25 September 2015 — Friday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price opened more or less flat in New York on Wednesday evening, but began to rally shortly before 9 a.m. Hong Kong time on their Thursday morning—and by 11 a.m. it up six dollars or so. The price didn’t do a lot after that until 9 a.m. in New York, when a short-covering rally of some size developed. The rally was capped at the London p.m. gold fix—and although it got sold a bit after that, it began to rally at 3 p.m. EDT in electronic trading—and closed pretty close to its high tick of the day.
The low and highs were reported as $1,129.50 and $1,156.40 in the December contract.
Gold finished the Thursday trading session in New York at $1,154.10 spot, up $23.80 from Wednesday’s close. Net volume was way up there at 173,000 contracts, so you can see that this short covering rally did not go unopposed.
Here’s the New York Spot Gold [Bid] chart so you can see the price action that mattered in more detail.
Here’s Brad Robertson’s 5-minute gold tick chart—and as you can tell once again, the only volume that mattered came between the COMEX open and close, which is 6:20 and 11:30 a.m. Denver time on this chart. Add two hours for EDT, the vertical gray line is midnight in New York—and don’t forget the ‘click to enlarge‘ feature.
The silver price rallied quietly until just before lunch Hong Kong time—and then traded flat until the morning gold fix was in at 10:30 a.m. BST. From there it chopped lower, with the low spike coming right at 9:00 a.m. EDT on the button—and at that point the short cover rally in that metal commenced as well. JPMorgan et al stepped in front of it at 10:30 a.m.—and the price traded flat from there.
The low and high ticks in this precious metal were recorded by the CME Group as $14.745 and $15.18 in the December contract.
Silver closed yesterday at $15.15 spot, up 36 cents from Wednesday’s close. Net volume was very decent at just over 41,000 contacts. Like gold, the silver rally obviously didn’t go unopposed, either.
Here’s the New York Spot Silver [Bid] chart that gives you a bird’s-eye view of the price action in New York on Thursday.
After opening basically flat, the platinum price took off to the upside shortly before 8 a.m. Hong Kong time—and within thirty minutes that rally got stepped on. From there it slid quietly lower until another rally began shortly after the COMEX open in New York. This one got capped at noon—and that was it for the day. Platinum finished the day at $953 spot, up 22 bucks from Wednesday’s close, but miles below its Tuesday high.
It was almost the same chart pattern for palladium, with the low tick in that precious metal coming at 2 p.m. Zurich time on their Thursday afternoon—and twenty minutes before the COMEX open. Palladium’s smallish rally got capped at noon in New York, just like platinum—and after that, the price didn’t do much. Palladium closed in New York yesterday at $654 spot, up 6 dollars on the day.
The dollar index closed late on Wednesday afternoon in New York at 96.20—and after making it up to its 96.30 Far East high of the day around 9:30 a.m. in Hong Kong trading on their Thursday morning, began to head lower. An attempt to ‘save’ the index at the 96.00 mark only lasted for three hours—and the 95.46 low tick came about 10 minutes before London closed, which was 10:50 a.m. EDT in New York. At that point the index was down 74 basis points. Then it turned on dime, making it back to the 96.00 level by 3 p.m. EDT, before sliding a bit. But minutes before 5 p.m. in the thinly-traded electronic market, the dollar index blasted higher—and back into positive territory, finishing the Thursday session at 96.30—up 10 basis points from Wednesday’s close. Wow!
If you think that was free-market forces at work, boy do I have a bridge for you!
And here’s the 6-month chart that will let you put Thursday’s shenanigans in some perspective.
The gold stocks gapped up a bit more than two percent at the open—and then crawled higher until about 11:40 a.m. in New York. From there they chopped sideways in a very tight range until a smallish rally developed at 3:15 p.m.—and the HUI closed almost on its high tick of the day, up 7.80 percent.
The silver equities rallied strongly until shortly after 10 a.m. in New York trading—and then more or less flat-lined until about 12:15 p.m. when the began to quietly rally anew. Like the gold stocks, the silver equities closed just off their high tick, as Nick Laird’s Intraday Silver Sentiment Index finished the Thursday session up 6.0 percent.
