08 September 2015 — Tuesday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
With North America closed for Labour Day yesterday, there isn’t must to talk about—and the only reason I have a column today is to deal with the stories of interest that popped up over the long weekend.
Gold silver and platinum chopped around a bit in Far East trading on their Monday, but starting around 2 p.m. Hong Kong time began to develop their usual negative bias—and they set their respective low ticks around the London p.m. fix. After that they didn’t do much—and the markets closed at 1 p.m. New York time.
All three, or course, finished lower on the day, but not by material amounts—and it’s on day’s like this that if there is interference in the markets, it doesn’t take much effort by anyone with an agenda and ultra-deep pockets to move the price any which way they chose. And as you’ve probably already figured out by now, “da boyz” pretty much always choose down.
Palladium was the only metal that closed in the black—up 7 bucks—as it traded in a ten dollar price range in what can only be described price/volume-wise as an ultra-thin illiquid market.
Net gold volume was around 38,000 contracts—and net silver volume was 8,200 contracts.
Note in the gold chart directly below, the price ‘action’ on the job numbers at 8:30 a.m. EDT on Friday, as the blue trace really stands out now that the scale of the chart is different.
The dollar index closed late on Friday afternoon in New York at 96.25—and then chopped around in a wide 30 basis point range, with the 96.40 high coming just before 2:30 p.m. Hong Kong time on their Monday afternoon. The 96.06 low came at, or shortly after the London p.m. gold fix. It rallied a bit from there, but then settled down around the 96.15 mark in late afternoon trading in London. It did nothing from there, closing the Monday trading session at 96.13—down 12 basis points. But with New York closed, nothing should be read into Monday’s moves.
With North American buttoned up tight, there was no HUI, Silver 7, or any reports from the CME, the U.S. Mint, or the COMEX-approved depositories.
But I do have a couple of charts that Nick Laird sent around last evening. They show the gold and silver coin sales from The Perth Mint for about the last four years—and I thought you’d find them of interest.
Although I took an axe to the list of stories, I still have quite a few—and I hope you’ll find a couple that interest you.
CRITICAL READS
Chart of the Day: U.S. Home Ownership Rate Plunges to 1967 Level
All there is to this ‘story’ from the David Stockman website is one chart. It’s semi-legible—and for whatever reason, there’s no ‘click to enlarge’ feature. But in this case, it’s not necessary, as the shape of the chart tells you all need to know—and it’s worth a quick look. I thank Roy Stephens for this one.
Pine Street studio with tiniest kitchen ever lists for $395K
With all this talk of mortgage-high rents, some of you may have asked yourselves “Isn’t it better to just buy a place if I’m paying that much every month to live in it?” A logical sentiment, to be sure — until you see that the median home price in San Francisco is now $1.15M. But wait: you can buy for less than that. A lot less. It just may also be a lot less space, functionality and… kitchen than you wanted.
Witness 725 Pine St., #304, with a price tag of $395K. The square footage has been left off the official listing, but a tour through the gallery shows it’s tiny. Cute though, and centrally located. Per its website, the unit is in “The Lambourne Nob Hill, located just across from the Ritz Carlton” and features “a cozy bedroom area, deluxe bathroom with marble Carrera accents and fixtures from Danze-Parma Collection. Custom kitchen by Scavolini with micro-wave/convection oven, hardwood floors, and common storage, in-unit washer/dryer combo.” The HOA is $463 a month but does not include parking, though that can be leased “in the neighborhood.” There’s also an elevator, which is always a joy when moving into a 3rd-floor apartment.
But if you like to cook anything more complicated than microwave popcorn, this studio is not the answer to your home-ownership dreams. As Curbed SF puts it, “the kitchenette turns out to be squished into a far corner, and it’s even smaller than those in some of the city’s most depressing rentals. It is literally the width of a microwave [which double as convection oven] with a mini-fridge on the bottom.”
Given the age of the building and downtown location, this unit was clearly once just a room in a boarding house, later converted to something one could own and live in independently by cramming a kitchenette in what was likely a closet. Still, it wouldn’t be a terrible investment. A few blocks down on Pine, a studio is renting for $1,875 a month. If you could put enough down, that would be a nice return on your money. Or, as long as no one needs a home-cooked dinner, you could call it home.
Phone #9 of the photo stream shows you the “kitchen” in question, dear reader. The barbeque on my patio is about three times that size. This interesting real estate-related story was posted on the blog.sfgate.com Internet site last Thursday—and I thank Vince Koloski for sharing it with us.
The Alberta Oil-Sands Glut Is About to Get a Lot Bigger
The last place oil producers want to be when prices plummet to profit-demolishing lows is midstream on a billion-dollar project in one of the costliest parts of the planet to extract crude.
