31 July 2015 — Friday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
After trading sideways for a while in Far East trading, the gold price got marked down by 4 dollars between 9:30 and 10:00 a.m. Hong Kong time. Then came the bear raid at 2 p.m. Hong Kong time—and the low of the day came at the London open. The price recovered a few bucks from there, before rallying a bit around the time of the London p.m. gold fix. The spike high came at 10:30 a.m. EDT—which doesn’t show up on the Kitco chart below—and it got gently sold off until the 1:30 p.m. COMEX close. The price did nothing after that.
The low and high tick were reported by the CME Group as $1,097.50 and $1,081.00 in the August contract.
Gold finished the Thursday session at $1,088.30 spot, down $8.40 from Wednesday’s close. Net volume was 168,000 contracts, with the lion’s share of that in the new front month which is now December. October used to be a major delivery month for gold, but that was dropped years ago.
The price path for silver was mostly similar to gold’s except the rally in that metal, such as it was, began ten minutes after the COMEX open—and then got capped at 10:30 a.m. EDT. Then the price traded just like gold—down into the COMEX close and flat after that.
With silver trading in a 20 cent range, I shall dispense with the low and high ticks on this precious metal today.
Silver finished the Thursday session at $14.73 spot, down 8 cents from Wednesday. Net volume was only 28,500 contracts.
The high tick for platinum came in mid-morning trading in the Far East—and the low was at either 8:30 a.m. or at the London p.m. gold fix—you chose. The metal rallied a bit after that, closing at $987 spot, up 3 dollars from Wednesday’s close. Not really a lot to see here.
Palladium traded within an eight dollar price band all day yesterday—and was closed up a buck at $618 spot.
The dollar index closed late on Wednesday afternoon in New York at 97.17—and chopped around unchanged until about 10:25 a.m. BST in London. It began to rally from there, with the 97.74 high tick come around 12:30 p.m. in New York. It headed lower from there until 4 p.m.—and then traded ruler flat into the close. The index finished the day at 97.49—up 32 basis points from Wednesday’s close.
The 6-month U.S. dollar chart below shows it gapping up yesterday, which it certainly didn’t do.
The gold shares gapped down—and after a feeble rally, headed lower once again, finishing the day just off their low ticks. The HUI was clocked for another 4.17 percent.
The silver equities only did marginally better—and their price path was very similar to the gold stocks, as Nick Laird’s Intraday Silver Sentiment Index got beaten up for another 3.15 percent.
I doubt very much that this selling is related to the average retail investor. I would speculate that it was hedge/mutual fund selling for end-of-month performance gaming. And, as always, the question begging an answer is who is buying all these shares that are being unloaded???
And the same question should be asked about the physical silver in SLV, gold and silver eagles sales at the U.S. Mint, silver Maple Leaf sales, along with the puzzling [at least to them] big increase in sales at The Perth Mint. As I said in The Wrap yesterday, the dichotomy of the demand we can see with our own eyes—and the paper price of the precious metals set on the COMEX, screams for a denouement of some sort.
The CME Daily Delivery Report showed that the last lonely gold contract that needed to be delivered in the July delivery month, will be delivered today—as will the last 44 silver contracts. July open interest in both metals is now zero.
First Day Notice for delivery into the August gold contract starts on Monday—and the report from the CME Group yesterday evening showed that only 3 gold and 1 silver contract were posted for delivery from within the COMEX-approved depositories on that day. I must admit that I was totally underwhelmed with these numbers, especially gold.
The CME Preliminary Report for the Thursday trading session showed that, with July off the board, there are 9,288 gold contracts open in the August delivery month, which is a very large number. However, I would guess that a large chunk of that amount will disappear in the next two business days just because of reporting delays. By the time my Tuesday column gets posted, there would be a more accurate number available. In silver, the August o.i. showed 109 contracts still open—and bunch of those will disappear over the same time period—and for the same reason. We’ll have a better idea how quickly these gold numbers get adjusted downwards when we see them in tomorrow’s column with another days’ reporting subtracted.
There were no reported changes in GLD yesterday—and as of 8:01 p.m. EDT yesterday evening, there were no reported changes in SLV.
