2015-09-16

16 September 2015 — Wednesday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM

It was another low-volume day in gold where not much happened.  There was the usual sell-off starting late in Hong Kong trading—and the smallish rally that began just before the London open, got dealt with in the usual way by “all the usual suspects” shortly after the COMEX open.  The New York low came at 3 p.m. EDT in electronic trading—and it rallied a few dollars into the close from there.

With gold trading in barely a six dollar range for the entire Tuesday session, the high and low ticks aren’t worth looking up.

Gold finished the Tuesday session in New York at $1,105.10 spot, down another $3.30 from Monday’s close.  Net volume was fumes and vapours at 72,300 contracts—and almost all the roll-overs that mattered were out of the October contract and into future months, mostly December.

The silver price didn’t do a lot yesterday but, like gold, had it’s usual negative bias starting around noon Hong Kong time.  And also like gold, the absolute low tick of the day in silver came in a spike low at, or just before, the noon London silver fix.  The ‘rally’ after that, if you wish to dignify it with that name, took the price back to almost unchanged.

Silver closed yesterday in New York at $14.405 spot, down 0.5 cents.  Net volume was exceedingly light at only 20,200 contracts, with almost all the roll-overs out of December 2015 and into March, May and July 2016, which I thought rather strange.

Platinum rallied six bucks by 9 a.m. in Hong Kong trading on their Tuesday, but that was as high as it was allowed to get.  The low tick came shortly before 11 a.m. in Zurich—and from there it chopped higher into the close.  Platinum finished the trading day at $961 spot, up 8 dollars from Monday.

Palladium’s low came minutes after the Zurich open—and it began to rally from there.  It really began to head higher the moment that the COMEX opened in New York yesterday morning, but judging from the saw-tooth pattern from there until noon, it appeared that there was some sort of selling pressure around to make sure that the rally didn’t get too rambunctious to the upside, which it looked like it wanted to do.  It managed to break above the $600 spot price mark to stay minutes after 2 p.m. in electronic trading—and it traded sideways from there.  Palladium finished the Tuesday session at $603 spot, up 16 bucks from Monday’s close.

The dollar index closed late on Monday afternoon in New York at 95.28—and then proceeded to chop lower in a fairly tight range, with the 95.13 low tick coming minutes before the 8:20 a.m. COMEX open in New York yesterday morning.  The 95.66 high tick came at noon EDT—and it chopped sideways in a very tight range into the close, finishing the Tuesday session at 95.59—up 31 basis points from Monday.

And, as always, here’s the 6-month U.S. dollar index chart to keep the one-day changes in some sort of perspective.

After opening down a bit, the gold stocks rallied into positive territory almost immediately—and by 10:30 a.m. EDT their high ticks were in—and then the stocks sold off to just above unchanged.  There was some hope [from me!] that they would close there, but that was dashed when the gold price got sold down to its 3 p.m. New York low—and the stocks followed.  However, they did rally in the last few minutes of trading, as the HUI closed down only 0.24 percent.

Like on Monday, the silver stocks opened in the red and, like gold, rallied quickly to their highs.  And although there was a bit of a sell-off as afternoon trading went along in New York, Nick Laird’s Intraday Silver Sentiment Index closed in the black to the tune of 1.22 percent.

The CME Daily Delivery Report showed that 4 gold and 55 silver contracts were posted for delivery within the COMEX-approved depositories on Thursday.  In silver, the largest short/issuer was ABN Amro with 50 contracts—and the only three long/stoppers that mattered were the three “usual suspects”—Canada’s Scotiabank out of its in-house account—JPMorgan out of its in-house account—and the Japanese bank Mizuho for its client account.  The contracts involved were 27, 15 and 8 respectively.  The link to yesterday’s Issuers and Stoppers Report is here.

The CME Daily Delivery Report for the Tuesday trading session showed that gold open interest for September rose by 3 contracts.  The new o.i. number is 110 contracts.  Silver o.i. in September is now 440 contracts, as it dropped by 5 contracts yesterday.  We’re halfway through September and we still have a lot of silver contracts left on the table—and one has to wonder why the short/issuers are being so pokey slow about delivering the physical metal required.

There were no reported changes in GLD yesterday—and as of 8:04 p.m. EDT yesterday evening, there were no reported changes in SLV, either.

Another day—and another sales report from the U.S. Mint.  They sold another 9,000 troy ounces of gold eagles—1,500 one-ounce 24K gold buffaloes—and another 236,500 silver eagles.

