27 August 2015 — Thursday
YESTERDAY IN GOLD, SILVER, PLATINUM and PALLADIUM
Gold’s tiny rally in the first two hours of Far East trading on their Wednesday morning got stepped on at 8 a.m. Hong Kong time—and within two hours the price was down a few dollars from Tuesday’s close. It traded sideways until the London a.m. gold fix at 10:30 a.m. BST/5:30 a.m. EDT—and then JPMorgan et al and their algorithms showed up. Just like on Tuesday, they were done a minute or so before 10:30 a.m. EDT—and all subsequent rallies, no matter how tiny, were capped.
The high and low ticks were recorded by the CME Group as $1,146.00 and $1,116.90 in the December contract.
Gold finished the day at $1,125.40 spot in New York yesterday, down an even $15 from Tuesday’s close. Net volume was sky high once again at just under 180,000 contracts, as the 50-day moving average was taken out to the downside with a vengeance—an event that I said was a near certainty in The Wrap in yesterday’s column.
Here’s the 5-minute gold tick chart courtesy of Brad Robertson once again. The HFT sell-off at 8 a.m. in Far East trading on their Wednesday morning was accomplished by very little volume. But volume began to pick up once “da boyz” showed up at the a.m. London gold fix, which is 3:30 a.m. Denver time on the chart below and, as usual, all the volume that really mattered occurred during the COMEX trading session in New York. Volume fell off to next to nothing once the COMEX closed at 1:30 p.m. EDT, which is 11:30 a.m. MDT on this chart. Use the ‘click to enlarge‘ features—and add two hours for EDT. Midnight EDT Tuesday evening is the vertical gray line.
It was exactly the same story in silver—and the Kitco gold chart and silver chart are pretty much interchangeable, as “da boyz” used the same playbook on both precious metals.
The high and low ticks were reported as $14.70 and $13.91 in the September contract, an intraday move of just under 5.4 percent.
Silver was closed in New York on Wednesday afternoon at $14.11 spot, down 58.5 cents from Tuesday’s close and, according to Nick Laird, a new record low tick going back to mid 2009. As expected, gross volume was very high at 103,915 contracts, but it netted out to just under 29,500 contracts, which is a pretty normal looking number these days.
Platinum tried to rally above the $980 spot mark on many occasions on Wednesday, but the HFT boyz were ever watchful. However it did managed to close up five bucks on the day at $980 spot.
After not doing much in Far East trading on Wednesday, the palladium price began to fade once Zurich opened, with the $519 low price tick coming around 9:15 a.m. in COMEX trading—and it rallied semi-quietly from there into the close, finishing the Wednesday session at $532 spot, down only 4 bucks on the day.
The dollar index closed in New York late on Tuesday afternoon at 93.96—and it briefly headed lower from the 6 p.m. Tuesday evening EDT open, hitting around 93.72 to the downside just before 8 a.m. Hong Kong time before heading higher. The rally only paused for a breath in a couple of spots during the Wednesday trading session—and it’s 95.44 high tick came around 4:35 p.m. EDT—and has backed off about ten basis points since. The dollar index finished the day at 95.28—up a whopping 132 basis points.
“Da boyz” used the dollar index rally as a fig leaf to hide their attack on the precious metals yesterday—and if you visually overlay the precious metal charts above on the dollar index chart below, you’ll note that it’s not even close to an exact match, but that’s the way the press will play it.
And here’s the 6-month U.S. dollar index so you can keep up with the 3-ringed circus that the U.S. dollar and the other world currencies have become.
The gold stocks gapped down 2 percent at the open and, after a bit of a rally attempt between the London p.m. gold fix and noon in New York, headed lower to stay, with the shares closing almost on their low tick of the day. The HUI finished down by 5.35 percent.
It was the same story with the silver equities—and Nick Laird’s Intraday Silver Sentiment Index got hit to the tune of 4.37 percent.
All of August’s gains in the gold and silver equities since the rally began on August 10, vanished as of the close of trading yesterday. The round trip took thirteen business days.
The CME Daily Delivery Report showed that 552 gold and 48 silver contracts were posted for delivery within the COMEX-approved depositories on Friday. In gold, the largest short/issuer by far was JPMorgan out of its client account with 500 contracts—and in distant second place was HSBC USA with 49 contracts out of its in-house trading account. The largest long/stopper was Goldman Sachs with 442 contracts for its in-house [proprietary] trading account—and in distant second place was JPMorgan with 71 contracts for its client account.
