02 February 2016
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price chopped about four dollars higher by noon Hong Kong time on their Monday—and then traded sideways until it got sold down a few dollars starting at 1 p.m. London time/8 a.m. EST, which was twenty minutes before the COMEX open. The low tick was in twenty minutes after the COMEX open—and at that point the price rallied anew until at, or just after the London p.m. gold fix. Then it got sold down a bit until 11:15 a.m. EST. At that point it began to rally quietly higher, closing just off its high tick.
The low and highs were recorded by the CME Group as $1,115.30 and $1,130.20 in the April contract, which is the new front month for gold.
The gold price closed in New York yesterday at $1,128.00 spot, up $10.20 from Friday’s close. Net volume was very much on the lighter side at just over 105,000 contracts.
Here’s the 5-minute gold tick chart courtesy of Brad Robertson. There’s not much to see, as there was no volume worthy of the name until shortly after the COMEX open, which is 6:20 p.m. Denver time on this chart—and volume died off to background levels after 11:30 a.m. MST, which was the COMEX close. Midnight in New York is the vertical gray line—add two hours for EST—and the ‘click to enlarge’ feature has still not been fixed by the folks over at wordpress.com.
The silver price pattern was similar to gold’s in most respects, except the price action was more ‘volatile’—and the sell-off on the price blast-off after the London p.m. gold fix was more brutal. It rallied from its 11:30 a.m. EST low, but never got a sniff of its previous high tick. The scale of the chart makes the action look more wild than it actually was.
The low and high in this precious metal was reported as $14.20 and $14.42 in the March contract.
Silver finished the Monday session in New York at $14.33 spot, up 9.5 cents on the day. Silver would have closed materially higher if allowed to do so, which it obviously wasn’t. Net volume was a bit over 26,000 contracts, which was pretty light.
Platinum chopped lower until just before 11 a.m. Zurich time—and then away it went to the upside, only to run into the same not-for-profit sellers at 8:00 a.m. EST that gold and silver did. And also like gold and silver, the low tick in New York came about twenty minutes after the COMEX open. Then, like silver, it was allowed to rally until the p.m. gold fix—and from there it chopped more or less sideways into the close. It finished the day at $868 spot, down a buck from Friday.
Palladium didn’t do much of anything in Far East trading—and got sold down to its low in morning trading in Zurich. At noon Europe time, it began to rally with some authority—and blasted through the $500 spot price with ease. The rally lasted until 11 a.m. in New York—and promptly got sold back below $500, but it did manage to rally back above that mark—and closed at $502 spot, up 7 dollars from Friday. It will be interesting to see if this new price handle is allowed to stand or not.
The dollar index closed late on Friday afternoon in New York at 99.53—and traded flat when it opened at noon in New York on Sunday afternoon. It spiked up to the 99.70 level in late afternoon trading—and then began to slide from there. It really began to head south with a vengeance at noon GMT in London, which was 7 a.m. in New York. The secondary low came at 10 a.m. EST, the London p.m. gold fix—and from there the dollar index bounced a bit until just before 11:30 a.m. The 98.94 low tick of the day came about 2:20 p.m. EST, before rallying a bit into the close. The index finished the day at 99.04—down 49 basis points from Friday. Here’s the 3-day chart so you can see the whole move, including Friday’s rally on the BoJ news.
And here’s the 6-month U.S. dollar index chart so you can keep an eye on how it’s doing longer term.
The gold stocks opened higher—and topped out at the point where ‘da boyz’ capped the price at the afternoon gold fix in London. They sold off until shortly before 1 p.m. in New York trading—and then rallied quietly for the rest of the day, as the HUI closed up 3.10 percent.
The silver equities followed a similar pattern, except their high ticks came about 11:20 a.m. EST, long after the high tick in the metal itself was in. Then, like their golden brethren, they began to rally shortly before 1 p.m.—and closed almost on their high tick, as Nick Laird’s Intraday Silver Sentiment Index closed higher by 3.07 percent.
The CME Daily Delivery Report for Day 2 of the February delivery month showed that 24 gold and zero silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday. The short/issuers were none of the usual suspects, but the two long/stoppers of note were HSBC USA with 14 for its own account—and JPMorgan with 10 contracts for its client account. The link to yesterday’s Issuers and Stoppers Report is here.
The CME Preliminary Report for the Monday trading session showed that gold open interest for February fell by 504 contracts, which is about the amount that was posted in my Saturday column for delivery today. That leaves 3,690 left, minus the 24 mentioned in the previous paragraph. February o.i. in silver declined by 3 contracts, leaving 108 left.
There was a huge deposit in GLD to start the month, as one or more authorized participants added 392,114 troy ounces. That’s a lot! And as of 7:51 p.m. EST, there were no reported changes in SLV.
Since the beginning of the year, there has been 1,255,723 troy ounces of gold added to GLD. During the same period there has been 8,424,156 troy ounces of silver withdrawn from SLV. And except for Ted Butler, nobody is asking why this is. You figure that the nut-ball lunatic fringe, which encompasses almost all the rest of the so called ‘analysts’ out there, would have a comment or two on this. But you would be wrong about that. They aren’t interested.