Since yesterday was Thursday, Joshua Gibbons, the Guru of the SLV Bar List, updated his website with the goings-on over at the iShares.com Internet site as of the close of business on Wednesday—and this is what he had to report.
“Analysis of the 29 July 2015 bar list, and comparison to the previous week’s list. 2,005,203.4 troy ounces were removed (all from Brinks London), no bars were removed or had serial number changes.”
“The bars removed were from: Solar Applied Materials (2.0M oz) and Korea Zinc (0.1M oz).”
“As of the time that the bar list was produced, it was overallocated 226.6oz. All daily changes are reflected on the bar list.”
Another day—and another big sales report from the U.S. Mint. They sold another 5,500 troy ounces of gold eagles—500 one-ounce 24K gold buffaloes—and another 197,500 silver eagles.
The silver eagles sales yesterday brought the monthly total up to 5,529,000 sold, exactly 1,000 silver eagles less than the amount sold back in January, the biggest sales month of the year so far. And as I said in yesterday’s column at this juncture, it will be interesting to see if they allow that record to broken, or will they take Friday’s sales and stick them into Monday, which is the new month. As Ted Butler said in his quote yesterday, the mint will use all the tricks in the book to try to make demand look like it’s less than it is, but Ted and I have been wise to their childish tricks for many years now.
There was no ‘in’ activity in gold at the COMEX-approved depositories on Wednesday—and one good delivery bar weighing 98.370 troy ounces was shipped out of Brink’s, Inc.
There wasn’t much activity in silver either, as nothing was reported received there—and only 131,756 troy ounces were shipped out. The link to that ‘activity’—such as it was—is here.
Over at the COMEX-approved gold kilobar depositories in Hong Kong on their Wednesday, they reported receiving 2,647 kilobars—and shipped out 9,949 of them. As usual, all of the activity was at Brink’s, Inc. The link to that action is here.
I have the usual number of stories for a week-day column—and I hope you’ll find a few of interest in what I’ve picked out.
CRITICAL READS
U.S. GDP Rises 2.3% in Second Quarter; First Quarter Revised Upward
The world’s largest economy expanded at a faster pace in the second quarter and managed to eke out a gain at the start of the year, painting a picture of incremental progress consistent with the Federal Reserve’s view.
Gross domestic product rose at a 2.3 percent annualized rate, and a revised 0.6 percent advance in the first quarter wiped out a previously reported contraction, Commerce Department data showed Thursday in Washington. The median forecast of 80 economists surveyed by Bloomberg called for a 2.5 percent gain. Consumer spending grew more than projected, and price increases accelerated.
The economy has moved beyond some of the early 2015 constraints including weather and port delays, while cooling global markets, a strong dollar and insufficient wage gains may continue to limit growth. Fed officials, considering when to begin raising rates this year, concluded on Wednesday that the U.S. is making progress.
If you believe this Bloomberg piece, I really do have a bridge for you. It was posted on their Internet site at 6:30 a.m. EDT on Thursday morning—and today’s first story is courtesy of reader M.A.
U.S. Economy Grew Less Than Expected in Q2: Worst Economic Recovery Since WWII—Revised Even Weaker
The much anticipated Q2 GDP number with prior revisions is out and, as expected, Atlanta Fed’s 2.4% estimate was once again nearly spot on, with the advance release coming in at 2.3%, below Wall Street’s consensus estimate of 2.5%.
But more importantly, as part of the annual revision to prior GDP data, one which as we observed would include the infamous “double seasonal adjustments”, both Q1 2014 and 2015 GDP prints, the “winter” collapse, was revised well higher, with Q1 2014 increase from -2.1% to -0.9%, while last quarter’s final GDP which had printed at -0.2% is now 0.6%.
Some further notes from the WSJ, which observes that “the economic expansion–already the worst on record since World War II–is weaker than previously thought, according to newly revised data.”
More creative accounting to hide the simple fact that the U.S is in a recession-come-depression. All the lipstick in the world won’t help this pig. The Zero Hedge spin on all this put in an appearance on their website at 8:43 a.m. yesterday morning EDT—and it’s the second contribution in a row from reader M.A.
