02 August 2016 — Tuesday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
It was pretty much a ‘nothing’ day in gold on Monday. It was down a few bucks at the COMEX open, but rallied four or five dollars until noon during the New York session — and then didn’t do much from there.
The low and high ticks aren’t worth looking up.
Gold closed in New York yesterday at $1,352.40 spot, up $2.00 on the day. Net volume was very light at only 103,500 contracts in the October and December delivery months combined.
Silver traded flat for the first three hours after trading began at 6:00 p.m. in New York on their Sunday evening. But starting shortly after 9 a.m. Hong Kong/Shanghai time, the price rallied sharply — but with obvious interference — until shortly after 12 o’clock noon local time. Then it was under selling pressure until around 10:20 a.m. in New York. The subsequent rally that began at that time got capped shortly before 11:30 a.m. EDT — and was sold down about until the COMEX close and didn’t do much after that.
The high and low ticks were recorded by the CME Group as $20.695 and $20.335 in the September contract.
Silver finished the Monday session at $20.395 spot, up a whole 11 cents on the day — and obviously well off its high tick, which was the obvious intent. Net volume was pretty decent at a hair over 46,000 contracts — and the roll-overs out of September and into December were fairly heavy.
The platinum price wandered around a few dollars either side of unchanged for all of Far East and morning trading in Zurich. The low tick, such as it was, came shortly after 1 p.m. Zurich time — and the subsequent rally last until around 11:30 a.m. in New York, which was the same time as the silver price got capped. It was sold down by five bucks by 1 p.m. EDT — and traded flat for the rest of the day. Platinum closed in New York yesterday at $1,156 spot — and up 9 dollars on the day.
It was mostly the same price pattern in palladium — and its rally started shortly before 2 p.m. Zurich time — which was twenty minutes before the COMEX open. That rally got capped shortly after 9 a.m. in New York, as did the rally that began shortly before 11 a.m. EDT. After 1 p.m. palladium, like platinum, traded flat into the close. It finished the day at $714 spot, up 5 bucks from its Friday close.
The dollar index closed very late on Friday afternoon in New York at 95.58 — and began to chop almost imperceptibly higher once trading began in New York on Sunday afternoon. By the time trading was done late yesterday afternoon in New York, the dollar index was up 13 basis points at 95.78.
Here’s the 3-day U.S. dollar index, so you can put Monday’s action in some perspective.
And for fun and entertainment purposes, here’s the 5-year U.S. dollar chart. How long the U.S. dollar index can maintain its lofty perch remains to be seen but, as you know, those ‘gentle hands’ are ever present — at least for the moment.
For whatever reason, there was no HUI feed on any of the websites until early afternoon EDT, so that’s why the chart below looks like that. The HUI closed higher by 1.56 percent.
The silver stocks opened up a bit, but dipped into negative territory briefly in the first few minutes of trading. After that they chopped quietly higher for the rest of the Monday trading session. Nick Laird’s Intraday Silver Sentiment/Silver 7 Index finished up 2.11 percent. Click to enlarge if necessary.
The Canadian markets were closed for a civic holiday yesterday.
The CME Daily Delivery Report showed that 2,096 gold and 120 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday. In gold, the three largest short/issuers were Goldman Sachs with 1,000 contracts out of their client account, JPMorgan with 850 out of its client account — and International F.C. Stone with 159 contracts out of their client account as well. The list of long stoppers is extensive: JPMorgan with 558 for its client account, MacQuarie with 485 for its house account, HSBC USA with 455 for its own account — and International F.C. Stone with 288 for its client account — plus many more. In silver, the only short/issuer was International F.C. Stone — and the only two long/stoppers that mattered were Scotiabank with 72 and ADM with 22 contracts. JPMorgan was nowhere to be seen. The link to yesterday’s Issuers and Stoppers Report is here.
The CME Preliminary Report for the Monday session showed that gold open interest in August fell by 2,002 contracts, leaving 6,517 still open — minus the 2,096 contracts mentioned in the previous paragraph. Friday’s Daily Delivery Report showed that 1,801 gold contracts were posted for delivery today, which means that 2,002-1,801=201 gold contracts on the short/issuer side were let off easy by the holders of the long side of their contract, as they didn’t have any gold backing their short positions — and the longs didn’t want to push the issue. In silver, August o.i. dropped by 11 contracts, leaving 405 still around. Friday’s Daily Delivery Report showed that only 1 silver contract was posted for delivery today, so that means that, like in gold 11-1=10 silver contracts on the short/issuer side were let slide by their opposite numbers holding the long sides of those contracts — and for the same reason.
