01 March 2016 — Tuesday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price got sold off about three bucks the moment that trading began in New York on Sunday evening. But that didn’t last, as the price began to chop higher until the morning gold fix in London [10:30 a.m. GMT/5:30 a.m. EST]. From there it got sold down until 8:30 a.m. in New York—and the subsequent rally ran out of gas/got capped at the afternoon gold fix, which was 10 a.m. EST. It was sold down about five dollars from there, but began to rally once again starting about ten minutes before the COMEX close. That rally got capped a few minutes before 4 p.m. in after-hours trading in New York—and was sold down a dollar or so into the 5:00 p.m. close.
The low and high tick were reported by the CME Group as $1,216.30 and $1,241.80 in the April contract.
Gold finished the Monday session at $1,238.30 spot, up $16.50 from Friday’s close. Net volume was very decent at a bit over 157,000 contracts.
The silver price, which rallied about a dime in the first three hours of trading in the Far East on their Monday morning, got sold down to its low tick of the day about 2:30 p.m. Hong Kong time on their Monday afternoon. The rally that followed topped out at 11:30 a.m. in London then, like gold, got sold off until exactly 8:30 a.m. in New York. From that point it chopped quietly higher until a minute or so after the COMEX close at 1:30 p.m. EST—and traded sideways in a pretty tight range after that.
The low and high tick were reported as $14.61 and $14.945 in the May contract, which is now the new front month for silver.
Silver finished the Monday session in New York at $15.885 spot, up 21.5 cents on the day. Volume, net of March and April, was very heavy at a hair over 58,000 contracts.
The platinum price got sold down 4 bucks to the $909 spot mark [the low tick of the day] the moment that trading began at 6:00 p.m. EST in New York on Sunday evening. But by around 1:30 p.m. Hong Kong time on their Monday afternoon, the price was up to the $922 spot mark—and it chopped sideways in a about a five dollar price range until shortly after 9 a.m. in New York. The ensuing saw-toothed rally got capped at 3 p.m. EST in after-hours trading—and the price wasn’t allowed to do much after that. That saw-tooth pattern is indicative of price management, as every time that the platinum price was about to go ‘no ask’—-a seller of last resort was there to provide the necessary ‘liquidity’ to prevent that from happening. Platinum finished the Monday session at $932 spot, up 19 bucks from Friday.
Platinum opened in New York on Sunday evening at $483 spot—and moved higher in fits and starts until it got to the $497 spot mark, where it ran into the usual sellers of last resort. By the time they were done, it was closed at $491 spot, up only 8 dollars on the day.
The dollar index closed late on Friday afternoon in New York at 98.12—and when it opened at noon EST on Sunday, it made a couple of minor forays above the 98.20 level like it attempted to do on Friday. That lasted until trading began at 6 p.m. in the evening—and it began to head lower from there. It got saved by the usual ‘gentle hands’ at the 97.80 mark at the 8:00 a.m. London open—and made it up to the 98.35 mark around 11:35 a.m. GMT. It chopped sideways from there with a 1-hour 20 basis point down/up dip centered around the London p.m. golf fix. Then shortly after 12 o’clock noon in New York, it began to chop lower—and finished the day at 98.15—almost unchanged from its Friday close.
Here’s the 3-day dollar index chart so you can see part of Friday’s price action—and all of Sunday and Monday’s as well.
And here’s the 6-month U.S. dollar chart—and it’s rally attempt above the 98.00 level is looking shakier by the day.
The gold stocks gapped up a bit over 2 percent at the open—and rallied a tad more until 11 a.m. EST—and then sank back a bit until shortly before 1 p.m. in New York trading. From there they headed higher, with the high tick coming just before 2:30 p.m.—and they chopped sideways into the close from there. The HUI finished the Monday session up 3.70 percent.
It was more or less the same chart pattern for the silver equities, as Nick Laird’s Intraday Silver Sentiment Index closed up by 2.69 percent.
Month-to-date the HUI was up 38.7 percent—and year-to-date that number is 50.7 percent. The ISSI was up 40.2 percent for the month—and year-to-date that index is higher by 32.6 percent.
The CME Daily Delivery Report for Day 2 of the March delivery month showed that 9 gold and only 17 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday. The standout feature in gold was that JPMorgan issued 2 contracts in their client account, but they also stopped 6 contracts for their own account. In silver, the only two issuers that mattered were RBC Capital Markets and Barclays, with 10 and 6 contracts respectively. JPMorgan stopped 8 for its client account, plus 7 contracts for its own 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 in March dropped by 177 contracts, leaving 513 still around for the moment, minus the 9 mentioned above. In silver, March o.i. fell by 316 contracts, leaving 3,488 contracts still open. The first two delivery days in March have only brought 22 deliveries out of the woodwork. One wonders why the short/issuers are being so shy. Ted has more to say about it in this quote in The Wrap.
