15 October 2015 — Thursday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
After jumping up five bucks or so shortly after 9 a.m. Hong Kong time on their Wednesday morning, the gold price traded flat before getting sold down to just below unchanged once the London a.m. gold fix was done. It traded flat once again until the COMEX open—and rallied from there in fits and starts until its high tick which came about 3:20 p.m. in electronic trading—and then gave up a decent chunk of its gains by the 5:15 p.m. close. However, it did close about its 200-day moving average for the first time since late January.
The low and high ticks were recorded by the CME Group as $1,162.50 and $1,189.90 in the December contract.
Gold closed in New York yesterday at $1,184.30 spot, up $15.40 from Tuesday. Unhappily, net volume was way up there at a hair under 172,000 contracts.
And here’s Brad Robertson’s 5-minute tick gold chart—and it only goes as far as noon Denver time—2 p.m. EDT. Midnight in New York is the vertical gray line—and the spike up in morning trading in Hong Kong is obvious, as are other big price/volume moves as the gold trading day moved around the planet. Add two hours for EDT—and don’t forget the ‘click to enlarge’ feature.
The price action in silver had a similar shape to the gold price action, but there should be no doubt in anyone’s mind that JPMorgan et al were attempting to defend the $16 spot mark—and its 200-day moving average—with just about everything they had. And like gold and platinum, silver’s high tick came at 3:20 p.m. EDT as well, which I doubt was a coincidence.
The low and high tick in this precious metal was reported as $15.79 and $16.195 spot in the December contract.
Silver finished the Tuesday trading session at $16.12 spot, up 21.5 cents from Tuesday’s close. Not surprisingly, net volume was way up there as well at just over 48,500 contracts.
With some minor variations, the price activity in platinum on Wednesday was a carbon copy of the price action in both gold and silver. However, it should be pointed out that for the third day in a row, platinum wasn’t allowed to close above the $1,000 spot price mark, finishing the day at $998 spot, up 10 bucks.
Ditto for the palladium trading session yesterday—and it wasn’t allow above the $700 spot price mark, as it was closed at $699 spot, up 19 dollars from Tuesday.
The dollar index closed late on Tuesday afternoon in New York at 94.76—and it began to head lower almost as soon as trading began in the Far East on their Wednesday morning. The bottom really fell out starting at 2 p.m. EDT, with the 93.85 low tick coming about 3:20 p.m. EDT, which more or less explains the reversals in fortune for gold, silver and platinum, as their high ticks came at that point. The dollar index didn’t do much after that—and closed at 93.91—down 85 basis points.
Here’s the 1-year U.S. dollar index chart that shows you the current progress of this decline vs. the longer term—and at this juncture one has to ask the obvious question as to whether it will be allowed to continue or not. We’ll find out soon enough I would think. The other thing worth noting is that the 50-day moving average is about to cross the 200-day moving average, the so-called ‘death cross’. But with such actively managed markets, I’m not prepared to read too much into this, even though the brain-dead T.A. people eat this stuff up. However, despite my personal feelings on this, it’s still worth keeping an eye on.
The gold stocks gapped up a whole bunch at the open—and continued to power higher as the Wednesday trading session moved along. The HUI closed just off its high tick, up 7.75 percent.
It was more or less the same for the silver equities, as Nick Laird’s Intraday Silver Sentiment Index closed higher to the tune of 6.20 percent.
The CME Daily Delivery Report showed that, for the second delivery day in a row, zero gold and 1 silver contract were posted for delivery within the COMEX-approved depositories on Friday.
The CME Preliminary Report for the Wednesday trading session showed that gold open interest in October declined another 126 contracts, leaving 1,016 still open. At this rate, there will be very little left to deliver by the end of the month. In silver, the o.i. dropped by 1 contract, leaving 13 still there.
I was happy to see a big deposit in GLD yesterday, as an authorized participant added a very decent 248,960 troy ounces of gold—and as of 8:28 p.m. EDT yesterday evening, there were no reported changes in SLV.
