03 March 2016 — Thursday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price got sold lower in fits and starts during the Far East trading session on their Wednesday, with the low tick of the day being placed shortly before the London open. Once that low had been set, the price began to move higher, also in fits and starts—and any break-out rally, no matter how tiny, was quickly dealt with. The high tick came at precisely 2:00 p.m. EST in after-hours trading—and the gold price got sold down about three bucks going into the 5 p.m. close.
The low and high ticks were reported by the CME Group as $1,225.10 and $1,244.80 in the April contract.
The gold price closed in New York yesterday at $1,239.50 spot, up $7.80 on the day. Net volume was very decent at just under 157,000 contracts.
The silver price chopped around a nickel either side of unchanged until a minute or so after 9 a.m. in New York. The rally that began at that point got capped around 10:25 a.m. EST just as it about to take out the $15 spot price to the upside. It didn’t do much after that.
The low and high tick in that precious metal was recorded as $14.77 and $15.045 in the May contract.
Silver finished the Wednesday session at $14.94 spot, up 13.5 cents from Tuesday’s close. Net volume was pretty light at a hair over 27,500 contracts.
The platinum price traded mostly sideways until just after 1 p.m. Zurich time on their Wednesday afternoon. Then the price action got a little jumpier, as firm buying pressure was met with even more firm selling pressure by ‘da boyz’—and platinum was closed at $933 spot, down 4 dollars on the day.
Palladium got sold down a small handful of dollars in the first hour of trading on Tuesday evening in New York, but began to inch higher from there, with the high tick coming shortly after 1 p.m. Zurich time. The low tick came shortly after 11 a.m. in New York—and it rallied back into positive territory by 2 p.m., before trading sideways for the rest of the day. Palladium finished the Wednesday session at $516 spot—and up 2 bucks from Tuesday’s close.
The dollar index closed in New York late on Tuesday afternoon at 98.34—and began to chop higher in a fairly narrow range, with most of the day’s gains coming by around 9:35 a.m. in London. From that point, the index chopped sideways in an up-and-down fashion I hadn’t seen before. That state of affairs lasted until 11 a.m. in New York, when the index began to head lower with a vengeance, closing at 98.18—down 16 basis points on the day.
As I’ve been saying for many days now, the dollar index is not happy at this level—and is only sporting its current valuation by brute force.
And here’s the 6-month U.S. dollar chart so you can keep an eye on the medium-term picture.
The gold stocks opened unchanged—and headed higher almost immediately. The highs of the day came around 1:45 p.m. EST—and they traded sideways to down a bit for the remainder of the day. The HUI closed up 3.35 percent.
The silver equities followed a very similar path, complete with the 1:45 p.m. high tick—and the softening of prices after that. Nick Laird’s Intraday Silver Sentiment Index closed higher by 2.75 percent.
The CME Daily Delivery Report for Day 4 of the March delivery month in silver showed that 87 gold and 186 silver contracts were posted for delivery within the COMEX-approved depositories on Friday. In gold, the only short/issuer of note was International F.C. Stone with 75 contracts. The only two long/stoppers worth mentioning were ABN Amro with 33—and JPMorgan with 30 contracts for its in-house [proprietary] trading account. In silver, the only short/issuer of note was ABN Amro with 186 contracts—and the tallest long/stopper hog at the trough was JPMorgan, with 87 for its client account—and 68 for its house account. In very distant second place was Canada’s Scotiabank—and they stopped 18 contracts. The link to yesterday’s Issuers and Stoppers Report is here.
The CME Preliminary Report for the Wednesday trading session showed that gold open interest in March dropped a chunky 319 contracts, leaving 171 still open—minus the 87 mentioned in the previous paragraph. The interesting thing about those 319 contracts is the fact that 390 gold contracts were actually posted for delivery—and that’s the number that I reported in yesterday’s column. The difference between those two numbers—71 contracts—were in fact added to March open interest in this Preliminary Report.
In silver, the March o.i. fell actually rose by 13 contracts, leaving 3,453 still around. And the 186 contracts mentioned above, have to be subtracted from the total to give a true picture of the delivery situation as it stands as of this moment. But, like what happened in gold, there were 10 silver contracts posted for delivery in my column yesterday, so the only way that yesterday evening’s report could show an increase of 13 contracts, is if 23 contracts were added to the March delivery month [23-10=13]—and that’s what happened.