Yet that’s exactly where half a dozen oil sands operators from Suncor Energy Inc. to Brion Energy Corp. find themselves with prices for Canadian [heavy] oil now hovering around $30 a barrel. While all around them projects have been postponed or canceled, their investments were judged too far along when the oil game suddenly moved from offense to defense.
These projects will add at least another 500,000 barrels a day — roughly a 25 percent increase from Alberta — to an oversupplied North American market by 2017. For companies stuck spending billions in a downturn, the time required to earn back their investments will lengthen considerably, said Rafi Tahmazian, senior portfolio manager at Canoe Financial LP.
“But the implications of slowing down a project are worse,” said Tahmazian, who helps oversee about C$1 billion ($758 million) in energy funds at the Calgary investment firm.
This heavy oil-related story put in an appearance on the Bloomberg Internet site last Thursday—and I thank Brad Robertson for sending it our way.
What’s Coming Unglued Now in Canada?
Canada lumbered through the first half of 2015 in a “technical recession,” Statistics Canada confirmed this week, as GDP shrank in both quarters. Among the culprits: the swooning energy sector and an investment slump.
Now everybody is lining up behind the hope that a sudden acceleration will put the economy back on track in the third quarter, despite oil that has re-crashed and despite the ongoing collapse – and that’s what it is – of the all-important energy sector.
To get to this acceleration, the once booming residential and commercial construction sectors have to hold up, or else Canada’s economy is in real trouble. Alas….
“Canada is also in the midst of an ill-timed supply surge that caused vacancy rates to rise even in markets with positive absorption” in the second quarter, warns a new report by commercial real estate firm Colliers International cited by the Financial Post. It paints a picture of an epic office boom turned into an even more epic office glut, particularly in Calgary and Edmonton, Alberta, the epicenter of Canada’s oil patch.
This office glut comes on top of Calgary’s housing meltdown. For the first eight months, total home sales in Calgary plunged 25%, according to the Calgary Real Estate Board. Condo sales collapsed 39% in August and 30% year-to-date. Inventory sits a lot longer on the market before it sells, if it sells. And pressures are building on prices: the average condo price was down over 10% in August from a year ago.
Well, dear reader, the current situation in Alberta [where I live] reminds of 1981—which was my second year in residential real estate sales. I remember a welding truck I pulled up beside at a traffic light. It had two bumper stickers on the side. The first one read “Please Lord, let there be another oil boom, I promise not to piss it all away this time“—and the second read, “Please don’t tell my Mom I work in the oil patch. She still thinks I play honky-tonk piano in a whore house.” This is the second contribution in a row from Brad Robertson—and it was posted on the wolfstreet.com Internet site last Friday.
David Cameron faces scrutiny over drone strikes against Britons in Syria
David Cameron is facing questions over Britain’s decision to follow the U.S. model of drone strikes after the prime minister confirmed that the government had authorised an unprecedented aerial strike in Syria that killed two Britons fighting alongside Islamic State (Isis).
Speaking to the Commons on its first day back after the summer break, Cameron justified the strikes on the grounds that Reyaad Khan, a 21-year-old from Cardiff, who had featured in a prominent Isis recruiting video last year, represented a “clear and present danger”.
Two other Isis fighters were killed in the attack on the Syrian city of Raqqa on 21 August, the first time that a U.K. prime minister has authorised the targeting of a U.K. citizen by an unmanned aerial drone outside a formal conflict. One of them, Ruhul Amin, 26, was also British. A third Briton, Junaid Hussain, 21, was killed by a separate U.S. airstrike three days later as part of a joint operation.
This story appeared on theguardian.com Internet site at 9:50 p.m. BST yesterday evening, which was 4:50 p.m. in Washington—EDT plus 5 hours. It’s the first offering of the day from Patricia Caulfield.
Father of the euro fears E.U. superstate by the back door
The euro’s founding father has warned that Europe’s latest plan for an EMU-wide finance ministry is a dangerous attempt to smuggle through political union, and breaches the basic tenets of modern democracy.
Professor Otmar Issing, the chief architect of monetary union through its early years, said it would be “dangerous” to transfer control over tax and spending to the E.U. federal level before full political union has been established first on democratic foundations.
Such a quantum leap in the constitutional structure of Europe – effectively the creation of an E.U. superstate, with a parliament comparable in power to the U.S. Congress – is unthinkable in the current political atmosphere.
It would require referenda across Europe, and a two-thirds majority in both houses of the German parliament. “The chances of political union are close to zero,” he said, speaking at the Ambrosetti forum of world policymakers on Lake Como.