There were a small number of bullion coin sales added to January’s total over at the U.S. Mint, plus they had new sales to report for the first business day in February. They added 28,000 silver eagles to their January total—and 1,500 one-ounce 24K gold buffaloes as well.
That brings January’s final totals up to 124,000 troy ounces of gold eagles—34,000 one-ounce 24K gold buffaloes—and 5,954,500 silver eagles. And it should come as no surprise that the added sales didn’t take the total over the 6 million mark.
Sales for February 1 were reported as 2,000 troy ounces of gold eagles—500 one-ounce 24K gold buffaloes—and another 732,500 silver eagles—and it’s a good bet that, as I said in my Saturday column, most if not all of these sales actually occurred in January, but some of the silver eagles sales were shoved into February for obvious reason.
Here are three charts that Nick Laird passed around yesterday afternoon—and they show the gold and silver coin sales from The Perth Mint for January—and the numbers are pretty impressive. The first is for gold, the second for silver—and the last one shows the sales by dollar value of each—and that’s the most impressive chart of all. The gold/silver price ratio is way up there at almost 79 to 1—but the dollar sales of each are 2 or 3 to 1 over the last six month, so it’s obvious that the smart money/insiders are buying more silver by a wide margin.
There wasn’t a lot of gold movement over at the COMEX-approved depositories on Friday. They received 4,822.500 troy ounces, which works out to exactly 150 kilobars. There was 997 troy ounces shipped out. With the exception of one kilobar shipped out of Brink’s, Inc., the remainder of the activity was at Canada’s Scotiabank. They also reported a transfer of 48,225.000 troy ounces [1,500 kilobars] from the eligible category to the registered category. The link to that activity is here.
It was another huge day in silver, as not a thing was reported received, but 2,026,488 troy ounces were shipped out the door for parts unknown. None of this activity involved JPMorgan—and Ted has a comment or two about that in today’s quote. The link to that action is here.
It was another big day over at the COMEX-approved gold kilobar depositories in Hong Kong on their Friday. They reported receiving 8,864 of them—and shipped out 4,213. All of the activity was at Brink’s, Inc. as per usual—and the link to that, in troy ounces, is here.
This very interesting chart of January returns in different things is worth scanning—and I shamelessly ripped it from a piece that Mark O’Byrne had on the goldcore.com Internet site yesterday.
I have a decent number of news items for you today—and quite a few of them fall in the must read category. There are a fair number of precious metal-related stories as well, so I hope you can find the time to read the ones that interest you.
CRITICAL READS
Apple, FANGS and Monetary Fools — David Stockman
That brings us to the lunatic valuation of the FANGs (Facebook, Amazon, Netflix and Google), which was also on display again this week. To wit, 100X+ PE multiples are always and everywhere a deformed artifact of central bank driven Bubble Finance, not the emission of an honest capital market.
The fact is, the greatest technology-based businesses of modern times accomplished its dramatic growth spurt in just over 20 quarters between 2011 and 2015. That was after the i-Phone incepted and the i-Pad worked up a serious head of steam.
Now Apple is pancaking or worse, and it is hard to believe that gimmick products like Apple Watch or Oculus can fill the hole from the fast fading i-Pad and the stalling i-Phone. No harm done, of course, and its entirely possible the APPL will have another modest growth run.
But here’s the thing. Apple essentially proves you can’t capitalize anything at 100X except in extremely rare cases because of the terminal growth rate barrier. That is, after a few years of red hot growth almost every large company’s organic growth rate bends toward the single digit path of GDP.
This longish chart-filled commentary put in an appearance on David’s website on Saturday—and it certainly worth reading if you have the time. Today’s first story is courtesy of Roy Stephens.
Jim Rickards: The Fed’s Mirage
The Federal Reserve now sees its own mirage. In a real Fata Morgana, the illusion is caused by thermal inversion and light refraction. In the Fed’s mirage the illusion is caused by academic dogma with names like “Phillips Curve,” “NAIRU,” and “FRB/US.” Still, an illusion is an illusion regardless of cause.
Illusions can persist as long as the conditions that give rise to the illusion dominate. In the case of a Fata Morgana, those conditions involve heat and light. In the case of the Fed, the illusions involve bad models. A change in the weather will shatter a Fata Morgana. A change in the economy will shatter Phillips, NAIRU and Ferbus.
Let’s consider the Fed’s failed dogma.
The Phillips Curve is the discredited belief that there is some tradeoff between employment and inflation. Supposedly tight labor markets give rise to demands for higher wages by workers, which lead to higher prices by companies to pay the wages, which lead to higher wage demands, etc. in an inflationary spiral sometimes referred to as “demand-pull inflation.” This is neo-Keynesian nonsense.
This commentary by James appeared on the darientimes.com website on Saturday—and I thank Harold Jacobsen for sharing it with us.