In silver, the only short/issuer was JPMorgan with 48 contracts out of its client account—and the only stopper was ADM, which may be an internal account at the CME Group, although I reserve the right to be wrong about that. Looking at the silver mini-contract for the September delivery month, there are 78 contracts still open. That translates into 78 good delivery bars of 1,000 troy ounces apiece—and those 48 contracts issued for delivery on Friday represents 240 individual good delivery bars. What are all those extra bars for, I wonder. I’ll get all the facts when I talk to Ted today—and I’ll have that for you in Friday’s column. The Issuers and Stoppers Report is linked here—and it’s certainly worth a look.
The CME Preliminary Report for the Wednesday trading session showed that gold open interest in August declined by 54 contracts leaving 1,291 still open. Subtracting out the 552 gold contracts for delivery tomorrow, leaves 739 that have to be delivered on Monday—no ifs, ands, or buts about it. This is by far the strangest ending to a delivery month I have ever witnessed—and I’d dearly love to know what’s going on behind the scenes. I await this evening’s Daily Delivery Report with great interest.
There were no reported changes in GLD yesterday—and as of 7:46 p.m. EDT yesterday evening, there were no reported changes in SLV, either.
After such a monster sales day on Tuesday, I was surprised to see that the U.S. Mint had more sales to report yesterday. They sold another 10,000 troy ounces of gold eagles—and 1,000 one-ounce 24K gold buffaloes. But no silver eagles.
The Royal Canadian Mint finally posted their second quarter report for 2015 on their website yesterday—and I’ve cut and paste the relevant parts from page 6 and 7 of that report below. If you want to read the whole thing, the link to the 32-page PDF file is here.
“Bullion, Refinery and ETR revenues were stable at $485.8 million in the second quarter of 2015 compared to $485.2 million in the same period in 2014. Sales volumes and market share were also stable with demand for gold products exceeding expectations.”
“Sales of gold, mostly as Maple Leaf (GML) coins, increased 1.2% to 164,000 troy ounces from 161,000 troy ounces in the second quarter of 2014. Sales of silver, mostly as Maple Leaf (SML) coins, declined 5.6% to 6.8 million ounces from 7.2 million ounces in the same quarter in 2014. While demand remains steady for the Mint’s bullion products, demand for premium refinery products such as kilobars, silver 100-ounce bars and grain softened during the quarter.”
“During the twenty-six weeks ended June 27, 2015, Bullion, Refinery and ETR revenue declined a modest 0.2% to $1,045.5 million from $1,047.5 million in the same period in 2014. Sales of gold, mostly as GML coins, rose by 1.8% to 343,000 troy ounces from 337,000 troy ounces in 2014 while sales of silver, mostly as SML coins, increased 2.0% to 15.7 million ounces from 15.4 million ounces in the previous year.”
“Outlook: Volatility in the metal price driven by uncertainty over global currencies and economies was having a significant impact on demand for the Mint’s bullion products by the end of the second quarter. Demand is expected to remain strong if these conditions persist.”
As you can tell, demand for gold and silver maple leafs remains robust, even while retail sales during the first half of 2015 in Canada and the U.S. continued to stink up the place. It’s obvious that the ‘big buyer’ over at the U.S. Mint is gorging themselves across the border at the Royal Canadian Mint as well.
And just as an aside, based on the sales numbers provided above, the silver/gold sales ratio in Q2 was just over 41 to 1—and for the first full six months of 2015, it worked out to just under 45 to 1.
I sent an e-mail to the RCM asking what “ETR revenue” meant—and if it’s anything important, I’ll mention it in tomorrow’s column, if they ever get back to me.
There was a bit of activity in gold over at the COMEX-approved depositories on Tuesday. There was 13,778 troy ounces received at the Delaware depository—and 1 kilobar was shipped out of the Manfra, Tordella & Brookes, Inc. depository. The link to that activity is here.
There was quite a bit more activity in silver, as 512,012 troy ounces were reported received—and 75,200 troy ounces were shipped out the door for parts unknown. Except for 14,886 troy ounces shipped out of Delaware, the rest of the activity was at Canada’s Scotiabank. The link to that action is here.
There was big ‘in’ activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Tuesday, as a chunky 8,043 kilobars were deposited—and a smallish 640 kilobars were reported withdrawn. All of the action was at the Brink’s, Inc. depository as usual. The link to that activity, in troy ounces, is here.