This commentary by Ambrose Evans-Pritchard showed up on the telegraph.co.uk Internet site at 9 p.m. BST on Sunday evening—and it’s the second story in a row from Patricia Caulfield.
Europe’s Biggest Bank Dares to Ask: Is the Fed Preparing For a “Controlled Demolition” of the Market
Why did we focus so much attention yesterday on a post in which the IMF confirmed what we had said since last October, namely that the BOJ’s days of ravenous debt monetization are coming to a tapering end as soon as 2017 (as willing sellers simply run out of product)? Simple: because in the global fiat regime, asset prices are nothing more than an indication of central bank generosity. Or, as Deutsche Bank puts it: “Ultimately in a fiat money system asset prices reflect “outside” i.e. central bank money and the extent to which it multiplied through the banking system.”
The problem is that the BOJ and the ECB are the only two remaining central banks in a world in which Reverse QE aka “Quantitative Tightening” in China, and the Fed’s tightening in the form of an upcoming rate hike (unless the Fed loses all credibility and reverts its pro-rate hike bias), are now actively involved in reducing global liquidity. It is only a matter of time before the market starts pricing in that the Bank of Japan’s open-ended QE has begun its tapering (followed by a QE-ending) countdown, which will lead to devastating risk-asset consequences. The ECB, which is also greatly supply constrained as Ewald Nowotny admitted yesterday, will follow closely behind.
But while we expanded on the Japanese problem to come in detail yesterday, here are some key observations on what is going on in both the US and China as of this moment – the two places which all now admit are the culprit for the recent equity sell-off, and which the market has finally realized are actively soaking up global liquidity.
Here the problem, as we initially discussed last November in “How The Petrodollar Quietly Died, and Nobody Noticed“, is that as a result of the soaring U.S. dollar and collapse in oil prices, Petrodollar recycling has crashed, leading to an outright liquidation of FX reserves, read U.S. Treasurys by emerging market nations. This was reinforced on August 11th when China joined the global liquidation push as a result of its devaluation announcement, a topic which we also covered far ahead of everyone else with our May report “Revealing The Identity of the Mystery “Belgian” Buyer of U.S. Treasurys“, exposing Chinese dumping of U.S. Treasurys via Belgium.
This long, interesting, but somewhat convoluted Zero Hedge piece showed up on their website at 2:25 p.m. EDT on Sunday afternoon—and it’s another contribution from Brad Robertson.
Farmers protest in Brussels to push for E.U. emergency measures
Police fired water cannon and blocked roads to stop nearly 5,000 farmers, with more than 1,000 tractors, marching on European Union buildings in Brussels to demand support for a sector badly hit by a Russian ban on E.U. food imports.
The protest, timed to coincide with an emergency meeting of E.U. agriculture ministers, caused gridlock in the center of the Belgian capital amid the smell of burning rubber and smoke from tyres and hay set on fire. Police fired water cannon to prevent farmers breaking through barricades.
Russia has banned imports of meat, dairy products and fruits and vegetables from the European Union, the United States, Norway, Canada and Australia since August 2014 in response to their sanctions imposed on Moscow over the Ukraine crisis.
The ban closed access to the E.U.’s main agricultural export market worth some €5.5 billion (US$6.1 billion) per year.
This Reuters article, filed from Brussels at 8:40 a.m. EDT yesterday morning is courtesy of reader “Tesla 3D”. He also included a BBC article on this with an embedded video clip and more photos. It’s headlined “Europe to give struggling farmers €500m in aid“.
Lesbos ‘on verge of explosion’ as refugees crowd Greek island
Lesbos is on the verge of ‘explosion, the Greek immigration ministry has said, as the island struggles to cope with the influx of thousands of refugees, mostly from Syria.
Yiannis Mouzalas told To Vima radio that boats taking refugees to the Greek mainland – the start point of a land route to Germany through Macedonia, Serbia and Hungary – would soon be using a second port to ease pressure on the island of 85,000 inhabitants.
“Mytilene [the capital of Lesbos] currently has 15,000 to 17,000 refugees and this is the official figure from all services,” Mouzalas, a junior interior minister, said. “We are placing emphasis here because the situation is on the verge of explosion.”
Greek television on Monday night reported scenes of chaos with as many as 6,000 refugees crowding the island’s port to board the Eleftherios Venizelos, a cruiseliner pressed into action to transport newcomers to the mainland. The surge was such that the ferry was forced to raise its gangplanks after it had docked.
This news item turned up on The Guardian‘s website at 6:08 p.m. London time yesterday evening—and I thank Patricia Caulfield once again for sharing it with us.