The CME Daily Delivery Report showed that 5 gold and 236 silver contracts were posted for delivery within the COMEX-approved depositories on Monday. The only two short/issuers that mattered were JPMorgan and ABN Amro with 130 and 102 contracts respectively—and both out of their respective clients accounts as well. The three biggest long/stoppers were ABN Amro with 104 contracts for its client account. In second and third place out of their respective in-house trading accounts were Canada’s Scotiabank with 79 contracts—and JPMorgan with 45 contracts. The link to yesterday’s Issuers and Stoppers Report is here—and it’s worth a quick look, especially the ABN Amro stats.
The interesting thing about this Daily Delivery Report is that Wednesday‘s Preliminary Report showed that only 213 silver contracts were left to deliver in the September contract. So with the 236 contracts that eventually showed up in the prior delivery paragraph, means that someone at the very last moment showed up and stood for delivery on at least another 23 contracts as the September delivery month winds down. This should complete the September delivery month in silver, but with two days left in the delivery month, there could be more surprises like this ahead. I’m writing this paragraph many hours before the data for the CME’s Thursday Preliminary Report shows up on their website, which normally occurs well after midnight EDT.
The CME Preliminary Report for the Thursday trading session is missing in action as of 4:55 a.m. EDT, as the CME’s website is still showing the final numbers from Wednesday. Too bad, as I really wanted to see the open interest change in silver. Now I’ll have to wait until I view the final number when I get out of bed later this morning.
There was a big deposit into GLD yesterday, as an authorized participant added 124,507 troy ounces of the stuff. And as of 6:17 p.m. EDT yesterday evening, there were no reported changes in SLV. But when I checked the iShares.com Internet site at 11:07 p.m. EDT I noted that an authorized participant had withdrawn 954,094 troy ounces of silver!
I must admit that I’ll be the most surprised person in the world if any silver is deposited in SLV during this rally, as it’s my belief that there isn’t much in the way of good delivery bars to be found anywhere and, for that reason, JPMorgan will short the shares in lieu of depositing metal.
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 business on Wednesday—and here is what he had to report.
“Analysis of the 23 September 2015 bar list—and comparison to the previous week’s list. No bars were removed, added, or had a serial number change. As of the time that the bar list was produced, it was overallocated 370.1 oz. All daily changes are reflected on the bar list, except a 1,717,426.8 oz. withdrawal on Tuesday, which will show up in next week’s report.”
For the second day in a row, there was no sales report from the U.S. Mint.
It was another quiet day in gold over at the COMEX-approved depositories on Wednesday. They didn’t receive anything—and only 5,608 troy ounces were shipped out—all from Canada’s Scotiabank.
Once again, it was another big day in silver, as 622,338 troy ounces were received—and 343,849 troy ounces were shipped out the door. Of the amount received, there was another truckload dropped off at JPMorgan’s vault, as it surpassed the 70 million ounce mark for the first time—and now sits at 70.2 million troy ounces.. The amount deposited was 613,247 troy ounces. They aren’t buying it because they expect prices to drop, dear reader—they’re expecting prices to rise dramatically. And not only that, they’re the entity that controls how high the price goes—and how fast it gets there. You couldn’t make up such a scenario if you tried. Do you have your fair share? The link to yesterday’s silver action is here.
Here’s the chart for the JPMorgan depository that shows the Blessed Event.
Over at the COMEX-approved gold kilobar depositories in Hong Kong on their Wednesday, they reported receiving 9,074 kilobars—and shipped out 2,050 of them. All of the action was at the Brink’s, Inc. depository once again—and the link to that activity, in troy ounces, is here.
I have the usual number of stories for a mid-week column—and I hope you find a few in here that you like.
CRITICAL READS
When Two Uber-Bears Sit Down: Albert Edwards and Bob Janjuah Expect the Fed to Cut to -5%
When two legendary “bears” (actually what they really are is realists who refuse to drink the Fed’s, the establishment’s, and the media’s Kool-Aid) such as Albert Edwards and Bob Janjuah sit down, while the outcome is hardly as dramatic as the Stay Puft marshmallow man emerging, one certainly expects very provocative and contrarian observations to emerge. This is precisely what happened one week ahead of the Fed’s last meeting.
