11 March 2016 — Friday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price was sold off a handful of dollars in mid-morning trading in the Far East—and was down five bucks or so by the London open. By the noon London silver fix, the price was almost back to unchanged, but began to roll over at that point, with the spike low coming at precisely 1 p.m. GMT/8:00 a.m. in New York. The spirited rally that began at that point ran into huge resistance immediately—and ‘da boyz’ knocked most of the starch out of it at the London p.m. gold fix. It continued to rally from there, albeit at a slower rate—and the rally breathed its last around 2:40 p.m. EST in after-hours trading. Then it had an down/up move into the 5 p.m. close.
The low and high tick were recorded by the CME group as $1,237.50 and $1,274.30 in the April contract.
Gold finished the Thursday session at $1,272.10 spot, up $19.20 on the day, but could have easily been up ten times that amount if ‘da boyz’ hadn’t been at battle stations. Net volume was an absolutely enormous at just over 262,000 contracts.
And here’s the 5-minute tick gold chart courtesy of Brad Robertson once again. All the volume that mattered was associated with the big down spike—and the New York trading session that followed. There were four 5-minute volume spikes that topped 8,000 contracts each, as the sellers of last resort met all comers. The volume didn’t really drop off to background until after 2 p.m. Denver time on this chart, which is on the extreme far right of this graph. The vertical gray line is midnight in New York—add two hours for EDT—and although the ‘click to enlarge‘ feature doesn’t work with Internet Explorer, a right mouse click with Google Chrome or the Firefox browsers will allow you to view it full-screen size.
The silver price followed a very similar path, with ‘da boyz’ riding shotgun all the way. The sell-off after the London p.m. gold fix was more brutal than in gold—and the rally in silver didn’t reassert itself until after 11:30 a.m. EST—and even that wasn’t allowed to amount to much.
The low and high tick in this precious metal was reported as $15.665 and $15.165 in the May contract.
Silver finished the Thursday session at $15.585 spot, up 31.5 cents. But, like gold, would have finished materially higher if JPMorgan and their buddies weren’t around. Net volume was huge at just over 58,500 contracts.
Platinum certainly wasn’t allowed to do much, as every time it approached the $580 spot mark, the rally got turned aside. The rally in sympathy with gold and silver that started at 8 a.m. EST got capped at 11 a.m. in New York trading—and was back below the $980 spot mark by the COMEX close. Platinum finished the day at $979 spot, up 2 bucks from Wednesday.
Palladium chopped higher starting around 1 p.m. HKT, but seemed to be kept under wraps like platinum, with a broad sawtooth trading pattern that got capped at its high tick at the London p.m. gold fix. Palladium closed up 5 dollars at $570 spot.
The dollar index closed late on Wednesday afternoon in New York at 97.20—and rallied as high as 97.40 by noon HKT on their Thursday. It then blasted higher around 1:30 p.m. Europe time/7:30 a.m. EST—and that’s probably when Draghi opened his yap. The rally got up to the 98.42 mark shortly after 8:30 a.m. in New York—and then headed south with a vengeance—and would have crashed and burned big time if the usual ‘gentle hands’ hadn’t put in an appearance. The final save came at the 95.94 low, which came around 12:35 p.m. EST. It rallied 25 basis points off that low by 3:20 p.m. before trading flat for the remainder of the day. The dollar index finished the Thursday session at 96.17—down 103 basis points from Wednesday’s close. But the intraday move was an eye-watering 248 basis points.
As I keep saying, the dollar index wants to die, but the PPT just won’t let it—and they didn’t allow it again yesterday.
And here’s the 6-month U.S. dollar index—and you can see that the 200-day moving averages got obliterated to the downside. It remains to be seen if ‘gentle hands’ will rescue it, or it they’ll just let nature take its course at some point.The gold stocks took off right from the 9:30 a.m. EST open in New York yesterday—and then rallied in fits and starts for the rest of the Thursday session. The high tick came shortly after the COMEX close—and the HUI finished the day up 3.72 percent, but 1 percent off its high tick.
The silver equities followed a similar price pattern—and their respective highs came at the same time as gold’s, as Nick Laird’s Intraday Silver Sentiment Index closed higher by 2.94 percent.
