27 October 2015 — Tuesday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
It was pretty much a ‘nothing’ day in gold yesterday. After trading flat in the Far East on their Monday, it rallied a few bucks, with the high tick—such as it was—coming at the London p.m. gold fix—and then it got sold down for a small loss on the day.
The low and high ticks aren’t worth looking up.
Gold finished the Monday trading session at $1,162.90 spot, down $1.10 from Friday’s close. Net volume was fumes and vapours at a bit over 71,500 contracts.
Silver followed a similar price pattern—and as you can see from the Kitco chart below, every time the price tried to reach the $16 spot price mark, there was a willing seller present.
Silver traded in less than 20 cent price range yesterday—and I shall dispense with the low and high tick in this precious metal as well.
Silver closed yesterday in New York at $15.84 spot—up 3 cents on the day. Net volume was pretty light at just a hair under 23,000 contracts.
Here’s the New York Spot Bid [Silver] chart on its own so you can see just how carefully the price was being micromanaged from 1 p.m. in London—8 a.m. EDT—and until the 1:30 p.m. COMEX close. After that, it got quietly sold down for the remainder of the day. JPMorgan et al are ever vigilant.
Platinum poked its nose above the $1,000 spot price mark for a brief moment in Far East trading, but that didn’t last long—and it sold off quietly until shortly after Zurich opened, when the price decline became far more pronounced. The low came minutes after 12 o’clock noon in Zurich—and it rallied from there to the $995 level shortly after 9 a.m. in New York. After that it traded mostly rule flat into the close. Platinum finished the Monday trading session at $994 spot, down 5 bucks from Friday.
The palladium price was managed in a similar fashion as platinum, except the low tick in this precious metal came just before 2 p.m. Zurich time. Palladium was closed at $681 spot, down 9 dollars on the day.
The dollar index closed late on Friday afternoon in New York at 97.05—and then quietly sold off in Far East trading to 96.77 by 9:30 a.m. in London. The 95.08 high tick came shortly after 9 a.m. in New York—and then it plunged to 96.75 shortly after the London p.m. gold fix. The 96.68 down/up low tick came a minute or so after 1 p.m.—and it didn’t do much after that. The index finished the day 96.82—down 23 basis points from Friday’s close.
And here, as always, is the 6-month U.S. dollar index chart so you can keep an eye on the longer term trend. It remains to be seen whether we’ve seen the end of the current short covering rally or not.
The gold stocks opened down—and then chopped sideways until minutes before the COMEX close. Then they got sold off some more as the HUI finished the day on its absolute low tick, down 3.82 percent.
The silver equities opened a hair below unchanged—which was their highs of the day—and then dropped down to their lows of the day at the 10 a.m. EDT London p.m. gold fix. They almost made it back to unchanged by shortly after the 1:30 p.m. close of COMEX trading, but then got sold off a bit—and Nick Laird’s Intraday Silver Sentiment Index dropped by 1.78 percent.
The CME Daily Delivery Report showed that 38 gold and zero silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday. Canada’s Scotiabank issued 35 contracts—and the other three came courtesy of ABN Amro. And, for the umpteenth day in a row, JPMorgan stopped all 38 for its own account. The link to yesterday’s Issuers and Stoppers Report is here.
The CME Preliminary Report for the Monday trading session showed that gold open interest for October declined by 98 contracts, leaving 463 still open—minus the 38 shown above. Silver o.i. declined by 3 contracts, leaving just 8 left to deliver. All the outstanding October contracts have to be delivered by Friday.
There were no changes in GLD yesterday—and as of 11:43 p.m. EDT late night, there were no reported changes in SLV, either.
The folks over at the shortsqueeze.com Internet site updated their website with the short interest in both GLD and SLV for the first half of October. The previous report showed huge increases in both GLD and SLV—and this one showed the opposite.
The short position in SLV declined from 19.70 million shares/troy ounces, down to 11.23 million shares/troy ounces, a drop of 43 percent. The short position in GLD fell from 1.73 million troy ounces, down to 1.09 million troy ounces.
These are big declines—and it’s entirely possible that these new changes, that more than cancel out the ones from two weeks ago, occurred because of poor reporting. Just looking at the deposits and withdrawals in GLD–and especially in SLV—over the last month, does not fully explain these changes. I’m sure that Ted will have more to say about this in his mid-week column tomorrow—and I’ll steal what I can, because he’s the only person I know that’s qualified to speak on this intelligently.
