27 April 2016 — Wednesday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price rallied a bit in mid morning trading in the Far East on their Tuesday morning, with the high tick over there coming about 9:30 a.m. HKT. It was sold lower in stair-step fashion, with the low tick of the day coming a minute or so before 1 p.m. in London. The price began to rally starting ten minutes after the COMEX open—and staring shortly after 9 a.m. in New York, the price tacked on a quick ten bucks within fifteen minutes, but got capped shortly before the equity markets opened at 9:30 a.m. EDT. That proved to be the high tick of the day. The price was sold down until 10:30 a.m.—and that juncture it chopped quietly higher until the 5:00 p.m. after-hours close.
The low and high tick were reported by the CME Group as $1,232.70 and $1,246.50 in the June contract.
Gold finished the Tuesday session in New York at $1,243.30 spot, up $5.40 from Monday’s close. Net volume wasn’t exactly light at just under 132,000 contracts—and I would guess a lot of that would have to do with the amount of COMEX paper it took JPMorgan et al to cap the early morning rally in New York.
Here’s the 5-minute gold tick chart courtesy of Brad Robertson once again. There was a little bit of volume associate with the choppy sell-off that started shortly before 10 a.m. HKT on their Tuesday morning—and ended at 8:30 a.m. in New York. Of course the volume was much heavier after that, but died off to nothing once the COMEX closed at 11:30 a.m. Denver time on the chart below, which was 1:30 p.m. EDT. The vertical gray line is midnight in New York, noon the following day in Hong Kong—and don’t forget to add two hours for EDT.
The ‘click to enlarge‘ feature still doesn’t work with Internet Explorer, but a right mouse click with Google Chrome or the Firefox browsers should allow you to view this chart full-screen size.
The silver price traded in a more ‘volatile’ fashion yesterday. The mid-morning rally in Hong Kong met the same fate as gold—and from there it was sold down into the London open. The subsequent rally ended at the London a.m. gold fix—and then got sold off two bits by bout one minute before 1 p.m. BST in London, also the same as gold. The silver price took off from there, but as you can tell from the saw-tooth price pattern, it was always under the guidance of ‘da boyz’.
The low and high in this precious metal was recorded as $16.835 and $17.16 in the May contract.
Silver was closed in New York yesterday at $17.13 spot, up a whole 14 cents from Monday—and finally broke the spell of five closes in a row just below the $17 spot mark. Not surprisingly, gross volume was over the moon at 120,540 contracts, but once all the roll-overs and switches out of the May contract were subtracted out, net volume was about the same as it was on Monday—a bit over 26,000 contracts.
Platinum was under a bit of selling pressure until noon HKT—and then rallied a bit until just before noon Zurich time. The price got rolled over at that point, with the low tick of the day coming about ten minutes or so after the COMEX open in New York. The subsequent rally got capped just before noon EDT—and $1,020 spot was its high tick at that point. It was then sold down for a small 4 dollar loss on the day, closing at $1,012 spot.
The palladium price chart was a mini version of what happened in platinum. The standout feature on the palladium chart was the six buck sell-off at the COMEX open. From there it rallied to its $608 high tick at noon, where the palladium price met the same fate as platinum at that point. Palladium was closed at $603 spot, up a buck from its close on Monday.
The dollar index closed late on Monday afternoon in New York at 94.77—and then didn’t do much until shortly after 1 p.m. HKT on their Tuesday afternoon. It began to head south from there, interrupted by a 3-hour counter-trend rally between 10 a.m. and 1 p.m. in London. At that point, the index really crashed—and as you can tell from the ino.com chart below, despite the valiant attempt to save it, the usual ‘gentle hand’s had to step in at the 94.21 mark. It then ‘rallied’ back to about 94.65 before rolling over a bit into the close. The dollar index finished the Tuesday session at 94.51—down 26 basis points on the day.
It’s plain to see that this index would have crashed and burned yesterday if left to its own devices, which it obviously wasn’t.
