04 March 2016 — Friday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price traded pretty flat throughout morning trading in the Far East on their Thursday, but began to develop a slight positive bias around 2 p.m. Hong Kong time. That tiny rally lasted until 1 p.m. GMT/8 a.m. EST—and then the price was sold back to unchanged just minutes before 9 a.m. in New York. At that point a rally of some substance developed. That got partially capped at 10:25 a.m. EST—and the rally became more subdued from that point onwards. But the rally that developed in the after-hours trading session around 3:15 p.m. was on the verge of going ‘no ask’—and at that point a seller-of-last-resort showed up to provide the necessary ‘liquidity’ to cap the price.
The low and high ticks were reported by the CME Group as $1,238.00 and $1,269.30 in the April contract.
Gold finished the Thursday session at $1,263.90 spot, up $24.40 from Wednesday’s close. Net volume was sky-high once again at just over 194,000 contracts, so it’s obvious that this rally did not go unopposed by ‘da boyz’.
The trading pattern in silver was somewhat similar to gold’s, but not identical. The low tick, for the second day in a row, came about 3:20 p.m. Hong Kong time—and from there it developed the same positive price bias as gold. The rally got capped by JPMorgan et al about 10:25 a.m.—and it drifted sideways to down a bit until the ‘no ask’ rally commenced around 2:50 p.m. EST in after-hours trading. Like gold, the silver price got capped—and then sold down—starting minutes before 3:30 p.m. EST.
The low and high ticks in this precious metal were reported as $14.865 and $15.34 in the May contract.
Silver was closed in New York yesterday afternoon at $15.215 spot, up 29 cents from Wednesday’s close. Net volume was just over 38,500 contracts.
Platinum’s price path on Thursday was a mini version of what happened in gold and silver—and the rally in that metal certainly didn’t go unchallenged, either. It closed on its $948 high—up 15 bucks on the day, but would have done better if allowed to trade freely.
Ditto for palladium, as its price got capped at the $540 spot mark around 11 a.m. in New York—and it chopped sideways into the close from there. It finished the Thursday session at $539 spot, up a whopping 23 bucks, but would have finished materially higher if the powers-that-be hadn’t stepped in when they did.
The dollar index closed late on Wednesday afternoon in New York at 98.18—and made it as high as 98.35 around 1 p.m. Hong Kong time on their Thursday afternoon—and then began to drift lower from there. The index really began to sell off in earnest starting at noon in London—and the 97.46 low tick came at about 11:35 a.m. in New York. ‘Gentle hands’ appeared at that point, but that rescue attempt didn’t last, as the index sank back close to its low, before rallying a hair into the close. It finished the Thursday session at 97.65—down 53 basis points from Wednesday.
As I’d been saying for the last many days, the dollar index was only above the 98.00 mark by sheer brute force—and that same brute force—a.k.a. ‘gentle hands’—prevented the index from crashing yesterday morning in New York, which is what it really wanted to do.
And here’s the 6-month U.S. dollar chart with yesterday’s damage posted. It remains to be seen what happens from here—another ‘ramp job’, or will they let it slide a little. Like gold, nothing was left to chance yesterday—and as Chris Powell said back in April 2008—“There are no markets anymore, only interventions.“
The gold stocks opened in positive territory—and powered higher until shortly after 11 a.m. in New York—and then didn’t do much after that despite the continuing rally in the gold price. Although they did catch a bit of bid in that late afternoon ‘no ask’ situation in the underlying metal, that gain disappeared before the close. The HUI closed higher by 4.51 percent.
The silver stocks followed the underlying metal price very closely during the Thursday trading session, as Nick Laird’s Intraday Silver Sentiment Index closed higher by a healthy 5.46 percent.
The CME Daily Delivery Report showed that 16 gold and 102 silver contracts were posted for delivery within the COMEX-approved depositories on Monday. In gold, JPMorgan stopped 5 contracts for its own in-house trading account. In silver, the only short/issuer that mattered was ADM with 99 contracts. JPMorgan gobbled up 44 contracts for its own in-house [proprietary] trading account, plus they stopped an additional 41 contracts for their clients. The link to yesterday’s Issuers and Stoppers Report is here.