As you can tell, the delivery month is a dynamic process—contracts being delivered into, contracts being added to the delivery month—and contracts being rolled or sold without being delivered into. But the stand-out so far this month is still Ted Butler’s “mismatch“—as even with 186 contracts up for delivery tomorrow, there are over 3,200 COMEX silver contracts that are still open, which is a huge number. Both Ted and I are waiting for the resolution of this situation with great interest.
There was another deposit in GLD yesterday, as an authorized participant added 76,486 troy ounces. And as of 5:57 p.m. EST yesterday afternoon, there were no reported changes in SLV. But when I checked back at 10:04 p.m. EST last night, there had been a change, as an authorized participant added a chunky 2,731,938 troy ounces of silver to that ETF.
And for the second day in a row, there was no sales report from the U.S. Mint.
There was decent gold movement over at the COMEX-approved depositories on Tuesday, as 26,355 troy ounces were reported received—and 55,943 troy ounces were shipped out the door. All the ‘in’ activity was at Brink’s, Inc.—and all the ‘out’ activity was at Canada’s Scotiabank. The link to that is here.
There was no ‘in’ activity in silver—and only 219,927 troy ounces in total were shipped out from four different depositories—and the link to that activity is here.
I mentioned in today’s headline that JPMorgan’s COMEX silver inventory was getting up there. According to Ted, they hold almost 50 percent of the silver held in all of the COMEX-approved depositories combined.
It was a pretty big day over at the COMEX-approved gold kilobar depositories in Hong Kong on their Tuesday. They only reported receiving 729 kilobars, but shipped out a very chunky 9,783 of them. All of the activity was at Brink’s, Inc. as per usual—and the link to that, in troy ounces, is here.
Yesterday I posted the gold and silver bullion coin sales from The Perth Mint that had been updated with February’s sales figures. Now here are the same charts for the U.S. Mint—complete with their February data. The gold coin sales include gold eagles and 24K gold buffaloes. The silver coin sales are silver eagles only. The silver/gold sales ratio based on February’s numbers works out to just under 48 to 1. That isn’t a true ratio, as the mint is running at maximum production capacity in silver eagles—and probably gold eagles as well. Therefore the free-market sales ratio would be different if the mint could make all it could sell—which it can’t. It should be noted that JPMorgan’s purchases from the mint certainly obscures the true ratio as well. The third chart shows the dollar sales ratio.
I have even fewer stories today than I did yesterday, so the editing process will go much quicker for you this time.
CRITICAL READS
The Trumpster Sends the GOP/Neocon Establishment to the Dumpster
Wow. Super Tuesday was an earthquake, and not just because Donald Trump ran the tables. The best thing was the complete drubbing and humiliation that voters all over America handed to the little Napoleon from Florida, Marco Rubio.
So doing, the voters began the process of ridding the nation of the GOP War Party and its neocon claque of rabid interventionists. They have held sway for nearly three decades in the Imperial City and the consequences have been deplorable.
It goes all the way back to the collapse of the old Soviet Union and the elder Bush’s historically foolish decision to invade the Persian Gulf in February 1991. The latter stopped dead in its tracks the first genuine opportunity for peace the people of the world had been afforded since August 1914; and it reprieved instead the fading remnants of the military-industrial-congressional complex, the neocon interventionist camp and Washington’s legions of cold war apparatchiks who would have otherwise been consigned to the dust bin of history.
This absolute must read commentary by David appeared on his website yesterday sometime—and my thanks go out to Roy Stephens for today’s first news item. By the way, I wasn’t kidding when I said that this was an absolute must read—from beginning to end! Another link to this article is here.
“We’re In Trouble”: Alan Greenspan Delivers Stark Warning
Were you wondering what Alan Greenspan thinks about the outlook for monetary policy across the globe?
Neither were we, but Bloomberg was and Tom Keene and Mike McKee got the “privilege” of sitting down with the “maestro” on Monday afternoon to discuss a variety of topics including NIRP, which Greenspan says “warps investment behavior.”
While he isn’t willing to go so far as to condemn negative rates as “dangerous,” he does say the global race to the proverbial Keynesian bottom is “counterproductive.”
As far as the U.S. economy is concerned, Greenspan isn’t optimistic. “We’re in trouble basically because productivity is dead in the water…Real capital investment is way below average. Why? Because business people are very uncertain about the future.”