Here is the story as told by Edwards himself in his latest note to SocGen clients:
I enjoyed afternoon tea with my fellow strategist Bob Janjuah of Nomura (aka Bob the Bear). When we occasionally meet up, we lie back and look up for a bit of clear blue sky thinking – okay, I know it’s London and the sky is usually overcast, but that sort of fits in with our bear view of the world! Among other things we wondered why no-one else entertains the possibility that rates might bottom at minus 5% Fed Funds in the coming downturn.
The next U.S. recession will probably arrive a lot sooner than most investors expect and will likely see more desperate monetary experimentation from the Fed. Bob and I thought that this time we would see deeply negative interest rates in the US (and Europe). Sweden has led the way, dipping their toe below the water line with their current -0.35% policy rates but there will be more, much more along these lines. For if -0.35% is possible, why not – 3.5% or less? It goes without saying that deeply negative interest rates would be accompanied by a massively expanded QE4 in the US. The last seven years of exploding central bank balance sheets will seem like Bundesbank monetary austerity compared to what is to come.
This very interesting news item put in an appearance on the Zero Hedge website at 11:14 a.m. EDT on Thursday morning—and it’s worth reading. I thank Richard Saler for today’s first story.
From ZIRP to NIRP
The sudden end of the Fed’s ambition to raise interest rates above the zero bound, coupled with the FOMC’s minutes, which expressed concerns about emerging market economies, has got financial scribblers writing about negative interest rate policies (NIRP).
Coincidentally, Andrew Haldane, the chief economist at the Bank of England, published a much commented-on speech giving us a window into the minds of central bankers, with zero interest rate policies (ZIRP) having failed in their objectives.
Of course, Haldane does not openly admit to ZIRP failing, but the fact that we are where we are is hardly an advertisement for successful monetary policies. The bare statistical recovery in the U.K., Germany and possibly the US is slender evidence of some result, but whether or not that is solely due to interest rate policies cannot be convincingly proved. And now, exogenous factors, such as China’s deflating credit bubble and its knock-on effect on other emerging market economies, are being blamed for the deteriorating economic outlook faced by the welfare states, and the possible contribution of monetary policy to this failure is never discussed.
This short essay by Alasdair, which is definitely worth reading, showed up on the goldmoney.com Internet site yesterday—and I found it embedded in a GATA release.
In cash we trust: Abolish it and you invite tyranny — Chris Giles
Central banks have never been so powerful, yet their ability to set the cost of borrowing, put limits on bank lending and poke their noses into every corner of the financial system is insufficient for some. Now the Bank of England’s chief economist wants to abolish the cash in your wallet and charge you for a digital equivalent.
Andy Haldane argues the world economy is entering a third leg of a long crisis: an emerging market disaster is following the Anglo-Saxon and eurozone crises of 2008 and 2011 respectively. In these circumstances he wants to be able to stimulate spending in Britain but says he cannot easily do so because interest rates are constrained not to fall below zero per cent. He worries that if the BoE set a negative interest rate — in effect charging savers to hold their money in the hope they would spend instead — people would switch to cash, stick it under the bed and thereby get around the efforts to encourage more consumption.
Attach a gloomy assessment of the efficacy of quantitative easing and other means of stimulating spending, and his answer is to get rid of cash and replace it with a digital wallet on which negative interest rates can be charged.
The commentary by the Bank of England’s Andy Haldane has set off alarm bells everywhere, including over at the venerable Financial Times of London, which is where this story came from on Wednesday. It was posted in the clear in a GATA release early yesterday evening EDT—and is very much worth your while.
Global Easing Bonanza Continues as Norway, Taiwan Cut Rates to Spur Struggling Economies
On several occasions this year we’ve profiled Norway where the central bank, much like the Riksbank in neighboring Sweden, is walking a fine line between keeping rates low to support the economy (not to mention remain competitive in the global currency wars) and being mindful of the effect low rates have on an overheating housing market.
Like the Riksbank, The Norges Bank is in a tough spot. The property bubble quite clearly needs to be arrested but using monetary policy to rein in the housing market means leaning hawkish in a world of DM doves and that can be exceptionally dangerous especially when your economy is heavily dependent on oil and crude prices are crashing.
Indeed, the pain from low oil prices has become so acute that Norway may ultimately be forced to tap its $900 billion sovereign wealth fund in order to avoid fiscal retrenchment.
