15 September 2015 — Tuesday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
Not surprisingly, the gold price got sold down in the first two hours of trading on Sunday evening in New York. The Far East low came at exactly 8 a.m. Hong Kong time on their Monday morning—and the price rallied until about noon, which was its high of the day—and once again the selling pressure showed up. There were multiple lows at $1,104 spot starting shortly after 9 a.m. in New York trading—and the rally that began at 10:30 a.m. EDT, was capped for the final time at 1 p.m. just after breaking above its Friday closing price. From there it got sold down until the 1:30 p.m. Comex close a half-hour later—and the price traded flat from there.
The low and high ticks were reported by the CME Group as $1,109.80 and $1,102.60 in the December contract.
Gold was closed on Monday in New York at $1,108.40 spot, down 30 cents from Friday. Net volume was a tiny 64,500 contracts, so it was easy for anyone with an agenda to micromanage the gold price—and that’s what they did.
Silver got sold down about eight cents in the first fifteen minutes of trading in New York on Sunday evening—and that as pretty much it until “da boyz” showed up shortly after 12 o’clock noon in Hong Kong trading. The low that mattered was put in around 10:30 a.m. in New York—and although the silver price rallied a nickel from there, it really didn’t do much for the rest of the day.
The high and low ticks were recorded as $14.59 and $14.31 in the December contract.
Silver finished the Monday session at $14.41 spot, down 21 cents from Friday’s close. Net volume was a very light 22,400 contracts.
The platinum price chart looks almost the same as the silver chart for Monday, with a double low at $950 being put in at, and just after, the London p.m. gold fix. After that the price rallied a few dollars before chopping sideways into the close. Platinum finished the day at $953 spot, down 17 bucks from Friday’s close.
The palladium price wasn’t spared, either. It rallied a bit in morning trading in the Far East—and after that the trend was generally down, with the low tick in that metal coming at 10:30 a.m. EDT in New York as well. From there it rallied about five bucks off its low, closing the Monday session at $587 spot, down 7 dollars from its close on Friday.
According to the folks over at the ino.com Internet site, the dollar index closed late on Friday afternoon in New York at 95.21—and it chopped around barely above the 95 mark until minutes before 2 p.m. Hong Kong time on their Monday afternoon. Then it took about a 40 basis point header in just over half an hour—and ‘gentle hands’ had to show up about twenty-five minutes before the London open on their Monday morning. The subsequent ‘rally’ began minutes after the London open, with a brief down/up dip at the London p.m. gold fix—and the 95.43 high tick came at exactly 10:30 p.m. in New York, which was the low tick for almost all four of the precious metals yesterday. By noon it was back down to around the 95.25 mark—and chopped sideways for the remainder of the day. The index closed at 95.28—up 7 basis points on the day.
As always, here’s the 6-month dollar chart so you can put the previous day’s action in some perspective.
The gold stocks opened down, hit their low ticks at, or shortly before, the London p.m. gold fix. Their highs came minutes after 11 a.m. in New York—and they edged lower until shortly before 2 p.m. EDT—and then some kind souls sold them down about 2.5 percent. They didn’t recover much from there—and the HUI finished the Monday session down 1.88 percent, erasing all of Friday’s gain, plus much more.
The silver equities followed the same price path as the gold shares, but once they rallied into positive territory, they pretty much stayed there for the remainder of the day. Nick Laird’s Intraday Silver Sentiment Index closed up 0.67 percent, despite the fact that underlying metal wasn’t allow a sniff of positive territory in New York yesterday.
The CME Daily Delivery Report showed that zero gold and only 5 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday, of the 5 contracts issued by ADM, JPMorgan stopped 2 of them for its own account.
The CME Preliminary Report for the Monday trading session showed that gold open interest in September fell by 3 contracts, leaving 107 still open—and silver o.i. in September dropped 18 contracts, leaving 445 still open.
There were no reported changes in GLD yesterday, but an authorized participant removed a very decent 1,145,098 troy ounces from SLV. I doubt very much if this withdrawal was price related, because except for Monday, the price action in silver has been sideways, as all rallies during that period were capped.
It was another big sales day at the U.S. Mint on Monday. They sold an eye-watering 25,000 troy ounces of gold eagles—4,000 one-ounce 24K gold buffaloes—and 573,000 silver eagles. Those are the biggest 1-day sales numbers for both gold eagles and gold buffaloes that I can remember. I was totally taken aback when I saw them. Ted says that for sure this is not ordinary retail demand—and I agree completely.
