29 October 2015 — Thursday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price didn’t do much until shortly before 2 p.m. Hong Kong time on their Wednesday afternoon. It jumped up about three bucks at that point—and began to creep higher from there. That rally developed more legs once the COMEX opened, but ran out of gas at, or just before, the London p.m. gold fix. From there it quietly sold off a bit more than five bucks going into the Fed news at 2 p.m. EDT. At that point JPMorgan et al and their HFT buddies showed up—and forty-five minutes later, the price was down about thirty bucks from it morning high tick. The price didn’t do much after that.
The high and low ticks were reported by the CME Group as $1,183.10 and $1,152.10 in the December contract.
Gold finished the Wednesday session in New York at $1,155.70 spot, down $11.30 from Tuesday’s close. At one point, it was up over twenty bucks on the day. Not surprisingly, net volume was pretty chunky at a hair under 169,000 contracts.
Here’s Brad Robertson’s 5-minute gold tick chart. There was noticeable background volume starting at that smallish price spike in afternoon trading in Hong Kong, which showed up around the 11:30 p.m. Denver time mark on this chart. Of course the real volume kicked in at the COMEX open, which is 6:20 p.m. MDT on this graph—and then the monster volume on the engineered price decline starting when Yellen spoke. The vertical gray line is midnight in New York—add two hours for EDT—and the ‘click to enlarge‘ feature is a must here.
The silver chart was similar in most respects to the gold chart, but it only took a hair over 30 minutes for “da boyz” and their algorithms to hit the Tuesday low after the 2 p.m. news. In gold, it took 45 minutes. The silver price then rallied back to just above the $16 spot level an hour later, but there wasn’t a snowball’s chance in hell that JPMorgan et al were going to allow that to stand—and they didn’t.
The high and low tick in silver were reported as $16.37 and $15.72 in the December contract.
Silver was closed in New York yesterday at $15.935 spot, up 6.5 cents on the day. Net volume was pretty sky high at just under 64,500 contracts.
Both gold and silver blasted through their respective 200-day moving averages, but neither metal was allowed to close above them.
Platinum was in rally mode up until 2 p.m. Hong Kong time on their Wednesday afternoon, before selling off a bit into the Zurich open. It began to rally anew about two hour later, before really taking off at the COMEX open. It had to be restrained at the London p.m. gold fix—and then it was really hit hard about ten minutes before the Fed ‘news’—as it had all the signs of turning into a ‘no ask’ market shortly after the 1:30 p.m. COMEX close. Platinum was closed back below the $1,000 spot mark, but up 13 dollars on the day. At its high—and before the HFT boyz and their algorithms showed up—it was up more than double that amount.
Like gold and silver, the palladium price didn’t do much until shortly before 2 p.m. Hong Kong time—and then it began to chop higher. It had to be capped at, or just after, the London p.m. gold fix—and it got sold down a bit, before getting hammered to its low tick, with that process starting at the 1:30 p.m. COMEX close. Palladium finished the day at $681 spot, up five bucks from Tuesday’s close.
The dollar index closed late on Tuesday afternoon in New York at 96.91—and didn’t do much of anything until around 1:40 p.m. Hong Kong time. At that point it began to chop quietly lower—and that trend continued right until “da boyz” spun their algorithms. The dollar index blasted higher—and that ‘rally’ began minutes before 2 p.m. EDT. The 97.82 high came minutes before 3 p.m.—and it sagged a bit into the close. The index finished the Wednesday session at 97.62—up 71 basis points on the day.
The 1:40 p.m. Hong Kong turn lower in the dollar index obviously coincided precisely with the start of the rallies in the precious metals. The timing is so perfect that it’s beyond coincidence, as it’s obvious that whoever precipitated the dollar index decline at that point in time knew enough to put on a long position in the precious metals at the same moment. I would guess that whoever it was, was smart enough to sell out before the Fed news, because they probably knew what was coming after that.