“There are no markets anymore, only interventions.“
Here’s the 6-month U.S. dollar index chart—and I’ll wait until Friday or Monday before I’ll be prepared to stick my neck out as to where the dollar index is headed.The gold stocks opened unchanged, rallied a bit—and then rolled over, hitting their respective lows at the London p.m. gold fix. They were back in positive territory to stay in short order—and the high tick of the day came just before noon in New York. From there, they sold off until a few minutes before the COMEX close—and then chopped quietly higher for the rest of the day. The HUI finished the Tuesday session up 1.78 percent. Although I was happy to see the gold shares close higher, it was the second day in a row that I was less than impressed with their performance considering how well the underlying metal did.
The silver equities followed a very similar path, rallying rapidly after their brief sell-off before the afternoon gold fix. The rally slowed considerably at the same time as the gold shares topped out—and that was shortly before 12 o’clock noon EDT. They chopped sideways until just before the COMEX close—and then rallied for the rest of the day, closing a hair off their respective high ticks. Nick Laird’s Intraday Silver Sentiment Index closed higher by a very respectable 3.90 percent.
The CME Daily Delivery Report showed that 107 gold and zero silver contracts were posted for delivery within the COMEX-approved depositories on Thursday. The three short/issuers of note were HSBC USA, International F.C. Stone—and ABN Amro, with 51, 39 and 16 contracts respectively. Once again it was ‘all the usual suspects’ as long/stoppers. JPMorgan stopped 42 contracts for itself, plus 24 for clients. Scotiabank and International F.C. Stone picked up 29 and 9 contracts respectively—the former for its house account—and the latter for its clients. The link to yesterday’s Issuers and Stoppers Report is here.
The CME Preliminary Report for the Tuesday trading session showed that gold open interest in April fell by 192 contracts, leaving 113 still around—minus the 107 mentioned in the previous paragraph. Since 202 gold contracts were posted for delivery today in Monday’s Daily Delivery Report, that means that 202-192=10 short contract holders were allowed off the hook because they had no physical metal to deliver. Silver o.i. in April dropped by 2 contracts, leaving 2 still open.
There were no reported changes in GLD yesterday—and as of 6:07 p.m. EDT yesterday evening, there were no reported changes in SLV, either.
There was smallish sales report from the U.S. Mint yesterday. They sold 1,200 troy ounces of gold eagles—and 176,000 silver eagles.
The only in/out gold movement over at the COMEX-approved depositories on Monday was at Canada’s Scotiabank. They received 32,073 troy ounces—and shipped out 1,607.500 troy ounces/50 kilobars. The link to that activity is here.
It was another busy day in silver, as 596,467 troy ounces were reported received—and 1,027,743 were shipped out the door for parts unknown. JPMorgan shipped 150,255 troy ounces out of their warehouse. The link to this activity is here.
It was a huge in/out day over at the COMEX-approved gold kilobar depositories in Hong Kong on their Monday, as they reported receiving 6,546 kilobars—and shipped out 8,374 of them. That’s a lot. All of the activity was at Brink’s, Inc. as per usual—and the link to that, in troy ounces, is here.
It was another fairly slow news day yesterday, so I don’t have all that much of a selection for you once again.
CRITICAL READS
IPhone Sales Drop, and Apple’s 13-Year Surge Ebbs
Apple’s 13 years of continuous quarterly growth have finally ended.
The technology giant said on Tuesday that revenue for its second fiscal quarter, which ended in March, fell 13 percent to $50.6 billion as sales of its flagship product, the iPhone, fell, with little else to take its place. Net income fell 22 percent to $10.5 billion, or $1.90 a share.
The results fell short of Wall Street expectations and Apple’s shares were down more than 7 percent in early after-hours trading.
Apple may be reaching the saturation point among potential customers in some countries, and other smartphone makers using Google’s Android operating system continue to challenge the company with powerful, lower-price devices. China, Apple’s second-largest market after the United States, is experiencing an economic slowdown and recently shut down Apple’s e-book and digital movie services in the country.
They say that no one rings a bell when the top of the stock market is in, but a news item like this—I would suspect—is as close as it gets. This story, filed from San Francisco, put in an appearance on The New York Times website after the markets closed in New York yesterday afternoon—and I thank Patricia Caulfield for today’s first story. It’s worth reading—and another link to this article is here.