Well yes, they most certainly are. Of course were it not for “the Greenspan put” and decades of policy largesse we might not have ever had a financial crisis in the first place (David Stockman will tell you all about Greenspan’s role in creating the conditions we now find ourselves in).
This must read commentary showed up on the Zero Hedge website minutes before midnight on Monday evening EST, which is why it didn’t make yesterday’s column. I thank Brad Robertson for sending it along—and another link to this article is here.
Sports Authority Files for Bankruptcy, Will Close One Third of Its Stores
Following weeks of fertile speculation whether it will or won’t file for bankruptcy, this morning Colorado-based Sports Authority, whose name graces the home stadium to the Super Bowl champion Denver Broncos, put all doubts to rest when it filed Chapter 11 in Delaware bankruptcy court (Case 16-10527) listing $500,000-$1 Bn in assets and between $1 and 10 billion in liabilities in its bankruptcy filing, adding that it will close as many as 140 of its 463 locations. As part of its bankruptcy process, the bankrupt retailer reported that it has access to a $595 million in debtor in possession financing loan.
In its summary of the company’s recent, troubled and over-levered history Bloomberg writes that Sports Authority has fallen far since a $1.3 billion buyout in 2006 piled it with debt. “In 2006, the chain was even with Dick’s Sporting Goods Inc. in sales. Today, Dick’s has hundreds more locations and takes in almost twice as much per store, making it the U.S. leader in selling athletic gear, while Englewood, Colorado-based Sports Authority’s debt load has hampered its ability to expand or innovate.”
“We are taking this action so that we can continue to adapt our business to meet the changing dynamics in the retail industry,” said Michael E. Foss, chief executive officer of Sports Authority. “We intend to use the Chapter 11 process to streamline and strengthen our business both operationally and financially so that we have the financial flexibility to continue to make necessary investments in our operations.”
That’s what happens with these leveraged buyouts, dear reader. The victim gets loaded up with debt, which not only limits the company’s ability to do anything, it also becomes unserviceable the moment that the economy turns south. Almost every LBO of the last decade will soon be in the same boat as the recession deepens. This Zero Hedge piece put in an appearance on their Internet site at 7:46 a.m. EST on Wednesday morning—and I thank ‘aurora’ for passing it around yesterday. Another link to this story is here.
How a Witch Doctor Convinces Everyone He’s a Neurosurgeon
In the Middle Ages, doctors used leeches to treat everything from headaches to ear infections, asthma, smallpox, the plague, and hundreds of other diseases. If there was something wrong with you, leeches were the solution. If that didn’t work, the answer was more leeches.
Today, modern medicine has discredited leeches as a cure-all. We look back on it and laugh. “How could we have been so stupid?”
Some things haven’t changed much. The average person is still willing to blindly accept conventional thinking—maybe even more so than he was in the past. Today, he hears the financial equivalent of “more leeches!” and agrees.
Establishment economists advocate upside-down concepts like negative interest rates, banning cash, debt-fueled consumption, government spending, and rampant money printing as the cures to economic ailments. “Money printing, debt, and low interest rates didn’t stimulate the economy? Well, we just need more money printing, more debt, and even lower interest rates.”
It’s nothing but the same bad medicine that caused many of these problems in the first place. No matter what, their solution is more financial leeches!
This excellent commentary by Nick Giambruno, the senior editor over at the internationalman.com Internet site, showed up there yesterday—and it’s certainly worth reading if you have the time. Another link to this article is here.
Only the IMF can save Brazil now
Brazil is heading straight into the arms of the International Monetary Fund. The sooner this grim reality is recognized by the country’s leaders, the safer it will be for the world.
The interwoven political and economic crisis has gone beyond the point of no return. The government is frozen. The finance ministry has lost the trust of Brazilian investors and global markets in equal measure.
Almost nothing credible is being done to stop the debt trajectory spinning into orbit. Few believe that the ruling Workers Party is either or capable or willing to take the drastic austerity measures needed to break out of the policy trap, or that it would suffice at this late stage even if they tried.
“There is an enormous fiscal crisis and we’re flirting with a return to hyperinflation. All the debt variables are going in the wrong direction,” said Raul Velloso, the former state secretary of planning.
This longish Ambrose Evans-Pritchard offering, filed from Sao Paulo, put in an appearance on The Telegraph‘s website at 8:46 p.m. GMT last night, which was 3:46 p.m. in New York—EST plus 5 hours. Another link to this news item is here.
