23 July 2015 — Thursday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price came under HFT selling pressure shortly after 9 a.m. Hong Kong time on their Wednesday morning, with the low tick of the day coming at 1 p.m. BST in London—and twenty minutes before the COMEX open. The choppy rally after that got capped/ran out of gas shortly after 11:30 a.m. in New York—and it chopped sideways from there.
The high and low ticks are barely worth my effort to look up, but they were recorded by the CME Group as $1,102.30 and $1,085.60 in the August contract.
Gold finished the Wednesday session at $1,094.00 spot, down $7.00 from Tuesday’s close. Gross volume was around 207,000 contracts, but one the roll-overs were subtracted out, the net was 135,000 contracts.
Silver’s price was a bit more ‘volatile’, but the trading pattern was very similar to gold’s in the broad strokes—the sell-off starting in mid-morning trading in Hong Kong, the low tick a minute or so after 1 p.m. BST—and the price capping of the subsequent rally at 11:30 a.m. as it broke above it’s Tuesday closing price. From there it got sold down until the 1:30 p.m. EDT COMEX close—and it traded sideways after that.
The high and low tick in this precious metal was recorded as $14.865 and $14.585 in the September contract.
Silver closed yesterday at $14.795 spot, down 5.5 cents on the day. Net volume was 30,500 contracts, which was nothing special.
Platinum opened lower in Far East trading, but really got hung out to dry at 9 a.m. Hong Kong time, along with gold and silver. The low of the day came at 11 a.m. Hong Kong time. It struggled after that, but the moment that trading began in New York, it rallied—with some opposition—right into the close of electronic trading at 5:15 p.m. EDT. It finished the trading session at $979 spot, unchanged from Tuesday—and actually up a buck from Monday’s close.
Palladium also got the same Hong Kong ‘treatment’ as the other three precious metals—and chopped sideways after that, but manged a quick rally starting at 11 a.m. EDT. That got capped before noon—and it traded flat from there. It, like platinum, was also closed unchanged from Tuesday at $625 spot. It’s all too cute for words, isn’t it?
The dollar index closed late on Tuesday afternoon in New York at 97.31—and chopped sideways in a mostly 20 basis point range, with the 97.11 spike low of the day coming about 2:20 p.m. Hong Kong time. From there it rallied to its 97.76 high tick, which came at precisely noon EDT. It slid quietly lower from there until shortly after 5 p.m. EDT—and traded ruler flat from there. The index finished the Wednesday session at 97.45—up 14 basis points.
Here’s the 6-month U.S. dollar chart for reference purposes.
The gold stocks opened down, hitting their low tick about five minutes after the equity markets opened in New York. From there they climbed back into positive territory, with the high tick coming shortly after 11 a.m. EDT. They chopped sideways for the rest of the day, but couldn’t quite squeeze a positive close, as the HUI finished lower by 0.29 percent.
Ditto for the silver equities, except their high tick came at 11 a.m. EDT—and they chopped sideways from there as well. They couldn’t finish in the green either, as Nick Laird’s Intraday Silver Sentiment Index closed down 0.59 percent.
The CME Daily Delivery Report showed that zero gold and 53 silver contracts were posted for delivery within the COMEX-approved depositories on Friday. The only short/issuer was S.G. Americas, which Ted says is the company that bought out Jefferies. The long/stoppers were a mixed bag, but JPMorgan picked up another 6 contracts for its own account. The link to yesterday’s Issuers and Stoppers Report is here.
The CME Preliminary Report for the Wednesday trading session showed that July open interest in gold declined by 2 contracts, leaving 119 still open—and silver’s o.i. also declined by 2 contracts, leaving 152 open.
Another day—and another withdrawal from GLD, as an authorized participant removed 76,673 troy ounces. And as of 8:31 p.m. EDT yesterday evening, there were no reported changes in SLV.
Since July 1 there has been about 780,000 troy ounces of gold removed from GLD. Since July 1 there has been 3.5 million troy ounces of silver added to SLV—and not a single ounce withdrawn. With the exception of Ted Butler and myself, nobody is talking about this unbelievable dichotomy, that goes begging for an explanation.
It almost goes without saying that shares in SLV are being sold off by the truck-load as well on this engineered price decline—and the question still screaming for an answer is—who are the buyers? Whoever they are, they haven’t redeemed a single share so far this month.
The folks over at Switzerland’s Zürcher Kantonalbank updated their gold and silver ETFs as of the close of business on Friday, July 17—and this is what they had to report. Both ETFs showed withdrawals, as their gold ETF sank by 25,285 troy ounces—and their silver ETF dropped another 84,259 troy ounces.