The CME Daily Delivery Report showed that 8 gold and 101 silver contracts were posted for delivery within the COMEX-approved depositories on Monday. ABN Amro issued all 8 gold contracts—and the three stoppers involved were of no importance. In silver, the largest short issuer was ABN Amro as well, with 95 contracts—and ADM issued the other 6. JPMorgan stopped 84 contracts—all for its own in-house [proprietary] trading account. Canada’s Scotiabank stopped 13 contracts. The link to yesterday’s Issuers and Stoppers Report is here.
The CME Preliminary Report for the Thursday trading session showed that March open interest in gold rose by another 33 contracts—and that leaves 146 still open. In silver, March o.i. fell by 176 contracts, leaving 1,344 left. Since 7 contracts were issued in yesterday’s preliminary report, it appears that JPMorgan let another 176-7=169 short/issuers in the March delivery month off the hook.
There were deposits in both GLD and SLV yesterday. An authorized participant added 191,201 troy ounces of gold in GLD—and in SLV a chunky 1,332,637 troy ounces were added. It’s an excellent bet that both these precious metal ETFs are owed more metal. And these are only two of many precious metal ETFs in the world today—and you have to ask yourself where all the gold and silver is going to come from as these rallies continue, or are allowed to continue.
There was another sales report from the U.S. Mint yesterday, although it wasn’t very large. They sold 2,000 troy ounces of gold eagles—and 32,500 silver eagles.
There was very little activity in gold at the COMEX-approved depositories on Wednesday. Three kilobars were reported received at Brink’s, Inc.—and only 1,678 troy ounces were shipped out—with 1,382.450 troy ounces/43 kilobars of that amount shipped out of the Manfra, Tordella & Brookes, Inc. depository.
There was very decent activity in silver once again, as 1,665,318 troy ounces were received, with almost all of it going into either Brink’s, Inc. or Canada’s Scotiabank. Nothing was reported shipped out. The link to that action is here.
Over at the COMEX-approved gold kilobar depositories in Hong Kong on their Wednesday, there was no gold reported received, but a very chunky 10,027 kilobars were shipped out the door—and all of the activity was at Brink’s, Inc. as per usual. The link to that activity is here.
I have the usual number of stories for you today—and I hope you’ll find a few that you like.
CRITICAL READS
Men’s Wearhouse Owner to Close Hundreds of Stores as Sales Slide
Tailored Brands Inc. jumped the most in more than two years after announcing plans to close hundreds of stores, part of a cost-cutting push for the owner of Men’s Wearhouse and Jos. A. Bank.
The Houston-based company plans to shutter about 250 locations this fiscal year, including all of its outlet stores, according to a statement Wednesday. Tailored Brands also is reducing expenses by about $50 million by slimming down its operations and overhead.
Investors applauded the move, which followed an unprofitable holiday quarter and a slide in sales. The stock rose as much as 16 percent to $18.91 in New York. The shares –traded under the Men’s Wearhouse name until February — were up 11 percent this year through Wednesday’s close.
Tailored Brands, the largest retailer specializing in men’s suits, is scrambling to align its two major divisions. While sales have been growing at Men’s Wearhouse, Jos. A. Bank faces a customer exodus.
This Bloomberg news item put in an appearance on their Internet site at 3:58 p.m. on Wednesday afternoon Denver time—and was updated about 16 hours later. The thought police at Bloomberg have changed the headline to a happier sounding “Men’s Wearhouse Store-Closing Plan Sends Company’s Stock Soaring“. I thank Brad Robertson for sending it—and it arrived via Zero Hedge. Another link to this story is here.
“I’m Out” – Bulls Dropping Like Flies After Evercore Says Tactical Bull is Over, “Buy Gold“
All it takes to find out just how much conviction so called bulls have in this rigged, centrally-planned market and short squeeze, which only goes on as long as faith in central planning still exists, is a major intraday reversal, coupled with a surge in gold. Like the one today in the aftermath of Draghi’s abysmal press conference. The result: first Goldman saying “the recent relief rally might be short-lived“, and now here is Evercore ISI’s Rich Ross with a note in which he once again expected the S&P to plunge to 1,670 in a note titled simply enough…
I’m Out.
“My Bullish tactical call is over. While we have repeatedly highlighted 2030 as our upside target, the rapid post ECB reversals in the cross asset technicals dictates that we abandon our tactical view at this time in favor of a far more defensive posture. Our structural Bear Market call with downside to 1,670 remains intact. We would sell Global Equities and Commodity Currencies (BRL, CAD, RUB) on the back of recent countertrend strength and buy Gold.”