The Energy Layoffs Resume: Shell Fires 6,500, Whiting Cuts 2015 Budget 2 Weeks After Raising It
Yesterday it was US and Italian energy giants Chevron and Saipem which announced a total of over 10,000 new job cuts in the aftermath of oil sliding back under $50 and resuming its downward trend. This is how we framed it: “in Q2, after the price of oil staged a substantial rebound of about 50% from the year to date lows in the $40’s, energy-related layoffs trickled to a halt as corporations hoped the worst is behind them, and as a result would merely bide their time before redeploying their workforce toward exploration and production. Alas, this was not meant to be, and as the events of the last month have shown, oil has resumed its downward slide. And, as expected, so have layoffs.”
Today, we got more confirmation of this when Royal Dutch Shell, still basking in the glow of its proposed $70 billion mega-acquisition of BG Group, announced it would axe 6,500 jobs this year and step up spending cuts, responding to an extended period of lower oil prices which contributed to a 37 percent drop in the oil and gas group’s second-quarter profits.
In addition, the Anglo-Dutch company is also increasing asset disposals to $50 billion between 2014 and 2018 as it pushes ahead with its proposed $70 billion acquisition of BG Group.
Here in Alberta yesterday, hundreds more oil-related layoffs were announced, with much more to come. The Zero Hedge article was posted on their Internet site at 8:12 a.m. EDT Wednesday morning—and that makes it three in a row from reader M.A.
70% Of Americans See Economy Worsening, Consumer Comfort Collapses By Most In 10 Month
With stocks just 1-2% from record highs, because China is fixed, oil is recovering, Europe is awesome, and gas prices are low? it appears the talking heads forgot to tell the ‘people’ how great things are. Bloomberg’s Consumer Comfort index plunged (by the most since Sept 2014) to hover at 18 month lows…as 70% of Americans see the state of the economy as negative.
Rather amusingly an intriguing 1% of Americans see the state of the economy as ‘excellent’ – wonder which 1% that is…
This brief 2-chart Zero Hedge story from 9:58 a.m. EDT yesterday morning is worth a quick look, but only look at the charts, as all the text in the article is posted above. This news item makes it four in a row from reader M.A.
Alan Greenspan: Soaring Entitlements, Govt Spending ‘Extremely Dangerous’ to U.S. Economy
Former Fed Chairman Alan Greenspan warns that government spending “extremely dangerous” to the future of the U.S. economy.
Greenspan decried a rise in entitlement costs, which he contended have pressured the U.S. economy.
“To me the discussion today shouldn’t even be on monetary policy it should be on how do we constrain this extraordinary rise in entitlements,” he told CNBC, calling the trend “extremely dangerous.”
Social expenditures in the U.S. were 19.2 percent of gross domestic product last year, up from 15.5 percent in 2005, according to data from the Organization for Economic Cooperation and Development.
This article was posted on the newsmax.com Internet site at 8:31 a.m. EDT on Thursday morning—and I thank West Virginia reader Elliot Simon for sliding it into my in-box yesterday evening MDT.
Investment Legends Warn Of A Systemic Event
More and more insiders are warning of a potential systemic event. The first sign of real trouble concerned a number of investment legends choosing to close shop and return investors’ capital.
The first of many real titans to bow out was Stanley Druckenmiller. Druckenmiller maintained average annual gains of nearly 30% for 30 years. He is arguably one of if not the greatest investor of the last three decades. In 2010, he chose to close shop, foregoing billions in management fees.
And finally, we get to today, where one of the largest asset managers in the world at Fidelity stated that we are heading for a “systemic event… similar to 2008” and that owning precious metals and physical cash is a good idea.
The punch line?
This was a bond fund manager. One of the class of investors who have poo-pooed gold and physical cash in the past because those assets pay next to or no dividend. And even HE is warning that it’s time to take safety and prepare.
Smart investors should take note of this now. It is a MAJOR red flag to be watched closely.
This commentary from phoenixcapitalmarketing.com was posted in the clear on the gold-eagle.com Internet site yesterday—and I thank Roy Stephens for find it it for us—and it’s a must read for sure.
Fed Reporter Pedro Da Costa is Leaving The Wall Street Journal After Asking Yellen “Uncomfortable” Questions
It was virtually inevitable.