There was a sales report from the U.S. Mint on Wednesday. They sold 7,500 troy ounces of gold eagles—and 2,000 one-ounce 24K gold buffaloes. No silver eagles were reported sold but, based on what they said back on July 7, they should be reporting sales any day now—and I would guess that they will be robust.
And except for 8 kilobars shipped out of the Manfra, Tordella & Brookes, Inc. depository, there was no in/out gold action at all in the COMEX-approved depositories on Tuesday.
It was another huge in/out day in silver on Tuesday, as 599,205 troy ounces were reported received—and 1,230,279 troy ounces were reported shipped out the door. Most of the ‘in’ action was at Brink’s, Inc.—and all of the ‘out’ action was at Canada’s Scotiabank. The link to that is here.
Scotiabank’s silver vault is now down to 8.8 million troy ounces, by far the smallest silver inventories in the COMEX-approved depositories. They’ve been lower than this before, but the trend is certainly heading towards zero. Here’s Nick’s chart for Scotiabank, updated with yesterday’s withdrawal.
Over at the COMEX-approved gold kilobar depositories in Hong Kong on their Tuesday, they reported receiving 499 kilobars—and shipped out 4,056 kilobars. As usual, all of the activity was at Brink’s, Inc.—and the link to it, in troy ounces, is here.
I have the usual number of stories for a week-day column—and for the first time in ages, I only have one story about Greece.
CRITICAL READS
This Is The ‘Thinnest’ New High In Stock Market History
When we posted yesterday’s piece on the stock market’s weak internals, we weren’t sure if things could get any worse – and by how much – with the major averages still able to hold near 52-week highs. Well, the answers were “yes” and “a lot”. In yesterday’s piece, we noted that Friday produced one of the ugliest “Up” days in memory, based on the internals. Again, the internals, as represented by indicators like advance-decline breadth, advance-decline volume and new highs-new lows, are a gauge of the health of the broad stock market. This health can differ, sometimes significantly, from the market’s appearance from merely watching the major averages (e.g., the S&P 500 and NASDAQ Composite, etc.) We like to see strong internals as an indication of a healthy market. When a rally “thins”, i.e., the internals weaken, it can be a sign of vulnerability for the broad market, even with the major averages at their highs.
Well, we can say with confidence that yesterday, July 20, 2015, was the thinnest new high on record in the U.S. stock market (while the NASDAQ Composite closed at a new high, we are taking some license with here with the S&P 500 as it closed up to within 0.12% of it 52-week high). Here is our evidence (all data from Reuters):
1.) Yesterday saw the fewest % of NYSE Advancing Issues ever near an S&P 500 52-Week High
There were just 967 Advancing Issues on the NYSE yesterday versus 2,086 Declining Issues. At 31.7% of issues, that is by far the lowest % of any day since 1965 that the S&P 500 closed up to within 0.5% of a 52-week high. As an FYI, there have been 1,564 such days since 1965.
Scary! This very interesting article appeared on the Zero Hedge website yesterday at 3:00 p.m. EDT—and the charts are worth the trip all by themselves. I thank reader U.D. for passing it around yesterday.
Marc Faber: Why U.S. stocks could drop up to 40%
The U.S. stock market could “easily” drop 20 percent to 40 percent, closely followed contrarian Marc Faber said Wednesday—citing a host of factors including the growing list of companies trading below their 200-day moving average.
In recent days, “there were [also] more declining than advancing stocks, and the list of 12-month new lows was very high on Friday,” the publisher of The Gloom, Boom & Doom Report told CNBC‘s “Squawk Box.”
“It shows you a lot of stocks are already declining.”
Faber said U.S. stocks are on the “high side” right now, despite Tuesday’s decline, and expectations are quite high, which can lead to big disappointments such as Apple after issuing a softer revenue outlook. The company’s earnings just beat estimates, turning off investors.
There are three brief CNBC video clips that play back-to-back here—and in total they last a bit over 4 minutes. In the second clip about commodity prices being driven lower, especially precious metals, he obviously has no grasp that the paper markets are setting the price. This interview was from early Wednesday morning EDT—and I thank Ken Hurt for sending them along.
“It’s Laughable Really“: Why No One, Especially Not Jamie Dimon, Will Be Held Accountable For London Whale
A few weeks back, Bruno Iksil, the man whose name shall live in CDX trading infamy and whose nicknames will forever haunt the desks at JP Morgan’s taxpayer-sponsored, London-based hedge fund (known in polite circles as “CIO”), got a break when the UK’s financial watchdog dropped its investigation saying it didn’t have a strong enough case.