“I do not expect the world to end overnight, but I do feel strongly that the countertrend rally in risky assets has likely run its course and that the risk/reward to continue to play for tactical upside is simply not acceptable given the current macro technical backdrop.”
This tiny 1-chart Zero Hedge piece appeared on their website at 1:44 p.m. EST on Thursday morning—and the chart is worth a quick look. Another link to this article is here.
U.S. Treasury Curve Collapses to December 2008 Lows
The spread between the 30Y US Treasury yield and 2Y has plunged by 7.5bps this morning (as 2Y sells off and 30Y rallies post-Draghi) to 175bps. This is the flattest curve since Dec 2008 lows (at 172bps) which can only bode poorly for financials…
30Y bonds are bid (juicy yield compared to Europe) and 2Y yields are surging (room for a Fed rate hike)…
This brief 2-chart Zero Hedge article was posted on their website at 8:53 a.m. on Thursday morning EST—and the charts are certainly worth a quick look as well. I thank Richard Saler for sending this our way. Another link to this item is here.
Global Liquidity Collapses To 2008 Crisis Levels
The last time that global liquidity conditions contracted at this pace was March 2008 (right as stocks dead-cat-bounced on the back of The Fed’s guarantee of Bear Stearns’ sale to JPMorgan)… and things escalated rather quickly thereafter.
Liquidity conditions also contracted (though not as severely as the current conditions) in Dec 2011… which prompted Bernanke to unleash QE2…
Most worryingly – if it wasn’t already obvious, given the world’s stock markets’ total and utter devotion and dependence on central bank-provided liquidity – we have seen this pattern before…
This short 2-chart Zero Hedge item was posted on their Internet site at 2:50 p.m. EST yesterday and, like the previous ZH piece, the charts are worth a look. Another link to this story is here.
Canada’s Trudeau Comes to Washington to Get Foreign Policy Marching Orders
What does this visit portend?
“It portends more of the same in foreign policy,” Black tells Loud & Clear. “I don’t see much of a difference between his party’s policies in the past and the Harper regime that came before him that was very willing in the imperialist adventures overseas — in the Middle East, Afghanistan, Ukraine, and everywhere else.”
Expectations for Trudeau aren’t very high in Canada. Rather, for Canadians, it is good enough that he simply ‘isn’t Stephen Harper.’
“Justin is seen in Canada as a nicer fellow because everybody detested Harper, but the Liberal Party will probably have quite close ties to the American administration,” says Black.
He adds, “Canada over the years, even under Stephen Harper, has gone along with whatever Washington wanted, and you won’t see too much of a difference with Trudeau, except in tone.”
Well, I can tell you this dear reader, he ain’t like his father—and in the case of Canada’s foreign policy, it’s not encouraging. This interview showed up on the sputniknews.com Internet site at 11:47 p.m. Moscow time on their Thursday evening, which was 3:37 p.m. EST—and I thank Roy Stephens for bringing it to our attention. Another link to this interview is here.
A Brexit paradise: How Iceland’s ‘Project Fear’ backfired
Thordur Oskarsson is in the departure lounge of Heathrow airport heading for Aberdeen.
Iceland’s ambassador to the U.K. is off to formally open Scotland’s second and Britain’s sixth direct air route to Reykjavik. Aberdeen will become the 60th and perhaps most improbable global destination offering round-trip travel to and from the Icelandic capital when it launches this week.
The four-weekly flights from Icelandair are evidence of the country’s new boom.
Eight years on and one $4.6bn bail-out later, the Nordic isle with a population smaller than Croydon, has cast off the demons of its banking meltdown.
This longish, but very interesting commentary appeared on the telegraph.co.uk Internet site at 6:55 p.m. GMT on Wednesday evening—and I thank Roy Stephens for his second offering in today’s column. Another link to this story is here.
ECB cuts rates, increases asset buys more than expected
The European Central Bank cut all three of its interest rates and expanded its asset-buying program today, delivering a bigger-than-expected cocktail of actions to boost the economy and stop ultra-low inflation becoming entrenched.
The ECB cuts its deposit rate deeper into negative territory, charging banks more for parking their cash, and increased monthly asset buys to 80 billion euros from 60 billion euros, exceeding expectations for an increase to 70 billion.
Surprising markets, it cut its main refinancing rate to zero from 0.05 percent. The euro fell around 1 percent against the dollar.
