22 December 2015 — Tuesday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price rose a few dollars between 9 and 10 a.m. Hong Kong time on their Monday morning—and then continued to crawl higher into the London a.m. gold fix. After that, the price didn’t do much until at, or shortly after, the noon GMT silver fix. From there it got sold down a few dollars into the COMEX open. A rally of sorts developed at that point, but once that London p.m. gold fix was done at 10 a.m. EST, the speed of the rally slowed considerably. And once COMEX trading ended, the gold price got sold down a bit into the 5:15 p.m. EST close of electronic trading.
The low and high tick were reported as $1,063.10 and $1,081.40 in the February contract.
Gold finished the Monday session in New York at $1,078.20 spot, up $12.10 from Friday’s close. Net volume was pretty light at a hair under 105,000 contracts, which Ted was very impressed with considering the fact that gold broke above—and close above its 20-day moving average once again.
Here’s the New York Spot Gold [Bid] chart so you can see the action from the COMEX open onwards in a bit more detail.
And here’s the 5-minute gold tick chart courtesy of Brad Robertson. As usual, all the volume that really mattered occurred during the COMEX trading session—and you’ll excuse me for thinking this, but it certainly appeared like there was some sort of price algorithm running in the background between the London p.m. gold fix and the COMEX close, which is between 8:00 and 11:30 a.m. Denver time on this chart. Midnight in New York is the vertical gray line, add two hours for EST—and don’t forget the ‘click to enlarge‘ feature.
It was more or less the same chart pattern for silver, except for the fact that the price got capped about twenty minutes or so after the COMEX open—and it crawled higher from there—and in the same fashion as gold. The high tick, if you wish to dignify it with that name, came about five minutes before the COMEX close. The price traded flat after that until around 3:25 p.m. in electronic trading—and at that point, a thoughtful soul peeled a nickel or so off the price into the 5:15 p.m. EST close.
The low and high tick in silver were recorded as $14.045 and $14.33 in the March contracts.
Silver closed yesterday at $14.245 spot, up 16.5 cents from Friday. Net volume was a bit higher than average at just under 35,500 contracts and, as in gold, silver broke above—and then closed above its 20-day moving average once again.
The platinum price traded flat in Far East trading on their Monday, but began to rally at 10 a.m. Zurich time. With the exception of the same tiny sell-off [as gold and silver] between the noon silver fix and the COMEX open, platinum rallied quietly and steadily until 1 p.m. in New York. Its high tick at that point was $880 spot—and an hour later it was down to the $872 mark—and finished the day at $871 spot, up 15 bucks from Friday’s close.
Palladium chopped a few dollars either side of the unchanged mark up until COMEX trading began. Then it got sold down to its $547 low tick about 11:30 a.m. EST—and the price didn’t do much after that. Palladium closed in New York yesterday at $549 spot, down 4 dollars from Friday.
The dollar index closed late on Friday afternoon in New York at 98.72—and once trading began at 1:00 p.m. EST on Sunday afternoon, began to chop a bit lower until the London open on their Monday morning.. At that point it rallied about 20 basis points within thirty minutes or so—and didn’t do too much of anything until 8 a.m. in New York. Then it headed lower with some authority, with the 98.29 low tick coming minutes after 11:30 EST. It rallied 20 basis points off that low by 1 p.m.—and then a 15 basis point down/up move between then and the close, as the dollar index finished the day at 98.47—down 25 basis points from Friday’s close. Here’s the 3-day chart so you can see all Sunday’s price action as well.
And here’s the 6-month U.S. dollar chart so you can keep up with the longer term trend.The gold stocks gapped up about 3 percent at the open—and then proceeded to chop more or less sideways until they began to slide a little starting a minute or so before the 1:30 p.m. COMEX close. Then at 3:45 p.m. they ticked higher into the close of the equity markets in New York—and the HUI finished the Monday session up 2.63 percent.
The silver equities had a wilder time of it yesterday. They peaked out shortly before 10:30 a.m. in New York trading—and began to sell off from there. Only the appearance of a buyer in the last fifteen minutes of trading prevented the silver shares from actually finishing down on the day. As it was, Nick Laird’s Intraday Silver Sentiment Index close in the green to the tune of only 0.28 percent.