There was a pretty large deposit in GLD yesterday, as an authorized participant added 190,904 troy ounces of gold. There was also a deposit in SLV as well, totalling 1,235,114 troy ounces.
There was no sales report from the U.S. Mint.
There was a decent amount of gold deposited in the COMEX-approved depositories around New York on Friday, with all of it going into Brink’s, Inc. It total they received 212,100 troy ounces — and they also shipped out the only gold of the day — 32.150 troy ounces, which is one kilobar. The link to that activity is here.
No silver was reported received, but 997,047 troy ounces were shipped out for parts unknown. Of that amount, there was 936,641 troy ounces shipped out of HSBC USA — and the remaining 60,406 troy ounces came out of Canada’s Scotiabank. The link to that action is here.
Over at the COMEX-approved gold kilobar depositories in Hong Kong on their Friday, they reported receiving 1,259 of them — and shipped out 712. All of the activity was at Brink’s, Inc. — and the link to that, in troy ounces, is here.
Here’s a chart that Nick Laird passed around last Friday evening. But since my Saturday column was already loaded with charts as it was, I though this could wait for today’s column. It shows how much gold the Federal Reserve Bank in New York has that’s earmarked gold held in its foreign and international accounts. Nick said that — “U.S. FRB exported 971,000 troy ounces of gold in June.“ Click to enlarge.
And here are two more charts that Nick sent along yesterday afternoon. They show the U.S. Mint sales for July — and without JPMorgan there to buy everything that John Q. Public wasn’t, true retail demand is laid bare for all to see — and it’s a sad sight. The gold coin sales include both gold eagles and gold buffaloes. Click to enlarge.
Here are two more charts from Nick that I did not want to post in today’s column. However, since I’m posting a story by Ronan Manly about Austrian mint sales in the Critical Reads section, it only makes sense that the two charts below show up in it as well. It’s ‘chart overload’ for sure today — and I shan’t do that again if I can possibly help it. Click to enlarge.
I have a decent number of stories for you today — and I hope there are few that pique your interest.
CRITICAL READS
Donald Trump’s Demagoguery—–The Dangers and Digressions of It
Donald Trump’s inchoate views on economics are mainly a virtue because he has not been schooled in the follies of bipartisan fiscal and monetary “stimulus policy”. Essentially, the Beltway’s statist practitioners of the great bipartisan economic policy consensus are advocates of CINO (capitalism in name only).
By contrast, whether the business empire Trump claims to have built is all it’s cracked-up to be (by him) or not, there is a secret sauce to it that the mainstream liberal media fails to grasp. They would find it downright frightening if it did.
To wit, Trump’s incessant bragging about his business prowess and accomplishments is not merely or even mainly an unbridled and uncouth expression of egotism and self-absorption. Actually, it is a profession of faith—–a policy statement—–that America’s capitalist economy grows owing to what capitalists like himself do, not because of the “policy” interventions of the Imperial City’s knaves, crooks and scolds.
To some considerable degree, “making America great” is about unleashing the nation’s capitalists again. It’s an expression that prosperity is not bestowed by the state but won by the kind of builders, investors, innovators and workers that The Donald fancies to be the essence of Trump Inc.
Another excerpt from David’s upcoming book. It appeared on his Internet site yesterday sometime — and it comes courtesy of Roy Stephens. Another link to this excerpt is here.
Morgan Stanley Warns Currency Traders Worst to Come for Dollar
The dollar is set to fall 5 percent in the next few months, the Federal Reserve isn’t raising interest rates anytime soon and U.S. economic data is only going to get worse.
That’s what Morgan Stanley chief global currency strategist Hans Redeker told clients in a note published Thursday, citing in-house indicators showing U.S. domestic demand is set to fade in the coming months. It didn’t take long for markets to prove him prescient. The greenback fell 1.3 percent Friday, capping its worst week since April, after the Commerce Department said U.S. second-quarter gross domestic product advanced at about half the rate economists had forecast.
