06 May 2016 — Friday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
[PLEASE NOTE: This is the fourth day that my e-mail blast-out service has been up and running. If you’re still not receiving it in your in-box—and it’s not in your ‘junk’ e-mail, please drop me a note—and I’ll get it sorted out for you. – Ed]
The gold price action on Thursday was very similar to what happened on Wednesday—selling off into the London silver fix, rallying until shortly after the COMEX open—and ‘da boyz’ showing up shortly after, with the low tick of the day coming at the COMEX close. From there the price rallied a bit, but was carefully finished at a new low for the fourth day in a row.
The CME Group reported the high and low ticks as $1,288.40 and $1,270.60 in the June contract.
Gold was closed in New York yesterday at $1,277.60 spot, down $1.40 from Wednesday. Net volume was a bit under 155,000 contracts.
The price path for silver was virtually the same as it was on Wednesday as well. The only real difference was the low tick on Thursday was at the COMEX close, whereas on Wednesday it was at, or just after, the noon silver fix in London. Silver was closed at a new low for the fourth day in a row as well.
The high and low in silver yesterday were recorded as $17.685 and $17.285 in the July contract.
Silver finished the Thursday session at $17.305 spot, down 3.5 cents on the day. Net volume was pretty decent once again at just under 51,000 contracts.
It was the same for platinum, as its Thursday trading pattern had a similar shape to its Wednesday trading pattern.. The low tick came about 12:30 p.m. Zurich time—and the subsequent rally back into positive territory got rolled over shortly after the London p.m. gold fix. From that point, it was sold down to its New York low at the COMEX close—and rallied quietly until the trading day ended at 5 p.m. EDT. Platinum closed up the magnificent sum of 6 bucks at $1,062 spot—and the only precious metal to finish in positive territory.
Palladium was up about 6 bucks by 10 a.m. Zurich time—and after that it was forced to follow the same price pattern as the other three precious metals. The $607 high tick came around 9 a.m. in New York—and ‘da boyz’ took it down to its low tick at the COMEX close. It didn’t do a lot after that—and finished down a dollar on the day at $597 spot, recording its fifth losing session in a row.
The dollar index closed late on Wednesday afternoon in New York at 93.27—and then traded sideways in a very tight range until the ramp job began minutes before the London open. All the gains were in by 10:30 a.m. in New York—and it was sold down about 10 points off its 93.86 high tick at that time. The dollar index finished the day at 93.76—up 49 basis points from Wednesday’s close.
Most of the gains in all four precious metals on Thursday came between 12:30 p.m. BST in London—and 9 a.m. EDT in New York—which was a 90-minute time span when the dollar index shed 25 basis points, before rallying anew. And despite the fact that dollar index peaked out at 10:30 a.m., all four of the precious metals continued to get sold off until the COMEX close, which I’m sure was no accident.
And here’s the 6-month U.S. dollar index chart—and this ‘rally’ is starting to get serious. But there’s nothing free-market about it.
Much to my surprise, the gold stocks gapped up at the open, hitting their highs at the afternoon gold fix in London. From there they gave back over half their gains by around 11:25 a.m. EDT, but began to chop higher from there, as the HUI closed up 3.17 percent.
The silver equities topped out at the London p.m. gold fix as well—and then chopped lower into the 1:30 p.m. EDT COMEX close—and then they chopped higher for the rest of the trading session in New York. Nick Laird’s Intraday Silver Sentiment Index closed up 3.27 percent.
The CME Daily Delivery Report showed that 50 gold and 220 silver contracts were posted for delivery within the COMEX-approved depositories on Monday. In gold, the only short/issuer was ABN Amro from its client account—and the two largest long/stoppers were Canada’s Scotiabank and JPMorgan with 37 and 9 contracts out of their respective in-house [proprietary] trading accounts. In silver the largest short/issuer by far was JPMorgan out of its client account with 156 contracts. In second and third spots were Merrill and ABN Amro with 36 and 27 contracts out of their respective client accounts. The largest long/stopper was, drum-roll please, JPMorgan with 143 contracts for its own account—screwing over its own clients for the benefit of the company once again. The second and third spots were taken by Canada’s Scotiabank with 49 contracts—and ABN Amro with 23. The link to yesterday’s Issuers and Stoppers Report is here—and it’s worth a look if you have the interest.
