11 September 2015 — Friday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price chopped around the unchanged mark through all of Far East and London trading on their Thursday, but began to rally about fifteen minutes before the COMEX open. Thirty minutes after that, the price was capped—and by the London p.m. gold fix, half those gains had been taken back—and the price wasn’t allowed to do much after that.
The low and high tick, such as they were, were recorded as $1,102.50 and $1,114.10 in the December contract.
Gold closed in New York yesterday at $1,110.90 spot, up $5.10 from Wednesday. Net volume was just under 112,000 contracts.
Here’s the 5-minute gold tick chart from Brad Robertson once again. All the volume that mattered occurred between 8:05 a.m. EDT and the 1:30 p.m. COMEX close, which is 6:05 and 11:30 a.m. Denver time on this chart. The vertical gray line is midnight in New York, add two hours for EDT—and don’t forget the ‘click to enlarge‘ feature.
The silver price didn’t do a whole lot until about noon in Hong Kong on their Thursday. Then it began to chop quietly higher until around the London a.m. gold fix, which was 10:30 a.m. BST. But by 8:05 a.m. EST, most of those gains had vanished—and the spike up that began at precisely 9:00 a.m. in New York was hammered flat less than ten minutes later. By 10:40 a.m. all the COMEX gains had been taken back and, like gold, the price chopped sideways in a very tight range for the remainder of the Thursday session.
The low and high ticks in silver were reported by the CME Group as $14.535 and $14.845 in the December contract.
Silver closed yesterday at $14.705 spot, up 9.5 cents on the day. Net volume was 30,000 contracts, about ten percent lower than Wednesday’s volume.
Platinum was sold down to its low tick around 9:30 a.m. Hong Kong time—and the subsequent rally ran out of gas/got capped around 9:30 a.m in Zurich—and it was pretty much all down hill until 2 p.m. in electronic trading in New York. It popped higher by a few dollars starting at that point—and then traded flat into the close. Platinum finished the Thursday trading session at $980 spot, unchanged from Wednesday. However, it was obvious from the price pattern that it wasn’t going to be allowed to rally whether it wanted to or not.
Palladium also hit its low during the first couple of hours of trading in the Far East on their Thursday morning—and from there it moved unsteadily higher, with the rally topping out at $592 just before lunch in New York. It traded sideways from there, closing yesterday at $590 spot, up $13 from Wednesday.
The dollar index closed late on Wednesday afternoon in New York at 95.95—and dropped to its 95.76 low just minutes after 8 a.m. Hong Kong time on their Thursday morning. The rather choppy rally that began at that point, topped out around the 96.17 mark before heading lower. It took a 40 plus basis points header starting a minute or so before 11 a.m. in New York, with the 95.41 low tick being set just after 2 p.m. in New York. It rallied a bit from there into the close. According to ino.com, the dollar index finished the Thursday session at 95.50—down 45 basis points on the day.
As I pointed out in yesterday’s column. What the currencies are doing is irrelevant to the precious metal prices when JPMorgan et al are in total control of the COMEX futures market. They, and they alone, are determining what the producing class gets for its services everywhere on Planet Earth—and until some country or some entity is prepared to stand up and put their marker down on this issue, that’s the way things will remain.
Here’s the 6-month U.S. dollar index so you can see the trend more clearly.
The gold stocks opened in positive territory, but began to sell off quietly, with their lows coming about 3:10 p.m. EDT—and from there they rallied for the remainder of the New York session, but couldn’t quite squeeze a positive close, despite the fact that the gold price closed well into positive territory. The HUI finished the Thursday session down 0.16 percent.
The silver equities followed a similar price pattern, but they headed south with a vengeance shortly after the 9:30 a.m. EDT open—and with barely a backward glance after that. Nick Laird’s Intraday Silver Sentiment Index closed down another 2.41 percent.
The CME Daily Delivery Report showed that 3 gold and 77 silver contracts were posted for delivery within the COMEX-approved depositories on Monday. In silver, the short/issuer on all 77 contracts was ABN Amro—and like it’s been all week, the long/stoppers were “all the usual suspects”—Canada’s Scotiabank in its in-house trading account, JPMorgan in its in-house trading account—and Japanese bank Mizuho for its client account. The contract amounts were 37, 21 and 12 respectively. The link to yesterday’s Issuers and Stoppers Report is here.