Apparently, the fact that Iksil was the driving force (if not the most senior of the employees involved) behind a trade so large it noticeably displaced the market doesn’t count as a “strong case.” Indeed, the simple fact that Iksil was known across trading desks as “Voldemort“, “The London Whale“, and perhaps most telling, “He Who Must Not Be Named,” might fairly be said to constitute a compelling bit of anecdotal evidence. Alas, the whale is now scott-free, having secured immunity in the US in exchange for cooperating with the investigation and having been exonerated in the UK.
As we noted in “Free Willy: FCA Drops Case Against London Whale,” junior trader Julien Grout and Iksil’s boss Javier Martin-Artajo are still theoretically on the hook for the trade which, as a reminder, saw CIO sell massive amounts of protection on IG.9 back in Q1 of 2012 in what ultimately became a rather poignant example of the old adage “if you find yourself in a hole, stop digging.”
We say “theoretically on the hook“, because in all likelihood, Grout and Martin-Artajo will never have to face the music either. Here’s The New York Times with more on why “in all likelihood, no one will be held legally accountable”:
This is another very interesting Zero Hedge piece—and this one put in an appearance on their website at 7:30 p.m. EDT yesterday evening—and I thank reader M.A. for sharing it with us.
7 Powerful Photos Before and After the California Drought
According to the National Drought Mitigation Center, more than 81% of California is in an “extreme drought.”
The state has been battling a drought that has become increasingly severe and costly over the past few years. California is now “short more than one year’s worth of reservoir water,” according to an NDMC report and residents can be fined up to $500 for excessively watering their lawns.
To view the before/after effect, drag the cursor across each photo of northern California’s Lake Oroville shown in the story. The differences are stunning. This photo series is from July 20, 2011 up until August 19, 2014 and, without doubt, the situation is even uglier now almost a year later.
This incredible photo essay was posted on the buzzfeed.com Internet site back on September 2, 2014—and I thank Roy Stephens for his first contribution to today’s column.
More Debt Traders at Risk as European Banks Report Results
Where will the new leaders of Europe’s top securities firms scale back to increase returns? If the second quarter is any guide, their bond-trading operations could bear the brunt.
Credit Suisse Group AG, Barclays Plc and Deutsche Bank AG are already overhauling their investment banks to respond to stricter capital rules and a slump in debt trading that eroded some of their most profitable businesses. Now the banks’ new bosses, who took over this month, must decide where and how much more to scale back.
“They have to adapt, cut costs and refocus by exiting businesses if needed,” said Christian Sole, who helps manage 89.2 billion euros ($96.9 billion) at Candriam Investors Group in Brussels. “We can hope that outsiders coming in may have freer hands to reshuffle their banks than previous CEOs. Profits just aren’t satisfactory at the moment.”
Credit Suisse publishes results on Thursday, while Barclays and Deutsche Bank report earnings next week. Below are some of the issues Credit Suisse Chief Executive Officer Tidjane Thiam, Deutsche Bank’s Co-CEO John Cryan and John McFarlane, the chairman and interim CEO at Barclays, must grapple with.
This Bloomberg news item appeared on their Internet site at 10:00 p.m. Denver time on Tuesday evening—and was updated about five hours later. I thank West Virginia reader Elliot Simon for finding it for us.
French MPs to make historical visit to reunited Crimea
A delegation of French lawmakers is coming to Russia to pay a visit to the Crimea – the first such visit since the region’s accession to the Russian Federation in March 2014.
The head of the mission, MP Thierry Mariani said in an interview with Russian business daily Kommersant that it will consist of nine members of the French National Assembly and one senator. Eight members of the delegation represented the center-left “The Republicans” party, led by Nicolas Sarkozy and two more represented centrists and leftists.
The French politician told RT in a telephone interview that he and his colleagues will arrive in Moscow on Wednesday evening. On Thursday, they will meet State Duma speaker Sergey Naryshkin and after the meeting will travel to the Crimean towns of Sevastopol and Yalta. The lawmakers plan to meet the head of the Crimean government Sergey Aksyonov and Sevastopol Governor Sergey Menyailo, and with ordinary citizens. In addition, the politicians plan to visit the French cultural center in Sevastopol and the French memorial cemetery that dates back to the Crimean war of 1854-55.
This news item was posted on the Russia Today website at 2:15 p.m. Moscow time on their Wednesday afternoon, which was 7:15 a.m. EDT in Washington—and it’s worth reading. It’s the second offering of the day from Roy Stephens.
Awkward Alliance Running Germany Exposed by Greek Crisis
In 2000, Angela Merkel pushed past Wolfgang Schaeuble on her way to the top of the political ladder. As finance minister, he’s won her pledge of a free hand in policy making in exchange for his loyalty.