There was no sales report from the U.S. Mint.
There was a decent amount of gold shipped out of the COMEX-approved depositories on Tuesday—and all of it came out of Canada’s Scotiabank—32,150.000 troy ounces, which works out to exactly 1,000 kilobars. The link to that activity is here.
It was on the quieter side in silver as 482,186 troy ounces were reported received—and only 50,170 troy ounces were shipped out. The ‘in’ action was at Canada’s Scotiabank—and the ‘out’ activity was at HSBC USA. There was also 178,219 troy ounces of silver transferred from the Registered to Eligible category over at the CNT Depository. These transfers have been a regular occurrence for the last month or so—and I’m finally relieved to see that the nut-ball lunatic fringe is no longer talking about this. I’m happy to see that as all it does is confuse people into thinking that it means something, when it really doesn’t.
It was a monster day over at the COMEX-approved gold kilobar depositories in Hong Kong on their Tuesday, as 25,006 kilobars were reported received—and that’s a new 1-day record receipt over at Brink’s, Inc.—and a very chunky 13,002 kilobars were shipped out. The link to that action is here—and although I haven’t checked with Nick Laird, it’s safe to assume that the total in/out movement on Tuesday was a new record overall at the Brink’s, Inc. depository since it opened in March.
Before hitting the stories today, “Roger in La La Land” sent me this newspaper clipping from the Monday edition of The Times in London—and, if true, I’m very surprised that this story hasn’t had more coverage than this. I’ll certainly be waiting to hear more in the days ahead—and the ‘click to enlarge‘ feature is no help here, I’m afraid.
I have an average number of stories for you today—and I hope there are a couple of them that you’ll find of interest.
CRITICAL READS
U.S. Retail Sales Tumble Most Since January, Signal Sustained Recessionary Environment
One year ago the abysmal retail sales data crushed the market’s hope that the recovery from the 7th half of 2012 was imminent. It also unleashed the Treasury flash crash, where the 40 bps plunge in yields was according to Jamie Dimon was a 1 in 3 billion year occurrence. It only ended when Bullard hinted at QE4.
Moments ago, in a stark déjà vu to precisely one year ago, retail sales disappointed even more than in October 2014, when 27 out of 27 economists thought the control group would be positive. It came at -0.1%.
The details: Retail Sales (ex Autos) dropped 0.3% in September, the 2nd drop in a row, the biggest drop since January (at the heart of the weather-driven economic weakness).
This is the 7th miss in the last 10 months…
Today’s first story is from the Zero Hedge website—and it put in an appearance there at 8:39 a.m. on Wednesday morning EDT. I thank Richard Saler for sending it along. It’s worth a minute of your time.
WalMart Carnage: Stock Plummets Most In 17 Years After Slashing Earnings Guidance, Blames Wage Hikes
Do you see what happens Larry when Wal-mart succumbs to “progressive” pressure and hikes wages? This:
WMT CFO: NEW HIRES TO START AT $10 PER HOUR NEXT YEAR
WMT CFO: 2017 RISE IN WAGES TO COST $1.5B
WMT PLANS REDUCTION IN CAPITAL EXPENDITURES THROUGH FY19
WAL-MART SEES FY2017 EPS DECREASING 6-12% VS FY2016
More from Reuters:
Company says strong dollar expected to hurt full-year revenue by $15 bln
Company says full-year net sales growth expected to be “relatively flat”, mainly due to strong dollar; Walmart had earlier forecast 1-2 pct growth
Says expects fiscal 2017 earnings per share to fall by 6-12 pct due to higher wages and training costs
Company’s $20 bln share buyback shrugged off in another sign that allure of buybacks is fading
Up to Tuesday’s close, stock had fallen about 22 pct this year
This news item appeared on the Zero Hedge website at 3:50 p.m. EDT on Wednesday afternoon—and I found it on their Internet site just before midnight Denver time last night.