The CME Preliminary Report for the Thursday trading session showed that gold open interest fell by 65 contracts, leaving 106 still open, minus the 16 mentioned in the previous paragraph. Silver o.i. dropped by 686 contracts, leaving 2,767 still around—minus the 102 mentioned in the previous paragraph.
I would guess that Ted Butler would say at this point that since there were 186 silver contracts posted for delivery today based on Wednesday’s Daily Delivery Report, the 686-186=500 extra contracts that fell out of the delivery month in this [Thursday’s] report, would have been JPMorgan stepping away from taking delivery of this many contracts because the short/issuer [whoever they were] were in no position to deliver physical silver without driving the price to the moon and stars, because they didn’t have the physical silver to deliver—-and JPMorgan knew that. Ted says that they’ve done this before to prevent a delivery squeeze in past months—and this big 500 contract drop in o.i. has all the hallmarks of being the same thing.
“He who sells what isn’t his’n—must buy it back, or go to pris’n”—is the saying that’s applicable here, I believe—and JPMorgan just gave them a “Get Out of Jail Free” card. And one has to ask, based on the 2,767 contracts still left in the March delivery month, if JPMorgan has more of these cards yet to give out?
So we wait.
There was another decent deposit in GLD yesterday, as an authorized participant added 152,971 troy ounces. And as of 7:16 p.m. EST yesterday evening, there were no reported changes in SLV. But when I checked back at 1:15 a.m. EST when I was editing today’s missive, I was totally blown away by what I saw, as an authorized participant, or maybe more than one authorized participant, had added a stunning 5,426,252 troy ounces. That’s 8 or 9 ‘big rigs’ loaded to the gills with silver. It’s also 2.5 days of world silver production!
In the last two days 8.16 million troy ounces of silver have been added to SLV.
I got an e-mail from the folks over at Switzerland’s Zürcher Kantonalbank at 2:31 a.m. EST this morning. They finally updated their website with the changes in their gold and silver ETFs as of the close of business on Friday, February 26—and this is what they had to report. Their gold ETF added 29,021 troy ounces—and their silver ETF declined by 31,572 troy ounces.
There was a smallish sales report from the U.S. Mint yesterday. They sold 263,500 silver eagles—and that was all.
I forgot to mention the February mint sales in yesterday’s column, so I’ll make amends here. They sold 83,500 troy ounces of gold eagles—19,000 one-ounce 24K gold buffaloes—and 4,782,000 silver eagles.
There was decent movement in gold over at the COMEX-approved depositories on Wednesday. They reported receiving 28,711 troy ounces—and all of that went into Canada’s Scotiabank. 17,052 troy ounces were shipped out from a total of three different depositories, including 2,314 troy ounces from Scotiabank as well. The link to that activity is here.
It was another over-the-top monstrous day in silver, as 1,662,576 troy ounces were received—and another 2,044,999 troy ounces were shipped out the door for parts unknown. A goodly chunk of the in/out activity was at Canada’s Scotiabank—and 603,475 troy ounces were shipped out of JPMorgan’s vault as well. The link to all that action is here.
It was reasonably busy at the COMEX-approved gold kilobar depositories in Hong Kong on their Wednesday, as 3,198 kilobars were received—and 5,247 were shipped out. All the activity was at Brink’s, Inc. as per usual—and the link to that, in troy ounces, is here.
Here are two more charts that Nick sent our way the other day. These show the average intraday gold and silver price on a 2-minute tick basis for every trading day in February. This averaging strips out all the daily jiggles and squiggles—and shows if there is any underlying trend.
The very fact that the gold and silver charts are not only almost identical, but also the fact that there’s any pattern at all, means that the prices are being actively managed throughout the entire trading day—even when New York and London are closed, as the GLOBEX system is open 23 hours a day.
Particular attention should be paid to the silver chart below. Note the huge downwards price pressure when London and New York aren’t open. It’s obvious from the chart that JPMorgan et al are keeping the silver price under wraps with their algorithms in the thinly-traded Far East session. What they’re giving away in London and New York, they’re taking back in the Tokyo and Hong Kong.