Now the awkward alliance that forms the core of Europe’s financial crisis-fighting effort is under its biggest strain yet. As officials prepare a third Greek bailout, Merkel is holding fast to the view that the 19-member currency union must stay intact. Schaeuble has pushed back, dangling the threat of expulsion to what he considered an untrustworthy government.
“Merkel and Schaeuble operate according to different logic,” Andrea Roemmele, a political scientist at the Hertie School of Governance in Berlin, said by phone. For Merkel, “to some extent it’s about her legacy” as German chancellor at a time of crises, “and that’s something that Schaeuble just doesn’t think about,” she said.
The mostly cordial entente between the two has dragged skeptical lawmakers to back bailouts that about half of Germans oppose. The cantankerous Schaeuble has given voice to backbenchers’ doubts, while Merkel has reminded Germany of its unique responsibility in holding the euro together. Ultimately, Germany has provided the biggest share of almost half a trillion euros ($547 billion) of aid offered to five euro-area countries in the past five years.
“Merkel and Schaeuble are singing from the same sheet, but they’re singing different melodies,” said Fredrik Erixon, head of the European Centre for International Political Economy in Brussels. “It falls to the finance minister to be the bad guy.”
This very interesting Bloomberg article appeared on their website at 4:25 a.m. MDT yesterday morning—and I thank Patricia Caulfield for sending it along.
Wolfgang Schäuble: The Man Behind the Iron Chancellor
Last Friday, Germany’s parliament, the Bundestag, overwhelmingly voted to support Chancellor Angela Merkel’s plan for how the country should handle its negotiations with a cash-strapped Greece. From afar, it may have looked like a major victory for the so-called Iron Chancellor, who muscled Greece into accepting a third bailout package under the conditions that Athens double down on budget cutting and taxation, begin far-reaching privatization, and finally begin a wide range of structural reforms.
Indeed, the country — and the broad-based ruling coalition with the Social Democrats — appear solidly behind the popular chancellor in her tenth year in office, even as she has shown herself willing to have Germany pay a high price to keep Greece in the eurozone. What this veneer of support glosses over, however, is ever-greater dissatisfaction among ordinary Germans with the chancellor’s position on Greece and ever-louder discontent in her own party, the Christian Democratic Union, and its Bavarian sister party, the Christian Social Union. A full fifth of her party’s MPs broke ranks on the Bundestag vote, an unexpected backlash that has shaken Germany’s political establishment.
In fact, the big winner was not Merkel but her no-nonsense finance minister, Wolfgang Schäuble, whose confrontational stance in negotiations with the leftist Greek government and threat to let Athens go bankrupt (and thus leave the eurozone) caused his popularity to soar this summer. Even though he, like Merkel, backed the bailout — and is deeply committed to the European Union — he is seen as the champion of a Germany at the end of its tether with Athens and with handouts dressed up as European solidarity. Schäuble has thus positioned himself as the voice of the country’s conservative right, which has, up until now, been fighting a losing two-front battle against Merkel’s liberal reforms and what many see as stand-by-Greece-at-all-costs policies, on the one hand, and a far-right insurgency led by the populist Alliance for Germany, on the other. Over the past year and a half, the Alliance for Germany has relied on anti-EU tropes and other classic right-wing topics, like immigration, to establish a political party to the right of the CDU/CSU for the first time in decades.
This excellent commentary showed up on the foreignpolicy.com Internet site on Tuesday sometime—and it’s definitely worth reading if the subject interests you—and it wouldn’t surprise me if the Bloomberg story posted above this one is based on this very article. It’s another offering from Roy Stephens.
Greek parliament passes second reform package
Greece’s parliament passed a second package of reforms demanded by the nation’s creditors early Thursday, clearing the way for final talks on a bailout of up to €86 billion.
Lawmakers voted 230-63 in favor of the judicial and banking reforms with five abstentions. Prime Minister Alexis Tsipras had to rely on opposition support again as 36 of his allies rejected the measures, reflecting deep divisions in his Syriza party over the country’s third rescue program.
Tsipras, a former student activist elected in January on an anti-austerity platform, has admitted the harsh bailout terms were hard for him to accept. He has framed the three-year financing deal as the only way to save the debt-laden country from “Grexit,” a prospect rejected by the vast majority of Greeks.
“It wouldn’t have been a patriotic choice to leave the people exposed to that uncharted and unpredictable situation,” Tsipras told parliament. “This deal gives us time to quell the dangerous talk about Grexit, regain investor confidence and smooth the country’s return to the markets.”