A Third of All Containers Shipped From Long Beach Port Are Empty
As it turns out, the economy was neither “super strong“, nor was “unemployment, consumer confidence, savings, or available discretionary spending” suggesting that we have more to spend. In fact just the opposite, because thanks to the WSJ we can now reconcile the seeming discrepancy between slowing macro and booming micro, at least as manifested by “record” west coast port traffic.
According to the WSJ, “shipments of empty containers out of the U.S. are surging this year, highlighting the impact the economic slowdown in China is having on U.S. exporters. The U.S. imports more from China than it sends back, but certain American industries—including those that supply scrap metal and wastepaper—feed China’s industrial production.”
The magnitude of the shipping container “contagion” is stunning: in September, the Port of Long Beach handled a near record 197,076 outbound empty boxes. “They accounted for nearly a third of all containers that moved through the port last month. September was the eighth straight month in which empty containers leaving Long Beach outnumbered those loaded with exports.”
As the chart below shows, the situation at L.A. and Long Beach is so dire, the amount of empty container has surpassed the 2008 crisis period, and is about to take out the all time highs from the peak of the 2006 credit bubble.
This very interesting, but not surprising news item is courtesy of the Zero Hedge website as well. It appeared there at 6:16 p.m. EDT yesterday evening—and it’s the second offering of the day from Richard Saler.
The U.S. is Back in Recession With Interest Rates Already at Zero
The Fed has now kept interest rates at zero for 81 months. This is the longest period in the history of the Fed’s existence, lasting longer than even the 1938-1942 period of ZIRP—and the U,S. economy is moving back into recession.
Never in history has the U.S. entered a recession when rates were this low. And it spells serious trouble for the financial system going forward.
Firstly, with rates at zero, the Fed has next to no ammo to combat the contraction. Some Central Banks have recently cut rates into the negative. But this is politically impossible in the U.S., particularly with an upcoming Presidential election. This ultimately leaves QE as the last tool in the Fed’s arsenal to address an economic contraction.
This short commentary/infomercial from Phoenix Capital Research was posted on the Zero Hedge website at 12:37 p.m. EDT on Wednesday morning—and I found it on the Sharps Pixley website. It’s certainly worth reading.
The Real Reason Global Stocks Are Flashing Red this Morning
This morning stock markets around the globe are flashing red. The perceived wisdom is that the news driving stocks lower is a report out of China that its imports plunged 17.7 percent year over year in September, the eleventh straight decline.
Make no mistake about it, just as Lehman Brothers was set up to take the fall for triggering the 2008 collapse, China is being groomed as the new scapegoat for the coming crisis. But China’s economic slump is only a symptom, not the disease.
In reality, the dark, gathering, economic storm clouds are merely the second leg of the 2008 financial collapse, set in motion on November 12, 1999 when President Bill Clinton, surrounded by Wall Street sycophants, signed the Gramm-Leach-Bliley Act (also known as the Financial Services Modernization Act of 1999) which repealed the Glass-Steagall Act of 1933, legislation which had kept our financial system safe for 66 years. A short 9 years later, the U.S. financial system collapsed in the greatest upheaval since the Great Depression.
Tonight, Bill Clinton’s spouse, Hillary Clinton – who has no intention of restoring the Glass-Steagall Act to separate insured banks from high-risk, stock speculating investment banks and their star wars derivatives operations — will deliver her pitch to the American people as to why she’s fit to extend the Clinton dynasty at the White House. This will be the first Democratic Presidential debate of the primary season and we urge our readers to watch. The debate will air at 8:30 p.m. ET on CNN which is hosting the event.
This commentary was posted on the wallstreetonparade.com Internet site on Tuesday sometime—and I thank reader U.D. for passing it around.
California Mayor Forced to Hand Over Belongings at Airport…Compares U.S. to Nazi Germany
The U.S. government is so out of control that even mayors are speaking out…and comparing what’s happening to Nazi Germany.
