25 August 2016 — Thursday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price didn’t do much of anything in Far East and London trading on their Wednesday — and was a up a buck and change by 8:40 a.m. in New York. Then ‘da boyz’ pulled the plug, hit the sell stops — and the Managed Money traders began to puke their longs and go short. That all came to an end around 2:30 p.m. in the thinly-traded after-hours market — and the price didn’t do much after that.
The high and low tick were recorded by the CME Group as $1,344.10 and $1,327.00 in the December contract.
Gold was closed in New York yesterday afternoon at $1,323.80 spot, down $13.10 from Tuesday. Net volume was pretty heavy at just under 195,000 contracts — and that includes both October and December’s volume.
Here’s the 5-minute tick gold chart courtesy of Brad Robertson once again — and as you can tell, there was no volume worthy of the name in either Far East or London trading compared to the monster volume that occurred during the New York session. The three big volume spikes during morning trading on the COMEX are the standout features — and it’s fair to say that volume never really fell back to what would normally be called ‘background’ levels for the remainder of the Wednesday session, even in the thinly-traded after-hours market.
The vertical gray line is 10:00 p.m. Denver time, midnight in New York — and 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.
Of course JPMorgan didn’t spare silver, either — and it got hit at the same time as gold. Most of the losses that mattered were in by 10:45 a.m. EDT, but it continued to crawl lower until around 2:15 p.m. in the after-hours trading — and it traded quietly sideways from there into the 5 p.m. close.
The high and low in this precious metal was reported by the CME Group as $18.965 and $18.50 in the September contract.
Silver was closed on Wednesday at $18.505 spot, down 27.5 cents from Tuesday. Net volume was nothing special at just over 38,000 contracts, but roll-over activity out of September was as heavy as I said it would be.
Platinum didn’t do much in either Far East or London trading yesterday — and was down 3 or 4 dollars by the COMEX open. But starting at 8:35 a.m. in New York — and ending by the Zurich close at 11 a.m. EDT, the price had been hit for 30 bucks and change. It recovered a bit from there, finishing the Wednesday session at $1,076 spot, down 29 dollars on the day.
Ditto for palladium, with its low tick coming shortly before noon in New York. It rallied a bit until 3 p.m. in after-hours trading, but then was sold back down into the close. Palladium finished the Wednesday session at $681 spot, down 15 bucks from Tuesday.
The dollar index closed very late on Tuesday afternoon in New York at 94.53 — and continued to chop quietly higher from its early morning low tick in London on their Tuesday morning. The index rolled over around the 94.70 mark starting around 2:30 p.m. HKT on their Wednesday afternoon. The 94.51 low tick came around 9:20 a.m. BST in London yesterday morning — and it began to rally unsteadily once again. The 94.92 high tick came shortly before noon in New York — and it fell back to just above the 94.75 mark — and it chopped quietly sideways from there. The index finished the Wednesday session at 94.77 — which was up 24 basis points from its Tuesday close.
And as you can tell from the dollar index chart below, the sell-offs in the precious metals had zero to do with what was going on in the currency market, as that was purely a manufactured event.
And here’s the 6-month U.S. dollar index chart for entertainment purposes only.
The gold stocks got hammered until around 2:30 p.m. in New York — and then some bottom fishing appeared — and they traded mostly sideways until the markets closed in New York yesterday afternoon. But despite the bottom fishing, the HUI closed down a chunky 7.84 percent.
And as bad as it was for the gold shares, the silver equities go hit even worse, as Nick Laird’s Intraday Silver Sentiment Index closed down a whopping 9.49 percent. It was a bloodbath. Click to enlarge if necessary.
The CME Daily Delivery Report showed that 214 gold and 11 silver contracts were posted for delivery within the COMEX-approved depositories on Friday. In gold, the only short/issuer worth noting was Goldman Sachs with 207 contracts out of its client account. The only long/stopper worth noting was JPMorgan with 201 contracts for their ‘client’ account. In silver, the only short/issuer was ADM. JPMorgan stopped 7 for its client account — and Canada’s Scotiabank picked up 3 contracts for its own account. It doesn’t have a client account. The link to yesterday’s Issuers and Stoppers Report is here.
