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Silver Equities Outperforming Year-to-Date

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November 17, 2019 - 5:14pm
This is an excerpt from Ed Steer's report -- to read the full report, please click here
 
Silver, like gold, was also sold unevenly lower starting at the 6:00 p.m. EST open in New York on Thursday evening -- and that lasted until a few minutes before the London open.  It was then bounced off its $16.82 spot price low multiple times from there until around 12:45 a.m. GMT/7:45 a.m. in New York.  From that point onwards, 'da boyz' handled the silver price in a matter very similar to that of gold...also capping it at the 11 a.m. EST London close.
 
The high and low ticks aren't worth looking up, either.
 
Silver was closed on Friday afternoon in New York at $16.935 spot, down 6.5 cents from Thursday.  Net volume was on the quieter side as well, at a bit under 56,500 contracts -- and there was a bit under 11,000 contracts worth of roll-over/switch volume in this precious metal.
 
 
It was the same price pattern in the silver equities, at least up until silver's price was capped at the London close at 11 a.m. EST.  They sold off a bit from there until noon -- and then rallied a bit until a few minutes before the 1:30 p.m. EST COMEX close.  They headed lower from there -- and Nick Laird's Intraday Silver Sentiment/Silver 7 Index closed down 0.52 percent.  Click to enlarge if necessary.

 

 

And here's Nick's 1-year Silver Sentiment/Silver 7 Index chart, updated with Friday's doji.  Click to enlarge as well.

 

 

The three usual laggards in the Silver 7 Index...Peñoles, Buenaventura and Hecla...turned in mixed results yesterday.  Peñoles closed higher by 0.56 percent...Buenaventura was down 1.34 percent -- and Hecla closed lower by 0.42 percent.  First Majestic Silver was down 1.49 percent.



Here are the usual three charts from Nick that show what's been happening for the week, month -- and year-to-date. The first one shows the changes in gold, silver, platinum and palladium for the past trading week, in both percent and dollar and cents terms, as of their Friday closes in New York - along with the changes in the HUI and the Silver 7 Index.
 
Here's the weekly chart -- and it's a lot happier looking this week than it was a week ago.  The only red on the chart is palladium -- and that's because of the beating 'da boyz' laid on it on Friday.  Click to enlarge.


Here's the month-to-date chart.  Here's where the outperformance of the silver equities stands out in all its stark glory.  I've been talking about this all week -- and here's the visible proof of that...the only green bar on the chart.  And what makes it even more incredible is how badly the underlying precious metal is performing.  I know I've spoken about it a fair amount, but it's a big smack across the side of the head when you see it in graph form.  This is unprecedented -- and you have to ask yourself why this so.  I know I am.  Click to enlarge.


Here's the year-to-date chart.  It's still all green across the board, of course -- and the most notable feature is that the silver equities are now outperforming their golden brethren...compared to the performance of their underlying precious metal price increases -- and that's all because of what has happened during the last two weeks -- and the proof of that is in the weekly and month-to-date charts above.  They would be doing even better than they are if it weren't for the three perennial laggards...Peñoles, Buenaventura and Hecla.


The current round of the 'wash, rinse, spin' cycle by the Big 7/8 commercial traders ended on Tuesday -- and there's no way of knowing if this is the end or not.  It's very possible that they may be resting before starting the next leg down...which means there's more price pain to come.  You'll find out more about that when you read my commentary on Friday's COT Report further down.



The CME Daily Delivery Report showed that 13 gold and 6 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.

In gold, the sole short/issuer was Advantage -- and the four long/stoppers were JPMorgan, Advantage, ADM -- and Morgan Stanley...with 4, 4, 3 and 2 contracts.  All contracts, both issued and stopped, involved their respective client accounts.

In silver, the sole short/issuer was ADM.  They also stopped 5 contracts -- and Advantage picked up the other one.

The link to yesterday's Issuers and Stoppers Report is here.

So far in November, there have been 1,562 gold contracts issued/reissued and stopped -- and that number in silver is 532 contracts.