The CME Preliminary Report for the Thursday trading session showed that gold open interest declined by 20 contracts, leaving 140 still open. In silver, September o.i. decreased by 141 contracts, leaving 545 still open—minus the 77 posted for delivery tomorrow.
There were no reported changes in GLD yesterday—and as of 10:48 p.m. EDT yesterday evening, there were no reported changes in SLV either.
Since yesterday was Thursday, Joshua Gibbons, the Guru of the SLV Bar List, updated his website with the goings-on over at the iShares.com Internet site as of the close of trading on Wednesday—and this is what he had to report.
“Analysis of the 09 September 2015 bar list, and comparison to the previous week’s list: 2,526,461.7 troy ounces were removed (all from Brinks London), no bars were added or had a serial number change.”
“The bars removed were from: Inner Mongolia Quankun (1.2M oz), Henan Yuguang (0.8Moz), and 2 others. As of the time that the bar list was produced, it was overallocated 441.4 oz.”
“All daily changes are reflected on the bar list, except a 1,336,003.2 oz withdrawal on Wednesday evening.”
The folks over at the shortsqueeze.com Internet site updated the short positions of both GLD and SLV as of the last trading day in August—and this is what they reported.
The short position in SLV declined from 13.54 million share/troy ounces, down to 13.02 million troy ounces, or 3.8 percent. The short position in GLD rose from 1.206 million troy ounces, up to 1.358 million troy ounces, or 12.6 percent.
For the second day in a row there was a sales report from the U.S. Mint. They sold another 6,000 troy ounces of gold eagles—1,000 one-ounce 24K gold buffaloes—and 99,500 silver eagles.
There was decent gold movement over at the COMEX-approved depositories on Wednesday. Once again there was nothing reported received, but 37,841 troy ounces were shipped out, with almost all of it coming out of the HSBC USA depository. They also transferred a tiny 2,703 troy ounces out of the Registered category—and into the Eligible category. The link to that activity is here.
The mind-boggling churn in COMEX silver inventories continues at Warp Factor 10—as 1,722,603 troy ounces were reported received—and 1,726,340 troy ounces were shipped out the door. Why is nobody except Ted Butler talking about this? Of the amount received—1,142,980 troy ounces were deposited into JPMorgan’s vault. The only depository that didn’t show any activity was HSBC USA. The link to Wednesday’s action is here—and it’s worth a quick look.
It’s been a frantic week over at the COMEX-approved gold kilobar depositories in Hong Kong, as they reported receiving 5,599 kilobars—and shipped out an absolute mind-boggling 19,178 kilobars on Wednesday. That’s the biggest one-day withdrawal I can remember from any of the COMEX-approved gold depositories—and I’ve been watching these numbers for almost a decade. Once again, all the movement was at the Brink’s, Inc. depository. The link to that action, in troy ounces, is here.
I’ve made every attempt to cut the number of stories in today’s column down to a reasonable number—and I hope you don’t find your editing job too onerous today.
CRITICAL READS
175 Days: Treasury Says Debt Has Been Frozen at $18,112,975,000,000
The portion of the federal debt that is subject to a legal limit set by Congress closed Friday, Sept. 4, at $18,112,975,000,000, according to the latest Daily Treasury Statement, which was published at 4:00 p.m. on Tuesday.
That, according to the Treasury’s statements, makes 175 straight days the debt subject to the limit has been frozen at $18,112,975,000,000.
$18,112,975,000,000 is about $25 million below the current legal debt limit of $18,113,000,080,959.35.
On July 30, Treasury Secretary Jacob Lew sent a letter to the leaders of Congress saying he was extending a “debt issuance suspension period” through October 30.
This story appeared on the cnsnews.com Internet site at 2:18 p.m. EDT on Wednesday afternoon—and it’s courtesy of Brad Robertson.
Fired Citigroup Trader Points Finger at His London Bosses
A Citigroup Inc. trader fired amid a global probe into foreign-exchange rigging alleged that improper conduct was endemic in the bank’s currency-trading activities, ranging from front-running to disclosing client orders to competitors in a bid to boost the company’s own positions.
