30 April 2016 — Saturday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price moved sideways in early morning trading in the Far East, but things got a bit more interesting starting at 9 a.m. HKT. Once the rally was capped two hours later, the price didn’t do much—and the two tiny rallies in morning trading in London, weren’t allowed to get too far over the $1,280 spot mark. But once COMEX trading began in New York, the rally that began at that point powered right through the London p.m. gold fix. However, the moment it set eyes on the $1,300 spot price mark, JPMorgan et al had to step in shortly before 11:30 a.m. in New York and put an end to it. The gold price chopped quietly lower into the COMEX close—and from there it chopped quietly higher, before getting sold down a couple of dollars in the last thirty minutes of the thinly-traded after-hours market.
The low and high ticks were reported by the CME Group as $1,267.00 and $1,299.00 in the June contract.
Gold closed on Friday afternoon in New York at $1,292.40 spot, up $26.00 on the day—and would have obviously closed materially higher if allowed to do so. Net volume was through the roof once again at something north of 225,000 contracts.
Here’s the 5-minute gold chart courtesy of Brad Robertson once again. You can see that there was decent volume surrounding the price movements in Far East trading on their Friday morning. It then died off to background levels until 2 p.m. HKT, which is midnight Denver time on the chart. From that point onward, the volume was decent—and once COMEX trading began at 6:20 MDT, it became even more decent. Then once COMEX trading ended, volume was back to mostly background levels. The vertical gray line is midnight in New York, noon the following day in Hong Kong—and don’t forget to add two hours for EDT.
The ‘click to enlarge‘ feature is back—and it works on all charts, graphs and photos!!!
The silver price rallied up to just above $17.80 spot in morning trading in the Far East—and wasn’t allowed to trade much higher than that—and the two rallies that threatened the $18 spot price mark during the COMEX trading session, were easily turned aside. From it’s 11:25 a.m. EDT high tick, it was sold down into the COMEX close. It chopped a bit higher for a few hours in the New York access market, before trading flat into the 5 p.m. close.
The low and high in silver were reported as $17.615 and $18.02 in the July contract.
Silver finished the day at $17.82 spot, up only 29 cents on the day. Net volume was way up there at just over 55,500 contracts.
The platinum price was about ten bucks higher by 9:30 a.m. HKT on their Friday morning—and from there it didn’t do much until shortly before the COMEX began to trade. It rose quietly and steadily until its vertical spike $1,080 spot high tick, which came shortly after 11 a.m. in New York. Another attempt to break above that high tick about two hours later was also turned aside as well. Platinum finished the New York session at $1,077 spot, up another 26 dollars from Thursday’s close.
Palladium’s price rose by 5 bucks by 9:30 a.m. HKT as well—and then chopped sideways until morning trading in New York. Like platinum, its high tick came shortly after 11 a.m. as well, but from there, it was sold back to unchanged on the day by some not-for-profit seller, closing at $621 spot.
The dollar index closed late on Thursday afternoon in New York at 93.76—and it began to head lower almost right from the moment that trading began in New York on Thursday evening. It’s 93.007 low tick came around 11:20 a.m. in New York—and although it rallied about 20 basis points from that juncture, it fell back a bunch as afternoon trading wound down. The index finished the day at 93.05—down 71 basis points.
It’s obvious that ‘gentle hands’ rescued the dollar index at the 93.00 level twice during the New York session, particularly at 11:20 a.m. EDT. If you check the precious metal charts, you’ll note that the high ticks in all four precious metals occurred precisely at that time as well.
And here’s the 2-year U.S. dollar chart—and as I’ve been saying for a while now, the index is at a critical juncture at this moment in time. Will ‘gentle hands’ step in, in a big way, or will a trap door open? And as I’ve also said before, I doubt very much if we’ll have long to wait to find out.
The gold stocks rallied sharply at the open in New York yesterday, with a decent chunk of the gains in by the London p.m. gold fix. But they continued to work their way higher as the Friday session moved along—and the HUI closed on its high tick, up 7.18 percent—which is the biggest 1-day percentage gain that I can remember.
The silver equities rallied hard until the London p.m. gold fix—and then chopped sideways in a fairly large price range for the rest of the day, as Nick Laird’s Intraday Silver Sentiment closed up 5.05 percent.