I don’t have all that many stories for you today, but I should warn you in advance that I’ve got quite a few I’ve been saving for my Saturday column.
CRITICAL READS
Stock Exchange Prices Grow So Convoluted Even Traders Are Confused, Study Finds
Computer-driven American stock markets have become so complex that at any moment in time more than 800 different pricing possibilities are being offered to trading firms across 12 official exchanges, according to new research attempting to explain the tangled system.
The report was prepared by the Royal Bank of Canada, one of the most outspoken critics of the computer-driven American stock market. It will be released to clients this week in advance of a Senate hearing on Thursday that will examine how the structure became so convoluted and what might be done to improve it.
The complexity is a result, in part, of the constant jockeying among exchanges to win business from the biggest traders, many of which are so-called high-frequency trading firms that make money by capitalizing on small changes in prices.
RBC Capital Markets, the division of the bank which led the research, found that the New York Stock Exchange, Nasdaq and other exchanges make frequent small tweaks to their prices, influencing trading behavior in ways that are hard for even sophisticated investors to understand.
This article was posted on The New York Times website on Tuesday—and it’s a story that I found in yesterday’s edition of the King Report. Another link to this article is here.
Bill Gross: Banks “Permanently Damaged” as Credit Expansion Ends
Financial companies will be hard-pressed to meet long-term growth expectations as decades of credit expansion come to an end and central-bank policies and tighter regulations squeeze profits, according to bond investor Bill Gross.
Banks such Citigroup Inc., Bank of America Corp., Credit Suisse Group AG, Deutsche Bank AG and Goldman Sachs Group Inc. are trading far below their pre-crisis highs as the credit growth that has fueled the global economic expansion in the past appears to near its end, Gross said in his monthly outlook posted Thursday. The recent selloff in global bank stocks shows investors recognize that future returns on equity for the industry “will be much akin to a utility stock,” he said.
“Banking/finance seems to be either a screaming sector ready to be bought or a permanently damaged victim of write- offs, tighter regulation and significantly lower future margins,” wrote Gross, co-manager of the $1.26 billion Janus Global Unconstrained Bond Fund. “I’ll vote for the latter.”
This news item put in an appearance on the newsmax.com Internet site at 8:38 a.m. on Thursday morning EST—and I thank Brad Robertson for finding it for us. Another link to this story is here.
Jim Rickards on the Fed as earnings weaken further
Edward Harrison sits down with Jim Rickards – editor of Strategic Intelligence and author of “The New Case for Gold” – to talk about the latest surrounding the Federal Reserve.
This Russia Today video interview with Jim starts at the 13:20 minute mark—and runs for about 8 minutes. I thank Harold Jacobsen for bringing it to our attention.
As Exxon Slashes 2016 CapEx Forecast by 25%, U.S. Faces Big Hit to GDP
And the CapEx hits just keep on coming.
Two weeks after Goldman reported something troubling, namely that there is a massive gap of nearly 20% between sell-side CapEx estimate for what US oil companies will spend on CapEx and what implied guidance suggests as shown in the table below…
… moments ago Rex Tillerson, the CEO of world’s formerly biggest by market cap company, Exxon, confirmed that the great CapEx drought of 2016 will be a definite reality, one which will subtract billions from U.S. 2016 GDP in the form of fixed investment, also known as Capital Expenditures, when it announced that it now expected full year 2016 capex to decline by 25% from 2015 to just $23 billion.
To be sure, Tillerson tried to spin the attempt to preserve some $7 billion in cash in a positive light:
“We remain steadfast in our mission to create superior long-term shareholder value,” Tillerson said at the company’s annual analyst meeting at the New York Stock Exchange. “We have the financial flexibility to pursue attractive opportunities and can adjust our investment program based on market demand fundamentals.”
This Zero Hedge news item appeared on their Internet site at 8:47 a.m. EST yesterday morning—and it’s the second contribution of the day from Brad Robertson. Another link to this article is here.