There was another big deposit in GLD to end the month of February, as an authorized participant added 478,049 troy ounces. And as of 9:58 p.m. EST last night, there were no reported changes in SLV.
The U.S. Mint had one more sales report to round out the month. They sold 12,000 troy ounces of gold eagles—2,000 one-ounce 24K gold buffaloes—and another 736,500 silver eagles.
For the month of February, the mint sold 83,500 troy ounces of gold eagles—19,000 one-ounce 24K gold buffaloes—and 4,782,000 silver eagles.
Year-to-date mint sales numbers are 207,500 troy ounces of gold eagles—53,000 one-ounce 24K gold buffaloes—and 10,736,500 silver eagles.
Comparing the 2016 year-to-date numbers above to what was sold in the first two months of 2015—the sales from a year ago were 99,500 troy ounces of gold eagles—-46,500 one-ounce 24K gold buffaloes—and 8,552,000 silver eagles. The current year is obviously headed for the record books again—just as long as JPMorgan continues to buy everything that John Q. Public isn’t.
There wasn’t much activity in gold over at the COMEX-approved depositories on Friday, as nothing was reported received—and only 10 kilobars [321.500 troy ounces] were shipped out of Manfra, Tordella & Brookes. I won’t bother linking this activity.
It was a totally different scenario in silver, as it usually is. 1,211,028 troy ounces were reported received and, with the exception of 3,975 troy ounces that went into the CNT Depository, every last ounce disappeared into JPMorgan’s arms. They also shipped out 301,008 troy ounces. Including that withdrawal from JPMorgan, there 1,156,231 troy ounces shipped out the door. The link to that action, which is worth a quick look, is here.
Over at the COMEX-approved gold kilobar depositories in Hong Kong on their Friday, they reported receiving 1,641 of them—and with the exception of one lonely kilobar shipped out of Loomis International, the rest came out of Brink’s, Inc. as per usual. The link to that activity, in troy ounces, is here.
Here’s one of many charts that Nick passed around last night—and it doesn’t require any further embellishment from me.
I have a decent number of stories for a Tuesday column—and I hope there are a few in here that interest you.
CRITICAL READS
Chicago PMI Collapses From ‘Mysterious’ January Bounce As Employment Crashes To 7 Year Lows
Following the biggest beat on record in January jumping to 55.6, Chicago PMI collapsed in February to a stunning 47.6 – below the lowest estimate from economists. The entire report is a disaster with mew orders tumbling, production sharply lower, and employment contracting for the 5th month in a row – to its lowest since March 2009. As one respondent warned, business was just “limping along at the moment with little promise in sight.”
From one-year high “HOPE” to near 7-year low “NOPE”…
This brief 2-chart Zero Hedge article showed up on their Internet site on Monday morning at 9:53 a.m. EST. Another link to this article is here.
Pending Home Sales Plunge Most In 2 Years; Soaring Prices Blamed
Following strength in existing home sales and weakness in new home sales, pending home sales greatly disappointed. Against expectations of a 0.5% jump, pending home sales tumbled 2.5% in January – the biggest drop since Dec 2013. This is the 9th monthly miss in a row. While the weather was blamed a little, NAR’s Larry Yun pins the absence of first-time buyers on high prices driven by “cash buyers and investors.“
The 9th monthly miss in pending home sales with the biggest monthly drop since Dec 2013—and the regional breakdown shows the plunge was widespread.
This is the second Zero Hedge article in a row. This one was posted on their website at 10:09 a.m. EST yesterday morning—and it’s worth skimming. Another link to this story is here.
The G-20s Big Fat Zero: Now Comes the Bubble’s Demise! — David Stockman
The tens of millions of taxpayer money wasted at the G-20’s Shanghai soirée had a silver lining. The assembled masters of world finance came up with a big fat zero on the coordinated global stimulus front.
So doing, they essentially admitted that their money printing central banks are out of dry powder (“…but monetary policy alone cannot lead to balanced growth”) and that they are divided and confused on the fiscal front.
Indeed, the best result of the weekend is that the gaggle of G-20 statists acquiesced to Germany’s absolute “nein” on the foolish notion that a world self-evidently drowning in debt can still borrow its way back to prosperity. With respect to that ragged Keynesian shibboleth, Germany’s intrepid finance minister left nothing to the imagination.