The CME Preliminary Report for the Friday trading session showed that gold open interest in November fell by 31 contracts, leaving 60 still open, minus the 13 mentioned a few paragraphs ago.  Thursday's Daily Delivery Report showed that 44 gold contracts were actually posted for delivery on Monday, so that means that 44-31=13 more gold contracts just got added to the November delivery month.  Silver o.i. in November declined by 3 contracts, leaving 6 still around...minus the 6 mentioned in the Daily Delivery Report a few paragraphs ago.  Thursday's Daily Delivery Report showed that 9 silver contracts were posted for delivery on Monday, so that means that 9-3=6 more silver contracts were added to November deliveries.



There were no reported changes in GLD on Friday, but an authorized participant removed 1,074,725 troy ounces of silver from SLV.

In other gold and silver ETFs on Planet Earth on Friday, there was an eye-watering amount of gold added to the UBS gold ETF on Friday [Ticker: PTUSA]...3,582,529 troy ounces/111.4 metric tonnes worth -- and you'll excuse me if I don't believe it.  Nick Laird has some comments on this in the next paragraph...but here's the gold and silver data from his website as it appears...net of what happened in COMEX warehouse stocks and GLD & SLV.  There was a net 3,604,493 troy ounces of gold added -- and in silver there was a net 275,399 troy ounces of silver added as well.

Here's what Nick had to say in his covering e-mail about this gold deposit at UBS..."Note the massive jump in gold. The week's data would have been down 400,000 troy ounces, but I included UBS's latest update.  Last week they looked like a data error -- and I left the increase out.  But this week it reads true -- and I have included it.  They made a massive purchase of approx 3.6m/oz.  Perhaps it is a Fat Freddy Typo."

A purchase of that amount of gold by one entity would have blow the market sky high, so until there's some sort of public statement on this directly from UBS, I'm not going to comment further.  But I'll certainly be keeping in touch with Nick on this issue.



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

Month-to-date the mint has sold only 7,500 troy ounces of gold eagles -- 2,500 one-ounce 24K gold buffaloes -- and 230,000 silver eagles.

It's mid-November already -- and there's still no Q3 report from the Royal Canadian Mint.

There was the tiniest possible amount of gold movement over at the COMEX-approved depositories on the U.S. east coast on Thursday.  Nothing was reported received -- and there was only 32.151 troy ounces/1 kilobar [SGE kilobar weight] shipped out of Brink's, Inc.  For obvious reasons I won't bother linking this amount.

It was much busier in silver, as 1,699,903 troy ounces was received -- and 602,361 troy ounces was shipped out.  All of this in/out activity happened over at CNT.  There was also a paper transfer of 24,535 troy ounces from the Eligible category -- and into Registered over at Delaware.  I suspect that this amount is destined for delivery in November. The link to all this is here.




The Commitment of Traders Report, for positions held at the close of COMEX trading on Tuesday, November 12, showed improvements in the commercial net short positions in both gold and silver...but weren't anywhere near as much as either Ted or I were expecting in either precious metal.  And unless revised next week, we have to assume these numbers are correct.

In silver, the Commercial net short position declined by only 13,090 contracts, or 65.5 million troy ounces.  I was expecting a change of at least double that amount.

They arrived at that number by adding 5,618 long contracts -- and they also reduced their short position by 7,472 contracts.  It's the sum of those two numbers that represents their change for the reporting week.

Under the hood in the Disaggregated COT Report, the Managed Money traders made up for only a portion of that amount.  The reduced their long position by 6,020 contracts -- and they added 3,541 short contracts -- and it's the sum of those two numbers...9,561 contracts...that represents their change for the reporting week.

The difference between that number and the Commercial net short position...13,090 minus 9,561 equals 3,529 contracts.  That difference was made up, as it must, by the traders in the other two categories, as the 'Other Reportables' decreased their net long position by 1,072 contracts -- and the 'Nonreportable'/small trader category reduced their net  long position by 2,457 contracts.  The sum of those two numbers is 3,529 contracts...which it must be.

So why didn't the Managed Money traders sell in droves like they normally do?  Ted entertained the idea that maybe some of the traders in that category have wised up to the fact that they are the patsies in this price management scheme -- and decided to sit tight.  Whatever the reason, they just didn't sell in a blind panic like they normally would have.  As a result the Commercial traders weren't able to cover much of their outstanding short position.

The Commercial net short position is now down to 309.5 million troy ounces, which is far from a bullish number.  This leaves open the possibility that more price pain lies ahead.  But as Ted pointed out on the phone yesterday, that's only one of the possible outcomes.