There was no sales report from the U.S. Mint yesterday.
It was another day of zeros for gold over at the COMEX-approved depositories on Friday, but the in/out movement in silver saved the day again. In silver there was 606,454 troy ounces reported received—and 461,565 troy ounces shipped out the door. There was not activity at JPMorgan once again. The link to that action is here.
Over at the COMEX-approved gold kilobar depositories in Hong Kong on their Friday, they reported receiving 2,951 kilobars—and shipped out 151 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.
Since this is my Tuesday column, I have a decent number of stories for you—and that’s despite my best efforts at editing, so the final edit is all yours.
“Our Data Is Not Good” – U.S. Companies Warn That a Recession is Coming
Earlier this month, we highlighted comments from new Fastenal CEO (and former CFO) Dan Florness who, on the company’s Q3 call, took homage to one analyst’s suggestion that we’re currently in a “non-recessionary environment.” Here, as reminder, is the exchange:
William Blair’s Ryan Merkel: Then just lastly, Fastenal growing zero percent here in September and in a non-recessionary environment, it’s pretty surprising, I think, for a lot of us.
Florness: The industrial environment is in a recession – I don’t care what anybody says, because nobody knows that market better than we do. You know, we touch 250,000 active customers a month.
There you go. No ambiguity there. Nor was there anything ambiguous about some of the numbers Fastenal reported. For instance, in September, the company saw its first Y/Y sales decline since 2009.
This economic news item put in an appearance on the Zero Hedge website at 12:02 p.m. Monday afternoon EDT—and it’s courtesy of Richard Saler.
Fund houses lose $700 billion in ‘particularly brutal’ Q3
Seven of the world’s largest fund managers collectively lost more than half a trillion dollars in assets during the third quarter as they struggled to cope with the fallout from Black Monday. The slump has sparked fears investors will pull more money during the final months of the year.
The assets of BlackRock, T Rowe Price, Franklin Templeton and the fund arms of BNY Mellon, JPMorgan, Bank of America Merrill Lynch and State Street dropped between 4 and 11 per cent in the three months to the end of September, wiping $727.7bn off their collective asset base.
The slide in assets is in stark contrast to the first half of the year, when BlackRock, JPMorgan, BofA, T Rowe Price and BNY Mellon all saw a jump in assets on the back of buoyant markets and strong investor demand.
This Financial Times story, posted mostly in the clear over at the CNBC website early on Monday morning, was sent to us by reader U.D.
Investment Grade Ain’t What It Used to Be in Nervous Bond Market
Newly armed with an investment-grade rating and looking to tap debt markets for the first time, the chief financial officer of retailer Fossil Group Inc. didn’t like what he saw this past May.
“We didn’t think the economics reflected our investment-grade rating,” Dennis Secor said when asked on an August earnings call with analysts why Fossil pulled a potential bond offering.
If Fossil executives didn’t like the interest rate they would have had to pay in May, they most likely wouldn’t now, either. While borrowing costs have risen for all companies since then, the difference between yields on BBB rated issuers such as Fossil and Hewlett-Packard Co. and those on more pristine AAA debt has grown even faster, touching a more than two-year high of 1.46 percent this month.
After six years of a credit boom in which investors distinguished less and less between ratings, rewarding companies across the spectrum with favorable borrowing costs, the market is becoming more discriminating. Fear of low growth, which has largely been focused on the riskiest of energy companies, is spilling over to other industries and into the lower rungs of investment grade as the strength of balance sheets comes back into focus.
Just being investment grade, it seems, isn’t good enough anymore.
This very interesting Bloomberg news item from last Thursday is the first of two stories that I ‘borrowed’ from yesterday’s edition of the King Report. It’s on the longish side, but certainly worth skimming.
Banks are seriously discussing negative interest rates for normal people’s savings
The concept of earning interest on money in the bank is so deeply ingrained into economic life that few people even know that the opposite can happen too: Banks can take a percentage of cash from your account in the form of negative interest rates, under certain conditions.
Normally, this doesn’t happen. Banks want your cash, and pay you interest on it, because the more deposits they have, the more they can lend it to others who pay them even more on their investments.