U.S. asks Greece to deny Russian flights to Syria
The United States has asked Greece to deny Russia the use of its airspace for supply flights to Syria, a Greek official said on Monday, after Washington told Moscow it was deeply concerned by reports of a Russian military build up in Syria.
The Greek foreign ministry said the request was being examined. Russian news wire RIA Novosti earlier said Greece had refused the U.S. request, adding that Russia was seeking permission to run the flights up to Sept. 24.
Kremlin spokesman Dmitry Peskov said Moscow would not give any official reaction until there was a decision from Athens.
Russia, which has a naval maintenance facility in the Syrian port of Tartous, has sent regular flights to Latakia, which it has also used to bring home Russian nationals who want to leave.
This Reuters story, co-filed from Athens, Beirut and Moscow, appeared on their Internet site at 2:19 p.m. EDT yesterday afternoon—and I thank Patricia C. for sending it our way.
Russia not a hedge fund, Ukraine should pay debt in full – Finance Minister
Russia will not enter into negotiations on restructuring Ukrainian debt, said Finance Minister Anton Siluanov, and Kiev must repay the $3 billion it owes Moscow in full by the December deadline.
“The $3 billion that we invested should be returned to Russia at the end of the year. We want to invest the funds in infrastructure and other projects, important to Russia. We need the money, especially in the present circumstances…Therefore we demand from our colleagues to return the full amount of the debt in accordance with the schedule,” said the minister on Monday.
Russia is responding to a statement Ukraine’s President Poroshenko made on Sunday that Moscow should not be in a more privileged position than other lenders, and more compliant in negotiations.
This news item appeared on the Russia Today website at 3 p.m. Moscow time on their Monday afternoon, which was 7 a.m. in Washington—EDT plus 7 hours. I found it when I was looking for another story.
Turkish jets strike PKK targets after deadly militant attack
Turkish warplanes bombed Kurdish insurgent targets overnight after the militants staged what appeared to be their deadliest attack since the collapse of a two-year-old ceasefire in July and killed 16 government soldiers.
The military said its aircraft bombed 23 targets in a mountainous area near the Iraqi frontier on Monday. Another six soldiers had been wounded, but none were in critical condition.
The clashes, weeks before polls the ruling AK Party hopes will restore its majority, threaten to sink a peace process President Tayyip Erdogan launched in 2012 in an attempt to end an insurgency that has killed more than 40,000 people.
Kurdistan Workers Party (PKK) rebels said they had killed 31 servicemen in an attack on a convoy and clashes on Sunday in the mountainous Daglica area of Hakkari province, near the Iraqi border. The army statement said 16 had died, making this the highest military death toll in a single attack for years.
This is another Reuters story from Patricia. Filed from Diyarbakir, Turkey, it was posted on their website at 12:36 p.m. EDT on Monday.
Islamic State takes Syrian state’s last oilfield: monitor
Islamic State fighters have seized the last major oilfield under Syrian government control during battles over a vast central desert zone, a group monitoring the conflict said on Monday.
The Jazal field was now shut down and clashes were ongoing east of Homs, with casualties reported on both sides, the Britain-based Syrian Observatory for Human Rights said, without giving dates or more details.
Syria’s army said it had repulsed an attack in the same area but did not mention Jazal or comment on how much of the country’s battered energy infrastructure remained under its sway. It said it killed 25 fighters, including non-Syrian jihadists.
“The regime has lost the last oilfield in Syria,” said the Observatory, which tracks violence through a network of sources on the ground.
This is yet another Reuters article, this one was filed from Amman—and posted on their Internet site at 7:43 a.m. Monday morning EDT. I thank Patricia for sharing it with us.
Russia flirts with Saudi Arabia as OPEC pain deepens
The OPEC oil cartel cannot withstand the pain of low crude prices indefinitely and may be forced to abandon its pugnacious bid for market share within months, Russia’s chief energy official has predicted.
Arkady Dvorkovich, the deputy prime minister, said OPEC producers are suffering the ricochet effects of their attempt to flush out rivals by flooding the world with excess output.
“I don’t think they really want to live with low oil prices for a long time. At some point it is likely that are going to have to change policy. They can last a few months, to a couple of years,” he told The Telegraph.
Saudi Arabia took a fateful decision last November to crank up production to record levels despite a glut of 1-2m barrels a day (b\d) accumulating in global markets, hoping to halt the advance of U.S. shale and kill off high-cost projects in the Arctic and deep off-shore waters.
This story has been in the public domain for a bit already, but Ambrose Evans-Pritchard has finally gotten around to put his spin on it. His commentary showed up on The Telegraph‘s website at 3:15 p.m. BST on Sunday afternoon—and the first place I found this story was on the gata.org Internet site.