This longish Zero Hedge story was posted on their Internet site at 7:53 a.m. Thursday morning EDT—and it’s the second offering of the day from Richard Saler. Roy Stephens sent a UPI story about this headlined “Norway lowers key rate on oil price drag“.
Draghi Says Time Needed to Judge If More Stimulus Necessary
Mario Draghi said it’s too soon to say whether risks to the economic outlook warrant a step-up in the European Central Bank’s stimulus.
“More time is needed to determine in particular whether the loss of growth momentum in emerging markets is of a temporary or permanent nature,” the ECB president said in his quarterly testimony to European Parliament lawmakers in Brussels on Wednesday. Officials need to “assess the driving forces behind the drop in the international price of commodities and behind the recent episodes of severe financial turbulence,” he said.
While ECB policy makers have repeatedly said the central bank is willing to bolster its bond-buying program if necessary, some officials are reluctant to rush in. Draghi’s comments echo sentiment expressed by Governing Council members Ewald Nowotny and Bostjan Jazbec, who both said earlier Wednesday that it’s too early to judge whether expanding purchases would be appropriate.
This Bloomberg news item appeared on their Internet site at 7:20 a.m. Denver time on Wednesday morning—and was updated a couple of hours later. I found this in yesterday’s edition of the King Report.
France signals E.U. treaty change to avert Brexit, warns on euro survival
France has opened the door to full-blown treaty changes in a bid to keep Britain in the E.U., warning that it would be grave mistake to disregard the legitimate demands of London.
Emmanuel Macron, the French economy minister, said creative ways can be found to amend the E.U. treaties and stop a European “Brexit” crisis from spinning out of control.
“We shouldn’t turn a treaty change into something traumatic or taboo,” he said, speaking in London on a visit to promote France’s “industrial renaissance“.
“We mustn’t close the door to the British if what they are demanding from other member states is acceptable,” he said.
This Ambrose Evans-Pritchard offering showed up on the telegraph.co.uk Internet site at 8:24 p.m. BST on their Thursday evening, which was 3:24 p.m. in Washington—EDT plus 5 hours—and I thank Patricia Caulfield for sharing it with us.
How Smog Cops Busted Volkswagen and Brought Down Its CEO
The revelation that ended Martin Winterkorn’s career at Volkswagen AG came on Sept. 3 in a meeting at an office park east of Los Angeles.
After months of obfuscation, company engineers finally divulged a secret to engineers at the California Environmental Protection Agency’s Air Resources Board: Volkswagen had installed a “defeat device” to cheat on vehicle emissions tests — and then lied about it to the board and the U.S. EPA for more than a year.
On Sept. 23, Europe’s largest automaker announced that Winterkorn, its 68-year-old chief executive officer, had resigned. While the company exonerated him of involvement in the manipulations, it said it will conduct an internal investigation and has asked local German prosecutors to assist and open a criminal probe.
The unraveling began in 2013. European regulators, concerned about diesel pollution there, wanted to test emissions on vehicles sold in the U.S. under actual driving conditions. The results were expected to show real-world emissions were closer to lab performance in America than in Europe. But they weren’t. That prompted investigations in California that ultimately involved 25 technicians working almost full time. They discovered the software Volkswagen used to circumvent air-pollution regulations in at least 11 million cars.
A first rate detective story—and I’m sure there’s a scriptwriter hard at work on it as I type this. The Bloomberg story was posted on their Internet site at 9:30 p.m. on Wednesday evening Denver time—and was updated eighteen hours later on Thursday afternoon MDT. I thank Garry Robinson for sending it along.
As Europe Wrangles Over Migrant Relocation, Reality Moves Faster
Amid the rancorous bickering this week by European leaders over a relocation plan to spread asylum seekers around the Continent, a Coast Guard officer stood on the dock here at Greece’s main port screaming a blunt command at a throng of rain-soaked new arrivals: Hurry up and relocate yourselves.
“Get out of here. Get on the bus! Go, go, go,” the officer shouted, ordering another shipload of Afghans, Syrians, Iraqis and others who had just been ferried from outlying Greek islands to keep moving to wherever it is in Europe they want to go.