But interest rates in Europe are so close to zero — and economic activity is so sluggish — that some central bankers are seriously discussing whether they should drive interest rates into negative territory in the future, as a sort of economic punishment for not spending money. The theory is that if you are deterred from keeping cash in the bank you’ll withdraw it and spend some of it, thus creating economic growth.
Wow!—but no surprise. This commentary showed up on the businessinsider.com Internet site on Saturday morning EDT—and it’s the second offering in a row from reader U.D.
Overstock Holds 3 Months of Food, $10 Million in Gold For Employees in Preparation For the Next Collapse
Overstock CEO Patrick Byrne’s crusade against naked short sellers in particular, and Wall Street and the Federal Reserve in general, has long been known and thoroughly documented (most recently with his push to use blockchain technology to revolutionize the multi-trillion repo market).
But little did we know that Overstock’s Chairman Jonathan Johnson is as vocal an opponent of the fiat system, and Wall Street’s tendency to create bubble after bubble, if not more than Byrne himself. That, and that his company actually puts its money where its gold-backed money is and in preparation for the next upcoming crash, has taken unprecedented steps to prepare for what comes next.
One week ago Johnson, who is also candidate for Utah governor, spoke at the United Precious Metals Association, or UPMA, which we first profiled a month ago, and which takes advantage of Utah’s special status allowing the it to use gold as legal tender, offering gold and silver-backed accounts. As a reminder, the UPMA takes Federal Reserve Notes (or paper dollars) which it then translates into golden dollars (or silver). The golden dollars are based off the $50 one ounce gold coins produced by the Treasury of The United States. They are legal tender under the law and are protected as such.
What did Johnson tell the UPMA? Here are some choice quotes:
Here’s another Zero Hedge story. This one appeared on their website at 6:49 p.m. EDT on Sunday evening—it’s courtesy of ‘David in California’. It’s worth reading.
Presstitutes at Their Work — Paul Craig Roberts
The Western media has only two tools. One is the outrageous lie. This overused tool no longer works, except on dumbshit Americans.
The pinpoint accuracy of the Russian cruise missiles and air attacks has the Pentagon shaking in its boots. But according to the Western presstitutes the Russian missiles fell out of the sky over Iran and never made it to their ISIS targets.
According to the presstitute reports, the Russia air attacks have only killed civilians and blew up a hospital.
The presstitutes fool only themselves and dumbshit Americans.
Always controversial, but never far off the mark, this must read commentary by Paul was posted on his Internet site on Saturday—and I thank reader U.D. for his third contribution to today’s column.
Mario Draghi gives the V-sign but a dangerous QE day looms
It’s all about the V-word, apparently. That’s a nod not to Sir Winston Churchill, but a rather different character – namely Mario Draghi, president of the European Central Bank.
It would appear that a eurozone quantitative easing programme running to €1,100bn (£795bn) isn’t enough. Having churned out €60bn of virtually printed money a month since March, and committed to maintaining that pace until September 2016, Draghi has now signalled there’s likely to be even more.
“The degree of monetary policy accommodation will need to be re-examined at our December meeting,” he said last week, following the latest gathering of the central bank’s Governing Council.
The “size, composition and duration” of eurozone QE could be adjusted, Draghi continued, with the monthly amounts getting bigger or the schedule extending into 2017 and beyond.
This news item was posted on the telegraph.co.uk Internet site on Saturday afternoon BST—and it’s the second article I ‘borrowed’ from yesterday’s edition of the King Report.
European leaders discuss refugee crisis at tense Brussels summit
European leaders have met for a tense summit in Brussels to try to agree a plan for managing large numbers of refugees making their way through Turkey, Greece and the western Balkans desperate to reach places such as Germany and Scandinavia before winter.
But the draft plan under discussion had already drawn criticism before the meeting started on Sunday for proposing that Balkan and eastern European countries should stop allowing asylum seekers to pass through to other neighbouring countries without first securing agreement from those neighbours.
The Croatian prime minister, Zoran Milanović, said before the summit that such consultation was “impossible”.
The draft plan seen by Reuters included a measure to send 400 border guards to the western Balkans within a week and to put in place more maritime efforts off Greece. It also said the European Union would try to speed up repatriations of Afghans, Iraqis and others if asylum claims were rejected.
This story appeared on The Guardian‘s website late on Sunday afternoon BST—and I thank Patricia Caulfield for her first contribution to today’s column.