Perry Stimpson, who is suing the bank for unfair dismissal, said at a London employment tribunal Wednesday that he saw managers deliberately flout the bank’s own code of conduct. He also said he was pressured by senior staff into using electronic chat rooms to share information with traders at other banks.
“My dismissal was down to an error of judgment” he said, adding that he neither sought nor made any financial gain. “I will show where senior management have deliberately flouted the code to the detriment of customers and the benefit of the bank,” he said.
Stimpson’s case is the first of a spate of wrongful termination lawsuits related to currency-exchange manipulation to be heard in London. His defense hinges on the allegation that the “information sharing” that resulted in his dismissal was prevalent, not only among traders, but among senior managers who went unpunished.
This very interesting Bloomberg story was posted on their website late Wednesday afternoon MDT—and it’s something I found in yesterday’s edition of the King Report. There was also a Reuters news item on this issue. It’s headlined “Citi shared central bank info with clients: ex trader“—and I found that on that gata.org Internet site very late last night.
Justice Department Sets Sights on Wall Street Executives
Stung by years of criticism that it has coddled Wall Street criminals, the Justice Department issued new policies on Wednesday that prioritize the prosecution of individual employees — not just their companies — and put pressure on corporations to turn over evidence against their executives.
The new rules, issued in a memo to federal prosecutors nationwide, are the first major policy announcement by Attorney General Loretta E. Lynch since she took office in April. The memo is a tacit acknowledgment of criticism that despite securing record fines from major corporations, the Justice Department under President Obama has punished few executives involved in the housing crisis, the financial meltdown and corporate scandals.
“Corporations can only commit crimes through flesh-and-blood people,” Sally Q. Yates, the deputy attorney general and the author of the memo, said in an interview on Wednesday. “It’s only fair that the people who are responsible for committing those crimes be held accountable. The public needs to have confidence that there is one system of justice and it applies equally regardless of whether that crime occurs on a street corner or in a boardroom.”
The talk sounds great—and it will be interesting to see if they go after the big fish, or just the little ones. I’m sure that Jamie Dimon and Lloyd Blankfein aren’t exactly shaking in their boots. This New York Times piece put in an appearance on their Internet site on Wednesday sometime—and it’s the second offering of the day from Brad Robertson.
Brazil downgraded to junk rating by S&P, deepening woes
Standard & Poor’s downgraded Brazil’s credit rating to junk grade on Wednesday, further hampering President Dilma Rousseff’s efforts to regain investors’ trust and pull Latin America’s largest economy out of recession.
The faster-than-anticipated downgrade from investment grade will likely rock Brazilian financial markets on Thursday and will increase borrowing costs for the government and Brazilian companies.
Brazil first won its investment-grade credit rating in 2008 and the S&P downgrade is a major setback for Rousseff, a leftist struggling to kick-start the economy and shore up weak public finances.
S&P cut Brazil’s rating to BB-plus, the highest junk rating, from BBB-minus.
This Reuters story, filed from Rio de Janeiro, appeared on their website at 11:27 p.m. EDT on Wednesday evening—and it’s the third offering from Brad Robertson. There was a Zero Hedge article on this headlined ““Junked” Brazil is Falling Apart at The Seams; Cancels Bond Auction“—and it’s courtesy of Richard Saler.
Brazil reduced to junk as BRICS facade crumbles — Ambrose Evans-Pritchard
Brazil’s currency has plummeted to an all-time low and borrowing costs have tightened viciously after Standard & Poor’s slashed the country’s debt to junk status, warning that the budget deficit has reached danger levels.
The downgrade is a painful blow to a nation that thought it had finally escaped the Latin American curse of boom-bust cycles and joined the top league of rich economies.
It is the second of the big emerging market (EM) economies to be stripped of its investment grade rating this year after Russia crashed out of the club in January. Little remains of the BRICS allure that captivated the world seven years ago, and now looks like a marketing gimmick.
This commentary by Ambrose showed up on the telegraph.co.uk Internet site at 8:28 p.m. BST last evening, which was 3:28 p.m. in New York. I thank Patricia Caulfield for her first offering in today’s column.
Catalonia’s Separatists Try to Stage Spain Breakaway Attempt
For a fourth consecutive year, hundreds of thousands of pro-independence Catalans are gearing up to rally Friday to break away from Spain, kicking off a fresh secession bid in a push to carve out a new European nation.