The CME Daily Delivery Report showed that 43 gold and 126 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday. In gold, the largest short/issuer was ABN Amro with 40 contracts from its client account. The biggest long/stopper was JPMorgan once again, stopping all 40 contracts that ABN Amro issued. In silver it was also ABN Amro as the largest short/issuer with 120 contracts from its client account. ABN Amro was also a big long/stopper with 47 contracts for its client account—and JPMorgan stopped the same number of contracts for its own account. HSBC USA and ADM stopped 17 and 14 contracts respectively. 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 in December fell by 98 contracts, leaving 1,031 still open—minus the 43 posted above. In silver, o.i. declined by 18 contracts, leaving 334 contracts still open—minus the 120 mentioned in the previous paragraph.
[I should mention that the CME Preliminary Report for the Friday session, although missing in action in my Saturday column, was updated by the CME Group in the wee hours of Monday morning—and the commentary now appears in my Saturday column. So if you want to read what happened, the link to that column is here—and you’ll find the commentary in its usual spot. – Ed]
After a big 603,000 troy ounce deposit on Friday, the folks over at GLD showed that an authorized participant withdrew 95,680 troy ounces on Monday. And as of 6:35 p.m. EST yesterday evening, there were no reported changes in SLV.
There wasn’t much gold activity over at the COMEX-approved depositories on Friday. They didn’t report receiving any—and only 200 kilobars [6,430.000 troy ounces] were shipped out—and that all came out of Scotia Mocatta’s vault. The link to that activity is here.
In silver, there was 594,850 troy ounces received—all into JPMorgan’s vault—and 305,244 troy ounces shipped out the door. Almost all of the ‘out’ activity was from Brink’s, Inc.—and the link to that is here.
It was another big day over at the COMEX-approved gold kilobar depositories in Hong Kong on their Friday. They reported receiving a chunky 18,350 kilobars—and shipped out 14,407 of them. That’s a lot of gold, dear reader! All of it was at the Brink’s, Inc. depository once again—and the link to that action, in troy ounces, is here.
It’s another day where I don’t have an overly large number of stories, but some are long and must reads—and I’ll happily leave the final edit in your hands.
CRITICAL READS
Bank Counterparty Risk Surges To 4-Year High
In September, interbank credit markets flashed a quick and brief warning that something was up… and Janet folded. Three months later and following The Fed’s oddly-timed rate-hike, interbank counterparty risk – as proxied by the TED-Spread – has spiked over 45% in 2 days, the most since Sept 2008 (Lehman).
The TED Spread is the difference between the interest rates on interbank loans and on short-term U.S. government debt and as such offers a proxy for how banks themselves perceive the relative creditworthiness of the financial system. The last time TED spread was surging to this level was late 2011, as Europe’s crises was exploding.
Which makes one wonder whether The Fed rate hike was an implicit bailout for foreign (read European) banks?
But the pace of increase is extremely worrisome historically.
This worthwhile read put in an appearance on the Zero Hedge website at 3:50 p.m. EST on Monday afternoon—and I thank Richard Saler for today’s first story.
As Pot-Growing Expands, Electricity Demands Tax U.S. Power Grids
Pot’s not green.
The $3.5 billion U.S. cannabis market is emerging as one of the nation’s most power-hungry industries, with the 24-hour demands of thousands of indoor growing sites taxing aging electricity grids and unraveling hard-earned gains in energy conservation.
Without design standards or efficient equipment, the facilities in the 23 states where marijuana is legal are responsible for greenhouse-gas emissions almost equal to those of every car, home and business in New Hampshire. While reams of regulations cover everything from tracking individual plants to package labeling to advertising, they lack requirements to reduce energy waste.
Some operations have blown out transformers, resulting in fires. Others rely on pollution-belching diesel generators to avoid hooking into the grid. And demand could intensify in 2017 if advocates succeed in legalizing the drug for recreational use in several states, including California and Nevada. State regulators are grappling with how to address the growth, said Pennsylvania Public Utility Commissioner Pam Witmer.
“We are at the edge of this,” Witmer said. “We are looking all across the country for examples and best practices.”
This very interesting Bloomberg story was posted on their Internet site at 3:00 a.m. Denver time yesterday morning—and it’s courtesy of Brad Robertson via Zero Hedge.
Just About Every Part of the Permian Basin is Unprofitable at $30 Per Barrel
Less than 2 percent of Permian basin tight oil wells are commercial at $30 per barrel oil prices.