The scene at Piraeus underscored the huge distance between decisions made in the conference rooms of Brussels and the often chaotic realities on the ground for a refugee crisis that keeps thwarting promises of a “European solution.”
This sprawling port southwest of Athens is where many of the various tributaries carrying desperate people fleeing war and poverty converge to form an unstoppable human river flowing northward, usually to Germany or Sweden.
This New York Times article, filed from Piraeus in Greece, appeared on their website on Wednesday sometime—and I thank Patricia Caulfield for finding it for us.
E.U. refugees deal barely scratches surface of a crisis still in its infancy
Following a bruising fight this week to agree a new quotas regime sharing 120,000 refugees across Europe, EU policymakers say that by Christmas member states will be embroiled in much bigger battles over how to distribute up to a million newcomers.
The signals emerging from two days of summitry in Brussels on Tuesday and Wednesday and days of non-stop negotiations behind the scenes suggest that the E.U.’s biggest refugee crisis is but in its infancy, and that Europe’s agony has barely begun.
The meetings of leaders and interior ministers produced breakthrough decisions in E.U. policy terms, but at the same time they hardly scratched the surface of an emergency whose scale is predicted to balloon by the end of the year.
A Brussels summit that ended early on Thursday began to heal the divisions and cool the tempers that have flared for months over what to do about immigration, fragmenting the union between east and west, north and south, big and small. The leaders did not decide very much but managed to communicate more civilly with one another, unlike in June when they engaged in an unseemly bout of recrimination until 3.30 a.m.
This refugee-related news item showed up on theguardian.com Internet site at 4:54 p.m. BST on their Thursday afternoon, which was 11:54 a.m. in New York—EDT plus 5 hours. I thank Patricia for this story as well.
Croatia and Serbia Trade Barbs as Migration Crisis Strains Ties
The migration crisis in Europe is fanning old tensions in the Balkans, prompting a war of words in a region where bloody memories run deep.
After Croatia, under strain from an influx of migrants, closed its borders with Serbia and banned the entry of Serbian vehicles and citizens, the Serbian Foreign Ministry replied on Thursday with unusually harsh language, comparing the measures to those taken by Croatia’s Nazi puppet state during World War II.
Croatia blamed a computer glitch for the restrictions on Serbian citizens. But the Serbian Foreign Ministry was apparently unmoved, writing in a protest note to the Croatian Embassy in Belgrade that the actions against holders of Serbian travel documents were unprecedented “in the civilized world.”
“In their discriminatory character, they can only be compared with measures taken in the past, during the Fascist independent Croatia,” the letter said, invoking the racial policies of the Ustashe, the Fascist movement that ruled Croatia during World War II.
This is getting ugly—and most likely to get worse—and spread as well. This news item, filed from London, appeared on The New York Times website yesterday—and it’s the final offering of the day from Patricia Caulfield—and I thank her on your behalf.
Asian credit fundamentals deteriorate to 2013 lows
Below consensus PMI data out of China and Japan this week has put further pressure on credit spreads in the emerging Asian region.
*Sovereign CDS spreads for ASEAN names have widened to late 2013 highs
*Corporate bond spreads for the region are more muted, closing in on January 2015 highs
*Markit iTraxx Asia Ex Japan IG has topped 150bps for the first time since September 2013
Continued slowdown in Asia’s developed markets is biting further into the region’s emerging economies.
Chinese stocks had the calmest day since March today, but fundamentals in China have continued to deteriorate. Earlier this week, the Caixin China Composite PMI hit a fresh six year low, marking further contraction in the world’s growth engine. But it’s not just China. Japan’s manufacturing PMI came in below consensus today, signalling falling exports, employment and prices. Deteriorating fundamentals in Asia’s more advanced economies have sent credit risk in the region’s emerging economies to 2013 highs.
This financial news item put in an appearance on the markit.com Internet site yesterday sometime—and I thank Richard Saler for bringing it to our attention.
A Big Bet That China’s Currency Will Devalue Further
When Mark L. Hart III, a hedge fund investor based in Texas, makes an investment bet, he does it in the style of his home state: big time.
Since 2007, his winners have included high-risk, high-return wagers that the United States housing market would collapse and that Greece would go bankrupt.