But what the COT did show -- and in spades, was that JPMorgan's double cross of the other Commercial traders is still very much alive.  He estimates that JPMorgan's short position is now down to the 5-10,000 contract range, which is down from the 20,000 contracts that Ted said that they were short in the October 25 COT Report.  He wasn't able to calculate it for the last two weeks because of the big reporting error in the 'Nonreportable'/small trader category that caused big distortions in those two COT Reports.  It's only with this report, which appears to be correct, that he was able to compute it once again -- and it's fallen by at least half, if not more, since the end of October.  Once he has time to 'sleep on it'...he may come up with a somewhat more accurate number in his weekly review later today.

But whatever number he comes up with, it's obvious that JPMorgan is "tightening the noose" on the other Commercial traders.

Here's Nick's 3-year COT Report for silver -- and this week's change should be duly noted.  Click to enlarge.


It's impossible to handicap where we go from here from a price perspective.   Could the Big 8 traders continue with engineered price decline that began early last week?  Sure.  However, the "can they, or will they" question is back on the table.



Here's Nick Laird's "Days to Cover" chart, updated with the COT data for positions held at the close of COMEX trading on Tuesday. It shows the days of world production that it would take to cover the short positions of the Big 4 - and Big '5 through 8' traders in each physically traded commodity on the COMEX. Click to enlarge.


For the current reporting week, the Big 4 traders are short 140 days of world silver production...unchanged from last week's COT Report - and the '5 through 8' large traders are short an additional 76 days of world silver production...up 5 days from last week's COT Report - for a total of 216 days that the Big 8 are short, which is seven months of world silver production, or about 504 million troy ounces of paper silver held short by the Big 8.  [In the prior reporting week, the Big 8 were short 211 days of world silver production.]

In the COT Report above, the Commercial net short position in silver was reported as 309 million troy ounces.  As mentioned in the previous paragraph, the short position of the Big 8 traders is 504 million troy ounces.  The short position of the Big 8 traders is larger than the total Commercial net short position by around 504-309=195 million troy ounces.

The reason for the difference in those numbers...as it always is...is that Ted's raptors, the 36-odd small commercial traders other than the Big 8, are net long that amount.  Another way of stating this is that if you removed the Big 8 commercial traders from that category, the remaining traders in the commercial category are net long the COMEX silver market.  It's the Big 8 against everyone else...a situation that has existed for at least a decade in all four precious metals.

As I mentioned in my COT commentary in silver above, Ted figures that JPMorgan is short around 5-10,000 COMEX silver contracts -- and I'll use the conservative number of 10,000 contracts.

10,000 COMEX contracts...is 50 million troy ounces of paper silver, which works out to around 21 days of world silver production the JPMorgan is short.

Based on this number, it appears that JPMorgan's short position puts them at the very bottom of the Big 4 category, or at the very top of the '5 through 8' large trader category...[see the next paragraph]...leaving Citigroup as the No. 1 silver short on Planet Earth.  Of course, if the number is closer to the 5,000 contract mark, that takes JPMorgan right out of the Big 8 traders category entirely.

The Big 4 traders in silver are short 140 days of world silver production in total. That's 35 days of world silver production each, on average.  The four traders in the '5 through 8' category are short around 76 days of world silver production in total, which is 19 days of world silver production each, on average.

The Big 8 commercial traders are short 45.4 percent of the entire open interest in silver in the COMEX futures market, which is up a bit from the 43.3 percent they were short in last week's report.  And once whatever market-neutral spread trades are subtracted out, that percentage would be a bit over the 50 percent mark.  In gold, it's now 38.6 percent of the total COMEX open interest that the Big 8 are short, down a bit from the 40.8 percent they were short in last week's report -- and a bit under 45 percent, once the market-neutral spread trades are subtracted out.

In gold, the Big 4 are short 60 days of world gold production, down 3 days from last week's COT Report.  The '5 through 8' are short another 35 days of world production, unchanged from last week's report...for a total of 95 days of world gold production held short by the Big 8...down 3 days from last week's COT Report.  Based on these numbers, the Big 4 in gold hold about 63 percent of the total short position held by the Big 8...down 1 percentage point from last week's report.

The "concentrated short position within a concentrated short position" in silver, platinum and palladium held by the Big 4 commercial traders are about 64, 73 and 76 percent respectively of the short positions held by the Big 8...the red and green bars on the above chart.  Silver is down 2 percentage points from last week's COT Report...platinum is up 1 percentage point -- and palladium is down 2 percentage points.