And here’s the 6-month U.S. dollar chart so you can see the longer term chart of the best looking horse in the glue factory.
Not surprisingly, the gold stocks gapped up a bit at the open—and their highs came shortly before 11 a.m. in New York trading. They sagged a hair from there, but were up about 4.25 percent before JPMorgan and their HFT buddies showed up at 2 p.m. The low in the stocks came a few minutes after 2:30 p.m.—and they rallied a hair from there, as the HUI closed down 1.27 percent.
The chart pattern was very similar for the silver equities, although they set their high ticks around 12:15 p.m.—but they obviously met the same fate as their golden brethren starting at 2 p.m.. Although once the low was in minutes after 2:30 p.m., they did manage to rally back into the black, as Nick Laird’s Intraday Silver Sentiment Index closed up 0.37 percent.
The CME Daily Delivery Report showed that 302 gold and 17 silver contracts were posted for delivery within the COMEX-approved depositories on Friday. The two short/issuers were Canada’s Scotiabank with 254 contracts out of its in-house [proprietary] trading account—and the other 48 were courtesy of JPMorgan’s client account. The only long/stopper that mattered was JPMorgan for it’s own account, with 301 contracts taken. There were no banks involved in any of the silver deliveries. The link to yesterday’s Issuers and Stoppers Report is here.
The CME Preliminary Report for the Wednesday trading session showed that gold open interest declined by 111 contracts, leaving 314 still open, minus the 302 mentioned in the previous paragraph. That leaves 12 October contracts that have to be dealt with sometime today. In silver, October o.i. rose by 12 contracts, leaving 17 still open—and as per the previous paragraph, those will be delivered tomorrow. October silver deliveries are done—and only the 12 gold contracts remain unresolved.
There was a withdrawal from GLD yesterday, as an authorized participant took out 38,296 troy ounces. And as of 7:01 p.m. EDT yesterday evening, there were no reported changes in SLV.
For the third day in a row, there was no sales report from the U.S. Mint.
It is now more than obvious that gold and silver eagles sales have declined significantly in the last week or so—and it is, as Ted Butler said in his quote in yesterday’s column—“I’m sensing the big buyer of both Gold and Silver Eagles (JPMorgan) may be stepping aside temporarily since it now appears positioned to drive prices lower on the COMEX. There’s no question plain vanilla retail demand is moribund.”
And although I hate to repeat myself, I had this to say in yesterday’s column “Not to be forgotten is the fact that SLV is owed around 10 million ounces of physical silver—and the authorized participants, notably JPMorgan, have shorted the shares in lieu of depositing real metal. This is just another reason for JPMorgan et al to bash the crap out of silver—and that’s so they can cover their short positions in SLV. That’s the way it has always been resolved in the past—and I fully expect that it will be resolved in a similar fashion this time around, although I’d love to be proven wrong about that.”
It was another zero day in gold over at the COMEX-approved depositories on Tuesday, as nothing was received or shipped out.
It was somewhat better in silver, as 589,576 troy ounces were reported received—and all of it went into Scotiabank’s vault. There was 166,429 troy ounces shipped out of three different depositories. There was no activity once again at JPMorgan’s vault—and the link to all that activity is here.
It was another very busy day over at the COMEX-approved gold kilobar depositories in Hong Kong on their Tuesday, as they reported receiving 11,248 kilobars—and shipped out 3,125 kilobars. All of the action was at Brink’s, Inc. once again—and the link to that, in troy ounces, is here.
I don’t have all that many stories for you today—and I hope there a couple in here that you’ll like.
CRITICAL READS
“Hawkish” FOMC Statement Confirms “Moderate” Domestic Growth, No Longer Focused “Abroad”
With a 4% probability, it is no surprise that The Fed did not raise rates. Since The FOMC “folded” in September blaming global turmoil, stocks, bonds, and precious metals have soared as China (and EM) chaos has calmed while domestic data has declined. This has led to ‘lift-off’ expectations extending to April 2016, and so the question today is – how will The Fed convince the world it ‘will’ raise rates when it really can’t...