After the central government rejected efforts by separatists to hold an independence referendum, Catalan politicians are now heading toward a Sept. 27 regional parliamentary election with candidates staking out positions for or against an independent Catalonia. The northeastern region of 7.5 million people is marked by fierce pride in Catalan language and traditions.
The massive rally for the Catalan National Day holiday on Sept. 11 marks the kickoff of campaigning for secessionists who say Catalonia is culturally different from Spain, doesn’t get back what it pays in taxes — and that independence is the only way forward. The latest effort follows rebukes to requests for greater self-governance by the Madrid central government.
The protest also starts an end-game for the independence drive because the election results will determine whether the region embarks on an 18-month “path to independence” or puts its secession aspirations on hold. Madrid has vowed to block any formal secessionist process.
This AP news story, filed from Barcelona, showed up on The New York Times website at 5:57 a.m. Thursday morning EDT—and it’s another contribution from Richard Saler.
Exclusive: Russian troops join combat in Syria – sources
Russian forces have begun participating in military operations in Syria in support of government troops, three Lebanese sources familiar with the political and military situation there said on Wednesday.
The sources, speaking to Reuters on condition they not be identified, gave the most forthright account yet from the region of what the United States fears is a deepening Russian military role in Syria’s civil war, though one of the Lebanese sources said the number of Russians involved so far was small.
U.S. officials said Russia sent two tank landing ships and additional cargo aircraft to Syria in the past day or so and deployed a small number of naval infantry forces.
The U.S. officials, who also spoke on condition of anonymity, said the intent of Russia’s military moves in Syria was unclear. One suggested the focus may be on preparing an airfield near the port city of Latakia, a stronghold of Syrian President Bashar al-Assad.
If you’re looking for a bulls hit propaganda ‘news’ story, this qualifies in spades. This piece of fear mongering journalistic trash appeared on the Reuters website at 3:10 a.m. Thursday morning EDT—and it’s courtesy of West Virginia reader Elliot Simon.
U.S. Senate attempt to block Iran deal fails
By a vote of 58-42, opponents of the Iran deal failed to make it through a procedural hurdle in the U.S. Senate on Thursday.
The vote marked the last chance of opponents of the Iran deal to block the international nuclear agreement from becoming law.
Four Democrats and 54 Republicans voted to end debate and advance to a final vote on the Iran deal. 42 Democrats were opposed.
Senate Majority Leader Mitch McConnell has pledged to hold a second vote next week to end debate on the motion to disapprove the Iran deal but it is unlikely that any additional Democrats will change their vote.
This ‘live update’ story was posted on The Guardian‘s website at 10:37 p.m. BST, which was 5:37 p.m. in Washington. I thank Patricia Caulfield for sending it.
Honor ceiling, Iran tells OPEC
The Organization of Petroleum Exporting Countries will have to review production levels to make room for Iran or face consequences, Iran’s Oil Ministry said.
An opinion piece published by SHANA, the Oil Ministry’s official news website, said crude oil markets are skewed toward the supply side by 2 million barrels. Once all sanctions pressures ease, Iran could add another 1 million barrels of oil per day to the global marketplace almost immediately, it said.
Iranian Oil Minister Bijan Zangeneh said his country could become the second-largest producer in the Organization of Petroleum Exporting Countries, after Saudi Arabia, within seven or eight months of sanctions relief. The minister said Iran will increase net oil production by more than 1.5 million bpd, bringing total production for the Islamic republic to just over 4 million bpd by the end of next year.
This UPI story, filed from Tehran, showed up on their website at 7:14 a.m. EDT yesterday morning—and I thank Roy Stephens for sharing it with us.
Confirmed: Saudi Arabia Offered Russia Oil Alliance and Full OPEC Membership
Igor Sechin, the powerful head of Rosneft, Russia’s big state oil company, has now confirmed that OPEC – the Saudi dominated oil producers’ cartel – has offered Russia membership.
This comes on the heels of media reports that the Saudis have been pressing the Russians for an “oil alliance” whereby Russia and Saudi Arabia, the world’s two biggest oil producers, would coordinate their production so as to dominate the oil market together.
The Saudi proposal makes complete sense from Saudi Arabia’s point of view.
But for the moment, the Russians are saying “nyet“.
