09 September 2015 — Wednesday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price certainly tried to rally on many occasions everywhere on Planet Earth yesterday—the Far East, London—and in New York, but wasn’t allowed to get far. The price spike around 11:10 a.m. EST got stomped on within minutes—and by the COMEX close, the not-for-profit sellers had negated that entire rally—and the gold price chopped sideways from there into the close.
The low and high ticks, such as they were, were reported by the CME Group as $1,114.70 and $1,126.00 in the December contract.
Gold was closed in New York yesterday at $1,121.40 spot, down $1.40 from Friday’s close, but up from Monday’s close. Subtracting out Monday’s volume, Tuesday’s net volume was extremely light at only about 81,000 contracts, so not too much should be read into yesterday’s price action except for the fact that “da boyz” were certainly there to make sure that the price didn’t get out of hand.
I’m only including Brad Robertson’s 5-minute tick gold chart so you can see how light the volume really was, as there weren’t too many ticks over the 1,500 contract mark. The vertical gray line is midnight in New York—add two hours for EDT—and don’t forget the ‘click to enlarge‘ feature.
After chopping sideways until minutes after 12 o’clock noon in Hong Kong, the price was sold down to its low tick by shortly after 2 p.m. local time. From there it rallied in fits and starts, with the obvious interference when the price got too frisky to the upside. As in gold, the rally after 11 a.m. in New York got hit with enough COMEX paper to halt, and then reverse, a goodly chunk of that gain—and once the price back to the $14.80 spot level, it traded almost ruler flat into the 5:15 p.m. close of electronic trading.
The low and high ticks were recorded by the CME Group as $14.44 and $14.88 in the December contract.
Silver finished the Tuesday session at $14.80 spot, up 22 cents from Friday’s close—and something less than that from Monday’s close in London trading. Net volume, minus Monday, checked in at 31,000 contracts, which is about ‘normal’.
The platinum price chopped sideways until about 2:30 p.m. Hong Kong time—and then, like gold and silver, rallied unsteadily until “da boyz” showed up just after 11:30 a.m. in New York. Then it got sold down a bit from there as well, finishing the day at $1,003 spot, up 16 bucks from Friday’s close—and right on its 50-day moving average.
Ditto for palladium, except it got hammered the moment it touched the $600 spot mark—and it was obvious that someone was standing watch to make sure that it didn’t blast through that price, which it was just about to do. By 1 p.m. EDT it had been sold back to within a dollar of its Monday closing price, but rallied a bit from there, finishing the Tuesday session at $588 spot, up only 5 dollars on the day. At one point it was up $17.
Like the other three precious metals, palladium would have closed materially higher if allowed to do so.
The dollar index finished the Monday trading session at 96.13—and as I mentioned in The Wrap in yesterday’s column, it fell of the proverbial cliff around 11:20 a.m. Hong Kong time on their Tuesday morning—and it took the powers-that-be until just about the London open to get it back to where it had been. But it was all for naught, as it chopped lower as the Tuesday session went along—and finished the day in New York at 95.86—down 27 basis points from its Monday close.
Here’s the chart starting at the Sunday night open in New York, so you can see the big down-move in its entirety.
And here, as usual, is the 6-month U.S. dollar chart so you can see how yesterday’s price action fits into the longer-term trend.
As you can see from the chart below, the gold stocks opened in positive territory, but dipped into the red briefly around the London p.m. gold fix. The subsequent rally got stopped it its tracks shortly after 11:30 a.m. in New York when JPMorgan et al hit the gold price. They held in there for an hour or so after that, but then slid a bit until just before 1 p.m. EDT—and from there they chopped sideways, with a slight positive bias, into the close. The HUI finished the day up 1.19 percent.
The price path for the silver equities followed a somewhat similar chart pattern, but never saw negative territory during the entire Tuesday session—and Nick Laird’s Intraday Silver Sentiment Index closed up 2.32 percent.
The CME Daily Delivery Report showed that 4 gold and 3 silver contracts were posted for delivery within the COMEX-approved depositories on Thursday.
The CME Preliminary Report for the Tuesday trading session showed that gold open interest actually rose 36 contracts, increasing September o.i. to 211 contracts. In silver, September open interest declined by 149 contracts, leaving 703 still open.