So this is not about a failed G-20 meeting; its about the end of a vast, long-running policy scam conducted by global officialdom and their central bankers. In a word, they did not save the world in 2008-2009 with the “courage” of extraordinary policies. They just temporarily buried the symptoms by resort to crank monetary theories and fiscal snake oil.
And as Bill King of King Report fame said: “The G20 Meeting produced a big fat zero. Nothing of consequence occurred…The G20 did issue a whopper when it said it would avoid competitive currency devaluations.” Another link to this commentary is here, and it’s a must read in my opinion. I thank Roy Stephens for digging it up for us.
The Two-Party Illusion — Jeff Thomas
Recently, an American college student, Justin Snyder, commented on his choice for his country’s next president and his reasons for it. Mister Snyder said, in part,
“I support Hillary Clinton for president … When you add up her know-how, leadership, and experience, it’s clear that Hillary Clinton is a perfect fit to be the commander-in-chief of the largest military the world has ever seen … The thing is, we’ve been trying the free market thing for centuries. All we have to show for it is a super wealthy class of people who run the country. What we need is someone to represent the common man, and that someone is Hillary Rodham Clinton.”
Mister Snyder has done quite well in absorbing the modern liberal party line, one that both advances itself on the concept of collectivism, yet reverses itself on its position just two generations ago that war is an evil concept, promoted by conservatives in an effort to control the world.
His comments are not unusual, and that’s what makes them significant. He’s a modern, educated, effectively indoctrinated liberal. His political counterpart is a modern, educated, effectively indoctrinated conservative. Together, they comprise the backbone of governmental dominance over a people: different party, same blind acceptance of political party dogma.
This commentary by Jeff appeared on the internationalman.com Internet site yesterday morning. Another link to this article is here.
Bush Haunts the GOP — Eric Margolis
“The evil that men do lives after them,” wrote Shakespeare. A prime example, former U.S. President George W. Bush who appeared last week campaigning in South Carolina for his amiable younger brother, Jeb.
George W. continues to haunt the Republican Party and damage its electoral chances. At home, Bush has been staying out of public gaze; abroad, he is widely hated and limits overseas travel due to fear of war crimes arrest for his 2003 invasions of Iraq.
Republican spin doctors and the right-wing U.S. media has been trying to soft soap Bush and his mentor, Dick Cheney, for years and slowly expunge their disastrous Iraq and Afghanistan Wars that opened a Pandora’s Box of horrors across the Muslim world. Democrats who cheered the war have equally sought to dodge responsibility. However, Hillary Clinton can’t seem to escape her tawdry war record.
The U.S., claim the Bush/Cheney amen chorus, was “misled” into invading Iraq by “faulty intelligence,” misled by the hope to promote democracy among the benighted Muslims; on a noble quest to remove a frightful dictator Saddam; and, of course, the famous missing “weapons of mass destruction.”
As candidate Donald Trump said last week, these were all bare-faced lies. These spurious allegations had one purpose: to mislead Americans into believing that Bush’s aggression in Iraq was a crusade for justice rather than a crude attempt to turn Iraq, with the world’s second biggest oil reserves, into an American vassal petrostate.
From a Canadian perspective, this short piece by Eric is right on the money. It put in an appearance on the informationclearinghouse.info website last Wednesday—and I thank Doug Clark for finding it for us. It’s worth reading. Another link to this commentary is here.
Argentina ends 15-year debt saga in deal with ‘vultures’
Its government reached an agreement with major American hedge funds that it had battled with since the country broke the record books and defaulted on $95 billion of debt in 2001.
Argentina agreed to pay a group of hedge funds led by NML Capital and its owner, billionaire Paul Singer, $4.6 billion. That represents 75% of the claims that the hedge funds had sued Argentina for, according to a statement issued Monday by the mediator in the case, Daniel Pollack.
Argentine officials, NML Capital and three other hedge funds signed the deal late on Sunday night after months of intense negotiations.
“It seemed like a 1,000 years to me,” Pollack told reporters Monday. “It took every hour of every day of my time…to reach peace between these warring parties.”
This story showed up on the money.cnn.com Internet site at 4:52 p.m. Monday afternoon EST—and it’s courtesy of ‘aurora’. Another link to this news item is here.
Eurozone slides back into deflation
The eurozone lurched back into deflation this month, putting more pressure on the European Central Bank to ramp up stimulus when it meets next week.
Prices fell by 0.2 percent in the year to February, according to figures published by Eurostat. The decline confounded economists, who had expected prices to remain steady.