“We are quite pessimistic about, first, the outcome of the U.S. economy,” Redeker said in an interview on Bloomberg Television Friday, before the GDP report’s release. “When you look at our internal indicators, which capture domestic demand very well, they are suggesting that the demand strength is going to fade from here.”
This news item showed up on the Bloomberg website at 10:00 p.m. Denver time on Friday evening — and I found it embedded in a GATA release on Saturday. Another link to it is here.
Ford Plunges After Warning “We Don’t See Growth“, Warns U.S. Auto Industry “Has Plateaued“
The reason Ford stock is plunging this morning is not so much the company’s earnings miss, when the U.S. auto giant reported Q2 EPS of $0.52, below the $0.60 expected, but because in some startling language, CEO Mark Fields laid out a very gloomy picture of the future.
As the company reported in its press release, it told investors to “expect another strong year of results, and Ford committed to full year guidance of company pretax profit and operating margin equal to or better than last year; however, company now sees risks challenging achieving guidance. Entire Ford team working to mitigate the risks.”
A key part of the problem is one shown here repeatedly over the past year, namely the troubling increase in auto inventories, which are now at 5 year highs, and the inventory to sales ratio back to levels seen during the last recession.
Whether the pile up of autos at dealers is the main threat to future sales, is not certain, as the company was relative vague about the risks facing it. What it was not vague at all, about, however, is that the company which until recently was the stalwart of the only US manufacturing sector to be humming along while the rest of U.S. non-service industries tumbled, is that the future is suddenly very unclear and full of risks.
This story was posted on the Zero Hedge website last Thursday — and my thanks go out to Brad Robertson for sliding it into my in-box early yesterday morning MDT. Another link to this news item is here.
Exxon Has Worst Profit Since ’99 as Chevron Posts Surprise Loss
Exxon Mobil Corp. and Chevron Corp. missed profit and production estimates as wildfires, write-downs and weak refining margins battered oil explorers already reeling under a glut-driven price collapse.
Exxon reported a $1.7 billion second-quarter profit that was its lowest since the first quarter of 1999, before the Mobil Corp. acquisition that shaped the company into its current form. The 41-cent-per-share result was 23 cents lower than the average of 20 estimates from analysts in a Bloomberg survey, the biggest miss in at least a decade.
Chevron extended its longest losing streak in more than a quarter century after booking a $2.8 billion write-down on assets that can’t generate profits at current prices. The company posted a surprise loss of $1.47 billion, or 78 cents a share, compared with profit of $571 million, or 30 cents, a year earlier, San Ramon, California-based Chevron said in a statement. Analysts had expected the world’s third-largest oil explorer by market value to earn anywhere from 19 to 41 cents a share.
Given the plunge in crude and natural gas markets, “you cannot recover no matter how efficient you are,” Fadel Gheit, an analyst at Oppenheimer & Co., said during an interview with Bloomberg Television. “The industry cannot survive on current oil prices.”
This Bloomberg article was posted on the rigzone.com Internet site last Friday — and it’s the second offering in a row from Brad Robertson. It’s worth reading — and another link to this news item is here.
Musical Chairs — Jeff Thomas
You’re familiar with the children’s game of musical chairs. Ten children walk around nine chairs whilst listening to music. When the music stops, each must quickly find a chair and sit in it. One child is out of luck and is out of the game. Then a chair is removed and the nine remaining children walk around the eight remaining chairs, waiting for the music to stop again.
Economics is a bit like musical chairs. In a recession, the economy takes a hit and there are some casualties. Some players fail to get a chair in time and are out of the game. The game then goes on without them. The economy eventually recovers.
But a depression is a different game entirely. Since 2007, the world has been in an unacknowledged depression. A depression is like a game of musical chairs in which ten children are walking around, but suddenly nine of the chairs are taken away. This means that nine of the children will soon be out of the game. But it also means that all ten understand that the odds of them remaining in the game are quite slim and that desperate times call for desperate measures. It’s time to toss out the rule book and do whatever you have to, to get the one remaining chair.
This worthwhile commentary by Jeff put in an appearance on the internationalman.com Internet site on Monday — and another link to it is here.
