08 July 2016 — Friday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
Gold had a bit of a rally in Far East trading on their Thursday morning, but it certainly didn’t amount to much. The high tick of the day came shortly after 9 a.m. HKT — and the price began to chop quietly lower from there. The sell-off got a bit more serious once COMEX trading began in New York, with the low tick of the day coming at 10:40 a.m. EDT. It rallied back close to unchanged by the close of COMEX trading, but got turned a bit lower during the thinly-traded after-hours market.
The high and low tick were recorded as $1,372.90 and $1,352.00 in the August contract.
Gold finished the Thursday session in New York at $1,359.80 spot, down $3.40 on the day. Net volume was very healthy at around 184,000 contracts.
Here’s the 5-minute gold tick chart courtesy of Brad Robertson. There was fair volume during the smallish rally in morning trading in the Far East, but that died off to nothing shortly afterwards — and didn’t pick up again until 23:30 p.m. Denver time on Wednesday nigh on the chart below, which was 1:30 p.m. HKT on their Thursday afternoon. From there, the volume was pretty steady but, as is always the case, the only volume that really mattered was when the bullion banks went to work at the 6:20 a.m. MST/8:20 a.m. EST COMEX open. By 12:30 p.m. MDT on the chart below — 2:30 p.m. EDT, the volume was back to background once again.
The vertical gray line is midnight in New York, noon the following day in Hong Kong and Shanghai—and don’t forget to add two hours for EDT. The ‘click to enlarge‘ is a must here.
The price pattern in silver was almost the same as it was for gold, expect the low tick came shortly after the London p.m. gold fix — and the subsequent rally wasn’t allowed anywhere near Wednesday’s closing price.
The high and low ticks were reported by the CME Group as $20.335 and $19.525 in the September contract.
Silver closed yesterday at $19.645 spot, down 41 cents on the day — and safely back below $20 the ounce. Net volume was way up there once again at just over 63,000 contracts.
The platinum price chopped around ten dollars either side of unchanged for the entire Thursday session — ending the day at $1,088 spot, up 4 dollars on the day.
It was more or less the same for palladium, except its price range was about 5 bucks either side of unchanged. It closed higher by 4 bucks as well, at $609 spot.
The dollar index closed late on Wednesday afternoon in New York at 96.09 — and traded sideways until just before 11 a.m. HKT — and between then and the London p.m. gold fix, it had to be rescued when it dipped below the 96.00 mark on three separate occasions. Once the ‘fix was in’, the dollar got ramped, with the 96.34 high tick coming shortly after 3 p.m. EDT. It sold off a bit into the close, finishing the Thursday session at 96.25 — up 16 basis points from Wednesday.
It was obviously another day where the powers-that-be had to save the dollar from its inevitable fate.
And here’s the 6-month U.S. dollar index chart — and I post it every day mostly for entertainment purposes, as it’s rigged just like every other index is. David Stockman has a story about this very thing in the Critical Reads section below.
The gold stocks opened down a percent or so, with their low ticks coming at gold’s low tick, which came just before 11 a.m. EDT. After that, the gold shares followed the gold price like a shadow. The HUI closed down 2.79 percent.
The silver equities followed a very similar path, except they gapped down 2 percent at the open — and their rallies off their 10:50 a.m. EDT low ticks were less than stellar. Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down 3.30 percent. Click to enlarge.
The CME Daily Delivery Report showed that 4 gold and 117 silver contracts were posted for delivery within the COMEX-approved depositories on Monday. And like the 4 gold contracts posted for delivery today, JPMorgan picked up 3 for its client account. In silver, there were only three short/issuers: ADM, SG Americas and ABN Amro, with 55, 41 and 21 contracts out of their respective client accounts. There were only three long/stoppers as well: HSBC USA and JPMorgan with 52 and 33 contracts for their own accounts. ABN Amro picked up 32 contracts for its clients. The link to yesterday’s Issuers and Stoppers Report is here.
The CME Preliminary Report for the Thursday trading session showed that gold open interest in July actually rose 116 contracts. Since Wednesday’s Daily Delivery Report shows that 20 gold contracts were posted for delivery today, that means that 116+20=136 gold contracts were added to the July delivery month in Thursday’s preliminary report. In silver, July o.i. fell by 78 contracts. Wednesday’s Daily Delivery Report showed that 91 silver contracts were in fact posted for delivery today, so that means that 91-78=13 silver contracts were added to the July delivery month in yesterday’s report.
Much to my surprise, there was fairly big withdrawal from GLD yesterday, as an authorized participant took out 133,670 troy ounces. I can’t imagine that to be price related. Maybe it was needed more urgently elsewhere, or maybe the shares were redeemed to avoid SEC reporting rules. I would guess that Ted will have something to say about it in his weekly review tomorrow. And as of 8:35 p.m. EDT yesterday evening, there were no reported changes in SLV.