How Sweet It Is! The Maple Syrup Cartel Crumbles
Economists have long argued that irresistible market forces will crush a cartel that inefficiently restricts supply and raises the price of a product. These forces are: (1) external competition from new entrants into the industry eager to profit by expanding supply and undercutting the high cartel price; and (2) internal competition from smaller and more efficient members of the cartel who “cheat” by offering secret price discounts to buyers and covertly violating cartel production quotas to steal market share from the other members. While these competitive market forces swiftly destroy free-market cartels, they work more slowly to undermine even cartels established or propped up by governments, such as the OPEC oil cartel and the generations-old De Beers diamond cartel.
A few days ago, it was reported that the Federation of Quebec Maple Syrup Producers is beginning to self-destruct. The cartel comprises the province of Quebec’s 13,500 sap farmers and accounts for 71 percent of the world supply of maple syrup. The Federation has existed for 50 years, but between 2002 and 2004 it was transformed into a government sanctioned cartel with production and sales quotas, that is, legal restrictions on the amount each farmer could produce and sell. Any producer in Quebec defying these limits on output is subject to legal action that may result in fines and asset forfeitures. The cartel also holds a stockpile of 60 million pounds in order to maintain the cartel-fixed price in the event of fluctuations of demand. Over the past decade the cartel has succeeded in boosting prices by 34 percent. In the past three years the price of the top two grades of syrup has risen by 6 cents a pound to C$2.95, despite the fact that agricultural prices in general have slumped during that period.
Fortunately for consumers, the Federation is beginning to face the main problem that typically afflicts an anti-competitive cartel: new and hungry entrepreneurs lured into the industry by the prospect of high profits. Thus, although world demand for maple syrup and other natural sweeteners has been growing, Quebec’s share of global supply has fallen by 10 percent in the last decade. Quebec growers are chafing at the bit to increase their supply to meet increasing competition from farms located in other parts of Canada and the northern US. And, despite the threat of legal penalties, many of the growers have taken to selling on the black market. Furthermore, there is strong evidence that external competition will only intensify in coming years. The number of taps in the US increased by 45 percent to 11.9 million between 2007 and 2015. Moreover, only 6 percent of the 200 million easily accessible maple trees are being exploited in the US. In northern Vermont, private investors have been buying up land to further expand the global supply of syrup and put downward pressure on the cartel price. In Canada itself, Ontario has 108 million trees available to tap.
This short, but very interesting news item appeared on the mises.org Internet on Tuesday—and I thank Charlie Orr for bringing it to our attention. Another link to this article is here.
Can London’s Boris Johnson Sway ‘Brexit’ Vote? — Jim Rickards
“The Death of Money” Author Jim Rickards weighs in on “Brexit.” He speaks on “Bloomberg Markets.”
This 5:48 minute Bloomberg video clip appeared on their website at 10:07 a.m. MST yesterday morning—and it’s definitely worth watching. Jim has a few things to say about gold as well. I thank Ken Hurt for sharing it with us.
Fresh recession will cause eurozone collapse, warns Swiss bank
A recession in Europe could lead to the collapse of the eurozone, as the single currency would buckle under the political turmoil unleashed by a fresh downturn, a leading investment bank has warned.
In a research note titled “Close to the edge“, economists at Swiss bank Credit Suisse warned the fate of monetary union hangs in the balance if Europe’s policymakers are unable to ward off another global slump and quell anti-euro populism.
“The viability of the euro is contingent on the current recovery,” said Peter Foley at Credit Suisse.
“If the euro area were to relapse back into recession, it is not clear it would endure.”
This article was posted on the telegraph.co.uk Internet site at 12:59 p.m. GMT yesterday afternoon, which was 7:59 a.m in New York—EST plus 5 hours. I thank Richard Saler for his first contribution to today’s column—and another link to this story is here.