Recently in San Francisco, California, Stockton mayor Anthony Silva experienced a travel delay that too many Americans can relate to. Silva had attended a mayor’s conference in China. On his return, federal agents detained him and confiscated his belongings, which included electronics and a cell phone. Silva told the press the most alarming part:
Unfortunately, they were not willing or able to produce a search warrant or any court documents suggesting they had a legal right to take my property….In addition, they were persistent about requiring my passwords for all devices.
Silva’s attorney told reporters that the agents wouldn’t allow the mayor to leave the airport without giving up his passwords.
I’m saddened, but not surprised by this short essay/infomerical that appeared on the internationalman.com Internet site yesterday—and I thank their senior editor Nick Giambruno for bringing it to our attention. it’s worth reading.
GCHQ can spy on British MPs, tribunal rules
MPs do not have special protection from having their communications monitored by Britain’s spy agencies, a tribunal has ruled.
The Investigatory Powers Tribunal said the so-called Wilson Doctrine, designed to stop intelligence agencies tapping MPs, was not enforceable in law.
It reveals MI5, MI6 and GCHQ have always had the power to monitor parliamentarian communications in “exceptional” circumstances.
The Wilson Doctrine was introduced in 1966 under Harold Wilson, the then Labour prime minister, to ban the tapping of MPs’ and peers’ phones and was later extended to cover e-mails.
This disturbing story was posted on The Telegraph‘s website at 10:49 a.m. BST on their Wednesday morning, which was 3:49 a.m. in Washington—EDT plus 5 hours. I thank U.K. reader Tariq Khan for sharing it with us.
E.U. leaders postpone talks on euro zone future until December
European Union leaders have postponed a deeper discussion of the future of the euro zone until December because of divergent views in the biggest countries and because of the more pressing migration issue, diplomats said.
EU leaders, who meet on Thursday in Brussels, were to talk about fleshing out a report on the future of the Economic and Monetary Union (EMU) prepared by the 28-nation bloc’s top five officials in June — the so-called five presidents’ report — as the Greek debt crisis was shaking the euro zone’s foundations.
“There will be a short report on EMU, but … there is no readiness for and no reform consensus between Germany and France,” one senior EU official said.
“We have not had such divergent views for a long time, so it would be very dangerous now if this discussion was opened, because it would reveal all the differences,” the official said.
The E.U. project is ‘shovel ready’—to be buried, that is. This Reuters article, filed from Brussels, was posted on their Internet site at 1:20 p.m. EDT yesterday afternoon—and it’s the first contribution of the day from Patricia Caulfield.
The MH-17 ‘Report’ — Paul Craig Roberts
When I read that the report on the downing of the Malaysian airliner over Ukraine was being
put in the hands of the Dutch, I knew that there would be no investigation and no attention to the facts—and there wasn’t.
I did not intend to write about the report, because Washington’s propaganda has already succeeded, at least in the Western world, in its purpose of laying the blame on Russia. However, the misrepresentation of the Dutch report by Western media, such as NPR, is so outrageous as to make the media the story and not the report.
For example, I just heard NPR’s Moscow correspondent, Corey Flintoff, say that the missile that hit the airliner was fired by Ukrainian separatists who lack the technical ability to operate the system. Therefore, the missile had to have been fired by a Russian.
There is nothing in the Dutch report whatsoever that leads to this conclusion. Flintoff either is incompetent or lying or he is expressing his view and not the report’s conclusion.
This right-on-the-money commentary from Paul appeared on his website on Tuesday—and if you have the interest, it’s certainly worth reading. I found this story via the Zero Hedge website late last night.
Russia abandons hope of oil price recovery and turns to the plough
The Kremlin has launched a radical shift in strategy, rationing funds for the once-sacrosanct oil and gas industry and relying instead on a revival of manufacturing and farming, driven by a much more competitive rouble.
“We have to have prudent forecasts. Our budget is based very conservative assumptions of oil at around $50 a barrel,” said Vladimir Putin, the Russian president.
“It is no secret that if the price goes down, investment peters out and disappears,” he told a group of investors at VTB Capital’s ‘Russia Calling!’ forum in Moscow.