For the week just ended, the HUI closed higher by 15.41 percent—and the ISSI was up a very decent 13.93 percent. And year-to-date those numbers are 110 percent and 123 percent respectively. Amazing!
And here, for the second time this week, is the long-term Silver 7 chart—and as much it has recovered since the first part of January, it still has a long way to go. But it is encouraging to see it run up like this. Let’s hope it lasts. Don’t forget the ‘click to enlarge’ feature if you need it!
The CME Daily Delivery Report for Day 2 of the May delivery month showed that 1 gold and 270 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday. In silver, the three largest short/issuers were ABN Amro, Goldman Sachs and International F.C. Stone—with 149, 46 and 37 contracts contracts out of their respective client accounts. The big piggy at the trough as long/stopper was, as always, JPMorgan with 140 contracts for its own account. In #2 and #3 spots were Canada’s Scotiabank with 43 for its own account—and ABN Amro with 41 for its client account. There was quite a list of smaller issuers and stoppers in yesterday’s report as well—and it’s worth a quick look if you have the interest—and the link to that is here.
The CME Preliminary Report for the Friday session showed that gold open interest for May only dropped by 29 contracts, leaving 1,794 left. I was expecting a bigger decline than that. In silver, May o.i. dropped by half—2,757 contracts—leaving 2,846 still around—minus the 270 contracts in the previous paragraph.
I expect that Ted will have something to say about the May delivery month for silver in his commentary this afternoon.
There were no reported changes in GLD yesterday, but it’s a very safe bet that it’s owed a lot of gold, especially after the price action on both Thursday and yesterday. There was a deposit in SLV reported late in the day, as an authorized participant added 1,426,890 troy ounces of silver.
Based on what Ted has said over the last week or so—and the price action over the last two days, I’d guess that SLV is owed about ten times that amount at this juncture. It remains to be seen if that quantity of physical metal, about 6 days of total world silver production, is actually available to deposit, or will the authorized participants have to short the shares in lieu of? I’ll be more than interested in what Ted has to say about all this in his weekly review this afternoon.
There was no sales report from the U.S. Mint yesterday—and unless they add to April’s total on Monday, the month closed out as follows. The mint sold 105,500 troy ounces of gold eagles—19,500 one-ounce 24K gold buffaloes—and 4,106,000 silver eagles.
As a comparison, in March the mint sold 38,000 troy ounces of gold eagles—7,000 one-ounce 24K gold buffaloes—and 4,106,000 silvers eagles, which is exactly the same number of silver eagles they sold in April.
It’s a very safe bet that John Q. Public wasn’t buying all the gold and silver coins that the mint was producing, so Ted’s big buyer, mostly likely JPMorgan, was buying up everything that the public wasn’t.
The only gold movent over at the COMEX-approved depositories on Thursday was 100 ounces shipped in—and another 100 ounces shipped out—two good delivery bars. This occurred at Canada’s Scotiabank. Needless to say, I shan’t bother linking this activity.
It was much busier once again in silver, as 743,657 troy ounces were received—and 647,973 troy ounces was shipped out the door. Once again there was a 600,000 troy ounce shipment out of JPMorgan—599,999.300 troy ounces to be precise about it. That’s the seventh or eighth shipment of that amount [plus or minus less than 1 troy ounce] that has departed their warehouse. Neither Ted nor I know what to make of it, or if it’s even important. But one thing is dead certain—and that is that these exact amounts are no accident. It takes real effort to move 1,000 ounce good delivery bars around to get a shipment that precise. The link to yesterday’s action is here.
There was decent ‘in’ activity at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday. They reported receiving 5,294 of them—and only shipped out 1 kilobar. All of the activity was at Brink’s, Inc. as per usual—and the link to that, in troy ounces, is here.
The Commitment of Traders Report for positions held at the close of COMEX trading on Tuesday was a huge disappointment in silver, but absolutely unchanged in gold.
In silver, the Commercial net short position increased by a chunky 7,218 contracts, or 36.1 million troy ounces. This came about as they added 9,966 short contracts—but also purchased 2,748 long contracts. The difference between those two numbers is the net change for the week. The Commercial net short position now stands at 91,302 COMEX contracts, or a mind-boggling 456.5 million troy ounces of paper silver.