Hoping to boost lending, consumption, and inflation, the ECB said it would also start buying corporate debt and would also launch four new rounds of cheap loan packages, to be extended by banks to the real economy.
This Reuters article, filed from Frankfurt, showed up on their Internet site at 1:27 p.m. on Thursday afternoon EST—and I found it embedded in a GATA release. Another link to this news item is here.
ECB’s Draghi plays his last card to stave off deflation — Ambrose Evans-Pritchard
The European Central Bank has pulled out all the stops to avert a dangerous deflation trap, launching a blast of triple stimulus despite angry criticism from Germany that it is entirely unnecessary and will do more harm than good.
The markets reacted wildly to the package of measures, surging at first and then plummeting on creeping fears that the bank has exhausted its policy options and may be defenseless against a fresh shock.
Mario Draghi, the ECB’s president, no longer seems able to conjure confidence with his former panache. His magic has, for now, deserted him.
The ECB cut the deposit rate by 10 basis points to a historic low of -0.4 percent and stepped up the pace of quantitative easing from E60 billion to E80 billion a month. It buttressed the effect with unlimited four-year loans to banks at near-zero cost, hoping this will limit the damaging side-effects of negative rates for banks.
This must read commentary by Ambrose appeared on the telegraph.co.uk Internet site at 9:21 p.m. GMT yesterday evening over in London, which was 4:21 p.m. EST in New York—and it’s another news item I found on the gata.org Internet site last night. The photo itself is worth the trip. Another link to this news item is here.
Draghi’s Deadly Derangement — David Stockman
Yes, the man is totally deranged, and so is the entire eurozone policy apparatus. Like much of officialdom elsewhere in the world, the ECB is attempting to fight low growth and low inflation with monetary nitroglycerin. Its only a matter of time before they blow the whole financial works sky high.
Low real GDP growth in the eurozone has absolutely nothing to do with the difference between –0.3% on the ECB deposit rate versus the new -0.4% dictate announced this morning; nor does QE bond purchases of EUR 80 billion per month compared to the prior EUR 60 billion rate have anything to do with it, either. The only purpose of such heavy handed financial intrusion is to make borrowing cheaper for households and businesses.
But here’s what the moronic Mario doesn’t get. The European private sector don’t want no more stinkin’ debt; they are up to their eyeballs in it already, and have been for the better part of a decade.
The growth problem in Europe is due to too much socialist welfare and too much statist taxation and regulation, not too little private borrowing. These are issues for fiscal policy and elected politicians, not central bank apparatchiks.
Never one to mince words, or suffer fools gladly, David rips Mario a new one in this commentary that appeared on his Internet site late yesterday afternoon. It’s certainly worth reading—and I thank Richard Saler for his second contribution to today’s column. Another link to this story is here.
Whole of Europe risks spinning into crisis if leaders mishandle Brexit
There is no blueprint for life after Brexit. Nothing like the European Union has ever existed before, and the political chemistry of leaving is so combustible that the consequences cannot easily be calculated.
We flirt with the Norwegian or Swiss models of free trade association but this is to suppose that the E.U. would carry on as before after such a traumatic rupture. It is equally possible that the familiar furniture of the status quo would go up in flames, for better or worse.
“A U.K. departure would have repercussions for the whole continent,” says Professor Otmar Issing, the founding chief economist of the European Central Bank. He dismisses the analogy with Norway and Switzerland as “misguided“. They do not shape E.U. affairs in any meaningful way. Britain most certainly does.
The eye-opener of my five years at the coal face in Brussels was to discover the pivotal role played by the UK in the EU machinery. The Frankfurter Allgemeine even ran a front-page story calling Brussels a “branch office of Whitehall”, with British officials strutting the streets like an occupying force.
This commentary by Ambrose Evans-Pritchard, with two short embedded video clips, appeared on The Telegraph‘s website at 8:36 a.m. GMT on Thursday morning, which was 3:36 a.m. in Washington—EDT plus 5 hours. It’s well worth reading—and I thank Roy Stephens for his final contribution to today’s column. Another link to this article is here.
Europe’s migrant crisis: A messy but necessary deal
Throughout the cold war, Turkey was one of Europe’s bastions against Soviet armies. Now it is being turned into Europe’s barrier against the huddled masses of the Middle East. At a summit on March 7th, European leaders and the Turkish prime minister, Ahmet Davutoglu, agreed on the outline of a strikingly ambitious deal. Turkey will take back all the boat-people setting off from its shores to Greece. In return, Europe is promising lots of things: money; the resettlement of many refugees now in Turkey; visa-free travel for Turks; and a revival of negotiations for Turkey to join the European Union.