Sorry about that. I know that many believe that U.S. shale and tight oil plays are commercial even at current low oil prices but data on the Permian basin and Bakken plays simply does not support that belief.
To make matters worse, Pioneer and EOG have made outrageous claims about Permian basin reserves in their 3rd quarter 2015 earnings reports that no sensible person should believe. Statements like these simply add to the mistaken idea that tight oil plays get a pass on the laws of physics and economics and that somehow the U.S. is going to beat Saudi Arabia as the low-cost “swing producer” of the world. I wish that were true but trust me–based on data, that’s not going to happen.
The Permian basin is one of the oldest producing areas in the United States. It has been thoroughly drilled and is in a hyper-mature phase of development. The Spraberry, Wolfcamp and Bone Springs plays that Pioneer and EOG are pursuing (Figure 1) are really secondary recovery projects in which horizontal drilling and hydraulic fracturing have replaced water and CO2 injection methods used in the past. Few new reserves should be expected. Most of the claims that these companies make are really about higher recovery efficiency of existing reserves.
This very interesting oil-related news item appeared on the oilprice.com Internet site on Sunday—and it’s the second offering of the day from Richard Saler.
Oil prices hit eleven-year low as global supply balloons
Brent crude oil prices hit their lowest in more than 11 years on Monday, while U.S. crude flirted with seven-year lows on more signs that swelling global supply looked set to outpace tepid demand again next year.
Global oil production is running close to record highs and, with more barrels poised to enter the market from nations such as Iran and Libya, the price of crude is set for its largest monthly percentage decline in seven years.
Brent’s premium over U.S. crude narrowed further as the market braced for the end of a 40-year ban on U.S. crude exports. President Obama signed a law on Friday that will end the ban.
U.S. crude futures fell 53 cents at $34.20 by 11:14 a.m. EST (1614 GMT) after bouncing off an intraday low of $33.98.
This Reuters article, filed from New York, showed up on their website at 1:57 p.m. EST on Monday afternoon—and it’s another story from Brad Robertson via Zero Hedge.
Spanish election is vote for malaise
Spanish politics are a mess. The ruling conservatives won the election but fell short of a majority, while the Socialists came in second. Anti-austerity Podemos did better than expected thanks to a savvy campaign. It’s far from clear what the next government in Spain will look like. No wonder investors are shooting first by selling Spanish stocks, particularly in regulated sectors.
Political pacts will be the order of the day. The problem is that there is no obvious combination that would add up to a majority of 176 seats in Parliament. Many had expected the ruling People’s Party to muster enough seats with Ciudadanos to pass the threshold. But Ciudadanos fizzled and came in fourth place, gaining just 40 seats. A PP-Ciudadanos alliance would have just 163 seats out of 350.
What now? The PP will attempt to form a government. The only combination that would have a clear majority would be to join forces with the Socialists in a grand coalition. Ideally, Spain’s new and old parties could come together to agree on key reforms. But there is much bad blood between the current party leaders.
Either way, it’s hard to see a stable government that can last another four years. The political malaise spells trouble for Spain’s IBEX 35, which fell 2.8 percent in early morning trading. A slowdown in the economy would hurt the banking sector and real estate market. First in the firing line are domestic banks such as Banco Popular. Investors also sold heavily regulated utilities such as Endesa and airports group Aena Investor.
This short opinion piece was posted on the Reuters website on Monday sometime—and it’s the third and final offering of the day from Richard Saler. Ambrose Evans-Pritchard also had something to say about Spain’s election in a headline that read “Political uprising in Spain shatters illusion of eurozone recovery“. It was posted on The Telegraph‘s website yesterday evening GMT—and I thank Roy Stephens for dropping that in my in-box very late last night Denver time. It’s a longish piece, but definitely worth reading if you have the interest.
The IMF Changes its Rules to Isolate China and Russia — Michael Hudson
The nightmare scenario of U.S. geopolitical strategists seems to be coming true: foreign economic independence from U.S. control. Instead of privatizing and neoliberalizing the world under U.S.-centered financial planning and ownership, the Russian and Chinese governments are investing in neighboring economies on terms that cement Eurasian economic integration on the basis of Russian oil and tax exports and Chinese financing. The Asian Infrastructure Investment Bank (AIIB) threatens to replace the IMF and World Bank programs that favor U.S. suppliers, banks and bondholders (with the United States holding unique veto power).