It was a huge day in gold over at the COMEX-approved depositories on Monday.  There was 32,150.000 troy ounces reported received at Canada’s Scotiabank, which works out to precisely 1,000 kilobars [1 metric tonne] of the stuff—and there was a very chunky 157,105 troy ounces shipped out the door for parts unknown.  The big surprise was that 122,124 troy ounces was shipped directly out of the ‘Eligible’ category over at the JPMorgan Chase depository.  That should have the nut-ball lunatic fringe in fits for the the rest of the week.  Also at JPMorgan there was a tiny transfer of 8,941 troy ounces from the Registered to the Eligible category as well.  The link to that action is here.

There was a story about COMEX gold inventories, including a discussion on Registered vs. Eligible storage on the Kitco website yesterday.  It’s headlined “Don’t Believe The Hype; Comex Gold Warehouses Well Stocked – Two Analysts“—and linked here.  I thank reader U.D. for passing that around late last night.  It’s also posted in the Critical Reads section as well.  It’s an absolute must read—as are my associated comments.

But it’s still the activity in silver that continues to astound, as 1,196,070 troy ounces were reported received—and another 745,413 troy ounces were shipped out.  Of the amount received—604,480 troy ounces ended up in JPMorgan’s depository once again.  JPMorgan now holds a hair more that 40 percent of the total silver inventories held by all six COMEX-approved depositories.  The ‘click to enlarge’ feature helps here.

Not to be forgotten in yesterday’s silver report from the COMEX are the two changes in inventories from the Registered back to the Eligible category at the Brink’s, Inc. and CNT depositories.  At Brinks, it was a 568,092 troy ounces—and at CNT it was 601,231 troy ounces.  More grist for the nut-ball mill.  The link to all the above action is here.

It’s still rather busy over at the COMEX-approved gold kilobar depositories in Hong Kong.  On their Monday they reported receiving 6,949 kilobars—but shipped out only 294 of them.  All of the activity was at the Brink’s, Inc. depository once again—and the link to that, in troy ounces, is here.

I’ve cut the number of stories way back today, so I hope you’ll find something worth your time from what I’ve selected.

CRITICAL READS

Manufacturing in U.S. Declines by Most Since January 2014

Factory production declined in August by the most since January 2014 as automakers scaled back after a surge the month before and a stronger dollar weighed on demand from overseas customers.

The 0.5 percent decrease followed a revised 0.9 percent advance in the prior month, the Federal Reserve reported Tuesday. Excluding motor vehicles, factory production was unchanged. Total industrial output, which also includes mines and utilities, fell 0.4 percent after a 0.9 percent gain.

Tepid economies abroad, elevated inventories in the U.S. and an appreciating dollar signal limited order growth for domestic producers. The strength of manufacturing will depend on whether consumer spending remains resilient and corporate investment can build momentum.

“It’s a combination of inventory adjustment domestically and weak growth abroad not aided by the strong dollar,” said Josh Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, who correctly projected the drop in industrial output. “I would expect for the next few months, we’re going to get soft numbers here and any improvement is going to be gradual.”

This Bloomberg news item put in an appearance on their Internet site at 7:54 a.m. Denver time on Tuesday morning—and today’s first story is courtesy of Patricia Caulfield.

Fed Credibility at Stake as Interest-Rate Decision Looms

The U.S. Federal Reserve, facing this week its biggest policy decision yet under Chair Janet Yellen, puts its credibility on the line regardless of whether it waits or raises interest rates for the first time in nearly a decade.

In a way it is a “damned if you do, damned if you don’t” situation for the Fed despite months of fine-tuning its message, dissecting economic data, and carefully building a consensus around the idea of a cautious and gradual “lift-off” from near zero rates towards levels it considers normal.

A chorus of prominent detractors, including former U.S. Treasury Secretary Lawrence Summers, argues raising rates now would be wrong given market turmoil caused by worries about China’s economic health and global growth, and the absence of inflation risks at home.

Others say the central bank’s credibility will suffer if it delays the long-telegraphed move and prolongs investors’ guessing game about the timing of the lift-off.

West Virginia reader Elliot Simon sent me this story yesterday, along with the comment that—“Their credibility isn’t at stake at all.  They don’t have any!”  That’s a fact, Jack!  This news item was posted on the newsmax.com Internet site at 4:12 p.m. EDT on Monday afternoon.

Now the DOJ Admits They Got it Wrong — William K. Black

By issuing its new memorandum the Justice Department is tacitly admitting that its experiment in refusing to prosecute the senior bankers that led the fraud epidemics that caused our economic crisis failed. The result was the death of accountability, of justice, and of deterrence. The result was a wave of recidivism in which elite bankers continued to defraud the public after promising to cease their crimes. The new Justice Department policy, correctly, restores the Department’s publicly stated policy in Spring 2009. Attorney General Holder and then U.S. Attorney Loretta Lynch ignored that policy emphasizing the need to prosecute elite white-collar criminals and refused to prosecute the senior bankers who led the fraud epidemics.