*FED REMOVES LINE THAT GLOBAL DEVELOPMENTS MAY RESTRAIN GROWTH
*FED SAYS U.S. ECONOMY `HAS BEEN EXPANDING AT A MODERATE PACE’
A definite hawkish bias but so we are left data-dependent (fundamentals bad, stocks good), and less economically optimistic, but are supposed to believe that December (34%) is still a live meeting (because of some hockey-stick expectation in data) because The Fed needs to raise to show that it can.
This commentary put in an appearance on the Zero Hedge website at 2:02 p.m. EDT on Wednesday afternoon—and I thank Richard Saler for the first story of the day. It’s worth reading.
Jim Rickards: Recession will force Fed to ease in 2016
Jim Rickards tells Lelde Smits there is no way the U.S. Federal Reserve will hike rates. Instead, Rickards believes the next move will be easing in March 2016 and predicts the impact on markets, metals and currencies.
This 5:36 minute youtube.com video clip appeared on that website on Tuesday—and even though its’ a couple of days old, it’s very much worth watching, as Jim spends almost all his time looking past yesterday’s Fed meeting. Harold Jacobsen was the first person through the door with this clip yesterday morning.
Hedge fund assets take biggest plunge since 2008
The hedge fund industry suffered a $95 billion decline in assets to $2.87 trillion during the turbulent third quarter, according to HFR.
That represents the first drop in hedge fund capital in three years and the biggest since just after Lehman Brothers collapsed during the 2008 financial crisis.
The declines came during a period of heavy volatility on Wall Street that was triggered by fears over China’s economy and uncertainty about Federal Reserve policy. Clearly, hedge funds were not immune to the violence in financial markets.
“It was primarily performance driven. We saw poor performance from a few specific segments of the market drag down assets,” said Peter Laurelli, global head of research at investment data and analytics firm eVestment.
This news item found a home over at the cnn.money.com Internet site at 12:54 p.m. on Tuesday afternoon EDT—and it’s something I found in yesterday’s edition of the King Report.
Good Riddance To Johnny [Lawnchair] Boehner: The Fastest Fold On The Potomac — David Stockman
There are few political hacks in Washington more deserving of everlasting ignominy than retiring speaker John Boehner. So here’s a vehement good riddance to the man who has single-handedly destroyed whatever pathetic semblance of fiscal responsibility that remained in Washington.
The so-called bipartisan budget deal he confected as a parting gesture doesn’t even deserve to be called a farce. It’s actually just an extension of Washington’s pathological lying to the American public about the monumental fiscal calamity now brewing.
Folks, a crisis driven resort to prioritized spending cutbacks is the only mechanism left to prevent a rapidly aging society and failing economy from drifting into fiscal calamity; and during the Obama era it was always in the power of the House Speaker to force that procedure.
That’s why Johnny Lawnchair deserves everlasting infamy—–or at least until Paul Ryan comes up with new excuses for burying future generations in terminal debt.
This commentary appeared on David Stockman’s website yesterday sometime—and I found it in this morning’s edition of the King Report.
Agency won’t give GOP internal documents on climate research
The federal government’s chief climate research agency is refusing to give House Republicans the detailed information they want on a controversial study on climate change.
Citing confidentiality concerns and the integrity of the scientific process, the National Oceanic and Atmospheric Administration (NOAA) said it won’t give Rep. Lamar Smith (R-Texas) the research documents he subpoenaed.
At the center of the controversy is a study that concluded there has not been a 15-year “pause” in global warming. Some NOAA scientists contributed to the report.
Skeptics of climate change, including Smith, have cited the pause to insist that increased greenhouse gas emissions, mostly from burning fossil fuels, are not heating up the globe.
This item appeared on thehill.com Internet site at 12:47 p.m. EDT yesterday afternoon—and I thank “Aurora” for sharing it with us.