Slovenia sees end to E.U. if leaders fail on migrant plan
The European Union faces collapse if the bloc cannot agree on a plan to confront the sudden influx of refugees through the Balkans, Slovenia’s premier warned on Sunday as leaders bickered over who was to blame for the crisis.
Nine days after Hungary’s move to seal its southern border drove unprecedented migrant flows into tiny Slovenia, Prime Minister Miro Cerar sent out a dramatic call to fellow central and eastern leaders in Brussels for emergency talks.
“If we don’t find a solution today, if we don’t do everything we can today, then it is the end of the European Union as such,” Cerar said. “If we don’t deliver concrete action, I believe Europe will start falling apart,” he told reporters.
This Reuters story, filed from Brussels, put in an appearance on their website on Sunday evening EDT—and I thank Patricia Caulfield for her second offering in a row.
Poland lurches to right with election of Law and Justice party
Poland has consolidated its rightwing shift after exit polls showed voters had handed an absolute majority in its parliamentary election to Law and Justice, a Eurosceptic party that is against immigration, wants family-focused welfare spending and has threatened to ban abortion and in-vitro fertilisation.
The current ruling party, Civic Platform, conceded defeat following the first exit poll, published by Ipsos moments after polling stations closed at 9pm (8pm GMT) on Sunday, which gave the national conservative Prawo i Sprawiedliwość (Law and Justice party) 39.1% of the vote, putting it far ahead of Civic Platform on 23.4%. On Monday morning, the latest Ipsos poll gave the Law and Justice party 37.7% and Civic Platform 23.6%.
Jarosław Kaczyński, Law and Justice’s chairman and the twin brother of Poland’s late president Lech, immediately declared victory. Speaking to supporters at his party headquarters in central Warsaw, a triumphant Kaczynski said: “We will not kick those who have fallen… We need to show that Polish public life can be different.”
If the latest polling is confirmed, the result would give Law and Justice 232 seats in the 460-member lower house of parliament, meaning the party could govern alone and that its lead candidate, 52-year-old Beata Szydło, is likely to be appointed prime minister.
This news item, filed from Warsaw, appeared on theguardian.com Internet site at 8:51 a.m. BST on their Monday morning, which was 3:51 a.m. in Washington—EDT plus 5 hours. It’s the third story in a row from Patricia C.
Ukraine rebels expel Médecins sans Frontières from region
Rebels in Ukraine have ousted an international task force of doctors in the country’s war-torn east, denying thousands of civilians urgent medical care.
The self-proclaimed Donetsk People’s Republic has blacklisted Médecins sans Frontières, who said rebel chiefs gave no reason for the ban.
Bart Janssens, MSF’s director of operations, warned that the ruling is likely to lead to the deaths of patients and urged the rebels to reconsider. “As a medical organisation we ethically cannot accept being forced to abandon our patients,” he said.
Medics with the NGO have treated Ukrainian civilians wounded in the war as well as patients with chronic and potentially fatal illnesses including tuberculosis, diabetes and kidney disease. The group supplies more than 75% of insulin in the DPR and almost all its dialysis equipment.
This is another story from The Guardian—and another offering from Patricia Caulfield. This one, filed from Mariupol, showed up on their Internet site on Sunday evening BST.
Russia and Ukraine suspend direct flights between countries
Direct flights between Ukraine and Russia were grounded on Sunday, as mistrust between the two countries boiled over into a new trade war that could affect hundreds of thousands of people.
“I never thought it would come to this,” said 30-year-old Alexander Mikhaylin, from Moscow, after walking off the last Russian flight into Kiev’s Boryspil airport late on Saturday night.
“Of course it will make life more difficult,” the IT specialist said with a sigh. “These were the cheapest and most convenient tickets.”
Russia and Ukraine share both a long history and a fierce animosity, rekindled by months of winter 2013-14 protests that brought Petro Poroshenko, a strongly pro-western leader, to power.
This AFP news item, filed from Kiev, was picked up by The Guardian website on Sunday afternoon BST—and it’s another offering from Patricia Caulfield. Patricia also sent a Reuters story on this issue—and it’s headlined “Ukraine-Russia flight ban seen lasting for some time“.
War and Peace — revisited: Pepe Escobar
Russian President Vladimir Putin once again had to pull all stops at the International Valdai Discussion Club’s 12th annual meeting in Sochi to highlight the tremendous seriousness of the current geopolitical juncture.