Atlanta Fed Sees Q1 GDP Growth at Just 1.2%, 50% Below Wall Street Consensus
Compared to the Wall Street Consensus, which had originally expected Q4 2015 GDP to rise as much as 3% only to admit Q4 was a total bust (and this time not even the weather was to blame) when last Friday the BEA’s first estimate of Q4 growth revealed GDP had risen a minimal 0.7% – a number which will be reduced following today’s big construction spending miss – the Atlanta Fed’s 1.0% pre-announcement estimate seems like a bulls eye.
Which is why the fact that according to the Atlanta Fed’s just launched Q1 GDP tracker the US economy will grow another barely above-recession 1.2%, more than 50% below the Wall Street consensus of 2.3%, should be very troubling, as it suggests there will barely be any growth in the quarter in which the 2015 inventory liquidation was supposed to have taken place, and instead the economic weakness will persist well into the year in which the Fed has signalled it will hike rates 4 times, a number which the market which sees just one rate hike in the next 11 months, vigorously disagrees with.
This is what the Atlanta Fed said:
The initial GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2016 is 1.2 percent on February 1. The final model nowcast for fourth-quarter real GDP growth was 1.0 percent, 0.3 percentage points above the advance estimate of 0.7 percent released last Friday by the U.S. Bureau of Economic Analysis.
This short 1-chart news item showed up on the Zero Hedge website at 11:32 a.m. EST on Monday morning—and I thank Richard Saler for sending it along.
Fed’s Fischer says markets might be right after all
Federal Reserve Vice Chairman Stanley Fischer said Monday the U.S. central bank was worried the global market sell-off could sap the strength of the U.S. economy, suggesting the market’s expectations of barely any interest rate hikes this year could turn out to be right.
Last month, Fischer was more hawkish, telling CNBC that the Fed thought the market expectations, at the time, for two rate hikes this year “are too low.” He said the Fed’s own forecast of three to four rate hikes in 2016 “are in the ballpark.”
The Fed vice chairman backed away from those sentiments in remarks at the Council on Foreign Relations in New York.
Referring to his January statement, Fischer said during a question-and-answer session: “When somebody said ‘in the ballpark,’ he meant it is among the numbers that are being talked about. He did not mean it is the only number that is being talked about.”
This article was posted on the marketwatch.com Internet site at 1:49 p.m. on Monday afternoon in New York—and it’s the second contribution in a row from Richard Saler.
Total U.S. Debt Surpasses $19 Trillion; Rises $8.4 Trillion Under President Obama
Two months ago, when we calculated that the U.S. would need a new “debt ceiling” of $19.6 trillion to last until after Obama’s tenure, we may have been too optimistic: since the increase in the hard debt limit of $18.15 trillion which was raised at the end of October, the U.S. appears to be growing its debt at a far faster pace than we had originally expected, and according to the latest public debt data, as of the last day of January, total U.S. debt just hit 19,012,827,698,417.93.
This means that if the nominal U.S. GDP as of December 31 which was $18.12 trillion grows at the 1.2% rate expected by the Atlanta Fed, total debt to GDP is now on pace to hit 105% at the next GDP tabulation, and rising fast from there.
It also means that since his inauguration in January 2009, the U.S. debt has now risen by a whopping 78.9%, or $8.4 trillion. It was $10.6 trillion when Obama came into office.
Indicatively, the Congressional Budget Office forecasts that the national debt will hit $22.6 trillion by 2020 and will rise to $29.3 trillion by 2026.
This Zero Hedge piece showed up on their website at 4:47 p.m. yesterday afternoon New York time—and it’s the third offering in a row from Richard Saler.
Bring on the Cashless Future: Bloombergview Editorial Board
Cash had a pretty good run for 4,000 years or so. These days, though, notes and coins increasingly seem declasse: They’re dirty and dangerous, unwieldy and expensive, antiquated and so very analog.
Sensing this dissatisfaction, entrepreneurs have introduced hundreds of digital currencies in the past few years, of which bitcoin is only the most famous. Now governments want in: The People’s Bank of China says it intends to issue a digital currency of its own. Central banks in Ecuador, the Philippines, the U.K. and Canada are mulling similar ideas. At least one company has sprung up to help them along.
Much depends on the details, of course. But this is a welcome trend. In theory, digital legal tender could combine the inventiveness of private virtual currencies with the stability of a government mint.
Most obviously, such a system would make moving money easier. Properly designed, a digital fiat currency could move seamlessly across otherwise incompatible payment networks, making transactions faster and cheaper. It would be of particular use to the poor, who could pay bills or accept payments online without need of a bank account, or make remittances without getting gouged.
Dennis Miller sent me this editorial yesterday. It was posted on the bloombergview.com Internet site at 5:00 p.m. EST on Sunday. I told Dennis that it will be ages before this gets anywhere in the U.S., but it certainly was the thin edge of the wedge. Dennis replied by saying that the drum-beat will get louder as time goes on—and he would be right about that.