The return to deflation followed inflation of 0.3pc in the year to January, and was the result of a renewed slump in oil and gas prices. The closely watched core inflation measure, which strips out volatile energy prices, also fell.
This news item appeared on The Telegraph‘s website at 11:36 a.m. GMT on their Monday morning—and it’s something I found embedded in a GATA release. Another link to this story is here.
Mervyn King: the eurozone is doomed
The eurozone is doomed to fail and will lurch from crisis to crisis unless it is broken up, according to the former governor of the Bank of England.
In his new book, Lord King claims that steps towards fiscal union will not quell tensions in the 19-nation bloc and could even tear it apart.
He warns of a looming “economic [and] political crisis” triggered by endless bail-outs, austerity demands and pressure from the “elites in Europe” and the U.S. to create “a transfer union” to solve the eurozone’s woes.
In the second extract of The Telegraph’s exclusive serialisation, Lord King warns that this has “sowed the seeds of division” in the bloc and created support for populist parties. Further steps towards political union, where countries are forced to cede sovereignty and yield to Brussels diktats, could spark a public backlash.
This news item put in an appearance on the telegraph.co.uk Internet site at 10:14 p.m. GMT on Sunday evening, which was 5:14 p.m. in Washington—EST plus 5 hours. It’s the second news item of the day that I found in yesterday’s edition of the King Report. Another link to this story is here.
Russians Ride Fast — Israel Shamir
The area around the Central Moscow tube stations looks like Aleppo after an air raid. Ruins, destroyed buildings, bulldozers gathering the shambles. No, Moscow was not hit by terrorists: this is a planned demolition of hundreds of small and not-too-small shacks erected (in defiance of planning law) in the vicinity of tube stations in the notorious Nineties, when the Law was vague and easily bought for ready money. The biggest of them, the Pyramid on top of Pushkinskaya Station, went down this week. The municipal workers promptly removed the vestiges of the collapsed constructions, while the erstwhile owners stared in disbelief.
They were surprised by the city hall offensive against illegally built shantytowns; some of them kept trading till the last moment. They received a warning and a demolition order a few months ago, but they did not believe the city would actually apply the order. They were sure the last moment it will be rescinded. It was not. Hundreds of buildings went down in one night.
This was a shocking reminder that Russian authorities can act, after so much ostensibly empty talk. The Russians take their time to saddle up, but they ride exceedingly fast, said the German Chancellor Bismarck quoting a Russian proverb (he served at the Russian court and knew a thing or two about Russians). So many rulers and rebels did not believe the Russian warnings, lulled by their long saddling up, and they usually lived to regret it.
This longish commentary showed up on the unz.com Internet site last Wednesday—and is certainly worth reading if you’re a serious student of the New Great Game. I thank Larry Galearis for sharing it with us. Another link to this story is here.
Regime Change in Ankara? More Likely Than You Think — Mike Whitney
On Friday, the United States rejected a draft resolution by Russia that was intended to prevent a Turkish invasion of Syria. Moscow had called for an emergency meeting of the United Nations Security Council (UNSC) to address its growing concern that Turkey is planning to send thousands of ground troops and armored vehicles it has massed on its southern border, into Syria to protect Turkish-backed militants and to block the Kurdish militia, the YPG, from establishing a contiguous state in northern Syria. Moscow’s one-page resolution was a thoroughly-straightforward document aimed at preventing a massive escalation in a conflict that has already claimed the lives of 250, 000 and left the country in ruins.
According to Russia’s deputy U.N. envoy, Vladimir Safronkov, “The main elements of this Russian draft resolution are to demand that all parties refrain from interfering in the internal affairs of Syria, that they fully respect Syria’s sovereignty and independence, stop incursions, and abandon plans for ground operations.”
The resolution also expressed Moscow’s “grave alarm at the reports of military buildup and preparatory activities aimed at launching foreign ground intervention into the territory of the Syrian Arab Republic.”
There was nothing controversial about the resolution, no tricks and no hidden meaning. The delegates were simply asked to support Syrian sovereignty and oppose armed aggression. These are the very principles upon which the United Nations was founded. The U.S. and its allies rejected these principles because they failed to jibe with Washington’s geopolitical ambitions in Syria.
This very interesting article put in an appearance on the counterpunch.org Internet site last Wednesday—and I thank Doug Clark for sending it our way on Sunday. It’s certainly worth reading if you have the interest. Another link to this story is here.