There was no sales report from the U.S. Mint.
There was a pretty hefty amount of gold received over at the COMEX-approved depositories on Wednesday — and a big chunk shipped out as well. The total amount received was 227,603 troy ounces — and the amount shipped out was 131,991 troy ounces. JPMorgan took delivery of 131,603 troy ounces — and all of the rest of the in/out activity was at Canada’s Scotiabank. The link to that action is here.
It was very quiet in silver for a change. Nothing was received — and only 27,972 troy ounces were reported shipped out the door. I shan’t bother linking that activity.
Over at the COMEX-approved gold kilobar depositories in Hong Kong on their Wednesday, they reported receiving 1,108 of them — and shipped out 3,722. All of the activity was at Brink’s, Inc. — and the link to that, in troy ounces, is here.
Here’s another chart courtesy of Nick Laird. It shows the 15 tonnes they added to China’s gold reserves in June. Of course the 1,823 tonnes of gold they say they have on the chart below is most likely only a small fraction of what they really have. In fact, it’s suspected that they hold two or three times that amount, as the Chinese have far more gold than they state publicly. Click to enlarge.
I have very few stories for you today, so your editing chores will be simple.
CRITICAL READS
Crisis Is Us: The Inexorable Result Of Modern Central Banking — David Stockman
The inexorable effect of contemporary central banking is serial financial booms and busts. With that comes increasing levels of systemic financial instability and a growing dissipation of real economic resources in misallocations and malinvestment. At length, the world becomes poorer.
Why? Because gains in real output and wealth depend upon efficient pricing of capital and savings, but the modus operandi of today’s central banking is to deliberately distort and relentlessly falsify financial prices.
This commentary by David appeared on his website yesterday sometime — and it’s certainly worth reading. I thank Roy Stephens for finding it for us — and another link to it is here.
Sterling slide is painful but what we need in a global deflation crisis — Ambrose Evans-Pritchard
Britain faces a frightening array of economic risks if Parliament makes a mess of Brexit, but a sterling crisis is not one of them.
A weaker exchange rate acts as a shock absorber. It cushions the downturn to some degree and strengthens our buffers against deflation. Those fretting about the inflationary risk of a lower pound are stuck in a time warp, or living on the wrong planet.
Global bond yields are touching historic lows every day and signalling a deflationary depression into the next decade. This is not like the 1930s. It is worse.
Investors are so frightened – or so short of safe debt to buy – that Switzerland can borrow for 50 years at rates below zero, Germany and Japan for 15 years, and France and Holland for nine years. Roughly $10.7 trillion of sovereign debt and $1 trillion of corporate debt is now trading at negative rates worldwide.
British 10-year yields have collapsed to an all-time low of 0.73pc since the Brexit vote, and 30-year yields are down to 1.58pc. This would not be happening if the bond vigilantes had the slightest concern that Britain was heading into a stagflation trap.
After all, the essence of ZIRP and NIRP is to drive interest rates below their natural market clearing levels so as to induce more borrowing and spending by business and consumers.
It’s also the inherent result of massive QE bond-buying where central banks finance their purchases with credits conjured from thin air. The central banks’ big fat thumb on the bond market’s supply/demand scale results in far lower yields than real savers would accept in an honest free market.
This commentary by Ambrose showed up on the telegraph.co.uk Internet site at 9:41 p.m. BST on their Wednesday evening, which was 4:41 p.m. in New York — EDT plus 5 hours. It’s certainly worth reading! It’s the second contribution in a row from Roy Stephens — and another link to this news item is here.
Italy’s Plan for Banks Could Roil Europe
Even as Europe grapples with repercussions of Britain’s vote to leave the European Union, a dispute over tens of billions of dollars is also threatening to roil the region’s $16 trillion economy.
The Italian government, according to some estimates, needs to spend $45 billion to shore up its banks burdened with bad loans. Fears that European authorities will bar the government from providing that support are adding to the turbulence caused by “Brexit.”
It may seem difficult at first to understand how the lenders of a medium-size country, none of which are particularly large, or engage much in risky Wall Street activities, could be spreading fear through global financial markets.
But they are, and their problems reveal what can happen when well-intentioned regulations bump into reality. And this is creating tension among the leaders of Europe. The situation may drag through the summer, keeping investors around the world on edge.
This story was posted on The New York Times website on Wednesday sometime — and it’s the third offering in a row form Roy Stephens. Another link to this article is here.
World faces deflation shock as China devalues at accelerating pace — Ambrose Evans-Pritchard
China has abandoned a solemn pledge to keep its exchange rate stable and is carrying out a systematic devaluation of the yuan, sending a powerful deflationary impulse through a global economy already caught in a 1930s trap.