Paris climate deal to ignite a $90 trillion energy revolution
The fossil fuel industry has taken a very cavalier bet that China, India and the developing world will continue to block any serious effort to curb greenhouse emissions, and that there is, in any case, no viable alternative to oil, gas or coal for decades to come.
Both assumptions were still credible six years ago when the Copenhagen climate summit ended in acrimony, poisoned by a North-South split over CO2 legacy guilt and the allegedly prohibitive costs of green virtue.
At that point the International Energy Agency (IEA) was still predicting that solar power would struggle to reach 20 gigawatts by now. Few could have foretold that it would in fact explode to 180 gigawatts – over three times Britain’s total power output – as costs plummeted, and that almost half of all new electricity installed in the US in 2013 and 2014 would come from solar.
Six years later there can be no such excuses. As The Telegraph reported yesterday, 155 countries have submitted plans so far for the COP21 climate summit to be held by the United Nations in Paris this December. These already cover 88pc of global CO2 emissions and include the submissions of China and India.
One wonders if Ambrose Evans-Pritchard needs new meds, or just needs to increase the dosage of the ones he’s already taking? He’s certainly doing his master’s bidding in this article. But, having said that, we’ll have to see how this all shakes out considering the current economic mess that the world currently finds itself in. This commentary put in an appearance on The Telegraph‘s website at 8:49 p.m. GMT, which was 4:49 p.m. in Washington—EDT plus 4 hours. It’s on the longish side, but certainly worth reading—make that a must read—and I thank Patricia Caulfield for her first contribution to today’s column.
U.K. growth slows as construction and manufacturing output shrinks
The sharpest contraction in construction output for three years dragged down U.K. growth at a faster pace than expected in the third quarter as manufacturing remained in recession.
Official data showed the U.K. economy expanded by 0.5pc in the three months to September.
This was weaker than expectations for growth of 0.6pc and follows an expansion of 0.7pc in the previous three months. Compared with a year ago, the economy expanded by 2.3pc.
The Office for National Statistics (ONS) said growth was driven almost entirely by Britain’s dominant services sector, which expanded by 0.7pc in the third quarter.
This story was posted on the telegraph.co.uk Internet site on Monday morning GMT—and it’s the second contribution of the day from yesterday’s edition of the King Report.
Sweden Launches MOAR QE, As Krugman Paradise Quadruples Down After Dovish Draghi
Over the last six months, we’ve documented Sweden’s descent into the Keynesian Twilight Zone in great detail.
Once upon a time, the Riksbank actually tried to raise rates, only to be lambasted by a furious Paul Krugman who accused the central bank of unnecessarily transforming Sweden from “recovery rock star” to deflationary deathtrap. Tragically, the Riksbank listened to Krugman and reversed course in 2011. Before you knew it, rates had plunged 35 basis points into NIRP-dom. Unemployment subsequently fell, but the promised lift in inflation didn’t quite pan out. Sweden did, however, get a massive housing bubble for their trouble.
This very interesting Zero Hedge story, which segues nicely into the ZH story just below, was posted on their Internet site at 7:15 a.m. EDT on Wednesday morning—and it’s the second offering of the day from Richard Saler. It’s on the longish side, but definitely worth skimming if you have the interest.
NIRP Panic: Over Half of European 2-Year Bonds Trade at Record Negative Yields; Italy Paid to Issue Debt
Last week it was Mario Draghi’s promise that he would push European deposit rates even further into NIRP territory from their current -0.20% level, something which market not only believed but has already priced in and then some, pushing German 2-year yields to a record -0.35%…but then earlier today, as predicted here previously, in a panic response Sweden’s Riksbank did the only thing it can do to halt the “money tsunami” that Draghi is unleashing as he makes money even more unwanted, by expanding its QE for the 4th time this year since it was unveiled in February in hopes of making the SEK even more worthless than the Euro.
In short, Europe has unleashed yet another monetary panic, and nowhere is it more visible than in what happened today across the short end of Europe’s government curve.