Every element of the arrangement is politically, legally or morally problematic. To make matters worse, the behaviour of the Turkish president, Recep Tayyip Erdogan, is increasingly autocratic: the weekend before striking the accord with the EU, his government took over a prominent opposition newspaper. But Europe is doing the right thing. The deal’s principles are sound (and have, indeed, been advocated by this newspaper): it would control chaotic mass-migration while preserving a generous European asylum system, and enlist Turkey as a gatekeeper by binding it more closely to Europe. It offers the best prospect of ending the uncontrolled influx that has been feeding anti-immigrant populism and undermining EU integration. And it provides a way for Europe to seek Mr Erdogan’s co-operation without flinching from criticising him.
This doesn’t pass the smell test—and I can already see big problems ahead. I can’t imagine that all the countries of the E.U. are going to embrace this plan with open arms. This news item appeared in the March 12 print edition of The Economist—and I thank Patricia Caulfield for bringing it to our attention. Anther link to this article is here.
‘Evil Joke’: Iran Told to Pay $10.5 Billion to 9/11 Kin, Insurers
Iran was ordered by a New York City judge to pay more than $10.5 billion in damages to the families of those killed in the September 11, 2001 terrorist attacks, Bloomberg reported.
U.S. District Judge George Daniels ruled on Wednesday that Tehran must pay $7.5 billion to the families of people who died at the World Trade Center and the Pentagon. Daniels also awarded $3 billion to a group of insurers that paid property damage, business interruption and other claims.
Hossein Sheikholeslam, a senior aide to Iran’s parliamentary speaker outlined Tehran’s position on the issue in an interview with Sputnik Persian.
“I never heard about this ruling and I’m very much surprised because the judge had no reason whatsoever to issue such a ruling… Iran never took part in any court hearings related to the events of September 11, 2001. Even if such an absurd and ridiculous decision has been made, the charges simply hold no water because Iran has never been mentioned at any stage of the investigation and the trials that followed,” Hossein Sheikholeslam said.
The investigation was partly secret but, judging by what was made public, the main suspect was Saudi Arabia, not Iran since all the masterminds were either Saudi nationals or lived and studied in Saudi Arabia, he added.
How macabre and duplicitous can you get? You couldn’t make this stuff up! This news story put in an appearance on the sputniknews.com Internet site at 6:15 p.m. Moscow to time on their Thursday evening, which was 10:15 a.m. EST in Washington. I thank Larry Galearis for sharing it with us. Another link to this article is here.
Too Many Boats for Too Little Cargo Leaves Shippers High and Dry
In the mid-to-late 2000s ship owners gambled that China’s economy would continue to grow at about 10 percent a year. The result: the number of the largest commodity carriers, called Capesizes, has almost doubled since 2008. The fleet hit a record 1,655 vessels in early 2015 — the same year in which the Chinese economy grew at the slowest pace in 25 years. Owners are now fighting for whatever market share they can get.
Clarkson Research forecasts that this year will see a second consecutive drop in the amount of coal and iron ore shipped around the world. Not since data going back to 1990 has the world seen two consecutive declines in the trade of those two key commodities. Coupled with near-record numbers of ships, that’s leading to enormous losses for the world’s owners. Golden Ocean Group Ltd. said last month it lost $69 million in the final quarter of 2015, versus net income of $5.2 million a year earlier.
Slowing demand for ships and a glut of supply can only mean one thing: record low costs to lease them. Capesize carrier fees have been breaking new lows almost every day this year, and now don’t even cover a third of the daily cost of their crew. When other operating costs and financing costs are included, owners stand to lose around $14,000 a day per ship.
Absolutely no surprises here. This Bloomberg story appeared on their Internet site at 5 p.m. MST on Wednesday afternoon—and it’s another offering from Brad Robertson via Zero Hedge. Another link to this news item is here.
Why silver, poor man’s gold, may be about to get more investor love
Silver hasn’t been so cheap relative to gold for more than seven years and with mine supplies forecast to contract this year that may be a sign its ready to come out of the yellow metal’s shadow.