But Mr. Hart’s most audacious gamble to date may well be the one he is making on China. He is betting that the mini-devaluation of China’s currency last month was a mere appetizer to a 50 percent currency implosion that he predicts will come when foreign investors pull their money out of China.
Such an extreme drop in China’s currency, the renminbi, would propel a broader rout in emerging-market currencies — from South Korea to Turkey to Brazil — and result in a sustained global slump as China’s borrowing binge grinds to a halt.
This article was posted on The New York Times website on Wednesday sometime—and I thank Roy Stephens for digging it up for us.
David Bryan: Fed, central banks trapped — gold is foundation of Exter’s Pyramid
This staggering giant paper Ponzi of unpayable leveraged finance means there are multiple counter-party paper claims within complex risk structures that will bankrupt the entire counter-party paper and electronic global financial system in a derivative collapse.
Gold is the mortal enemy of the central bank counter-party paper system; to prevent the flight of capital away from the Ponzi of paper finance markets and into independent wealth, the price of gold is tightly suppressed by the central planners as documented by GATA, especially during times where there is market uncertainty or periods of geopolitical stress.
Writing at Gold Core, David Bryan summons economist and central banker John Exter’s famous inverted pyramid of financial assets, showing all assets having little security compared to gold, the only asset without counterparty risk.
Bryan’s commentary is headlined “Fed, Central Banks Trapped — Gold Foundation of Exter’s Pyramid” and it was posted on the goldcore.com Internet site on Wednesday. I saw this on their website when it was first posted—and can’t figure out why I didn’t post it in yesterday’s column. But when I saw it on the gata.org Internet site yesterday, it prodded me into action—and here it is.
Gold Prices Should Be Higher – Panel Discussion
On gold manipulation, the panelists agreed that there is some type of arbitrage happening in the market, but similar to what can be seen in other markets.
“Manipulation is a loaded term but sure people use their muscle in markets. We see it in the equities; we see it in junior mining companies looking for financing. I don’t think there should be a taboo to talk about this,” Pollitt started.
Grady noted that most people tend to put the blame on investment banks for sharp moves in any market; however, since the financial crisis and the introduction of Dodd-Frank in 2010, these financial firms, which he says he works with closely, are merely a ‘shell of what they used to be.’
“I don’t see anyone coming in at this stage with the regulatory environment that there is and suppressing the price of gold,” Grady argued. “I agree when someone is short and they can push the market, they’ll push the market, it happens in every market. [But] in my opinion, these stories about investment banks selling and being short are totally false,” he added.
Except for Doug Pollitt, these guys don’t have two synapse to rub together. But if any good can be found in this article that was posted on the kitco.com Internet site at 4:10 p.m. EDT on Wednesday afternoon, it’s that the fact that they’re discussing the manipulation issue at all. However, none of them sound eager to dig further and see if there’s any truth to the matter. With this sort of “brain trust” in the precious metal mining sector, it should come as no surprise to anyone that their industry is in big trouble. I found it on the Sharps Pixley website last night.
Believe it or not, gold miners are starting to glitter
After years of depreciation, the gold-mining ETFs are beginning to exhibit basing patterns in contrast to the toppy patterns exhibited by the major equity market indices.
After all, with intense and persistent global monetary stimulus since 2009 that has been unable to produce “healthy inflation” outside of the relentless climb in the value of paper assets, perhaps real assets — land with gold deposits — will regain some measure of respect and value.
The more chaos in the emerging markets and the weaker the performance of the global economies, the more it becomes apparent that the efficacy of the central bankers has been greatly diminished. In such an environment, it is only a matter of time until real assets in the form of gold deposits are embraced by investors.
This positive main stream media story about gold put in an appearance on the marketwatch.com Internet site at 11:26 a.m. EDT on Thursday morning—and I thank Richard Saler for his final offering in today’s column.
Gold buying in India seen rising 15% as festivals aid demand
Gold purchases in India are poised to climb in the final quarter to the highest level since 2012, adding to signs that lower prices are spurring a resurgence of buying in Asia.
Demand may jump as much as 15 percent from a year earlier, said Bachhraj Bamalwa, a director with the All India Gems & Jewellery Trade Federation. That would increase consumption to about 230 tonnes, the highest for the quarter since 261.9 tons in 2012, World Gold Council data show. India vies with China as the world’s biggest gold consumer.