It is now seven years after Lehman’s senior officers’ frauds destroyed it and triggered the financial crisis. The Bush and Obama administrations have not convicted a single senior bank officer for leading the fraud epidemics that triggered the crisis. The Department’s announced restoration of the rule of law for elite white-collar criminals, even if it becomes real, will come too late to prosecute the senior bankers for leading the fraud epidemics. The Justice Department has, effectively, let the statute of limitations run and allowed the most destructive white-collar criminal bankers in history to become wealthy through fraud with absolute impunity. This will go down as the Justice Department’s greatest strategic failure against elite white-collar crime.

The Obama administration and the Department have failed to take the most basic steps essential to prosecute elite bankers. They have not restored the “criminal referral coordinators” at the banking regulatory agencies and they have virtually ignored the whistleblowers who gave them cases against the top bankers on a platinum platter. The Department has not even trained its attorneys and the FBI to understand, detect, investigate, and prosecute the “accounting control frauds” that caused the financial crisis. The restoration of the rule of law that the new policy promises will not happen in more than a token number of cases against senior bankers until these basic steps are taken.

This longish, but must read commentary, appeared on the neweconomicperspectives.org Internet site last Thursday—and I thank reader U.D. for passing it around on Saturday.  It was too much for Tuesday’s column, so here it is today.

Dr. Dave Janda interviews your humble scribe

The good doctor and I had a 25-minute chat on Sunday afternoon over at all-talk radio WAAM-FM out of Ann Arbor, Michigan.  And if you’re just sitting there watching grass grow or paint dry at the moment, this might be slightly more entertaining!  It was posted on the davejanda.com Internet site on Monday morning.

Brazil Real Leads Losses as Goldman Sachs Doubts Political Will

Brazil’s real led global losses as Goldman Sachs Group Inc. questioned the viability of government proposals to shore up its finances. The Ibovespa rebounded on speculation interest rates will be kept on hold.

The currency traded near a 12 year-low, extending this year’s rout to 31 percent and posting the biggest slide among the world’s 16 major currencies. Most of the government measures proposed on Monday require approval from Congress, which could be difficult as President Dilma Rousseff struggles with record-low popularity and the longest recession since the 1930s, said Alberto Ramos, the chief Latin America economist for Goldman Sachs.

“The market is digesting the proposals and realizing that a lot of measures require Congressional approval and the government does not have that much capital in Congress,” Ramos said in an interview from New York.

Brazil is planning to reduce spending by 26 billion reais ($6.8 billion) next year and boost taxes after Standard & Poor’s cut the nation’s credit rating to junk last week. The plan buys the government some time as Fitch Ratings and Moody’s Investors Service still rate the nation investment grade, Mark McCormick, a strategist at Credit Agricole SA, said from New York.

This Bloomberg article, complete with at 2:36 minute video clip, showed up on their Internet site at 6:33 a.m. MDT yesterday morning—and it’s courtesy of Richard Saler.

Fired London Currency Traders Won’t Leave Quietly

As banks try to clean up trading floors beset by benchmark-rigging scandals, not all fired workers are leaving quietly. London’s specialist employment courts offer a chance to get justice, recover lost bonuses, or just hurl dirt at former colleagues.

Six cases involving former currency traders at Citigroup Inc., HSBC Holdings Plc and Lloyds Banking Group Plc have emerged in the last month. Some of the traders say they were unfairly swept up in clear-outs of currency desks at the center of regulatory probes into the manipulation of foreign-exchange markets.

More than 30 traders were fired, suspended or put on leave over the last two years since the foreign-exchange investigations started, with about $10 billion in fines levied against banks globally.

Legal conflicts often follow periods of upheaval in the finance sector. Lay-offs linked to the London interbank offered rate scandal triggered a spate of lawsuits. Most were settled out-of-court by banks keen to avoid dragging up historic allegations of misconduct. In the years after the 2008 financial crisis, fired bankers were telling London employment judges they had been made scapegoats for systemic failings.

I had a story about this late last week, but here’s an update.  This one appeared on the Bloomberg website at 5 p.m. MDT on Monday, but was subsequently updated about twelve hours later.  I thank Brad Robertson for the first of two contributions in a row.