There were no reported changes in GLD yesterday—and as of 9:04 p.m. EDT yesterday evening, there were no reported changes in SLV, either.
There was a very decent sales report from the U.S. Mint yesterday. They sold 13,000 troy ounces of gold eagles—2,500 one-ounce 24K gold buffaloes—and 909,500 silver eagles. Based on what Ted Butler’s sources are telling him—and my sources are telling me—very little of this is retail demand. It’s Ted ‘big buyer[s]’ gorging itself/themselves. What do they know that we don’t, at least not yet?
It was a big day in gold over at the COMEX-approved depositories, as zero ounce were reported received, but a chunky 105,025 troy ounces were shipped out the door, with 89,425 troy ounces coming out of JPMorgan’s vault. On top of that there was also a big switch from the Registered category to the Eligible category at JPMorgan’s vault as well—a chunky 122,124 troy ounces. The nut-ball lunatic fringe is all atwitter when the move is from Registered to Eligible, but are strangely silent when the process goes in the other direction. As Ted said on the phone yesterday—it’s not important, but it is interesting. The link to yesterday’s action is here—and it’s worth a quick look.
The movement in silver was equally as impressive. Nothing was reported received there either, but another 1,282,159 troy ounces were shipped out the door for parts unknown. Almost all of the activity was at Brink’s, Inc. and CNT. The link to that activity is here.
The activity over at the COMEX-approved gold kilobar depositories in Hong Kong was enormous—as 13,722 kilobars were reported received—and an equally impressive 13,614 were shipped out. As per usual, all the activity was at the Brink’s, Inc. depository—and the link to that action, in troy ounces, is here.
I don’t have all that many stories for you today—and that makes your daily edit all that much easier.
[NOTE: One of my Saturday Critical Reads—the video documentary headlined “Snowden’s Great Escape“—was only available to residents of Canada. I didn’t know that until yesterday—and I apologize. But if you are ever presented with the opportunity to watch this, you should drop everything and do so.]
CRITICAL READS
U.S. Consumer Borrowing Hits Fresh Record in July
U.S. consumer borrowing climbed to a fresh record in July, the latest evidence that the U.S. economy is on track to grow at a healthy pace in the second half of this year.
The Federal Reserve says consumer borrowing rose by $19.1 billion in July, pushing the total to a record $3.45 trillion. This followed an even larger $27 billion increase in June, the biggest one-month gain in credit since November 2001. The June increase was revised up significantly from an initial estimate of $20.7 billion.
Economists believe strong job gains will support increased borrowing and consumer spending, which accounts for nearly 70 percent of economic activity.
In July, borrowing in the category that includes auto and student loans rose $14.8 billion, while the category for consumer card debt expanded $4.3 billion.
This AP story, filed from Washington at 3:17 p.m. EDT on Tuesday afternoon, was picked up by the abcnews.go.com Internet site—and I thank West Virginia reader Elliot Simon for today’s first story.
Record 94,031,000 Americans Not in Labor Force; Participation Rate Stuck at 38-Year Low for 3rd Straight Month
A record 94,031,000 Americans were not in the American labor force last month — 261,000 more than July — and the labor force participation rate stayed stuck at 62.6 percent, a 38-year low, for a third straight month in August, the Labor Department reported on Friday, as the nation heads into the Labor Day weekend.
The number of Americans not in the labor force has continued to rise, partly because of retiring baby-boomers and fewer workers entering the workforce.
In August, according to BLS, the nation’s civilian non-institutional population, consisting of all people 16 or older who were not in the military or an institution, reached 251,096,000. Of those, 157,065,000 participated in the labor force by either holding a job or actively seeking one.
The 157,065,000 who participated in the labor force equaled only 62.6 percent of the 251,096,000 civilian non-institutional population — the same as it was in July and June. Not since October 1977, when the participation rate dropped to 62.4, has the percentage been this low.
This story was posted on the cnsnews.com Internet site on Friday—and it’s the first of several that I ‘borrowed’ from Tuesday’s edition of the King Report.
Weak Mall Traffic and Difficult Comparisons Hurt August Retail Sales in U.S.
August retail sales – as expected – showed the effects of slow mall traffic and comparisons with very strong August results a year ago. The Thomson Reuters Same Store Sales Index actual result for August 2015 showed a decline of -0.5%, missing its final estimate of -0.2%. Excluding drug stores, the index registered a -1.0% comp for August, matching its final estimate.