The Q.E. Forever Cycle Will Have a Catastrophic End — Financial Times of London
Policymakers have chosen to ignore the central issue of debt as they try to resuscitate activity.
Since 2008, total public and private debt in major economies has increased by over $60tn to more than $200tn, about 300 per cent of global gross domestic product (“GDP”), an increase of more than 20 percentage points.
Over the past eight years, total debt growth has slowed but remains well above the corresponding rate of economic growth. Higher public borrowing to support demand and the financial system has offset modest debt reductions by businesses and households.
If the average interest rate is 2 per cent, then a 300 per cent debt-to-GDP ratio means that the economy needs to grow at a nominal rate of 6 per cent to cover interest.
Financial markets are now haunted by high debt levels which constrain demand, as heavily indebted borrowers and nations are limited in their ability to increase spending. Debt service payments transfer income to investors with a lower marginal propensity to consume. Low interest rates are required to prevent defaults, lowering income of savers, forcing additional savings to meet future needs and affecting the solvency of pension funds and insurance companies.
This commentary was posted on the Financial Times on Monday — and it’s posted in the clear on David Stockman’s website. Another link to it is here — and it’s worth your while if you have the time and/or the interest.
Monte Paschi capital wiped out in European bank stress test
The world’s oldest bank is also Europe’s riskiest.
Italy’s Banca Monte dei Paschi di Siena SpA was the only one of 51 lenders tested by European regulators to have its capital wiped out in the exam’s toughest scenario. The bank, which has been bailed out twice by the government since 2009, said it plans to sell as much as €5 billion ($5.6 billion) of stock if it can offload a bad-loan portfolio.
The European tests released Friday showed that most lenders would keep an adequate level of capital in a crisis. Among the region’s biggest banks, London-based Barclays Plc fared worse than Deutsche Bank AG and almost as poorly as Italy’s UniCredit SpA. Monte Paschi and Allied Irish Banks Plc fell below the minimum capital level required by regulators.
“The results are better than expected for the bigger banks, including Deutsche Bank and UniCredit,” said Carlo Alberto Carnevale Maffe, professor of business strategy at Milan’s Bocconi University. “What remains a worry is Monte Paschi, which needs urgent measures to replenish capital.”
Persistent doubts over the resilience of lenders, particularly those in Italy, have made banking shares the worst performers on the Stoxx Europe 600 Index this year.
This Bloomberg article from Monday is datelined 2:02 p.m. EDT yesterday, but it has been extensively rewritten since it was originally posted — and also sports a new and less ominous sounding headline. I received a copy of it four hours before then, so I know what used to be in it. It’s also another contribution from Brad Robertson — and it’s worth reading. Another link to this story is here. There was also an AP story about this courtesy of Brad as well. It’s headlined “Shares in troubled Italian bank rise on rescue deal” — and a link to that is here.
Deutsche Bank, Credit Suisse Kicked Out Of Stoxx Europe 50 Index
What do you do when you are one of the biggest indices in Europe and are unable to rise simply because two of your biggest constituents, if not so much in market cap any more but certainly in terms of systemic importance, just can’t catch a bid? Why you delete them, of course even if the two names in question happen to be Europe’s two largest banks, Deutsche Bank and Credit Suisse.
Moments ago, STOXX Ltd, the operator of Deutsche Boerse Group’s index business, announced component changes in the STOXX Europe 50 Index due to the fast-exit rule. All changes become effective with the open of markets on Aug. 8, 2016.
What is the Fast Exit rule? “The rule states that a component is deleted from the Dow Jones EURO STOXX 50 or Dow Jones STOXX 50 indexes if it ranks 75 or below on the respective index’s monthly selection lists for a consecutive period of two months. Deleted components for all three indexes will be replaced by the highest ranking non-components on the monthly selection list. Component changes will be announced on the first trading day of the month following the publication of the monthly selection lists, implemented on the close of the fifth trading day and effective the next trading day.”
In other words, someone did not like how DB and CS were trading and decided to kick them out.
This very interesting, but not surprising article appeared on the Zero Hedge website at 4:34 p.m. on Monday afternoon EDT — and I thank West Virginia reader Elliot Simon for finding it for us. Another link to this new story is here.