My only Greece-related story today! This one, filed from Athens, appeared on the politico.eu website at 3:46 a.m. [CET] Central Europe Time this morning—and it’s another contribution from Roy Stephens.
‘MH17 crash used by U.S. to break Russia’s relationship with Europe’
RT: It’s been a year since the downing of Malaysia Airlines flight MH17 in eastern Ukraine, which claimed the lives of all 298 people on board. Eastern Ukraine was a war zone at the time – yet the Ukrainian authorities haven’t closed the airspace, allowing civil flights over the area. What was behind their inaction?
Paul Craig Roberts: I think they intended for the airliner to be shot down. The latest evidence is that it was shot down by air, by a Ukrainian jet fighter using a missile. This is the best evidence we have at this time. What is suspicious about this is that the instant that the airliner was reported to have been shot down, the entirety of the Western media was already programmed to blame Russia. Before there was any evidence, before there was any explanation, we had all of the Western media blaming Russia – even the BBC, which used to be a respectable news organization. So this suggests the whole thing was preplanned.
And if you look at the development of this we see that Ukraine has not released any information about its contacts with the airliner. And we see that Washington, which had a spy satellite directly over the area at the time, refuses to release its information. So the only information we have comes from the Russians, and the Russians say that if this had happened on a ground-to-air missile, this Buk system, that their radar in Rostov would have picked it up and yet it shows no such happening.
So I think the reason that we can’t get to the bottom of this is that it’s been used against Russia by Washington in order to break off Russia’s relationships with Europe. It’s the foundation of the sanctions and it’s part of Washington trying to break up the political and economic relationships between Russia and Europe. In my opinion, all the evidence we have, as of this time, supports no other conclusion.
This interview with Paul Craig Roberts put in an appearance on the Russia Today website last Thursday—and it’s definitely worth reading for any serious student of the New Great Game. I thank reader M.A. for pointing it out.
Persia’s approaching gold rush– Pepe Escobar
Even under a nasty UN/US/EU package of sanctions – which Tehran always qualified as unlawful and unjust – Iran has built the most solid industrial base in Southwest Asia. It ranks, for instance, among the Top 15 global steel producers and Top 15 global car manufacturers. It is the worlds’ top exporter of cement, pistachios, saffron and caviar.
Iran is well positioned among global leaders in nanotechnology and stem cell research. It is the certified scientific power in Southwest Asia; the 17th largest producer of scientific papers in the world – ahead of Turkey and Israel. Not to mention Saudi Arabia, that global leader of, well, beheadings.
As the sanctions vanish, Iran will be able to boost its already sprawling industrial and scientific infrastructure. It will be a quest for selected Western technology. For the moment, technology breakthroughs come from BRICS member-nations China, Russia and India.
The Lausanne agreement was barely inked when a global corporate caravan – spanning Europe to Asia – began hitting the Persian trail, positioning themselves for the grand (re)opening of the Iranian bazaar.
On energy, that included European giants Royal Dutch Shell and Eni, French ambassador to the US Gerard Araud was forced to placate hawks at the Atlantic Council think tank with an obvious fact; “Really, we lost a lot of money, not the Americans,” Araud noted as European companies were forced to abide by U.S.-concocted sanctions. He added, “so stop taking the moral high ground.”
This is your one and only absolute must read of the day, especially for any serious student of the New Great Game. This op-edge piece by Pepe was posted on the Russia Today website at 3:01 p.m. yesterday afternoon Moscow time—and my thanks go out to Roy Stephens once again.
Capital exodus from China reaches $800bn as crisis deepens
China is engineering yet another mini-boom. Credit is picking up again. The Communist Party has helpfully outlawed falling equity prices.
Economic growth will almost certainly accelerate over the next few months, giving global commodity markets a brief reprieve.
Yet the underlying picture in China is going from bad to worse. Robin Brooks at Goldman Sachs estimates that capital outflows topped $224bn in the second quarter, a level “beyond anything seen historically”.
The Chinese central bank (PBOC) is being forced to run down the country’s foreign reserves to defend the yuan. This intervention is becoming chronic. The volume is rising. Mr Brooks calculates that the authorities sold $48bn of bonds between March and June.
Charles Dumas at Lombard Street Research says capital outflows – when will we start calling it capital flight? – have reached $800bn over the past year. These are frighteningly large sums of money.
This Ambrose Evans-Pritchard commentary appeared on The Telegraph‘s website at 8:51 p.m. BST on their Wednesday evening, which was 3:51 p.m. EDT. I thank Patricia Caulfield for bringing it to my attention—and now to yours. It’s definitely worth reading.