Ted says that the Big 4 traders increased their short positions by around 1,200 contracts—and the ‘5 through 8’ large traders added another 1,800 contracts or so to their short position as well. The smaller Commercial traders other that the Big 8, Ted’s raptors, sold their remaining 3,000 long contracts that they had on their books, and also added about 1,200 contracts on the short side. So it was Ted’s “Three Musketeer Syndrome” again this week—“all for one, and one for all” against the Non-Commercials and Nonreportable small traders.
Although the Big 4 traders increased their short position by around 1,200 contracts during the reporting week, which wasn’t a lot, Ted was loath to assign that increase in short position to JPMorgan at this juncture—and wants to wait for next Friday’s Bank Participation Report before putting his marker down on this. Currently he pegs JPMorgan’s net short position on the COMEX at 25,000 contracts. Canada’s Scotiabank would be short around that many contracts as well.
Under the hood in the Disaggregated COT Report, the Managed Money traders only accounted for 3,257 contracts of the change in the Commercial net short position. They increased their long position by 2,291 contracts, plus they covered 966 short contracts. Almost all of the remainder came from the ‘Other Reportables’ category, as the Nonreportable/small trader category was basically unchanged from the prior reporting week. CLICK to ENLARGE!
In gold, the Commercial net short position decreased by the magnificent sum of 13 contracts—and is a number so close to unchanged, that you’re not likely to see such a number again in your lifetime. The Commercial traders sold 1,298 long contracts, but they also covered 1,311 short contracts—and the net of those two numbers is 13 contracts. The Commercial net short position in gold remains unchanged from last week at 24.01 million troy ounces of paper gold.
But that’s not to say that there was nothing going on, because that would not be correct. During the reporting week, the Big 4 Commercial traders covered approximately 6,500 short contracts, as the ‘5 through 8’ and raptors went in the other direction. The ‘5 through 8’ added about 700 contracts to their collective short positions—and Ted’s raptors added around 5,800 contracts to their respective short positions.
Under the hood in the Disaggregated COT Report there wasn’t much change in the Managed Money category, as they actually decreased their net long position by 2,057 contracts. The real big changes were in the ‘Other Reportables’ and ‘Nonreportable’/small trader category. The former category decreased their short positions by a net 6,077 contracts—and the small traders went the other direction, as they sold 3,175 longs, plus they added 858 short contracts, for a net change of 4,033 contracts. Doing the math: [6,077-4,033-2,057=13 contracts] which is the change in the Commercial net short position. CLICK to ENLARGE!
Of course things are far worse since the Tuesday cut-off, especially in gold—and unless something extraordinary happens to the downside during the Monday and Tuesday trading session, next Friday’s COT Report [and Bank Participation Report] will be another one for the record books.
Ted said that these are dangerous markets for both the long and short contract holders at this moment in history—and all possible shame should be dumped on the CFTC and CME Group for allowing this situation to get this far out of hand.
Here’s Nick Laird’s “Days to Cover” chart updated with yesterday’s COT data for positions held at the close of COMEX trading on Tuesday. It shows the days of world production that it would take to cover the short positions of the Big 4 and Big 8 traders in each physically traded commodity on the COMEX. CLICK to ENLARGE!
As I say in every Saturday column—the short positions of the Big 4 and 8 traders in silver continues to redefine the meaning of the words ‘obscene’ and ‘grotesque.’ This week the Big 4 are short 148 days [almost 5 months] of world silver production—and the ‘5 through 8’ traders are short 65 days of world silver production—for a total of 213 days, which is 7 months of world silver production, or 490 million troy ounces of paper silver held short by the Big 8.
And it should be pointed out here that in the COT Report above, the Commercial net short position in silver is 456.5 million troy ounces. So the Big 8 hold a short position larger than the net position—and by a goodly amount. That’s how grotesque, twisted, obscene—and dangerous—this COT situation in silver has become.
And as an aside, the two largest silver shorts on Planet Earth—JPMorgan and Canada’s Scotiabank—are short about 106 days of world silver production between the two of them—and that 106 days represents around 72 percent [almost three quarters] of the length of the red bar in silver in the above chart. The other two traders in the Big 4 category are short, on average, about 21 days of world silver production apiece.
