09 February 2016 — Tuesday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price was sold down about five dollars during the first hour of trading when New York opened on Sunday evening—and it chopped quietly sideways until the London open. Then a very decent rally began that got capped at, or just after, the London p.m. gold fix. It didn’t do much from there until a smallish rally began around 12:30 p.m. in New York—and the moment it stuck its nose above the $1,200 spot mark, it got sold off immediately at precisely 2:00 p.m. EST. From that high tick, it got sold down about 11 dollars into the 5:00 p.m. close of electronic trading.
The low and high tick were recorded as $1,164.50 and $1,201.40 in the April contract.
Gold finished the Monday session in New York at $1,189.00 spot, up $15.50 from Friday’s close—and well off its high. Net volume was over the moon at over 219,000 contracts.
Here’s the 5-minute gold tick chart courtesy of Brad Robertson. The volume began to pick up the moment the rally began at the London open—and was already pretty substantial by the time the COMEX opened at 6:30 p.m. Denver time on the chart below. The volume died off about thirty minutes after the price was capped at 2 p.m. EST, but was still more than background for the remainder of the the trading session. Midnight in New York is the vertical gray line—add two hours for EST—and the ‘click to enlarge’ feature is still not working.
Here’s the gold chart showing the New York price action—and you can see where ‘da boyz’ stepped in—once at, or just after the p.m. gold fix—and then the precise price capping at 2 p.m. EST. Nothing free market about any of that.
The silver price received the same treatment as gold did at the Sunday open in New York—and the low tick came shortly before 2 p.m. Hong Kong time. From there it wandered generally higher until 8:30 a.m. when the real price action began. A rally developed that had all the signs of going ‘no ask’—and the powers-that-be had to step in at 9:30 a.m. EST, or heaven only knows what the price would have been by the ‘fix’. Then, also like gold, it didn’t do much until 12:30 p.m. EST—and the ensuing rally got snuffed out at 2 p.m. as well. About one percent of its gains vanished after that.
The low and high tick were reported by the CME Group as $14.90 and $15.48 in the March contract.
Silver closed yesterday at $15.305 spot, up 29.5 cents on the day. Net volume was sky high here as well, at just under 53,000 contracts. Roll-over activity was pretty decent.
And here’s the New York Spot Silver [Bid] chart—and you can see how carefully the silver price was managed yesterday as well.
The platinum price chart looks similar in most respects to the silver and gold charts, complete with the cap at the London gold fix—and again when JPMorgan et al showed up at 2:00 p.m EST. Platinum finished the day in New York yesterday at $924 spot, up $14 from Friday’s close.
Palladium didn’t do much for the first half of Monday trading, but when Zurich opened, it got sold down to its $491 low tick by 1 p.m. Europe time. The subsequent rally took it up to the $517 mark by 11:30 a.m. in New York—and its price got capped at that point—and it sold off a few dollars into the close. Palladium finished the Monday trading session at $512 spot, up 10 bucks from Friday.
The dollar index closed late on Friday afternoon in New York at 96.95—and it began to rally the moment that it opened for trading at noon EST on Sunday. It made it up to the 97.18 mark around 1:30 p.m. Hong Kong time—and then sank back to the 96.80 level by 10 a.m. GMT in London. It rallied to its 97.45 high tick, which came at the COMEX open—and it was all down hill until the 96.57 low, which came minutes before 3 p.m. EST. It regained a handful of basis points during the remainder of the Monday trading session. After its wild ride, the index closed at 96.54—down 41 basis points from Friday. Here’s the 3-day DXY chart, so you can see the overall move on both Sunday and Monday.
And here’s the 6-month U.S. dollar chart so you can keep up with the longer term. It ain’t the healthiest looking thing, is it, dear reader?
The gold stocks gapped up a the open—and then chopped higher, with their highs coming shortly after 12 o’clock noon in New York trading. They managed to hang in their pretty good until the 1:30 p.m. COMEX close—and despite the fact that gold was rallying to the $1,200 spot mark, they began to sell off—and over half of their earlier gains vanished by the close. The HUI finished higher by 3.01 percent.
The silver equities put in a very similar performance—and their chart pattern was also very similar to their golden brethren. Nick Laird’s Intraday Silver Sentiment Index closed higher by only 2.77 percent when all was said and done, as over half of its earlier gains disappeared as well.