Eurozone GDP growth halves as French economy stalls
GDP rose by 0.3% between April and June, in line with expectations but below 0.6% growth in the first quarter.
France, the eurozone’s second-largest economy, saw no growth after expanding by 0.7% in the first quarter.
Eurozone inflation rose to 0.2% in July from 0.1% in June as a result of higher food, alcohol and tobacco prices.
Data also revealed that the eurozone jobless rate remained at 10.1% in June.
The economic growth figures are the first to be published since Britain voted to leave the European Union (EU).
This story put in an appearance on the bbc.com Internet site last Friday — and my thanks go out to Patrik Ekdahl for sending it along. Another link to this news item is here.
IMF admits disastrous love affair with the euro and apologises for the immolation of Greece — Ambrose Evans-Pritchard
The International Monetary Fund’s top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory.
This is the lacerating verdict of the IMF’s top watchdog on the fund’s tangled political role in the eurozone debt crisis, the most damaging episode in the history of the Bretton Woods institutions.
It describes a “culture of complacency”, prone to “superficial and mechanistic” analysis, and traces a shocking breakdown in the governance of the IMF, leaving it unclear who is ultimately in charge of this extremely powerful organisation.
The report by the IMF’s Independent Evaluation Office (IEO) goes above the head of the managing director, Christine Lagarde. It answers solely to the board of executive directors, and those from Asia and Latin America are clearly incensed at the way European Union insiders used the fund to rescue their own rich currency union and banking system.
I love it when Ambrose gets angry, as he’s a the top of his game when he’s got his knickers in a twist. This commentary showed up on the telegraph.co.uk Internet site last Friday — and I found it on the gata.org Internet site. It’s certainly worth reading if you have the interest — and another link to this article is here.
Russia Expert Stephen Cohen: Trump Wants To Stop The New Cold War, But The American Media Just Doesn’t Understand
Stephen F. Cohen, professor emeritus of Russian studies at NYU and Princeton, spoke with CNN’s ‘Smerconish’ Saturday morning about Donald Trump, Vladimir Putin, and the ‘New Cold War.’
Cohen says the media at large is doing a huge disservice to the American people by ignoring the substance of Trump’s arguments about NATO and Russia, and buying the Clinton campaign’s simplistic smear that Trump is a Russian “Manchurian candidate.”
“That reckless branding of Trump as a Russian agent, most of it is coming from the Clinton campaign,” Cohen said. “And they really need to stop.”
“We’re approaching a Cuban Missile Crisis level nuclear confrontation with Russia,” he explained. “And there is absolutely no discussion, no debate, about this in the American media.”
This 5:26 minute video clip [with partial transcript] from CNN on Saturday is a must watch, even if you’re not a serious student of the New Great Game. Like his interview with John Batchelor in my Saturday column, Stephen doesn’t pull any punches here — and lays out the whole situation in no uncertain terms. All of this was posted on the realclearpolitics.com Internet site — and my thanks to Larry Galearis for pointing it out. Another link to all of this is here.
Putin’s Warning: Full Speech — June 2016
Initially, I translated only a small portion of this segment as I felt the key message must be made obvious. However, I have been pleasantly surprised with many people around the world reaching out to translate this into other languages, as well as to see the full address. This candid conversation took place with representatives of various media outlets during the St. Petersburg International Economic Forum, in June 2016. Putin urged journalists to report genuinely on the impending danger that is a nuclear arms race.
Nobody has anything to gain from a nuclear stand-off against Russia. The power hungry decision-makers are few in number, but powerful enough to have subverted mainstream media to misrepresent Russia as the main threat to international security.
If you are a journalist or a blogger, please do your part and share this message. Time is of the essence , especially in light of the recent NATO summit in Warsaw (July 2016) where the alliance stipulated that Russia is the main threat to international security.
This 12:18 minute video clip in Russian, with English subtitles, was posted on the youtube.com Internet site on July 24 — and is an absolute must watch!!! This is right from the horse’s mouth, without any spin from the international media added. I thank Roy Stephens for pointing it out — and it fits perfectly with the Stephen F. Cohen interview that precedes this story. Another link to it is here.
Gundlach: “Sell everything — except gold and gold stocks“
Jeffrey Gundlach, the chief executive of DoubleLine Capital, said on Friday that many asset classes look frothy and his firm continues to hold gold, a traditional safe-haven, along with gold miner stocks.