Someone with very deep pockets that knows far more about future events than us, is most likely the one that’s buying up everything that the U.S. and Canadian mints are producing.
There was no gold reported received over at the COMEX-approved depositories on Friday—and the only ‘out’ activity was at Canada’s Scotiabank, as they shipped 16,644 troy ounces out the door. Here’s the link to that activity.
But it was another monster day in silver, as 1,361,804 troy ounces were reported received—and 914,916 troy ounces were sent out the door for parts unknown. Of the amount received—780,716 troy ounces disappeared into JPMorgan’s depository—which now holds 67.2 million ounces of silver. Their depository had zero ounces in it five days before the drive-by shooting in silver on May 1, 2011. This silver depost is over and above the amount that Ted mentioned in his weekly review on Saturday—and which now appears as the quote in The Wrap section of today’s column. The link to that in/out action is here—and it’s worth a quick look.
The activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Friday was equally as impressive. They reported receiving 14,346 kilobars—and shipped out 6,603 of them. As per usual, all of the activity was at the Brink’s, Inc. depository—and the link to that, in troy ounces, is here.
I have a fairly decent number of stories for you today—and there are also a decent number of them that fall into the, absolute must read, or must read category, so I hope you have the time to do them justice, as they are more than worth your while.
CRITICAL READS
Fed to dominate week of central bank meetings
The U.S. Federal Reserve takes center stage in the coming week, eclipsing industry data from China, another grim inflation reading from the euro zone and rate decisions in Japan and Switzerland.
Guessing whether the Fed hikes rates on Thursday or opts for a later date, perhaps December, is something of a futile exercise because even the rate setters appear to be wavering and the decision will probably come down to the wire.
An unexpected drop in the jobless rate to 5.1 percent and an upward revision in second quarter growth to 3.7 percent support calls for a hike as the labor market tightens and utilization is at its best level since the global financial crisis.
Yet, futures only price a 24 percent chance of a hike as emerging markets, particularly China, struggle, inflation remains benign and some notable Fed watchers, like former Treasury Secretary Larry Summers, argue against a hike.
This Reuters article, filed from Frankfurt, put in an appearance on their Internet site very early on Sunday morning EDT—and I thank Patricia Caulfield for today’s first story.
BIS fears emerging market maelstrom as Fed tightens
Debt ratios have reached extreme levels across all major regions of the global economy, leaving the financial system acutely vulnerable to monetary tightening by the U.S. Federal Reserve, the world’s top financial watchdog has warned.
The Bank for International Settlements said the wild market ructions of recent weeks and capital outflows from China are warning signs that the massive buildup in credit is coming back to haunt, compounded by worries that policymakers may be struggling to control events.
“We are not seeing isolated tremors but the release of pressure that has gradually accumulated over the years along major fault lines,” said Claudio Borio, the bank’s chief economist.
The Swiss-based BIS said total debt ratios are now significantly higher than they were at the peak of the last credit cycle in 2007, just before the onset of global financial crisis.
This commentary by Ambrose Evans-Pritchard showed up on the telegraph.co.uk Internet site at 8:30 a.m. BST yesterday—which was 3:30 a.m. in New York. I found this must read news item in a GATA release. The ‘thought police’ at The Telegraph have been busy, as the headline to the story now reads “U.S. interest rate rise could trigger global debt crisis“.
Extended interview with U.S. economist and author Jim Rickards
This is the week that global markets have been nervously awaiting. Janet Yellen is to announce whether the US Fed will raise interest rates for the first time since the financial crisis. The implications for stock, bond, currency and commodity markets are likely to be big. From New York, U.S. economist and author of Currency Wars and the Death of Money, Jim Rickards speaks to Ticky Fullerton of the Australian Broadcasting Corporation.
This 8:02 minute video clip with Jim and Ticky was posted on the abc.net.au Internet site on their Monday morning “down under”—and it’s worth your while, as Jim isn’t pressed for time like he is on the American networks. I thank Harold Jacobsen for sending it along.
Ex-NYSE Chief Admits “It’s Not a Fair Market…It’s Bad For the Country“
When a digital dickweed exposes the reality “the equity markets are broken,” it can be shrugged off as the rantings of a kid in his mom’s basement. When an experienced investigative writer claims “the markets are rigged,” it is drowned out with mainstream media propaganda forcing words like liquidity and cost effectiveness to hide the truth. But when Dick Grasso, the former head of the NYSE says Black Monday’s flash-crash exposes the reality that “it’s not a fair market,” it is going to be hard to regain the collapsed confidence of an investor-class multiple-times-burned by an ever more arrogant group of ‘operators’ on Wall Street.