The CME Daily Delivery Report showed that 14 gold and 116 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday. In gold, the only short/issuer was Morgan Stanley out of its client account. The largest two long/stoppers, if you can dignify them with that name, were HSBC USA—and JPMorgan for its client account—with 8 and 4 contracts apiece. In silver, the only short issuers were ABN Amro and ADM with 76 and 40 contracts respectively. Scotiabank stopped 104 contracts—and JPMorgan was an ‘also ran’ stopping 8 contracts for its client account.
The CME Preliminary Report for the Monday trading session showed that gold open interest in February rose by a surprising 186 contracts. Since there was 40 contracts posted for delivery today, there had to be [40+186] 226 contracts added to February open interest in gold, for the math to work out right on this—then minus the 14 mentioned in the prior paragraph. Silver open interest by 1 lone contract, leaving 141 contracts still around—but minus the 116 contracts posted for delivery tomorrow.
For the sixth day in a row, there was a deposit in GLD, as an authorized participant added 162,573 troy ounces. And as of 8:44 p.m. EST yesterday evening, there were no reported changes in SLV once again.
So far this month, there has been 1,102,433 troy ounces of gold added to GLD. And so far this month there has been 510,915 troy ounces withdrawn from SLV—and not one ounce has been deposited.
The U.S. Mint had another sales report yesterday. They sold 5,500 troy ounces of gold eagles, along with another 722,500 silver eagles.
Their was 5,001 troy ounces of gold received at the COMEX-approved depositories on Friday—and that activity was at Brink’s, Inc. There was also 6,430.000 troy ounces/200 kilobars shipped out of Scotiabank’s vault. The link to that activity is here.
It was much busier in silver, as 1,191,377 troy ounces were reported received—and 891,901 troy ounces were shipped out the door. Of the total in/out amount, 618,892 troy ounces involved a transfer from Canada’s Scotiabank—and into JPMorgan’s vault. How macabre—the world second largest short holder in silver in the COMEX futures market shipping physical silver to the largest silver short holder in the COMEX futures market. The link to that action is here.
There was very little activity in the COMEX-approved gold kilobar depositories in Hong Kong on their Friday, as only 3 kilobars were reported received, all at Loomis International—and none were shipped out. I shan’t both linking this ‘activity’.
Here’s a chart that Nick Laird sent around on Sunday evening—and it shows that China added 16.02 tonnes of gold to their reserves in January. This is just window dressing to please the IMF, as it’s a given that they added more to their official reserves than that.
Here’s the monthly Chinese net gold imports through Hong Kong in December. The amount was huge. Nick said it was 129.266 tonnes, the third highest import month in history—and I thank him for passing this chart around last night.
Hong Kong may no longer be a proxy for gold imports into China, but it has far from disappeared as an important import conduit. The chart below certainly proves that.
I don’t have all that many stories for you today—and that suits me just fine.
CRITICAL READS
Why The Bulls Will Get Slaughtered — David Stockman
Well, they got that right. Detecting that “parts of the U.S. jobs report for January seem fishy”, MarketWatch offered a fish as the headline photo to its Friday commentary. [See the lead story in my Saturday column for that – Ed]
Needless to say, none of that stink was detected by Steve Liesman and his band of Jobs Friday half-wits who bloviate on bubblevision after each release. This time the BLS report actually showed the U.S. economy lost 2.989 million jobs between December and January. Yet Moody’s Keynesian pitchman, Mark Zandi described it as “perfect”
Yes, the BLS always uses a big seasonal adjustment (SA) in January——so that’s how they got the positive headline number. But the point is that the seasonal adjustment factor for the month is so huge that the resulting month-over-month delta is inherently just plain noise.
To wit, the seasonal adjustment factor for the month was 2.165 million. That means the headline jobs gain of 151k reported on Friday amounted to only 7% of the adjustment amount!
This commentary by David put in an appearance on his website on Saturday—and I thank Roy Stephens for today’s first story. Another link to David’s commentary is here.
Resist the urge to buy this stock-market pullback, says J.P. Morgan
http://www.marketwatch.com/story/resist-the-urge-to-buy-this-stock-market-pullback-says-jp-morgan-2016-02-08
It is too soon to look for a bottom for stocks, at least over the medium term, Mislav Matejka, equity strategist at J.P. Morgan, and a team of analysts wrote in a note on Monday.