As we reported on June 17, Pedro Da Costa, one of the more determined and controversial Fed reporters, was shocked to learn he was no longer welcome to ask Janet Yellen uncomfortable questions, questions related to the biggest scandal currently gripping the Fed: its leaks of proprietary information to “expert network” Medley Global (recently sold by Pearson to Japan’s Nikkei) and one which has since morphed into a criminal investigation.
Shortly after this exchange we learned that indeed the Justice Department did launch a criminal probe for leaks at the Fed itself as was disclosed shortly after the above exchange, a probe which may very well implicate anyone, including Janet herself hence her eagerness to avoid any “touchy” questions.
Nonetheless, after “shutting down” Pedro, the result was a “chilling effect” on any actually probing questions, and the same day that Pedro announced he would not be present at the June Fed press conference, not a single other journalist dared to ask anything on the topic.
This very interesting Zero Hedge item was posted on their website at 12:44 p.m. yesterday afternoon EDT—and it’s another contribution from reader M.A.
California Drought Could Wipe Cities Off Map If Their Water Runs Out
The epicenter of California’s drought crisis is in the Central Valley, where there are growing fears the drought could wipe entire towns off of the map.
Wells are going dry, jobs are harder to come by and families are already moving, either to different states or even Mexico in search of work.
Before visiting Tulare County, a place where wells have gone dry and some people are living in third-world conditions, we went to a place deep in the Mojave Desert that offers a dire warning of what can happen when the water runs out.
Desolate and deserted, Dave Leimbach is one of the few left in Lockhart.
This commentary appeared on the sacramento.cbslocal.com Internet site on Tuesday evening PDT—and it’s courtesy of Brad Robertson.
New York Mayor de Blasio Demands a Federal Bailout For Puerto Rico
While Greece may have kicked the can for the time being by imposing a third bailout whose terms are sure to led to the terminal collapse of the Greek economy (which has already moved on to barter), and lead to yet another in the immediate future, a bailout which even the IMF now openly opposes demanding a concrete debt haircut before it participates with more funds, the insolvency soap opera is about to jump the Atlantic to Puerto Rico where a default is now just 48 hours away.
As a reminder, August 1 is the due date for Puerto Rico’s public agencies to make close to $200 million in bond payments. Next month, the commonwealth is on the hook for $635 million in payments. Over the next 12 months, it has to cover over $5 billion in bond payments.
Last month, Puerto Rico Governor Alejandro Garcia Padilla announced that the commonwealth was no longer capable of making payments on its $72 billion dollars in public debt. Not long after his declaration, Puerto Rico’s Power Authority narrowly avoided default with a last-minute $128 million bridge loan so it could cover a $415 million payment.
This longish Zero Hedge news story put in an appearance on their website at 12:40 p.m. EDT on Thursday afternoon—and it’s the sixth and final offering of the day from reader M.A.—and I thank him on your behalf. It is worth reading if you have the time and/or the interest.
Britain and France Scramble as Channel Becomes Choke Point in Migration Crisis
They have reached Europe after often-treacherous journeys, usually across the Mediterranean. They have dodged the authorities as they made their way north toward their ultimate goal, Britain. But now, thousands of illegal migrants, refugees from war and poverty in Africa and the Middle East, find themselves bottled up at one final choke point in northern France: the entrance to the Channel Tunnel.
Over two nights this week, their desperation and frustration flared to new levels as they tried in far larger numbers than normal to breach the security around the tunnel and hide themselves amid the trucks and freight being shuttled by rail from Calais to southern England.
The French police said there were about 2,100 attempts by migrants to gain access to the tunnel on Monday, and Eurotunnel, the company that operates the 31-mile English Channel crossing, put the number for Tuesday night at about 1,500.
The main stream media in the U.S. have now deemed this story important enough that it’s worth talking about on the hallowed pages of The New York Times. This article appeared on their website on Wednesday sometime—and I thank Roy Stephens for finding it for us.
It’s Over: Russia, France Agree Mistral Contract Breach Settlement
Russia and France have agreed the terms of the settlement of the contract on delivery of two Mistral-class helicopter carriers to Russia, which have been suspended by Paris, a Kremlin official said Thursday.
“The talks have been completed, everything is settled — the schedule and the amount, which Paris will repay to Moscow,” Vladimir Kozhin, President Vladimir Putin’s aide on military-technical cooperation, told RIA Novosti.