Saudi central banker sees no threat to currency’s dollar peg
Central bank Governor Fahad Al-Mubarak said Saudi Arabia will stick with its currency peg as long as oil underpins the economy, dismissing speculation that the country’s currency system is coming under pressure.
Investors have increased bets that Saudi Arabia and others in the region will be next to drop their pegs after China devalued the yuan and Kazakhstan allowed its currency to float. One-year forward contracts for the Saudi riyal, an indicator of where investors expect it to trade, are near the highest since 2003.
“Looking at our economy now, in the near future and for many years to come, oil will be dominant in our economy so keeping the peg will be our policy,” Al-Mubarak said in a Bloomberg Television interview in Ankara, where he attended the G-20 meeting of global finance chiefs. “Stability is very important to the Saudi government, to Saudi investors and international investors.”
The peg of 3.75 riyals to the dollar has “served our economy well” for more than three decades and recent volatility in the forwards market reflected speculation, he said. “Definitely we’re solid and confident that this is a good policy for our exchange rate,” Al-Mubarak said.
I’d guess that this decision was made under some sort of duress, as it would not look good for the House of Saud to cut their currency loose just after China devalued the yuan. Doing there U.S. master’s bidding would be my guess. This Bloomberg article from early Sunday morning Denver time, was something I found in another GATA release.
The Numbers Are In: China Dumps a Record $94 Billion In U.S. Treasurys In One Month
Shortly after the PBoC’s move to devalue the yuan, we noted with some alarm that it looked as though China may have drawn down its reserves by more than $100 billion in the space of just two weeks. That, we went on the point out, would represent a stunning increase over the previous pace of the country’s reserve draw down, which we began documenting months ahead of the devaluation. We went on to estimate, based on the projected size of the RMB carry trade unwind, how large the FX reserve liquidation might need to be to offset capital outflows and finally, late last week, we suggested that China’s official FX reserve data was set to become the new risk-on/off trigger for nervous, erratic markets. In short, the pace at which Beijing is burning through its USD assets in defense of the yuan has serious implications not only for investors’ collective perception of market stability, but for yields on core paper, for global liquidity, and for U.S. monetary policy.
On Monday we got the official data from China and sure enough, we find out that the PBoC liquidated around $94 billion in reserves during the month of August to $3.557 trillion (the lowest since September 2013)…… and as Goldman argues (see below), the “real” figure might have been closer to $115 billion. Whatever the case, it’s a staggering burn rate and needless to say, were the PBoC to continue to liquidate its assets at this pace, it would necessitate a raft of RRR cuts and hundreds of billions in short-term liquidity ops to ensure that money markets don’t seize up in the face of the liquidity drain.
This must read Zero Hedge commentary put in an appearance on their Internet site at 8:10 p.m. yesterday evening EDT—and I thank Richard Saler for bringing it to our attention. There was a Reuters story about this from yesterday afternoon EDT, but it’s not anywhere near in-depth as the ZH piece. It’s headlined “China forex reserves in record fall as Beijing tries to calm markets“—and I thank Patricia Caulfield for her last contribution to today’s column.
China’s new oil contract signals shift from Brent and U.S. dollar
Brent crude has been the global benchmark against which most oil is measured ever since the field from which it draws its name was discovered in the 1970s. …
However, its role as the preferred global benchmark is soon to be challenged by a new contract that is expected to be offered to the market next month. China is thought to be plotting the downfall of Brent and its U.S. cousin, West Texas Intermediate (WTI), as the world’s second largest economy seeks to gain more control over the pricing of its main source of energy. The Chinese are expected to launch their own global crude contract as early as next month. Unlike Brent and WTI, the new contract will be priced in China’s yuan instead of U.S. dollars.
The contract is to be traded on the Shanghai International Energy Exchange to compete with the existing global benchmarks, and traders are already talking about the new benchmark potentially superseding these more established crude futures contracts.
This oil-related news item appeared on the telegraph.co.uk Internet site at 9:05 a.m. BST yesterday morning, which was 4:05 a.m. in New York. GATA‘s Chris Powell beat Roy Stephens on this story by about two hours because of the time difference.
China SGE August gold deliveries phenomenal — Lawrie Williams
August is always a weak month for physical gold moving through China’s Shanghai Gold Exchange – or rather it has been up until now. The big months for SGE withdrawals are normally at the beginning and the end of the year ahead of The Chinese New Year holidays, while trading in the summer months is usually thin.