Mine production of silver will probably drop in 2016 for the first time in over a decade and demand is set to outstrip supply for a fourth straight year, says Standard Chartered Plc. Much of the world’s silver is extracted from the ground with other minerals, and output cuts announced by the biggest miners will hurt supplies of the metal as well as others such as copper and zinc.
Silver’s 10 percent advance this year has trailed gold’s 18 percent surge as financial turmoil and worries about a global slowdown sent investors flocking to the yellow metal as a haven. An ounce of gold bought about 83 ounces of silver last month, more than any time since the financial crisis of 2008. That’s a signal to some that it’s relatively undervalued and will narrow the gap.
This short Bloomberg article, along with some moronic comments by Jeff Christian, was posted on their Internet site at 5:40 p.m. Denver time on Wednesday afternoon, but was updated at 1:30 p.m. MST yesterday afternoon. It’s another article I found in a GATA release last night—and another link to this silver-related story is here.
PDAC in retrospect: Is the recent gold rally sustainable — Lawrie Williams
The annual Prospectors and Developers Association of Canada (PDAC) is a great convention providing one can see through some of the hype surrounding the industry. It demonstrates the enormous enthusiasm for an unpopular industry. Unpopular with the general public partly due to the environmental sins of modern-day mining’s forefathers and partly due to the often hugely exaggerated potential problems in bringing a new mine to production as expressed by NGOs and environmentalists around the world, all of whom may well have hidden agendas which are seldom revealed.
It does attract the real great and good of mineral exploration and mining, as well as the bad and the ugly, and in terms of a technical mineral exploration exhibition and conference has to be among the world’s best – if not the best. Nowadays with the big investor attendance too, there are some great financially-oriented presentations at the conference itself, and commentary on its fringes, and most of these are thankfully free of the hype one hears on the convention floor. Yes there are metals and minerals bulls making their cases, but these are usually well-reasoned, as indeed are those who may warn of impending doom and gloom.
But perhaps it is the sideline comments rather than pre-prepared presentations which are the best indicator of where the mood lies and which give the best advice.
This commentary by Lawrie, which is certainly worth reading, showed up on the Sharps Pixley website yesterday sometime—and another link to this article is here.
The PHOTOS and the FUNNIES
The first photo is an adult female bongo—and the second is a cute-as-a-button young ‘un of the same breed. The bird is southern ground hornbill.
The WRAP
By letting the March silver shorts off the hook and averting a delivery squeeze that surely would have lit a fire under the price of silver, JPM has set the stage to buy much more silver in paper form in COMEX futures. Remember, despite the very pleasant surprise that JPM hadn’t increased its net COMEX silver futures position as of Tuesday a week ago, it was still net short, by my calculations, 18,000 contracts or the equivalent of 90 million oz.
Buying as many of those short contracts back on lower prices as possible would be of the most benefit to JPM at this time. If JPMorgan can buy back, for instance, 8,000 to 10,000 of its short COMEX contracts, that would have the same financial impact to the bank as buying an additional 40 or 50 million oz of physical silver. Yes, I know there is a difference between paper silver and real silver, but not to JPM in this case.
There is no way that JPMorgan could buy 40 to 50 million oz of physical silver in a hurry without launching the price skyward, considering that it just backed down on demanding much less of a quantity in the March deliveries over concern of what that would do to silver prices. But in a deliberate price rigging to the downside, which would likely set off an orgy of managed money technical fund selling, JPMorgan has (on many past occasions) and most likely could buy back a significant percentage of its remaining paper short position.
If JPMorgan succeeds in arrange such a price sell-off, the potential benefit to the bank would be immense. It would also be about the most bullish thing that could occur in silver, to my mind, since it would appear to remove the last obstacle for a silver price liftoff. Along with JPMorgan not adding to its silver shorts through last Tuesday, for the first time ever, a significant reduction in the bank’s existing short position would be bullish beyond description. — Silver analyst Ted Butler: 09 March 2016
Yesterday’s price rallies in both gold and silver speaks to two different but inseparable issues. Firstly is the total failure of central banking and its ongoing interference in free markets. And a corollary of that is that despite yesterday’s rallies, the powers-that-be in the financial world are not backing off one inch in their attempts to prevent precious metal prices from blowing sky high. Without a doubt they were all over the U.S. equity markets and the currency markets yesterday as well.
Volumes in both metals were through the roof again and, without doubt, a COT Report generated at the close of COMEX trading yesterday would strike to fear into anyone. And as bad as that report might be, the actual one that will show up on the CFTC’s website at 3:30 p.m. EST, will be bad enough.