A decline in global prices to the lowest level in more than five years in July has fueled physical demand in Asia. A shock devaluation of the Chinese currency last month and a rout in equity markets also helped buying. In India, demand usually peaks in the final quarter with gifting during festivals, which begin at the end of September this year and culminate with the start of the wedding season in November.
This Bloomberg story showed up on the mineweb.com Internet site at 9:10 a.m. BST on Wednesday morning—and it’s worth reading if you have the time.
Gold de-hedging at 9% in June quarter: Société Générale
In a major indication for a rebound in gold price this year, global producers have squared off their long positions in commodity exchanges. Consequently, global miners reported 9 per cent decline in gold hedge in the second quarter of the current calendar year.
A Société Générale study conducted by Thomson Reuters GFMS titled “Global Hedge Book Analysis 2Q ’15” reported hedging in the overall gold holding of producers at 5.69 million oz (177 tonnes) for the quarter ended June 2015, a decline of 0.54 million oz (17 tonnes) from the previous quarter.
This means, global gold producers de-hedged (squared off or abstained from hedging) of their positions amid fear of an upsurge in prices.
Based on the activity reported to date, we now consider it probable that modest net de-hedging will be the outcome for the year, the report said.
Hedging is dead—and I remember Ted Butler had an article on this issue about 15 years ago. And now that I’ve searched for it, the commentary is headlined “The Death of Hedging“—and it’s dated 27 June 1999. If you haven’t read it, stop right here and rectify that situation. Once you’ve done that, then you should give this brief business-standard.com story the time it deserves. Filed from Mumbai, it appeared on their website at 18:48 IST on their Thursday evening—and it’s something else I found on the Sharps Pixley website in the wee hours of this morning EDT.
China’s gold imports from Hong Kong at 3-month high in August
China’s net gold imports from main conduit Hong Kong rose to a three-month high in August, data showed on Thursday.
Net gold imports from Hong Kong rose to 59.319 tonnes last month from 55.063 tonnes in July, according to data emailed to Reuters by the Hong Kong Census and Statistics Department.
This itty-bitty 2-paragraph news item, filed from Singapore, was posted on The Economic Times of India website at 3:24 p.m. India Standard Time [IST] on their Thursday afternoon—and it’s another gold-related news item that I snatched off the Sharps Pixley website yesterday.
The PHOTOS and the FUNNIES
This photo is of a double rainbow, as seen from about 400 meters up. When we’re standing on the ground, we only get to see half of it, but there’s a lower half we never get to see unless we’re at altitude. I found this photo by Netherlands photographer Martjin Harleman on the spaceweather.com Internet site—and the link to the story surrounding this picture, is here.
The WRAP
In developments since [last] Saturday’s review, it is still the price of silver out of synch with everything else. Silver (and Gold) Eagle sales from the U.S. Mint are still pedal-to-the-metal, as the Mint appears to be producing all it can produce, or its blank suppliers can provide. It appears to me that the difference between Silver and Gold Eagles is that JPMorgan’s buying of Silver Eagles over the past 4.5 years had so dominated the demand side that even normal retail demand was enough to cause the historic shortage we’re in currently. With Gold Eagles, the big buyer over the past 4 months was able to clean out existing Mint inventories and cause the Mint to produce to capacity, but has not (yet) tightened retail forms of gold resulting in high premiums or the delivery delays now common in silver.
There was another highly counterintuitive reduction in the holdings of SLV, the big silver ETF, of 1.7 million oz on Tuesday. [Plus the 954,000 troy ounces that were withdrawn on Thursday – Ed] Prices were weak on Tuesday, but trading volume was light in SLV (it was heavy on the COMEX) and I don’t recall a same day reduction or increase in holdings based upon that day’s trading. Along with the general decline in total COMEX warehouse inventories recently, the reduction in metal holdings in SLV looks like a conversion of shares to metal (to avoid SEC reporting requirements) or a more pressing need for metal elsewhere. Both are in keeping with tight physical conditions in the wholesale silver market.