This ‘Days to Cover’ chart has looked like this in all four precious metals for at least the last twenty years. Not this extreme maybe, but the pattern is the same, with all four of the PMs pinned to the far right-hand side of the chart [cocoa is the only exception] and with silver always in the number one position.
It was another slow news day on Friday—and I don’t have a lot again today.
CRITICAL READS
David Stockman’s Fed Fix: Demand Their Resignations
Former OMB Director David Stockman rips into the job done by the Federal Reserve since the financial crisis and offers his suggestions for fixing the U.S. economy and monetary policy. He speaks on “Bloomberg ‹GO›.”
This 3:28 minute Bloomberg video clip was posted on their Internet site at 6:07 a.m. on Friday morning EDT—and it’s courtesy of Roy Stephens.
Chicago PMI Tumbles From March Dead-Cat-Bounce “Plagued By a Lack of Orders”
March’s dead-cat-bounce in Chicago PMI (like January’s) has died again as the business barometer drops to just 50.4 (from 53.6) missing expectations of 52.6. This barely-above-contractionary level was driven by an 11-point collapse in Order backlogs to the lowest since Dec 2015, and as MNI reports, “order patterns continued to be plagued by a lack of large orders and absence of international demand, purchasers said.”
Barely above contraction, Chicago PMI’s bounce is over…
This 1-chart Zero Hedge article appeared on their Internet site at 9:54 a.m. EDT on Friday morning—and it’s worth skimming.
Dissatisfied Zero Hedge employee feeds his resentments to Bloomberg
A dissatisfied employee has quit Zero Hedge and fed his complaints to Bloomberg News, which gleefully recounts them today—and Zero Hedge quickly replies.
In any case, Bloomberg will remain a news organization that tells people what the government and financial establishment don’t object to their knowing, and Zero Hedge will remain a news organization that tells people what the government and financial establishment would prefer them not to know.
The links to the Bloomberg article—and the ZH rebuttal—are embedded in this GATA release from yesterday. Another link to this news item is here.
U.S. Treasury Gives Explicit Warning to China, Germany and Japan Not to Devalue Their Currencies
While the U.S. Treasury’s semi-annual report on the foreign-exchange policies of major U.S. trading partners has traditionally been, pardon the pun, a paper tiger, as the U.S. has not named a single country as a currency manipulator since it did so to China in 1994, and it didn’t go so far as to blame any country as an outright manipulator in the just released April edition, there was a new addition to the latest report.
In an inaugural “monitoring list”, the US put five economies including China, Japan and Germany (as well as South Korea and Taiwan) on a new currency watch list, saying that their foreign-exchange practices bear close monitoring to gauge if they provide an unfair trade advantage over America.
This is about as direct a threat to the 3+2 nations not to engage in major currency devaluation whether through QE, NIRP or major interest rate changes as Jack Lew could come up with, and in some ways was to be expected in the aftermath of the G-20 meeting which as we found out this week, precluded any additional QE by the BOJ.
Recall that as part of the most recent G-20 accords, which many believe is what unleashed the steep slide in the dollar, the member nations agreed to refrain from FX intervention absent “disorderly markets.” It also made clear what could push a country from merely the watch list to full blown manipulator status.
This Zero Hedge article, which is definitely worth reading, put in an appearance on their Internet site at 4:24 p.m. EDT on Friday afternoon—and another link to this article is here.
Royal Bank of Scotland [RBS] plunges to a £1bn loss on bailout-era costs
Royal Bank of Scotland’s losses more than doubled to £968m for the first quarter of the year, as it shelled out fees of £1.2bn to the Government, clearing some of the debt from its bailout in 2008.
Although bosses insisted the bank was making progress, analysts called its sustained losses and the latest delay to spinning off the Williams & Glyn bank “farcical“.
RBS paid the Government £1.2bn to remove the burdensome Dividend Access Share, which prevented it from paying dividends to investors.
However, the bank is still struggling to be profitable even without the onerous one-off charges it has incurred.
Key hurdles to returning capital to shareholders include a pending multi-billion dollar fine in the U.S. relating to the sale of toxic mortgage-backed securities before the financial crisis.
This news item showed up on The Telegraph‘s website at 10:42 a.m. BST on their Friday morning, which was 5:42 a.m. EDT in New York. Another link to this story is here.