Oil-patch weakness could lead to a liquidity crisis, Dallas Fed chief says
Persistent weakness in the U.S. energy sector could have “negative ripple effects” on the larger financial market though the fire sale of assets by shadow banks, said Dallas Fed President Robert Kaplan on Thursday.
Wider spreads on high-yield debt has been one byproduct of lower oil prices, Kaplan said in a speech in Austin, Texas.
With oil prices expected to stay low, there will be bankruptcies, mergers and restructurings in the energy sector.
“This, in turn, can put pressure on funds to sell holdings more broadly in order to meet liquidity needs,” Kaplan said.
Well, dear reader, the man certainly has a keen grasp of the obvious. This article was posted on the marketwatch.com Internet site at 1:37 p.m. EST on Thursday afternoon—and I thank Scott Linn for sending it along. Another link to this story is here.
JPMorgan Goes Underweight Stocks “For the First Time This Cycle“, Says to Buy Gold
Less than 24 hours ago we presented the latest reason by JPM’s Mislav Matejka explaining why the equity strategist refuses to buy this market, to wit: “equities are down YTD, but notably the 2016 P/E is not much cheaper today than it was at the start of the year. In fact, for the U.S., the P/E multiple is currently higher than it was on 1st January, at 16.8x vs 16.6x then.”
Fast forward to today when we read something rather stunning: in a dramatic conversion, after moving to Netural on equities just a month ago, JPM is as of this moment underweight equities “for the first time this cycle.” Additionally, JPM is also Underweight such highly correlated to stocks (and China) commodities as gas, oil, and copper, but in a surprising reversal is now, perhaps most importantly, overweight gold.
The details from JPM’s Jan Loeys:
Equities, credit and commodities have all rallied in the last three weeks, as some of the immediate threats to the world economy have faded from attention, possibly only because the bad earnings season has wound up. But, to us, the fundamentals of growth, earnings and recession risk have not improved, and if anything have worsened. We remain wary of the near-empty ammo box of policy makers.
But most stunning is that in the overall asset allocation we spot the following (bolded and underlined):
Our portfolio is now 5% UW Equities, the first UW this cycle. We retain a 10% OW of Credit, moving Bonds to Neutral, and Cash to OW. Commodities stay UW, but we move it to a small -1%, given recent momentum and volatility. Within Equities, be OW defensive sectors. Given that our risk focus is now switching from Chinese debt to US corporate caution, we go OW EM equities. In Credit, OW US HG, US banks, and sterling HG against EUR and EM. In Commodities, be short gas oil and base metals but OW gold.
You just have to know that when analysts inside the Darth Vader of banking is recommending buying gold, that the end is nigh for the price management scheme in the precious metals. The only thing we don’t know for sure, is how its demise will unfold. This article appeared on the Zero Hedge website at 9:50 a.m. EST on Thursday morning—and I thank Richard Saler for sharing it with us—and it’s definitely worth reading. Another link to this article is here.
Brexit and a Hanseatic League — Alasdair Macleod
David Cameron, Britain’s Prime Minister, has negotiated terms with the other E.U. member states, which he feels justified to put to voters in an in/out referendum called for 23 June.
At this early stage in the campaign, the terms are not sufficient to give a clear lead in favour a vote to stay, contributing to a slide in sterling on the foreign exchanges. However, if voters do vote to leave the E.U., it won’t be just sterling which suffers, but the euro will face considerable challenges as well.
It is thought that arranging for the referendum to be held at the earliest possible date will limit disaffection with the E.U. Within this time-scale, the strategy is to emphasise the dangers of Brexit, highlight the advantages of being able to influence EU policies from within, and to emphasise the security benefits of being in as opposed to out. It is essentially a weak and negative campaign strategy designed to scare the electorate against change. Negative campaigns are a weak strategy, which tend to wane through repetition.
There is an elephant in the room that might also trip up the planned outcome, and that is a material and growing risk of financial instability in the Eurozone. While it is probable that no major problems will surface before June, there is a significant possibility they will. The Eurozone’s banking system is somewhere between insolvency and bankruptcy with the Italian, Greek and Portuguese banks in intensive care. Eurozone government bond prices, many so over-priced they have negative yields, are certain to fall significantly at some stage, leading to an inevitable Eurozone debt crisis.