UniCredit to Fire 10,000 as E.U. Bank Pink Slip Pandemonium Continues

Hours ago, it was revealed that Deutsche Bank is set to fire some 23,000 people or around a quarter of its workforce. The move comes as new CEO John Cryan works to cut costs and boost profitability after the bank’s co-CEOs Anshu Jain and Jürgen Fitschen were shown the door as investors became impatient with efforts to boost profitability and as a string of settlements and seemingly endless accusations of malfeasance underscored deep seated problems with the bank’s corporate culture.

Of course as we noted this morning, the layoffs at Deutsche don’t say much for Europe’s economic “recovery” either and may also suggest that far from creating jobs, the persistence of ZIRP has crimped margins forcing banks to make up the difference by getting leaner.

In any event, Deutsche Bank isn’t the only European lender that’s axing people. As tipped by CEO Federico Ghizzoni earlier this month, UniCredit is now set to layoff 10,000 employees across its Italian, Austrian, and German operations.  Here’s Reuters….

And there, ladies and gentlemen, is your European recovery – 33,000 pink slips in a single day.

This Zero Hedge news item showed up on their website at 12:42 p.m. EDT on Monday afternoon—and I thank Brad Robertson for digging it up for us.

Hungary seals border with Serbia – in pictures

Hungary finishes fortifying its long-promised border fence, blocking a pathway that has brought more than 160,000 refugees and migrants into northern Europe since the start of the year.

They say a picture is worth a thousand words, but in the case of this first rate photo essay, they’re worth more than that.  It’s worth a minute of your time.  It was posted on theguardian.com Internet site at 3:13 p.m. BST on their Tuesday afternoon, which was 10:13 a.m. EDT in New York.  I thank Patricia Caulfield for sending it our way.

Refugee crisis: thousands may lose right of asylum under E.U. plans

European governments are aiming to deny the right of asylum to innumerable refugees by funding and building camps for them in Africa and elsewhere outside the European Union.

Under plans endorsed in Brussels on Monday evening, E.U. interior ministers agreed that once the proposed system of refugee camps outside the union was up and running, asylum claims from people in the camps would be inadmissible in Europe.

The emergency meeting of interior ministers was called to grapple with Europe’s worst modern refugee crisis. It broke up in acrimony amid failure to agree on a new system of binding quotas for refugees being shared across the E.U. and other decisions being deferred until next month.

The lacklustre response to a refugee emergency that is turning into a full-blown European crisis focused on “Fortress Europe” policies aimed at excluding refugees and shifting the burden of responsibility on to third countries, either of transit or of origin.

This news story, filed from Brussels, put in an appearance on The Guardian‘s website at 7 a.m. BST on their Tuesday morning, which was 2 a.m. EDT.  It’s the second offering in a row from Patricia Caulfield.

Turkey on the verge of civil war, says Kurdish leader

The leader of Turkey’s main pro-Kurdish political party has warned that the country is on the verge of civil war between state forces and militant Kurdish separatists. The remarks made by Selahattin Demirtas, co-chairman of the Peoples’ Democratic party, followed scenes of violence and firebombing in Turkey last week, with hundreds of reported attacks by nationalist mobs on offices belonging to Demirtas’s party, known by the Turkish abbreviation HDP, as well as on ordinary Kurds.

The incidents were partially a reflection of simmering anti-Kurdish sentiment in a week that saw 29 Turkish security personnel killed in three days at the hands of suspected Kurdish PKK guerrillas. Since the resumption of hostilities earlier this summer between the state and the PKK, considered a terror organisation by Washington and Ankara, more than 100 soldiers have reportedly died. Turkish airstrikes have pounded PKK positions in the south east and across the border in the Kurdish areas of northern Iraq.

The conflict has claimed some 40,000 lives since it started in 1984. A ceasefire in 2013 led to a fragile peace. Elections in June saw Demirtas and the HDP clinch 14% of the vote and thereby prevent the ruling Justice and Development Party (AKP) of President Recep Tayyip Erdogan from winning a parliamentary majority. But coalition talks failed, tensions with the PKK mounted, and Demirtas and his allies will now have to do it all over again in elections scheduled for November. That is, unless, things spiral further.

This is another story from theguardian.com Internet site yesterday—and I thank Patricia Caulfield for this one as well.

West ‘ignored Russian offer in 2012 to have Syria’s Assad step aside’

Russia proposed more than three years ago that Syria’s president, Bashar al-Assad, could step down as part of a peace deal, according to a senior negotiator involved in back-channel discussions at the time.

Former Finnish president and Nobel peace prize laureate Martti Ahtisaari said western powers failed to seize on the proposal. Since it was made, in 2012, tens of thousands of people have been killed and millions uprooted, causing the world’s gravest refugee crisis since the second world war.