The CME Preliminary Report for the Thursday trading session showed that gold open interest in May fell by 360 contracts, leaving 1,423 still around. But Wednesday’s Daily Delivery Report showed that 530 gold contracts were actually posted for delivery today, so there were 530-360=170 gold contracts added to May open interest yesterday. May gold deliveries are getting more interesting as time goes along. In silver, May o.i. dropped by 255 contracts. Wednesday’s Daily Delivery Report showed that 150 silver contracts were posted for delivery today, so that means that 255-150=105 short/issuers were given a free pass for May, because they didn’t have any physical metal backing their short positions.
There was another decent deposit into GLD yesterday, as an authorized participant added 125,473 troy ounces. And, for the second day in a row, there was another big withdrawal from SLV, as an a.p. took out 1,141,421 troy ounces. That’s on top of the 1.55 million troy ounces that was taken out on Wednesday. It’s obvious that someone is buying SLV shares and redeeming them immediately. I’m sure that Ted will have more to say about this in his weekly review tomorrow.
There was a sales report from the U.S. Mint. They sold 4,500 troy ounces of gold eagles—2,500 one-ounce 24K gold buffaloes—and 346,500 silver eagles.
There was very decent gold movement over at the COMEX-approved depositories on Wednesday. There was only 5,704 troy ounces received and, of that amount, 500 ten-ounce bars were deposited at Brink’s, Inc. There was a hefty 122,152 troy ounces shipped out—and with the exception of 5 kilobars out of Manfra, Tordella & Brookes, Inc. and 50 kilobars out of Canada’s Scotiabank—all the rest was shipped out HSBC USA. That shipment out of HSBC USA may have had something to do with the April delivery contract in gold, as Ted mentioned them a time or two in that regard. And it may have to do with COMEX deliveries in May as well. Ted may have something to say about this in his Saturday commentary. A link to that action is here.
In silver—600,841 troy ounces were received—and all of that went into CNT—and only 81,088 troy ounces were shipped out, with all of the coming out of Brink’s, Inc. A link to that activity is here.
Over at the COMEX-approved gold kilobar depositories in Hong Kong on their Wednesday, the reported receiving only 293 of them, but a very hefty 9,466 were shipped out the door for parts unknown. All of the activity was at Brink’s, Inc. as per usual—and a link to that, in troy ounces, is here.
It was another semi-quiet new day on Thursday—and I hope you’ll find a few stories out of this lot that interest you.
CRITICAL READS
Party’s Over – High Yield Bond ETF Crushed By Largest Outflows Ever
It appears the credit market’s dead-cat-bounce party is over. Following the almost unprecedented bounce off the February lows, the last few days have seen HYG (the largest high yield bond ETF) tumble back below its 200-day moving average as credit spreads (in IG and HY) start to widen significantly. The driver of this sudden weakness is now clear – a $2.3bn 4-day outflow which is the most sudden and largest redemption ever.
HYG tumbles below its 20-day moving average after the panic buying off the lows…
Which has smashed HYG back to a ‘zero’ premium to NAV as HY spreads push back to 2-month highs. We had argued previously that HYG (and the bond ETFs) had become cash storage facilities for credit funds unable to find enough cash bonds and new issuance to dump their flows into and so the massive outflows this last 4 days could be a sign of a preparation for a heavier HY calendar going forward (silver lining) or perhaps it is just time to get back to cash and reduce exposure after the biggest v-shaped recovery on record (amid tumbling earnings and macro).
This excellent 2-chart Zero Hedge article is certainly worth a minute of your time. It put in an appearance on their Internet site at 12:38 p.m. on Thursday afternoon EDT—and it’s courtesy of Richard Saler. Another link to this must read article is here.
It’s happening — oil and gas defaults are starting to hurt the rest of the credit market
The high default rate in the oil and gas sector after a long period of low oil prices is starting to hurt the broader high-yield market, according to a new report from Moody’s.
Until now, slow-but-positive U.S. growth has been a support for corporate cash flow and helped prevent commodity weakness from spreading to other sectors.
“But the commodity-driven climb in defaults is contributing to an increase in investor risk aversion and borrowing costs,” said analysts led by Moody’s Senior Vice President John Puchalla.
It’s a classic Catch 22 situation. Defaults are making investors nervous and that is making it more expensive for speculative-grade, or high-yield, companies to borrow short term to resolve liquidity issues. That’s because investors demand higher premiums for the extra risk they are taking on. And that in turn presents risks to the economy and makes if more likely the default risk will spread.
