disadvantaged both in terms of price but also in terms of premiums that have spread on some physical bars such as one kilo bars.

In the course of gold’s bull market, vicious sell offs like this have often presaged material weakness in stock markets and this may occur again.

Gold’s ‘plunge’ is now headline news which is bullish from a contrarian perspective. Less informed money is again selling gold or proclaiming the end of gold’s bull market.

The smart money such as certain hedge fund managers, high net worth individuals, pension funds, family offices, institutions and creditor nation central banks and will see this vicious sell off as an absolute gift and will accumulate again on this dip.


Talking Gold Manipulation with GATA

GIN: Can you outline how the gold manipulation scheme works?

CP: Sure. Central banks that want to support their currencies and support the US dollar in particular want to control interest rates and government bond prices so they intervene in the gold market by selling their gold outright, by leasing it into the market through bullion banks and the BIS, and by swapping it to other central banks that will be doing these sales or leases. They also sell gold options and futures contracts through the BIS. They do a lot of shorting of gold to control the price.

GIN: Who is involved in this manipulation scheme?

CP: I think all the major western central banks are, if not participating, then at least aware of it and cooperating. I think all of the western central banks who were identified openly as being part of the London gold pool in the 1960s are certainly cooperating with it. Though I think the major ones lately have been the US, Bank of England and the Bundesbank. But I think any central bank that has been identified as having swapped or leased gold is a participant.

GIN: So, you’d say that the gold cartel is composed of central banks?

CP: It is a central bank scheme but they operate very often through agents like bullion banks. JP Morgan Chase and HSBC. The Bank for International Settlements (BIS) in Basel, Switzerland conducts much of the gold trading for the western central banks. So certainly the BIS is an agent as much as the bullion banks are.

GIN: Who does gold manipulation affect? Is the negative impact just limited to gold investors?

CP: Oh no. It’s the destruction of all free markets. It’s the destruction of transparency in government. Certainly gold investors and mining companies and developing countries that rely on the production of commodities for their livelihood are terribly harmed.

But from my standpoint as an American citizen and a journalist who wants transparent government I think the greatest casualties are free markets and accountability in government. This scheme is a matter of rigging markets surreptitiously and when you rig markets you don’t have free markets anymore. And when you lose free markets you lose your competitive economy as well as your democracy when such major government action is undertaken in secret.

GIN: Is gold manipulation done mostly through leases, swaps and selling gold?

CP: Not only gold, but futures and options as well. They are hugely capitalized operations so they have very deep pockets. The can probably sell gold futures and options to an extent that no buyer can compete with them. And most buyers will be driven out the market by the amount of imaginary gold that central banks can sell because they have the ability to create money in infinite amounts.

GIN: How do the bullion banks and the futures market factor in?

CP: Because central banks trade through them, they are acting as agents. Whenever there is any crisis in the financial markets, where do the Fed and the Treasury go to try to put together a bailout? They start with JP Morgan Chase.

The use of New York investment banks by the US government, particularly JP Morgan Chase, that’s public record. I’m sure if you asked for access to all the communications between the Federal Reserve and the US Treasury and JP Morgan Chase you would get a lot of interesting information if it was made available to you.

But again, these are questions that are best put to central banks. I am only a derivative source of information. I can’t speak for the Fed and the Treasury and the Bank of England. I can show you the exchanges we’ve had with them. I can show you what has come out as a result of our suing the Fed. But we are not the possessors of the original information here. We are not the original sources.

I have always marveled that we should be questioned at GATA before any questions are put to the central banks about their policy in the gold market. I think if you pose questions [to the central banks] that are specific enough that you will find pretty quickly that the door is slammed in your face.

GIN: You said the motive for gold manipulation is to control interest rates and bond rates?

CP: If you read the academic paper which is on GATA’s internet site called Gibson’s Paradox and the Gold Standard, that paper analyzed the historical relationship between gold and real interest rates. If you read it I think you will indeed find there is a historic relationship. And indeed gold is pretty much by definition a determinant of currency value and interest rates and by extension government bond prices.

Gold is a terribly important determinant of the value of other financial instruments. We have collected a lot of State Department memorandums, CIA memos and documents throughout history about the importance the US government put on controlling the gold price. Many central bankers have made statements signifying that the gold price is of great concern. Governments have always sought to control the gold price and that’s what the Gold Standard was really about.

GIN: If gold market price control has pretty much always existed, does the tactic remain the same? Or does the gold cartel switch up how they control the price from time to time?

CP: Well they certainly change their mechanisms. Back in the 1960s the western central banks were controlling the gold price in a forthright but very costly fashion. That is, they were dishoarding a lot of metal out of their reserves and they lost a lot of it. And as they were down to the last tonnage they decided they couldn’t do it that way anymore

They’ve come up with a much more efficient and powerful way of controlling the gold market insofar as they’ve created a vast imaginary supply of what we call paper gold. That is certificates claiming ownership to gold. Central banks realized that they could basically underwrite the paper gold market run by bullion banks by advancing gold to bullion banks as necessary to avert a short squeeze in gold when bullion banks sold more gold than they could deliver.