Russia’s 2013 loan to Ukraine, made at the request of Ukraine’s elected pro-Russian government, demonstrated the benefits of mutual trade and investment relations between the two countries. As Russian finance minister Anton Siluanov points out, Ukraine’s “international reserves were barely enough to cover three months’ imports, and no other creditor was prepared to lend on terms acceptable to Kiev. Yet Russia provided $3 billion of much-needed funding at a 5 per cent interest rate, when Ukraine’s bonds were yielding nearly 12 per cent.”[1]
What especially annoys U.S. financial strategists is that this loan by Russia’s sovereign debt fund was protected by IMF lending practice, which at that time ensured collectability by withholding new credit from countries in default of foreign official debts (or at least, not bargaining in good faith to pay). To cap matters, the bonds are registered under London’s creditor-oriented rules and courts.
Moving to denominate their trade and investment in their own currencies instead of dollars, China and Russia are creating a geopolitical system free from U.S. control. After U.S. officials threatened to derange Russia’s banking linkages by cutting it off from the SWIFT interbank clearing system, China accelerated its creation of the alternative China International Payments System (CIPS), with its own credit card system to protect Eurasian economies from the shrill threats made by U.S. unilateralists.
This very long commentary by Michael was posted on the informationclearinghouse.com Internet site last Friday—and I thank Larry Galearis for sending it our way on Saturday. It’s an Absolutely Positively Must Read, even if you’re not a serious student of the New Great Game. I didn’t want to leave it for Saturday’s column, as I’m not going to have one.
30% of GOP voters support bombing Agrabah, the city from Aladdin
Almost one-third of Republican primary voters would support bombing the fictional kingdom of Agrabah, according to a report released by Public Policy Polling on Friday.
More than 530 Republican primary voters were polled this week on their support for Republican candidates and foreign policy issues including banning Muslims from entering the U.S., Japanese internment camps from the second world war and bombing Agrabah, the kingdom from Disney’s animated classic, Aladdin.
In its poll, Public Policy Polling asked the 532 Republicans: “Would you support or oppose bombing Agrabah?” While 57% of responders said they were not sure, 30% said they supported bombing it. Only 13% opposed it.
Public Policy Polling also polled Democratic primary voters: only 19% of them said they would support bombing Agrabah, while 36% said they would oppose it.
If this story hadn’t shown up in the main stream media, I wouldn’t have believed it. It was posted on theguardian.com Internet site very early last Friday evening GMT—and I thank Chris Powell for sending it our way yesterday evening.
BoJ’s $2.5 Billion ETF Boost Seen Having Little Impact on Stocks
Stock investors’ delight after the BOJ said Friday it would buy more exchange-traded funds quickly turned to disappointment at the size of the program: at ¥300 billion ($2.5 billion), it’s just a 10th of the size of the bank’s current ETF efforts. Not only that, it’s intended to offset the market impact as the central bank resumes selling stocks it purchased from financial institutions from April. The benchmark Topix index jumped and then tumbled, while the yen gained against the dollar.
The new program is in addition to the 3 trillion yen the bank already spends on ETFs each year, the BOJ said on Friday. The BOJ also said it would extend the average maturity of holdings of Japanese government bonds to seven to 12 years, and increase the amount of individual Japanese real estate investment trusts it can own. The Topix index sank 1.8 percent to 1,537.10 at the close in Tokyo, reversing a gain of as much as 2 percent.
“At ¥300 billion, it’s on the scale of margin of error. The impact to the stock market will not be big,” said Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd. “If it’s this small, some investors will think this is the best they can do. Kuroda himself says he never does anything half-baked, but frankly speaking this is half-baked.”
This Bloomberg article, with a 4:30 minute video clip embedded, appeared on their website last Thursday morning—and it’s something I found in yesterday’s edition of the King Report.
Dr. Dave Janda interviewed your humble scribe on all-talk radio WAAM 1600 on Sunday
The good doctor and I had a live on-air 25-minute chat on Sunday afternoon—and I thought it one of our better Q&A sessions, but I’ll let you be the judge. It was posted on the davejanda.com Internet site yesterday morning.
Marc Faber: I’d Buy Gold and Treasurys
Again, if you said, “Marc, here is $1 million, but you have to put everything in either gold or in the Dow Jones,” then I would say I’d take gold.