But not this year! Gold moving through the Exchange this August has totalled a phenomenal 301.96 tonnes bringing the year to date total to 1,718.2 tonnes, some 219 tonnes more at the same time of year than in 2013 when China consumed a record amount of gold by even according to the consistently much lower consumption estimates by the major precious metals analytical consultancies.
This all flies in the face of media reports and estimates from the major gold analysts who all tell us that Chinese consumption, by their estimates, has been significantly lower so far this year than last year, let alone compared with the record 2013 year’s figures.
The question thus is where on earth is the physical gold moving through the SGE coming from – or going? The Chinese themselves tend to obfuscate on what really represents domestic demand. One official element from the Peoples Bank of China/SGE tells us that SGE withdrawals represent the true demand position while the China Gold Association tends to quote the considerably lower World Gold Council figures, which in the past have been produced first by precious metals consultancy GFMS, and most recently by Metals Focus. The differences between these latter figures and SGE deliveries seems to be ever increasing. China gold specialist, Koos Jansen, sets this all out in considerable detail in an article published earlier this year: The Mechanics Of The Chinese Domestic Gold Market. This addresses the demand metrics used by GFMS, and demand as represented by the SGE withdrawal figures, which differ enormously.
I posted the chart on this in my Saturday column, but this must read commentary by Lawrie is something I found on the sharpspixley.com Internet site on Sunday.
Gold Price Slips as China Adds Another 16 Tonnes of Bullion, FX Reserves Plunge
Gold prices slipped in quiet trade in London on Monday, retreating near the lowest levels since mid-August at $1119 per ounce as European stock markets held flat, ignoring another sharp drop in Asian equities.
New data overnight showed China’s People Bank growing its gold bullion reserves again in August, extending the growth since end-June’s restatement to 2.1%, even as broader reserves fell more than 10%.
“This week’s trade and inflation data out of China,” says Japanese conglomerate Mitsubishi’s analyst Jonathan Butler, “will give a gauge on the scale of the country’s economic slowdown.
“Any downside surprises have the potential to ignite safe haven bids in gold through a further equity market washout [or] fear of contagion into other economies.”
This commentary by Adrian Ash was posted on the bullionvault.com Internet site at 3:05 p.m. London time on Monday afternoon—and it’s another item I found on the Sharps Pixley website.
Moving the goalposts…the LBMA’s shifting stance on gold refinery production statistics — Ronan Manly
According to the LBMA, the ‘Physical Committee is made up of industry experts from the physical bullion market“, therefore this physical committee is well aware of the 6,601 tonnes of gold refinery production figure in 2013, not least because it’s printed in the committee’s news section in the latest edition of the Alchemist.
The explosion in gold refining activity in 2013, and the huge throughput of Good Delivery bars being transformed into smaller higher fineness bars for the Asian gold market was without doubt one of the biggest stories in the gold world during 2013. I had cited the 6,601 tonnes figure to help support a calculation about Valcambi refining capacity, and my reference wasn’t really central to the main topic of my Valcambi article. But it was a topic that I was planning to re-visit, and I tweeted about it on 4th June when I first read the LBMA report that contained the 6,601 tonnes data.
All of the above seems logical and easy to understand. It was therefore surprising to notice that on Wednesday 5th August 2015, three business days after my Valcambi articles was published, the LBMA substantially amended the gold refinery figures in the file ‘LBMA Brochure Final 20150501.pdf‘, and dramatically lowered the 2013 refined gold production figure from 6,601 tonnes to 4,600 tonnes, while substantially altering the wording and meaning of the paragraph commenting on the refined tonnage. The document content was amended and re-saved with the same file name LBMA Brochure Final 20150501.pdf‘, and left in the same web directory. So anyone viewing the LBMA document for the first time would not know that the gold refining figures in the report had been altered and substantially reduced. The file directory in question is here, and contains the altered report.
Well, dear reader, as I pointed out to Ronan yesterday, not only are the gold figures for 2013 reduced by 2,000 tonnes, every other year going back to 2008 has been changed as well—and those refinery figures were changed in both gold and silver. And not a word of explanation from the organization about these changes! So WTF is this all about? As you are aware, the LBMA, which Ted Butler says has only been around since about 1987, is a totally opaque organization—and they only release the data they want the public to see—and with no supporting documentation. If you think they had credibility and believability issues before—with changes like these, it’s obvious that any data they publish going forward will viewed with deepest suspicion—and that obviously now goes for anything they said in the past as well. But the lunatic fringe has been quoting these LBMA numbers like their gospel, along with the GOFO rates—and it will be interesting to see them ‘spin’ this sow’s ear into a silk purse. They’ll probably just ignore it.