This interesting story appeared on the russia-insider.com Internet site on Wednesday Moscow time—and I thank Brad Robertson for this story as well.
China intends to oust dollar from oil trade
China is planning to launch its own oil benchmark in October, similar to Brent and WTI, striving for a more important role in establishing crude prices. Unlike the Western benchmarks, the Chinese contracts will be nominated in the yuan, not the US dollar.
Shanghai International Energy Exchange sent a draft futures contract to market players in August, Reuters reported quoting sources.
Oil futures will be the first Chinese contract to permit direct participation of foreign investors. However, this is not the first step for greater oil market openness in China. In July, Beijing allowed private companies to import crude. Previously importing was only done by state-run majors such as Sinopec, China National Petroleum Corporation and China National Offshore Oil Corporation, the Xinhua news agency reported.
This oil-related story was posted on the Russia Today website on Tuesday afternoon Moscow time—and I thank reader “h c” for sending it to me in the wee hours of yesterday morning.
Abe Adviser Says Next Month Good Opportunity for BOJ Easing
The Bank of Japan should expand its monetary easing program by at least 10 trillion yen ($83 billion), ruling Liberal Democratic Party lawmaker Kozo Yamamoto said in an interview Thursday, adding that its Oct. 30 policy meeting would be a “good opportunity” to add stimulus.
Yamamoto said reaching the bank’s 2 percent inflation target in the first half of the fiscal year beginning April 2016 is an “absolute imperative,” and governor Haruhiko Kuroda must fulfill his responsibility to explain if he fails. The BOJ is scheduled to release its next outlook report on the economy and inflation on Oct. 30.
“Looking at the BOJ’s pattern of behavior, that would be the easiest timing,” Yamamoto said at his offices in Tokyo. “They will probably be revising their outlook” downward, he added.
Last October, the central bank surprised markets by expanding its annual target for expanding the monetary base to 80 trillion yen from the previous 60-70 trillion yen. The program has been primarily used to purchase government bonds in an effort to prime the economy and spur inflation. Still, the BOJ’s preferred price gauge, pressured by declines in oil, fell to zero percent for a third time this year in July.
This Bloomberg article put in an appearance on their website at 11:09 p.m. Denver time on Wednesday evening—and was updated about fourteen hours later. I thank Elliot Simon for digging up this story for us.
China on a CBD spree, foreign investors are buying up big in Sydney and Melbourne
[CBD is an acronym for “Central Business District” – Ed]
China is pouring billions into Australia’s commercial property and the sector is heating up, encouraged by high returns soon to be followed by higher prices.
The market trends triggered a warning against complacency from the Reserve Bank which drew attention to the financial threat posed by a commercial property collapse.
This very interesting 3:39 minute video clip was posted on the abc.net.au Internet site earlier this week—and I thank Australian reader Grahame Goodman for bringing it to our attention.
Kiwi dollar tumbles after New Zealand cuts interest rates
New Zealand’s dollar tumbled on Thursday after the country’s central bank cut interest rates and said policy could be eased further if China’s economy continues to slow down.
While moves among other major currencies were generally more subdued, the yen also slipped after reported comments by a Japanese ruling party lawmaker put renewed focus on the possibility of yet more monetary easing by the Bank of Japan.
A rate cut from the Reserve Bank of New Zealand had been widely expected by investors. But the RBNZ also revised down its outlook for global growth and outlined a scenario where a sluggish China, the country’s main trading partner, could push its benchmark rate towards 2 percent – a record low.
The Kiwi dollar slid by over 2 percent after the policy statement to as low as $0.6256, before recovering a little to around $0.6297 in European trading, still down 1.7 percent on the day.
This Reuters news item, filed from London, appeared on their Internet site at 9:11 a.m. BST yesterday morning, which was 4:11 a.m. in New York—EDT plus 5 hours. I thank Elliot Simon for this story.
Gold council lauds plan to paperize, lend, and suppress price of Indian public’s gold
Welcoming the Cabinet’s approval for gold schemes, the World Gold Council today said this would help monetise privately held gold stocks and make precious metal an integral part of the financial system.
It also demanded that the gold bond and monetisation schemes should be made attractive for customers and then well-marketed.