As a compact Greatest Hits on comparative foreign policy and military strategy, this already qualifies as required reading in political science courses everywhere. Putin’s full speech, plus a crucial Q&A, is here. The speech on video is here.
Let’s go straight to some of the unmissable highlights.
On “moderate rebels” in Syria: “We shouldn’t play with words here and divide the terrorists into moderate and non-moderate … The difference, according to the “specialists” (Team Obama), seems to be that “moderate” bandits behead people softly … Success in fighting terrorists cannot be reached if using some of them as a battering ram to overthrow disliked regimes (because) it’s just an illusion that they can be dealt with (later), removed from power and somehow negotiated with.”
This commentary by Pepe was posted on the Asia Times website last Friday—and is a must read for any serious student of the New Great Game. I thank U.K. reader Tariq Khan for finding it for us.
Syria: Russia’s peace efforts acquire gravitas
The sudden visit by the U.S. Secretary of State John Kerry on Sunday to Saudi Arabia and his meeting with King Salman at his ranch outside Riyadh can be seen as a swift follow-up on the phone conversation he held with his Russian counterpart Sergey Lavrov the previous day.
Lavrov had initiated the phone call to Kerry, which followed their meeting in Vienna on Friday together with their Turkish and Saudi counterparts. Lavorv also held telephonic conversations on Saturday with his Iranian and Egyptian counterparts.
Evidently, Lavrov and Kerry are engaged in what increasingly seems a combined mutually reinforcing effort to flesh out a peace plan that finds acceptance with the external players who are aligned with them while also not entirely in sync with them as well as with the Syrian parties concerned. The brainpower could be Lavrov’s, but Moscow’s priority is to work with Washington to the extent the latter is willing – the common ground is steadily expanding – rather than indulge in one-upmanship.
In bits and pieces, the contours of a peace plan could be emerging out of these hectic consultations.
This commentary by career India diplomat M.K. Bhadrakumar appeared on the Asia Times website yesterday—and it’s courtesy of Tariq Khan as well. It’s worth reading for the same reason that the previous story was.
Battle of Aleppo is a must-win for Russia: Pepe Escobar
Once again, whatever hangs in the future for Syria on both the political and military fronts depends on the new Battle of Aleppo. The city and its outskirts, with the influx of internal refugees, may be harboring up to three million people by now.
Here’s what’s going on, essentially, on the ground. West Aleppo is controlled by Damascus, via the Syrian Arab Army (SAA).
Some of the northern parts are controlled by the Kurds from the PYD – which are way more engaged in fighting ISIS/ISIL/Daesh than Damascus. The PYD also happens to be considered an objective ally by the Obama administration and the Pentagon, much to the disgust of Turkey’s ‘Sultan’ Erdogan.
East Aleppo is the key. It is controlled by the so-called Army of Conquest, which includes Jabhat al-Nusra, a.k.a. Al-Qaeda in Syria, and the Salafi outfit Ahrar al-Sham. Other eastern parts are controlled by the “remnants” (copyright Donald Rumsfeld) of the Free Syrian Army (FSA), who refused to collaborate with the Army of Conquest.
Across the Beltway, all of the above are somewhat considered “moderate rebels.”
You need a program to keep up with the various different factions in this ‘domestic dispute’. This op-edge piece by Pepe, his second article in today’s column, showed up on the Russia Today website at 2:03 p.m. Moscow time on their Monday afternoon, which was 7:03 a.m. in Washington—EDT plus 7 hours. That’s three in a row for Tariq!
Stephen Cohen: Washington an Obstacle to Peaceful Multipolar World
The fact that Washington has refused to help Russia in the fight against ISIL is evidence of US fears of losing the “ultimate superpower” standing it obtained after the collapse of the USSR, professor of Russian studies at Princeton University and New York University Stephen Cohen believes.
On The John Batchelor Show, the scholar said that the current foreign policy of the United States is indicative of its unwillingness to recognize the multipolarity if the world today. What we are witnessing now, Cohen said, is Washington’s failing but persistent effort to maintain its superpower status in the global arena, and this is the primary reason for its refusal to join France, Germany and Russia in a peaceful resolution of the Ukrainian crisis and to join Putin’s coalition against ISIL.
“Putin proposed sending to the United States his Prime Minister Dmitry Medvedev, the former president, along with his Secretary of Defense…and the head of his National Security Council, to meet in Washington or somewhere privately to try to create a coalition against the Islamic State. Washington, the White House, refused the offer.” Cohen said.