There’s must more to this story that showed up on the marketwatch.com Internet site at 1:33 p.m. EDT yesterday—and I thank Scott Linn for finding it for us. Another link to this news item is here—and it’s worth reading if you have the interest.
Donald Trump backs Brexit, saying U.K. would be ‘better off‘ without E.U.
Donald Trump, the presumptive Republican nominee for president, has come out in support of Brexit, saying the U.K. would be “better off” outside of the European Union and lamenting the consequences of migration in the continent.
The billionaire, who secured backing of Republican voters on a staunchly anti-immigration platform, said that his support for the U.K. leaving the E.U. was a personal belief and not a “recommendation”.
“I think the migration has been a horrible thing for Europe,” Trump told Fox News late on Thursday. “A lot of that was pushed by the EU. I would say that they’re better off without it, personally, but I’m not making that as a recommendation. Just my feeling.”
“I know Great Britain very well,” Trump continued. “I know, you know, the country very well. I have a lot of investments there. I would say that they’re better off without it. But I want them to make their own decision.”
This news item appeared on theguardian.com Internet site just after midnight BST on their Friday morning, which was 7:44 p.m. in New York on Thursday evening—EDT plus 5 hours. It’s the first contribution of the day from Patricia Caulfield—and another link to this story is here.
Depression reigns as E.U. presidents debate future of Europe
The presidents of Europe’s three main institutions on Thursday presented a bleak picture of the European Union, saying the 28-nation bloc lacked leadership and was descending into petty, nationalistic politics.
“We have a lot of salesmen in the European Council and only a few statesmen,” said Martin Schulz, the president of the European Parliament, bemoaning the current crop of E.U. government chiefs who are struggling to overcome a string of crises.
Schulz joined European Commission President Jean-Claude Juncker and E.U. Council President Donald Tusk for a debate on the future of Europe in the room where the Treaty of Rome was signed in 1957, which laid the foundations of today’s European Union.
“The idea of one E.U. state, one vision … was an illusion,” said Tusk, a former Polish prime minister, who is now tasked with finding consensus and cohesion amongst E.U. leaders.
The E.U. is doomed—and why anyone would hold any of their investments in euros is beyond me. It’s almost worse than the Japanese yen. This Reuters article, filed from Rome, was posted on their website at 3:31 p.m. EDT on on Thursday afternoon—and it’s the second offering in a row from Patricia Caulfield. Another link to this news item is here.
Rain Czech? Support for Adoption of Euro Hits Rock Bottom in Czech Republic
Support for euro adoption in the Czech Republic is down to a 15 year low with a mere 17 percent voting for a transition to the single European currency with 78 percent saying no, according to a CVVM poll, novinky.cz news agency reported.
The past year saw a 7 percent drop in the number of those favoring euro adoption.
“The proportion of respondents who say they disagree with the adoption of the euro increased by nine percentage points from April 2015, and is thus comparable to April 2012, 2013 and 2014,” the agency said.
36 percent of respondents voiced confidence in the future of the European project, which was almost the same as in 2015, when it was 35 per cent.
This interesting news item showed up on the sputniknews.com Internet site a 6:17 p.m. Moscow time on their Thursday afternoon, which was 10:17 a.m. in Washington—EDT plus 8 hours. I thank Larry Galearis for sharing it with us. Another link to this story is here.
NATO Ratchets Up Missile Defense Despite Russian Criticism
NATO’s European missile defense system will go live on Thursday when a base in Romania becomes operational. The next day, Poland is scheduled to break ground on its NATO missile-defense base.
The decision by the United States and its allies in Eastern Europe to proceed with ballistic missile defense in the face of increasingly loud Russian criticism is an important stage in the alliance’s new stance toward Moscow.
Those deployments will be coupled this spring with major military exercises in Poland and the Baltics, with significant American participation, and a beefed-up rapid reaction force of up to 5,000 troops.
Altogether, said Derek Chollet, a former United States assistant secretary of defense for international security affairs, “There will be a quite robust display of military power in Europe and allied resolve, and hopefully Moscow will see it for what it is, an alliance improving its capabilities.”
What a bulls hit piece of propaganda and outright lies this piece is—and it’s proof positive that the U.S. is a warfare state set on taking over the world. But since The New York Times is owned and operated by the NWO crowd, there should be no surprises as to why it’s posted there. It was filed from London yesterday—and another link to it is here. It’s another offering from Patricia Caulfield.