This short essay by Alasdair appeared on the goldmoney.com Internet site on Thursday sometime—and I thank Robert Jonathan Lewis for pointing it out. Another link to this article is here.
Macau’s Economy Shrinks 20% in 2015 Amid Casino Gaming Slump
Macau’s economic output contracted 20.3 percent in 2015 as the world’s largest center of gambling was hurt by falling casino revenue and fewer visitors amid China’s anti-corruption campaign and slowing economy.
The Chinese city’s economy shrank 14.4 percent in the fourth quarter due to the continued decline in exports of tourism and gaming services, the local statistics bureau said in an e-mailed statement, easing from a fall of 24.2 percent drop in the three months through September.
President Xi Jinping’s crackdown on graft has deterred high rollers from traveling to Macau, the only place in China where casinos are legal, and about $46 billion of market value were wiped out from the city’s six casino operators last year.
This short news item [via Zero Hedge] showed up on the Bloomberg website at 3:06 a.m. Denver time on Thursday morning—and I thank Brad Robertson for his third and final offering in today’s column. Another link to this story is here.
Just Two “Reasons” Why Gold Is Breaking Out
Aside from the legitimate, but largely irrelevant for the sake of this post, reasons including this morning surprisingly weak service data, in which both the ISM and the Markit PMI reports confirmed that the “malaise in manufacturing has spread to services”, JPM’s recommendation to sell stocks and buy gold, and the fact that slowly but surely the world is being flooded by negative rates, here are the two most actionable reasons why gold just broke out and soared to $1,260, and is fast approaching levels not seek since January 2015.
First, here is Goldman’s Jeff Currie telling CNBC‘s viewers just two weeks ago to short gold: “we maintain our view of rising U.S. rates and hence lower gold prices with a 3-month target of $1,100 (per troy ounce) and 12-month target of $1000 (per troy ounce)” not to mention Goldman’s October 14 summary that gold is a “slam dunk sell.”
But perhaps even more important, was the green light for the spike higher from none other than Dennis Gartman. Recall just yesterday, in a note in which Gartman said “We Were Stunningly, Shockingly, Stupidly Wrong“, he also had the following good news for gold longs:
… because we respect “reversals” in equities and commodities, the fact that the shares of the largest gold mining operation in North America opened higher and then closed lower upon the day, taking out and closing below the previous day’s lows… an “outside” reversal as they are known… we ran to cover our US dollar denominated gold position mid-day and we shall argue strongly that those still long of gold in US dollar terms, as noted above, should do the same.
This short Zero Hedge piece, which is definitely worth your while—especially the chart at the end—appeared on their website at 12:05 p.m. EST yesterday afternoon—and I thank Chris Powell for bringing it to my attention—and now to yours. Another link to this ZH article is here.
It’s Official: Canada Has Sold All of Its Gold Reserves
One month ago, when looking at the latest Canadian official international reserves, we noticed something strange: Canada had sold nearly half of its gold reserves in one month. According to the February data, total Canadian gold reserves stood at 1.7 tonnes. That was just 0.1 per cent of the country’s total reserves, which also include foreign currency deposits and bonds.
As we noted, the decision to sell came from Finance Minister Bill Morneau’s office.
“Canada’s gold reserves belong to the Government of Canada, and are held under the name of the Minister of Finance,” explained a spokesperson for the Bank of Canada on Wednesday. “Decisions relative to gold holdings are taken by the Minister of Finance.”
Earlier today Canada’s Department of Finance released its latest official international reserves and as of this moment it’s official – Canada has fully “broken away with tradition” and has exactly zero gold left.
This sad story showed up on the Zero Hedge website at 9:04 a.m. on Thursday morning EST—and it’s another contribution from Richard Saler. If you haven’t read my 15–year old essay on my theory on what happened to Canada’s gold, it’s linked here. And another link to the above ZH news item is here.
Plumbers find $50,000 gold brick while renovating Calgary bathroom
Rare art, original comics, prized love letters, vintage newspapers, fancy jewelry — home contractors are used to finding odd treasures behind walls and under floors.