I have an average number of stories/articles for you today -- and several of them are ones that I've been saving for my Saturday column for the usual length and/or content reasons...including a Batchelor/Cohen interview.
 

The WRAP

"Powell lecturing Congress on deficits is like a crack cocaine dealer telling his street junkies that they have bad spending habits." -- Robert Herdman...a comment posted on Gregory Mannarino's youtube.com video channel on Thursday



Today's pop 'blast from the past' is the last of the 1-hit wonders from the 1970s.  The band was formed by a group of four American expats in Paris in 1970 -- and their 'Greatest Hit' was released in 1972.  I can't remember the last time I heard this on the radio.  The link is here.  There's a surprising number of bass covers to this -- and the link to one of them is here.

Today's classical 'blast from the past' is somewhat older, of course -- and this Wolfgang Amadeus Mozart double concerto for flute and harp dates from 1778...composed when he was 22 years young.  I've never featured it before.  The second movement is the most popular -- and I've heard it live as a 'stand alone' number -- including once in rehearsal.

Here's Zubin Mehta conducting select parts of the Israel Philharmonic Orchestra...with Julia Rovinksy on harp -- and Guy Eshed as flutist.  The link is here.



With little volume in either silver or gold yesterday, 'da boyz' had no trouble keeping these two metals in line.  It looked like another 'care and maintenance' sort of day to me.  Platinum got a little too frisky for them -- and they stepped in at the 11 a.m. EST Zurich close -- and that was that.  And despite the fact that it wanted to rally, palladium got taken out behind the proverbial wood shed.  Copper closed back above its 50-day moving average by a hair -- and WTIC finally managed to break above its 200-day moving average...albeit by only a small amount.

I'm still pondering yesterday's COT Report -- and the surprising and the disappointingly small decreases in the commercial net short position in both.  The fact that JPMorgan's potential double cross of the other commercial traders brings some comfort, but the huge short positions in gold and silver in the COMEX futures market is the only negative in an otherwise wildly bullish environment. We're still no further along the road to a resolution of this situation.

However, despite that sword of Damocles, some very real comfort can be taken from the performance of the silver equities during the past couple of weeks.  Despite the engineered price decline in gold and silver, there have been 'strong hands' buying up all the silver shares being offered for sale.  There has been in the gold stocks as well, but not nearly as robust during the first four days of the engineered price decline that began back on Tuesday, November 5.  This past week they did better.

Here are the 6-month charts for the Big 6 commodities -- and the changes I mentioned above should be noted.  Click to enlarge.
 
 
 
 
 
The only thing keeping the equity markets aloft is the rampant injection of money into the U.S. financial system and Wall Street by the Federal Reserve, with the equity markets closing at new record highs virtually every day.

Underneath all that, the real economy in the U.S. continues to sink into the mire.  The only change from this time last week are the signs that this state of affairs is accelerating to the downside.  The rest of the world is slowly sinking as well -- and at some point reality with catch up with fantasy on Wall Street, along with the other bourses around the world.  That's in the future somewhere -- and until that event occurs, or is precipitated, it's "party on, dude like 1929" in the U.S. equity markets.

But in this 'Everything Bubble' that exists planet wide, when trouble shows up in some area of the world that no amount of paper will fix...then confidence, already hanging by a thread everywhere you care to look, will go with it.  Then look out below.

I keep harping on this subject every Saturday, but the absolute truth of the matter is that the current economic, financial and monetary system is unfixable -- and the world's central banks know that all too well.  But they're going to run them into the ground anyway.  As I've said before, along with others, it has obviously been a situation of "print...or die" for quite some time now, but with the start of the Fed's repo program in September, it has now morphed into something far more serious -- and most likely terminal.  It's QE forever -- and all they're doing now is delaying the inevitable.

I don't even want to think about what happens after that.

And regardless of whether there's more pain to come in precious metal prices or not, the activity in the precious metal shares, particularly the silver equities, certainly indicates that the insider 'strong hands' know that the next rally is going to be one for the record books.

For that reason, I'm still quite comfortable in my position of being "all in".

I'm done for the day -- and the week -- and I'll see you here on Tuesday.

Ed
 
 

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