Syrian Peace Plan: U.S. Seethes at Its Humiliation by Russia
A very well sourced article, which has recently appeared in The Wall Street Journal (attached below), shows the extent of the policy disarray in Washington following the U.S.-Russian “cessation of hostilities” agreement.
It seems there has been a massive row.
The heads of the U.S. military and the CIA are clearly furious at the way in which they feel the U.S. has been humiliated, and in a series of angry meetings in the White House they have made their feelings known.
Though they rationalise their anger with talk about how Russia cannot be trusted, and how U.S. allies in the regions like the Turks and the Saudis feel betrayed, that is what it amounts to.
These recriminations have slipped into the open, as shown by the recent angry comments of Mark Toner, the U.S. State Department’s deputy spokesman, who in exceptionally crude and undiplomatic language called on Russia in Syria “to put up or shut up”.
This very interesting article was posted on the russia-insider.com Internet site yesterday sometime I believe—and I thank Larry Galearis for sending it our way. Another link to this commentary is here.
Saudi Cash Reserves Drop to Lowest Level in 40 Months Amid Crude Carnage
When the Saudis moved to artificially suppress crude prices in an effort to preserve market share by bankrupting the cash flow negative U.S. shale space, Riyadh was gambling.
Gambling on how long U.S. producers could rely on wide open capital markets to keep them afloat. Gambling on how tolerant everyday Saudis would be should it become necessary to cut subsidies to shore up the budget. Gambling on the extent to which the market would test the riyal peg. And on and on.
In short, the kingdom was betting that it could ride out the price storm without essentially going bankrupt. But the downturn has lasted longer than the Saudis might have expected, and now that some 1,000,000 b/d of Iranian supply is set to come back online by year end, Riyadh has to a certain extent lost its ability to control the situation.
Complicating matters is the war in Yemen, which next month will drag into its second year. Not only has the conflict been costly, it’s also put Riyadh in a bad spot from a reputational perspective. Last week, the European Parliament recommended a wholesale embargo on arms sales to the Saudis in light of the 3,000 civilians the kingdom has “accidentally” killed over the course of the campaign to rout the Iran-backed Houthis.
All of this costs money. Lots of it. The war, the 16% budget deficit, maintaining the riyal peg – it’s all costly and it’s showing up in the depletion of Saudi reserves which in January fell 2.4%, or $14.3 billion, falling below $600 billion for the first time since the summer of 2012. Last month was the third month in a row that the SAMA reserve draw-down topped $10 billion.
This news item appeared on the Zero Hedge Internet site at 5:23 p.m. EST on Monday afternoon—and I thank Richard Saler for sending it our way. Another link to this story is here.
China just announced one of the largest single layoffs in history
China may soon have a rust belt of its own.
Chinese officials announced plans to lay off roughly 1.8 million workers in the coal and steel industries, as part of president Xi Jinping’s politically difficult effort to restructure the world’s second-largest economy. It’s unclear as to the time frame for the cuts, which were announced by Yin Weimin, China’s minister for human resources and social security.
In recent decades, China built its economy on heavy state investment in export-oriented manufacturing industries. Those investments created large numbers of jobs for low-skilled people flooding China’s fast-growing cities.
But China seems to have over-invested, leaving a glut of capacity in the heavy industrial sector that has forced plants to cut prices deeply. The low prices mean those factories are effectively operating at a loss subsidized by the state.
This is certainly no surprise. This news item was posted on the qz.com Internet site early yesterday afternoon EST—and I thank ‘aurora’ for sending it our way. Another link to this article is here.
The Golden Chameleon — Jim Rickards
Is gold a commodity, an investment, or money?
The answer is…
Gold is a chameleon. It changes in response to the environment.Gold is making an important change right now.
At times, gold behaves like a commodity. The gold price tracks the ups and downs of commodity indices.
At other times, gold is viewed as a safe haven investment. It competes with stocks and bonds for investor attention.
As JPMorgan said over a hundred years ago “Gold is money. Everything else is credit.” This commentary by Jim showed up on the dailyreckoning.com Internet site last Thursday—and I thank Harold Jacobsen for finding it for us. Another link to this article is here.
The gold market rigging story could be called ‘The Bigger Short’
Yesterday your secretary/treasurer went to a movie theater to see “The Big Short” (seemingly the first time he has been to the movies since going to “Babe the Pig” 20 years ago, for reasons you can probably figure out). “The Big Short” is an excellent movie, despite its constant gratuitous vulgarity and the unattractiveness of the nominal heroes.