Seoul Will Not Impose Sanctions on Russia – South Korean MP
“Despite the outside pressure we stick to our position on this issue,” Kim Han Gil, who chairs the Korea-Russia Inter-Parliamentary Council, said when meeting with his colleagues from Russia’s Federation Council upper house of parliament.
Igor Zuga, who represents the Omsk region in the Federation Council, said Russia was fully behind the idea of maintaining peace and stability on the Korean peninsula.
Igor Zuga also urged his Korean colleagues to more actively implement trilateral economic cooperation projects with China, including the Khasan-Rajin transport route, which opens up good prospects for cooperation between Russia and the countries of the Asia-Pacific region.
Senator Zuga said that despite the slowing pace of the global economic development Russia and South Korea managed to ensure a hefty 8.5 percent increase in their bilateral trade, which now exceeds $27 billion.
That’s about all there is to this brief news item that showed up on the sputniknews.com Internet site at 5:46 p.m. Moscow time on their Wednesday afternoon, which was 10:46 a.m. in New York.
Gold Rout Spreads to Copper, Tin and Zinc as Industrial Metals Retreat
The sell-off in gold is infecting metal markets from copper to zinc and tin.
“Commodities are not in vogue,” Daniel Briesemann, an analyst at Commerzbank AG in Frankfurt, said by e-mail. “The speculative financial investors are still withdrawing from the markets. The weakness of the precious metals prices is spilling over to the base metals.”
Copper, zinc and lead fell more than 1 percent. The worst losses were in tin, which fell as much as 4.9 percent, the most this month. Gold futures retreated for a 10th day in the longest run of losses since 1996 as Goldman Sachs Group Inc. predicted further declines and investors sold more through funds.
Societe Generale SA expects surpluses in copper, aluminum and tin this year. China’s economy is set to expand at the slowest pace since 1990, curbing demand in the world’s biggest consumer of metals. The strengthening dollar has also hurt commodity prices as the Federal Reserve moves closer to raising borrowing costs.
This ‘Chicken Little‘ piece showed up on the Bloomberg website at 4:21 a.m. Denver time yesterday morning—and the only thing missing from this article are the real facts surrounding the gold price. It’s not worth reading—but I thought I’d post it anyway. I thank Patricia Caulfield for sending it along.
Gold majors skating close to the precipice — Lawrence Williams
Let’s face it, in the light of the latest gold price falls, the gold mining sector now desperately needs something that can set it back on a positive track. Gold stocks are sitting at multi-year lows and for even the gold mining majors their 2015 AISC predictions are now getting perilously close to the levels where gold is currently trading.
As can be seen from the above, three of the top 5 are already probably looking to an AISC level of close to $1000 an ounce or more this year. But perhaps what is even more worrying for gold stock investors in the companies is that some analysts don’t believe even AISC are a sufficient indicator of the real cost of keeping the company on track, as the figure ignores some capital, permitting, and social costs. In terms of achieved Free Cash Flow, this means that many gold miners will be falling short. Sometimes it is hard for investors to get to grips with the fact that a mining company can report what appear to be profitable mining activities, yet will end up making an overall loss and may even need to dip into financial reserves or sell assets to retain dividend levels.
The World Gold Council also suggests another more rigorous metric – All In Costs (AIC) – which sets the bar a little higher by taking into account costs incurred by a mining company but not necessarily directly relating to current operations, but nonetheless have an impact on overall profit and cash flow figures.
This commentary by Lawrie was posted on the mineweb.com Internet site at 12:10 p.m. BST in London yesterday morning—and it’s courtesy of Roy Stephens.
Don’t count on India to come to gold’s rescue
Blame poor rains or a lack of weddings, but Indians, for whom gold is the investment of choice, aren’t rushing to buy bullion after this week’s sharp sell-off.
India and China are the world’s top gold buyers and, after massive selling on the Shanghai Gold Exchange on Monday helped drive down gold prices by 4 percent to a 5-year low, traders hoped demand would perk up in India, or elsewhere in Asia.
The last big slide in gold prices – a 13 percent drop in just two consecutive trading days in April 2013 – prompted weeks of long queues of Indians outside gold showrooms.
Not this time. India’s gold appetite – it accounts for more than a fifth of global demand – remains sluggish, with only modest local premiums to the global spot benchmark.
This myopic Reuters article appeared on the mineweb.com Internet site at 12:24 p.m. BST yesterday. Not mentioned in this ‘story’ is the fact that regardless of the current demand in India—that country, plus China and Russia, are currently absorbing all the world’s gold mine production between them—and at these prices, gold scrap sales in India and elsewhere are close to rock bottom. They say that there’s “no truth in advertising“—but that applies equally as much to the main stream media when they talk about gold. I thank Roy Stephens for his final contribution to today’s column.