“I hope that an agreement on the termination of the contract will be signed very soon, and we will be able to announce the sum that France will pay us,” Kozhin said.
This brief news item appeared on the sputniknews.com Internet site at 7:30 p.m. Moscow time on their Thursday evening, which was 12:30 p.m. in Washington [EDT+7 hours]. My thanks go out to Roy Stephens for sending this our way.
Lagarde Says No to IMF Aid For Greece
The International Monetary Fund’s board has been told Athens’ high debt levels and poor record of implementing reforms disqualify Greece from a third IMF bailout of the country, raising new questions over whether the institution will join the EU’s latest financial rescue.
The determination, presented by IMF staff at a two-hour board meeting Wednesday, means that while IMF staff will participate in bailout negotiations currently under way in Athens, the Fund will not decide whether to agree a new programme for months – potentially into next year.
That delay could have significant repercussions – particularly n Germany, where officials have long said it would be impossible to win Bundestag approval for the new €86bn bailout without the IMF on board.
According to a four-page “strictly confidential” summary of Wednesday’s board meeting obtained by the Financial Times, IMF negotiators will “participate in policy discussions” to ensure the eurozone’s new bailout “is consistent with what the Fund has in mind”.
But they “cannot reach staff level agreement at this stage.”
This Zero Hedge piece is based on an extensively-quoted story that appeared in the Financial Times of London yesterday—and it’s my only item on Greece. It’s another contribution from reader M.A.
French Delegation Banned Entry to Ukraine After a Visit to Crimea
The Ukrainian Security Service (SBU) has banned ten members of the Senate of the French Parliament entry to Ukraine after their visit to the peninsula. The politicians will not be able to enter the country for three years, media reported.
Kiev authorities consider the visit a destructive step as it was made “without consent with the Ukrainian side”. The actions of those French citizens are “contrary to the interests of national security and infringe on the state sovereignty and territorial integrity of Ukraine,” the official site of the SBU said.
Head of the French delegation Thierry Mariani stated that such a decision is a part of the Foreign Minister’s authority, but expressed doubts about the appropriateness of such measures.
The French delegation visited Crimea on July 23-24 to assess the situation and the mood of the population on the peninsula. They held meetings with local leaders and talked to the residents in Simferopol, Sevastopol and Yalta.
This interesting item appeared on the sputniknews.com Internet site at 9:28 p.m. Moscow time on their Thursday evening—and it’s another offering from Roy Stephens.
U.S. imposes further sanctions on Russia over Crimea, east Ukraine conflict
The United States has imposed further sanctions against Russia over the events in eastern Ukraine and Crimea. Eleven more people and 15 more companies have been put on the sanctions list.
Sanctions were also imposed against five Crimean commercial ports located in the towns of Sevastopol, Feodoisa, Kerch, Evpatoria and Yalta, as well as the Kerch ferry service.
The U.S. embassy to Russia said that Washington regards the new sanctions not as an escalation of tensions between the countries but rather as a “routine step” in strengthening current U.S. policy.
“This is not common practice, and this is no coincidence… The U.S. is getting back into the game of competing with Russia,” Gregory Copley, editor of the Defense and Foreign Policy Journal, told RT.
“The sanctions are not helping anybody… they are also reinforcing the growing rift between the United States and the European Union and that will have profound negative effect over their relations as Europe is already split over the sanctions,” he added.
This Russia Today story, filed from Moscow, showed up on their website at 7:32 p.m. Moscow time on their Thursday evening, which was 12:32 p.m. in Washington. It’s another offering from Roy Stephens, for which I thank him on your behalf.
Paul Craig Roberts: ‘U.S. Wants to Coerce Russia Into Submission’
In contrast with the Russian government which relies on diplomacy, Washington relies on coercion and it obviously intends to coerce Russia into submission, Dr. Paul Craig Roberts told Sputnik.
The cornerstone of America’s foreign and military policy is the Wolfowitz Doctrine which declares that Washington’s primary objective “is to prevent the re-emergence of a new rival, either in the territory of the former Soviet Union or elsewhere that poses a threat similar to that posed formerly by the Soviet Union,” Dr. Paul Craig Roberts, a prominent American economist, former Assistant Secretary of the Treasury for Economic Policy and author, elaborated.