The Ukraine, Syria, NATO, Russia Imbroglio: John Batchelor Interviews Stephen F. Cohen
Cohen begins his remarks saying that two weeks ago he was guardedly optimistic about the NCW thawing but now considers conditions worse again. The discussions this week encompass the major battle going on in Syria over the city of Aleppo, new NATO troop deployments in Europe, political changes in Ukraine, and political pressure on Putin to change his foreign policy with Washington. . In Syria Turkey has closed the border trapping the refugees from Aleppo in the war zone, and Washington’s neocons do not want to support Russia or the Syrian Army, and that point to Cohen means the neocons do not mind seeing ISIS in Damascus. The fighting in Syria is very fierce with reports of hospitals being attacked by Syrian air forces.
The focus is also in Europe there is news that four battalions of troops, some 4000 personal, are to be deployed in the Baltic States along the Russian border. Russia considers this a violation of the NATO Russia Founding Act, an agreement to limit troops in Europe to those numbers commensurate with security only. Also covered is the Donald Cook (destroyer) incident in the Baltic Sea on April 13th; these events to Russians look like preparation for a NATO invasion of Russia.
Meanwhile Ukraine now has a new Prime Minister, Volodymyr Groysman, who was former Speaker of the Rada. Has this stabilized Poroshenko’s government? It has not, and Cohen lists various weaknesses not least of which is that he will surely be unacceptable to Right Sector elements. But he is Poroshenko’s choice and now all the failures of the Rada too will rest on his shoulders. Another complication for the Minsk2 Accords, notes Cohen, is that recently U.N. Ambassador Samantha Powers, has arbitrarily re-written them in a statement to the U.N. Security Council to include the demand that Russia gives back Crimea to Ukraine. Batchelor dismisses this as Powers being “intransigent” but in reality it means that Minsk2 will never see compliance and completion because it is Washington’s policy decision that it fails – and failure can be orchestrated through miscreant behavior by Kiev. Batchelor raises the premise that a lot of these NATO provocation games are like a geostrategic “games of chicken”, but Cohen worries that there is a group within NATO (Washington) that is actively seeking war with Russia. From my point of view all is the same (including machinations by Samantha Powers at the U.N. level) that both of these views would be valid and that the war party would be using the other group to further the march to war. It is all a party of fools and useful fools step dancing their collective way off a cliff.
And as a counter reaction there are groups within the Kremlin that are dissatisfied with Putin’s foreign policy and how he is handling the economy; they want a “mobilization” of everything, the economy and the military to meet the growing threat from the West – and for Putin to take a harder line with Russian foreign policy in dealing with it. This discussion is now very public in Russia and represents growing pressure on Putin to change tactics. This is the important discussion in this podcast as it shows that there are groups that are getting very angry with Washington and its hostility, dishonesty and incompetence, and who decidedly do not consider Western states as anything resembling “partners”.
I will be posting this interview in tomorrow’s column as well, but I thought I’d post it here, as it fits with The New York Times article that precedes it. Besides which, it’s a slow news day—and I don’t have all that many stories. I thank Ken Hurt for sending the link—but that big THANK YOU is always reserved for Larry Galearis for the above executive summary. This 40-minute audio interview showed up on the audioboom.com Internet site on Tuesday—and another link to this interview is here. It’s a must listen for any serious student of the New Great Game.
Turkey Premier Said to Give Up as Erdogan Tightens Grip
Turkish Prime Minister Ahmet Davutoglu is expected to step down after losing a market-roiling power struggle with President Recep Tayyip Erdogan, clouding the country’s economic prospects and imperiling its relations with the European Union.
The two leaders met late Wednesday without disclosing details of their talks, but a person familiar with the matter said Davutoglu’s ruling AK Party decided to choose a new leader by the end of the month. The premier met with senior party members Thursday and is scheduled to brief reporters on the results. Turkish bonds and stocks fell and the lira rose, trimming yesterday’s plunge of as much as 4.5 percent, the most in eight years.
The leadership crisis raises questions about everything from the fate of Turkey’s membership talks with the E.U. and the flow of war refugees from neighboring Syria to management of the country’s $720 billion economy. Erdogan, who has run Turkey for more than a decade, has tightened his grip on power since moving to what had been the largely ceremonial role of president in 2014, sidelining Davutoglu, his handpicked successor, along the way.