That buying opportunity is tough to see right now, even as the proportion of S&P 500 and European stocks already in a bear market have increased to 40%, the analysts said.
“This could lead to some knee-jerk bounces, but we note that in [2011], this ratio was as high as 60% and that was even without a recession materializing,” said Matejka. “In [2008], the ratio rocketed to 95%, more than double the current levels.”
This news item appeared on the marketwatch.com Internet site at 12:10 p.m. EST on Monday afternoon—and I thank Scott Linn for this one. Another link to this story is here.
Fears over new financial crisis come back to haunt global markets as trading turmoil hits
Global stocks were gripped by a fresh bout of panic selling on Monday, raising fears over the health of the world’s banking system for the first time since the financial crisis.
European markets slumped to their lowest level in more than two years amid an unremittingly bleak outlook for the global economy and concerns over the resilience of the world’s biggest lenders.
The Euro Stoxx 600 index of leading bank shares fell as much as 6pc in Monday’s trading, closing down 5.6pc, plumbing depths not seen since August 2012. The continent’s lenders have now lost 17.3pc of their value of the last 30 days.
Volatility forced shares in Barclays to be briefly suspended in late afternoon trading. Barclays, along with BNP Paribas and ING Santander all closed down more than 5pc.
Here’s the first of two commentaries by The Telegraph‘s Mehreen Khan. This one showed up on their website at 6:30 p.m. GMT yesterday evening, which was 1:30 p.m. in New York—and about an hour before the PPT appeared and goosed the U.S. markets, cutting their losses in half on the day. Roy Stephens sent this one our way late last night MST. Another link to the story is here.
Chesapeake Energy Plunges 40% on Report It Hired Restructuring Adviser
Chesapeake Energy Corp., the U.S. natural gas driller that’s been slashing jobs and investor payouts to conserve dwindling cash flows, lost half its value after a report that it hired restructuring attorneys.
The shares dropped a record 51 percent after Debtwire reported that Chesapeake retained Kirkland & Ellis to help restructure a $9.8 billion debt load. The plunge triggered three circuit-breaker halts during the first half hour of trading and extended Chesapeake’s 12-month loss to about 93 percent. The free fall wiped out $838 million in market value in the first hour of trading on Monday.
Burdened with a debt load eight times larger than its market value, Chesapeake has been canceling drilling projects, trimming its workforce and closing offices to slow the rate at which it burns through cash. Gas, which accounts for about 80 percent of Chesapeake’s production, has averaged about $2.56 per million British thermal units during the past year, down 38 percent from a year earlier.
Chesapeake is the latest U.S. shale driller to flirt with collapse as a crushing glut of gas and crude renders companies increasingly desperate to avoid insolvency. Houston-based Halcon Resources Corp, retained the Weil, Gotschal law firm to explore bankruptcy, TheDeal.com reported on Feb. 5, citing a person it didn’t identify. Chesapeake and Halcon both suspended dividend payouts on preferred shares last month.
This news item showed up on the Bloomberg website at 10:50 a.m. Denver time on Monday morning—Brad Roberson was the first person through the door with it yesterday. There’s also a link to this story here.
Record number of Americans dump U.S. passports
More Americans than ever before are turning their backs on the United States.
The number of citizens and long-term residents cutting their official ties to Uncle Sam jumped more than 20% last year to 4,279, according to a CNNMoney analysis of the latest government data.
It’s a trend that’s been increasing in recent years. Many of those severing links are Americans living overseas who are tired of dealing with complicated tax paperwork, a headache that has worsened since new regulations came into effect.
Unlike most other countries, the U.S. taxes its citizens on all income, no matter where it’s earned or where they live. For Americans living abroad, that results in a mountain of paperwork so complex that they are often forced to seek professional help, forking out high fees for accountants and lawyers.
This very interesting news item, which is not entirely surprising, was posted on the money.cnn.com Internet site at 9:27 a.m. on Monday morning EST—and it’s the second contribution of the day from Scott Linn. Another link to this story is here.
Dr. Dave Janda interviews your humble scribe
This 25-minute audio interview took place on Sunday afternoon—and in it, we discuss all of the topics mentioned in the previous stories, plus we spend a decent amount of time talking about the precious metals as well.
The interview was posted on the davejanda.com Internet site on Monday morning.