You may know the movie’s outline: A few unorthodox money managers discover that the residential mortgage bond business has become a colossal fraud because investment banks have packaged good mortgages with bad ones and the regulatory agencies are looking the other way. The unorthodox money managers persuade some investment banks to create financial contracts for shorting their own mortgage bonds. Then they wait for the housing bubble to pop so they can collect stratospheric profits.
Except that it takes the seemingly inevitable takes a lot longer than it should. Even when mortgage defaults rise sharply, the market value of the bond shorts doesn’t rise. Someone seems to be interfering with the market, so the shorts try to persuade the bond-rating agencies and mainstream financial news organizations to do their jobs, and of course they won’t.
The similarities to GATA’s experience are obvious, perhaps most obvious in the scene in the movie scene where two of the unorthodox fund managers visit the headquarters of The Wall Street Journal at 1211 Avenue of the Americas in New York to pitch the story to a former college classmate who has become a reporter for the newspaper. The reporter declines to pursue the story, explaining that by doing so he would be putting himself, his family, and his job at risk to chase what he calls a mere “hunch.”
Of course what applies to the gold market, also applies to the silver market. This commentary by Chris Powell is definitely worth reading if you have the time. I found it on the gata.org website yesterday—and another link to this article is here.
Gold’s Top Performer Adds to Hedging Reboot as Price Soars
With gold prices soaring this year after three years of losses, the world’s best performing bullion company is looking to add to its hedge book as a growing number of producers move to lock in profits.
St Barbara Ltd., the biggest gainer on the 44-member Bloomberg Intelligence Gold Mining Competitive Peers Index in the past year, Evolution Mining Ltd., Australia’s second-biggest producer, and South Africa’s Harmony Gold Mining Co. are among companies who’ve put in hedges this month spurred by prices hitting highs in some local currencies.
Hedging enables mining companies to sell future output at fixed prices to secure loans and protect margins. It’s a strategy that’s been shunned by investors and producers who spent at least $10 billion at the end of the last decade unwinding unprofitable forward sales as prices surged to a record.
Producers now are focused on shorter-term hedging often over periods of months, not years, according to Stephen White, a Sydney-based director at Noah’s Rule Ltd., a risk advisory company that works with miners. “What gives hedging a bad name are long-term hedges that are not managed properly,” he said by phone.
This Bloomberg story was posted on their website at 6:17 p.m. Denver time on Sunday evening—and was updated about two hours later. I found it on the Sharps Pixley website. Another link to this gold-related news item is here.
Gold market is tighter than many think, Tocqueville’s Hathaway tells Kitco News
In an interview with Daniela Cambone of Kitco News, Tocqueville Gold Fund manager John Hathaway says the gold market is tighter than many people think and that returning gold to the market when it has been distributed in many forms could not be accomplished quickly.
This 7:09 minute video clip, along with a condensed transcript, showed up on the kitco.com Internet site at 11:47 a.m. EST on Monday morning—and it’s another gold-related news item I found in a GATA release. It’s worth watching/reading.
OMG: London Times acknowledges increasing vulnerability of gold derivatives
A young, smartly-dressed woman swept through the doors of a new shop in the heart of London’s clubland to buy £50,000 of gold last week. She paid with her debit card.
She was among the first customers at Sharps Pixley, Britain’s first high-street gold shop. Dealer Ross Norman opened his doors last month to serve what he said was an “unmet need.”
In uncertain times, people want to buy gold. “We’ve been surprised by the diversity of the clientele,” Norman said. “We thought it would be mostly mature, wealthy males but it’s been much more varied.”
What did the woman want with the precious metal? “She gave me a look like, ‘I’ll give you the short version.’ She said: ‘Look, I’m Kurdish.’ I got the impression she had moved here fairly recently.” The Kurds are locked in bloody conflicts in Syria and Turkey. Many have fled.
This must read commentary appeared on the sundaytimes.co.uk Internet site—and it’s yet another gold-related news story I found on the gata.org Internet site. Almost all of this news item is hidden behind a subscription wall, but it’s posted in the clear in a GATA release. Another link to this story is here.
India imposes gold sales tax on top of record import duty
India has reintroduced a local sales tax on gold jewellery after a gap of four years, on top of record import duty, in a move officials hope will dampen demand for the precious metal in the world’s second biggest consumer.
Successive governments in Asia’s third largest economy have struggled to curb Indian appetite for gold despite the imposition of a 10 percent import duty in 2013 and other restrictions introduced from time to time.
Annual imports of up to 1,000 tonnes of gold, accounting for about a quarter of India’s trade deficit, have also prompted the government to launch a scheme to mobilize a pool of more than 20,000 tonnes of the metal lying idle in homes and temples.