As the table below shows, more than half of European sovereign issuers just saw the yield on their 2 Year Notes trade not only below zero, but hit never before seen negative yields!
But nothing shows just how insane it is getting than the story of Italy, which earlier today not only sold €6 billion in Bills due April 2016, but did so at negative yields.
Unbelievable! This is another Zero Hedge story courtesy of Richard Saler. It was posted on their website at 12:53 p.m. EDT yesterday afternoon—and it’s definitely worth reading.
Germany to apply more stringent refugee policy
Germany has announced a tightening of its refugee policy, saying it is “not acceptable” that many refugees coming to the country are from Afghanistan and not Syria.
The German interior minister, Thomas de Maizière, said on Wednesday that, of the thousands of refugees and migrants arriving every day, the second highest number came from Afghanistan.
“Afghanistan is on the second place for the number of cases being handled. That is not acceptable,” he told journalists in Berlin after a cabinet meeting.
“We agree with the Afghan government that Afghanistan’s youth and middle class should remain in their country and take part in its reconstruction,” he said, claiming that an increasing number of those coming in recent weeks were from Kabul’s middle class, and that their departure threatened Afghanistan’s stability.
This article was posted on theguardian.com Internet site at 5:55 p.m. GMT on their Wednesday afternoon, which was 1:55 p.m. in New York—EDT plus 4 hours. I thank Patricia Caulfield for her second offering of the day.
Egyptian credit risk climbs in earnest
The country’s current account chasm and free-falling currency has seen the country’s bonds exhibit its largest amount of credit risk in 18 months.
CDS spreads now at 400bps, highest since the Sisi election
Egypt’s 10 year bonds have seen their yield jump by over 1% since their June issuance
The country’s 2040 USD bonds are trading with a spread of 500bps for the first time in two years
This brief news item put in an appearance on the markit.com Internet site on Tuesday sometime—and it’s the fourth contribution of the day from Richard Saler.
What it means to invite Iran to key Syria talks — M.K. Bhadrakumar
The invitation extended to Iran to attend the multi-party talks on Syria in the weekend signifies a profound shift in the stance of the United States and Saudi Arabia. For the U.S., this shift comes naturally as a logical sequence to the recently concluded nuclear agreement, but for Saudi Arabia it is a bitter pill to swallow that Iran is being recognized as a stakeholder in the future of a major Arab country, something that it has been loathe to concede.
The Saudis all along had feared that the nuclear deal would end Iran’s international isolation and unshackle it, enabling it to expand its activities and boost its influence in the region. Therefore, the fact that Riyadh has given way to U.S. (and, possibly, Russian) entreaties to bring Iran into the talks shows Saudi weakness to some extent. On the other hand, it could also be that in the Saudi calculation, there could be useful fall-outs for the resolution of the crisis in Yemen in which it is deeply entangled.
On the other hand, it is sound realism on the part of the U.S. that Iran is invited to the negotiating table, given its presence on the ground in Syria and its great camaraderie with the Syrian leadership, aside its sheer capacity to make or mar any eventual settlement. The U.S., undoubtedly, has been eager to engage with Iran over the Middle Eastern issues, and working together on Syria would create mutual confidence to extend the cooperation to other issues as well in future, such as Yemen.
This slightly longish, but very interesting commentary appeared on the Asia Times website yesterday—and it’s certainly a must read for any serious student of the New Great Game. I thank U.K. reader Tariq Khan for his first contribution to today’s column.
No, Thanks! Iraq Rules Out Need for U.S. Ground Operation
On Tuesday, U.S. Defense Secretary Ashton Carter said that the Pentagon had not ruled out conducting ground attacks against ISIL.
“This is an Iraqi affair and the government did not ask the U.S. Department of Defense to be involved in direct operations,” Saad Hadithi told NBC News, adding that Baghdad had “enough soldiers on the ground.“
Hadithi said the United States is required to coordinate through Baghdad any military activity in the country, including the airstrikes that an international U.S.-led coalition is currently conducting against ISIL targets on Iraqi soil.