There Is No Freedom Without Truth — Paul Craig Roberts
Dwight D. Eisenhower was a five-star general in charge of the Normandy Invasion and a popular two-term President of the United States. Today he would be called a “conspiracy theorist.”
“This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence — economic, political, even spiritual — is felt in every city, every statehouse, every office of the federal government. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved; so is the very structure of our society. In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military–industrial complex. The potential for the disastrous rise of misplaced power exists, and will persist. We must never let the weight of this combination endanger our liberties or democratic processes. We should take nothing for granted. Only an alert and knowledgeable citizenry can compel the proper meshing of the huge industrial and military machinery of defense with our peaceful methods and goals so that security and liberty may prosper together.” — President Dwight D. Eisenhower
Were Ike to be issuing his warning from the White House today, conservative Republicans like Senators Lindsey Graham (R-SC) and Marco Rubio (R-FL) would be screaming at Ike for impugning the motives of “the patriotic industry that protects our freedom.”
Neoconservatives such as William Kristol would be demanding to know why President Eisenhower was issuing warnings about our own military-industrial complex instead of warning about the threat presented by the Soviet military.
This absolute must read commentary by Paul appeared on the sputniknews.com Internet site at 12:48 p.m. Moscow time on their Monday afternoon, which was 4:48 a.m. in Washington—EST plus 8 hours. I thank U.K. reader Tariq Khan for bringing it to my attention—and now to yours.
Drug smuggling is HSBC’s raison d’être
The powerful bank is in the news for attempting to suppress a report into money laundering. This is no surprise as the company’s entire history, right up to the present day, is one of financing drug cartels.
HSBC is not known for its transparency. Britain’s wealthiest company, with a stock market valuation of $215 billion, has enough advertising muscle in the British press to ensure that critical investigative pieces have been spiked in both the Sunday Times and the Daily Telegraph – in the latter case, causing that newspaper’s chief political commentator to resign in protest.
Then last year, the bank’s friends in the Swiss government sentenced the whistleblower who exposed the bank’s massive facilitation of tax avoidance to five years in prison, the longest sentence ever demanded by the country’s public ministry for a banking data theft case.
And back in 2011, HSBC was revealed to be the U.K. financial sector’s most enthusiastic user of tax havens, with no less than 556 subsidiary companies based in offshore jurisdictions. Tax havens, as leading expert Nicholas Shaxson notes, “are characterized by secrecy… what they are fundamentally about is escape – escape from the rules, laws, regulations of jurisdictions elsewhere. You move your money offshore and you can then escape the laws that you don’t like”. This is clearly an institution with much to hide.
This HSBC, the British bank, is NOT to be confused with HSBC USA. They are two entirely separate legal entities, at least on paper. This is another longish but absolute must read news item. This one put in an appearance on the Russia Today website on Sunday afternoon Moscow time—and about 6:20 a.m. EST. I thank Tolling Jennings for finding it for us.
Helicopter Money Arrives: Switzerland to Hand Out $2,500 Monthly to All Citizens
With Citi’s chief economist proclaiming “only helicopter money can save the world now,” and the Bank of England pre-empting paradropping money concerns, it appears that Australia’s largest investment bank’s forecast that money-drops were 12-18 months away was too conservative. While The Finns consider a “basic monthly income” for the entire population, Swiss residents are to vote on a countrywide referendum about a radical plan to pay every single adult a guaranteed income of around $2,500 per month, with authorities insisting that people will still want to find a job.
The plan, as The Daily Mail reports, proposed by a group of intellectuals, could make the country the first in the world to pay all of its citizens a monthly basic income regardless if they work or not. But the initiative has not gained much traction among politicians from left and right despite the fact that a referendum on it was approved by the federal government for the ballot box on June 5.
Under the proposed initiative, each adult would receive $2,500 per months, and each child would also receive 625 francs ($750) a month.
The federal government estimates the cost of the proposal at 208 billion francs ($215 billion) a year.
This Zero Hedge story is of the “all hat—and no cattle” variety. The hyperbole on this website is almost as bad as it is on King World News. But even though the headline is patently false, the underlying facts of the story does give one pause—and I await June 5 with some interest. It was posted on their website on Friday evening—and Brad Robertson sent it our way on Saturday. There was also a story on the Russia Today website about this—and it’s headlined “No free lunch? Swiss tempted by vote granting $2,400 monthly stipend to adults“—and I thank John Bastian for digging it up for us.
Surely This Problem Won’t Affect Me — Jeff Thomas
On a daily basis, I receive emails from associates in the UK and Europe that speak of the sheer madness of allowing refugees in the millions to pour into Europe. The riot in Cologne, Germany, by some 1,000 men who sexually assaulted 90 women, and robbed and threatened others, offers insight as to the scale of riots that we may expect to see in the future.
And the immigration of refugees is just beginning. The shock and horror that my associates express evidences that never before in their lifetimes have events such as these taken place, and that far worse is yet to come.