This news item appeared on the Bloomberg website at 12:59 p.m. MDT on Wednesday evening—and was updated about five hours later. I thank Doug Clark for bringing it to our attention—and another link to this story is here.
Who’s making sure the Saudi bombs keep falling on Yemen? The Tories
We now have a real insight into the moral character of the Conservative government. Three thousand unaccompanied child refugees saw Britain’s door slammed in their face, before the resulting outcry forced a partial climb down. Disabled people have had vital support taken away from them in George Osborne’s budget. But something even worse is happening, and it is barely being discussed: the UK’s complicity in an indiscriminate, Saudi-led bombing campaign in Yemen that has killed and maimed thousands of innocent people.
Conservative members of the parliamentary select committee on international development blocked a call for the suspension of arms sales to Saudi Arabia. They cast this shameful vote after hearing overwhelming evidence from the world’s leading human rights groups and aid agencies that a Saudi-led coalition is systematically bombing civilian targets in Yemen, exacerbating a humanitarian disaster comparable in scale to that in Syria.
Since the 1960s, Labour and Conservative governments have sold the Saudi regime entire fleets of combat aircraft, as well as providing regular continuing supplies of training, upgrades and ammunition. Since the onslaught on Yemen began in March last year, the flow of arms – bombs, rockets and missiles in particular – has not only continued, but dramatically increased.
This opinion piece, which is right on the money as far as I’m concerned, appeared on theguardian.com Internet site at 11:08 a.m. on Thursday morning BST in London—and it’s the final contribution of the day from Patricia Caulfield. Another link to this article is here.
Japan’s economy is tanking. So why should the U.K. listen to Shinzo Abe on Brexit?
Japanese Prime Minister Shinzo Abe is touring Europe this week. He has so far lectured Germany on the virtues of ramping up government spending, and today warned Britain of the risks of leaving the E.U. But is Mr Abe’s economic advice worth taking?
His main task since taking over as Japanese Prime Minister in late 2012 has been to to revive the economy, which has failed to register strong growth since a large boom-bust cycle in the early 1990s.
Mr Abe has launched a three-pronged attack consisting of “three arrows”: one arrow for monetary policy, one for government spending, and another for reforms of the economy. But his arrows appear to have landed wide of the mark.
[So] given the parlous state of the Japanese economy after three years of Abenomics, Mr Abe’s intervention in the Brexit debate today may not go down as well as he would like.
This short article put in an appearance on the telegraph.co.uk Internet site at 3:48 p.m. in London yesterday—and I thank Roy Stephens for passing it along. Another link to this news item is here.
A Cartel and a Briefcase: How Drug Cash Moves on a River of Gold
Mexican drug cartels operating in the U.S. have a problem: getting the profits home. Sometimes they try sending cash through banks, but that’s grown difficult as the government forces financial institutions to beef up anti-money-laundering efforts. So at least one international organization moved its money on a river of molten gold.
The Sinaloa cartel, once led by serial prison escapee Joaquin “El Chapo” Guzman, used some of its proceeds from selling drugs in the U.S. to buy gold in pawn shops, according to allegations in court records. It shipped more than $98 million in gold to a Florida company that had it melted down and sold for cash. Then the cartel used fake invoices to justify sending the proceeds to a company in Mexico.
Court documents, plus interviews with people familiar with the alleged scheme, paint an unusually detailed picture of how gold can be used to hide an illicit money transfer.
“If I had a lot of money to launder, I would choose gold,” says John Cassara, a former U.S. Treasury special agent and author of books on money laundering. “There really isn’t anything else like it out there.” Once it’s melted down, the commodity’s origins are difficult to trace. It can quickly be converted to cash. Many of the companies that deal in gold aren’t held to the same compliance standards as banks.
This Bloomberg article showed up on the their Internet site at 3:00 a.m. Thursday morning Denver time—and it’s courtesy of Brad Robertson via Zero Hedge. Another link to this story is here.
China’s latest export boom: Fake gold coins
As investors become increasingly nervous about the stock market, the price of gold has been swinging up, rising roughly 20 percent since just the beginning of the year. But if you buy your gold in coin form, you need to be wary. Chinese crooks are minting fakes in large quantities and selling them on the Internet.