Finance Minister Arun Jaitley, presenting his third budget today, announced an excise duty of 1 percent on gold and diamond jewellery. A report from his ministry on Friday said gold was under-taxed in the country, where the richest 20 percent account for roughly 80 percent of gold purchases.
This is another must read gold story. This Reuters article, filed from Mumbai, showed up on their Internet site at 5:47 a.m. IST on their Monday morning—and I found this article in a GATA release as well. Another link to this news item is here.
Jewellers to strike in protest over gold tax
Indian jewellers will go on indefinite strike from Tuesday in protest over the reintroduction after four years of a sales tax on gold jewellery, their trade body said.
The strike could curb gold imports by the world’s second biggest consumer and put pressure on global prices.
Finance Minister Arun Jaitley announced an excise duty of 1 percent on gold and diamond jewellery on Monday.
“Jewellers across the country will go on strike from tomorrow. We are urging the government to roll back excise duty,” Ketan Shroff, a spokesman for India Bullion and Jewellers Association (IBJA), told Reuters.
This is another Reuters story about gold—and it was also filed from Mumbai. It appeared on their website at 11:27 p.m. IST on their Monday evening—and it’s something I found on the Sharps Pixley website. Another link to this gold-related article is here.
World No. 2 gold miner’s 2015 output highest since 2003 — Lawrie Williams
Most of the world’s principal precious metals consultancies had been predicting an increase in gold production in 2015, despite the lower U.S. dollar gold price – and contrary to the views of a number of commentators. In the event, as 2015 figures begin to come in it looks as though we will indeed see a small increase, although now the top analysts do see things beginning to turn down. Chinese output is stuttering, but other countries where the local gold price has been high in domestic currency terms have even seen improving margins for gold miners and in some gold is trading at an all-time high in local currency terms. This has meant that what many analysts had predicted as marginal, or loss-making, mines at the lower U.S. gold price are actually nothing of the sort in domestic currency terms.
Take Australia, the world’s No. 2 gold producer after China, for example. Figures compiled by Australian consultancy, Surbiton Associates, show that the country’s gold output last year hit a 12-year high at 285 tonnes. Q4 production was 73 tonnes, marginally up on the Q3 figure.
Indeed the Australian gold sector – even before the recent upturn in prices – had very much been bucking the dismal resource sector trend despite the very negative sentiment see in U.S. markets. As Surbiton director Dr. Sandra Close points out “Once again the local gold sector has benefited from weaker exchange rates against the U.S. dollar.” Indeed, although over 2015 the US dollar gold price slowly declined to around US$1,050 per ounce near year end, by contrast the Australian dollar gold price remained relatively stable during the year, averaging A$1,540 per ounce, while since January it has risen to over A$1,700 per ounce.
This commentary by Lawrie showed up on the Sharp Pixley website yesterday. Another link to his commentary is here.
Gold Price In The Zero-Bound: Michael Kosares
“When you have zero money for so long, the marginal benefits you get through consumption greatly diminish – but there’s one thing that doesn’t diminish, which is unintended consequences.” – Stanley Druckenmiller
Something happened on the way to negative interest rates. Something unexpected. Gold and silver demand went through the roof. The first two months of business at USAGOLD were reminiscent of the 2009 run to gold. In London, where people have the additional concern of a potential exit from the European Union, investors were lining up around the block to purchase precious metals, and reports were circulating that “Some London banks are placing unusually large orders for physical gold.” For the first two months of the year, the U.S. Mint reported gold coin sales running double what they were for the same period in 2015.
So what’s behind the rush for gold at a time when the financial news is dominated with concerns about negative interest rates?
Worry over disinflationary/deflationary systemic risks is certainly one incentive, i.e., gold’s safe haven appeal, but there is something else at work here though – a set of circumstances that forces us to think outside the box.
This short commentary by Michael put in an appearance on the usagold.com Internet site yesterday morning. Another link to this article is here.
The PHOTOS and the FUNNIES
The first photo is of a giant armadillo—and the second one if of Japanese macaque monkeys.
The WRAP
Monday is first delivery day for the big COMEX March futures contract and the notices to deliver were quite small at 5 versus the preliminary estimate of futures contracts still open after yesterday’s trading, which at more than 3,800 contracts is quite large. In fact, I’m hard pressed to remember a larger recent mismatch between the first day’s deliveries and remaining open contracts. On its face, it is potentially very bullish because it hints at a reluctance by short holders in the March contract to part with (or secure) metal for delivery. In other words, this is the kind of first delivery day mismatch that gets your attention. Adding to that is tightening of the nearby spreads involving the March contract.