Mr. Grasso told the WSJ that he recommends a broad-based review of the markets as a first step toward addressing the problems he sees…
“A fast market is not necessarily a fair market, as evidenced by that Monday open,” he said in a clip of the interview viewed by The Wall Street Journal, referring to the tumultuous early trading on Aug. 24.
The action that day has drawn scrutiny from regulators, exchanges, institutions and everyday investors—and sparked discussions about how to tweak the market to prevent similar problems. There were nearly 1,300 trading halts, most of them in the first part of the day, and some stocks dropped rapidly before recouping losses in a matter of minutes.
“Frankly, some of the things that went on that day need very close scrutiny,” Mr. Grasso said in an interview Friday with the Journal. “A day like that, where Facebook’s shares go from $86 to $72 to $84 in a matter of minutes will cause the public to lose confidence in the markets.
And let’s not forget the COMEX casino while, we’re at it Mr. Grasso. This Zero Hedge piece appeared on their website early Saturday afternoon—and I thank Brad Robertson for sharing it with us.
9/11 Fourteen Years Later — Paul Craig Roberts
Millions of refugees from Washington’s wars are currently over-running Europe. Washington’s 14-year and ongoing slaughter of Muslims and destruction of their countries are war crimes for which the US government’s official 9/11 conspiracy theory was the catalyst. Factual evidence and science do not support Washington’s conspiracy theory. The 9/11 Commission did not conduct an investigation. It was not permitted to investigate. The Commission sat and listened to the government’s story and wrote it down. Afterwards, the chairman and co-chairman of the Commission said that the Commission “was set up to fail.”
Phil Restino of the Central Florida chapter of Veterans For Peace wants to know why national anti-war organizations buy into the official 9/11 story when the official story is the basis for the wars that anti-war organizations oppose. Some are beginning to wonder if ineffectual peace groups are really Homeland Security or CIA fronts.
The account below of the government’s 9/11 conspiracy theory reads like a parody, but in fact is an accurate summary of the official 9/11 conspiracy theory. It was posted as a comment in the on the telegraph.co.uk Internet site on September 12, 2009, in response to Charlie Sheen’s request to President Obama to conduct a real investigation into what happened on September 11, 2001.
Paul is right on the money with this story about 9/11. It appeared on The Daily Bell website last Friday—and falls into the absolute must read category. I thank Scott Otey for bringing it to my attention—and now to yours.
Equity markets and credit contraction — Alasdair Macleod
GoldMoney research director Alasdair Macleod writes that falling stock prices are impugning government claims that economies are doing well and intensifying concern about the decline in bank credit. This, Macleod adds, may invite even more direct market intervention by government, including government buying of stocks, dropping “helicopter money” on investors, and attacking alternative investments.
Macleod’s commentary is headlined “Equity Markets and Credit Contraction” and I found it on the gata.org Internet site on Saturday. It’s worth reading.
A Flock of Black Swans — Jeff Thomas
In 1999, the Federal Reserve, under Alan Greenspan, convinced the US Congress to repeal the Glass-Steagall Act, which had been passed in 1932 to eliminate banks’ abilities to offer loans far beyond the actual level of their deposits.
When I learned of this development in 1999, I anticipated that it was put through to allow banks to once again recklessly loan money and that the outcome would be essentially the same as what occurred in 1929 – a depression of major proportions.
Major depressions do not occur overnight. They go in downward waves, interrupted at intervals by false recovery waves. The first major event of what would become the Greater Depression took place in 2007 with the housing crash. A year later, right on cue, came the first of the stock market crashes.
Since then, the US Federal Reserve and the governments and central banks of much of the world have been involved in Band-Aid solutions to postpone further crashes, in spite of the fact that the economy is, in fact, a “dead economy walking.”
This commentary/infomercial showed up on the internationalman.com Internet site yesterday—and I thank their senior editor, Nick Giambruno, for sending it our way.
“There’s Just No Cash” Oil Price Increase Will Not Come Fast Enough to Save Alberta
“There’s just no cash.” That’s the Coles Notes from a senior banker describing the book of oil service loans he manages for one of Alberta’s leading lenders. There’s simply not enough cash flow to support current levels of debt.