And unlike the fakes of yesteryear, which were often made of precious metals but altered to appear more rare, many of today’s fakes are coins that are commonly sold for their precious metal content. But these are constructed of cheap alloys like tungsten, lead and zinc, with just enough gold to give them color.
“The average person probably would not be able to tell the difference between a real coin and a counterfeit,” said Mike Fuljenz of Universal Coin and Bullion in Beaumont, Texas. “They can get fooled by even a bad fake because they don’t know what a real one looks like.”
That’s particularly true of coins sold via the Web. Some of the coins are extraordinary artistic copies made with lasers to exactly replicate the look and shape of the real coin. And they even come in packaging that makes them appear genuine, Fuljenz said. However, coin dealers can typically tell a bogus coin by its weight, color and how it reflects light. These factors are difficult — often impossible — to gauge remotely.
This very interesting story was posted on the cbsnews.com Internet site at 8:23 a.m. EDT on Thursday morning–and it’s certainly worth reading. You’ll never knowingly get scammed by a reputable dealer as they know their stuff—and their reputation is everything to them. I thank Jim Gullo for bringing it to our attention—and another link to this article is here.
Islamic finance’s entry into gold market could send price soaring
On the outlook for new investment opportunities, the rapidly growing Islamic finance industry has set sight on the gold market as initiatives are underway to establish a new standard to make the metal tradable under Shariah finance rules, eliminating disputes among scholars whether gold is to be treated as a currency or as a commodity.
So far, Islamic investors have been reluctant to invest in gold because to do so, they would need the metal in physical form as an underlying asset, which is rarely the case in conventional gold trade. Because of that, broadly traded gold futures do not qualify as a Shariah-compliant investment. Other conventional gold-based financial offerings in the form of derivatives are also widely viewed as unacceptable for Islamic scholars.
On the other hand, investment that involves a forward purchase agreement at an agreed price against future delivery (the principle of salam) would, but there is still physical gold in the play.
London-headquartered World Gold Council (WGC), together with Kuala Lumpur-based Amanie Advisors, an independent advisory firm on Shariah investments and the Accounting and Auditing Organisation for Islamic Financial Institutions in Bahrain, now have been developing a “Shariah Standard on Gold” which aims at “providing guidance from the Shariah perspective on the usage of gold in financial and investment transactions for Islamic financial institutions and participants,” as WGC head Natalie Dempster puts it. The standard also aims to increase transparency and harmonisation of the use of gold investments and reduce unclear specifications on what’s haram and what’s halal in trading the metal.
I’ll believe this when I see it, as I’m always on my guard when I see an hyperbole-ladened headline like this one. This story was posted on the gulf-times.com Internet site on Tuesday evening local time over there—and I found it in a story over on the goldcore.com Internet site yesterday morning. Another link to this article is here.
Jim Rickards: The Dollar Dilemma Driving the Gold Market
James Rickards, author of “The Case for Gold,” explains the relationship between gold and the U.S. dollar and how he sees global currencies measuring up against the dollar. He speaks on “Bloomberg Markets.” The talking head that interviews Jim isn’t the sharpest knife in the drawer. The interviews Jim had with Max Keiser that appeared in two of my column earlier this week, were the best.
This 3:51 minute video clip was posted on their website at 8:55 a.m. MDT on Wednesday morning—and I thank Ken Hurt for sending it.
Gold rally shines on miners’ bonds
Although gold has surged by over 15% this year, the commodity’s price has been outpaced by the bonds issued by gold miners, according to the newly launched Markit iBoxx USD Gold Mining index.
Gold bonds have returned 23% ytd on a total return basis, driven by a collapse in spreads
Bonds issued by gold miners have returned 20% since gold’s peak in 2011
Markit iBoxx USD Gold Mining index yield is still above 5%, despite recent performance
Gold’s surging popularity has been making waves in the bond market. Bonds issued by gold mining firms have outperformed almost every segment of the bond market since the start of the year, according to the newly launched Markit iBoxx USD Gold Mining index.
This news item showed up on the markit.com Internet site on Wednesday sometime—and I thank Richard Saler for pointing it out. Another link to this article is here.
A Paper Gold Rally: Physical Yet to Engage — Ross Norman
2016 is different.
Yes, gold has seen a similar price action, but the drivers are not the same. The key physical gold markets in China and India are comparatively speaking absent and the erstwhile seller – the West – has turned buyer. This is not a question of geography, but of motivation, form and tenure.