The CME Preliminary Report for the Wednesday trading session showed that gold open interest in August fell by 321 contract, leaving 370 still open, minus the 214 contracts mentioned in the previous paragraph. Tuesday’s Daily Delivery Report showed that 499 gold contracts were posted for delivery today, so that means that another 499-321=178 gold contracts were added to the August delivery month. August silver o.i. was unchanged at 16 contracts. Tuesday’s Daily Delivery Report showed that 10 silver contracts were posted for delivery today, so that means that 0+10=10 silver contracts were added to the August delivery month.
September open interest in gold dropped by 185 contracts, leaving 3,872 still around — and October o.i. in gold fell by 244 contracts, leaving 46,594 still open.
There were no reported changes in GLD yesterday — and as of 8:52 p.m. EDT yesterday evening, there were no reported changes in SLV.
The folks over at the shortsqueeze.com Internet site updated the short positions for both SLV and GLD as of the close of trading on August 15 — and this is what they had to report. The short interest in SLV rose from 10.71 million shares/troy ounces, up to 12.39 million shares/troy ounces, an increase of 15.7 percent. The short interest in GLD dropped from 1.39 million troy ounces, down to 1.22 million troy ounces, which was a decline of 12.4 percent.
There was a small sales report from the U.S. Mint yesterday. They sold 3,500 troy ounces of gold eagles — and 2,500 one-ounce 24K gold buffaloes — and no silver eagles.
There wasn’t much activity in gold over at the COMEX-approved depositories on Tuesday. Nothing was reported received — and only 20,993 troy ounces were shipped out, with ninety percent of the withdrawals [600 kilobars/19,290.000 troy ounces] coming from Canada’s Scotiabank. There were 52 kilobars taken out of Brink’s, Inc., plus 1 out of Manfra, Tordella & Brookes, Inc. All of the kilobars were the U.S./British kilobar weight of 32.150 troy ounces. The link to all that activity is here.
There was big ‘in’ movement in silver yesterday, as 1,048,397 troy ounces were received, but only 30,043 were shipped out. The big ‘in’ activity was divided up between HSBC USA and Canada’s Scotiabank. The link to that action is here.
Over at the COMEX-approved gold kilobar depositories in Hong Kong on their Tuesday, they reported receiving 740 of them, but shipped out 3,309. All of the activity was at Brink’s, Inc. as per usual — and the link to that, in troy ounces, is here.
There wasn’t a lot what I call real hard news stories yesterday, so I don’t have a lot for you today.
CRITICAL READS
Bubbles in Bond Land: A Central Bank Made Mania, Part 3 — David Stockman
The Giant Volcano Of Uncollectible Capital Gains In Global Bond Markets
…….In short, the global bond market has become a giant volcano of uncollectible capital gains. For example, long-term German bunds issued four years ago are now trading at 200% of par.
Yet even if the financial system of the world somehow survives the current mayhem, the German government will never pay back more than 100 cents on the dollar.
What that means is there will eventually be a multi-trillion dollar bond implosion as speculators and bond fund managers alike scramble to cash-in their capital gains at the first sign that the global bond markets are breaking and heading back to par or below. And it is not just the “winners” who will be stampeding for the exists.
There will also be an even larger and sorrier band of “losers” in an even greater state of panicked flight. We refer here to all the Johnny-come-lately bond managers on the planet who are today buying trillions of bonds at a premium to par. For example, the premium price of the 4% coupon Italian bonds that have traded up to a 1.2% yield owing to Mario Draghi’s $90 billion per month buying spree will get absolutely monkey-hammered when the ECB’s Big Fat Bid finally ends.
Another worthwhile excerpt from David’s upcoming book. This one was posted on his Internet site yesterday — and I thank Roy Stephens for sharing it with us. Another link to this commentary is here.