Time for this organization to come clean, or disband. It’s longish, but worth reading. This commentary appeared on the bullionstar.com Internet site on Sunday sometime—and I thank Nick Laird for passing it around.
How many Good Delivery gold bars are in all the London Vaults—including the Bank of England vaults: Ronan Manly
Each year in June, the Bank of England publishes its annual report which quotes financial data up to the end of February (its financial year-end). The Bank’s annual report also states the amount of gold, valued at a market price in Pounds sterling, that it holds under custody for its customers, which comprise central banks, international financial institutions, and LBMA member banks.
In 2014, the Bank of England stated that, as at 28th February 2014, it held gold assets in custody worth £140 billion for its gold account customers, while in 2013, the corresponding figure was £210 billion. In June 2014, Koos Jansen of Bullionstar calculated that the Bank of England therefore held 5,485 tonnes of customer gold at the end of February 2014, and 6,240 tonnes of customer gold at the end of February 2013. This meant that between the two year end dates, end of February 2013 to end of February 2014, the amount of gold in custody at the Bank of England fell by 755 tonnes.
In his personal blog in June 2014, Bron Suchecki of the Perth Mint, also discussed the 2013 and 2014 Bank of England gold custody tonnage numbers, and derived the same 755 tonne drop between February 2013 and February 2014, and he also went back all the way to 2005 and calculated yearly figures for each February year-end from 2005 to 2014.
After my comments on the previous LBMA story, this longish commentary by Ronan should be read for entertainment purposes only. It showed up on the bullionstar.com Internet site yesterday—and I thank Ronan for sending it along.
Judy Shelton: How a gold-backed bond could open an avenue to monetary reform
Today’s global economy is so utterly dependent on the latest move by a major central bank, or even the latest utterance of any semi-important monetary official, that it seems scarcely able to function without gleaning hints about the next big monetary policy decision. But why has a global obsession with “monetary policy” become more important than money itself? How can we reconnect money to its more fundamental purpose of providing a tool of measurement for real economic performance? …
Pity those who actually produce real goods, though. Mere manufacturers can’t operate with the nimbleness of savvy financiers. If only money worked for them as a meaningful unit of account and a reliable store of value. …
Why not allow the private sector to decide what fiat money issued by central banks is worth in terms of a universally-acknowledged surrogate for real money? Gold serves as a common denominator for value across borders and through time; it has historically represented a true measure of monetary value. If the U.S. Treasury were to issue a bond that could be redeemed at maturity in either dollars or gold — at the option of the bondholder — it would send an important signal that America recognizes the need to reverse the trend toward financialization of the economy in favor of encouraging genuinely productive output. …
More significantly, it would establish a vital beachhead toward building a stable monetary foundation to support international trade based on a level playing field. Trading partners could emulate Americas example by moving away from currency manipulation in favor of gold-convertible money.
This commentary showed up on The New York Sun‘s website on Saturday—and I found it embedded in a GATA release.
Silver heist mystery continues after empty shipping container found
A shipping container stolen from Montreal’s port this week may have been found in Repentigny, Que. — but the $10 million in silver inside of it at the time of the heist is nowhere to be found.
The Maersk container lifted from the port was found on Saturday afternoon on St-Paul Street in Repentigny, a small city just off the northeast tip of the island of Montreal.
It appears to have been detached from the semi-trailer — also stolen — that was carrying it, and left on the side of a residential street.
The brazen heist began on Wednesday, when one or more individuals stole a semi-trailer from Montreal’s west end, drove it to the Port of Montreal, loaded a shipping container carrying 16 tonnes of silver onto it and then took off.
Police are still looking for the truck, a white 1997 Freightliner with the licence plate L548854.
Well, dear reader, the truck may or may not be parked in Jamie Dimon’s driveway, but I’m sure the 500,000+ ounces will show up in JPMorgan’s depository soon enough—- ;-))) This story appeared on the cbc.ca website on Saturday—and if you’d read the above, you’ve read the whole news item. I thank Tolling Jennings for digging it up for us.
Platinum supply deficit shrinks
Speaking on the current platinum price, Wilson said he hoped the report would go a long way to countering the impact that day traders were having on it, as current price movements are not based on fundamentals.
“Our view is that traders are trading the metal without a fundamental view of it. Many of them a have short positions on the metal and take whatever opportunity they can to say negative things about the market. What we’re trying to do is give a more balanced picture…The current situation won’t continue for very long because a large percentage of the mines in South Africa are making losses at the current price level.”
He added that, while the past quarter has seen an improvement in mine supply due to improved efficiency in various South African operations, the medium term picture looked less promising. Citing a recent report, he said the collapse of capital investment, from over $3 billion per annum in 2008 to under $1 billion per annum in 2015, would have a negative impact on South Africa’s platinum supply.