The Russian finance minister, Anton Siluanov, said over-reliance on oil and gas over the last decade had been a fundamental error, leading to an overvalued currency and the slow death of other industries in a textbook case of the Dutch Disease.
This Ambrose Evans-Pritchard offering was posted on the telegraph.co.uk Internet site at 7:05 p.m. BST on Tuesday evening, which was 2:05 p.m. in New York. I thank Richard Saler for his third contribution to today’s column. It’s worth reading.
$50 Oil for 15 Years Isn’t What Scares Bank of Russia Governor
“What worries me more is the pace of reforms in the economy that could stimulate private investment,” Nabiullina, 51, said in a Bloomberg Television interview on Tuesday. “What’s very important is a whole set of conditions to make Russia more attractive to private investments. And what’s worrisome is the pace of such changes.”
It’s a shot across the bow to President Vladimir Putin, who’s faced growing pressure from inside and outside the government for new measures to pull the world’s largest energy exporter out of its first recession in six years. While Russia has adjusted to the collapse in oil prices by allowing the ruble to lose almost half its value since January 2014 and letting consumer demand bear the brunt of the downturn, its economy remains hamstrung by corruption and inefficiencies.
Russia ranks alongside Nigeria and Kyrgyzstan at 136th, out of 174 countries, in Transparency International’s 2014 ranking of perceived levels of corruption, down from 82nd in 2000, a year after Putin came to power. Its property rights rank 120th and the level of judicial independence 109th of 144 nations in the World Economic Forum’s latest Global Competitiveness Report.
This Bloomberg article appeared on their Internet site at 2:23 a.m. Denver time on Wednesday morning—and it’s the second offering of the day from Patricia Caulfield.
Syria conflict: Shells hit Russian embassy compound
Two shells have struck the Russian embassy compound in the Syrian capital Damascus as hundreds of pro-government supporters rallied outside in support of Russian air strikes.
No-one was killed but a BBC Arabic correspondent in Damascus says some people were injured.
The explosions triggered widespread panic and smoke was seen coming from the embassy compound.
Russian Foreign Minister Sergei Lavrov described it as “a terrorist attack“.
This news item showed up on the bbc.com website on Tuesday sometime—and I thank Patricia C. for this story as well.
Iran Is Set to Put Nuclear Deal, Now Ratified, in Motion
The final step for Iran to start carrying out the nuclear agreement was completed Wednesday, after an oversight panel ratified the bill passed by Parliament supporting the deal with six world powers.
The ratification by the veto-wielding panel, the 12-member Guardian Council, made within 36 hours after Parliament accepted the details of the agreement, now clears the way for the Atomic Energy Organization of Iran to start dismantling thousands of centrifuges and redesign a heavy-water reactor into a much less a dangerous light-water reactor. It also needs to take several other measures.
In exchange, as soon as the International Atomic Energy Agency verifies the steps, sanctions against Iran will be lifted.
Iranian officials, including President Hassan Rouhani, speaking on state television on Tuesday, predicted that the process would take about two months.
This news item, filed from Tehran, put in an appearance on The New York Times website yesterday sometime—and I thank Patricia Caulfield for this article.
China third-quarter growth seen dipping to 6.8 percent, weakest since 2009
China’s economic growth is expected to fall below 7 percent for the first time since the global financial crisis in the third quarter, putting pressure on policymakers to roll out more support measures as fears of a sharper slowdown spook investors.
Chinese leaders have been trying to reassure global markets that Beijing is able to manage the world’s second-largest economy after a shock devaluation of the yuan and a summer stock market plunge fanned fears of a hard landing.
But even the government concedes the economy is entering a slower growth phase after decades of breakneck expansion.
Growth in third-quarter gross domestic product (GDP) likely slowed to 6.8 percent from the same period last year, down from 7 percent in the second quarter, according to a Reuters poll of 50 economists.
This Reuters story, filed from Beijing, was posted on their Internet at 12:20 p.m. on Wednesday afternoon EDT—and the stories from Patricia just keep on coming.