Gold’s plunge sparks retail demand in China, India
Gold’s plunge to five-year lows this week has prompted a swift rise in demand from jewelry retailers in China and India, the world’s top consumers of gold, leading to a doubling of premiums paid on physical gold.
At the same time, sales of gold coins from Australia’s biggest bullion mint have been rising sharply, likely thanks to some bargain hunting.
The increase in demand is expected to provide a cushion to the battering that gold has taken this week, although it may not be enough to offset the bearish outlook on the yellow metal amid growing expectations of a rise in U.S. interest rates and a lack of safe-haven demand. India, together with China, accounts for around half of the global demand.
I hope you read my comments in the previous Reuters piece first. The above three paragraphs are all that are posted in the clear in this GATA release from yesterday. The rest of it is for subscribers only at The Wall Street Journal‘s website.
Russians Buy Gold Again In June – Another 25 Tonnes
With all the focus on the Chinese low-balling their total institutional gold holdings, combined CIC, SAFE and PBOC, this week and the continuing attacks and manipulation of the gold market on Sunday night, the latest large increase in Russia’s gold reserves has gone largely unnoticed and barely covered by commentators – especially the more vocal bearish ones.
Russia continues to add to its gold reserves and added another 800,000 ounces in June or another 25 metric tonnes, and analysts believe this buying will continue in the coming months.
Its total gold reserves now amount to 41 million ounces or around 1,275 metric tonnes, with a current value of just $48 billion. Russia’s total FX reserves are $362 billion and their gold allocation is now 13% of their total reserves.
I posted Nick’s chart of this in my Tuesday morning column—and this is the only other commentary I’ve seen about it anywhere on the Internet since then. Mark O’Byrne posted this piece on the goldcore.com Internet site yesterday—and it’s definitely worth reading.
Facing FBI inquiry, BullionDirect seeks Chapter 11
BullionDirect Inc., a Web-based precious metals trading platform, has shuttered its operations and filed for Chapter 11 protection as the FBI and other authorities launch investigations into the company.
The Austin, Texas, debtor on Monday, July 20, submitted a petition in the U.S. Bankruptcy Court for the Western District of Texas in Austin after suspending operations due to “significant transaction delays,” a message on the company’s website said.
The debtor in court papers said it had ceased operations and sought bankruptcy protection on the heels of inquiries by the FBI, the Texas Attorney General’s Office and the Travis County, Texas, District Attorney’s Office. Details of those inquiries were not included in court papers.
This precious metals-related news item appeared on thedeal.com Internet site on Tuesday afternoon—and it’s certainly worth skimming. I found it on the Sharps Pixley website in the wee hours of this morning MDT.
Seth Lipsky in The Wall Street Journal: Fifty years of debasing money
July 23 marks the 50th anniversary of the Coinage Act of 1965, which stripped U.S. coins of silver and made legal tender out of base metal slugs. It’s an anniversary that comes at an apt time, as Congress considers monetary reform.
This discussion has been quietly taking place in recent months, in the Senate Banking and House Financial Services committees. Rep. Kevin Brady, vice chairman of the Joint Economic Committee, recently reintroduced a proposal for a Centennial Monetary Commission as the Federal Reserve starts its second century.
The anniversary of the 1965 Coinage Act is a reminder of why reform is needed. Speaking from the White House Rose Garden, President Lyndon B. Johnson called the law he signed a “very rare and historic occasion.” It certainly was; it superseded the coinage act drafted by Alexander Hamilton and passed by Congress in 1792.
Well, dear reader, I’m sad to say that the rest of this outstanding editorial is also out of reach unless you have a paid-up subscription to The Wall Street Journal, as that’s where it appeared yesterday. If I can talk Chris Powell into letting me post the whole thing in the clear, I’ll do that at the first opportunity. I must admit that I was amazed to see such a piece show up there, especially considering the fact that Seth is the editor of The New York Sun. The above three paragraphs are a must read.
The PHOTOS and the FUNNIES
The first two photos are courtesy of reader M.A.—and I’m sure he took them, but he hasn’t returned my e-mail inquiring about that. The first one is of an Eastern tiger swallowtail butterfly—and the second is a female Pallas’s cat, or Manui, complete with kitten. The third photo is of the male of the species that I stole off the Internet.