The spokesman, however, admitted that U.S. assistance was important to Iraq to arm and train its forces.
This news item showed up on the sputniknews.com Internet site at 6:15 p.m. Moscow time on their Wednesday evening—which was 11:15 a.m. in Washington—EDT plus 7 hours. I thank Tariq Khan for his second contribution in a row.
Crude “Tipping Point” Arrives: China Runs Out of Space to Store Oil
It was just two days ago when we reported that according to Goldman calculations, the world was dangerously close to an almost unprecedented event (with two exceptions: 1998 and 2009): running out of space to store crude distillate products.
As a reminder, this is what Goldman said: “the build in Atlantic distillate inventories this year has been large, following near-record refinery utilization in both the U.S. and Europe, only modest demand growth, especially relative to gasoline, and increased imports from the East on refinery expansion and rising Chinese exports.”
“As a result, and despite a cold winter in both Europe and the U.S. last year, European and U.S. distillate storage utilization is reaching historically elevated levels, driving a sharp weakening in heating oil and gas/oil time spreads.”
Then moments ago the EIA reported that despite Goldman’s concerns, and despite yet another inventory build in the U.S., which rose by a further 3.4 million barrels, as U.S. production rose once again, Cushing inventories actually declined further, dropping by 785K, following a 78K decline a week earlier.
And then something very unexpected happened: the world quietly hit a tipping point when, according to Reuters, China ran out of space to store oil. In a report explaining why “oil cargoes bought for state reserve stranded at China port” Reuters notes that “about 4 million barrels of crude oil bought by a Chinese state trader for the country’s strategic reserves have been stranded in two tankers off an eastern port for nearly two months due to a lack of storage, two trade sources said.”
This longish, but very interesting commentary appeared on the Zero Hedge website at 11:17 a.m. EDT on Wednesday morning—and it’s the first of two in a row from West Virginia reader Elliot Simon.
China Steel Head Says Demand Slumping at Unprecedented Speed
If anyone doubted the magnitude of the crisis facing the world’s largest steel industry, listening to Zhu Jimin would put them right, fast.
Demand is collapsing along with prices, banks are tightening lending and losses are stacking up, the deputy head of the China Iron & Steel Association said on Wednesday.
“Production cuts are slower than the contraction in demand, therefore oversupply is worsening,” said Zhu at a quarterly briefing in Beijing by the main producers’ group. “Although China has cut interest rates many times recently, steel mills said their funding costs have actually gone up.”
China’s mills — which produce about half of worldwide output — are battling against oversupply and sinking prices as local consumption shrinks for the first time in a generation amid a property-led slowdown.
This Bloomberg story showed up on their Internet site at 1:42 a.m. Denver time yesterday morning—and it’s the second offering in a row from Elliot Simon.
China Margin Debt Hits 8-Week High, Japan Pumps ‘n’ Dumps as Kyle Bass Fears Looming EM Banking Crisis
Following Marc Faber’s reality check on China recently, Hayman Capital’s Kyle Bass took a swing tonight noting that “China’s 7% GDP growth is a farce,” and adding that, just as we detailed previously, China’s credit cycle has begun and non-performing loans will rise rapidly leading to an emerging Asia banking crisis ahead. Japanese markets continue to entertain with “someone” insta-ramping NKY Futs 100 points at the open only to give it all back as USD/JPY slides back towards 120.00 (and 10Y JGB yields drop below 30bps for the first time in 6 months).