The Ukraine/Turkey/Syria/Russia Imbroglio: John Batchelor Interviews Stephen F. Cohen
The “intermission” in the Syrian war continues, but like in all good theatre, a lot of the important action is behind the scenes. The ceasefire is holding somewhat in that, as Batchelor states, “the killing is somewhat reduced.” But the diplomacy heats up as Russia requests Turkey to cease bringing its heavy artillery up to its border in order to shell the Kurdish YPG forces in Syria. Cohen states that Turkey has moved, 100,000 troops, a lot of tanks and high calibre (150 mm) artillery and self-propelled guns up to its border and is shelling YPG (Kurdish) forces (in and around Kobane in Syria). At the same time the War Party in Washington headed by the usual culprits, Ash Carter, Sec Def., and NATO’s Breedlove have come out very vocally against the ceasefire. How the War Party functions, its members, and its contribution to the NCW is one of the important offerings of this podcast. Cohen compares the Washington group with its counterpart in Russia and comes to the conclusion that the American version is more dangerous: “as the American political class are lying to themselves” and the “war party is out and out lying” (ludicrously so). And it is strongly opposed to the Syrian ceasefire. One example sees NATO’s general Breedlove attempting to deflect responsibility for the refugee crisis in Europe to Putin’s “weaponizing the refugee stream”. Russians see this as just another reason to distrust Washington. Cohen emphasizes that “there are two Washingtons”, the War Party, probably headed by presidential candidate Clinton, and Sec. Def., Ash Carter, and the moderates by Sec. State, Kerry. I presume that if Obama is at all visible he is seen sitting precariously on the fence separating them.
The other very major point that Cohen has made is to add to Turkey to the list of flash points for World War 3 along with Ukraine and Syria. The War Party in Washington is quietly siding with Turkey, and those who distrust the United States so vehemently in the Kremlin know this. From my point of view the act of placing 100,000 troops (five to 6 full divisions) supported by tanks and massive artillery units is extremely worrisome in that this is just under 1/3 of the Turkish Army – much too large a force for just a provocation statement. Although the military would likely not support President Erdogan in a direct assault on Syria, it may be more open to assaulting the Kurdish YPK forces there. It may do so if it avoids exchanging fire with Russians or the Syrian Army. But the likelihood of this would be remote unless the operation was very limited and brief. Please recall that Turkey has a budding civil war with its Kurdish population within Turkey and it is desperate to weaken Kurdish aspirations for its own state – and, of course, to continue its illicit oil business with ISIS. Turkey is now a major concern for all its neighbours. Clearly Russia sees the danger of the Turkish build up and is protesting strongly about it. Europe is very worried by Turkey’s duplicity with ISIS and the refugee crisis, and Washington is trying to maintain good relations with Turkey while supporting the YPG. The only good aspect to all this is that NATO has stated no interest in supporting a militarily aggressive Turkey; it is not yet prepared to go to war with Russia.
This 40-minute audio interview was posted on the audioboom.com Internet site on Tuesday. I’m posting it in today’s column because it’s current—and because I don’t have much else. I will be posting it in it’s usual spot in the my Saturday missive if you don’t have time for it now. I thank Ken Hurt for sending along the link, but the big THANK YOU goes out to Larry Galearis for the extensive ‘executive summary’ that you see above. If you don’t have time for the audio interview, you should at least read that. This is a must listen for any serious student of the New Great Game—and another link to this interview is here.
China Rating Outlook Cut to Negative by Moody’s
China’s credit-rating outlook was lowered to negative from stable by Moody’s Investors Service, which cited rising government debt, falling currency reserves and uncertainty over the authorities’ ability to carry out reforms.
The government’s fiscal strength is weakening and there’s a growing probability that it will need to shoulder some of the liabilities of local governments, policy banks and state-owned enterprises, the ratings company said in a statement published Wednesday. Declines in the nation’s foreign-exchange reserves amid capital outflows underscore policy, currency and growth risks, while failure to undertake reforms may undermine the credibility of policy makers, it said.
Moody’s joined Standard & Poor’s in warning rising local debt has the potential to add pressure to the country’s rating. The People’s Bank of China lowered lenders’ reserve-requirement ratios to the lowest in five years this week to bolster an economy expanding at the slowest pace in a quarter century. Banks extended record new loans in January.
Moody’s affirmed China’s long-term credit rating of Aa3, saying the country’s fiscal and foreign reserves remain “sizeable,” giving the authorities time to implement some reforms and “gradually” address imbalances in the economy. That’s the fourth-highest ranking and puts the country on a par with Chile and Taiwan.
The above four paragraphs are all there is to this brief Bloomberg article. It was posted on their Internet site at 5:43 p.m. Denver time on Tuesday afternoon—and I thank Richard Saler for his second offering in a row.
Barrick announces ‘drastic revision’ of Pascua-Lama, may add partner
Canada’s Barrick Gold, which recently regained its status as the world’s most valuable producer of the precious metal, has began a “drastic revision” of its mothballed Pascua-Lama project in South America.