So what has changed. There is growing perception in the West that Central Banks may indeed be fallible and that the Keynesian experiment may have run its course – in short, the desire for sound money and by extension a growing concern about the increase in debt to resolve financial crisis is gaining currency. If fear is back in vogue then arguably it may less of a sustainable position then the motivation of many Eastern buyers which is simply as long term store of value.
For gold to see a sustained rally it needs to fire on more than one cylinder and physical players need to join the party. This in turn would put bullion onto the radar of institutional investors who are yet to be convinced that it really is an alternative to more traditional asset classes. This could then bring about the price elasticity – or buying on higher prices – that typified the last bull run. Or equally perhaps physical buyers do not turn up to the party in which case the speculators – sometimes described as behaving like 11 year olds high on e-numbers – could get bored and as easily reverse their positions.
This must read commentary by Ross appeared on the Sharps Pixley website yesterday—and he draws direct aim at the paper hangers in the COMEX futures market. Another lead to this article is here.
The PHOTOS and the FUNNIES
This is a male northern [yellow-shafted] flicker that I photographed on Sunday. In actuality it’s a woodpecker that spends most of its life on the ground—which is obviously where this one is. I was happy to get this close, as I’m been trying to photograph these things for years, but they are very wary—and that’s being kind. Trying to get a photo of one in flight—well, good luck to you. The third photo is one I borrowed from the Internet so you can see where the name ‘yellow-shafted’ comes from. There’s also a red-shafted flicker as well, but I’ve never seen one in this province. The ‘click to enlarge’ feature is really useful here.
The WRAP
It was just another day off the calendar when the powers that be kept things under control both in Far East trading—and again in New York, where all four precious metals were more than prepared to rally—and had to be turned lower.
As I said before, three of the four precious metals had new low closes for this move down—and JPMorgan et al sliced the salamis once again.
Here are the 6-month charts for all four precious metals, so you can see how this engineered price decline is currently unfolding. And as both Ted and I have mentioned on several occasions, it may or may not end up as the same old, same old in the end. But regardless of the outcome, all we can do is sit here and wait it out—and there’s really not much to look at, as the salami slices are pretty thin at the moment.
Today at 8:30 a.m. EDT this morning, we get the job numbers—and we’ll certainly get some sort of ‘reaction’ from the precious metals. It remains to be seen if they get leaned on hard or not. But whatever the job numbers are, you can pretty much dismiss them out of hand, as they’ll be massaged to perfection. I’m sure David Stockman, plus others, will be able to hang the BLS out to dry regardless of the positive spin they put on things.
And as I type this paragraph, the London open is less than ten minutes away—and I note that neither gold nor silver did much in Friday trading in the Far East. Gold is unchanged—and silver is down 4 cents the ounce. Platinum rallied a bit, but has been sold back to unchanged—and palladium is up 4 bucks at the moment.
Net HFT gold volume is just under 22,500 contracts—and that number in silver is 7,500 contracts. The dollar index traded pretty flat in Far East trading, but dropped 12 or so basis points starting at 2 p.m. HKT—and is down 5 basis points as London opens. Nothing to see here.
We also get the latest Commitment of Traders Report—and the companion Bank Participation Report—both of which go up on the CFTC’s website at 3:30 p.m. EDT this afternoon. As Ted has mentioned, he’s expecting an eye-watering increase in the net short position of the Commercial traders in general in gold—and the Big 8 traders in particular. He’s open for any eventuality in silver, as silver o.i. is actually down about 8,500 contracts from the cut-off from the previous report. Ted and I will be bisecting and dissecting the Bank Participation Report as well—and all the numbers will be in tomorrow’s column, which is always the biggest one of the month.
And as I post today’s effort on the website at 4:05 a.m. EDT, I see that there still isn’t much happening in gold or silver, although the former is now up a dollar—and the latter is back to unchanged. Platinum is now up 2 bucks—and palladium is still up 4 bucks the ounce.
Net HFT gold volume is now sitting at 28,000 contracts—and that number in silver is around 8,900 contracts. The dollar index is now down 11 points. All is calm at the moment—but that won’t last.
By the time I roll out of bed this morning, the effects of the job numbers on precious metal prices should be history—and, as always, I’ll be prepared for anything when I power up my computer later this morning.
Enjoy your weekend—and I’ll see you on Saturday.
Ed
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