Everything is distorted, and it’s a relative game. Looking at the fundamentals of the world, including the quantity of money, the magnitude of debt as a percent of GDP, the low economic potential and the mad frame of mind of central bankers and their intellectual dishonesty, I would own gold.
This longish interview/commentary put in an appearance on the etf.com Internet site on Monday sometime—and I thank Ken Hurt for sharing it with us.
Randgold Resources pulls out of Ghana gold mine project
Randgold Resources has abandoned plans to redevelop a gold mine in Ghana, just three months after announcing its interest in the “world-class resource.”
The FTSE 100-listed miner, which operates in central and West Africa, has scrapped a potential joint venture with South African firm AngloGold Ashanti to reopen and expand the Obuasi mine, which has some 5 million ounces of gold reserves below ground, after it failed to pass due diligence.
“We spent more time on it than most people would do on a normal merger and acquisition. But it got to the point where whichever way we cut the cake, we couldn’t get it to pass our criteria,” said Mark Bristow, Randgold’s chief executive. “Anglo has never made any money out of this asset, ever,” he added.
In September, gold mining specialist Randgold said it would fund and lead a plan to modernise the loss-making mine, which was shut down by AngloGold in 2014, with a view to forming a joint venture to manage its output.
This news item appeared on the telegraph.co.uk Internet site at 11:41 a.m. GMT on their Monday morning, which was 6:41 a.m. in New York—EDT plus 5 hours. I found it embedded in a GATA release.
Gold-rich temples weigh monetisation scheme, but ‘melting’ a dampener
As the government seeks to monetise gold worth an estimated USD one trillion lying idle, all eyes are on their biggest repositories — the temples — but many of them fear that ‘melting’ of the ornaments donated by devotees may hurt religious sentiments.
Officials at a number of rich and famous temples across the country said they may not be able to immediately participate in the scheme, while a few others said the scheme was worth exploring but a final decision was yet to be taken.
For some temples, including Sree Padmanabhaswamy Temple in Kerala and the Shirdi Sai Baba temple in Maharashtra, the ongoing court cases are coming in the way.
The interest remains lukewarm among major temples in Kerala, Karnataka, Telangana and Rajasthan among other states, while a few in Andhra Pradesh, West Bengal and Gujarat have shown initial interest.
However, most of them are concerned about issues like loss of value in the melting process and the religious sentiments of the devotees who donate gold ornaments in the name of the deities of the respective temples.
This long, but very interesting PTI gold-related article was picked up the Economic Times of India website on Sunday evening IST—and it’s another news item I found on the gata.org Internet site. Chris Powell’s headline to the GATA release read “Indian temples not wild about using religious offerings for gold price suppression”
Do grams or ounces win? — Patrick Heller
Today, the usage of the troy ounce unit of weight is down to almost only measuring the mass (weight) of precious metals. In the past it had been used as part of the apothecary system and was the base of the British Imperial troy ounce from about 1400 through 1971.
The troy ounce weighs 31.1034768 grams (usually rounded to 31.1 grams) or 480 grains or 20 pennyweights. In contrast, the avoirdupois ounce used to weigh bananas and humans weighs 28.349523125 grams (usually rounded to 28.35 grams), 437.5 grains, or 18.229 pennyweights. A troy ounce is about 10 percent heavier than the avoirdupois version. To be precise, the troy ounce is 192/175 times the weight of the other ounce.
Two events, one that just happened—and one coming in April 2016, may end up with the use of troy ounce measurements in precious metals becoming obsolete.
With the recent release of the 2016-dated Chinese Pandas, the sizes are no longer stated in troy ounce measurements. Instead, the coins that used to weigh one troy ounce now weigh 30 grams, slightly less than prior year issues. Smaller-sized coins are also proportionately smaller. To help minimize confusion, the new coins list their precious metal content in grams.
I posted a story about the new gram weight for China’s 2016 bullion coins a couple of months ago, but this very very interesting commentary by Pat showed up on the numismaticnews.com Internet site last Thursday—and it’s far more comprehensive. I thank Tolling Jennings for sending it our way on Saturday. It’s definitely worth reading.