But in mid-February, Alif Babul and his brand new employee Dean Materi noticed something extra unusual amid a dusty pile of rubble while ripping apart a Calgary home’s bathroom.
It was Materi’s second day working with Babul as a plumbing apprentice, a job he found after he was laid off from a gig in the crane industry in November.
“I seen a gold shimmery thing on the ground and I thought it was a copper light fixture,” Materi said. “But when I went to shovel it up, it seemed kind of heavy. I picked it up and it was a gold brick.”
This very interesting gold-related news item put in an appearance on the calgaryherald.com Internet site last Saturday—and it was subsequently updated on Wednesday. I thank ‘aurora’ for passing it around yesterday. Another link to this gold-related news item is here.
India’s love affair with gold tested as tax fight spurs jeweler shutdown
India’s thriving gold markets have gone strangely quiet. Shops are shuttered across the world’s largest consumer after China and would-be customers are getting frustrated in a country that adores bullion.
“I will have to wait and see when the shops open next,” said Ghevar Jain, who stepped out in Mumbai this week to buy 200,000 rupees ($2,970) worth of jewelry for weddings next month. Instead, he had to return empty-handed as stores in the Zaveri Bazaar weren’t trading. “I didn’t know about the strike.”
Jain had walked into a dispute that erupted this week between the nation’s thousands of jewelers and Prime Minister Narendra Modi. Intent on boosting revenue as he reshapes Asia’s third-largest economy, Modi wants to impose a 1 percent excise duty on jewelry produced and sold within the country, and Finance Minister Arun Jaitley announced the move in the budget on Monday. By Wednesday, members of the All India Gems & Jewellery Trade Federation, which represents jewelers nationwide, had started a three-day stoppage.
This Bloomberg article was posted on their website at 6 p.m. on Wednesday evening MST—and updated about seven hours later. It’s something that I found on the gata.org Internet site yesterday. Another link to this story is here.
Hong Kong exchange will launch a gold futures contract that’s actually gold
Hong Kong Exchanges and Clearing Ltd. plans to revamp its gold futures, targeting Chinese investors after ending the previous contract a year ago.
The new contracts will be for physical delivery denominated in yuan and U.S. dollars, said Romnesh Lamba, the co-head of market development at the bourse. The previous contract, which was started in 2008, was cash-settled and quoted only in U.S. dollars. It was suspended after gold pricing was transferred to an electronic auction on March 15 from a century-old procedure.
Prompted by stock-market volatility and economic growth concerns, consumers in China, the world’s largest consumer of the metal, are expected to buy more gold this year to store value, according to the World Gold Council. The Hong Kong exchange will be competing with CME Group Inc., the world’s largest futures market, and ASX Ltd., Australia’s biggest exchange group, in developing gold contracts to capture Chinese clients.
“There is more demand for physical delivery for gold,” Lamba said in an interview on Wednesday without elaborating when the futures will be offered. “We are in the mode where we’d like to do more product development.”
This is another gold-related Bloomberg story that I found embedded in a GATA release yesterday. This one appeared on their Internet site at 11:46 p.m. Denver time on Wednesday night. Another link to this article is here.
Barclays, exiting bullion business, has tough sell in London gold vault
Barclays, winding down its physical bullion business in the face of tough market conditions, will do well to find a buyer for its interest in a gold vault near London, market participants said.
The vault, at an unknown location, was designed and built by global logistics and security company Brinks, which was said to have leased it to Barclays. Barclays would not comment, while Brinks was not available.
One senior market source said Barclays will likely simply wind down the contract with Brinks and write down the business as a loss.
Market conditions in the precious metals space are becoming more challenging by the day, with operations hampered by increased compliance and regulations.
This news item was posted on the platts.com Internet site at 2:44 p.m. GMT yesterday afternoon, which was 9:44 a.m. in New York. I found this on the Sharps Pixley website. Another link to this story is here.