This sputniknews.com item is basically an executive summary of what Stephen had to say in the John Batchelor interview that was posted in my Saturday column. I thank Patricia C. for digging it up for us.
Busted! Saudi Prince Arrested in Lebanon for Smuggling 2 Tons of Cocaine
A Saudi prince was detained at the Beirut International Airport in Lebanon’s largest drug bust in history, a security source told Sputnik.
Prince Abdel Mohsen Bin Walid Bin Abdulaziz and four of his friends were detained by airport security on Monday, while trying to smuggle about two tons of Captagon pills and some cocaine.
Captagon is the brand name for the amphetamine phenelhylline, a synthetic stimulant known for psychoactive and stimulant effects. The drug is fairly popular in the Middle East.
“The smuggling operation is the largest one that has been foiled through the Beirut International Airport,” AFP cited an anonymous Lebanese security source.
It will be interesting to see if this guy escape with his head when everything is said and done. This news item put in an appearance on the sputniknews.com Internet site at 7:23 p.m. Moscow time on their Friday evening, was was 12:23 p.m. EDT. It’s the four and final offering from Tariq Khan—and I thank him on your behalf.
Strongest Afghan Quake Since 1949 Triggers Search for Survivors
Afghanistan’s strongest earthquake in more than six decades shook buildings across South Asia, prompting officials from Kabul to Islamabad to New Delhi to send out rescue teams to search for survivors. More than 130 people died.
A 7.5 magnitude quake struck 254 kilometers (158 miles) north of the Afghan capital at a depth of 213 kilometers at 2:39 p.m. Indian time, the U.S. Geological Survey said. It was the first major temblor in the region since April, when a 7.8 earthquake in Nepal killed more than 8,000 people and triggered deadly avalanches on Mount Everest.
“The strongest earthquake in recent years has caused heavy damages and casualties in the nation,” Abdullah Abdullah, Afghanistan’s chief executive officer, told the country in a televised address. He said that 11 children died in a stampede as they tried to run out of a school building during the earthquake.
The quake caused landslides, disrupted mobile phone networks and caused houses to collapse in Pakistan, according to news reports. Omar Abdullah, the former chief minister of India’s northern Jammu & Kashmir state, wrote on Twitter that electricity was cut off in the main city of Srinagar. Office workers in New Delhi evacuated buildings.
This Bloomberg story appeared on their website at 3:34 a.m. Denver time yesterday morning—and was updated about three hours later. It’s courtesy of Brad Robertson via the Zero Hedge Internet site.
Marc Faber: China Has Credit Bubble of Epic Proportions
Marc Faber, publisher of the “Gloom, Boom and Doom” Report, examines China’s economic slowdown and what he sees as an “epic” credit bubble in the nation. He speaks on “Bloomberg ‹GO›.”
This 5:35 minute video clip showed up on the Bloomberg website at 8:01 a.m. MDT on Monday morning—and I thank Ken Hurt for sliding it into my in-box late yesterday afternoon.
Schadenfreude: How the U.S. Is Helping China Create a New Financial Order — Jeff Thomas
Here we have an image of a Chinese banknote, featuring Chairman Mao, followed by a seemingly incongruous German word – schadenfreude. Is there an error here?
Happily, no. We’ll begin with the word, schadenfreude, which means “harm-joy.” It’s used to express an occurrence that’s destructive, yet brings about happiness.
This would seem to be a conflict in terms, but, looked at a bit more deeply, it could be said that the killing of an enemy may mean that peace will soon prevail – and so the event brings happiness. Or, another analogy: the bulldozing of an old structure may mean that a new one – a better one – will soon be under construction.
And that’s the case here. The world’s most powerful (and most oppressive) political/economic power structure has begun to go under the bulldozer. Its replacement will hopefully be a better one.
This commentary by Jeff is something that as posted on the internationalman.com Internet site yesterday sometime—and it’s worth reading.
Mortgage rate rises are too little, too late to save Australia’s bloated banking sector
In Australia, the big four banks are joining the mortgage interest rate hike bandwagon to boost additional capital in what is truly a high-risk banking and financial system.
Simply put, when it comes to lending, banks are facilitators. On the front end, banks’ assets are generated by providing credit (debt) to home buyers and charging a specific rate of interest. On the back end, banks have liabilities derived from depositors and wholesale lenders, fetching an interest rate which is lower than that charged to home buyers. The banks earn the difference in revenue.