U.S., Australia rebuff China over South China Sea
In a rebuff to China, U.S. Defense Secretary Ash Carter said on Tuesday the United States military would sail and fly wherever international law allowed, including the disputed South China Sea.
Carter spoke after a two-day meeting between U.S. and Australian foreign and defense ministers at which the long-time allies agreed to expand defense cooperation and expressed “strong concerns” over Beijing’s building on disputed islands.
“Make no mistake, the United States will fly, sail and operate wherever international law allows, as we do around the world, and the South China Sea will not be an exception,” Carter told a joint news conference.
“We will do that in the time and places of our choosing,” Carter added.
This Reuters news item, filed from Boston, showed up on their website at 4:59 a.m. EDT yesterday morning—and it’s courtesy of Patricia Caulfield as well.
China hits back at U.S. in row over South China Sea
Foreign ministry spokeswoman Hua Chunying alluded to the US when she blamed “some countries” for flexing “their military muscles again and again” in the South China Sea.
Last week, US officials said they were considering sailing warships in an area around the Spratly island chain which China claims as territory.
It has sparked tit-for-tat warnings between the two powers.
China has been worrying its neighbours – and the US – by enlarging the series of tiny islands, reports the BBC’s China analyst Michael Bristow.
This news item was posted on the bbc.com Internet site on Wednesday sometime—and it’s the final contribution of the day from Patricia Caulfield—and I thank her on you behalf.
CLSA Just Stumbled on the Neutron Bomb in China’s Banking System
Two weeks ago, using Macquarie data, we found something disturbing at China’s micro level: not only are a quarter of Chinese firms with debt unable to cover their annual interest expense currently, but when just looking at the commodity sector, roughly half of all companies are in the same dire straits, as a result of the collapse in commodity prices which translates into a drop off in cash flow which makes just the annual all-in cash interest payment impossible.
Over the weekend, Hong-Kong based CLSA decided to take this micro-level data and look at it from the top-down. What it found was stunning.
According to CLSA estimates, Chinese banks’ bad debts ratio could be as high 8.1% a whopping 6 times higher than the official 1.5% NPL level reported by China’s banking regulator!
I’m not sure what to make of this article that showed up on the Zero Hedge website on Tuesday evening, as the headline, full of “excessive hyperbole,” is something you would normally find on the King World News website—and for that reason I suggest you read it with your eyes wide open. I thank Richard Saler for sending it our way.
Gold Soars Into Green Year-to-Date, Breaks Above Key Technical Level
Gold has broken above its 200-day moving-average and pushed back into positive territory for 2015 amid a notable surge in prices (after whipsawing around in the last 24 hours). As the USD Index suffers its first ‘death cross’ in over 2 years, perhaps Paul Singer’s comments are starting to gather momentum.
Gold is now up 4 days in a row, back to 4 month highs…
This brief 2-chart Zero Hedge gold-related story is something I found on the Sharps Pixley website late last night—and I’ll have much more to say about it in The Wrap.
Elliott’s Paul Singer: “In a World of Intentionally Degraded Currencies, Gold Should Be in Everyone’s Portfolio”
Gold is reversing its earlier losses as retail sales weakness prompts expectations of more easing to save the world. This among other reasons is why Elliott Management’s billionaire manager Paul Singer told a conference in Tel Aviv this morning that he likes gold and the precious metal “should be in every portfolio.”
“In a world where the value of paper money is affirmatively aimed at being degraded by central bank policy, it’s kind of surprising to me that gold can’t catch a bid,” the billionaire and member of Bloomberg Markets 50 Most Influential said at a conference in Tel Aviv on Wednesday. “I like gold. I believe its under-owned. It should be a part of every investment portfolio, maybe five to ten percent.”
“Gold is the only real money,“ Singer said. “Gold would do well if people felt they needed some real asset to protect against inflation, government policy and/or diversification from stocks and bonds.”
This is yet another story from the Zero Hedge website—and I thank Richard Saler for his final contribution to today’s column. It was posted there at 8:59 a.m. on Wednesday morning EDT.