In August, 2014, the index registered a powerful 4.8% gain, rising to 5.0% ex-drug. The 2015 results are not quite final, due to the later Labor Day weekend. Zumiez will report August SSS on Sept. 10.
However, it’s a dismal picture. So far, 71% of retailers missed estimates. Costco has the biggest weighting in our retail index. As a result, its -2.0% SSS result dragged the index down. The retailer was hurt by foreign exchange rates driven by a stronger dollar, and lower year-over-year gasoline prices. Excluding gas, Costco posted a robust 5.0% SSS, but still below last year’s 8.0% SSS result.
Analysts polled by Thomson Reuters are also expecting a weaker back-to-school season than last year. Nonetheless, L Brands was the clear winner for August. The retailer beat expectations of 2.4% with a 6.0% SSS result. Both its Bath & Body Works and Victoria Secret divisions were strong at 5.0% and 6.0% gains, respectively. On the flip side, Gap posted a -2.0% SSS, but its Old Navy division was strong at 6.0% SSS. Meanwhile, teen retailers are struggling as parents are spending less than last year.
This business-related news item was posted on the alphanow.thomsonreuters.com Internet site last Friday—and it’s the second story in a row that I found in yesterday’s edition of the King Report.
Bond Market Sends Fed All-Clear to Raise Interest Rates
Janet Yellen has the fixed-income market just where she wants it: ripe for the first increase in U.S. interest rates since 2006.
Just about every indicator is telling the Federal Reserve Chair a move at next week’s policy meeting would cause government bonds little disruption. Her guidance has money markets pricing an extraordinarily slow pace of tightening, volatility metrics show no signs of panic, and forwards indicate benchmark rates will remain contained. Differences between shorter- and longer-term yields are flashing a positive signal for the economy.
A green light from Treasuries is vital to avoid derailing the recovery that Yellen has nurtured because they help determine borrowing costs for businesses and consumers. Acting decisively now may even lend investors greater confidence in the outlook for growth.
“The debt markets have priced in a lot and it’s now time for the Fed to take advantage of that,” said Peter Tchir, head of macro credit strategy in New York at Brean Capital LLC, which has clients ranging from hedge funds and pension funds to money managers specializing in fixed-income markets.
Well, we’ll find out for sure a week from today. This Bloomberg story, along with a 2:38 minute embedded video clip, put in an appearance on their Internet site at 5:00 p.m. Denver time on Monday evening—and it’s the first offering of the day from Patricia Caulfield.
Apple and Other Tech Companies Tangle With U.S. Over Data Access
In an investigation involving guns and drugs, the Justice Department obtained a court order this summer demanding that Apple turn over, in real time, text messages between suspects using iPhones.
Apple’s response: Its iMessage system was encrypted and the company could not comply.
Government officials had warned for months that this type of standoff was inevitable as technology companies like Apple and Google embraced tougher encryption. The case, coming after several others in which similar requests were rebuffed, prompted some senior Justice Department and F.B.I. officials to advocate taking Apple to court, several current and former law enforcement officials said.
While that prospect has been shelved for now, the Justice Department is engaged in a court dispute with another tech company, Microsoft. The case, which goes before a federal appeals court in New York on Wednesday and is being closely watched by industry officials and civil liberties advocates, began when the company refused to comply with a warrant in December 2013 for emails from a drug trafficking suspect. Microsoft said federal officials would have to get an order from an Irish court, because the emails were stored on servers in Dublin.
This longish, but very interesting news item appeared on The New York Times website on Monday—and I just didn’t have room for it in Tuesday’s missive, so here it is now. It’s the second offering in a row from Patricia Caulfield.
Stock market rally worldwide on China stimulus hopes, strong European data
Stock markets worldwide rallied on Tuesday on hopes of more stimulus measures in China and on strong German trade data, while Brent crude oil prices also rose.
China’s imports shrank far more than expected in August, falling for the 10th straight month, though exports fell less than expected. Analysts said the imports data could lead to further policy easing from the Chinese government in coming months.
Those hopes helped U.S. shares advance, while data showing Germany’s imports and exports hit record highs in value terms in July underpinned gains in European stocks. Germany’s benchmark DAX share index ended up 1.6 percent.