Australian households owe creditors an unconsolidated $1.97 trillion as of the second quarter of 2015, comprised primarily of mortgages with a remainder of personal loans. Relative to GDP, this amounts to 121.5%, and the proportion increased by 150 basis points every quarter over the past year. Given this historically and internationally large stock of household debt, the banks are earning mega dollars via net interest rate margins.
Australian banks are raking in record-breaking profits due to the sheer volume of mortgage debt issued to home buyers and residential property investors. This is the primary reason housing prices in Australia are at record levels, relative to inflation, rents and household income: a housing bubble generated by debt-financed speculation. Today, our banks are more exposed to the risk of a shock to the housing market than in any other moment in Australia’s economic history.
This news item showed up on theguardian.com Internet site just after midnight BST on their Saturday morning—and I thank J. White for finding it for us.
Gold Demand in China May Gain to Record, Bullion Bourse Says
Gold consumption in mainland China may match or exceed the record in 2013 after financial-market turmoil and the yuan’s devaluation boosted the metal’s appeal, according to the Chinese Gold & Silver Exchange Society, which also saw higher sales at jewelers in Hong Kong.
Buying in mainland China, which vies with India as the world’s largest consumer, picked up after the stock-market turmoil this year and August’s surprise devaluation, according to Haywood Cheung, chairman of the supervisory committee at the century-old bullion bourse. Demand in Hong Kong may expand 25 percent this half after a lackluster first six months, he said in an interview.
Gold prices are lower in 2015 following two years of losses on prospects for higher U.S. interest rates. The decline in 2013, when bullion sank 28 percent, spurred increased buying across Asia, and 2015 is shaping up well and may surpass that year’s total, according to Cheung. The yuan was devalued in the third quarter to bolster the nation’s competitiveness, and policy makers have also acted to stem a stock-market rout.
“Investors still prefer gold as they don’t have many alternatives in terms of investment choices,” Cheung said on Friday, citing estimates by the society’s members, which include the world’s largest listed jewelry chain Chow Tai Fook Jewellery Group Ltd. and Chow Sang Sang Holdings International Ltd. “Also, there’s a general feeling there’s less price uncertainty now.”
According to the weekly SGE data, China’s gold consumption will easily be a new record in 2015. This gold-related Bloomberg story showed up on their Internet site at midnight Sunday—and was updated in the wee hours of Monday morning. It’s something I found on the Sharps Pixley website. It’s safe to ignore the demand data in the last paragraph, as it’s all bulls hit.
Bloomberg marvels that hedge funds can’t beat central banks in rigged gold market
Gold prices are befuddling hedge funds, which are posting a track record no better than a coin flip when it comes to betting on the metal.
The funds and other money managers have placed wrong-way wagers on gold in five of the past nine weeks, U.S. government data show. Last week speculators increased their net-bullish position to the highest since February just before the biggest price drop since August. The precious metal has fluctuated between year-to-date gains and losses more than a dozen times in 2015 as traders weigh a dimming global economic outlook against the prospect for higher U.S. borrowing costs.
“Gold has been in a broad trading range,” said Michael Cuggino, the San Francisco-based president and portfolio manager at Permanent Portfolio Family of Funds Inc., which oversees about $4 billion. “It remains there and continues to trade off of central bank expectations and lack of inflationary pressure. It trends up, it trends down. From a trading perspective, there’s no compelling reason either to buy it or sell it at the moment.”
This gold-related news item, along with a 4:56 minute video interview with Jim Grant, appeared on the Bloomberg Internet site at 2 p.m. Denver time on Sunday afternoon. Jim knows perfectly well that the precious metal markets are rigged seven ways to heaven, but can’t quite bring himself to say it. In this interview he sounds off on fiat money and currency debasement, even though the talking head that’s interviewing him gave him ample opportunity to insert that golden fact if he wished to. The title above is from a GATA release, but the actual title reads “Hedge Funds Are Getting Their Gold Bets Wrong “.
The PHOTOS and the FUNNIES
This [past] week, the physical turnover of metal in the COMEX silver warehouses cooled off sharply, as only 1.75 million oz were moved and total inventories fell 0.7 million oz to 162.3 million oz, a fresh two year low. Not having predicted the frantic physical silver turnover would begin 4.5 years ago or that it would continue to remain frantic; I’m in no position to predict what happens next. I suppose if this specific silver movement were to suddenly cease after being so frantic for so long, the mystery of why it occurred would be even greater. It still smells like supply tightness to me.