We tend to view this “scourge of the demon” as though it’s something new. Yet, in fact, it’s occurred many times before.
This commentary by Jeff starts with a discussion about the refugee situation in Europe, but it doesn’t end there. It’s definitely worth reading if you have the time. It was posted on the internationalman.com Internet site yesterday.
Turkey accuses Russia of new airspace violation
Turkey warned of consequences on Saturday after saying a Russian SU-34 jet had violated its airspace despite warnings, once more stoking tensions between two countries involved in Syria’s war, but Russia denied that there had been any incursion.
In a similar incident in November, Turkey shot down a Russian warplane flying a sortie over Syria that it said had violated its airspace, triggering a diplomatic rupture in which Russia imposed economic sanctions.
Russian Defence Ministry spokesman Major-General Igor Konashenkov denied that any Russian plane had entered Turkish airspace, and called the Turkish allegation “pure propaganda”.
He said Turkish radar installations were not capable of identifying a particular aircraft or its type or nationality, and that no verbal warning had been issued in either English or Russian.
This story put in an appearance on the france24.com Internet site on Sunday sometime—and I thank Roy Stephens for finding it for us.
Mid-tier Chinese banks piling up trillions of dollars in shadow loans
Mid-tier Chinese banks are increasingly using complex instruments to make new loans and restructure existing loans that are then shown as low-risk investments on their balance sheets, masking the scale and risks of their lending to China’s slowing economy.
The size of this ‘shadow loan’ book rose by a third in the first half of 2015 to an estimated $1.8 trillion, equivalent to 16.5 percent of all commercial loans in China, a UBS analysis shows. For smaller banks, the rate is much faster.
This growing practice, which involves financial structures known as Directional Asset Management Plans (DAMPs) or Trust Beneficiary Rights (TBRs), comes at a time when some mid-tier lenders, under pressure from China’s slowest economic growth in 25 years, are already delaying the recognition of bad loans.
“These are now the fastest growing assets on the balance sheets of most listed banks, excluding the Big Five, not just in percentage terms but absolute terms,” said UBS financial institutions analyst Jason Bedford, a former bank auditor in China who focuses on the issue.
This Reuters article, flied from Beijing, appeared on their Internet site in the wee hours of Sunday morning EST. It’s the final offering of the day from Richard Saler—and I thank him on your behalf.
China’s Record Factory Gauge Slump Adds to a Policy Dilemma
China’s official factory gauge signaled a record sixth straight month of deterioration, raising the stakes for policy makers struggling to prop up the economy amid a second bear market in stocks since June and a currency at a five-year low.
The purchasing managers index dropped to a three-year low of 49.4 in January, the National Bureau of Statistics said Monday. That compared with a median estimate of 49.6 in a Bloomberg survey of economists. Numbers below 50 indicate conditions worsened. The official services index also fell, while a private PMI survey signaled the industry shrank an 11th month.
The reports could complicate the dilemma for policy makers: add monetary stimulus to help stem the slowdown in growth, or avoid more easing that could exacerbate record capital outflows and put more pressure on the yuan. Chinese stocks fell, extending January’s steepest monthly rout since 2008, threatening to further shake investor faith in how top officials can manage the world’s second-largest economy.
This Bloomberg article was posted on their website at 6:01 p.m. MST on Sunday evening—and subsequently updated about twelve hours later. It’s the first of the three in a row that I lifted from yesterday’s edition of the King Report.
Slouching Toward the Dark Side — David Stockman
Last Wednesday we noted there is something rotten in the state of Denmark, meaning that the world’s great Potemkin village of Bubble Finance is unraveling. The evidence piles up by the day.
To wit, now comes still another story about the Red Paddy Wagons rolling out in China. This time they are rounding-up the proprietors of a $7.6 billion peer-to-peer (P2P) lending Ponzi called Ezubao Ltd.
The particulars of this story are worth more than a week of bloviating by the Wall Street economists, strategists and other shills who visit bubblevision the whole day long. That’s because it exposes the rotten foundation on which the entire Red Ponzi and the related world central bank regime of Bubble Finance is based.
Here’s another must read for you. This piece by David showed up on his website yesterday—and Roy Stephens slid it into my in-box just after midnight Denver time this morning.
Time running out for China on capital flight, warns bank chief
China is rapidly losing the confidence of global lenders and capital outflows risk turning virulent if the current policy paralysis continues, the world’s top banking body has warned.
“There is a perception that the renminbi could weaken drastically,” said Charles Collyns, the managing-director of the Institute of International Finance in Washington.
Mr Collyns said the authorities have so far failed to articulate a coherent strategy, and there are serious worries that outflows of capital could accelerate, broadening into a flood beyond Beijing’s control.
“The Chinese have not been rigorous and they have not been very convincing,” he told The Telegraph.
This commentary by Ambrose Evans-Pritchard is definitely worth reading as well. It showed up on the telegraph.co.uk Internet site at 8:43 p.m. GMT last night, which was 3:43 p.m. in New York—EST plus 5 hours. This is the second contribution in a row from Roy Stephens.
