One thing that I did notice was that January open

first_imgOne thing that I did notice, was that January open interest in silver had been sneaking up slowly during the week, with 102 contracts added yesterday.It was a very quiet trading day for both gold and silver yesterday.In gold, the high tick came shortly after 3:00 p.m. Hong Kong time…and from there, the gold price wandered around within five bucks of the $1,640 spot price for the rest of the Wednesday trading day.Gold closed at $1,643.00 spot…up $10.80 on the day. Volume, net of all roll-overs out of the February contact, was around 130,000 contracts…almost the same as Tuesday’s volume.  This is quite big volume considering the lack of price movement.The silver price didn’t do too much either.  It was pretty steady until 2:00 p.m. Hong Kong time…and then rose to its high of the day at 10:00 a.m. in London, before getting sold off to its low of the day about five minutes after Comex trading began in New York.The subsequent price rally ended around 11:40 a.m. Eastern time…and then declined about 30 cents going into the close of Comex trading.  From there it traded pretty flat until the close of electronic trading at 5:15 p.m. Eastern.Silver closed just under the $30 mark for the second day in a row, at $29.97 spot…up 3 whole cents.  Net volume was 35,000 contracts…a few thousand less than Tuesday.As I mentioned in ‘The Wrap’ yesterday, the U.S. dollar index rose and fell about 25 basis points between the New York open on Tuesday evening…and 5:00 a.m. Eastern time on Wednesday morning, which was 10:00 a.m. in London.Then it blasted 50 basis points higher in two hours flat, crawling up to its high of the day around 11:30 a.m. in New York.  From there it declined gently into the close.  The dollar index closed up about 45 points on the day.The approximately ten dollar decline in the gold price [that accompanied the 50 basis point rally in the dollar] between 10 a.m. and noon in London is pretty obvious on the Kitco gold chart above…but it wasn’t much of a decline for such a big dollar move.  And by the time the dollar rally was done around 11:30 a.m. Eastern, the gold price had rallied back to within a few bucks of its starting point at 10:00 a.m. in London…5:00 a.m. Eastern time.  That’s a bullish sign in my books.On the bad news of out of Hecla Mining yesterday, the HUI gapped down at the open.  The low came at 10:30 a.m. Eastern…and then the rest of the gold stocks spent the day crawling higher.  I’m sure that if it hadn’t been for the 21% pounding in Hecla’s stock price, the HUI would have finished in positive territory yesterday.  As it was, the HUI finished well off its low, closing down only 1.02%.With the odd exception, the silver stocks didn’t do overly well…and with Hecla Mining being one of the major components of Nick Laird’s Silver Sentiment Index, it got hit for a 2.77% loss yesterday.  BIG GOLD editor Jeff Clark informed me that Hecla will lose about 3.5 million ounces of silver production because of the closure of the Lucky Friday mine…if it stays closed all year, that is.(Click on image to enlarge)The CME’s Daily Delivery Report was a bit of a surprise.  Only 8 gold contracts were posted for delivery on Friday…but a very chunky [for this time of month] 125 silver contracts were also posted for delivery.  As usual, it was Jefferies on the short/issuer side…and the Bank of Nova Scotia and JPMorgan as the only long/stoppers.  The link to the action is here.There was a very minor withdrawal from the GLD ETF yesterday…13,239 troy ounces…which was probably a fee payment.  There were no reported changes in SLV.There was no sales report from the U.S. Mint yesterday, either.The Comex-approved warehouses are still busy places these days.  Tuesday’s report showed that 701,831 troy ounces were shipped in…and 426,528 troy ounces were shipped out. The link to that action is here.Silver analyst Ted Butler posted his mid-week commentary for his paying subscribers yesterday…and here are the usual two free paragraphs…“The main issue with the CME is the inherent conflict between its role as a for-profit corporation…and as a self-regulator. Let’s face it, allowing any for-profit entity to essentially regulate itself, is just asking for trouble. And that is the problem. This conflict is at the heart of the new criticism…yet, curiously, is not mentioned often enough. Instead, observers of the current drama involving the CME and MF Global are misled by sound bites and clutter that fail to mention any inherent conflict of interest on the CME’s part. That’s because the CME is a master at spin-doctoring.”“Because the CME is more interested in profit at any cost, not only has its self-regulatory role been compromised, it has actually enacted and encouraged developments which are downright hostile to the efficient functioning of its markets. You need not look further than the scourge of High Frequency Trading (HFT) for an example of what the CME has done wrong. HFT does nothing to enhance our markets, except generate excessive trading fees for the CME. HFT works against the very purpose for our futures markets of legitimate hedging because HFT is nothing more than day trading gone mad. Legitimate hedgers have no use for frantic day trading. High Frequency Trading also allows for markets to be manipulated easier.”I have a decent number of stories for you today…and most of them are precious metals related. I hope you have the time to spend on them.The first panacea for a mismanaged nation is inflation of the currency; the second is war.  Both bring a temporary prosperity; both bring a permanent ruin.  But both are the refuge of political and economic opportunists. – Ernest HemingwayIt was pretty much a nothing sort of day in both gold and silver on Wednesday, as both metals didn’t do much of anything.  The preliminary open interest numbers were down a couple of thousand contracts in gold…and a few hundred contracts in silver.One thing that I did notice, was that January open interest in silver had been sneaking up slowly during the week, with 102 contracts added yesterday.  That was certainly associated with the fairly large delivery notice in silver [125 contracts] that was reported by the CME last evening…which I mentioned close to the top of this column.Not much happened during the Far East trading session during their Thursday…and not much is going on during the first hour of trading in London, either.  As of 3:40 a.m. Eastern time, gold is up about four bucks…and silver is up about 15 cents.  Volumes in both metals are very light…and the dollar index is flat.About ninety minutes has gone by since I wrote that last paragraph. It’s now 10:10 a.m. in London…5:10 a.m. Eastern time…and both gold and silver are showing some signs of life.  Gold is now up about eight bucks…and silver is up a hair over 40 cents.  Volume has picked up a bit as well…and the dollar index is now down about 20 basis point.  It’s nothing to get excited about, but it’s more price action than there’s been since the New York open at 6:00 p.m. Eastern last night.Tomorrow we get the new Commitment of Traders Report…and based on the price activity of the reporting week that ended on Tuesday, I wouldn’t be at all surprised if there was deterioration in the Commercial net short positions in both gold and silver, as I’m sure that the technical funds were covering their short positions…and the small commercial traders were selling out to them and taking profits.This is not what either Ted Butler or myself is hoping for, but that’s the most plausible outcome at the moment.  We’ll see how much truth there is to this speculation tomorrow at 3:30 p.m. Eastern time.That’s all I have for today.  I hope your Thursday goes well…and I’ll see you here tomorrow. 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