Deutsche Bank tires quickly of its experiment with integrity
Georg Thoma is to resign from Deutsche Bank’s supervisory board after coming under fire from other board members in a battle over how to deal with the German bank’s past scandals.
The veteran corporate lawyer was brought on to the board by chairman Paul Achleitner in 2013 and headed the integrity committee, whose remit includes overseeing the bank’s efforts to comply with legal and regulatory requirements.
However, Mr Thoma’s approach left him at odds with some colleagues, and on Sunday, Alfred Herling, Deutsche’s vice-chairman, took the unusual step of publicly criticising his actions in Germany’s Frankfurter Allgemeine
Sonntagszeitung.
Mr Herling accused Mr Thoma of “overzealousness,” saying that he “goes too far when he demands ever wider investigations and more and more lawyers come marching up,” and adding that the costs were “no longer proportionate.”
This Financial Times story from Thursday was posted in the clear on the gata.org Internet site yesterday—and another link to this news item is here.
Italy’s Bank Bailout Fund Already One Third Empty After First Bank Rescue
the name Atlante, or Atlas, for the Titan god who was condemned to hold up the sky for eternity, only in this case he is holding up Italy’s €360 billion in bad loans), many wondered why the rush? While the explicit purpose of the fund was to allow Italy to bailout insolvent banks without the involvement of the state which is expressly prohibited by the Eurozone, the scramble appeared erratic almost frantic, and was one of the reasons why Italian bank stocks tumbled in early February. The question: “Does someone know something?“
It turns out the answer was yes, because as we learn today, “Atlas” is about to become the proud new owner of around 90% of Italy’s Popolare di Vicenza after investors only bought a fraction of the mid-tier bank’s €1.5 billion IPO, Reuters reports.
Popolare di Vicenza, which was due to announce the outcome of the public share offer later on Friday, said earlier in the day that it had raised €4.25 billion, at the lower end of a 4-6 billion euro range it had initially targeted, from 67 mostly domestic financial institutions.
And if the low take-up for the Popolare di Vicenza share sale is confirmed, Atlas is about to see nearly a third of its fire-power invested in a single bank.
This Zero Hedge news item, based on a Reuters story, showed up on their website at 5:58 p.m. yesterday afternoon—and it’s worth reading as well. Another link to this story is here.
Moscow’s Fifth Column: German Populists Forge Ties with Russia
Marcus Pretzell is waiting. He’s a member of the European Parliament with the right-wing populist party Alternative for Germany (AfD) and he’s sitting on the podium at the Yalta International Economic Forum, an event hosted by the Russian government at a resort on the occupied Crimean Peninsula. Pretzell has been seated directly next to the moderator. The AfD politician, who is head of the party in North Rhine-Westphalia, its largest state chapter, is the guest of honor from Europe. His presence is intended to send the message that Russia is not internationally isolated.
For the hour and a half during which Pretzell sits on the stage, he’s little more than a wallflower. Through his headphones, he listens to an interpreter translating the words of an illustrious group of top Russian officials who few German politicians would be keen to share a stage with. Five of the eight panel members are on the sanctions lists of the European Union and the United States for their involvement in the illegal annexation of Crimea. They include men like Sergey Aksyonov, prime minister of Crimea, and Yevgeny Bushmin, a close confidant of the Kremlin leadership.
The panel host then finally asks Pretzell to speak. “We at Alternative for Germany represent not only a threat to the Ukrainian government, but also to the German government,” he proudly announces. The audience applauds. He then goes on to say that good economic relations with Russia “are in the interest of the German people” and that sanctions should be lifted immediately. The applause grows. In Russia, the moderator adds, people have the impression that the German people are of the same opinion as Pretzell. “Marcus, you have made 140 million new friends today.”
I’m very unhappy to see the German newspaper spiegel.de take sides in this issue, as that’s not their job. I always assumed that the European press wasn’t bought and paid for but, unfortunately, that’s turned out not to be the case. This longish story showed up on their Internet site at 3:08 p.m. Europe time on Wednesday. It’s the second offering of the day from Roy Stephens—and another link to this article is here.
Vision or Mirage: Saudi Arabia’s post-oil future
If anyone needed confirmation that Muhammad bin Salman, Saudi Arabia’s deputy crown prince, is a man in a hurry, they got it on April 25th. The 30-year-old unveiled a string of commitments to end the kingdom’s dependence on oil by 2030 which, in themselves, would be a remarkable achievement for a hidebound country. Then he proceeded to trump himself, saying that the kingdom could overcome “any dependence on oil” within a mere four years, by 2020.