Bankers and borrowers have kicked the can down the road about as far as they can as more oilfield service (OFS) and exploration and production (E&P) companies default on their loans and seek more relief on lending covenants. While a significant oil price increase to lift all the sinking boats will surely come, it won’t happen soon enough. More of the same won’t work.
Oil industry debt is everyday news. But the discussion is about the symptoms, not the ailment.
Companies cannot borrow their way out of debt. Equity capital is only available at distressed valuations. Specialized OFS assets will fetch only a fraction of replacement cost—if somebody actually wants them. Although oil and gas reserve valuations are down by half, borrowers are being forced to sell them anyway to repair balance sheets. The last four months of 2015 will be very difficult for any company with meaningful amounts of debt. Same for their lenders, the other signatories to the loan agreement.
Great shades of the early 1980s! It will be much worse this time, as the fall will be from a substantially higher financial base than existed thirty-five years ago. As an Alberta resident for the last 42+ years, I’ll be watching this carefully. This commentary appeared on the oilprice.com Internet site on Sunday—and is worth reading if you have the interest. I thank reader U.D. for passing it around yesterday.
Germany border crackdown deals blow to Schengen system
Germany’s decision to re-establish national border controls on its southern frontier with Austria deals a telling blow to two decades of open travel in the 26-nation bloc known as the Schengen area.
The abrupt move to suspend Schengen arrangements along the 500-mile border with Austria will shock the rest of the E.U. and may spur it towards a more coherent strategy to deal with its migration crisis. Yet there will be little sympathy for Berlin from Hungary, Italy or Greece, which are bearing the brunt of the mass arrivals of people from Syria, Iraq, Eritrea and Afghanistan.
The German decision came as E.U. interior ministers prepared to meet for a crucial session on the issue. There are deep splits over Brussels’ campaign, backed by Berlin, to establish a new compulsory quota system to distribute asylum seekers across the E.U. on a more equitable basis.
Thomas de Maizière, the German interior minister, announced that while Austria was the focus of the new border controls, all of Germany’s borders would be affected. As the E.U.’s biggest country straddling the union’s geographical centre, Germany is the lynchpin of the Schengen system. It borders nine countries. Without Germany’s participation, Schengen faces collapse.
This news item was posted on The Guardian‘s website early on Sunday evening BST—and it’s the second offering of the day from Patricia Caulfield.
Border-free Europe unravels as migrant crisis hits record day
Two decades of frontier-free travel across Europe unraveled on Monday as countries re-established border controls in the face of an unprecedented influx of migrants, which broke the record for the most arrivals by land in a single day.
Germany’s surprise decision to restore border controls on Sunday had a swift domino effect, prompting neighbors to impose checks at their own frontiers as thousands of refugees pressed north and west across the continent while Hungary sealed the main informal border crossing point into the European Union.
A majority of EU interior ministers, meeting in Brussels, agreed in principle to share out 120,000 asylum seekers on top of some 40,000 distributed on a voluntary basis so far, EU president Luxembourg said. But details of the deal, to be formalized on Oct. 8, were vague with several ex-Communist central European states still rejecting mandatory quotas.
Austria said it would dispatch its military to help police carry out checks at the border with Hungary after thousands of migrants crossed on foot overnight, filling up emergency accommodation nearby, including tents at the frontier.
Thousands more raced across the Balkans to enter Hungary before new rules take effect on Tuesday, which Budapest’s right-wing government says will bring a halt to the illegal flow of migrants across its territory.
This Reuters article, co-filed from Roske, Hungary—and Vienna, is datelined 6:35 p.m. EDT on Monday evening, but is an update from the original story that was filed very early Monday morning EDT. Patricia Caulfield sent me both of them.
Putin Said to Explore Sidelining Assad Even as He Arms Him
Russia is sending signals to the U.S. and Saudi Arabia that it may allow Syria’s embattled leader Bashar al-Assad to be eased out of power as it seeks to forge a united front against Islamic State and retain influence in the region, officials and Syrian opposition leaders said.
Officials from the three countries, as well as from the opposition, have been negotiating possible terms for sidelining Assad since at least June, when President Vladimir Putin hosted Saudi King Salman’s son, Deputy Crown Prince Mohammed, they said. Saudi Arabia is Assad’s main regional enemy, while Russia is his longtime ally. Since then, Russia’s whirlwind diplomacy has brought key officials from across the region to Moscow for talks.