Before heading into the stories for today, here’s the 1-year gold/silver ratio chart—and as you can tell, it doesn’t stay at these extremes for long once it’s there—and we’re certainly far beyond the extreme.
I have the usual number of stories for a week-day column and, as usual, the final edit is up to you.
CRITICAL READS
How Washington will try to rig the stock market — John Crudele
How long will it be before Washington decides to rig the U.S. stock market?
Well, it could have happened Monday around noon.
The U.S. Treasury admitted that it had been in touch with “market participants.” Was that just a social call or was Treasury Secretary Jack Lew lining up his market manipulators?
The rig didn’t take, even though the Dow Jones industrial average went from a loss of more than 1,000 points to one-tenth that amount around lunchtime.
But by the end of the day, the Dow still lost an incredible 586.13 points, or 3.6 percent.
But just because the market manipulation didn’t work on Monday doesn’t mean Washington will stop trying.
As we found out, they did the job on Tuesday and Wednesday. This right-on-the-money Crudele commentary showed up on The New York Post website at 8:48 p.m. Monday evening after the big ‘down’ day—and it’s definitely worth reading. I found this in a GATA release yesterday.
U.S. stock markets surge to end six days of sell-offs
U.S. stock markets surged on Wednesday afternoon, ending a six-day sell-off sparked by growing global concerns about the health of the Chinese economy.
The Dow Jones Industrial Average soared 619 points (3.95%) to close at 16,285, as concerns about China gave way to bargain hunters piling into the market as an an influential Federal Reserve policymaker said it was unlikely that interest rates will rise in September, as had been widely expected.
The Dow has now recovered most of the losses it sustained on Monday and Tuesday. The S&P 500 and the NASDAQ also closed higher on Wednesday, following days of losses.
Traders were emboldened by Bill Dudley, the president of the New York Federal Reserve and a key member of the US central bank’s rate setting committee, saying that a September interest rate rise was now “less compelling” than it had been just a few weeks ago.
The PPT got ‘er done again. Nothing to see here, folks—please move along. the article appeared on The Guardian‘s website at 9:01 p.m. BST yesterday evening, which was 4:01 p.m. in New York—EDT plus 5 hours. I thank Patricia Caulfield for her first story of the day.
Marc Faber: China Has Given Fed an Excuse Not to Hike Rates
“The Fed loves the fact that the Chinese have begun to let the currency float down,” says Marc Faber, publisher of the Gloom, Boom & Doom Report. “They have an excuse not to increase interest rates,” he told Anna Edwards on Bloomberg‘s “Countdown.”
This 6:02 minute video clip appeared on the bloomberg.com Internet site just before midnight Denver time on Tuesday evening—and I thank Ken Hurt for bringing it to our attention.
$2 gas is coming soon
Gas prices have dropped about 5% in the last month to $2.60 a gallon according to AAA. And they’re expected to fall even more this fall, as they begin to more closely track the price of oil, which plunged 18% in the previous month.
Gasoline has been slow to follow oil prices lower due to outages at several major refineries. Problems at the BP refinery in Whiting, Ind., caused a price spike in much of the Great Lakes region in recent weeks. And a fire at a Delaware refinery on Friday could bump up East Coast gas prices.
Also keeping prices higher is the fact that gas stations are required to sell a more expensive summer blend of gas until Sept. 15, when environmental regulations allow the winter blend to roll out.
But all of this is about to change, says Tom Kloza, chief oil analyst for the Oil Price Information Service, which tracks pump prices for AAA. He expects gas to be below $2 by Thanksgiving, if not well before then.
This news item put in an appearance on the money.cnn.com Internet site early Monday afternoon EDT—and it’s courtesy of Patricia Caulfield once again.
U.S. budget report sees shrinking deficits, but only for now
An unforeseen flood of revenue is shrinking federal deficits to the lowest level of President Barack Obama’s tenure, Congress’ nonpartisan budget adviser said Tuesday. But in a report that will fuel both parties in their autumn clash over spending, the analysts also warned that perilously high shortfalls will roar back unless lawmakers act.
Two weeks before Congress returns from recess, the Congressional Budget Office said it expects this year’s federal deficit to fall to $426 billion. That’s $60 billion less than it expected in March, thanks to greater-than-expected individual and corporate income tax collections, and less than a third of the record $1.4 trillion gap of 2009 as the government tried fighting off the Great Recession.
White House spokesman Eric Schultz said Congress should prevent cuts in agency budgets and fund highways and other projects, saying, “We need to stay focused on this route and avoid self-inflicted wounds” like a government shutdown.