Hayman Capital’s Kyle Bass discusses China at Sohn San Francisco:
*HAYMAN’S BASS SAYS CHINA 7% GDP GROWTH IS A ‘FARCE’
*HAYMAN’S BASS SAYS HE’S ASSUMING CHINA CREDIT CYCLE HAS BEGUN
*HAYMAN’S BASS: CHINA WILL FACE NPL CYCLE, CREDIT CONTRACTING
*HAYMAN’S BASS: ASSUMES 8.5%-10% CHINA LOANS NON-PERFORMING
*HAYMAN’S BASS SEES EMERGING ASIA BANKING CRISIS AHEAD
This is another Zero Hedge commentary—and this one appeared on their website at 9:21 p.m. EDT on Tuesday evening—and it’s the final offering of the day from Richard Saler. I thank him on your behalf.
China unswayed by U.S. threats and coercion: Former White House official
The United States should not use “threats and coercion” against Beijing because these tactics do not work against “powerful” countries like China, a former White House official says.
Dr. Paul Craig Roberts, who was Assistant Secretary of the Treasury in the Reagan Administration and associate editor of The Wall Street Journal, made the remarks in a phone interview with Press TV on Wednesday.
He was commenting on a statement by Secretary of Defense Ashton Carter who said that the United States will continue operations in the South China Sea after a U.S. warship entered the disputed waters, provoking Beijing’s anger.
“There have been naval operations in that region in recent days, and there will be in the weeks and months,” Carter told the Senate Armed Services Committee on Tuesday. “We will fly, sail and operate wherever international law permits, and whenever our operation needs require it.”
This story was posted on the presstv.ir Internet site late Wednesday afternoon in Tehran—and I thank Tariq Khan for his final contribution to today’s column.
Austrian central bank won’t answer questions about its exec’s remark on gold intervention
Freelance financial journalist Lars Schall reports today that the Austrian central bank has refused to answer his questions about the assertion last week by the bank’s executive director, Peter Mooslechner, that Asian central banks are using their gold reserves to intervene secretly in the gold and currency markets.
Schall writes that he received yesterday the following reply from the head of the Austrian central bank’s press office, Christian Gutlederer: “Sorry, we are not going to answer your questions. We never comment on our investment strategy and trading.”
The rest of this short commentary, plus an embedded link, can be found in this GATA release from yesterday.
Gold ready to take its position when QE undoubtedly fails
Yet, despite the massive demand for physical gold from China, and as gold flows from West to East, the futures market of Comex is still largely responsible for setting the gold price. But, the more the Chinese become involved in the global gold price mechanism the more their influence will rise in determining the actual price given these massive gold flows. This of course will lead to a more credible reflection of prices as they will be determined according to the correct fundamentals and not simply by a few bullion banks that simply create price distortions.
But, it is not only the Chinese that have been adding physical gold to their reserves. Russia has been consistently increasing its holdings of the precious metal.
Russia added another 34.2 tons of the precious metal in September. This follows on the heels of a 1 million ounce increase in Russian gold reserves in August.
Since the global financial crisis, Russia has increased its gold reserves at an average pace of about 300,000 ounces per month. And, other countries formerly part of the Soviet Union have also increased their holdings of gold.
There’s nothing really new in this commentary until you get just over halfway through it. But despite that fact, it’s good to see some sensible commentary about gold other than from the usual sources. I found this on the mineweb.com Internet site in the wee hours of this morning. It’s worth reading if you have the time.
Venezuela Is Selling Off Gold Reserves as Bond Payments Loom
In a sign of how Venezuela is growing increasingly desperate to acquire hard currency, a report released this week showed the country has been stepping up its sales of gold.
The value of the central bank’s bullion holdings fell 28 percent at the end of May from a year earlier, while the spot price for the metal declined just 12 percent. The figures, while reflecting transactions that took place five months ago, underscore the efforts the government is taking to raise the cash to repay creditors and fund imports amid a punishing recession, inflation exceeding 100 percent and a collapse in the price of its main export, oil.
With $3.5 billion of bond payments due this week and next, the cash-strapped country’s international reserves are hovering near a 12-year low of $15.2 billion, including gold holdings that totaled $11.8 billion at the end of May. Notes from Venezuela, which relies on crude for 95 percent of export revenue, are trading at distressed levels with swaps contracts pricing in a 96 percent chance of default over the next five years.