Kuroda Stock Rally Gone in 28 Minutes, Before Making a Comeback
This time, Haruhiko Kuroda’s stock rally lasted just 28 minutes. At first.
The Topix index soared as much as 3.1 percent after the Bank of Japan at 12:38 p.m. unexpectedly adopted a negative interest rate policy — but by 1:06 p.m. in Tokyo, those gains were all gone, with the share gauge sinking as much as 1.6 percent to the day’s low. The measure then restored almost all of the advance, closing 2.9 percent higher.
“I’m repeatedly going through it, and it’s still not clear. It’s not easy to understand,” said Stefan Worrall, director of equity cash sales at Credit Suisse Group AG in Tokyo, about the BOJ’s statement. “The problem is that it looks too finicky. It looks like it’s a convoluted manipulation of the very limited remaining tools that the BOJ has at their disposal.”
I found this Bloomberg story in yesterday’s edition of the King Report—and this is what Bill King had to say: “The Nikkei’s swift reversal must have alarmed Abe and Kuroda. Without a wealth effect from soaring stock prices, NIRP will force Japanese consumers to intensify their boarding of cash and reduce consumption further. Japan’s recession will worsen appreciably; and if the Nikkei continues to decline, the big ‘D’ could make its dreaded appearance.”
“You can be sure that Draghi is keenly aware of the Nikkei’s baby step into NIRP. If the markets become convinced that central bank easy credit schemes have lost their mojo, central banks are in big trouble. If the markets start fearing that NIRP’s wealth tax effect encumbers economies, it’s checkmate.”
That’s a big ’10-4′ good buddy! This Bloomberg news item appeared on their Internet site at 11:26 p.m. Denver time last Thursday evening.
Japan’s ‘TPP Chief’ Resigns Over Corruption Scandal
Reporting by Shukan Bunshun (a weekly tabloid magazine) last week, which alleged Economic Revitalization Minister Akira Amari was involved in a cash-for-favors bribery scandal, led to Japan’s “TPP Chief” resigning from the Cabinet on Thursday. Amari explained, “Out of respect for my duty as a Cabinet member and to take moral responsibility as a politician, I have decided to resign from the ministerial post today.”
Amari was made responsible for Japan’s economic and fiscal policy under Prime Minister Shinzo Abe when the second Abe Cabinet was convened in 2012. He has been a key player pushing Abe’s economic agenda, including “Abenomics” domestically and the mammoth Trans-Pacific Partnership (TPP) trade deal internationally.
The Shukan Bunshun article alleged that Amari and his aides received illegal donations from a construction company in return for mediating negotiations between the company and Urban Renaissance Agency (UR), a semi-public housing developer fully funded by the central and local governments. The article accused Amari and his aides of accepting funds and entertainment from the construction company worth a total of 12 million yen ($100,000).
This news item showed up on thediplomat.com Internet site last Friday—and it’s the third story in a row that I ‘borrowed’ from yesterday’s edition of the King Report.
Barclays to exit precious metals: sources
Barclays is set to exit the precious metals sector, several sources told Platts this week, following an announcement by the bank last week that it would be closing some of its investment banking operations to concentrate on its core market of the U.S. and Europe.
Barclays declined to comment on the matter.
One trader said the bank had been in touch last week to say it would be ending its precious metals business, describing the move as the “worst kept secret in commodities.”
The news comes following a statement last week by the U.K. bank that it would be “exiting certain product lines”, while closing offices in nine countries across Asia, the Americas and EMEA.
This precious metal news item, filed from London, was posted on the platts.com Internet site on Friday morning GMT—and I found it on the Sharps Pixley website yesterday.
SILVER FIX: Not Fit For Purpose, R.I.P. — Ross Norman
Somebody needs to say it … so I will. The LBMA silver price (aka the silver fix) is not fit for purpose.
The journey that started with false claims that the old fixing methodology was flawed only to be replaced by an IOSCO compliant model which was technically advanced, manipulation-resistant, all engaging and transparent solution … which does not work. Ten times in the last six months the silver price has been “fixed” outside the trading range of the spot price for that day which is nonsensical. Laughably last Thursday silver traded between 14:40 and 14.10 in the spot markets yet “fixed” at $13.58. Fridays benchmark price was little better. A benchmark or reference price it is not.
The LBMA silver price is meant to represent the price at which the optimal buying and selling volumes would be met and to provide a benchmark against which thousands of trades between producers, consumers, jewellers, industrials, speculators etc etc would settle. In short – the so called LBMA silver price does not come close to reflecting reality – and it is clearly vulnerable to manipulation – it is therefore effectively invalid. The key question is WHY is it failing … and why is the price administrator (CME & Thomson Reuters) saying nothing and doing less.