This AP story, filed from Washington, was picked up by the news.yahoo.com Internet site very early Tuesday evening—and it’s courtesy of West Virginia reader Elliot Simon.
Signs, Long Unheeded, Now Point to Risks in U.S. Economy
As investors scramble to make sense of the wild market swings in recent days, a number of financial experts argue that, for more than a year now, signs pointing to an equity crisis were there for all to see.
The data points range from the obvious to the obscure, encompassing stock market and credit bubbles in China, the strength of the dollar relative to emerging market currencies, a commodity rout and a sudden halt to global earnings growth.
While it would have been impossible to predict the precise timing of the last week’s downturn, this array of economic and financial indicators led to an inescapable conclusion, these analysts say: The United States economy would only be able to avoid for so long the deflationary forces that have taken root in China.
This commentary appeared on The New York Times website yesterday sometime—and it’s the third offering of the day from Patricia Caulfield.
Dick Morris: Obama Threw Clinton ‘Under the Bus’ With Biden Endorsement
President Barack Obama was “clearly stabbing Hillary in the back” when he expressed support Monday for Vice President Joe Biden running for the Democratic nomination, political strategist Dick Morris told Newsmax TV on Tuesday.
“Of course, Hillary has slit her own throat, slit her own wrists, stabbed herself in the heart and cut her jugular to herself — but she’s still not dead,” Morris told “Newsmax Now” hosts John Bachman and Miranda Khan. “To whatever is left of her candidacy, Obama is stabbing her in the back.
“What I’m saying is that all of Hillary’s problems to date are self-inflicted wounds,” Morris added. “This one’s not.”
Morris, who served under President Bill Clinton, is co-author of The New York Times best-seller, “Power Grab: Obama’s Dangerous Plan for a One-Party Nation.”
This news item appeared on the newsmax.com website on Tuesday evening EDT—and I thank Brad Robertson for sharing it with us.
Something is Very Wrong at Mexico’s Largest Construction Company…
Let’s say, for argument’s sake, that you’re a big company in an emerging market and suddenly, a commodities crash for the ages and a “surprise” devaluation by the world’s engine for global growth and trade sends your country’s currency into a veritable tailspin.
If that were the case, just about the worst possible situation you could find yourself in would go something like this (adapted from Bloomberg): “Eighty-five percent of [your] backlog is denominated in the [home currency], which plunged to a record low this week [and] almost half of [your] debt is in foreign currencies, mostly dollars.”
Well, that’s precisely what the situation looks like for Mexico’s largest construction company Empresas ICA SAB which spooked bond investors earlier this month by selling a key 3% stake in an airport operator for $56 million in order to pay down debt.
That has sparked liquidity worries and as you can see from the following, investors are slightly concerned.
This 2-chart Zero Hedge piece showed up on their website at 1:23 p.m. yesterday afternoon EDT—and it’s worth a minute of your time. My thanks go out to Richard Saler for sending it our way.
Puerto Rico Turmoil Sinks Sewer Bond
Up against a deadline to reveal its plan to restructure its staggering debt, Puerto Rico has decided not to move ahead with a controversial proposal to borrow an additional $750 million to pay for improvements to its water and sewer authority.
It attributed the decision, made late Monday, to the turmoil in the global markets. But the government also appears to have decided it could not borrow the money — by issuing bonds — at an affordable interest rate.
Just a few days earlier, Puerto Rico petitioned the United States Supreme Court asking for the right to restructure its debt — which has reached $72 billion — under its own quasi-bankruptcy law. Puerto Rico, a United States commonwealth, enacted the law last year because it has no access to the federal bankruptcy courts. But the law was later found unconstitutional and was voided by the courts.
Investors who at one time might have been potential buyers of the water and sewer bonds seemed taken aback by the island’s move, on the one hand, to sell new bonds (and incur new debt) while also telling the Supreme Court that it had to restructure its old debt.
This article showed up on The New York Times website on Tuesday sometime—and it’s the second contribution in a row from Richard Saler.
Venezuela Is Adding More Zeroes to Its Currency to Deal With Hyperinflation
Venezuela is preparing to issue bank notes in higher denominations next year as rampant inflation reduces the value of a 100-bolivar bill to just 14 cents on the black market.
The new notes — of 500 and possibly 1,000 bolivars — are expected to be released sometime after congressional elections are held on Dec. 6, said a senior government official who isn’t authorized to talk about the plans publicly.