I’m not suggesting there will be a delivery squeeze based upon one day’s data, but if there were to be such a squeeze, it would most likely occur after looking like current configurations. Also, since JPMorgan, in its own house or proprietary trading account, stopped (took) delivery on two of the five contracts issued, that most likely means JPM is net long in the March contract since delivery notices are assigned according to how many contracts a clearing member holds. I must point out the inherent conflict (illegality) here.
JPMorgan appears to not only be the largest short holder in COMEX silver futures, but appears to have sold short additional contracts recently, thus capping silver prices and setting the stage for even lower prices. Yet at the same time, JPM appears to be taking delivery of metal at the artificially depressed prices it created. Could anything be more crooked? And I’m not just talking about what JPM might or might do over the course of the March delivery process, this is what these crooks did consistently all last year. If someone is looking for a motive for the silver manipulation, look no further than to allow JPMorgan to load up on physical metal at artificially depressed prices. — Silver analyst Ted Butler: 27 February 2016
I was certainly a happy camper when I saw the charts yesterday morning, as I figured for sure that JPMorgan et al would slam the precious metals on the last day of the month. And except for elevated volume levels, there was almost no sign that they were throwing their weight around big time on Monday, as it appeared that they were back in the micromanaging mode again. It was most obvious in platinum.
The precious metal stocks had another good day and month—and I’m hoping that there will be many more like it as the year progresses. But I must admit that with the Commitment of Traders Report being as ugly as can possibly be, my short-to-medium term outlook is choked with caution—notwithstanding yesterday’s wonderful day.
Here are the 6-month charts for the big 6+1 commodities, complete with their respective 50 and 200-day moving averages.
So where to from here?
After yesterday’s big surprise, it’s really hard to tell tell. I was expecting the worst, but it never materialized. But as I said just above, the butt-ass ugly COT Report we had last Friday, plus the one we’ll see this Friday, certainly is the dark cloud that covers everything at the moment. But, as Ted Butler has pointed out, on numerous occasions, someday those numbers won’t matter. But is that “someday” now?
And as I type this paragraph, the London open is less than ten minutes away—and I see that the gold price generally traded higher in Hong Kong on their Tuesday morning. But the price was capped and then sold off starting shortly after 10 a.m. local time—and most of the remaining gains vanished when a not-for-profit seller appeared at 3 p.m. Hong Kong time—and an hour before the London open. Gold is currently up a couple of bucks, but was up 10 dollars at one point. The same can be said of silver, except ‘da boyz’ have now sold it down 3 cents from Monday’s New York close. Platinum is up 4 bucks in very choppy trading and, wonder of wonders, palladium is currently/momentarily back above the $500 spot mark at $502—up 11 bucks in what looks like a very illiquid market.
Net HFT gold volume is already over the moon at 45,000 contracts—and that number in silver sits at 6,300 contracts. Just looking at these numbers, it’s obvious that JPMorgan et al had to throw a decent amount of paper gold and silver at these morning rallies in the Far East to get them under control. The dollar index drifted below the 98.10 mark shortly before 3 p.m. Hong Kong time, but got rescued to the 98.28 mark by around 3:30 p.m.—but is currently heading lower once again—and is basically unchanged from its late Monday afternoon close in New York.
Today, at the close of COMEX trading, is the cut-off for this Friday’s COT Report—and the companion Bank Participation Report. I expect all of Monday’s volume to be in them—and hopefully most of today’s as well.
I shan’t hazard a guess as to what may or may not happen from a price perspective for the remainder of the Tuesday session. But in my daily telephone conversation with Ted yesterday, we were both in agreement that the precious metal market is certainly trading far differently this year that they have in a very long time.
And as I post today’s column on the website at 4:05 a.m. EST, I note that gold was back to unchanged just before 8:30 a.m. in London—and is off that low by a bit and up a dollar or os. The same can be said for the price action in silver—and it’s off its low as well, but still down 3 cents the ounce. On the other hand, platinum is a bit more now that Zurich has opened—and it’s currently higher by 7 dollars an ounce. The palladium price has jumped as well—and it’s up by 15 bucks from Monday’s New York close.
Net HFT gold volume is now sits at just under 53,000 contracts—and that number in silver is now up to an equally chunky 8,000 contracts. And after hitting its currently low of 98.09—the dollar index has been chopping higher ever since—and is currently up 14 basis points.
That’s all I have for today—and I’ll see you here tomorrow.
Ed
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