“By ‘threat’ the Wolfowitz Doctrine means a country sufficiently strong enough to have a foreign policy independent of Washington. ‘Threat’ does not mean a military threat or a plan to attack the US. It means any country capable of standing up to Washington. Today there are two such countries, Russia and China. While the Washington neoconservatives were absorbed in their decade-long wars in the Middle East, Vladimir Putin revived Russia from the Yeltsin debacle, and China rose much more rapidly than Washington expected,” Dr. Roberts told Sputnik.
Russia’s diplomatic involvement into the U.S. geopolitical game in the Middle East undermined neoconservatives’ plans and became the trigger for backlash from Washington.
Nothing but the truth in this piece! This absolute must read commentary was posted on the sputniknews.com Internet site on Wednesday evening Moscow time—and it’s the final offering of the day from reader M.A.—and I thank him on your behalf.
Georgia has no plans to join all anti-Russian sanctions — diplomat
Georgia has no plans to join all sanctions of the European Union against Russia, Georgian Prime Minister’s envoy for relations with Russia Zurab Abashidze told reporters on Thursday in comments on an extension of economic sanctions against Russia by some European countries.
According to Abashidze, on June 19 Georgia automatically prolonged by one year a ban on imports of goods produced in Crimea and Sevastopol. “Our country’s joining other sanctions of the E.U. against Russia is not discussed,” he added.
Seven European countries – Montenegro, Albania, Iceland, Norway, Lichtenstein, Ukraine and Georgia have reaffirmed to the E.U. Council they prolonged the participation in the E.U.’s sanctions against Crimea and Sevastopol till June 23, 2016, as follows from a statement by the E.U. high representative for foreign affairs and security policy, Federica Mogherini, published on the E.U. Council’s website on July 28.
This article put in an appearance on the tass.ru Internet site at 8:41 p.m. Moscow time on their Thursday evening, which was 1:41 p.m. EDT in New York [EDT+7 hours]. My thanks go out to Roy Stephens once again.
Oil prices will not fall lower – OPEC chief
Oil prices will get no lower, as demand is surging and production going down, said OPEC Secretary General Abdalla Salem El-Badri after meeting Russian Energy Minister Aleksandr Novak. However, the cartel is not going to cut crude output.
“At the last meeting, in June, we agreed that we will not reduce production quotas. It is 30 million barrels a day, and will remain so,” said El-Badri, responding to a question on whether there is an understanding within OPEC on reducing production quotas.
The global oil demand will increase by 7-11 percent a year until 2020, said Novak. The growth will continue even after 2020, he added.
The Russian Energy Minister said that the situation in the crude market will improve in 2016, as Russia and OPEC share the same views on many questions.
“Despite continuing uncertainties, there are possible signs of achieving a more balanced situation in the oil market and to stabilize it by 2016, which is a mandatory requirement for the continuity of timely and sufficient investments,” said a joint statement released after the meeting.
Oil is one of the Big 6 commodities where the technical funds in the Managed Money category are short up the ying yang—and JPMorgan et al are equally as long. The oil price could explode to the upside with the same speed as the precious metals, plus copper, if “da boyz” just put their hands in their pockets on the next rally. This oil-related news item was posted on the Russia Today website at 12:07 p.m. Moscow time on their Thursday afternoon—EDT+7 hours.
As gold price falls, miners pick derivatives to protect income
Gold mining companies are turning increasingly to derivatives to lock in future revenues, as an industry still smarting from losing out on a 12-year bull run gets creative over protecting its income during the metal’s current downturn.
While miners overall remain wary of hedging — the outstanding global hedge book stood at just 6.2 million ounces at end March compared with 57.2 million a decade earlier — those who do favour the strategy are leaning more strongly towards options.
Data released this month from Societe Generale and GFMS analysts at Thomson Reuters showed options structures made up 46 percent of the global hedge book by the end of the first quarter of 2015, compared with just 16 percent in the same period a year before and 11 percent in 2013.
Hedging allows miners to lock in the price of their output, usually by selling future production forward. This offers protection from falling gold prices, but means they can lose out if prices rise sharply.
Big mining companies lost billions closing out hedges during a 12-year rally that took gold prices to record highs in 2011 just shy of $2,000 per ounce.