The churn or physical movement of metal brought into or taken out from the COMEX-approved silver warehouses has not abated much this week, although no new metal has come into the JPMorgan COMEX warehouse [as of Wednesday—and 613,000 ounces were deposited in JPMorgan’s vault yesterday – Ed]. The delivery situation in the soon-to-expire September COMEX futures contract is uneventful despite another 200 or so contracts yet to be delivered. There has been no new buying for delivery purposes in this contract, just existing longs waiting for delivery. [Yes, there has, but I won’t know how much until later this morning. – Ed] My sense is that if someone did try to buy a chunk of physical delivery silver (as I outlined in “turning $1 billion into $5 billion”) it would be reflected in price, but alas no such buying has emerged (yet). — Silver analyst Ted Butler: 23 September 2015
Without doubt, all of the precious metal price action was of the short covering variety, with the powers-that-be providing enough COMEX paper liquidity to stop the rallies on a dime when required—and they can do that with split-second timing on the hour, or whenever they feel it necessary.
Prices, based on supply and demand, should be much higher than they are now—and will be the moment that JPMorgan et al are instructed to stand back and “let ‘er rip.” But for the moment, it looks like this is a controlled retreat in price—and it’s way too soon to read anything into this price activity.
Here are the 6-month charts for the Big 6 commodities once again—and of them, only silver broke a moving average that mattered, blasting through it’s 50-day like a hot knife through soft butter.
As I’ve said before—and it’s worth repeating here, is that if the central banks and governments of the world want inflation in the face of zero or negative interest rates, all they have to do is allow a little commodity inflation to creep into the system—and they’ll have all the inflation that they could ever possibly want. This could be accomplished by JPMorgan et al taking their collective feet off the prices of the Big 6 commodities—and letting commodity prices run.
But the real—and possibly lethal danger to the banking system is that once started, the run to the hard asset side of the street from the paper side of the street may become an unstoppable force.
That scenario presupposes that this commodity inflation would be allowed to play out over an extended period. A weekend reset of the gold price would be preferable to the banking system rather than sure death by a thousand cuts over time.
But will it happen? Beats the hell out of me, but with the exception of negative interest rates on a global scale, the gold card is the only card that central banks have left.
And as I type this paragraph, the London open is less than ten minutes away. Gold got hit for 4 bucks right at the 6 p.m. EDT open in New York yesterday evening—and then another 4 dollars of Thursday’s gains disappeared between 10 a.m. and noon in Hong Kong trading. The price has traded flat since. Silver got sold down a nickel at yesterday evening’s open—and is still down that amount as I write this. Platinum and palladium are down a few dollars each as well.
Net gold volume is way up there at just under 23,000 contracts—and silver’s net volume is just over 4,200 contracts. And not a thing is going on in the dollar index after its ‘hail Mary’ rally late yesterday afternoon just before trading ended, as it’s currently up 1 whole basis point.
Today we get the latest Commitment of Traders Report for positions held at the close of COMEX trading on Tuesday—and just eye-balling the charts, I would guess that we’ll see some deterioration in the Commercial net short positions in both silver and gold. Ted is hoping that last week’s capped rally involved the raptors [the Commercial traders other than the Big 8] selling long positions—and not the Big 4 or 8 adding to short positions. I hope that’s the case as well, but I’m not prepared to bet one thin dime on that scenario.
But whatever the numbers are, I’ll have them for you in Saturday’s column.
And as I post today’s column on the website at 4:55 a.m. EDT, I see that gold continues to get sold down—and almost half of yesterday’s gains are history at the moment, as it’s currently down 12 bucks. Silver is down as well, but only 8 cents—and platinum is chopping lower. Only palladium is bucking the trend—and it’s up 6 dollars the ounce.
Gold volume is pretty chunky at 33,000 contracts net—and silver’s net volume is 6,100 contracts. The dollar index began to rally in earnest starting at exactly 2 p.m. in Hong Kong trading on their Friday afternoon, hitting its current high at precisely 9 a.m. in London trading—and is up 21 basis points at the moment.
Today is Friday—and all the big traders have to be out of the October contract by the close of COMEX trading on Monday, so I’m expecting heavy volume today as well—and we’re certainly having that at the moment. With “da boyz” still firmly in charge of the precious metal prices, I haven’t a clue as to how the remainder of the Friday session will turn out.
That’s it for today—have a good weekend—and I’ll see you here on Saturday.
Ed
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