Ahtisaari held talks with envoys from the five permanent members of the U.N. security council in February 2012. He said that during those discussions, the Russian ambassador, Vitaly Churkin, laid out a three-point plan, which included a proposal for Assad to cede power at some point after peace talks had started between the regime and the opposition.

But he said that the U.S., Britain and France were so convinced that the Syrian dictator was about to fall, they ignored the proposal.

“It was an opportunity lost in 2012,” Ahtisaari said in an interview.

This is yet another story from The Guardian that’s courtesy of Patricia C.—and it’s worth reading as well.  It was posted on their website at 9:20 a.m. BST yesterday morning, which was 4:20 a.m. in Washington.

Hayman Capital’s Bass: China’s real problem is its banking sector

While many are watching its stock market, China’s real problem may lie with its banking system, according to one hedge fund manager.

Kyle Bass, Hayman Capital Management founder and managing partner, told CNBC’s “Squawk on the Street” on Tuesday that Chinese banks will likely experience losses that may affect the country as a whole.

“Those that are watching whether Chinese stocks go up or down aren’t paying attention, in my opinion, to what the real problem is,” Bass said. “And the real problem is the loans in this banking sector.”

This story, along with two video clips totalling 6:46 minutes that run concurrently, appeared on the CNBC website late yesterday morning in New York—and it’s definitely worth your time.  I thank Richard Saler for bringing this interview to our attention.

Freight Goes to Heck, First Globally, Now Even in the U.S.

The Dow Jones Transportation index has been warning us: by August 25, it was down 19% year-to-date before bouncing. It’s now off 13%. Not all is well in the transportation sector – and by extension in the global economy.

The World Trade Monitor, when I last wrote about it on July 22, painted a very un-rosy picture of global trade by having dropped the most since the Financial Crisis.

In granular detail, the weekly China Containerized Freight Index (CCFI) fell to 820.91 on Friday, hobbling along near its multiyear low set in June. It tracks contractual rates and spot rates for shipping containers from major Chinese ports to major ports around the world. It’s 22% below where it was in February and 18% below where it had been in 1998, when it was set at 1,000!

Spot rates from Shanghai to the U.S. West Coast per 40-foot container equivalent unit (FEU) are down 33.4% from a year ago, according to the Shanghai Containerized Freight Index (SCFI); spot rates from Shanghai to the US East Coast are down 41%. The Drewry Container Freight spot rate from Hong Kong to Los Angeles is down 38%. That’s the east-bound trade, where rates had been collapsing all year.

This Wolf Richter commentary showed up on David Stockman’s website on Monday sometime—and it’s courtesy of Kathmandu reader Nitin Agrawal.

JP Morgan: calling the bottom

JP Morgan joins the trickle of institutions and funds eyeing the mining sector. In a note this week with a few stock recommendations, it slapped a buy (i.e. overweight) on the sector in general Monday, ending what has been a bearish view of the commodities and mining sectors.

The view has been supported by high profile investors putting their money where their mouth is.  Carl Icahn bought an 8% stake in Freeport McMoRan recently, taking on one of the hardest hit among North American headquartered miners that faces a heavy debt load, but owns top tier mining assets. George Soros bought a sizeable stake in Barrick Gold, which has seen a modest pickup in fund interest recently.

JP Morgan’s argument for miners was simple: that there is little downside left in the space. Mining has been punished more harshly than most sectors in recent years on the back of falling commodity prices, of course. But JP Morgan sees commodity prices as stabilizing in the coming year or so. That, combined with the depths mining shares are plumbing, has the vulture in JP Morgan circling.

Now that JPMorgan is loaded up with physical silver, amongst other things I would presume, it’s time to run up commodity prices.  This news item, filed  from Halifax, Nova Scotia, was posted on the mineweb.com Internet site at 8:24 a.m. BST on their Tuesday morning—and it’s definitely worth reading.  I thank Patricia Caulfield for sharing it with us.

Investment strategist Joe McAlinden reverses view and predicts recovery for gold, oil and housing

With the markets in whiplash mode, Joe McAlinden, founder of McAlinden Research Partners and former chief global strategist with Morgan Stanley Investment Management, believes volatility is going to stick around for a while, and we might see a correction double of what we’ve had so far. In this interview with The Gold Report, McAlinden bucks conventional wisdom to argue that an interest rate hike is good for gold and oil, and lays out his investing strategy for this period of market uncertainty.

The Gold Report: For more than a decade, you led Morgan Stanley Investment Management’s global investment strategy; now you own your own research firm based on your observations of the industry for more than 50 years. How do you explain the volatility in the markets right now and how should investors position themselves to prepare for what is coming?