Syria’s civil war has traumatized the Middle East, spilling into neighbors and enabling the rise of Islamic State amid the turmoil. The latest Russian-backed efforts to end the conflict come as its fallout spreads westwards, with hundreds of thousands of migrants seeking refuge in the European Union.
Like every other aspect of the war in Syria, though, Russia’s policy isn’t straightforward. U.S. and Russian officials say they’re weighing a transition plan that would strip Assad of power while remaining interim head of state.
It’s hard to know how much of this Sunday afternoon Bloomberg ‘story’ is the truth—and how much is something less than that. But coming from the New York main stream media, it should be read with your eyes wide open. This offering is courtesy of Patricia Caulfield as well.
U.S. backs those who want to use terrorists against Assad – Lavrov
Russian Foreign Minister Sergey Lavrov says Washington is making a grave mistake by appeasing those who want to use the terrorist group Islamic State to force the ouster of Syria’s president, Bashar Assad.
On Wednesday, Foreign Minister Sergey Lavrov spoke on the phone with his US counterpart, Secretary of State John Kerry, who expressed concern over Russian support to the Syrian leader.
“Kerry was also pushing the very strange idea that supporting Bashar Assad in his anti-terror fight only strengthens the positions of ISIS, because the sponsors of ISIS would pump even more arms and money into it,” Lavrov said.
“It’s an absolutely upside-down logic and yet another attempt to appease those who use terrorists to fight dissenting regimes,” the Russian FM said, mentioning U.S. attempts to cooperate with various extremist groups in Syria over the past few years.
This news item appeared on the Russia Today Internet site last Thursday—and it’s an item I found in yesterday’s edition of the King Report.
China sells record FX in August, shows pressure after devaluation
China’s central bank and commercial banks sold a net 723.8 billion yuan ($113.69 billion) of foreign exchange in August, by far the largest on record, highlighting how capital outflows intensified in the wake of the yuan’s devaluation last month.
The previous largest outflow, in July, totaled 249.1 billion yuan ($39.13 billion). The figures are based on Reuters calculations using central bank data, the latest of which was released on Monday.
The figures show the price China is paying to keep its currency from falling further in the face of concerns about the health of the economy and as financial markets anticipate a rise in U.S. interest rates.
Shen Jianguang, an economist at Mizuho Securities in Hong Kong, said the figures suggest selling pressure on the yuan remains strong.
This Reuters article, filed from Shanghai, put in an appearance on their website at 7:02 a.m. EDT yesterday morning—and I thank Richard Saler for sending it along.
Visualizing China’s Mind-Boggling Consumption of the World’s Raw Materials
Over the last 20 years, the world economy has relied on the Chinese economic growth engine more than it would like to admit. The 1.4 billion people living in the world’s most populous country account for 13% of global GDP, which is significant no matter how it is interpreted. However, in the commodity sector, China has another magnitude of importance. The fact is that China consumes mind-bending amounts of materials, energy, and food. That’s why the prospect of slowing Chinese growth is likely to continue as a source of nightmares for investors focused on the commodity sector.
The country consumes a big proportion of the world’s materials used in infrastructure. It consumes 54% of aluminum, 48% of copper, 50% of nickel, 45% of all steel, and 60% of concrete. In fact, the country has consumed more concrete in the last three years than the United States did in all of the 20th century.
China is also prolific in accumulating precious metals – the country buys or mines 23% of gold and 15% of the world’s silver supply. With many mouths to feed, China also needs large amounts of food. About 30% of rice, 22% of corn, and 17% of wheat gets eaten by the Chinese. Lastly, the country is no hack in terms of burning fuel either. Notably, China uses 49% of coal for power generation as well as metallurgical processes in making steel. It also uses 13% of the world’s uranium and 12% of all oil.
It should be noted that based on the SGE withdrawals, that the gold import number is not correct. But, having said that, China does use an impressive amount of raw materials. This rather brief Zero Hedge piece from last Friday has an embedded chart is worth a minute of your time. This article is courtesy of Brad Robertson.
Founder of Bitcoin exchange MtGox charged with embezzlement
Japanese prosecutors have charged the head of collapsed Bitcoin exchange MtGox with embezzlement, amid fraud allegations over the disappearance of hundreds-of-millions-of-dollars-worth of the virtual currency.
The indictment of France-born Mark Karpeles, 30, comes after he was taken into police custody in Tokyo last month over the affair. He remained in custody on Friday but has the option of petitioning the court for release pending trial.
The charges are tied to allegations that Mr Karpeles falsified data, while another relates to claims he pocketed millions of dollars of Bitcoin deposits.