Goldman Sachs sees near-zero risk of U.K. recession despite market tantrum
Britain is extremely unlikely to face an economic recession over the next two years and is on safer ground than any other major country in the developed world, according to a new crisis-study by Goldman Sachs.
The US investment bank said the global stock market rout and the credit tremors this year are sending off false signals, insisting that underlying indicators of economic health show little sign of a sudden rupture in Europe, the US or across the OECD bloc of rich states.
An array of “alarm” indicators – based on the experience of 20 countries since 1970 – suggest that the current business cycle is still in full swing and far from exhaustion, even if risks have been ratcheting up over recent months.
Credit ratios are high but they have not been spiking higher in most OECD states, and there is still plenty of slack left in the economy. This allows central banks to take their time before having to slam on the brakes – the time-honoured cause of recessions.
It’s bad enough that the giant vampire squid actually put this sort of bilge water out in the public domain, but the fact that Ambrose actually picked up on it is shameful in and of itself. But Ambrose has other masters—and sometimes he has to write what he’s told to write—and this could very well be a case in point. His commentary was posted on the telegraph.co.uk Internet site at 7:56 p.m. GMT on their Monday evening, which was 2:56 p.m. in New York—EDT plus 5 hours. I thank Patricia Caulfield for this article. Another link to this commentary is here.
Debt, defaults, and devaluations: why this market crash is like nothing we’ve seen before
A global recession is on the way. This truism of economics holds at any point in which the world is not in the grips of a contraction.
The real question is always when and how deep the upcoming downturn will be.
“The crash will come, but it would be nice if it came two years from now”, Thomas Thygesen, head of economics at SEB told over 200 commodity investors and analysts in London last month.
His audience was rapt with unusual attention. They could be forgiven for thinking the slump had not already arrived.
This offering by Mehreen Khan over at The Telegraph is the second of his commentaries in today’s column. Unlike Ambrose, nobody owns him. It appeared on their Internet site at 10 a.m. GMT on Saturday morning—and it’s courtesy of Roy Stephens as well. It’s on the longish side, but worth reading if you have the time. Another link to this article is here.
European Bank Bloodbath Crashes Bond, Stock Markets
Just as we warned, not only is it time to panic but the panic is ‘contagion’-ing over into the sovereign risk market. European banks are in free fall, down over 4.3% broadly, crashing to 2012’s lows.
European bank risk has gone vertical… Today’s spike is the largest since April 2010.
TBTF banks are all seeing credit risk explode to 52-week highs and beyond, slamming European bank stocks back to near “whatever it takes” lows.
For those desperate dip-buyers hoping for another move from Draghi – don’t hold your breath… As Deutsche Bank itself warned, any more easing by The ECB or BoJ will only hurt banks (and certainly Deutsche). In other words, they are all officially trapped now.
This 6-chart Zero Hedge piece was posted on their website at 12:10 p.m. yesterday afternoon EST—and it’s certainly worth a minute of your time. I thank Richard Saler for sending it along. There’s another link to this story here.
Denmark to Ukraine: Follow Minsk agreement, or we could drop Russia sanctions
Ukraine must take the steps to peace agreed a year ago in Minsk, or risk losing the support of the European Union, said Denmark’s foreign minister. Earlier this week other western powers criticized Kiev, following the resignation of a key minister.
If Ukraine doesn’t come through with the reforms linked to the Minsk peace process, it will be very difficult for Europe to continue united in support for sanctions against Russia,” Kristian Jensen told Reuters at the EU foreign ministers’ meeting in Amsterdam on Friday. “Ukraine has a deadline. They need to push those reforms now, they can’t wait.”
Signed by Ukraine, Russia, France, and Germany last February, the Minsk accord lays out 13 steps to secure the end of the armed conflict in Donbas, in eastern Ukraine, which broke out in 2014, after people in the regions refused to accept the forceful change of power in Kiev. The conflict has resulted in over 9,000 deaths and the displacement of more than 2 million people, according to the U.N.
This worthwhile news item appeared on the Russia Today website very early Friday morning Moscow time—and it’s certainly worth reading if you have any interest in the New Great Game. My thanks go out to Roy Stephens for sharing it with us. Another link to that article is here.
Greek Tragedy: Pension Pandemonium Sparks Bank Crash, Stocks at 26 Year Lows
And you thought Greece was “fixed“. The last three days have seen Greek bank stocks cut in half.