Many Venezuelans have to carry wads of cash in bags instead of wallets as soaring inflation and a declining currency increase the number of bills needed for everyday purchases. The situation is set to get worse. Inflation, already the fastest in the world, could end the year at 150 percent, said the official.
The government stopped releasing regular economic statistics in December, when it reported inflation had reached 69 percent.
This Bloomberg story appeared on their Internet site at 10:17 a.m. MDT on Wednesday morning—and it’s definitely worth reading. It’s also another offering from Patricia Caulfield.
Ecuador Reveals Pain Inside OPEC: It’s Pumping Oil at a Loss
Ecuador has revealed the financial stress inside OPEC created by low oil prices, becoming the first member of the group to say it’s pumping at a loss.
President Rafael Correa said on Tuesday that the South American nation is receiving as little as $30 a barrel for its crude, while production costs average about $39. The warning comes after several other members of the Organization of Petroleum Exporting Countries, including Algeria and Libya, said the group should consider holding an emergency meeting to respond to the drop in oil prices.
“We are going through a very difficult year economically because the price of oil collapsed,” Correa said in a speech in the central highland province of Cotopaxi.
This Bloomberg news story put in an appearance on their Internet site at 9:55 a.m. Denver time yesterday morning—and I thank Patricia C. one more time for sending it along.
Stocks in Europe Resume Retreat as Rebound Proves Temporary
Even the best day since 2011 wasn’t enough to reverse fortunes for European stocks, which resumed declines on Wednesday.
Investors have dealt with zigzags this week, as European stocks first slid the most since the financial crisis, before rallying yesterday after China cut interest rates. A late-day announcement that Monsanto Co. abandoned efforts to acquire Syngenta AG sent shares of the Swiss company down 18 percent, the most on the Stoxx Europe 600 Index.
The benchmark gauge for European equities lost 1.8 percent at the close of trading. It rebounded as much as 0.2 percent earlier from a drop of 2.7 percent after a report showed U.S. durable-goods data beat estimates. The optimism proved brief.
We’ll have more volatility until we get more visibility,” said Jacques Porta, a fund manager who helps oversee 500 million euros ($570 million) at Ofi Gestion Privee in Paris. “The Chinese devaluation worried investors and the economic data has struggled. The sharp drop in prices of oil and commodities is concerning.”
This Bloomberg news story was originally posted on their website at 5 minutes after midnight Denver time on their Wednesday morning, but it was updated ten hours later. It’s also courtesy of Patricia C.
Once a source of envy, Germany’s China exports turn into a risk
Germany’s export exposure to China, for years a source of economic strength, is fast turning into a risk that raises questions about the health of other sources of growth in Europe’s largest economy.
Germany has the greatest trade exposure to China of the 28 European Union nations, largely thanks to demand for its cars and the strength of its engineering industry.
For years, its E.U. peers tried – and failed – to match Germany’s export prowess in China, where German companies profited from the infrastructure and consumer spending that have helped make the Chinese economy the world’s second largest.
But now a slowdown in China means corporate Germany’s ventures there risk turning profit streams into cost burdens.
This Reuters piece, filed from Berlin, appeared on their website at 9:55 a.m. EDT Wednesday morning—and I thank Patricia Caulfield once again.
Rebels Blame Turkey After U.S.-Trained ‘Moderates’ Captured Inside Syria
Turkish intelligence orchestrated last month’s capture of a group of Syrian moderate rebels trained by the United States to fight the Islamic State, according to rebel sources who spoke with McClatchy.
On July 29, al Qaeda-affiliated Nusra Front captured many of the 54 graduates of the $500 million U.S. training program as soon as they entered Syria.
Rebels believe the plans were leaked because Turkish officials feared that the US-trained Syrians would one day attack Islamist fighters that Turkey is close to, including Nusra and another major Islamist force, Ahrar al Sham, McClatchy reported.
“Only the Americans and the Turks knew” about the plans for the train-and-equip fighters to enter Syria, said an officer of one rebel group. “We have sources who tell us the Turks warned Nusra that they would be targeted by this group.”
Wow! Talk about a double cross! You couldn’t make this stuff up! This news story appeared on the Russia Today website very late Tuesday evening Moscow time—and was updated five hours later. It’s definitely worth reading if you have the interest. It’s another offering from Patricia Caulfield.
Assad ‘confident’ of Russian support for Syria regime
The Syrian president, Bashar al-Assad, has expressed “strong confidence” that Russia will continue supporting his embattled regime.