Atlanta Fed Boosts GDP Forecast Following Tuesday’s Durable Goods Miss and Downward Revision
If there was some confusion why the Atlanta Fed recently revised its GDP Nowcast higher following the recent retail sales miss, that confusion will be even more acute when moments ago the Atlanta Fed plugged Tuesday’s weaker than expected durable goods print (and downward revision to past month’s data), and ended up with…a GDP forecast that was higher than previously, or an increase from 0.3% to 0.4%.
From the Atlanta Fed’s Nowcast:
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2016 is 0.4 percent on April 26, up from 0.3 percent on April 19. After last Wednesday’s existing-home sales release from the National Association of Realtors, the forecast for first-quarter real residential investment growth increased from 8.5 percent to 10.8 percent. After this morning’s advance report on durable manufacturing from the U.S. Census Bureau, the forecast for real equipment investment growth declined slightly while the forecast for real inventory investment increased slightly.
I’d guess that someone is playing loosey-goosey with the numbers going into the Nowcast computer, as they are desperate to show growth, even if they have to make it up. This 1-chart Zero Hedge piece showed up on their website at 11:30 a.m. on Tuesday morning EDT—and the chart is worth a quick look. Another link to this news item is here.
Why Goldman Sachs Is Launching an Online Bank
Goldman Sachs Group Inc.’s new online bank, acquired from General Electric Co. last week, caps a decade-long shift by the firm and Morgan Stanley to lean more on deposits for funding — efforts that will help them comply with a U.S. rule unveiled Tuesday.
Goldman Sachs took over $16 billion of deposits from the online business it bought from GE Capital. It merged the platform with its GS Bank USA unit and is offering 1.05 percent interest on savings accounts opened online. That’s adding to a deposit base that’s already grown almost seven-fold since 2007.
Goldman and smaller rival Morgan Stanley scraped through the 2008 financial crisis, converting into bank holding companies under the oversight of the Federal Reserve, while three of their biggest rivals succumbed or sold themselves to stronger firms. Since then, the pair have been amassing deposits, a form of funding favored by regulators over the short-term financing markets that froze during the crisis. On Tuesday, two U.S. agencies announced their version of a long-term liquidity rule outlined by global regulators in 2014.
This article was posted on the Bloomberg website at 3:00 a.m. Denver time on Tuesday morning—and I thank Doug Clark for sending it our way. Another link to this story is here.
Kansas Required Work for Food Stamps. Here’s What Happened.
Abraham Lincoln once said, “No country can sustain, in idleness, more than a small percentage of its numbers. The great majority must labor at something productive.”
Over the past several years, the number of Americans on food stamps has soared. In particular, since 2009, the number of “able-bodied-adults” without dependents receiving food stamps more than doubled nationally. Part of this increase is due to a federal rule that allowed states to waive food stamps’ modest work requirement. However, states such as Kansas and Maine chose to reinstate work requirements. Comparing and contrasting the two approaches provides powerful new evidence about the effectiveness of work.
According to a report from the Foundation for Government Accountability, before Kansas instituted a work requirement, 93 percent of food stamp recipients were in poverty, with 84 percent in severe poverty. Few of the food stamp recipients claimed any income. Only 21 percent were working at all, and two-fifths of those working were working fewer than 20 hours per week.
Once work requirements were established, thousands of food stamp recipients moved into the workforce, promoting income gains and a decrease in poverty. Forty percent of the individuals who left the food stamp ranks found employment within three months, and about 60 percent found employment within a year. They saw an average income increase of 127 percent. Half of those who left the rolls and are working have earnings above the poverty level. Even many of those who stayed on food stamps saw their income increase significantly.
No surprises here. This article was posted on the dailysignal.com Internet site on Monday sometime—and it’s something I found in yesterday’s edition of the King Report. Another link to this news item is here.
Canada’s [junior] mining industry is a ‘horror story’
Canada has a reputation worldwide as the epicenter for mining exploration, and over the years the country’s junior-listed companies have created billions of dollars in wealth through new mineral discoveries.
However, these days, Canada is home to a horror story that seems to haunt investors more each year: 52% of all Canadian mining stocks are now “zombies”, and together the walking dead combine for a total of -$2.8 billion in negative working capital.
It was just over a year ago that Tony Simon, President of Seguro Consulting, brought to our attention the initial problem of the zombie miners.