Franco-Nevada to Acquire a Silver Stream on the Antamina mine from Teck for US$610 million
“Franco-Nevada is pleased to partner with Teck on the Antamina mine to create our first pure silver stream,” said David Harquail, President and CEO of Franco-Nevada. “This further strengthens and diversifies our portfolio with a proven, long-life, high-margin asset that will be immediately accretive. This investment provides our shareholders with metal price optionality over multiple cycles and potential further exploration and expansion upside.”
First silver delivery expected in fourth quarter: The effective date for the transaction is July 1, 2015 and Franco-Nevada is expected to receive 900,000 – 1,100,000 ounces of silver (12,300 – 15,000 GEOs [1]) in the fourth quarter 2015. Annual silver stream contributions are expected to average 2.8 – 3.2 million ounces going forward (38,200 – 43,600 GEOs [1]), with 2016 and 2017 silver deliveries expected to be above average. Based on current expectations, and assuming spot commodity prices, Antamina would increase Franco-Nevada’s GEOs and operating cash flow by approximately 13% and 18% respectively.
Antamina mine plan: The mine contains total Measured and Indicated resources (“M&I resources”) of 1.1 billion tonnes of ore and Inferred resources of 1.3 billion tonnes of ore [2]. Within the resource envelope, total reserves are 647 million tonnes of ore [2], which are currently constrained by tailings disposal capacity. CMA is currently considering options for storing additional tailings and alternative mine plans that could result in significant mine life extensions. Current M&I resources are sufficient to support over 20 years of open pit mining. Historically, a high level of Inferred resources have converted to M&I resources and ultimately to reserves. With continued conversion and upgrading of resources, the project could support
mining for 30 – 40 years.
This silver-related story showed up on the franco-nevada.com Internet site eight days ago—and I found the link to this PDF file, along with Ted Butler’s comments on it, in his mid-week commentary yesterday afternoon.
If U.S. wants to devalue dollar and debt, gold is the mechanism for it
Today a friend asked if the monetary metals sector was turning upward and even breaking out. Your secretary/treasurer replied as follows.
A few things do seem different:
1) While gold shares were clobbered Monday afternoon even as the gold price itself wasn’t, the sort of action that ordinarily has foretold a smash-down in the metal for the next day, such a smash-down didn’t happen on Tuesday.
2) Lately gold has seemed to rise during trading in New York instead of falling as it has mainly done for years.
3) Many foreign currencies have devalued. Is it time for the U.S. dollar to devalue too? Certainly the world is clamoring for the United States not to raise interest rates and thereby increase the burden of debt around the world, and delaying a rate increase would facilitate devaluation. Of course the easiest and most traditional way to accomplish dollar devaluation would be for the U.S. government to ease off the gold suppression scheme.
This commentary by GATA’s secretary/treasurer Chris Powell appeared on the gata.org Internet site late last evening—and it’s definitely worth reading.
The PHOTOS and the FUNNIES
The WRAP
The sellers of silver streams get most of the future income upfront and therefore get no real benefit from higher silver prices in the future. The buyers stand to benefit greatly from higher future silver prices and would not likely enter into such transactions if they believed silver prices would not advance. In many ways, these silver streaming transactions remind me of the gold (and silver) leasing/forward sales of 10 to 20 years ago that ended in financial disaster for most of the mining companies who locked in gold prices under $300 (silver under $5) back then. I don’t foresee it will end in similar disaster for the sellers of silver streams because the metal only represents a small percentage of total mine production, but in keeping with what I see for future price levels for silver, I am convinced the sellers will one day regret selling their future silver production at what will turn out to be very low prices.
That’s another way of saying that the buyers of silver streams stand to profit mightily if silver prices do what I believe they will do. Please don’t take this as investment advice to buy or not to buy silver streamers because, as I hope you know, that is something I strive hard to avoid. All things considered, I think the buyers of silver streams will fare better than the sellers over time, but I don’t want to get bogged down on specific company research. My point instead is to see what can be learned from what must be considered mega-transactions involving silver.