Here are the 6-month charts for the Big 6+1 commodities—and unless ‘da boyz’ get over run in silver and gold—and they still show no signs of it, the hurricane flags are are snapping in gale force winds as I write this.
The upcoming FOMC meeting is next Tuesday and Wednesday—and regardless of what they do or don’t do, central banking’s power in the financial and monetary world is now a spent force after the Draghi Disaster yesterday. Anything Yellen has to say will fall with a thud at her feet, interest rate increase or not.
Peter Warburton’s classic April 2001 essay contains the three most famous paragraphs ever written on this subject—and here they are again for the umpteenth time:
Central banks are engaged in a desperate battle on two fronts
“What we see at present is a battle between the central banks and the collapse of the financial system fought on two fronts. On one front, the central banks preside over the creation of additional liquidity for the financial system in order to hold back the tide of debt defaults that would otherwise occur. On the other, they incite investment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, soft commodities or anything else that might be deemed an indicator of inherent value. Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the US dollar, but of all fiat currencies. Equally, they seek to deny the investor the opportunity to hedge against the fragility of the financial system by switching into a freely traded market for non-financial assets.
“It is important to recognize that the central banks have found the battle on the second front much easier to fight than the first. Last November I estimated the size of the gross stock of global debt instruments at $90 trillion for mid-2000. How much capital would it take to control the combined gold, oil, and commodity markets? Probably, no more than $200 billion, using derivatives. Moreover, it is not necessary for the central banks to fight the battle themselves, although central bank gold sales and gold leasing have certainly contributed to the cause. Most of the world’s large investment banks have over-traded their capital [bases] so flagrantly that if the central banks were to lose the fight on the first front, then the stock of the investment banks would be worthless. Because their fate is intertwined with that of the central banks, investment banks are willing participants in the battle against rising gold, oil, and commodity prices.
“Central banks, and particularly the U.S. Federal Reserve, are deploying their heavy artillery in the battle against a systemic collapse. This has been their primary concern for at least seven years. Their immediate objectives are to prevent the private sector bond market from closing its doors to new or refinancing borrowers and to forestall a technical break in the Dow Jones Industrials. Keeping the bond markets open is absolutely vital at a time when corporate profitability is on the ropes. Keeping the equity index on an even keel is essential to protect the wealth of the household sector and to maintain the expectation of future gains. For as long as these objectives can be achieved, the value of the US dollar can also be stabilized in relation to other currencies, despite the extraordinary imbalances in external trade.
And as I type this paragraph, the London open is about five minutes away—and I note that the big rallies in all four precious metals that began at 9 a.m. HKT on their Friday morning got capped within 15 minutes or so—and all the gains in both gold and silver were negated by noon in Hong Kong. Gold is currently down a couple of dollars, silver is down a penny—and both platinum and palladium are still up, but only by a dollar and 3 dollars respectively.
Net HFT gold volume is an astonishing 59,000 contracts already—and that number in silver is 9,100 contracts, so JPMorgan et al are going short against all comers—and it obviously took oodles of COMEX paper firepower to snuff out and then negate those rallies in Friday morning trading in the Far East. The dollar index revisited the 96.00 mark briefly around 9:20 a.m. HKT, but has been ‘rallying’ ever since—and is currently up 23 basis points as London opens.
Today, as I mentioned earlier, we get the latest and greatest Commitment of Traders Report for positions held at the close of COMEX trading on Tuesday—and it will be wall-to-wall ugly, especially in silver. I know that Ted will be particularly interested in what the Big 4 traders in silver did during the reporting week, as we both hope/pray that JPMorgan didn’t add to its already grotesque 18,000 contract short position. We’ll find out soon enough—and I’ll have all that for you tomorrow.
And as I post today’s missive on the website at 3:50 a.m. EST, I see that gold is chopping sideways—and is currently down 3 dollars, silver is back to unchanged, as are platinum and palladium. Net gold volume is now up to 64,500 contracts—and that number in silver is just under 10,000 contracts, so there hasn’t been much volume since London opened about forty-five minutes ago. The dollar index is now up 35 basis points.
That’s all I have for today—and with today being a Friday, absolutely nothing will surprise me when I check the charts after I roll out of bed later this morning.
Enjoy your weekend—and I’ll see you here tomorrow.
Ed
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