Noting the recent run-up in the benchmark Standard & Poor’s 500 index while economic growth remains weak and corporate earnings are stagnant, Gundlach said stock investors have entered a “world of uber complacency.”
“The artist Christopher Wool has a word painting, ‘Sell the house, sell the car, sell the kids.’ That’s exactly how I feel – sell everything. Nothing here looks good,” Gundlach said in a telephone interview.
This Reuters story from late Friday afternoon was picked up by the businessinsider.com Internet site — an already has 37,700 hits as I post it in my column at 9:20 p.m. EDT yesterday evening. It’s a must read for sure — and my thanks go out to reader U.D. for passing it around. Another link to it is here.
Ronan Manly: Austrian Mint sold 41 tonnes of gold coins and bars in 2015
Earlier this year, the director of marketing and sales at the Austrian Mint confirmed to Bloomberg in an interview that the Mint’s combined gold bar and gold coin sales in 2015 had totalled 1.32 million troy ounces, a 45% increase on 2014, while the Mint’s silver sales in 2015 had reached 7.3 million ounces, a figure 58% higher than in 2014.
Since Münze Österreich, or the Austrian Mint in English, only publishes its annual report in July of each year, we had to wait a few months to see the granular details behind these sales numbers. Now that the Austrian Mint’s 2015 Annual Report has been published, the detailed sales figures are as follows.
In 2015, the Austrian Mint sold 756,200 troy ounces (23.52 tonnes) of Vienna Philharmonic gold coins, of which 647,100 troy ounces (20.18 tonnes) were in the form of its flagship 1 oz Vienna Philharmonics, with the remainder comprising ½ oz, ¼ oz, 1/10 oz and 1/25 oz gold Philharmonic coins, as well as a handful of the Mint’s very large 20 oz gold Philharmonics. Gold Philharmonic sales in 2015 were 56% higher than comparable sales of 483,700 ozs in 2014, and were also higher than 2013’s figure of 652,600 ozs.
This rather long commentary from Ronan Manly is definitely worth reading — and I note that he’s got Nick’s Austria Mint charts in his article as well, so he must be on Nick’s chart distribution list, as I am. It was posted on the Singapore-based bullionstar.com Internet site on Sunday — and I found it embedded in a GATA release. Another link to this story is here. [The folks at Canada’s Royal Canadian Mint still don’t have their second quarter report posted yet — and I’ve been checking for it every day. — Ed]
The silver boom is coming
Silver is still about 60 percent below its last peak. So, there is a lot of room for silver prices to climb before they get back to where they were a few years ago.
But if you really want to maximise your returns in the coming silver bull market look at silver mining shares. Their prices explode when silver prices boom.
That’s because running a mine costs the same – whether silver prices are high or low. With fixed costs and low silver prices, miners often barely break even. But when silver prices are higher, and the mining costs haven’t changed, it means bigger profits for the mining companies – and higher share prices.
For example, during the most recent silver bull market from late 2008 through 2011, silver prices rose over 400 percent. At the same time, the Solactive Global Silver Miners Index, which tracks a basket of silver mining companies, gained 595 percent – or 50 percent more.
If you’re a silver buff, this falls into the must read category for sure. It put in an appearance on the businessinsider.com Internet site late Saturday morning EDT — and I thank Elliot Simon for sharing it with us. Another link to this news item is here.
The PHOTOS and the FUNNIES
Here are two more photos of that juvenile muskrat. As you can see, it’s come to the shore — and I actually had to back off a bit so I could lock focus, as it as within 4 meters. I’m looking down on it now — and not from the side. As you can tell, there’s no depth of field here worth mentioning, as the area of sharp focus is only a handful of centimeters deep at this distance. The click to enlarge feature helps on both these shots.
The WRAP
I find myself thinking about the circumstances of how the big 5 thru 8 gold short which bought back its short position and came to be replaced by JPMorgan or another big short trader. This doesn’t sound at all like a fully open market transaction in which a big short moved to buy back in a transparent manner and accepting free market sell orders to close out the short position. Instead, it reeks as an arranged trade (highly illegal) in which the vast majority of market participants and observers knew nothing about as it was transacted. The price action during the reporting week it which it occurred was highly orderly and no hint was given that a big short fish was in trouble. My guess is that the big gold short which covered came into financial distress weeks ago and was carried by the exchange until the position rearrangement was finalized.