Wow! When you see Ross talking dirty like this, you just know he’s not a happy camper with the establishment of which he is part. I just love the blue-blood Brits when they get angry. They don’t swear, as they consider it vulgar and very lower class—the weak-minded’s attempting to express itself forcefully, they think. If you haven’t read it, it’s a must read, as he points the silver price manipulation finger right at the banks, but doesn’t mention JPMorgan by name, however. It almost goes without saying that this “cutting” commentary, as Lawrie Williams described it, appeared on the Sharps Pixley website very early on Monday morning GMT.
World’s largest silver producer slams silver benchmarking controversy
The world’s largest producer of silver, KGHM, has weighed in on last week’s hugely controversial silver price benchmark, which was set some six percent below the prevailing spot price on Thursday.
KGHM, one of the largest producers of copper and the single largest producer of silver in the world, called the difference between the prices “very alarming” and called on the London Bullion Market Association (LBMA) to provide an explanation.
“The large discrepancy between the spot price and the fix is very alarming to us especially that it happened twice in a row,” KGHM head of market risk Grzegorz Laskowski told FastMarkets.
“I think the LBMA needs to make every effort to explain why it happened and needs to help to develop a system that would help to avoid these kind of situations in the future,” he added.
It’s nice to see a mining company getting its knickers in a twist over this, but that’s not the issue that matters. They should be knocking on Jamie Dimon’s door over at JPMorgan, as all silver roads lead there. This bulliondesk.com article found a home over on the Sharps Pixley website on Monday afternoon.
2016 Silver Market Trends — The Silver Institute
Silver is prized primarily for its dual role as a monetary asset as well as an important industrial metal utilized in a wide-range of existing and growing applications. Factors driving the silver market include supply and demand fundamentals, global economic performance, geopolitical issues, interest rates, currency fluctuations and investor sentiment, among others. Against this backdrop, the Silver Institute offers the following thoughts on this year’s silver market trends.
Silver industrial demand, the largest component of total silver off-take, is set to increase its share of total demand in 2016. Silver is incorporated into a variety of industrial applications and is generally price-insensitive given the small quantities that are used in some applications and its critical contribution to these applications’ functionality. In 2015, industrial fabrication demand accounted for an estimated 54 percent of total physical silver demand.
Coin demand is expected to be robust once again in 2016, following a record 130 million oz of demand last year. Demand will remain elevated this year as investors take advantage of relatively lower metal prices in the first few months of the year. Increased interest in safe haven assets, as already seen in the first few weeks of the year, will also be positive for physical silver investment demand. In 2015, coin demand made up an estimated 12 percent of total physical demand.
Well, a mildly bullish report on silver from The Silver Institute! Wonders will never cease! This article appeared on the silverseek.com Internet site last Thursday—and I lifted it from Ted Butler’s weekly review on Saturday. It’s definitely worth reading.
Platinum to remain in deficit through next six years, council says
The platinum market will stay in a shortage in the next six years as supplies remain constrained amid growing or robust demand from jewellers and car companies, according to a report commissioned by the World Platinum Investment Council.
The deficit, which totaled 365 000 ounces in 2015, will average about 250 000 ounces a year though 2021, David Jollie, an independent consultant at Glaux Metal, said in the report. The global truck market, which uses the metal in devices to curb emissions, may double purchases in the next five years, he said.
While platinum has been in annual shortage since 2012, ample supplies of stockpiled metal and China’s slowdown sent prices to a seven-year low this month. The rout has hurt some of the biggest miners, including Lonmin, who have been forced to cut unprofitable production. If prices remain weak, there’s a risk that output will decline further as producers reduce investment, according to Jollie.
“The drivers for the continued deficit are split between the supply and demand side,” Jollie, the former head of research at Mitsui & Co Precious Metals, said by phone. That “should help drive higher metal prices,” he said.
“Should???” Platinum prices will rise only if JPMorgan decides. Neither deficits nor supply/demand matter anymore. Please revisit the “Days to Cover” chart in my Saturday column linked here. After silver, platinum is the most heavily shorted COMEX-traded commodity on Planet Earth, as the Big 4 short holders are short 65 days of world platinum production—and the Big 8 are short 92 days. It’s a given that most, if not all of these 8 traders are banks, either U.S. or foreign. This Bloomberg article showed up on the mineweb.com Internet site last Friday.
World’s Top 10 Gold producers: Peak Gold already here? — Lawrie Williams
According to the latest estimates from major precious metals consultancy GFMS, global gold output in 2015 grew by an almost infinitesimal 0.2%, but is now seen as turning down in 2016 as the almost wholesale cancellations and deferments of major new projects due mostly to financing difficulties, and big cutbacks in exploration expenditure, are at last beginning to make an impact. Indeed GFMS analysts were already seeing the start of a downturn by Q4 2015.
So far annual global production has been advancing largely due to some major projects already being well advanced in the production pipeline when the gold price started to turn down in 2011. These provided more than sufficient new gold to replace the naturally declining output from aging mines and any shutdowns due to ore depletion or for economic reasons up until last year. But now these new mines and expansions are mostly at full capacity with relatively little out there in terms of new projects to bring in new production, while the exploration cutbacks will have been creating legacy issues which will diminish any potential growth in the years ahead – indeed will likely lead to accelerating decline in global gold output for a number of years to come.