Once again, dear reader, all roads lead to the COMEX via the CME Group. But at least the platinum industry appears to now understand why the prices are so low, something that Glasenberg over at Glencore has already pointed out regarding copper. I mentioned this forcefully in Saturday’s column when I discussed the Bank Participation Report, where ‘3 or less’ U.S. banks were short 9,142 COMEX platinum contracts—and didn’t hold any long contracts at all.
This story was posted on the mineweb.com Internet site at 3:30 a.m. BST this morning—and it’s worth reading.
The PHOTOS and the FUNNIES
I was in British Columbia for four days, but didn’t have the time to do much wildlife photography. However I did catch this rather large bull elk running down the ditch just outside Jasper, going in the opposite direction to which I was driving. I, like the rest of the tourists, stopped in the middle of the highway—and I took this shot leaning out the window from the driver’s seat. This was all I could get in the frame, as the rest of him was below the level of the road. This fellow is about as big as they get—and with his new antlers, he’s all ready for the rut. Don’t forget the ‘click to enlarge‘ feature to view it full screen.
The WRAP
The single most insightful clue into the genuine condition of the wholesale silver market continues to be the turnover or physical movement of metal brought into or taken out from the COMEX-approved silver warehouses. This week, turnover surged to nearly 6.3 million oz, as total inventories declined by a steep 3.3 million oz to 167.9 million oz. While not low by longer term historical levels, this is the lowest the total COMEX silver stocks have been in a year and a half and is sure to draw attention should the decline continue.
I’m scratching my head a bit as to why COMEX silver inventories have declined by more than 15.5 million oz over the past two months, as I don’t believe there are fewer 1,000 oz bars in existence; it’s just that there are fewer in the COMEX inventories. In fact, I would contend that COMEX inventories should be growing over time, seeing that there is no strong evidence of an actual silver deficit, as existed prior to 2006 when we had less silver in world inventories as we did each year for 65 consecutive years. The best explanation I can offer is that the metal was more urgently needed elsewhere and that’s why it was taken from the COMEX warehouses.
I still believe the main story is the grinding physical movement or churn of silver into and out from these warehouses. Even this week, on a notable reduction of 3.3 million oz, turnover was almost double that amount. Not in any way does this point to anything but tight supply conditions in the wholesale physical silver market. — Silver analyst Ted Butler: 05 September 2015
As I said earlier, nothing should be read into yesterday’s price action in the precious metals except to note that, with the exception of palladium, all were closed lower. Not by any significant amounts, mind you, but enough to set the tone.
With New York closed, there are no updated 6-month charts—and even if there were, the changes are immaterial.
And as I type this paragraph, the London open is ten minutes away. I’ll start with the dollar index, which was trading around the 96.15 mark through all of early trading in the Far East. But at 11:20 a.m. Hong Kong time, the dollar index took a 35 basis point header—and is still struggling at the new low level for the moment.
The gold price rallied quietly in early Far East trading, hitting it high tick, such as it was, just minutes after 12 o’clock noon in Hong Kong. It got sold down to unchanged from Monday’s close in London—and is now up a bit with minutes to go. The dollar dive had zero impact on silver, as it got sold down along with gold. Platinum is struggling higher—and palladium isn’t doing a thing.
As far as volume is concerned, once you subtract out Monday’s volume, there have only been about 13,000 gold contracts traded on a net basis so far today. Subtracting out Monday’s silver volume, leaves only about 2,300 contracts traded so far on Tuesday. Nothing to see here.
One would think that a move that big and fast plunge in the world’s reserve currency would have a more profound and immediate response from the precious metals. But with prices set by the U.S banks’ HFT traders and their algorithms in the COMEX futures market, that sort of thing—along with supply and demand factors—no longer matter, as the platinum and copper producers have now discovered.
And as I put today’s column up on the website at 5:15 a.m. EDT I note that smallish rallies developed in all four precious metals starting at, or just before the London open. All of them ran into ‘resistance’—probably by the usual crop of not-for-profit sellers within a few minutes, but all are struggling higher at the moment.
Net gold volume, minus Monday’s, is now around the 19,000 contract mark—and in silver it’s around 5,500 contracts. This isn’t big volume.
The dollar index got ‘rescued’ about thirty minutes before the London open—and made it back to almost unchanged by 8:40 a.m. BST. It’s currently down 6 basis points.
Today, at the close of COMEX trading, is the cut-off for this Friday’s Commitment of Traders Report and, hopefully, all of today’s volume will be in it.
That’s all I have for today—and I’ll see you here tomorrow.
Ed
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