ed steer is back
posted on
Aug 03, 2009 03:19PM
SSO on the TSX, SSRI on the NASDAQ
ed steer has his own report at casey research now. these are his comments on friday's trading in gold and silver:
Just like Thursday, the silver price mirrored the gold price exactly...and from its low of $13.37 at the same time as gold's low of $930.90...silver managed to add 54 cents to its price before the JPMorgan sledge hammer dispatched it at the same time.
I figured that today's price explosions were short covering rallies. Ted Butler wasn't so sure. He figures that the bullion banks were very reluctant to squash this rally...but did for obvious reasons. If they hadn't, we'd be looking at a gold price way over $1,000...and a even larger corresponding increase in the silver price. You can tell by the price action, that it was only the U.S. bullion banks that are the short sellers of last resort yesterday...as London was already closed for the weekend. If they hadn't, we would have been 'limit up' in both metals in a New York minute. As a matter of fact, it was a New York minute when all this excitement happened!
The open interest numbers for Thursday were educational. Both gold and silver rose slightly in price on Thursday...but the o.i. numbers for both metals were down. Was there short covering involved...or more delayed reporting from the price declines on Tuesday and Wednesday? In gold, o.i. fell 3,080 contracts to 369,572...on rather large volume of 116,542 contracts. In silver, o.i. fell 955 contracts to 97,827...on 20,640 contracts traded. Unfortunately, this activity won't see the full light of day until next Friday's Commitment of Traders report. And as events are unfolding at the moment, that report may be immaterial by the time it does arrive.
Talking about the COT...here's the scoop on the one that was issued yesterday. As soon as I glanced at the silver numbers I knew that not a single contract of Tuesday's improvement in silver open interest had made it into this report. The bullion banks [principally JPMorgan] increased their net short position by 2,675 contracts...but in gold, there was a slight improvement, as the bullion banks decreased their net short position by a smallish 1,705 contracts.
This Commitment of Traders report showed, that as of Tuesday's cut-off, the bullion banks were net short 35,886 silver contracts...which is 179.4 million ounces of the stuff...and in gold, the bullion banks were net short 202,521 contracts...20.3 million troy ounces.
However, since absolutely none of the improvement in open interest after Tuesday's slaughter in the Comex gold and silver pits is in this report...this COT doesn't mean much...and it's highest and best use would be to wipe the nether parts of your body with it.
There certainly has been a big improvement in the open interest numbers since Monday...but that will be tempered somewhat by what happened yesterday...as you will see when you get down to the jottings of the usual New York gold commentator. We won't be able to tell whether this was a short covering rally...or a new buyer...until the open interest numbers for Friday's activity are reported on Monday. A short covering rally means a drop in o.i....while a buyer would have forced the bullion banks' hand when it came time to cap the rallies in both gold and silver...and o.i. would rise. Ted Butler and I agree that there was little volume in the price spikes themselves...that's why the prices went vertical in the first place...there were no sellers...only buyers. That's what Monday's open interest changes should tell us...provided a lot of spreads and switches don't obscure it.