Which has slammed Greek stocks to their lowest since December 1989…breaking below Draghi’s “Whatever it takes” lows—and Greek bond yields are back above 10% – the highest since last year’s crisis.
This 3-chart Zero Hedge piece was posted on their Internet site at 10:18 a.m. yesterday morning EST—and I thank Richard Saler for his second offering of the day.
Week Seventeen of the Russian Intervention in Syria: does Erdogan want war with Russia?
The situation with Turkey is rapidly getting out of control: not only have the Turks conducted artillery strikes across the Syrian border, Turkey has refused to comply with its obligations under the Open Skies Treaty and refused to let a Russian surveillance aircraft overfly Turkey. The Russian military has now declared that it had detected signs of Turkish preparations for an invasion. The Turkish refusal to abide by the Open Skies Treaty is an extremely worrisome development, especially when combined with the Russian warnings about the preparation for an invasion of Syria, and the Russians are not mincing their words.
There are plenty more indicators and warnings showing that an escalation is possible: the Geneva negotiations have been abruptly terminated, the Saudis are threatening to invade Syria and there are signs that the Syrian army is slowly but surely preparing an operation to liberate Aleppo from the Takfiris, creating a panic in Ankara and Riyadh (so much for the stupid notions that the Russians are not winning or that the Syrian military does not exist).
In the meantime, there are plenty of signs that Erdogan’s entire “grand plan” for Syria has completely collapsed that that he has no more options left.
I am not a psychic or a prophet. I cannot tell what Erdogan is really thinking, or whether the Turks will try to invade Syria. But what I can do is to try to make some educated guesses about possible Russian responses to such an event.
This commentary, plus an excellent 8:19 minute embedded video briefing from the Russian military, put in an appearance on thesaker.is website on Saturday—and I thank ‘aurora’ for bringing it to our attention. It’s certainly worth reading if you’re a student of the New Great Game. There’s also a link to another Pepe Escobar piece in that story as well. And there’s another link to the entire article here.
Peace Talks “Paused” After Putin’s Triumph in Aleppo
A last ditch effort to stop a Russian-led military offensive in northern Syria ended in failure on Wednesday when the Syrian Arab Army (SAA) backed by the National Defense Forces (NDF) and heavy Russian air cover broke a 40-month siege on the villages of Nubl and al-Zahra in northwestern Aleppo province. The Obama administration had hoped that it could forestall the onslaught by cobbling together an eleventh-hour ceasefire agreement at the Geneva peace talks. But when the news that Syrian armored units had crashed through al Nusra’s defenses and forced the jihadists to retreat, UN envoy Staffan de Mistura suspended the negotiations tacitly acknowledging that the mission had failed.
“I have indicated from the first day that I won’t talk for the sake of talking,” the envoy told reporters, saying he needed immediate help from international backers led by the United States and Russia, which are supporting opposite sides of a war that has also drawn in regional powers.” (Reuters) De Mistura then announced a “temporary pause” in the stillborn negotiations which had only formally begun just hours earlier. Developments on the battlefield had convinced the Italian-Swedish diplomat that it was pointless to continue while government forces were effecting a solution through military means.
After months of grinding away at enemy positions across the country, the Russian strategy has begun to bear fruit. Loyalist ground forces have made great strides on the battlefield rolling back the war-weary insurgents on virtually all fronts. A broad swathe of the Turkish border is now under SAA control while the ubiquitous Russian bombers continue to inflict heavy losses on demoralized anti-regime militants. Wednesday’s lightening attack on the strategic towns of Nubl and Zahraa was just the icing on the cake. The bold maneuver severed critical supply-lines to Turkey while tightening the military noose around the country’s largest city leaving hundreds of terrorists stranded in a battered cauldron with no way out.
This commentary by Mike Whitney put in an appearance on the counterpunch.org Internet site on Friday—and certainly falls into the absolute must read category, especially for any serious student of the New Great Game. I thank Doug Clark for sending it our way. There’s another link to this short essay here.
Iran wants euro payment for new and outstanding oil sales, source tells Reuters
Iran wants to recover tens of billions of dollars it is owed by India and other buyers of its oil in euros and is billing new crude sales in euros too, looking to reduce its dependence on the U.S. dollar following last month’s sanctions relief.A source at state-owned National Iranian Oil Co. told Reuters that Iran will charge in euros for its recently signed oil contracts with firms including French oil and gas major Total, Spanish refiner Cepsa, and Litasco, the trading arm of Russia’s Lukoil.