The country’s currency basket has been sliding at an annual pace of 12pc since the start of the year. This has picked up sharply since the Brexit vote, suggesting that the Peoples Bank may be taking advantage of the distraction to push through a sharper devaluation.
“This makes a mockery of the PBOC’s suggestion that its policy is to keep the currency’s value stable,” said Mark Williams, chief China economist at Capital Economics. “Markets will not take PBOC policy statements at face value in the future.”
Mr. Williams said it is unclear whether Beijing intended to deceive investors all along when it gave categorical assurances earlier this year, or whether it is feeding on events.
This article from Ambrose put in an appearance on The Telegraph‘s website at 7:40 p.m. BST on their Thursday evening, which was 2:40 p.m. EDT in New York. I found this news item embedded in a GATA release — and another link to it is here. It’s definitely worth reading as well.
Gold assets top 2,000 tonnes as the clamor for havens grows louder
Global gold holdings topped 2,000 metric tons for the first time in three years as the Brexit fallout and speculation that U.S. interest rates won’t rise anytime soon sent investors hunting for a haven.
Holdings in bullion-backed exchange-traded funds rose 4.1 tons to 2,001.4 tons on Wednesday, data compiled by Bloomberg show. That’s larger than gold reserves held by China, the biggest consumer and a consistent central-bank buyer in recent months. The latest increase followed the biggest one-day gain since 2009 in the SPDR Gold Shares, the largest gold ETF.
Global assets in the funds have surged 37 percent this year and prices are near a two-year high as slowing growth, negative rates in Europe and Japan and the likelihood that the Federal Reserve won’t hike further combined to boost demand. The U.K.’s vote last month to quit the European Union has added further impetus to that pro-bullion mix. Gold has likely entered the early stages of the next bull run, according to UBS Group AG, while ABN Amro Group NV says prices may hit $1,425 this quarter.
“Investment demand has been very strong, with institutional buyers of ETFs the big gorilla in the room,” said John Butler, a vice president at GoldMoney, which provides custodian and investment services in Toronto. “We’ve reached a psychological tipping point where people see a material increase in the risk of a repeat of what we saw in 2008.”
This gold-related new item showed up on the Bloomberg website at 6:18 p.m. Denver time on Wednesday evening — and was subsequently updated about ten hours later. This is the second item in today’s column that I found on the gata.org Internet site — and another link to it is here.
China resumes monthly gold buying to diversify reserves
China, the world’s biggest producer and consumer of gold, added about 500,000 ounces to central bank reserves in June, restarting monthly purchases to diversify holdings after taking a breather in May.
The People’s Bank of China increased assets to 58.62 million ounces, or about 1,823 metric tons, from 58.14 million ounces in May when they were unchanged, according to data on the central bank’s website. The country has boosted its hoard in 11 out of the past 12 months after announcing a 57 percent increase to 53.32 million ounces since 2009.
China bought gold during a month when global prices climbed 8.8 percent, boosted by the U.K. vote to leave the European Union and a further scaling back of expectations for a rise in U.S. interest rates. Bullion has surged 29 percent this year as investors sought a shelter from market turbulence and increasing global economic and political risks. Assets in exchange-traded funds jumped 37 percent in 2016 to more than 2,000 metric tons.
“China renewed purchases despite a spike in prices, signaling that the nation is still looking to diversify its foreign exchange reserves in a steady manner,” Zhang Yanxin, an analyst at Shanghai Flow International Trade Co., said by phone. “But the amount is relatively insignificant in a global context,” Zhang said, noting it was about 15 tonnes whereas ETF assets jumped more than twice that number in a single day this week.
The above four paragraphs are all there is to this story that was posted on the Bloomberg website at 3:14 a.m. MDT on Thursday morning. It’s another gold-related story that I found embedded in a GATA release.
Turning of the Tide? — Ted Butler
The price fireworks over the July 4 holiday, particularly in silver, were met with an outpouring of commentary and renewed interest. Not only have precious metals prices soared to levels not seen in a couple of years, it’s hard for me to recall a time with more input from different voices. It’s also hard to believe that it was only six months ago that gold and silver were locked in nearly the opposite situation. So the obvious questions are what happened and, more importantly, what is likely to occur from here?
I continue to believe that the main price driver for gold and silver was the historic positioning changes in COMEX futures over the past six months. Year to date, the now $300+ rally in gold and $6+ rally in silver, were driven by more than 30 million oz of paper gold and 325 million oz of paper silver on the COMEX, bought principally by managed money technical funds and sold by commercials (mostly banks).