That may have been meant to convey a sense of urgency; but it also sums up what seems to be manic optimism among the youthful new policy-setters of the royal court. They have yet to set out a cool, detailed explanation of how to turn vision into reality. That has been promised since January, and will now supposedly be provided in a few weeks’ time.
The outlines of the announcement, which has generated much anticipation, had been well trailed. They included: the floating of a small stake in Saudi Aramco, the world’s biggest oil company; the creation of the world’s largest sovereign-wealth fund to invest in a diverse range of assets; more jobs for women; and more vibrant non-oil industries, ranging from mining to military hardware. These are radical proposals in a country that has historically generated nine-tenths of government revenues from oil, and whose budget deficit is expected to reach 13.5% of GDP this year after an 18-month slump in oil prices.
This very interesting and particularly well written article appeared on The Economist website yesterday, but is datelined today. It’s worth reading—and I thank Patricia Caulfield for pointing it out. Another link to this news item is here.
Chinese banks’ stealth clean-up fools nobody
Chinese banks are engaging in some clumsy sleight of hand. Big lenders like ICBC and Bank of China are piling up bad loans while still reporting seemingly healthy earnings. The stealth clean-up will only make investors even more sceptical.
Critics have long accused China’s big state-owned banks of hiding bad loans. The latest batch of quarterly results suggests they are beginning to own up to the problem. ICBC’s stock of dodgy debt grew by 14 percent to 25 billion yuan ($3.9 billion) in the first three months of the year. Agricultural Bank of China shovelled another 8.8 billion yuan onto its pile in the same period.
Yet earnings are holding up. Four of the five biggest banks reported first-quarter operating profit that was largely unchanged from a year ago. That’s because provisions for bad loans aren’t keeping up with the growth in questionable credits.
This opinion piece by Reuters columnist Peter Thai Larsen put in an appearance on their Internet site yesterday sometime—and it’s courtesy of Richard Saler. Another link to this commentary is here.
Japan’s Abenomics ‘dead in the water’ after U.S. currency warnings — Ambrose Evans-Pritchard
The Bank of Japan has been forced to retreat from further emergency stimulus after a blizzard of criticism at home and abroad, and warnings that extreme measures may now be doing more harm than good.
The climb-down by the world’s most radical central bank is the latest sign that the monetary experiments since Lehman crisis may have run their course. The authorities have not exhausted their ammunition but are hitting political and legal constraints.
The yen surged 3pc against the U.S. dollar in the biggest one-day move in eight months and equities skidded across Asia after the Bank of Japan (BoJ) failed to take fresh action to stave off deepening deflation, catching markets badly off guard.
Governor Haruhiko Kuroda dashed hopes for ‘helicopter money’, warning that direct monetary financing of spending would be “illegal”.
The demographic shock of a declining population is already being felt. This absolute must read commentary by Ambrose was posted on the telegraph.co.uk Internet site at 8:01 p.m. BST on their Thursday evening, which was 3:01 p.m. in Washington—EDT plus 5 hours. I found it on David Stockman’s website. Another link to this story is here—and I have more to say about this story in The Wrap.
Doug Noland: The Red Line
From my vantage point, global market vulnerability has reemerged. Sentiment has begun to shift back in the direction of central banks having largely expended their ammunition. This becomes a more pressing issue when market players sense heightened deleveraging risk. Dan Loeb’s (Third Point Capital) comment, “There is no doubt that we are in the first innings of a washout in hedge funds,” provided a timely reminder that the market recovery did little to erase levered player woes. Indeed, market convulsions over recent months have only compounded problems.
It’s during bouts of “risk off” that the true underlying liquidity backdrop is illuminated. Combine short squeezes and the unwind of hedges with QE – and global markets seemingly luxuriate in liquidity abundance. “Risk off” exposes the liquidity illusion. Risk aversion would see longs liquidated and leverage unwound, with a rush to reestablish shorts and risk hedges. And rather quickly de-risking/de-leveraging would overwhelm QE. And if “risk off” is accompanied by Chinese Credit, banking and “repo” problems, well, global crisis dynamics would gather momentum in a hurry.