The Cabinet today cleared a gold monetisation scheme aimed at tapping a part of an estimated 20,000 tonnes of idle gold into the banking system and a gold bonds scheme under which the government will be issuing sovereign bonds as an alternative to the precious metal.
“The Union Cabinet’s announcements reflect both a very practical approach and a long-term view of gold,” World Gold Council India Managing Director Somasundaram PR said in a statement. “The question is no longer whether the scheme will work but how to make it attractive for customers.”
Somasundaram said this is a step toward gold becoming an integral part of the larger financial system and a fungible asset class in its own right.
As I said in a similar story in yesterday’s column—I wish them luck, as every other government scheme like this one has failed miserably. This one will as well. The story appeared on the Economic Times of India website at 10:20 p.m. IST on their Wednesday evening—and I found it embedded in a GATA release yesterday.
Koos Jansen: India’s precious metals imports explosive in August
In the month of August 2015, India imported 126 tonnes of gold and 1,400 tonnes of silver, according to data from Infodrive India. Gold import into India is rising after a steep fall due to government import restrictions implemented in 2013.
Year-to-date India has imported 654 tonnes of gold, which is 66% up year on year. 6,782 tonnes in silver bars have crossed the Indian border so far this year, up 96% y/y.
Gold import is set to reach an annualized 980 tonnes, which would be up 26% relative to 2014 and would be the second highest figure on (my) record—and my records go back to 2008.
This commentary by Koos showed up on the bullionstar.com Internet site yesterday some time—and it’s another story I found on the gata.org website very early Thursday morning. It’s definitely worth reading.
Gold Bullion Allowed As Collateral in China
China’s Shanghai Gold Exchange said it will allow physical gold to be used as collateral on futures contracts from September 29, according to a statement posted on its website this morning as reported by Reuters.
Physical gold will be permitted to be used for up to 80 percent of margin value, according to the statement.
Reuters then corrected the story and the second refiled story was changed and given a different focus:
The Shanghai Gold Exchange said on Thursday it will allow A-shares, exchange-traded funds and treasuries to be used as collateral for gold trading.
This gold-related Reuters news story—and Mark O’Byrne’s comments on it—easily falls into the absolute must read category—and it was posted on the goldcore.com Internet site yesterday. And as Mark pointed out—“It shows, once again, that gold is slowly but surely becoming a cash equivalent—and as money again.” I thank Brad Robertson for sending it—and for his last contribution to today’s column. There was also a Bloomberg story about this contained in a GATA release yesterday. It’s headlined “Shanghai Gold Exchange Expands Trading Collateral to Help Volume“.
Lawrence Williams: Could gold drop below $1,000? If there’s a stock market crash – yes
Another week and gold has been falling again, but investors don’t know which way to turn given the yo-yo performance of the major stock indices – particularly in the U.S. and Asia. Gold has been damaged by yet another set of indicators which have suggested to some that the U.S. Fed will next week make its long heralded decision to start raising interest rates. It has talked itself into the position that it will have to raise rates sooner or later or lose whatever credibility it may have, but there’s still so much uncertainty around that the decision could yet be postponed to later in the year, or even into next although this observer feels that sooner rather than later is the most likely outcome. Indeed any decision to start raising rates will probably come as a relief to the gold investment community with the gold price having been knocked down almost every time the Fed is predicted to take the decision to start the process.
But should a Fed interest rate move be bad for gold. The market is fixated on this and has been subjected to prediction after prediction from the major bank analysts suggesting that higher interest rates lead to reduced investment in gold as the latter doesn’t generate interest. Yet if the Fed does raise interest rates it is only likely to be by around a paltry 0.25 of a percent for fear of a severe adverse impact on what has been recently a very fragile stock market. The market is giving mixed signals at the moment. Will it return to the bull market of last year – or perhaps crash horribly? Indeed the recent market fluctuations – the Dow fell back over 200 points again yesterday after a big recovery the day before (and is down just short of 9% year to date) – must be exceedingly worrying for the Fed as well as to the investment community. European markets are also falling back today after falls in Asian markets overnight. This is all reminiscent of 2007-2009 when the major stock markets virtually halved in value in a few months. The Fed will be running scared that an interest rates rise, even as small a one as would seem likely to be implemented, could be the trigger to turn a stock market correction into a rout.