“We have strong confidence in the Russians, as they have proven throughout this crisis, for four years, that they are sincere and transparent in their relationship with us,” Assad said in an interview with Hezbollah’s al-Manar television network.
He also described as “legitimate” the presence in Syria of fighters from Hezbollah backing his forces. The powerful Lebanese Shia movement, along with Russia and Iran, has backed Assad since Syria’s revolt broke out in 2011.
The rare television interview came as the Russian president, Vladimir Putin, discussed the Syrian crisis with Jordan’s King Abdullah on the sidelines of the Maks-2015 aerospace show in Moscow.
This story was posted on theguardian.com Internet site at 8:22 a.m. BST on their Wednesday morning, which was 3:22 a.m. in Washington. The stories from Patricia just keep on coming.
Spreading the pain: China’s slowdown
A cut in Chinese interest rates and reserve requirements last night helped stem the slide in its stock markets this morning, after the Shanghai Composite index fell yesterday by 7.6% to its lowest level since December. Markets elsewhere rallied on Monday, as some investors decided that talk of an abrupt Chinese slowdown was overdone, and others concluded that even if it isn’t, the collateral damage will not be disastrous. It is true that if Chinese demand plummets, the pain will not be evenly spread elsewhere. Big commodity exporters, including Australia and Brazil, are likely to suffer most, having prospered selling metals and minerals to the Chinese. Countries like Japan and South Korea, which supply high-tech components to Chinese industry, are also exposed. Conversely, Britain and Germany are much less vulnerable; their exports to China account for only around 5% of what they sell abroad each year. America could be somewhat more exposed, particularly its West Coast.
This brief article was posted on The Economist website yesterday—and the embedded chart is definitely worth your while. I thank Patricia C. for this story as well.
Bill Gross Asks the $64 Trillion Question: Is China Dumping Treasurys?
For months, we’ve been at pains to explain to anyone and everyone listening that China is dumping US paper at a record pace.
As we detailed on Tuesday evening, the new FX regime (i.e. the system in place since the dramatic August 11 yuan devaluation) is costing China dearly in terms of FX reserves.
The reason: the new, more “market-based” regime is ironically requiring more intervention than the previous system and this has led directly to the liquidation of more than $100 billion in USTs in the past two weeks alone (by SocGen’s math), which means that incredibly, Beijing has sold more US paper in the past two weeks than it had previously sold all year!
And as SocGen, and now Zero Hedge readers, are acutely aware, this will only continue, as a stable currency requires either “complete FX flexibility or zero FX flexibility” and because China is stuck somewhere in between, the UST fire sale is set to continue unabated.
Now, the world has awoken, and indeed Bill Gross is out asking the $64 trillion question.
This tiny article appeared on the Zero Hedge website at 3:04 p.m. EDT Wednesday afternoon—and it’s the third offering of the day from Richard Saler, for which I thank him. There was also a Bloomberg story on this headlined “How China Is Keeping Treasuries Cheap Amid Safe-Haven Stampede“—and it appeared on their Internet site at 2:58 p.m. Denver time on Wednesday afternoon. That story is courtesy of Patricia Caulfield.
China is in a serious bind but this is not yet a ‘Lehman’ moment
You need steel nerves to resist the emotional pull of a full-blown financial panic.
The media will by instinct seek out those warning loudest of impending disaster, giving them a platform to make arguments that sound all too plausible, and may indeed be right.
It is a self-reinforcing effect. Pushed far enough, such spasms can bring about the very crisis most feared, almost regardless of economic facts on the ground. These episodes are especially wild in August, when liquidity is thin.
Yet most turn out to be false alarms. Even the 1929 crash itself was essentially a trivial episode. It did not cause the Great Depression.
This puff piece tries to throw oil on troubled waters—and is not really news per se. I get the impression that Ambrose is doing his master’s bidding on this one as well. If you read it, do so with your eyes wide open, along with a great deal of scepticism. It was posted on the telegraph.co.uk Internet site at 11:45 p.m. BST last night, which was 6:45 p.m. EDT in New York. It’s also courtesy of Patricia C.
China can ride out this crisis. But we’re on course for another crash
It may not yet be the moment to get in supplies of tinned food. That was what Gordon Brown’s former adviser during the 2008 crash, Damian McBride, suggested on Monday as stock markets crashed from Shanghai to New York and $1tn was wiped off the value of shares in one day. But seven years after the collapse of Lehman Brothers brought down the global financial system and plunged half the world into a slump, it’s scarcely alarmist to see the financial panic as the harbinger of a new crisis in a still crippled world economy.