According to Chilean news outlet El Pulso (in Spanish), the company’s President Kelvin Dushnisky revealed that management is re-evaluating plans for the gold, silver and copper mine straddling the border of Chile and Argentina, adding that Barrick does not rule out a possible partnership to bring the project to completion.
“We are looking at how to lower the costs, perhaps by digging a smaller pit, or aiming at higher grades (…) we are very open to consider different options, but we’d only restart the project when the market is right,” Dushnisky said.
Analysts are now speculating that Barrick’s partner in Papua New Guinea, China-owned Zijin Mining Group, could be the one to help turn Pascua-Lama into a success by spreading the financial and political risk.
This news item showed up on the mining.com Internet site early yesterday morning EST—and I thank Richard Saler for his third and final contribution to today’s column. Another link to this story is here.
Why Has the Gold/Silver Ratio Exploded? — Mike Maloney
The Gold to Silver price ratio is an important metric to pay attention to. In fact, it’s so important they keep it posted on our website in real time.
In this week’s video, Mike explain why the recent price action in the gold and silver markets have led to an increase in the ratio.
The other reason that the gold/silver price ratio has blow out is because JPMorgan is keeping silver’s price down as gold rises, because they don’t want metal to be deposited in SLV, or another silver ETF for that matter. The metal to do so just doesn’t exist in any quatity—and what little there is around, is certainly hard to come by considering the fact that JPMorgan is skimming off the top. This must watch 3:53 minute video clip appeared on the youtube.com Internet site on Tuesday—and I thank Jim Gullo for bringing it to our attention. Another link to this video clip is here.
Russia becomes world’s largest buyer of gold
The IMF could not but pay attention to recent actions of the Russian authorities. It turned out that the Bank of Russia became the world’s largest buyer of gold among all central banks of the planet as of January 2016. International Monetary Fund experts said that the Bank of Russia acquired 688,000 ounces of gold. The statistics did not include China. Reportedly, the Chinese central bank purchased about 520,000 ounces of gold in January.
“This is a quiet attack on the almighty dollar. Russian President Putin buys a lot of gold without attracting much attention to it. As long as political circles fear a new cold war between Moscow and the West, this war has already erupted in the financial sector,” Germany’s Die Welt wrote.
According to German economists, Putin is trying to undermine the power of the United State and Europe. Those who buy gold stand in the way for Western currencies in their global domination. This is a part of Putin’s plan for world domination, economists say.
If you subtract the ‘excessive hyperbole’ by the author, this article isn’t half bad—and the photo alone is worth the trip. It’s also a reasonable assumption that this story was originally written in Russian—and something was lost/added in the translation. This gold-related story posted on the pravdareport.com Internet site on Tuesday—and it, in turn, was embedded in a GATA release yesterday. Chris gave it the headline “Pravda: Russia aims to overthrow dollar and West with gold“. Another link to this news item is here.
Gold price resilient and set for an interesting year — Lawrence Williams
How things have changed in terms of market sentiment towards gold in just a couple of months! Heading into the end of 2015 virtually every bank analyst was predicting doom and gloom for gold as Fed rate rises would make holding gold less and less attractive. They were falling over each other to predict ever lower prices – $1050, $1000, $900 or even less. The only way was down.
There were some marginally conflicting analyses coming out – but only marginal – most seeing a continuing downturn in the first half or three quarters of 2016 but perhaps something of a pickup towards the year end. But this all made depressing reading for the gold investor despite some fundamental supply/demand factors suggesting that this outlook might have been too pessimistic.
Indeed, the gold price has so far been pretty resilient this year generally holding on to its big gains despite seemingly frequent attempts to pull it back. It has, though, so far failed to break through the significant $1,250 level except extremely briefly, but conversely has also so far seemed to hit strong resistance to falls in the $1,225-$1,230 levels. We are sure the downside pressures on the price will likely continue – just as the bears were victorious last year after an early year price surge – but so far the force has continued to stay with the yellow metal. Whether this can continue remains to be seen, but we do think the fundamentals, and the political risk elements ahead may well help it retain what strength it has generated so far.
This commentary by Lawrie appeared on the Sharps Pixley website yesterday sometime—and it’s a must read. Another link to this story is here.