A late bounce in Chinese stocks, which pushed the Shanghai Composite Index up 2.9 percent after earlier declines, also supported European shares.
The “late bounce” was the Chinese version of the PPT in action in the last half-hour of trading to prevent the stocks from closing lower once again. This Reuters article, filed from New York, is dateline 4:34 p.m. EDT on Tuesday, but only the headline remains unchanged, as it was probably extensively revised since it was first filed, as it arrived in my in-box at 11:05 a.m. EDT yesterday morning.
U.K.’s August retail sales fall is biggest decline in seven years – BDO survey
August was the worst month for British retail sales since the global financial crisis of 2008, according to a survey published on Friday.
Accountancy firm BDO said its monthly high street sales tracker (HSST) showed a 4.3 percent year-on-year fall in August sales — the biggest drop since November 2008 and the sixth monthly dip this year.
The retail data follows a survey on Thursday from financial data company Markit, which showed that businesses in Britain’s services sector recorded their slowest growth in more than two years last month, mirroring signs of economic weakness in the United States and China.
The Bank of England is considering when to start raising interest rates, though financial markets do not expect it to act until next year, with inflation barely above zero in Britain.
This Reuters article, filed from London, was posted on their Internet site on Friday—and I found it in yesterday’s edition of the King Report.
A New Wave of Migrants Flees Iraq, Yearning for Europe
Having sold his car for $4,600, and then some of his wife’s jewelry, and having loaded his smartphone with photographs of his five children, all that was left for Haider Abdella to do was say goodbye.
“From yesterday to today, we are crying,” he said.
His mother sat next to him on the couch, sobbing. “He’s never left me before, from when he was a child until now,” she said. “How can I bear him leaving?”
Mr. Abdella, 42, a police officer, had never left Iraq — never even seen the sea. But last week, he was on a plane to Istanbul, and from there traveled to the coastal resort city of Izmir, Turkey. A day later, he was on a smuggler’s boat to Greece, crying and praying over the phone with his family left behind in Baghdad. By the weekend, he told them, he was well on his way to Germany.
Another longish article from The New York Times. This one, filed from Baghdad, was posted on their website yesterday sometime—and it’s another contribution from Patricia C.
Saudi Arabia to cut spending after oil price decline
Talking to broadcaster CNBC Arabia, he said the country was in a good position to manage low oil prices.
“We have built reserves, cut public debt to near-zero levels and we are now working on cutting unnecessary expenses while focusing on main development projects and on building human resources in the kingdom,” he said in the interview.
Some areas of the economy will still receive investment, he said, as the country tries to improve industries outside energy.
“Projects in sectors such as education, health and infrastructure are not only important for the private sector but also for the long-term growth of the Saudi economy,” he said. He did not give details of where cuts would happen.
This story showed up on the bbc.com website on Sunday sometime—and I thank Lawrence Clooney for sharing it with us.
‘Fireball’ seen over Bangkok – dash-cam video footage
Dash-cam footage appears to show a fireball over the Thai capital Bangkok. Video from Porjai Jaturongkhakun, Mesapong Poojeenapun and Raweewat Tuntisavee shows the fireball’s speedy descent before it increases in size and burns out. Despite the apparent size of the fireball, which was visible 200 km from the capital, meteorologists say the event is not a major incident.
This 26 second video clip of this broad daylight event is certainly worth your while—and I thank Patricia Caulfield for sending it to me on Monday, but it had to wait for today’s column. This piece showed up in The Guardian on Monday.
China Loses All Control, Spends 600 Billion Yuan on Plunge Protection in August, Tightens Capital Controls
Back on July 20, Caijing reporter Wang Xiaolu suggested that China Securities Finance – the state-owned plunge protection vehicle – may be set to exit the market. That sent futures plunging and ultimately led to Mr. Wang’s arrest late last month. Under duress, Wang would later “admit” that he “shouldn’t have released a report with a major negative impact on the market at such a sensitive time.”
Of course Wang wasn’t the last person to speculate about how long China would be willing to spend billions propping up the market, and indeed it certainly seems as though Beijing tried to scale back the manipulation two weeks ago only to see the SHCOMP crash 8%, a move which promptly triggered a global rout of epic proportions. One additional 8% decline and a dual policy rate cut later, and CSF was back in the market desperately trying to arrest the inexorable slide ahead of Xi Jinping’s lavish military parade on September 3.