This commentary by Lawrie put in an appearance on the Sharps Pixley website yesterday sometime—a I thank Patricia Caulfield for her final offering in today’s column.
The PHOTOS and the FUNNIES
The WRAP
On the one hand we have potentially exploding investment demand for 1,000 oz bars, given that this is the form offering the greatest current relative value and is what the COMEX and world ETFs are denominated in and what industrial users will rush to when the shortage becomes apparent and their deliveries are delayed; and on the other hand a we have a very limited potential supply. This is the stuff of which constitutes a potential historic shortage.
If the coming silver shortage is as inevitable as I suggest, then why hasn’t it occurred yet? The short answer is that COMEX futures trading has come to so dominate the price of silver (and now other commodities) that the surest sign of a physical commodity shortage, a rising price, is blunted. The price of silver is not depressed because of a surplus of real metal, retail or wholesale, or a lack of physical demand, it is depressed by a surplus of derivatives contracts. In essence, the artificial price emanating from the COMEX is short-circuiting the true functioning of the law of supply and demand.
What it comes down to is how much longer the COMEX-orchestrated price can delay the physical silver crunch and shortage to come? I don’t have the answer, but I am confident that this is the right question. I am also confident that once a wholesale physical silver shortage kicks in, that shortage can’t be further contained by derivatives trading and most likely will have to burn itself out the old-fashioned way – by allowing the market to discover the true clearing price. The trick, of course, is to be positioned before the physical shortage is reflected in price. — Silver analyst Ted Butler: 09 September 2015
With the exception of palladium, the other three precious metals weren’t allowed to get far yesterday—and as I pointed out at the top of this column, despite the fact that gold and silver finished in positive territory, their associated equities didn’t enjoy that luxury.
Here are the 6-month charts for the Big 6 commodities once again. With the exception of copper, all the rest of these key commodities are currently trading below their respective 50-day moving averages—and until JPMorgan et al allow them to rise, or are ordered to stand clear, that’s where they will remain until the technical funds in the Managed Money category are forced to cover as the 50-day moving average finally gets penetrated to the upside as that moving average descends.
And as I said in my comments on the U.S. dollar index at the top of this column—“What the currencies are doing is irrelevant to the precious metal prices when JPMorgan et al are in total control of the COMEX futures market. They, and they alone, are determining what the producing class gets for its services everywhere on Planet Earth—and until some country or some entity is prepared to stand up and put their marker down on this issue, that’s the way things will remain.”
Here’s the 10-year U.S. dollar chart vs. the spot gold price that Nick Laird was kind enough to provide in the wee hours of this morning—and if you can spot any real direct correlation between the two on this chart [gold in yellow, dollar in blue] I’d love to hear about it, as the two traces aren’t even close to being the inverse of each other.
And as I type this paragraph, the London open is only ten minutes away. I see that there were tiny rallies in all four of the precious metals during the morning session in the Far East on their Friday. But starting around 1:30 p.m. Hong Kong time, the selling pressure appeared—and all are back at, or slightly below, their Thursday closing prices in New York.
Net HFT volume in gold is sitting right at the 10,000 contract mark—and silver’s net volume is a very quiet 2,550 contracts. The dollar index faded about 15 basis points, but has rallied back to only down 4 basis points at the moment.
Not much should be read into the current price action because of the very low volumes, but it can’ help be noted that the price trends, once again, are down.
Today we get the latest Commitment of Traders Report for positions held at the close of COMEX trading on Tuesday—and as I said in my Thursday missive, it’s just too bad that Wednesday’s big engineered price declines won’t be in it. I’m hoping for little or no change in silver—and some improvement in gold. Whatever the numbers show, I’ll have them for you in tomorrow’s column.
And as I post today’s effort on the website at 5:00 a.m. EDT, I see that all four precious metals continue on their respective downward paths—and all are now well below their closes in New York on Thursday afternoon. Net gold volume is now approaching 20,000 contracts—and in silver, the net volume is over 4,600 contracts. The dollar index is down 5 basis points.
Since today is Friday, nothing will surprise me from a price perspective when I roll out of bed later this morning. The Fed meeting next week hangs over all markets like some sort of Stygian gloom—and at this point all we can do is wait it out and see what happens.
Enjoy your weekend—and I’ll see you here on Tuesday.
Ed
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