The market gyrations that followed “Black Monday” this week and the 40% drop in the value of Chinese stocks since June have only underlined the fragility of what is supposed to be an international recovery. For all the finger-wagging hubris of western commentators over the fact that the latest mayhem has erupted in China, this is a global firestorm. And after three decades of deregulation punctuated by financial crises and a systemic meltdown, there is every reason to fear more fallout from casino capitalism.
Financial markets pumped up with credit and quantitative easing to keep the real economy afloat are in any case ripe for a crash – or “correction”, as the market players like to call it. The only question is how far and fast they go – and how great is the price paid by the rest of us.
This commentary appeared on theguardian.com Internet site at 8:35 p.m. BST yesterday evening, which was 3:35 p.m. in New York—EDT plus 5 hours. It’s the final offering of the day from Patricia Caulfield—and I thank her on your behalf.
Here Comes the Red Cavalry: Goldman Says Back-Up the Trucks, Again! — David Stockman
Whee! This is becoming a weird form of time travel.
Twenty-five trading days ago the S&P 500 was just 0.1% below its all-time high of 2131 recorded on May 21. Since then we have traveled backwards about 415 days!
That’s right. Yesterday’s 1893 close was down 11.2% from the all-time high, and marked the chart point first crossed way back on May 22, 2014.
Do not fret, however. Beijing has called in the Red Cavalry—otherwise known as the PBOC.
In standard central bank fashion, the latter injected (even) moar credit into the Chinese economy via a 25 bps rate cut, reduction of bank reserve requirements by 50 bps and mainlining about $25 billion directly into the banks via reverse repos. Under the latter procedure, the PBOC takes collateral and gives banks cash for a few weeks and then rinses and repeats—over and over, for as long as it takes.
David wrote this on Tuesday before the PPT showed up yesterday. I thank Richard Saler for his final contribution to today’s column.
India’s gold demand to see four-year high in July-December period
Gold demand in India is likely to hit a four-year high between July and December on strong demand from the jewellery sector. The World Gold Council (WGC) has estimated India’s gold demand in 2015 at 900-1,000 tonnes. Demand is likely to be at least 554 tonnes in the second half of 2015 as the first half saw demand for 346.2 tonnes of the metal.
After its recent low of Rs 24,800 per 10 gm, standard gold hit Rs 28,000 but fell back to trade below Rs 27,000. Gold was Rs 28,100 per 10 gm on July 26, 2014, Rs 1,000 higher than Rs 27,030 today.
“Stockists’ demand was high in July as jewellers were preparing for the India International Jewellery Show in the first week of August. But the demand tapered off. With the festive and wedding seasons, we see strong demand for gold in the second half,” said Rajan Venkatesh, managing director, India bullion, ScotiaMocatta.
This gold-related story, filed from Mumbai, put in an appearance on the business-standard.com Internet site yesterday sometime—and I found it on the Sharps Pixley website.
The PHOTOS and the FUNNIES
These two photos are the left-overs from the last couple of weekends. This first is a crow in flight, silhouetted against the sky. It’s not very exciting, but I like the profile. The second photo is the same red-necked grebe you’ve seen before. It’s taken from further away than I would have liked—more than 100 meters—and even with the 400mm lens and a 1.4x converter, plus cropping the hell out of it, this is the best I could do. Even with 90 percent of his body out of the water, you can’t see his legs or feet. To say they would be clumsy on land is an understatement. I’ve only seen them in the water, on the wing, or on their nests.
THE WRAP
Now on to recent developments and the horrid silver price action in which new five year lows are being set today. The first question that comes to mind is why silver prices are dropping? Clearly, it’s not due to massive selling by investors of real silver. That’s not to say that we might not see some liquidation in SLV in reaction to the price drop, but it is to say that should that occur, it was not the cause of silver dropping, but a reaction to the drop. It’s important to know the difference.
By process of elimination and as is always the case, the price is down because of speculative selling on the COMEX. I did grow concerned that there was massive deterioration in gold as a result of its recent penetration of its 50 day moving average to the upside and that weakness in gold could drag silver lower, even though silver’s market structure was much better than gold’s. But this week’s price action goes far beyond any negative vibes I had.