So in case anyone still harbored any doubts about the degree to which China most certainly has not wound down the plunge protection effort, Goldman has updated its analysis on the “national team’s” efforts on the way to concluding that China spent an additional CNY600 billion propping up the market in August.
This Zero Hedge commentary put in an appearance on their Internet site at 7:38 a.m. Tuesday morning EDT—and I thank reader U.D. for passing it around. The Bloomberg story on which this ZH piece is based, was posted on their website at 9:51 p.m. MDT on Monday evening. It’s headlined “China’s Stock-Rescue Tab Surges to $236 Billion, Goldman Says“—and is courtesy of Patricia Caulfield.
China Just Killed the World’s Biggest Stock-Index Futures Market
Add the world’s biggest stock-index futures market to the list of casualties from China’s interventionist campaign to stop a $5 trillion equity rout.
Volumes in the country’s CSI 300 Index and CSI 500 Index futures sank to record lows on Tuesday after falling 99 percent from their June highs. Ranked by the World Federation of Exchanges as the most active market for index futures as recently as July, liquidity in China has dried up as authorities raised margin requirements, tightened position limits and started a police probe into bearish wagers.
While trading in Chinese equities has also slumped amid curbs on short sales and an investigation into computer-driven orders, the tumble in futures volumes may cause even greater damage because of their central role in the investment strategies of domestic hedge funds and other institutional money managers. A failure to revive the market would undercut the government’s own efforts to attract professional investors to local stock exchanges, where individuals still account for more than 80 percent of trades.
“It is further evidence that the Chinese authorities are not yet ready to commit to freely trading markets,” said Tony Hann, a London-based money manager at Blackfriars Asset Management, which oversees about $350 million. “Fully functioning developed financial markets in China will take many years.”
This Bloomberg news item showed up on their Internet site at 9:17 a.m. Denver time yesterday morning—and it’s the final offering of the day from Patricia Caulfield—and I thank her on your behalf. It’s worth reading.
Putin aide’s advice: Default on foreign debt, put reserves into gold and BRICs bonds
Russia’s government long has understood gold’s secret power over the international monetary system. In an address in June 2004 at the summer meeting of the London Bullion Market Association at the Kempinsky Hotel in Moscow, the Russian central bank’s deputy chairman, Oleg Mozhaiskov, spoke only four words in English: “Gold Anti-Trust Action Committee”.
As far as GATA itself knew at that time, it had never had any contact with anyone in Russia or anyone connected with the Russian government.
But Russia’s expressions of interest in gold have multiplied since then and another one was reported today by the Moscow-based financial newspaper Kommersant (“The Businessman”), which described a plan to achieve Russia’s economic sovereignty that is to be presented next week to Russia’s Security Council by Sergei Glazyev, a politician and economist who is an assistant to President Vladimir Putin. Glazyev is among the small number of Russian officials targeted specifically by U.S. economic sanctions, and according to Kommersant his plan includes a section about “neutralizing anti-Russian sanctions.”
Kommersant’s report is available only in Russian, but a Google translation of its 12th paragraph says Glazyev proposes authorizing Russian companies to “declare force majeure” against loans from countries that have imposed financial sanctions against Russia, “in effect the legalization of non-repayment of all private foreign debt“; converting the reserves of Russia’s central bank and the government’s Reserve Fund and National Welfare Fund into gold and obligations of the “BRICs” countries; and creating a system of international payments separate from the Western-controlled SWIFT system that would operate with China’s UnionPay system.
This GATA dispatch from yesterday certainly falls into the must read category—and my thanks and gratitude goes out to Russian subscriber Vladimir Momitko, whose e-mail to me in the wee hours of yesterday morning, brought this Russian-language news item to my attention and, through GATA, to yours.
Next IMF Tranche to Ukraine Will Go to Gold Currency Reserves
The IMF’s mission in Ukraine is likely to submit its proposals on the next batch of loan payments for Kiev to the IMF board of directors in October.
“It will go completely to fulfilling [the gold currency reserves],” Jaresko told journalists before a Cabinet of Ministers meeting.