Global Central Banks Continue Longest Gold-Buying-Spree Since Vietnam War
While “greed was good” in the ’80s, it appears “gold is good” in the new normal. As much as the barbarous relic is despised by all the mainstream money-peddlers in public (aside from those who have left the familia like Alan Greenspan), it seems to be loved in private. Central banks have been net buyers of gold for eight straight years, according to IMF estimates, the longest streak since the first troops were deployed in The Vietnam War.
As Bloomberg notes, Russia, China and Kazakhstan among the biggest hoarders, International Monetary Fund data show.
Countries purchased almost 590 metric tons last year, accounting for 14 percent of annual global bullion demand, the World Gold Council estimates. Central bankers are using the metal to diversify from currencies, particularly the dollar, said Stefan Wieler, a Toronto-based vice president at GoldMoney Inc., a financial bullion services firm.
While physical demand has been consistently strong, paper prices have roller-coastered over the same period. However, gold’s recent “golden cross” as the world goes NIRP (and protectionist), just as The Fed unleashes tightening hell, suggests something is different this time…
This very interesting Zero Hedge article is something I found on the Sharps Pixley website last night. It was posted on the ZH Internet site at 9:30 p.m. EST on Wednesday evening—and the charts are worth the trip. Another link to this story is here.
Lewitt: “Buy gold and save yourself!” — Lawrie Williams
Indeed Levitt ends his letter with the following comment on the yellow metal:
“Gold has finally caught a bid in 2016 as investors grow increasingly concerned about monetary disarray and global instability. Gold mining shares, which I also recommended in January, are also doing well. Gold remains the antidote to central banks’ deliberate policies to destroy fiat currencies. Recently, both Mario Draghi and Haruhiko Kuroda promised to do whatever they can to destroy their currencies regardless of the consequences to financial stability, comments that would have gotten them fired in a saner era; today, these idiocies win them cheers from global investors intent on committing financial suicide”
“The hierarchy of global currencies remains Gold/USD/Euro/Yen, but as noted above just because the dollar is better than the others doesn’t change the fact that its value is being actively debauched by Janet Yellen and her colleagues. We are also seeing the British pound get pounded (sorry) to under $1.40 as investors fret about a possible Brexit. This publication is read by people around the world and my closing advice applies to citizens in any country with a central bank: buy gold and save yourself!”
This commentary by Lawrie put in an appearance on the Sharps Pixley website yesterday—and it’s worth reading. Another link to this article is here.
The PHOTOS and the FUNNIES
The first two photos are of a male regent bowerbird—and the third photo is of a weta, which is a native New Zealand bush cricket of sorts. If the carrot it’s eating doesn’t give you an idea of the scale of this critter, then the hand it’s sitting on, should.
The WRAP
The other very recent development is the continued mismatch between the number of March COMEX futures contracts still remaining open and the lack of deliveries to date. I first mentioned this on Saturday and after two additional delivery days, I am even more concerned about a mismatch or delivery crunch. As of the close of business on Tuesday, there were still more than 3,400 March contracts open (or the equivalent of 17 million oz) and only 32 deliveries have been made over the first three delivery days.
Of the 32 silver deliveries made so far on the March contract, JPMorgan has stopped (taken) 28 of those deliveries (or 87% of total deliveries); 15 contracts for a customer or customers and 13 in its own proprietary trading (house) account. Because of the way COMEX deliveries are assigned, it is reasonable to assume that JPMorgan holds a large percentage of the remaining open interest in the March contract (on the long side) for both its customer(s) and itself. This is just another notch on the gun belt attesting to JPMorgan’s dominant and controlling role in the silver market. Because of that control, the moment JPMorgan decides that it is time for silver to explode in price that will be the moment silver will explode. It is not possible for me to be more convinced of this statement than I already am.