In this case, his “zombie” definition referred to mining exploration companies that had negative working capital and therefore did not meet the Continuous Listing Requirements (CLR) for the TSX and TSX-V stock exchanges.
This must read mining-related news story was posted on the businessinsider.com Internet site early Monday evening EDT—and I thank the above-mentioned Tony Simon for bringing it to our attention. Another link to this news item is here.
Aussie Dollar Plunges as Inflation Slumps to Record Low
Despite surging commodity prices in China – which must be real and represent demand growth and price increases, right? – Aussie core inflation slowed to the weakest on record as headline prices unexpectedly fell last quarter (CPI -0.2%). RBA Rate-cut odds tripled instantly sending AUD down over 1.2% (its biggest drop in 2 months). Perhaps, just perhaps, that colossal credit injection in Q1 via China did not make it into the AsiaPac economy after all and merely fueled a speculative frenzy in commodities that merely “looks” like a recovery?
Which drove traders to bet on a rate-cut…“A preemptive May cut is surely now a real possibility,” said Gareth Berry, a foreign-exchange and rates strategist in Singapore at Macquarie Bank Ltd. “At the latest, an August cut is now inevitable. That spells the end of this three-month old Australian dollar rebound, and the downtrend can now resume in earnest.”
This longish Zero Hedge article appeared on their Internet just before midnight EDT last night—and another link to this story is here.
The Mirage of Exports — Hugo Salinas Price
All countries of the world, with the exception of the U.S., are very concerned about their exports. This is irrational and denotes a pathological condition in their economies.
There is no country in the world – with the exception we just noted – where the government is not striving to promote exports. Exports have become the sine qua non or essential pillar of prosperity. We might say that the “center of gravity” of each of the national economies of the world is not to be found within each country, in production and consumption for its own use, but rather outside its borders, in exports. We are, each and every one, off-center and unbalanced, seeking the market for our production outside our borders. And we are all also unbalanced – even in a psychological sense – seeking “foreign investment” to promote our progress.
This aberrant situation, is the meaning of “globalization”. Globalization means that no country is solidly built upon its own foundations, but rather that its center of gravity is outside its borders. Globalization is a sickness, not a sound condition or process.
Foreign investment can also be beneficial, but only when it purchases goods with other goods, not with papers; or when the foreign investor brings tangible goods which he owns, to the country he is investing in, and puts them to work there. In fact, the “privatization” of government-owned enterprises all over the world, has really been nothing more than shifting ownership of these enterprises, from national governments, to foreign finance which only provides paper dollars in return for ownership of real assets. Is the foreigner to come to our countries to purchase our resources, with papers or glass beads? That is insane.
The health of Mexico, and of all countries, calls for a monetary system that is not parasitic on the dollar. Our money must be worth something on its own, as has been the case for centuries. This is the only way we can build a country whose foundations rest within itself. For the time being, we are an alienated or schizophrenic country – and this is reflected in the breakdown of our social structure – blindly following the mirage of exports, more than the solid and orderly development of the whole of our Mexican economy.
Hugo Salinas Price wrote these words 19 years ago—and they’re just as true now, as they were then. This short essay was posted on the plata.com.mx website yesterday—and it’s certainly worth reading. I thank Roy Stephens for pointing it out—and another link to this commentary is here.
Where Next for Gold and Global Growth — Jim Rickards
West Shore Group Portfolio Manager James Rickards, joins Bloomberg‘s Francine Lacqua to discuss his new book “The New Case for Gold” and the opportunities in trading the commodity. Rickards also discusses the outlook for global banks with Francine on “The Pulse.”
This 5:38 minute video interview spends little time on Jim’s books—and mostly on other matters. I must admit that the ‘talking head’ that interviewed Jim did not impress me in the slightest. The video clip appeared on the bloomberg.com Internet site at 4:38 a.m. MDT on Tuesday morning—and it’s worth watching if you have the interest. I thank Harold Jacobsen for sharing it with us.
Investment Veteran Roche Changes Tack to Back Gold’s Outlook
Gold just picked up another backer in the form of Independent Strategy Ltd.’s David Roche, who says that he’s concerned enough about central banks’ policy making to reverse his bearish position.