It’s almost as if gold, silver and crude prices are now shouting they win either way. If the China Bubble perseveres along with global QE, inflation has a decent shot of taking root (an ugly scenario for global bond Bubbles). But if the ominous China “repo” Red Line foretells a harsh Chinese and global crisis – crude and the precious metals, in particular, offer rather enticing wealth preservation potential. It’s time again to be especially vigilant.
Doug’s weekly Credit Bubble Bulletin showed up on his website just before midnight Denver time last night—and is always a must read for me. It should be for you as well. Another link to his weekly commentary is here.
Goldman Sachs Stopped Out of “Short Gold” Recommendation
Goldman went short gold on February 15 at around $1,205…
We also maintain our bearish view on gold that has rallied along with the other commodities. Our short gold recommendation (which we opened with a 17% upside, in line with our $1,000/troy oz 12-month forecast) is currently at a c.5% loss, with a stop loss at 7%.
This gold rally was driven by a lack of conviction in divergence in US growth as a weak US dollar has been highly correlated with a higher gold price.
We believe this realignment view of weak global growth is not supported by the U.S. data, which will likely reinforce higher U.S. yields, a stronger U.S. dollar and the return of divergence, particularly should strong U.S. consumer growth dissolve market fears regarding U.S. growth. This in turn will likely put downward pressure on gold prices towards our near-term target of $1,100/troy oz.
That just ended… as the 7% loss stopped them out…
This news item appeared on the Zero Hedge website at 11:04 a.m. EDT on Friday morning—and another link to this article is here.
China Gold Association releases data for Q1
China’s gold demand was 867 tons in 2015, down 7 percent from a year earlier. The downward trend continued in the first three months of this year. Consumption came in at about 318 tons in the first quarter, off nearly 4 percent from the same period in 2015.
But it is notable that the sale of gold bars and coins soared in the first quarter from a year ago, compared to major drops in gold jewelry and industrial gold. Gold prices also rebounded in the first three months of this year.
As prices rebounded, China’s gold production reported double-digit growth during this year’s first quarter. Chinese gold producers are active in global mergers and acquisitions as well. For example, the China Gold Group recently purchased an 82 percent share in a mine owned by Canada’s Eldorado Gold Corporation.
The above three paragraphs are all there is to this tiny gold-related story that appeared on the cctv.com Internet site at 12:14 a.m. Beijing time [BJT]—and the embedded 1:20 minute video clip is worth watching. I found it on the Sharps Pixley website just before midnight Denver time last night.
Dollar down, equities down, gold up, silver up more — Lawrie Williams
The latest gold price move, if it is sustained, will be yet another blow to the Goldman Sachs call in February to sell gold short. In retrospect very bad timing by the GS analysts. Indeed one might consider gold’s performance since that mid-February call doubly remarkable given Goldman’s clout in the financial sector. At the time of the short gold call it was trading just below $1,240 and indeed did fall back sharply by around $30 in the couple of days following before making something of a recovery. The current price, near $1,280 puts it close to Goldman’s stop loss level and if momentum is sustained then this could be reached which would certainly be a blow to the investment bank’s perceived infallibility.
Where Goldman has gone wrong is that it had assumed the U.S. Fed would be well into its rising interest rate programme by now with a second increase in place and another couple due. But currently the consensus among financial analysts in the U.S. is that a second Fed rate rise is unlikely before September at the earliest, if then. One suspects that the Fed, as last year with its initial increase, may bounce itself into a second rate increase late in the year if only to try and retain some credibility in its forecasting, whether such a rise is truly justifiable or not.
What may be going in Goldman’s favour yet though is that May is now only a couple of days away, and in most years gold tends to weaken May to September – although not always. It should thus also be remembered that in 2011 when gold hit its plus $1900 peak, it strengthened hugely through June, July and August. Are we in for a repeat? At the moment the force is with gold – and even more so with silver. That can turn around rapidly, of course, but a close above $1,275 this weekend could be taken as a signal of higher moves into the beginning of May – particularly if there is continuing nervousness in general equities.
This commentary by Lawrie put in an appearance on the Sharps Pixley website yesterday sometime—and it’s certainly worth reading. Another link to this article is here.