The PHOTOS and the FUNNIES
The first photo is of a naked mole-rat—and the second photo is of a yellow-eyed penguin
The WRAP
There was an unusual surge in the trading volume on Tuesday in SLV, the big silver ETF. On a fairly nothing trading day price-wise, the volume in SLV exploded to more than 20 million shares, or three times average daily volume. Even though the price of SLV ended 3 cents lower for the day, basically flat, the volume came in late in the day and to the upside, which indicated that the buyers were more aggressive and were the initiators of the transactions, as opposed to the sellers. Now there may have been some other explanation for the sharp increase in trading volume, but I am not aware of what those other explanations might be. I’ve seen big trading volume in SLV on sharp price rallies and declines, but not on, basically, flat price days.
Not only is SLV the largest silver investment vehicle in the world, it has a direct connection with physical silver in that its shares and the metal are convertible and interchangeable. In fact, it is the share-for-physical (and vice versa) conversion mechanism that gives SLV legitimacy, in my opinion. Because of its size and conversion mechanism, should an entity or entities begin to buy shares of SLV in noteworthy quantities, it could easily be construed as a means to acquire physical silver.
Since I see no technical trading reasons (moving averages, etc.) for Tuesday’s huge trading volume, it’s even easier to imagine a physical metal motivation. Moreover, if the volume surge does indicate a rush to buy physical metal, given what I perceive as an already tight silver supply situation, it wouldn’t take long for that to come to light. Look, I don’t want to be the boy who cried wolf about a silver shortage, but I know the silver shortage wolf exists (as was seen into April 2011) and it’s just a matter of time before the wolf returns. — Silver analyst Ted Butler: 02 March 2016
Gold continues to move quietly higher with one small step back, followed by a slightly larger step forward, with Wednesday’s trading action definitely falling into the latter category. Silver is the laggard here—and as Ted Butler has mentioned on several occasions this year, that’s the way JPMorgan wants to keep it, as it takes pressure off the SLV authorized participants to deposit metal that either doesn’t exist, or JPMorgan wants physical delivery of itself.
Of course there was a large deposit in SLV yesterday—and an even bigger one [3.81 million troy ounces] on February 12. But one can only imagine what the physical demand would be in all silver ETFs world-wide if the silver price had rallied three or four bucks—or more—alongside gold’s big rally this year.
Here are the 6-month charts for the Big 6+1 commodities once again, complete with their respective 50 and 200-day moving averages.
And as I type this paragraph, the London open is less than ten minutes away—and I see that the gold price didn’t do much in Far East trading on their Thursday—and is currently up a dollar or so. Silver is down 3 cents—and both platinum and palladium are sitting an unchanged after being down a few dollars earlier in the day.
Net HFT gold volume is just under 26,000 contracts—and that number in silver is already up to 4,600 contracts. The dollar index has rallied a bit off its closing low in New York yesterday—and is currently up 10 basis points with the London open less than five minutes away. There’s not much going on at the moment.
Tomorrow we get the new Commitment of Traders Report—and Ted was talking about how the current market structure in the COMEX futures market is going to get resolved. As you already know, the Commercial net short position in silver is at record highs—and the market structure in gold is not as bad, but ugly enough. Will they or won’t they be able to resolve this to the downside from a price perspective? That’s been the S.O.P. by JPMorgan et al in the past—and it’s something that I’ve been harping on for weeks now.
Here’s a 1-paragraph comment about it from Ted in his mid-week column yesterday—“With so many COMEX gold and silver contracts having been bought by the technical funds and causing prices to rally, the risk has grown for a sell-off at some point. This is the essence of the market structure analysis, at least as I see it. At the very least, should gold and silver prices decline sharply, there will be no other reason for the decline away from the technical funds being induced to sell by the commercials at lower prices. The COMEX market structure is the only potential bearish factor. Let’s face it – if silver prices drop sharply, it sure won’t be because investors are rushing to dump their metal to raise funds to deposit into zero interest rate bank deposits. It will occur because of futures position manipulation on the COMEX; period.”
Also on Friday, at 8:30 a.m. EST, we get the job numbers—and I’ll be more than interested in how the precious metals react, or are allowed to react, when those numbers are released in the public domain.
As for what may happen for the rest of the Thursday session, I haven’t a clue. It’s reached the point where trying to call this market is a total waste of time. Things may not be different this time, as an engineered price decline may still lie ahead in the precious metal complex, but as Ted said, it’s a market that’s trading far differently this year than it has in a very long time.
So we wait some more.
I’m off to bed early, as there’s nothing going on as I post this on the website at 3:35 a.m. EST
See you tomorrow.
Ed
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