Australia Gold Export to China in August a Record 13 Tonnes — Koos Jansen
While withdrawals from the vaults of the Shanghai Gold Exchange (SGE) continue at an unprecedented pace – 46 tonnes in week forty-eight, year to date 2,541 tonnes – our job here at BullionStar is to track where this gold is coming from. The short answer would be it’s mainly supplied by gold imports. But, more important is the question how much is imported and from what country or warehouse? Partially, the gold is being sourced from Australia.
The second largest gold producer globally is Australia with an annual production of 270 tonnes, according the U.S. Geological Survey. The majority of Australia’s mine output is exported, as suggested by foreign trade statistics. In 2014 total gross gold export from the land of down under was valued at 12 billion US dollars, which is roughly 296 tonnes, gross gold import was valued at 3.4 billion U.S. dollars, or 85 tonnes. Australia’s net gold export accounted for 211 tonnes in 2014.
When it comes to Australia’s net gold export to China we’ll have to do some analysis, simply subtracting import from export won’t work in this case. Strangely, Australia discloses gold shipments as “export to China” even when it’s transferred via Hong Kong. Implying Australia records its gold export by country of destination, not the first stop, which is unusual to my knowledge.
This is another long and convoluted commentary from Koos over at the bullionstar.com Internet site—and my eyes started to glaze over rather quickly once again, so you’re on your own with this one. It’s another gold-related news item I found in a GATA release yesterday.
Russia adds another 21.8 tonnes of gold, and 46 tonnes more drawn out of China’s SGE — Lawrie Williams
Friday saw two announcements demonstrating that physical gold demand remains at a strong level as the year draws to a close. The Russian central bank continued to expand its gold reserves by just under 22 tonnes in November, while in China another 45.99 tonnes of gold were withdrawn from the Shanghai gold Exchange.
The Russian Central Bank has been the main purchaser of gold for its reserves this year if one disregards China’s announcement of a leap of 604 tonnes in July – but as this was China’s first reported increase in six years we could assume that it had thus been only buying at the rate of eight or nine tonnes a month over the period, However there remain doubts about this rate of buying with many assuming that China’s actual purchases may have been three or four times this amount, maybe more, and that the country’s total holdings are far, far higher than the figure of a little over 1,700 tonnes reported to the IMF, with the balance held in unreported government accounts.
Russia has so far added around 187 tonnes into its reserves this year, while China has added around 70 tonnes since it started announcing monthly increments to its reserves in August. Between them Russia and China are adding to reserves at a rate of close to 400 tonnes of gold a year.
All this data was in my Saturday column—and I’m always grateful that Lawrie writes about it later, so I can ‘borrow’ it. This commentary was posted on the Sharps Pixley website on Sunday sometime—and it’s certainly worth reading.
Kazakhstan Extends Gold Buying Spree With Russia as Turkey Adds
Kazakhstan increased its gold reserves for a 38th month as Russia and Turkey also expanded holdings, according to the International Monetary Fund.
Kazakhstan raised its stash to 7.03 million ounces in November from 6.96 million ounces a month earlier and Russia boosted assets to 44.78 million ounces from 44.07 million ounces, data on the IMF’s website showed. Turkey’s reserves increased to 16.39 million ounces from 16.10 million ounces.
The central banks bought bullion amid a 6.8 percent decline in prices last month as investors anticipated an increase in U.S. borrowing costs, a move confirmed by the Federal Reserve last week. While the IMF’s last update on China’s reserves is for September, figures from the People’s Bank of China show the country has boosted holdings by 5.1 percent since announcing in July a 57 percent jump in the previous six years.
“The buying trend will continue,” Feifei Li, an analyst at Barclays Plc, said by e-mail before the data were released. Emerging market countries such as Russia, China and Kazakhstan “have a long-term need to increase their reserves due to portfolio and strategic reasons.”
This news item put in an appearance on the Bloomberg website at 6:45 p.m. MST on Monday evening—and I found it on the Sharps Pixley website in the wee hours of this morning.
The PHOTOS and the FUNNIES
The WRAP
I admit to focusing mainly on the market structure forces on the COMEX as the prime price determinant and how that has overwhelmed actual supply/demand developments. But I know that the actual supply/demand fundamentals are what matter most in the end and I have spent more than three decades immersed in them. Although I haven’t seen it reported on just yet, the new omnibus budget passed by both houses and signed by the president [on Friday] has what I believe may be an important silver kicker.