$600 million isn’t quite the billion dollars that I suggested might be invested into physical silver and, certainly, streaming is a different form of buying physical silver than I outlined; but, in a larger sense, neither the amount nor concept is that far apart from my suggestion. More importantly, the quality of the buyer (remember, we’re talking about the House of Lassonde) and the fact that it was Franco-Nevada’s first pure silver stream, tells volumes about what this company feels about the current and future price prospects for silver. As I said, no one buys any investment not expected to appreciate in value, not if amount invested is $600, or $600 million or $6 billion (roughly what I believe JPMorgan has invested in physical silver). — Silver analyst Ted Butler: 14 October 2015
Although I was very happy to see the precious metals do well yesterday, with all but palladium above its respective 200-day moving average, I’m keenly aware of the fact that these metals are still driven by the tango between JPMorgan et al on one hand—and the technical funds in the Managed Money category on the other. The Managed Money traders, plus the traders in the other two categories, are covering short positions and going long—with “da boyz” in the Commercial category providing the necessary liquidity to prevent the prices from blowing to the moon and the stars.
It’s worth repeating here that there are no producers of these metals involved in the Commercial category—and the number of users hedging in the same category would represent but a tiny fraction of the overall daily volume. The COMEX, with the CME Group’s full complicity, is a casino—and a price management tool for the Big 6 commodities.
As to how far these rallies go, or are allowed to go, it’s really up in the air at the moment—and although I get a sense that the internal dynamics of the markets are “different this time”—both Ted and I are very much of the opinion that an engineered price decline for profit and price manage purposes is still a very real possibility at some point in the future. But how soon and how low, is unknowable at this juncture.
However, as Ted would say, it’s really a mug’s game trying to handicap these markets—so, like you, I’m just going to sit back and watch the show unfold. However, I’m always on the lookout for “in your ear.”
Here are the 5-year charts for all of the Big 6 commodities, so you can measure the current price action versus where we’ve been since the drive-by shooting in silver on May 1, 2011—and the engineered price decline in gold that began in the fall of that year.
And as I type this paragraph, the London open is less than ten minutes away—and there was no follow-through price action to the upside in Far East trading on their Thursday—and both precious metals are trading flat at the moment. Both platinum and palladium are up a bit, with platinum back above $1,000 spot—and palladium back above $700 the ounce—but nothing should be read into that, as the Thursday trading session is young.
Net HFT gold volume is sitting right at 20,000 contracts—and in silver, its net volume is 5,100 contracts. The dollar index hasn’t done a thing since its swan dive yesterday—and is currently down 5 basis points as London opens. There’s nothing to see here.
One thing I did note with some mild interest yesterday was the fact that gold crossed above its 200-day moving average the same day that the U.S. dollar index broke below its 200-day moving average. Coincidence I’m sure, but maybe its a harbinger of things to come, as the momentum trade builds in both. But one should always be on the lookout for JPMorgan et al, their HFT buddies and their algorithms. I know I am, as I’ve seen this show before.
And as I post today’s column on the website at 4:35 p.m. EDT, I see that with the exception of palladium, which jumped up a few more dollars shortly after Zurich opened, there’s not a thing going on in the other three precious metals. Net HFT gold volume is now up to 29,000 contracts—and silver’s net volume is just over 7,600 contracts.
The dollar index, which had been down a handful of basis points at the London open, has now rallied a bit and is currently up 14 basis points.
As far as what may or may not happen in the precious metals price arena in New York today, I haven’t a clue. Like I said yesterday, I’m just going to sit here with my face pressed against the glass and watch the show unfold like everyone else.
That’s all I have for today, which is more than enough.
Enjoy your Thursday, or what’s left of it if you live west of the International Date Line—and I’ll see you here on Friday.
Ed
The post If the U.S. Wants to Devalue the Dollar and Its Debt, Gold Is the Mechanism For It appeared first on Ed Steer.