He has been held without formal charge for six weeks, as allowed under Japanese law.
This news story appeared on The Telegraph‘s website last Friday afternoon BST—and I found it in a GATA release on Saturday.
Once booming, Nevada gold output falls to 1988 level
Gold production in Nevada fell to less than 5 million ounces in 2014, the first time since 1988 that output of the precious metal has dipped so low.
A new state Division of Minerals report shows 4.94 million ounces of the precious metal was taken from 30 Nevada mines in 2014. There was about 5.5 million ounces of gold produced in Nevada in 2013.
The peak year in recent memory was 1998, with just under 9 million ounces.
Richard Perry, administrator of the Division of Minerals, said it appears production has leveled off in the 5 million ounce range over the past five years. While production has fallen, Nevada mines still throw of gold valued at $5.5 billion, at $1,100 per ounce, he said.
“We need better gold prices to see more projects and new mining,” Perry said.
We’ll see higher gold prices when JPMorgan et al are instructed to to back off in the COMEX futures market—and not one minute before that. This story, filed from Carson City, was posted on the reviewjournal.com Internet site early Saturday afternoon MDT—and it’s another gold-related news item that was in a GATA release on the weekend. The rocks with a coat of gold-coloured paint at the top of the story, is a real cheesy touch.
Montreal police make arrests in $10M silver heist
Police have arrested four men in connection with last week’s brazen theft of 16 tonnes of silver from the Port of Montreal.
Constable Anie Lemieux says the men will be questioned overnight.
Lemieux says some of the loot has been recovered by investigators as well.
“They found silver bars during their searches, but we do not have a count on how much silver has been found so far,” she said.
This very interesting silver-related news item showed up on the cbc.ca website last Wednesday—and I thank Ted Butler for alerting me to this news event.
Mounties allege inside theft at Royal Canadian Mint
On Sept. 16, in Courtroom No. 5, an Ottawa man is to appear on charges with a Hollywood ring: smuggling gold from the fortress-like Royal Canadian Mint.
And not just a flake or two. Leston Lawrence, 34, of Barrhaven, is facing five criminal charges, including theft over $5,000, laundering the proceeds of crime, possession of property obtained by crime, and, in the often arcane language of the Criminal Code, “conveying metal out of the Mint.”
According to a document sworn by a Royal Canadian Mounted Police officer, the charges relate to activity between Nov. 27, 2014, and March 12 this year.
It was all kept hush-hush, of course. No news release from any law-enforcement agency, or the Mint, headquartered on Sussex Drive; no amounts disclosed. But Ottawa is a small town where the sidewalks whisper. So a tipster called us.
A Mint spokesman declined comment on the matter, except to say an unidentified employee had been terminated earlier this year. Curiously, Christine Aquino said the Mint had been “informed” of the charges by the Mounties, rather than instigating the investigation itself.
In other words, the alleged theft appears to have gone undetected at the Mint.
You just couldn’t make this stuff up, now could you? This gold-related story was posted on the Ottawa Citizen‘s website last Friday—and it’s another item I found on the gata.org Internet site on Saturday.
Gold Bulls Can’t Shake Fed Woes as $2.6 Billion Wiped From ETPs
Gold bulls can’t shake the specter of higher U.S. interest rates as Federal Reserve policy makers gather this week.
Prices are trading near a one-month low, investors are dumping holdings through exchange-traded products, and the metal’s volatility is rebounding. A resilient U.S. job market and dollar strength are adding to gold’s woes, spurring money managers to cut their bets on a rally by more than a third.
More than $2.6 billion was wiped from the value of gold ETPs in the past three weeks as investors awaited the central bank meeting. While Fed-fund futures show lowered expectations for monetary tightening this week, traders are still pricing in more than a 50 percent chance for a rate increase by the end of the year. Higher borrowing costs reduce bullion’s allure because it doesn’t pay interest, unlike competing assets such as bonds.
“The likelihood is the Fed moves this year, and for now a tighter Fed and stronger dollar are both keeping a lid on gold,” said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees $127 billion. “When I look at the gold market, that’s the biggest overriding factor.”
What a piece of anti-gold bulls hit this is and, except for the last paragraph, it ain’t worth reading. However, I do thank Patricia C. for digging it up for us.