“We’ve increased our holdings of gold, now that’s after a long, long time being short,” Roche, who’s president and global strategist of the London-based group, said in a Bloomberg TV interview on Tuesday. “The reason for that is because we don’t know what central banks are going to do next.”
Investors may turn to gold as an “insurance policy” against the uncertainty surrounding central banks’ policies, said Roche, who was until 1994 head of research and global strategist at Morgan Stanley, according to Strategy’s website. While the Bank of Japan will continue to try to get money circulating to get inflation back to target, that won’t produce further growth, he said.
This gold-related Bloomberg article showed up on their website at 10:27 p.m. Denver time on Monday evening—and I thank Richard Saler for sending it along. Another link to this story is here.
Chinese company buys full control of Eldorado’s Jinfeng mine
Eldorado Gold Corp. is pleased to announce that it has reached an agreement to sell its 82 percent interest in the company’s Jinfeng mine to a wholly-owned subsidiary of China National Gold Group for US$300 million in cash, subject to certain closing adjustments.
“We are pleased to have reached an agreement which we believe mutually benefits both companies. China National Gold has been our minority partner at Jinfeng for over 14 years is the logical buyer as the operation transitions fully into the underground,” said Paul Wright, president and chief executive officer of Eldorado Gold. “Since commencement of production in 2007, Jinfeng has consistently delivered solid operating results and has been a strong contributor in Eldorado’s global portfolio.”
Excuse me for thinking this, but I would guess that Eldorado was given an offer that they couldn’t refuse, or would have been unwise for them not to accept. This news item, filed from Vancouver, was picked up by the finance.yahoo.com Internet site very late on Monday evening EDT—and I found it embedded in a GATA release. Another link to this article is here.
China’s Gold Imports Jump on Investment Demand as Price Falters
China, the world’s biggest gold consumer, increased bullion imports from Hong Kong in March as a global price rally stalled and local investment demand showed signs of recovery.
Net purchases climbed to 64.1 metric tons from 42.9 tons in February and 61.8 tons a year earlier, according to data from the Hong Kong Census and Statistics Department compiled by Bloomberg. The mainland bought nearly 76.3 tons compared with 55.1 tons a month earlier, while exports to Hong Kong were 12.1 tons from 12.2 tons. Mainland China doesn’t publish the data.
China’s gold consumption has been expanding as rising incomes and economic growth boost purchases of jewelry, bars and coins. The central bank has also been adding to its bullion holdings every month in a move to diversify its foreign-exchange reserves. While gold has been one of the best-performing assets this year on haven demand, prices fell 0.5 percent in March, trimming their advance in the first quarter to 16 percent.
“From anecdotal evidence, we gather that retail sales of jewelry, bars and coins are quite good this year,” Long Ling, an analyst at Industrial Futures Co., said by phone from Shanghai before the data were released.
This short Bloomberg article was posted on their website at 3:05 a.m. MDT on Tuesday morning—and it’s something I found on the Sharps Pixley website late last night. Nick Laird will have the charts for this once the ‘official’ numbers are released next week. Another link to this gold-related story is here.
Gold Back in Fashion? Why Precious Metal Has Made an ‘Amazing Comeback‘
So, why has gold caught its second wind?
As Brush and Rickards note, central banks are trying to protect themselves from the U.S. dollar inflation. But it’s only half the story: some experts believe that there is trouble brewing for global economy.
In late December 2015 Lord Jacob Rothschild warned his investors that market conditions are deteriorating. “So much so that the wind is certainly not behind us; indeed we may well be in the eye of a storm,” Rothschild wrote in an annual RIT Capital Partners’ report.
Indeed, in his recent book ‘The New Case for Gold‘ Rickards argues that the world may soon face the international monetary system collapse. According to the economist, the system collapsed three times during the twentieth century — in 1914, 1939 and 1971 — and was teetering on the brink in 1998 and 2008.
There’s nothing much new in this article, although the picture is nice. The story came off the sputniknews.com Internet site on Saturday—and it should be noted that the Russian news websites having been talking about gold with increasing frequency lately. I thank Roy Stephens for this gold-related news item—and another link to it is here.