Ukraine’s national debt exceeds $70 billion. The country has been increasingly reliant on external funding since a coup in February 2014, followed by an armed conflict in the southeast.
Well, dear reader, I wonder what this event means? This brief, but fascinating gold-related news item put in an appearance on the sputniknews.com Internet site at 1:34 p.m. Moscow time on their Tuesday afternoon, which was 6:34 a.m. in Washington—EDT plus 7 hours. And I thank Frances Jacobs for finding it for us.
World Platinum Investment Council increases platinum deficit forecast for 2015 — Lawrence Williams
The World Platinum Investment Council (WPIC) has today released its latest quarterly report on the state of the global platinum sector. The report is based on figures produced by independent consultants SFA (Oxford). While it perhaps has little of real cheer for the platinum sector, it does at least suggest that this year’s annual supply deficit will be higher than it had forecast in its previous quarter’s report although this would likely only be the case if investment demand continues to show some strength. It is possible that the low platinum price will keep investors coming in, and may also positively impact some of the more price sensitive aspects of the global market – like jewellery demand.
The report points out that global platinum output remains strong, even in the face of low metal prices as the South African mines, which dominate global new mined supply, have made a more rapid recovery that forecast from the five-month strike last year, which effectively shut down around 60% of the country’s production. The thus hugely increased output from South Africa in H1 compared with 2014 has also been supplemented by production rises from the world’s next two largest producers, Zimbabwe and Russia, which have respectively seen output rise by 20,000 ounces and 10,000 ounces respectively over Q1 figures. WPIC estimates South African refined production for the quarter at 1.08 million ounces as operational and safety performance improved, compared to the below par production of 890,000 ounces in Q1.
While it is apparent that an important proportion of South African production is under water financially at current prices – notably in Anglo Platinum (Amplats)’s deep mines in the Rustenburg area, but also for some other producers too – mine closures and personnel retrenchments remain difficult politically in the South African high unemployment situation and with a militant dominant Union representing the majority of the workers. Anglo Platinum has made no secret that it would like to sell off its Rustenburg and Union Platinum operations – and Sibanye Gold is known to be interested in moving into the sector and is apparently in talks with Amplats over Rustenburg but not Union. Sibanye is the Gold Fields spin-off which incorporates most of the latter’s aging South African gold mining operations and has proved adept at eking out profits from these, so is presumably hoping to do the same with the Rustenburg platinum operations – while longer term hoping for a big improvement in the platinum price to turn them into a real money-spinner.
This longish, but very interesting platinum-related story by Lawrie showed up on the sharpspixley.com Internet site yesterday.
South Africa’s central bank says not aware of talks to make platinum reserve asset
The South African Reserve Bank (SARB) said on Monday there were no talks among central bankers about upgrading platinum’s status to a recognized reserve asset and past studies on the issue it had taken did not support the notion.
South Africa’s mining industry, unions and the government want to boost platinum’s sagging fortunes by promoting it as a central bank reserve asset, part of a broader plan aimed at stemming job losses in the shafts.
But the SARB made clear it was cool on the idea.
“Feasibility studies conducted by the SARB previously around the possibility of adding platinum to reserves … suggested that the status quo should remain,” said Hlengani Mathebula, the head of the SARB’s Group Strategy and Communications, in an e-mailed response to Reuters‘ questions.
This brief Reuters item, filed from Johannesburg, appeared on their website on Monday—and it’s something else I found on the Sharps Pixley website late last night.
The PHOTOS and the FUNNIES
These three photos were taken in the inter-mountain country just south of Kamloops, B.C. I was amazed to see this Eurasian collared dove drinking at a puddle on the asphalt. The first time I photographed one of these creatures was when I was at the Casey conference in San Antonio, Texas last September. When I looked up the bird on the Internet after I took this shot, all became clear. It’s a highly invasive species—and is now just about everywhere in North America. But we certainly don’t have them where I live in Edmonton. Don’t forget the ‘click, or double click, to enlarge‘ feature to bring them up to full screen size.
This shot is of an osprey was taken from a little too far away, even for my 400mm lens—and I had to crop the heck out of it to get it this size—and it shows. Of the dozen or so I took of this bird, it’s the only one I kept. But since it’s my first osprey photo, I’ll keep it until something better come along. The osprey shots that reader Mark O’Brien sent us earlier this year were light years better than this one—and I know he’ll laugh when he sees this one.