This gold-related Bloomberg story was posted on their Internet site at 12:43 p.m. MDT on Wednesday afternoon—and I found it on the Sharps Pixley website.
The PHOTOS and the FUNNIES
The WRAP
Silver jumped to new multi-month price highs [yesterday] on impressive COMEX trading volume, before retreating. Gold hadn’t quite hit new price highs before falling late in the day and trading volumes were proportionately less impressive than silver’s. According to my COT analysis premise, as I recall writing recently, prices can do anything in the short run. New price highs will likely only occur if there is additional managed money technical fund buying and that appears to be the case today in silver (less so in gold so far).
But if it is new managed money buying that drove prices higher and no other actual change is afoot that just increases the level of resolution yet to come. In essence, it would appear that the size of the COMEX poker pot has increased today, but the cards have not been turned over yet nor the winner declared. More technical fund buying and commercial selling just means the amount of the ultimate resolution is greater. If you analyze the COTs as I do, open and unrealized profits and losses matter little; only closed out profits and losses count.
I fully admit that it is possible for the managed money traders to beat the commercials in terms of closed out profits and losses, but that is premature and unknowable at this point. Further, I can’t recall a time when the 8 largest concentrated commercial shorts have added significantly to short positions and then been forced to turn around and buy those added short contracts back at a loss. There is a first time for everything, but only a prophet could predict that, not a mere analyst. — Silver analyst Ted Butler: 28 October 2015
Yesterday’s price action in pretty much everything was about as in-your-face price management as your going to see on any one given day. The precious metals were slammed by the HFT traders, the dollar index was spun higher, as were all the equities in New York trading yesterday. The only outlier was WTIC, which closed up an impressive 5.9 percent.
Here are the 6-month charts for the Big 6 commodities—and they don’t reflect the end-of-day price action, because the prices on these charts are as of the 1:30 p.m. EDT COMEX close. That was a full thirty minutes before “da boyz” spun their algorithms. Yesterday’s low prices will appear in today’s charts—and I’ll have them for you tomorrow.
Yesterday we had what is called in technical terms a “key reversal to the downside.” We’ve had them to the upside before—and they’ve always amounted to nothing. It remains to be seen if JPMorgan et al continue with these engineered price declines as the last trading week in October draws to a close. The table is certainly set for it, so it’s just a matter of waiting to see what happens going forward.
And as I type this paragraph, the London open is less than ten minutes away—and I note that gold is up five bucks or so. Silver is up a few pennies after being down in Far East trading on their Thursday—and creeping ever closer to the $16 spot price mark. Platinum is back at $1,000 the ounce, after being down a bit as well in Far East trading—and palladium is currently down 9 bucks.
Net HFT gold volume is already a bit over 21,000 contracts—and silver’s net HFT volume is around 7,100 contracts—both pretty big numbers for this time of day. The dollar index has been crawling quietly lower all night long—and is currently down 10 basis points as London opens.
As I said a couple of paragraphs ago, the table is set for a down-side smash in all four precious metals—and using past as prologue, that’s what should happen. But will it? Beats the hell out of me. I’d like to think that things are “different this time”—but I’ll happily reserve judgement on that statement, as JPMorgan et al are still fully in control of what happens with commodity prices in general—and precious metal prices in particular. Until that changes, nothing changes.
And as I post today’s column on the website at 4:00 a.m. EDT, I see that all four precious metals were turned lower starting around 8:45 a.m. GMT in London trading. Gold is now up only 3 dollars, silver is down 11 cents, platinum is down a couple of bucks—and palladium is now down 14 dollars.
Gold volume is north of 25,000 contracts—and silver’s net HFT volume is just over 8,100 contracts. The dollar index isn’t doing much—and is currently down 6 basis points.
That’s all I have for today—and as is usually the case, absolutely nothing will surprise me when I check the Kitco charts when I crawl out of bed later this morning.
See you on Friday.
Ed
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