Joe McAlinden: It has been a wonderful bull market, a wild ride going all the way back to 2007 when the market made its top. That was followed by a horrendous plunge. We’ve not only made that back, but the market has reached highs that were 36% above the 2007 highs. I had been concerned recently, however, that price-earnings ratios have become elevated and we are seeing other spooky similarities to the conditions that prevailed prior to the 1987 crash, including the absence of a more than a 10% correction for three years and a breakdown of small-cap stocks. The market could be vulnerable to some kind of major shock. I believe that the big shock is only beginning to unfold and that as it does, this correction will get considerably worse, perhaps double what we’ve had so far and maybe even worse than that.

This news item is definitely worth reading as well.  Like the previous story, Patricia Caulfield found this on one the mineweb.com Internet site yesterday.

About the COT Reports — Courtesy of the CFTC

Antecedents of the Commitments of Traders (COT) reports can be traced all the way back to 1924. In that year, the U.S. Department of Agriculture’s Grain Futures Administration (predecessor to the USDA Commodity Exchange Authority, in turn the predecessor to the CFTC), published its first comprehensive annual report of hedging and speculation in regulated futures markets.

Beginning as of June 30, 1962, COT data were published each month. At the time, this report for 13 agricultural commodities was proclaimed as “another step forward in the policy of providing the public with current and basic data on futures market operations.” Those original reports then were compiled on an end-of-month basis and published on the 11th or 12th calendar day of the following month.

Over the years, the CFTC has improved the Commitments of Traders reports in several ways as part of its continuing effort to better inform the public about futures markets.

The COT reports provide a breakdown of each Tuesday’s open interest for markets in which 20 or more traders hold positions equal to or above the reporting levels established by the CFTC. The weekly reports for Futures-Only Commitments of Traders and for Futures-and-Options-Combined Commitments of Traders are released every Friday at 3:30 p.m. Eastern time.

This very interesting commentary about the origins of the COT Report are posted on the cftc.gov website—and I thank Ted Butler for pointing them out.

Don’t Believe The Hype; Comex Gold Warehouses Well Stocked – Two Analysts

Gold inventories in Comex vaults remain well stocked and there is no looming physical gold crisis despite continued rumors, according to not one but two precious-metals research reports released on the same day.

Monday, U.K.-based bank Barclays and U.S.-based independent research firm CPM Group both released reports dismissing rumors that there is a physical gold crisis in today’s marketplace as gold held in Comex vaults remains at low levels.

Barclays analysts went into even more detail in their dismissal of “shortage” rumors, providing three reasons why they are false.

The U.K. bank noted that the current ratio shows that total open interest equals about 200 ounces of gold to one ounce of physical delivery. “However, we believe this does not reflect the physical delivery mechanism in the gold futures market,” the analysts said.

They explained that only front-month contracts are eligible for physical delivery. According to their research, “the total curve opening interest has grown relative to front contracts; thus, using total opening interest would overestimate the relevant financial interest.”

Barclays also said that it is important to look at how many days there are before first-notice day. The bank notes that open interest normally declines sharply in the last few weeks before first-notice day.

This is the Kitco story I linked in my COMEX-approved depository stocks update in the first part of today’s column—and I thank reader U.D. once again for passing it around last night.  As Ted Butler has been going on about for years, the distinction between registered and eligible COMEX warehouse stocks is basically meaningless, as the COMEX gold data report yesterday proves in spades.  Please, please, please dear reader—stay miles away from the nut-ball lunatic fringe, as you can’t believe everything you read on the Internet.   All that does is screw up your thinking, as they can say whatever they want without fear of recrimination.  I don’t have that luxury—and neither does Ted.

India’s gold bond scheme is structured to cut demand for metal

After the first round of deliberation and feedback, the gold bond scheme and the gold monetisation scheme have been approved by the cabinet and some details have been released in the public domain.

The final operational contours of both the schemes, including the most important — interest rates, are still awaited. I am making an attempt to simplify the 2 schemes for the benefit of the readers and outline some of the key ingredients that will need to be finalised if these schemes are to be successful.

First the basics – The Gold Bond Scheme (also called the Sovereign Gold Bond Scheme) is aimed at retail investors who buy physical gold for investment purposes. The Gold Monetisation Scheme, on the other hand, is a major revamp of the existing Gold Deposit Scheme that encourages existing holders of gold to surrender their physical gold and convert it into electronic format.

Writing for the newspaper DNA in Mumbai yesterday, investment adviser Harsh Roongta explains, if a bit inadvertently, how the Indian government’s gold bond scheme is structured to reduce demand for the monetary metal and thus push its price down. Roongta’s analysis is headlined “Gold Bond Scheme Comes with Attendant Costs” and it’s posted at dnaindia.com Internet site at 6:40 a.m. IST on their Tuesday morning.  I found this gold-related news item on that gata.org Internet site—and I thank Chris Powell for writing this paragraph of introduction.