In addition, the price rally in gold, in particular, set off significant buying in ETFs and other investment vehicles in which massive amounts of physical gold were purchased and deposited. In six months, nearly 20 million oz of physical gold were deposited into ETFs and COMEX warehouses (11 million oz in GLD alone), further cementing the gold rally. In dollar terms, that comes to $25 billion. The physical flows into silver have been much smaller in dollar terms as less than $1 billion worth of silver (40 million oz) has been deposited in silver ETFs, although there are recent signs that may be changing.
The purchase of so much physical gold has apparently thwarted the usual outcome of an extremely bearish COT market structure causing a big price selloff, or at least so far. Physical metal demand is understandable because it is near impossible to construct a fundamental bear case for gold or silver. I don’t think many would disagree over what occurred these past six months, namely, historic COMEX positioning, coupled with massive physical buying in gold ETFs. Now what?
This commentary by Ted was part of his mid-week column on Wednesday — and falls into the absolute must read category. It was posted on the silverseek.com Internet site yesterday. And if the last two paragraphs seem familiar, it’s because I used them as my quote in Thursday’s column. Another link to this must read story is here.
The PHOTOS and the FUNNIES
Only one photo again today. I took this magpie shot looking almost straight up. It was a parent trying to distract me from one of their young ones that was hopping around in the bushes nearby, but not flying yet. Normally you’d never get anywhere near this close to these birds. This shot is right out of the camera untouched — and I didn’t have to crop it one bit, either. The click to enlarge feature doesn’t help with this photo.
The WRAP
“The gold standard makes the money’s purchasing power independent of the changing ambitions and doctrines of political parties and pressure groups. This is not a defect of the gold standard; it is its main excellence.” ~ Ludwig von Mises
Not too much should be read into just one day’s price action — and I’m certainly not prepared to do it. The 6-month precious metal charts below appear to be poised for the usual take-down by JPMorgan et al, but it remains to be seen if it does happen. And if it does happen, how low — and for how long?
And as I type this paragraph, the London open is less than ten minutes away — and I note that precious metal prices were a bit softer in Far East trading on their Friday. Gold is down 3 bucks, silver is down 3 cents, platinum got sold off pretty good in Far East trading — and is down 7 dollars an ounce at the moment. Palladium is down 4 bucks.
Net HFT gold volume is just under 27,000 contracts — and although reasonably heavy, it’s certainly the smallest volume number that I’ve seen at this time of day in a very long time. Net volume in silver is a hair under 7,500 contracts. There’s not much going on at the moment. The dollar index has been heading quietly lower ever since its 96.34 high tick around 2:30 p.m. EDT in New York yesterday afternoon. It came close to falling back below the 96.00 mark again, but the usual ‘gentle hands’ appeared at 96.04 — and now its rallying a bit, but still down 12 basis points as London opens.
I should make mention once again of Ted Butler’s piece that closes out the Critical Reads section in today’s column. What he says in it, pretty much encapsulates everything that you need to know about what’s happening in gold and silver at the moment — and it’s worthwhile reading for a second time.
There’s nothing I can add here, as Ted has said it all. As a matter of fact, just about everything I write about in gold and silver in my columns for the last ten years has been through Ted first — and that goes for most of the other so-called analysts in the precious metal market. All the knowledge about silver worth knowing, came through him originally.
Like my profuse thanks to the subscribers who provide stories or charts, I’m happy to acknowledge their contribution, as they enrich everyone — and I can’t be everywhere. I’ll be the first to admit that everything worth knowing about the silver and gold market has come through Ted first — and that’s why you see his name sprinkled liberally through my columns. Most people just use/steal his work without attribution.
And as I post today’s column on the website at 4:00 a.m. EDT, I see that gold has sold off a few dollars more during the first hour of trading in London — and it’s down 5 bucks the ounce. Silver has rallied a few pennies off its London low — and is down the same amount, a couple of pennies. Platinum got sold down a bunch at the London/Zurich open — and was down $14 at one point, but is only down 10 at the moment. Palladium is lower by 7 dollars.
Net HFT volume in gold is up to a bit over 33,500 contracts, so its been pretty quiet from a volume perspective. That number in silver is just under 9,100 contracts. The dollar index continues to inch higher — and is down only 8 basis points.
Today we get the latest Commitment of Traders Report for positions held at the close of COMEX trading on Tuesday. I’m hoping for happy surprises, but prepared for far worse. We also get the companion Bank Participation Report and, and for this one day a month we get to see what the world’s banks have been up to in the precious metal markets, and they’re usually up to quite a bit — and this report should be a real eye-opener.
Since today is Friday, nothing will surprise me as the trading day unfolds.
Enjoy your weekend — and I’ll see you here tomorrow.
Ed
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