The important point is still that forces apart from actual supply and demand are driving the price of silver and other commodities. I know that gets old for silver investors to hear and for me to say, but it doesn’t make it any less true. Also true is that even the artificial price force of COMEX positioning has its own sick sort of supply and demand factors in that the price will go lower only as long as managed money and other speculative selling continues. When the maximum amount of managed money selling is achieved, prices stop falling and reverse, although the rally reversals have been particularly disappointing to date. Yes, the managed money traders appear to be sitting pretty and accumulate impressive open profits along the way, but it still remains rare for them to convert open profits into realized profits. — Silver analyst Ted Butler: 26 August 2015
Despite the horrid price action in gold and silver yesterday, we probably haven’t seen the end of it, particularly in gold. Silver, at its new low price tick going back to mid-2009, looks sold out to the extreme—and as Ted mentioned in the quote above, if we go lower, it’s because JPMorgan et al have been engineer/spoofed more Managed Money traders into pitching what remaining longs they have, or go even shorter than they are now. That act, and only that act, is what makes prices go lower in any of the Big 6 commodities.
Ted is of the opinion that “da boyz” will use a further engineered price decline in gold to beat silver down even more, but there’s only so much blood in the silver ‘stone’ so to speak—and we have to be close right now.
It’s unfortunate that Wednesday’s price action occurred one day after the cut-off for tomorrow’s Commitment of Traders Report. But as I’ve mentioned on numerous occasions, the powers-that-be can keep what they’re doing hidden for longer if they start on a Wednesday, because it’s ten days until next Friday’s COT Report, and that’s the report that yesterday’s data will be in. Whatever they did yesterday will be long-since buried by the data from the next four trading days.
Here are the 6-month charts for the ‘Big 6′ commodities—and both silver and palladium set new record lows. Note that the 50-day moving average in gold was taken out with authority, with more to go. It’s ugly.
And as I write this paragraph, the London open is less than ten minutes away. The gold price rallied a few dollar in early Far East trading—and has traded virtually ruler flat since 11 a.m. Hong Kong time on their Thursday morning. Silver has been crawling higher—and is currently up a dime. Platinum rallied 15 bucks in early trading in the Far East, but got capped shortly before 10 a.m. Hong Kong time—and has given back 5 dollars of that gain. Palladium also rallied a bit in morning trading in Far East, but has been sold down starting around 11 a.m. Hong Kong time—and is currently up 4 bucks.
HFT gold volume is right on the 17,000 contract mark, which is on the lighter side comparatively speaking. Silver volume for September is 7,450 contracts—and 7,000 of those contracts are roll-overs into future months, mostly December. And as London opens, the dollar index is down 15 basis points.
Except for the large traders that are standing for delivery, the rest have to roll or sell their September future contracts by the 1:30 p.m. Comex close this afternoon. The remaining traders have to be out by the same time tomorrow.
Well, the 50-day moving average in gold fell as expected—but I was somewhat surprised that they didn’t take a bigger slice out of the golden salami than they did, as I was expecting a $40 or $50 hit when they did take it out. Maybe that’s in the cards today or tomorrow, or maybe early next week. But I will be the most surprised person in the world [with the exception of Ted, maybe] if JPMorgan et al don’t press their advantage further at this point. I was expecting some down-side price action in Far East trading this morning, but it never materialized. Maybe it will start in morning trading in London like it did yesterday.
And I have to agree with Ted when said in the above quote that the down-side price action in silver was far beyond any “negative vibes” he had. I was shocked, as were a lot of people.
It’s just too bad the miners will never do anything about it, even though they all know full well what’s happenign to them and why. But the organizations that some of them belong to—such as the World Gold Council and The Silver Institute are there to ensure that embarrassing questions never get asked of either JPMorgan et al or the CME Group. As a matter of fact, the CME Group is a member of The Silver Institute. In case you haven’t figured it out yet, the mining companies don’t give a damn about us, their shareholders—and they get get their respective boards of directors to reprice their stock options whenever they wish.
How did it come to this.
I’m off to bed early—and as I put today’s column up on the website at 3:55 a.m. EDT, I note that with the exception of gold, all the precious metals are up a bit more since I wrote about them an hour ago. HFT gold volume is now just north of 21,000 contracts—and September volume in silver is up to 9,250 contracts, with about 8,500 of that amount being roll-over into future months. The dollar index is down only 3 basis points. I also note that oil is up $1.32 per barrel at the moment.
Nothing will surprise me as the Thursday session unfolds—and I’ll be prepared for anything when I check the charts later this morning when I roll out of bed.
See you tomorrow.
Ed
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