A quick update on the October COMEX gold delivery process which I’ve written about recently. As of yesterday, around 500 contracts remain open and 485 gold deliveries have been issued so far this month, with JPMorgan having stopped (taken) 375 contracts in its own proprietary (house) trading account. Actually, when you net out the 107 contracts initially stopped by HSBC but subsequently redelivered and other traders who stopped and then redelivered gold this month on the COMEX, JPMorgan has been the sole gold stopper so far (with a week to go). These are not big numbers by any stretch, but JPM does stand out as the sole gold stopper. What’s interesting is that I would imagine JPMorgan is net short in COMEX gold futures overall, so it has taken delivery while being net short, something this bank has done in COMEX silver on a number of occasions.
My point is that despite all the talk about Dodd-Frank and the Volcker Rule (which I thought was aimed at getting the big banks out of speculating in commodities), one bank, JPMorgan, has become (or remained) the most dominant player of all in gold and silver and other commodities. Why the heck do we allow banks to trade in commodities in the first place, to say nothing about allowing one bank, JPMorgan, to monopolize and control gold and silver? — Silver analyst Ted Butler: 24 October 2015
It was just another day off the calendar as Ted Butler is wont to say from time to time. But despite the low volume in both gold and silver yesterday, it’s should be obvious that any upside movement was quickly squashed the moment that it appeared.
Both of these precious metals have now back below their respective 200-day moving averages for about a week now. Copper is sitting on its 50-day moving average—and crude oil has closed below its 50-day moving average for the last two consecutive days. Here are the 6-month charts for the Big 6 commodities so you can see where they all sit at the moment.
Even though there has been some minor improvements in the Commercial net short positions in both gold and silver since last Tuesday’s cut-off, it should not be forgotten that last Friday’s Commitment of Traders Report was absolutely horrid—and unless “da boyz” get over run, which is an event that I wouldn’t bet any money on, a day of reckoning to the downside is coming at some point.
And when it does arrive, it won’t be a matter of how low the prices of each will go, but it will be solely determined [as it always is] by the number of long contracts that JPMorgan et al can get the technical funds in the Managed Money category to sell—and how many short contracts they can get them to buy in the process. When they’ve sold the last long position and placed the last short position that they’re going to, the price at that point will be the bottom.
In other words, it’s the “same old, same old” once again. Absolutely nothing has changed since the last go around. We’ve seen this movie before.
And if you’re asking me to pick a price for each metal when it’s all over, all I’ll say is that we could certainly revisit the $1,100 price mark in gold—and get within spitting distance of $14 in silver.
And as I type this paragraph, the London open is less than ten minutes away—and I see that both silver and gold are up a hair in price from Monday’s close—and both platinum and palladium are sitting back at unchanged after being down in morning trading in the Far East.
Gold volume is pretty quiet at just over 14,500 contracts—and in silver the net HFT volume is a handful of contracts over the 4,000 mark. The dollar index traded a bit lower during most of the Far East session, but has rallied a bit—and is only down 5 basis points as London opens.
Today is the cut-off for this Friday’s Commitment of Traders Report—and as I said above, there should be some improvement in the Commercial net short position in this report, but I’m not prepared to estimate how much.
Also today we get the start of the FOMC meeting—and the smoke will go up the chimney on that on Wednesday afternoon. I’m not expecting them to say much at the end of it all, but it wouldn’t surprise me if we see some ‘action’ in the precious metals the second it’s over.
And as I post today’s column on the website at 4:45 a.m. EDT, I see that gold and silver are struggling higher—and both platinum and palladium have run into willing sellers at the same time that they ran into them yesterday, which was shortly after Zurich opened.
Net HFT gold volume is a bit over 19,000 contracts—and silver’s volume hasn’t changed much from about an hour ago, and is just over 4,600 contracts. The dollar index isn’t doing much either—and is down 6 basis points at the moment.
Can gold and silver continue to rally from here? I suppose, but I’ll be very surprised if we set new highs if we do, as it’s obvious that the powers-that-be have their respective prices well in hand.
I’m off to bed—and I’ll see you here tomorrow.
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