Economic Times: India imported 138 Tonnes of Gold in August

Year-to-date India has imported 666 tonnes of gold, up 69% year on year.  Annualized gold import is set to reach 998 tonnes – the second highest amount on record and 35% of this year’s world mining production.

Currently demand from India is strong, which fits with alleged scarcity in the gold market.

Official data on the website of the DGCIS has yet to be released, although I think The Economic Times got their hands on a preview sheet from the DGCIS.

Silver import data was not disclosed by The Economic Times. When it’s released I will update this post below.

This brief news item showed up on the bullionstar.com Internet site yesterday—and I thank Patricia Caulfield for her final contribution in today’s column.  The two embedded charts are definitely worth a quick look.  The original story headlined “Gold imports jump 140% to $4.95 billion in August” appeared on The Economic Times of India website yesterday sometime, but was updated earlier this morning IST—and I thank Nitin Agrawal for his second offering in today’s column.

Gold: The Once and Future Currency — Jim Rickards

Is gold off the bottom?

No one knows for sure. If the Fed raises interest rates on Thursday (which we do not expect), the effect will be highly deflationary and gold prices could move lower, at least temporarily.

Conversely, if the Fed doesn’t raise rates and offers some reason to believe it won’t raise them for the foreseeable future (so-called “forward guidance”), then gold prices could rally in anticipation of inflation.

It’s unfortunate that markets are now reduced to reading Janet Yellen’s mind. But that’s what happens after seven years of market intervention and central planning by the Federal Reserve.

For those who are fully allocated in physical gold (I recommend about 10% of investible assets), there’s nothing more to do on that front. You can just sit tight and enjoy the ride.

I’m sure that Jim wrote that last paragraph just for my benefit!  As you know, I’ve been “all in” for many years—and it wasn’t exactly the smartest investment decision I ever made.  Let’s see how it works out going forward.  This commentary/infomercial put in an appearance on the dailyreckoning.com Internet site yesterday sometime—and I thank Ken Hurt for sliding it into my in-box very late last night EDT.  It’s definitely worth reading.

The PHOTOS and the FUNNIES

Australian reader Grahame Goodman sent me a newspaper article about the Australian Magpie and, needless to say, except for it’s black and white outfit, it’s a good deal different than the one we have in North America.  It looks more like our crow. They have several species and subspecies of this bird—but they’re all related, although their colour scheme [plus a few other things] are noticeably different.  They’re described as one of Australia’s most accomplished songbirds—and that’s a definite improvement over the annoying call of the North American variety.  The photos here are of the white-black magpie—C. tibicen tyrannica—I believe.  But I reserve the right to be wrong.

The WRAP

In trying to explain why I think the frantic physical movement of silver in and out of the COMEX warehouses is so important, let me reference an unusual silver event last week in the hopes of explaining why – the heist of $10 million of silver from the port of Montreal. Late reports indicate some of the stolen silver has been recovered and five suspects nabbed.

At first, it may seem somewhat odd that 600,000 troy oz of silver would be transported in a common shipping container (instead of an armored vehicle), but the reality is that this is the standard shipping unit for silver – approximately 600 bars weighing 1,000 troy oz each, or 120 COMEX contracts. Total weight – 42,000 pounds or 19 metric tonnes. I was scratching my head thinking this theft had to be a sophisticated inside job for the simple reason that each 1,000 oz bar has its own unique serial number, hallmark and weight (rarely 1,000 oz exactly); meaning it would have to be re-melted by an unscrupulous refiner, probably overseas (China). But now that the silver thieves have been busted, maybe they weren’t so sophisticated after all (someone should have told them that bank fraud is a better line of criminal work).

Last week, the equivalent of more than 18 full truckloads of 600,000 oz of silver were either brought into or taken out from the six COMEX silver warehouses over four business days. The tempo of this physical movement, both this week and for just about every week for the past four and a half years is nothing short of stunning. It is undeniable that the physical movement took place, as not only is there no motive for misrepresentation; considering the actual mechanics of the movement, there are so many “suits” involved, (warehousemen and trucking officials, lawyers and auditors) it would be criminal to lie about it even if there was some motive for doing so. – Silver analyst Ted Butler: 12 September 2015

It was another day of not much to report.  Volumes were fumes and vapours once again—and all the volume, as it is just about every day, was “da boyz” having their way with the speculators.  One set of speculators gaming another set of speculators, as Ted says.  But JPMorgan et al in the Commercial category have an ulterior motive.  Besides never losing money on their trades, they’re there to control the price—and so far they have an unblemished record in both arenas.