Included in the budget was an extension until the end of 2019 of the 30% tax credit (due to expire) for residential and commercial installation of solar panels, which is an important and growing demand component for silver. Those familiar with investment tax credits know just how powerfully they can influence spending decisions. In the case of potential new installations for solar panels, The Wall Street Journal estimated that the impact would be massive – basically increasing the base of solar power installations in the U.S. by 50% over the next few years and increasing employment in the industry from 200,000 to 340,000. In response to the news, shares of some solar power companies jumped 50% or more this week, very much in contrast to overall stock performance. There was no mention of silver in the article (there never is), but all this will require a lot more industrial silver consumption. The link to that Wall Street Journal article is here. — Silver analyst Ted Butler: 19 December 2015
Although both gold and silver broke above—and then closed above their respective 20-day moving averages for the second time in less than a week, this time it didn’t occur along with the immense volume that accompanied that move last Wednesday. Ted was very excited about that, as he said something to the effect that it didn’t appear that the Managed Money traders had covered much of their short position during yesterday’s price action—and that it all looked cleverly orchestrated to him.
Not that I wanted to argue with Ted, as it always turns out to be a losing proposition, but I was born in Missouri in another life—and it wasn’t until I saw what appeared to be an algorithm running in the background in the gold market between the London p.m. gold fix and the COMEX close on Brad Robertson’s 5-minute gold tick chart, that I become a believer. And as I also mentioned, it appeared that the same thing was happening in silver was well.
Is the start of the Big Move, now that JPMorgan et al have the Managed Money traders all teed up and ready to drive them down the fairway? Beats the hell out of me. So we wait some more.
Here are the 6-month charts for the Big 7 commodities—and I’m now including natural gas on a temporary basis. And all these charts, courtesy of stockcharts.com, come complete with their respective 20 and 50-day moving averages. With the exception of both natural gas and crude oil, the other Big 5 commodities are all above their respective 20-day moving averages as this juncture.
I had a major brain reset on the weekend—and one of the things that contributed to that was the Michael Hudson piece that was posted as an Absolutely Positively Must Read article further up. [If you haven’t read it yet, all I can do is ask you gently to do so, as I can’t stand over your left shoulder and berate you if you didn’t.]
The other ‘Road to Damascus’ item was a video interview that was posted on the Zero Hedge website on the weekend. I’m saving that for tomorrow’s column, but if you absolutely have to watch it now, it’s headlined “”America’s Ship is Sinking” Former Bush Official Exposes the Unfixable Corruption Inside the Establishment“—and the link is here.
I already had some idea of what was happening in the broad strokes, but the fine print in both these items scared the bejesus out of me—and it got me wondering about how soon these problems that Michael Hudson spoke of will begin manifesting themselves in the gold price. Maybe that’s what the current set-up is all about?
The other thing that got me thinking was all this new solar energy and wind power coming out of this ‘Climate Change’ thingy that’s being rammed down everyone’s throats. It will certainly show up in the silver price at some point—and The Wall Street Journal article that Ted provided a link to, plus the happenings at the Paris Climate conference, added to that feeling. And I can’t help but think about JPMorgan’s 400+ million ounce stash that will be sold for fantastic profits some day, as will our own personal stashes—hopefully.
And as I write this paragraph, the London open is less than ten minutes away—and I see that nothing is happening in any of the four precious metals from a price perspective. Gold volume is something under 14,000 contracts, which ain’t much—and silver’s net volume is fairly decent at 5,800 contracts. The U.S. dollar index is chopping sideways in a very tight range. All is calm, at least for the moment.
Today, at the close of COMEX trading in New York, is the cut-off for the next Commitment of Traders Report—and because of Christmas, it won’t be posted on the CFTC’s website until Monday afternoon.
And as I post today’s column on the website at 4:57 a.m. EST, I see that gold isn’t doing much, silver is up a few pennies, platinum is up five dollars—and palladium is up 4 bucks. Net HFT gold volume is just over 17,000 contracts—and in silver, that number is up to 7,800 contracts. The dollar index is now down 15 basis points.
I have no idea what will happen with precious metal prices today, despite the wildly bullish set-up that currently exists in the COMEX futures market. The holiday break is almost upon us—and I’m certainly expecting trading to wind down as Christmas day approaches, but you just never know.
That’s all I have for today—and I’ll see you here on Wednesday sometime.
Ed
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