The WRAP
Deliveries against the current September COMEX silver contract look light but tight, if that is possible. There have been only 804 contracts delivered so far and only 700 or so remaining open, but the spread differential between September and December continued to tighten to a half penny on [Friday’s] settlement. JPMorgan has taken nearly 25% (194) of the total deliveries issued, continuing its pattern of openly taking COMEX silver deliveries this year, but remains only the third largest stopper this month. It wouldn’t take much, in my opinion, for a big buyer to upset the manipulated silver market by demanding delivery, but we will probably only see concrete signs of that after prices surge higher.
There were also 2.5 million oz removed from the big silver ETF, SLV, [last] week, even though prices were flat and trading volumes were subdued; thus in keeping with the often counterintuitive deposit/withdrawal pattern unique to SLV. As was the case with the continued churn in COMEX silver inventories, the most plausible explanation I can come up with is that the metal was more urgently needed elsewhere, or shares were converted to metal to avoid SEC reporting requirements. These are, of course, the two main mechanisms by which I believe JPMorgan has accumulated the bulk of the 400 million oz of silver it has over the past 4.5 years – skimming off metal in the great COMEX silver warehouse churn and buying and then converting shares of SLV into metal, both mechanisms designed to acquire metal sans public reporting. — Silver analyst Ted Butler: 05 September 2015
Despite the light volume, particularly in gold, it was obvious that there were forces in the market that made sure that the big pre-noon rallies in New York got put in their respective places—and that palladium was kept below $600 spot.
Here are the 6-month charts for all the Big 6 commodities. You should note the 5 plus percent rally in copper. We can only dream of that happening in gold. But some day it will.
With these low volumes, which are accompanied by rather sudden up or down moves in price, are sure signs of an illiquid market. Ted Butler has spoken of that before—and it’s been more than obvious lately.
The traders in the COMEX futures market are supposed to be producers and consumers laying off risk onto willing speculators. But as Ted has pointed out countless times over the last fifteen years, only a tiny fraction of 1 percent of the trading volume in the precious metals involves these entities—and even that amount may be generous! Real-world prices are now set by the gaming going on between the bullion banks on one side—and the Managed Money traders on the other. With the banks, led by JPMorgan et al with their HFT algorithms, running the CME/COMEX casino for fun, profit and price management purposes—and they’re making out like bandits in the process. As Ted has said, JPMorgan has most likely never had a losing trade in the COMEX futures market in any of the Big 6 commodities.
How did it come to this?
And as I write this paragraph, the London open is just under ten minutes away—and for the third day in a row, a smallish rally in morning trading in the Far East was negated, with the decline starting around noon Hong Kong time. Gold and palladium are up a dollar or so—platinum is down that amount—and silver is down a nickel.
Net gold volume is around 16,000 contracts, with decent roll-overs out of the October contract. At one time, October used to be a major delivery month for gold, but no longer. However, having said that, there’s still some decent trading and delivery activity surrounding this month—and virtually all of the roll-over activity for the rest of September will involve this ‘delivery’ month. Silver’s net volume is around 5,800 contracts.
The dollar index, which hit its 95.80 low tick shortly after trading began in the Far East on their Wednesday morning has been in rally mode since—and in the early going, it obviously had some help, but as London opens, the index is up 35 basis points—and I would guess that there’s some short covering going on at the moment.
Yesterday at the close of COMEX trading was the cut-off for this Friday’s Commitment of Traders Report—and just eye-balling the 6-month gold and silver charts above, I would guess we’ll see some sort of improvement in the Commercial net short position in gold, but likely some deterioration in silver.
And as I put today’s effort up on the website at 4:20 a.m. EDT, I note that all four precious metals are now down a bit on the day. Net gold volume is around 21,000 contracts—and net silver volume is up to 7,200 contracts. The dollar index is off its earlier high by a bit—and is currently up 28 basis points.
I note the Nikkei closed up 1,343 points during their Wednesday trading session—and other East Asian stock markets did pretty well, also. The animal spirits have spilled over into Europe—and it’s a certainty that the American markets will follow suit later this morning.
As for the precious metals today, it’s up to JPMorgan et al—and nothing will surprise me when I check the charts later this morning.
See you tomorrow.
Ed
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