“In our invoices we mention a clause that buyers of our oil will have to pay in euros, considering the exchange rate versus the dollar around the time of delivery,” the NIOC source said. …
Iran has also told its trading partners who owe it billions of dollars that it wants to be paid in euros rather than U.S. dollars, said the person, who has direct knowledge of the matter.
This Reuters story, filed from New Delhi, is datelined 12:02 p.m. EST on Monday afternoon, so it’s obviously gone through at least one rewrite in its life, because I found it in a GATA release on Saturday morning. Another link to this news item is here.
China FX reserves fall $99.5 billion in January
China’s foreign exchange reserves, the world’s largest, fell by $99.5 billion in January, the central bank said in a statement on Sunday.
Foreign reserves fell to $3.23 trillion at the of January, the lowest level since May 2012.
The figure was higher than a Reuters poll forecast of $3.20 trillion.
China’s gold reserves rose to $63.57 billion at the end of January, from $60.19 billion at the end of 2015, the People’s Bank of China said on its website.
This brief Reuters news item, filed from Beijing, showed up on their website at 1:29 a.m. GMT on Sunday morning in London—and it’s something I found on the Sharps Pixley website last night.
GATA secretary will speak at Hong Kong and Singapore conferences in April
GATA secretary treasurer Chris Powell will speak in April at the Mines and Money conference in Hong Kong and the Mining Investment Asia conference in Singapore.
Other speakers at the Mines and Money conference well known to GATA’s followers include Grant Williams, editor of the “Things that Make You Go Hmmm” newsletter and founder of Real Vision TV; Perth Mint research director Bron Suchecki; and Dutch fund manager Willem Middelkoop, author of “The Big Reset.”
The Mines and Money conference will be held from Tuesday to Thursday, April 5 to 7, at the Hong Kong Convention and Exhibition Centre. [Details about the conference are embedded in the linked story. – Ed]
Speakers at the Mining Investment Asia conference who are well known to GATA’s followers include GoldMoney founder and GATA consultant James Turk and gold forecasting newsletter editor Bo Polny. Suchecki is schedule to speak at the Mining Investment Asia conference too.
The Mining Investment Asia conference will be held from Wednesday to Friday, April 13 to 15, at the Marina Bay Sands conference and hotel center in Singapore.
All the pertinent details on both conferences are linked in this story that was posted on the gata.org Internet site on Sunday. There’s also a link to this story here.
To cut debt, Glencore will assign future Chilean gold production to Franco-Nevada
Glencore is set to unveil a deal to bring in at least $500 million as part of its frantic efforts to slash its debt.
The commodities giant is in advanced talks on a “streaming” deal under which it would hand future precious metal production from a mine in Chile to American gold specialist Franco-Nevada in exchange for an upfront payment. The agreement could be unveiled as early as this week.
It is part of a $13 billion fundraising campaign that Glencore launched last year to scotch concerns over its $30 billion net debt.
Glencore shares plunged 70 percent last year, making it the worst-performing stock in London’s FTSE 100 after rival Anglo American.
Miners and oil companies have been hit hard by the collapse in global raw material prices after a decade-long commodities boom came to a halt.
The above five paragraphs are all there is to this news item that appeared on theaustralian.com Internet site on Sunday. The rest of it is hidden behind a subscription wall. I found it in a GATA release. Another link to this gold-related story is here.
The PHOTOS and the FUNNIES
The WRAP
It’s not as if there is anything wrong with gold leading the price way, particularly since gold was in an extremely bullish COMEX market structure since mid to late November. I didn’t utter a bearish word on gold since then, if my memory hasn’t failed me. At the very least, the gold (and silver) price rally over the past several weeks, once again, confirms the validity of the COT market structure approach.
Since year end—and extrapolating through Friday, close to 100,000 net contracts of COMEX gold futures were bought by technical funds and sold by the commercials as the gold price rose by $115. That’s the equivalent of 10 million oz of gold. I fully acknowledge that these 10 million gold oz were in the form of paper derivatives contracts and not actual metal, but one would be hard pressed not to see the connection between the concerted and excessive buying and selling on the COMEX as not impacting the price. Heck, over the past five weeks, the world barely mined 10 million oz of gold; so how could a few players on either side of a derivatives market dealing in larger size not affect price? There was a helluva lot more real producers and consumers behind the actual gold that came out of the ground over this time, so why should a few COMEX speculators [be allowed] determine the price for everyone?