The PHOTOS and the FUNNIES
I came across a group of seven jackrabbits/hares—and spent thirty minutes or so trying to get close enough for some shots, as they scattered in all directions the moment I approached on foot. The first two shots are different photos of the same animal, although it didn’t move an inch as I crept closer, so it’s easy to think they’re just a different crop of the same photo, but they’re not. There’s still some winter white left on this critter. The third photo is of a different jackrabbit of the group sitting in the middle of a parking lot, which is not a setting I would have chosen. But it does show the animal in its entirety—and this one still has lots of winter white in its coat. I took these photos ten days ago.
The WRAP
I’m not sure what to read into yesterday’s price action in gold and silver. Anyone trying to handicap what’s going on out there at the moment will either crash and burn, or come out of it smelling like a rose. I’m just going to sit on my hands, as I really don’t have a clue.
Based on supply/demand fundamentals, prices should explode higher. But the record short positions of the Big 8/Commercial traders in both precious metals says otherwise, at least in the short-to-medium term.
Today, at the close of COMEX trading, all the large traders have to be rolled out of the May silver contract, unless they’re standing for delivery. It will certainly be another huge volume day as well.
Of course the world is waiting for ‘the word’ from Yellen at 2 p.m. EDT this afternoon—and I would suspect it will be a market-moving event in several areas. But as to whether these moves will be free-market or engineered, is not known. But since I was born in Missouri in another life, I will immediately suspect the latter.
Here are the 6-month charts for all four precious metals as of the close of COMEX trading yesterday. I was happy to see silver finally close above the $17 spot mark, but as the RSI trace indicates, it’s hugely overbought—and has been for a while.
As I and others have said over the last year or so, if the Fed really wants to turn this deflationary price spiral around, they can do so by letting commodity prices run to the upside. The first step in the inflationary process would be indicated by rising precious metal prices, gold in particular. But at some point, silver would take over the lead.
Whether this is allowed to happen won’t be known until later today, because it’s a given that whatever Yellen has in mind, will be coordinated with her fellow central bankers. They haven’t allowed the free markets to work property for almost a generation since the Fed and the U.S. Treasury saved the U.S. stock market in the crash of 1987—and they’ve become even more interventionist since.
And as I type this paragraph, the London open is less than ten minutes away and, just like it did on Tuesday, I note that gold rallied a bit in Wednesday morning trading in the Far East—and then got gently sold off, only to rally a bit more in the last few hours—and is currently up 3 bucks and change. Ditto for silver, although the rally in morning trading in Hong Kong was a bit more exuberant—and JPMorgan et al had to step on the price pretty good at that juncture—and then again just before London open, as the market went ‘no ask’. Silver is up about 23 cents the ounce at the moment. Platinum and palladium had similar chart patterns to the other two precious metals, with platinum currently up 6 bucks—and palladium up 3.
Net gold volume is sitting right at the 23,000 contract mark—and that number in silver is just under 4,000 contracts, with enormous roll-over volume as gross volume is approaching 30,000 contracts. And as London opens, the dollar index isn’t doing much—and is currently down 4 basis points, although it was in positive territory briefly around 2 p.m. HKT.
Yesterday, at the close of COMEX trading, was the cut-off for this Friday’s Commitment of Traders Report. Just eyeballing the gold and silver charts posted above, I’d guess that we’ll see a bit more deterioration in both precious metals in this report—and thus new records for the Big 8 and Commercial traders in both silver and gold.
And how this situation is going to be resolved without an engineered price decline of biblical proportions, is something that I think about on a daily basis. So does Ted, except he thinks about it more than I do.
And as I post today’s missive on the website at 4:01 a.m. EDT, I see that gold got capped and sold down a bit once London opened, as did the other three precious metals, with palladium now down on the day.
Net HFT gold volume is just under 29,000 contracts. Silver’s net volume is now a bit under 5,000 contracts, with continuing huge roll-over volume as expected, which will get even heavier once New York opens. The dollar index is off its 2:10 p.m. HKT 94.56 high tick—and is now down 21 basis points from its close in New York late Tuesday afternoon.
Now all we can do is sit back and wait for ‘the word’. The Fed should have been assigned to the junkyard of history decades ago, but they’re still there like some virulent form of cancer that destroys everything it infects.
How did it come to this?
Ed
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