Reg Howe: Pray for the pope of gold
Gold researcher and litigator Reg Howe writes that the logic of Pope Francis’ critique of capitalism would support an encyclical in favor of sound money, insofar as unlimited money creation in the hands of governments and big banks causes war, environmental degradation, and all sorts of exploitation and damage to society — exploitation and damage that the pope well might have seen in his native country, Argentina.
The gold world hasn’t heard from Reg in years—and I was amazed to see his name pop up in this GATA release yesterday. Howe’s commentary is headlined “Pray for the Pope of Gold” and is posted at his Internet site, the goldensextant.com—and it’s an absolute must read. I thank Chris Powell for the above words of introduction. He added the following comment to his above intro—“Of course if, as some suspect, Francis is essentially just another socialist—and all socialists, when pressed, become totalitarians, the pope is less likely to demand sound money than a ban on cash.”
India plans to increase gold supply from domestic mines
They are calling it the great Indian gold rush. Within months Indian officials are expected to auction licences for new gold mines across the country, and abandoned colonial-era mines are set to be revived.
India is the world’s largest consumer of the precious metal, importing more than 1,000 tonnes a year. In August alone 120 tonnes were brought in, and demand is expected to rise still further in the runup to Diwali and weddings season. Local production of gold totals less than two tonnes.
Successive governments have struggled to turn Indians away from gold, which economists say accounts for almost a third of the country’s deficit.
Now ministers want to increase domestic supply and believe gold worth more than L2.5 billion can be mined in the dusty hills of Kolar, in the southern state of Karnataka, with more to come from other sites in the west and centre of the country.
It will be years before any gold shows up at Indian mines—and it’s a very safe bet that whatever is dug up won’t make any serious dent in India’s gold import requirements. This interesting story, filed from New Delhi, appeared on theguardian.com Internet site at 3:33 p.m. BST on their Monday afternoon—and it’s another item I found in a GATA release yesterday.
China’s SGE gold demand beating global new mined supply — Lawrence Williams
As we have pointed out in previous articles, Chinese gold demand as represented by deliveries out of the Shanghai Gold Exchange (SGE) has been exceptionally strong over the summer months – a time when demand is usually weak. But quite how strong has been remarkable by any standards.
All physical gold sold on the Chinese market has to be delivered through the SGE, so by Chinese calculations the amount of gold withdrawn from the SGE equates to national demand. While this may be disputed by mainstream gold analysts like Metals Focus, GFMS and CPM Group, the principal differences between their calculations – which suggest Chinese demand is falling – and the SGE withdrawal figures, which suggest the complete opposite, appear to be down to the classification of what actually comprises consumption and the analysts do, for example, seem to ignore gold used in the financial sector in their calculations, and no doubt other categories which might reasonably be included in an overall real demand figure. But what is worrying to those trying to understand the full picture is that currently there is an enormous discrepancy between the SGE gold deliveries and the analysts’ consumption calculations. Whatever the truth of the matter, SGE delivery figures, which are announced every week, a week in arrears, have to be at the very least a terrific indicator of Chinese interest, and demand, for physical gold and the figures for July and August suggest that this is running at a huge level.
This commentary by Lawrie put in an appearance on the sharpspixley.com Internet site yesterday—and it’s a must read for sure.
The Coming Silver Shortage — Ted Butler
From the very beginning of my epiphany 30 years ago about a silver price manipulation on the COMEX, was the unavoidable conclusion that if prices were artificially depressed as I believed, then at some point a physical shortage must develop. If the price of any commodity were set too low for too long a period of time, then the dynamics of the law of supply and demand would eventually crimp supply and encourage demand to such an extent that a physical shortage must develop and end the manipulation.
I was never much of a geopolitical or monetary analyst or even a conspiracy theorist, as my background and interest was always in commodity supply and demand analysis. As such, I knew that the most potent force for driving prices higher was an actual commodity shortage. If there is not enough of a commodity to meet demand, then the price must go to whatever high level is necessary to satisfy demand. That is a primal market force few would argue with.
What drew me to silver in 1985 was that its price appeared to be too low and not in conformity with credible evidence that more silver was being consumed than was being produced, which necessitated a steady draw down in world silver inventories. In trying to reconcile these two conflicting circumstances – low price in spite of current demand being greater than current production – I stumbled on concentrated short selling on the COMEX and, much later, leasing. The discovery only convinced me more that this must end with silver in a pronounced physical shortage; as excessive COMEX paper short selling and the uneconomic dumping of actual metal (leasing) couldn’t last indefinitely or invalidate forever the law of supply and demand.