Here are the 6-month charts for the Big 6 commodities once again—and based on what I see here, we’ll see some decent improvements in the Commercial net short position of both gold and silver in Friday’s Commitment of Traders Report.

I was rather relieved to see two of the stories that showed up in the Critical Reads section of today’s column.  The first was headlined “JP Morgan: calling the bottom“—and the second “Investment strategist Joe McAlinden reverses view and predicts recovery for gold, oil and housing“.  I’m speculating here, but I think we’re getting the inside hint from the powers-that-be that the end of the price management scheme in the Big 6 commodities is nigh.  When JPMorgan and an ex-Morgan Stanley analyst are saying the same thing on the same day about forty-eight hours before ‘the word’ comes down from Janet Yellen tomorrow, it certainly gives me pause.  The commentary by Jim Rickards  “Gold: The Once and Future Currency” certainly fit into that mold as well.

By the way, I found out from reader Curtis Bok why there’s an extra day taken for this set of Fed meetings—and that’s because of Rosh Hashanah, the Jewish New Year.  I’d never heard of it before.  Apparently they celebrate it at the Fed with a day off from work.  Here in Alberta we note the Ukrainian New Year, as there is a huge legacy Ukrainian population in this province—and we’ve just started making a big deal of the Chinese New Year in the last five years.  But there are no holidays as such surrounding them.  But if you control the Fed—and thus the financial system of the entire planet—I suppose you can name any day a holiday at the Eccles building.  Reader Curtis Bok was unhappy about it because “It was a new one to me—and very disappointing—like when Sandy Koufax couldn’t pitch for the Dodgers in Game 1 of the 1965 World Series because of Yom Kippur”

As I’ve mentioned several times in the past week or so, the last two times being in my Saturday column—and again in my comments to Dr. Dave Janda on Sunday, the only way that the powers-that-be can create inflation without money printing is by allowing commodity prices to rally—and starting inflation that way.  And as I also pointed out, a run from paper assets to hard assets could prove lethal to the current financial system, so if a managed commodity inflation is the perceived way out, it will be interesting to see how it’s allowed to unfold—and at what speed.

Of course that’s wild-ass speculation on my part, but after 44 years without a gold standard, the Fed is all out of aces, regardless of what the decision is on interest rates tomorrow—and the current deflationary spiral that threats to suck the entire planet into it at some point in the not-to-distant future, cannot be allowed to continue.  The only way I can see it ended without running the printing presses white hot world wide, is to have a ‘bubble’ in hard assets and hope like hell they can keep it contained—and that’s a very fine line they would have to walk.   But, like their interest rate decision, they’ve left this asset bubble thingy to the very last minute as well—and it might turn around and bite them at some point.

Jim Rickards, who has deep inside knowledge of what goes on at the Fed, says that they really have no idea what they’re doing over there—and I believe every word of that.

And as I type this paragraph, the London open is less that ten minutes away.  The gold price isn’t doing a thing, silver has climbed back to unchanged—and both platinum and palladium, which had also been sold down a bit in Far East trading on their Wednesday morning, are also close to being back to unchanged as well.  Net gold volume is nonexistent at 8,700 contracts—and silver’s volume is 2,480 contracts, with only 4 contracts worth of roll-overs.  It’s dead, dead, dead out there.  The dollar index had a down/up dip of about 18 basis points during the Far East trading session—and is only down 1 basis point as London opens.

Yesterday, at the close of COMEX trading was the cut-off for this Friday’s COT Report—and as I mentioned at the top of The Wrap, I’m expecting to see some improvement in the Commercial net short positions in both silver and gold in Friday’s COT Report.

And as I post today’s column on the website at 4:55 a.m. EDT, I note that there was some price movement surrounding the London open.  Gold is up a couple of bucks or so, silver is up a dime—and platinum rallied as well, but is now back below Tuesday’s close in New York.  Palladium made it back above the $600 spot mark, but that wasn’t allowed to stand, either.  Net gold volume is up to 15,500 contracts—and silver’s net volume is up to 4,730 contracts.  The dollar index is back to unchanged.

As I said on Saturday I believe, I wasn’t expecting much price/volume activity leading up to ‘the word’ on Thursday—and that has certainly has been the way things have turned out, at least for the moment—and I expect the remainder of the Wednesday trading session to be more of the same, although I’d be happy to be wrong to the upside.

I hope your Wednesday goes well, or has gone well if you live just west of the International Date Line—and I’ll see you here tomorrow.

Ed

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