GFMS suggests in its latest quarterly publication’s analysis that output was already beginning to reduce in Q4 and that Q3 2015 gold output may prove to have been the highest quarterly figure for many years to come (peak gold) as the slowdown at last starts to filter down to the producers.
But perhaps the key observation in the GFMS analysis is that in Q4 last year, total gold supply dropped by 7% and that new mined production fell by 4%, the largest quarterly reduction since 2008. GFMS also saw a net return to dehedging by producers. The prediction is that the Q4 production decline will continue in 2016, and in the years ahead.
This must read commentary by Lawrie put in an appearance on the Sharps Pixley website yesterday sometime.
Willem Middelkoop explains the coming ‘big reset’ to Grant Williams
Singapore fund manager Grant Williams, editor of the “Things That Make You Go Hmmm” letter and proprietor of Real Vision TV has done an excellent interview with Dutch fund manager and author Willem Middelkoop about the trend toward a profound reform of the world financial system that entails a major upward revaluation of gold.
The interview, conducted in London just before the recent upturn in the gold price, covers what appears to be a balancing of official gold reserves among the United States, Europe, and China. It also covers the gold price suppression by central banks that is happening in the meantime.
Middelkoop has just published an expanded edition of his book “The Big Reset: The War on Gold and the Financial Endgame.”
While the interview is an hour long, it’s packed with useful observations. I found this youtube.com video interview posted in a GATA release last night and, it’s a must watch for sure. I know Willem personally—and he’s very credible. It’s important enough, that despite its length, I didn’t want to leave it for my Saturday column.
The PHOTOS and the FUNNIES
The WRAP
The first day of delivery against the COMEX February gold contract featured 604 contracts delivered and an estimated 3,600 contracts still open for delivery or futures trading closeout. One notable feature has been the lack of any role by JPMorgan for its own trading account as either an issuer or stopper, but we’ll see what emerges as the delivery month plays out. I still sense that gold for delivery is tight and should an aggressive big buyer emerge, it would be reflected in price more than typically.
Back to COMEX silver, I sense a change in pattern for JPMorgan. The bank did not take into its own warehouse the last 3 million oz it took delivery of in December and in fact shipped out more than 600,000 oz (120 contracts) to another COMEX warehouse this week. I sense that JPM may be finally reacting to the publicity of its physical silver accumulation and is now trying to cover its tracks. In addition, JPMorgan made a delivery of 16 contracts (80,000 oz) at the end of the January delivery month, the first delivery of silver it has made in its own proprietary trading account in more than a year. The amount is puny, but what I sense is that JPM wasn’t necessarily looking to make delivery, but there were few other candidates willing to do so at the time.
The sense I have is that JPMorgan is now micro-managing the silver market and that is not incompatible with my tight physical premise. To skip ahead, I also sense JPM is micro-managing in their purchase of Silver and Gold Eagles from the U.S. Mint. This month, 124,000 oz. of Gold Eagles (plus 32,500 Gold Buffaloes) and nearly 6.0 million Silver Eagles were sold, truly enormous amounts—and by a razor thin amount close to the Mint’s production or blank supply capacity. With reports from the retail front still indicating extremely weak demand, such strong sales from the Mint can only be rationally explained by the presence of a large single buyer. — Silver analyst Ted Butler: 30 January 2016
I was happy to see gold and silver rally yesterday—and on not much volume in either precious metal. And even though there was further deterioration in the Commercial net short position in both, it certainly wasn’t by much.
Ted says that even though the deterioration in Friday’s COT Report was not welcome, he’s still of the opinion that the set-up in gold and silver is still bullish, but it’s certainly not as bullish as it was a month ago. It will be interesting to see how the current rallies play out over the next while.
In gold, the price has been allowed to pierce the 200-day moving average to the upside four times during the last twelve months, but wasn’t allowed to get much further than that—and despite the phenomenal supply/demand fundamentals, silver has been pinned to the $14 mat for months now.
But regardless of what the COT Report says, or doesn’t say, there will come a time as Ted has mentioned, that what the numbers in that report say won’t mean a thing—and that day can’t come too soon for me, or for you, I bet.
Here are the 6-month charts for the Big 6+1 commodities, complete with their respective 50 and 200-day moving averages.
<img class="alignleft size-full wp-image-8415" src="http://www.edsteergoldandsilver.com/wp-content/uploads/2016/02/160202-6-month-palladium.png" alt="160202 6-month palladium" width="700" height="530" srcset="http://www.edsteergoldandsilver.com/wp-content/uploads/2016/02/160202-6-month-palladium-300x227.png 300w, http://www.edsteergoldandsilver.com/wp-content/uploads/2016/02/160202-6-month-palladium-624x472.png 624w, htt