THE WRAP
There was a marked increase, at least in Internet commentary (as opposed to main stream media), on the nature of gold’s price decline; specifically, the sudden downdraft of $50 on Sunday evening. Most of that Internet commentary was focused just where it should have been directed – on the COMEX’s role in the gold price smack down. The sell-off was clearly a COMEX electronic phenomenon as opposed to any type of sudden selling in the physical markets or due to any sudden change in actual supply and demand. Yes, there was a sudden change in paper or electronic supply and demand starting Sunday evening, but not in real gold supply and demand and therein lies the rub.
Certainly, the COMEX’s influence on gold prices (along with silver and other CME metals) didn’t begin and end on Sunday evening; futures positioning is virtually the sole price influence. That’s what makes the vast majority of recent gold commentary unconstructive at best, because it leaves out the most important price influence. What’s most incredible is that the most important price influence is also the easiest to verify because the CFTC publishes the data behind futures positioning weekly. I admit that the data in the COT report is mostly incomprehensible at first glance to most observers, but most observers aren’t writing gold commentary, particularly in the main stream media. I would think those writing commentary have at least some responsibility to uncover what is most important. — Silver analyst Ted Butler: 22 July 2015
That more Internet commentators are picking up on the COMEX’s influence is a very good thing, even if main stream media is way behind the learning curve. It’s good for a number of reasons; one, it reinforces the validity of the premise that changes in futures positioning move prices. Two, because the futures positioning changes are in clear violation of commodity law (because they are strictly speculative in nature), the increasing attention should hasten the day when the speculative price control ceases to be so dominant. Finally, there are such persistent patterns to the changes in futures positioning that is possible to better foretell future price trends using the COT analysis than by relying on popular MSM commentary. — Silver analyst Ted Butler: 22 July 2015
It was a day where nothing much was allowed to happen to the upside in any of the precious metals—and gold wasn’t even allowed a sniff of the $1,100 spot price mark during New York trading. HFT volume was very heavy in gold—and roll-overs were decent, but nothing outstanding. We’re now down to the last seven business day of the month—and all the big traders [except those standing for delivery] have to be out of the August gold contract by the close of COMEX trading next Wednesday, so one should expect even higher roll-over volumes as the days go along.
Here are the 6-month charts for all four precious metals, plus copper and WTIC—and as you can tell, West Texas Intermediate made another new intraday low for this move down—and closed there as well.
And as I type this paragraph, the London open is five minutes away. All four precious metals were up decent amounts by 1 p.m. Hong Kong time on their Thursday morning, but the HFT boyz fixed that during the last hour or so. They’re all still up on the day, but only small fractions of what they were earlier. HFT volume in gold is just over 22,000 contracts—and well under ten percent of the gross volume is roll-overs out of the August contract. Silver’s HFT volume is 2,900 contracts, with no roll-overs at all. The dollar index sold down a bit in early Far East trading, but began to rally at precisely 1:00 p.m. Hong Kong time—and is now only down 6 basis points. I guess that’s the only reason that “da boyz” needed to lean on the price.
Yesterday was basically just “another day off the calendar” as Ted Butler would say. Nothing is going to happen in any of these COMEX-traded commodities until the powers-that-be say so—and it wasn’t yesterday. So we wait some more.
Not that I wish to read more into it than there is, I found the Seth Lipsky editorial in The Wall Street Journal yesterday to be of interest—and wondered out loud about the timing of it. And as I said in my comments further up, I’d love to be able to read the rest—and will post it in its entirety when it shows up in the clear.
They keep talking about deflation taking hold in the world—and that the declines in commodity prices are an indication of that. This situation could be easily remedied if JPMorgan et al removed their collective thumbs from the prices of the four precious metals, plus copper and crude oil in the COMEX futures market. The short covering rallies that would ensue at that point would would drive these commodities to the moon in days, if not hours; then they would have all the inflation they could ever hope for.
I suppose the powers-that-be might have that sort of scenario in mind—but if they do, it’s certainly a carefully guarded secret.
And as I put this up on the website at 5:30 p.m. EDT I see that all four precious metals took a bit of a jump in price shortly after London opened. They were capped almost immediately of course, but they had all the hallmarks of short covering rallies that weren’t allowed to get anywhere. Gold’s net volume is approaching 41,000 contracts—and about ten percent of the gross volume is roll-overs. Silver’s net volume is around 6,700 contracts, with only about 150 contracts of that amount being roll-overs, so the HFT boyz are out in force.
Glancing at the U.S. dollar index chart I see that it took a header starting shortly before the London open, so that might have accounted for some of the price action in the precious metals. It crashed below the 97.00 mark before ‘gentle hands’ showed up—and is currently down 40 basis points.
I have no idea what to expect as the remainder of the Thursday session unfolds and, as usual, nothing will surprise me when I power up my computer later this morning.
I’m off to bed—and I’ll see you here tomorrow.
Ed
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