This absolute must read commentary by Ted was posted on the silverseek.com Internet site yesterday.
The PHOTOS and the FUNNIES
I was at the usual spot on Saturday afternoon—and this great blue heron was there. It’s the first time I’ve seen one at this particular fishin’ hole—and I’ve been coming to this pond for three years now. It was obviously just passing through heading south for the winter—and in its non-breeding colours, it was impossible [at least for me] to tell if it was a male or female. Even with the 400mm lens, plus the 1.4x converter, plus cropping the heck of them, these are the best shots I could salvage—and they’ll have to do until a better photo op with this species presents itself. The first is from 150+ meters—and the other three from a bit over half that distance. I only included the fourth photo because it’s the only one of the four where you can see it has two legs—and landing gear of some size. Don’t forget the ‘click to enlarge’ feature to bring them up to full screen size.
The WRAP
The COMEX silver warehouse turnover [last] week was one for the record books. I remember a previous weekly movement of 11.1 million oz back in March, but this week had only four business days thanks to the Labor Day holiday. That made this week’s daily average movement nearly 2.8 million oz, or more than the daily total world production of silver (mine plus recycling). Total COMEX silver inventories fell again, to fresh year and a half lows of 166.4 million oz, down 1.5 million oz for the week. I’m sure the drop in total inventories will attract attention, but if my hunch is correct, the real story of the physical silver turnover will continue to be overlooked.
I had been waiting to see if JPMorgan would ever move the last of the 2.5 million oz or so I believed the bank would physically transfer into its own COMEX silver warehouse and promised to report in any event. I had been expecting metal to come into the JPM COMEX warehouse as a result of the bank taking delivery of 4 million oz in the COMEX July futures delivery and this week’s movement of 3 million oz into that vault seemed to resolve the matter. Best as I can determine, JPMorgan has now moved every ounce of silver (close to 20 million oz) it had taken delivery of on COMEX futures this year. Why pay another warehouse to store your own metal?
By itself, my prediction wasn’t particularly critical—and it merely reflected a continuation of a pattern JPMorgan had established in its quest to acquire silver. But seeing the pattern unfold as expected not only adds to the proof of JPM acquiring silver, it adds to the credibility of the data itself. — Silver analyst Ted Butler: 12 September 2015
With volume very much on the lighter side, it was, as usual, easy for anyone with an agenda to keep the precious metal prices under control—and it wouldn’t surprise me in the slightest to see this continue until the Fed news is released on Thursday.
Why Thursday, you ask? Well, to tell you the truth, I though it was supposed to be on Wednesday, as these Fed meetings start on a Tuesday, which is today—and end the following day, with the smoke going up the chimney at 2 p.m. EDT. Well, not this time. I was informed of this change by subscriber ‘OkieBill’ on Sunday afternoon after he’d read my Saturday column—and I have no idea why there’s been a change for this particular meeting. Naturally, I’m suspicious of it, as I’ve seen no official explanation why it’s “different this time”—so I’ll be really paying attention from now until Thursday afternoon.
Here are the 6-month charts for the Big 6 commodities—and as I said before, not much should be read into Monday’s price action because of the low volume levels.
And as I type this paragraph, the London open is less than ten minutes away—and the gold price hasn’t done much in Far East trading on their Tuesday morning—and is about unchanged at the moment. The other three precious metals are down a hair. Net HFT gold volume is right at 11,000 contracts—and in silver it’s a hair under 2,850. The roll-over/switch volume in both metals is bouncing off zero. The dollar index, which had been down a bit in mid morning trading in Hong Kong, is now back to unchanged. Nothing to see here.
Today, at the close of COMEX trading, is the cut-off for this Friday’s Commitment of Traders Report—and I’ll be very surprised if we have any kind of price/volume action that matters between now and 1:30 p.m. EDT.
And as I fire today’s column out the door at 5:10 a.m. EDT I note that all four precious metals continued to get sold off a bit more in early London and Zurich trading, but are off their current lows at the moment. Net HFT volume in gold is around 17,500 contracts—and in silver it’s up to 4,700 contracts. This is very similar price action to what we observed yesterday at this time—and volumes are pretty light as well. The dollar index has been trading in a 20 basis point range since the day began in the Far East on their Tuesday—and it’s currently down 7 basis points.
As I said, I’m not expecting much in the way of price/volume activity until ‘the word’ comes out on Thursday, as it appears that JPMorgan et al have things firmly hand as usual.
See you tomorrow.
Ed
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