The PHOTOS and the FUNNIES
Here is a pair of lesser scaups. They’ve returned to this particular pond for the three years that I’ve been going there, so they’ve probably been coming there for years before that—and I saw them for the first time year this past Sunday. It was cold, cloudy and windy—and I was using my flash for fill lighting—and it worked wonderfully well. Not that I wish to denigrate my work, but I took these photos out the driver’s side window while I was sitting all comfy in my car! And with the ‘click to enlarge‘ feature back, they’re certainly worth viewing full screen.
The WRAP
Today’s pop ‘blast from the past’ dates back to 1978—which is 38 years ago if you’re doing the math—and it gets more depressing with each passing year as I delve into the hits of ‘way back when’—because they’re getting further away [and older] all the time. Here’s Olivia Newton-John with one of her greatest hits—and the link to that is here.
Today’s classical ‘blast from the past’ is somewhat more ancient, of course—90 years more ancient than Olivia’s. It’s been many years since I’ve posted Nikolai Rimsky-Korsakov’s Scheherazde, Op. 35—but here it is again today. It’s a symphonic suite that he composed in 1888—and it’s meant for a big orchestra. Here’s maestro Valery Gergiev conducting the Vienna Philharmonic at the Salzburg Festival back in 2005—and if my memory serves me correctly, this is the video that I posted last time. It’s wonderful—and the link is here.
Even though the footprints of JPMorgan et al were present throughout the Friday trading session, they couldn’t prevent the precious metals from rallying, although they managed to close palladium unchanged—plus they capped both gold and silver before they could break above their crucial $1,300 and $18 spot price marks.
Their associate equities continue to power higher—and although I’m tickled pink about that, as I’m sure you are, I’m still more than fearful of the outrageous and record short positions of the Big 8 traders in both silver and gold, which are even more outrageous as of the close of COMEX trading yesterday.
Here are the 6-month charts for the Big 6+1 commodities that ‘da boyz’ are most interested in controlling—and as you can tell, the Relative Strength Indicators [RSI] in the all four precious metals are getting up there—and as I’ve pointed out, silver is at nose-bleed levels—as is palladium—with platinum and gold closing in fast.
With record, or near record, Commercial net short positions in both gold and silver, it appears that the world’s central banks, acting through their U.S. bullion bank proxies, plus Canada’s Scotiabank—are pulling out all the stops in an attempt to keep investors from fleeing the paper markets to the safety of the hard assets—and in particular, the precious metals. In the end, these attempts will prove futile.
The short positions in gold and silver [plus the other two precious metals] now tower over all else in the COMEX futures market and are, as Ted Butler pointed out on the phone yesterday—an immediate danger to all participants. How much longer they’re going to keep this up is unknown, but there is absolutely no indication that they are in the process of cutting and running.
Of course, as the ‘Days to Cover’ chart posted in my discussion on yesterday’s Commitment of Traders Report at the top of today’s column indicates this struggle to keep precious metal prices contained has been going on for more than a generation, but now has reached unimagined extremes. Sooner or later, something has to give, as this preposterous circumstance cannot continue indefinitely.
I’ll quote a paragraph from Ambrose Evans-Pritchard’s commentary in the Critical Reads section above when he said this about the demographic crisis that now faces Japan.
“A shrinking workforce means that Japan can have a tight labour market – with unemployment falling to 3.2pc in March, and the job-to-applicant ratio rising to 1.3 – even though growth is negative. Nothing like this has been seen before in the modern world.” [Emphasis is mine. – Ed]
That’s where the whole world now sits from an economic, financial and monetary perspective—as nothing like what we are experiencing today has been witnessed before—ever. The only comparisons that come to mind at this wee hour of Saturday morning, is the John Law era in France in the early 1700s, or maybe the crash of 1929—and they pale in comparison to the situation we face today, which is now global in scale.
Nothing that governments or their central banks can do will make any difference going forward, as the collapse of everything we know is now baked in the cake. And now even Japan’s central bank has backed off in the face of the obvious, which meant that they can see it as well.
My concern lies in what desperate measures that governments and their respective central banks will take in the face of the inevitable. Jim Rickards is of the opinion that if a functioning monetary system backed in part by gold cannot be agreed to in time to save the current system from melting down, the world will descend into chaos until something new is formulated. I h