This Reuters story, filed from London yesterday, falls into the absolute must read category for gold bugs with less than ten years experience—and is an excellent refresher for those who remember this 25-year old gold hedging strategy all too well. I found this embedded in a GATA release.
Mega-bear Albert Edwards says gold is a ‘must-have’ even after the latest price slump
Societe Generale’s Albert Edwards is a bit of a bear, to put it mildly. One asset he absolutely loves, all the time, is gold.
So you might think he’d be a little down, given the precious metal’s recent tumble in value.
But Edwards is sticking firmly to his guns in his latest email— gold is a great investment for the coming crash (it’s always just around the corner).
Here’s what he says: “Many clients ask me about gold. I still like gold despite it being sucked into the general commodity malaise. As Marc Faber said at our January conference, if he could short central banks directly he would do so, but gold is the next best thing.”
“I have not one scintilla of doubt that the western central banks have set us up for an even bigger version of the 2008 Great Financial Crisis/Recession – but this time rock bottom interest rates and large fiscal deficits will mean only one thing; QE will be stepped up to such a pace that you will hear the roar of the printing presses from Mars. Gold is a must-have holding in that world.”
The reporter dumps all over Edwards and his beliefs, but the point is still clear—own gold. This gold-related news item showed up on the uk.businessinsider.com Internet site at 11:41 a.m. EDT on Thursday morning—and it’s the second offering of the day from Elliot Simon. It’s certainly worth reading.
Threat Of Cyber War – “Other Reason to Own Physical Gold” – Rickards
Author and monetary expert Jim Rickards says that gold, apart from its qualities as a form of insurance against conventional economic crises, is an essential hedge against cyber warfare.
In an interview with Henry Bonner at SprottGlobal.com, ahead of the Sprott-Stansberry Vancouver Natural Resource Symposium taking place this week, Rickards said this subject would form part of his talk at the conference.
We have frequently covered the risks posed by cyber warfare and cyber terrorism to markets, investments and deposits, and these risks remain, as yet, widely underappreciated in the mainstream media and the wider world.
As Rickards astutely points out: “Physical gold is a non-digital asset. You can’t attack it with cyber warfare, so I think it has another insurance function for investors there.”
This worthwhile commentary by Mark O’Byrne appeared on the goldcore.com Internet site yesterday—and I thank Roy Stephens for pointing it out.
Alasdair Macleod: China’s 1929 moment
A 1929-style collapse in China’s stock markets would change this delicate balance. In mainstream macroeconomic theory, the only way China can resolve her excessive financial imbalances is to devalue the renminbi against other SDR currencies, hardly a good start for a new member. The IMF, probably egged on by the Americans, could be forced to defer its decision again, reviewing it in 2020.
This would be a bad outcome, given China has set her sights on joining the IMF’s top table. There can be little doubt that the recent announcement increasing her gold reserves by only 600 tonnes was made in the context of her desire for the currency to be included in the SDR. If she is rejected, China could swing the emphasis more firmly towards gold, which she owns and mines in abundance.
The Chinese government almost certainly views gold as the ultimate money. The time is approaching for Plan B when a higher gold price would serve her interests better than membership of the SDR. It would reduce China’s debt levels expressed in the ultimate money, without currency intervention. And it would also boost the personal wealth of her people. In short, it would be popular with ordinary people, at a time when the authorities’ credibility is threatened by internal financial developments.
This very interesting commentary by Alasdair was posted on the goldmoney.com Internet site yesterday sometime—and I thank U.K. reader Robert J. Lewis for sending it our way. It’s worth reading.
Ted Butler: Price takers and price makers
In a nutshell, here’s the problem – because managed money technical traders generally do the same thing (buy or sell) under similar pricing circumstances (buying on rising prices and selling on declining prices), even though each technical trader is operating independent of other technical traders, the net effect is that their collective actions transform them into one massive trader – the largest such trader ever known to markets. The price-setting influence the unified managed money traders is having on world commodities is undeniable. Whereas I usually talk in terms of what this collective influence has on silver and gold prices, it has now gone much further than that.