The question is what does JPMorgan intend for March deliveries (and what connection, if any, the surge in volume for SLV may have)? Since we can’t know JPM’s intent, we are forced to speculate. I had been thinking there was almost no chance that JPMorgan would allow silver to explode now, since I believe the bank just added 8000 contracts (40 million oz) of new COMEX shorts over the past few weeks and why add shorts if you intend to run silver higher? And JPM could end any delivery congestion in the March contract single-handedly, by rolling over its and its customers longs to a more deferred month. But maybe my calculations were wrong or maybe JPM has already bought back its added shorts. (We should know when Friday’s Bank Participation Report is issued). — Silver analyst Ted Butler: 02 March 2016
Ted wrote the above words on Wednesday afternoon—and since then there are have been two more days worth of deliveries posted—and as of last night’s Daily Delivery Report, the total number of silver contracts posted for delivery in March is now up to 320 contracts from the 32 he mentioned. Of those 320 contracts, JPMorgan has issued zero of those contracts for delivery, but has stopped 268 of them—just under 84 percent of the total—143 for its client account, and 126 for its own in-house [proprietary] trading account.
And last night’s Preliminary Report shows that there are still 2,665 contracts still to deliver, even after JPM’s 500 contract “Get out of jail free” card was played—and that’s also net of the 320 contracts already posted for delivery. If you extrapolate that 84 percent of the 2,665 contracts, they’ll end up with just under 2,240 contracts, which is more than the allowable limit of 1,500 contracts in one delivery month I believe.
So we await developments.
Well, we had the breakout to the upside in gold that a lot analysts were saying could happen. My comment at the time was that JPMorgan would do everything possible to break that technical pattern to the downside, but they appeared to be totally missing in action when the events occurred yesterday.
And the operative word in that last sentence is ‘appeared’—as they were certainly there, especially in gold. Because without their heavy hand, the precious metal prices would be beyond the orbit of Jupiter by now. ‘Da boyz’ were taking the short side of every long that the Managed Money and small traders were placing yesterday in all four precious metals and, without doubt, if we could see the COT Report as of the close of trading yesterday, we would not like what we saw.
Remember, there are only two ways that these now grotesque short positions in both gold and silver can get resolved. Either through an engineered price decline so the powers-that-be can cover their massive short positions—or they get over run and the markets have their way in a short covering rally that would be one for the ages.
Of course the latter scenario would be ideal, but it would be, as Ted Butler has been saying for fifteen years now, the very first time it has happened—and based on yesterday’s price/volume action, they aren’t about to fold up their tents just yet.
Here are the 6-month charts for the Big 6+1 commodities once again—and they’re worth a closer look today than usual.
And as I type this paragraph, the London open is less than ten minutes away—and I note that gold got sold down about five bucks during the first two hours of trading in Tokyo on their Friday morning. It’s recovered about half that amount at the moment. The same sell-off occurred in silver, but it has been rallying in fits and starts since, so it’s obvious that even this tiny rally is not going unopposed. It’s currently up a dime from Thursday’s close. The same can be said for both platinum and palladium in the first two hours of trading as well. The former is currently up 3 bucks—and the latter is down 2 dollars after being back at unchanged earlier.
Net HFT volume in gold is a bit over 34,000 contracts already—and that number in silver is a chunky 7,400 contracts. The dollar index has been comatose throughout the entire Far East session—and is currently up 4 basis points as London opens.
It’s going to be an action-packed day in New York. We get the job numbers at 8:30 a.m. EST—and the Commitment of Traders Report, plus the companion Bank Participation Report at 3:30 p.m. EST.
As for what may happen with the precious metal prices today, only ‘da boyz’ know that for sure—as they’re still at battle stations, so we should be prepared for any eventuality—except free market price action.
And as I post today’s column on the website at 4:05 a.m. EST, I see that all four precious metals are in rally mode. Gold is currently up 6 bucks—and silver is already up 27 cents the ounce. Platinum is up 10 dollars—and taking up the rear is palladium, as it’s only up a dollar at the moment.
Net HFT gold volume is already an eye-watering 47,500 contracts—and that number in silver is a hair over 10,000 contracts. ‘Da boyz’ are obviously taking on all comers. The dollar index began to rally a bit almost from the moment that London opened—and it’s currently up 12 basis points.
That’s all I have for today—and most of the day’s precious metal fireworks will occur while I’m sound asleep—and nothing will surprise me when I check the charts later this morning, as it could be a wild a woolly Friday in New York.
Enjoy your weekend, or what’s left of it if you live just west of the International Date Line—and I’ll see you here tomorrow.
Ed
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