There really wasn’t much question that we would rally in gold and silver given the previous market structure established beginning in November; the question was more the nature of the rally and were there any other market factors in place that could overcome the continuous wash, rinse and repeat cycle of COMEX positioning. It was much more certain that we would rally than what would occur after the rally. Upfront, we are at the uncertain point now and the other market factors could take on an oversized role. These other market forces are more physical in substance and of the type I usually highlight. — Silver analyst Ted Butler: 06 February 2016
Although I was happy to roll out of bed yesterday and find the precious metals and their associated equities up a bunch yesterday, it was clear long before the end of the day that the powers-that-be were all over this market like white on rice, which is a favourite saying of Ted’s.
The volume numbers were sky high and, without doubt, there was Massive deterioration in the Commercial net short position in all four precious metals yesterday. And if it ends up being the ‘same old, same old’ as I said in my Saturday column—we’re much closer to a top [interim or otherwise] than the bottom of this rally, as we are well into the overbought region in gold.
But, as Ted has been pointing out for years—with the latest coming in his quote above—there are other forces at work in the market right now. The only thing unknown is when they will become a factor or, more succinctly, when they will be allowed to become a factor. And as is always the case, the markets can remain overbought [or oversold] for long periods of time.
So all we can do is look at the current price rallies with our eyes wide open—and emotionally prepare for any eventuality.
Here are the 6-month charts for the Big 6+1 commodities complete with their respective 50 and 200-day moving averages. As I just mentioned, gold is well into overbought territory—and silver is just about there—but the other two precious metals still have a ways to go yet. The other three commodities—copper, natural gas and West Texas crude are not even on the same planet at the moment.
And as I type this paragraph, the London open is less than ten minutes away—and I note that gold traded higher by a few dollars throughout Far East trading on their Tuesday. But about twenty minutes before the London open, it got sold down by a few dollars below its Monday closing price in New York. Ditto for silver, although its price is now back to unchanged at the moment. Platinum and palladium are both down a bit as well.
Net HFT gold volume is just over 22,000 contracts, which is pretty decent for this time of day—and in silver, that number is 4,200 contracts. The dollar index dipped as low as 96.30 shortly before 11 a.m. Hong Kong time on their Tuesday morning—and has been chopping higher ever since—and is currently up 9 basis points as London opens.
Today, at the 1:30 p.m. EST close of COMEX trading, is the cut-off for this Friday’s Commitment of Traders Report. We’ve now had four straight days of very heavy deterioration in the Commercial net short positions in gold and silver in particular—and almost regardless of what happens today from a price perspective, the Friday numbers are going to be butt-ass ugly. There’s no way to sugar coat this.
I see that the Nikkei got hammered for more than 5 percent on their Tuesday—and reflecting back on yesterday’s trading in New York, it’s a reasonable assumption that along with capping the gold price when they did, the PPT also had a hand in the late-day rallies in the equity markets. The banking index in particular [BKX] set a new low close for this move down. In Europe, the banking stocks are circling the drain. Because they are so interconnected, this “too big to fail” doctrine is going to take them all down—U.S. banks as well. All eyes are on Deutsche Bank—and rightfully so. But under the hood where we can’t see, they’re all doomed—and it’s just a matter of who’s first—and how soon?
And as I post today’s column on the website at 4:05 a.m. EST, I see that gold is back to basically unchanged, as are platinum and palladium—and silver is up 6 cents the ounce. Net HFT gold volume is way up there at just over 36,000 contracts—and silver’s net HFT volume is a hair over 6,000 contracts, with no roll-overs worthy of the name. These are big volumes for such tiny price moves—and I have no idea what that means. The dollar index, which had been up 9 basis points at the London open, is now down 5 points.
I haven’t the foggiest notion of what to expect from Tuesday’s price action in New York, but I’m more than conscious of the fact that the bullish configuration in the COMEX futures market in both gold and silver, is no more. And the jury is still out on whether it ends up as the ‘same old, same old’—or is it different this time?
So we wait some more.
That’s all I have for today—and I’ll see you here tomorrow.
Ed
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