The proof that collective managed money positioning has been the dominate price force in recent moves in corn, crude oil and copper (in addition to silver and gold) can be seen in the data in the CFTC’s Commitments of Traders (COT) report. Other commodities are similarly affected by collective managed money futures market positioning, but let me stick to just these five commodities for the sake of brevity.
On the recent 20%+ jump in corn prices (now reversing), managed money traders bought (mostly in the form of short covering) roughly 400,000 net futures contracts in a matter of weeks, or nearly 30% of the total open interest in the Chicago Board of Trade’s corn futures market . In addition, that’s the equivalent of two billion bushels of corn, nearly 15% of U.S. corn production and the U.S. is the largest corn producer in the world with half the world output. If one trader, effectively and suddenly, bought 30% of an entire major futures market, could there be a more obvious force for driving prices higher?
This must read commentary by Ted was posted on the silverseek.com Internet site yesterday.
The PHOTOS and the FUNNIES
THE WRAP
The intent of today’s article on price takers and makers was to restate in the simplest terms possible what is a very complicated and serious problem in the pricing of world commodities. But just because I refrained from discussing how bullish is the current market structure in silver and gold, please don’t interpret that omission as indicating that both aren’t locked and loaded for the upside, regardless of very short term price action.
It’s hard to imagine a further big improvement in this week’s COT report, considering the bullish extremity of the current COMEX market structure, but price action during the reporting week that ended yesterday suggests additional commercial buying and managed money selling. And given just how bullish the setup has grown, neither have I abandoned my thoughts that this may still be the last great such setup. — Silver analyst Ted Butler: 29 July 2015
It was another day when the gold price was not allowed to operate in a free market environment—and the smallish bear raid[s] in Far East trading were duly noted. Since no moving averages were broken again yesterday, this was all pretty background noise in the grand scheme of things, but most of the new long placed since last Friday’s Far East bear raid were all taken out with that spike down yesterday just before the London open.
Here are the 6-month charts for the Big 6 commodities.
And as I write this paragraph, the London open is less than five minutes away. The four precious metals ran into the HFT crowd around 9 a.m. in Hong Kong for the second day in a row—and that event peeled another four or five bucks off the gold price—and it’s been trading pretty flat since then. It was more or less the same in silver, but it’s been under some selling pressure almost from the open in Far East trading on their Friday morning—and the metal is currently down a dime. Platinum and palladium suffered similar fates, with platinum currently down five bucks—and palladium down just a couple of dollars.
Net gold volume is around 21,500 contracts, which is very decent for this time of day—and a big chunk of that was involved in the five dollar price ‘adjustment’ in Hong Kong earlier. With July now off the board at the end of today, virtually all of the volume is in the new front month, which is December. Silver’s volume is pretty quiet at 3,100 contracts, so nothing much should be read into the current price action, such as it is. The dollar index has been chopping quietly lower all day in Hong Kong—and is currently down 18 basis points as London has now been open for a couple of minutes.
Like Ted, I’m expecting some minor improvements in the Commitment of Traders structure in both gold and silver for the reporting week that ended at the COMEX close on Tuesday afternoon EDT. And after the big spike down to new lows on Friday, I’m expecting to see further shorting by the Managed Money traders in the Disaggregated Report—and that’s what I’ll be checking right after I look at the Commercial net short positions in both metals in the legacy COT Report. Both reports should be up on the CFTC’s website at 3:30 p.m. EDT—and whatever the numbers show, I’ll have them for you in tomorrow’s column.
And as I put today’s column up on the website at 5:15 a.m. EDT, I note that the gold price is still trending lower, as it’s currently down 7 bucks—and “da boyz” are working over silver pretty good once again, and it’s down 15 cents. The ultra-thinly-traded platinum and palladium markets are suffering the same fate, as platinum is currently down 9 dollars—and palladium is down eight.
Net gold volume is approaching 37,000 contracts—and silver’s net volume has more than doubled to 6,800 contracts since minutes before the London open. The dollar index is bouncing around a bit—and is currently flat on the day.
Since today is not only Friday, it’s also the last trading day of the month—and absolutely nothing will surprise me when I check the charts later this morning when I roll out of bed.
I’m done for the day—and I hope you enjoy your weekend, or what’s left of it if you live just West of the International Date Line, and I’ll see you here tomorrow.
Ed
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