As such, someone had to know of it – certainly the short trader which bought back and JPMorgan or whoever else added gold shorts. The CME clearing house had to know and probably arranged the illegal transaction. While I am convinced few other traders were aware of the gold short in trouble, I am not sure if the CFTC was in on this or is as out to lunch as some (including me) profess. My hunch is that the CFTC was told after the gold short got in trouble but before the transaction was effected. In any event, this was an arranged transaction in keeping with a long COMEX tradition of arranged transactions (such as the Bear Stearns takeover and the May 1, 2011 silver price massacre). The only questions are was it enough and what now?
Even though I think I have a clear reading on what took place that doesn’t extend to blueprinting short term price action. As I’ve maintained all along, I’ve narrowed it down to either we go straight up from here or experience one last hard shake to the downside before lifting off for good. This week’s extraordinary big 8 gold repositioning just accentuates either outcome. Should the commercials lose control, prices will surge and it is hard to understate all the unintended consequences. I’m not an end of the world guy, but a genuine commercial failure could rock the world. — Silver analyst Ted Butler: 30 July 2016
Nothing should be read into Monday’s price action. It was just another day off the calendar in most respects. All we can do is just wait for the resolution of the current situation. As to when that will happen, who knows, but I’d be prepared to bet a fair amount of coin that this certainly resolved well before the end of this year.
Here are the 6-month charts for all four precious metals. There’s not much to see except for the fact that platinum and palladium continue to power to new highs just about every day, including yesterday.
And as I type this paragraph, the London open is less than ten minutes away — and I note that after getting sold down six bucks or so by shortly after 10 a.m. Hong Kong/Shanghai time on their Tuesday morning, the gold price began to rally just minutes before 2 p.m. HKT — and is down less than a dollar at the moment. Silver was sold down about a dime — and is back to unchanged currently. Platinum and palladium were also sold down a couple of dollars in early Far East trading, but platinum is now up 5 bucks — and palladium is up 3.
Net HFT gold volume is around 28,000 contracts, net of the volume in both October and December — and in silver, net HFT volume is just under 6,700 contracts. The dollar index had a down/up move of about 15 basis points in early morning trading in the Far East, but then rolled over mid-morning — and has been chopping lower ever since. As London opens, the dollar index is down 18 basis points.
Today, at the close of COMEX trading, is the cut-off to this Friday’s Commitment of Traders Report — and unless there’s a huge downside price reversal during the remainder of the Tuesday session, the COT Report on Friday will be another one for the record books.
Along with Friday’s Commitment of Traders Report we get the companion Bank Participation Report. This data is extracted directly from the above-mentioned COT Report, so 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 it’s usually quite a bit. Ted will also be able to recalibrate JPMorgan’s short position in silver in the COMEX futures market.
And as I post today’s column on the website at 4:12 a.m. EDT, I note that gold rallied about 5 bucks starting at the London open — and appears to have been capped just before 9 a.m. BST over there, but it’s way too soon to say if that was the end of the current rally or not. Silver’s up 9 cents — and just off its current high tick as well. Platinum is still rallying — and up 9 dollars, but it got tapped lower just before 9 a.m. BST as well — and palladium was up a few bucks at the London/Zurich open, but has been sold back to unchanged.
Net HFT gold volume is a bit over 43,500 contracts — and that’s net of October and December. Silver’s HFT volume is now up to a hair under 10,000 contracts, so it’s obvious that JPMorgan et al are at battle stations throwing everything they have at the precious metals to keep from exploding higher.
The dollar index, which was down 17 basis points just before the London open, is now down 36 basis points as of 4:02 a.m. EDT — 9:02 a.m. BST in London.
I haven’t a clue as to how trading will turn out today. We’re in totally uncharted territory now — and just observers from this point onward. Only ‘da boyz’ know for sure what’s going on — and maybe I’m giving them way too much credit at this juncture, because they could be making things up as they go along.
And as I said in closing in my Saturday column — “How did it come to this?”
See you tomorrow.
Ed
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