The hidden risk to the economy in corporate balance sheets
You might think big U.S. companies, if anything, have been too conservative with their finances. They’ve collectively hoarded hundreds of billions of dollars in cash, instead of spending it to hire workers or expand their operations.
The reality is different, and more worrisome. Much of the cash is held by just a precious few companies, while debt is ballooning at other, weaker businesses as investors desperate for income rush to lend to them. These investors could face losses, perhaps steep, if economic growth falters. The broader economy is also vulnerable because companies with more debt have to cut back further and lay off more whenever downturns hit.
“There’s a misconception that companies are swimming in cash,” says Andrew Chang, a director at S&P Global Ratings. “They’re actually drowning in debt.”
It turns out there’s a wealth gap among companies, just like among people. Of the $1.8 trillion in cash that’s sitting in U.S. corporate accounts, half of it belongs to just 25 of the 2,000 companies tracked by S&P Global Ratings. Outside of Apple, Google and the rest of the corporate 1 percent, cash has been falling over the last two years even as debt has been rising. It now covers only $15 of every $100 they owe, less than it did even during the financial crisis in 2008 when finances were crumbling.
You don’t have to look hard to find other signs of trouble.
This AP story, filed from New York, found a home over at the finance.yahoo.com Internet site yesterday — and it comes courtesy of West Virginia reader Elliot Simon. It’s certainly worth reading — and another link to this news item is here.
Cuba: A Forbidden Investment Fruit
“If surviving assassination attempts were an Olympic event, I would win the gold medal.”
These are the words of former Cuban leader Fidel Castro.
There have been more plots to kill him than any other man alive.
The U.S. has wanted Castro dead since 1959. That’s when he overthrew the pro-U.S. puppet government in Cuba. The CIA has been plotting to kill him ever since.
This very interesting commentary by International Man senior editor Nick Giambruno put in an appearance on their website yesterday sometime — and another link to it is here.
Belgium offers olive branch on Brexit, calls for North Sea Union
The prime minister of Flanders has proposed a radical North Sea Union linking Britain to a cluster of regional states to cushion the Brexit shock, a sign that European leaders are starting to look for creative ways to heal the referendum rift.
Geert Bourgeois, leader of Belgium’s dominant region, said there is a growing consensus in E.U. capitals that it would be fatal mistake to try to “punish” Britain.
“More and more people now agree that there has to be a ‘soft Brexit,” he told the Daily Telegraph.
Mr Bourgeois said the vote to leave the E.U. was a sad moment but he insisted that it is possible to find a new modus vivendi on a friendly footing, to the benefit of all.
This Ambrose Evans-Pritchard offering appeared on the telegraph.co.uk Internet site at 5:39 p.m. BST on their Wednesday afternoon, which was 12:39 p.m. in New York — EDT plus 5 hours. I thank Roy Stephens for sending it our way — and another link to this story is here.
European Derivatives Users Hit as Negative Rates Raise Collateral Costs
Derivatives users are the latest group to be hurt by negative interest rates as they get penalized for the cash they park at Europe’s biggest clearinghouses. Traders can thank European Central Bank President Mario Draghi.
Futures and swaps are used to hedge or speculate on everything from German interest rates to oil prices. To avoid taking a loss if a counterparty to a trade defaults, they post collateral, such as government bonds or cash, at a clearinghouse. In Europe, the biggest ones are in Frankfurt and London. But with German and U.K. debt yields so low, or even negative, clearinghouse customers are sometimes losing money on those assets.
Europe’s big clearing firms are operated by the likes of Deutsche Boerse AG, Intercontinental Exchange Inc. and LCH, which is majority owned by London Stock Exchange Group Plc. To varying degrees, they have customers who lose money on euro collateral, whereas they used to receive a return. Two-year German debt yields minus 0.64 percent. An important benchmark known as Eonia, the euro overnight index average, is at minus 0.34 percent.
While the costs don’t so far seem to be impeding trading or collateral holdings, they’re a sign that monetary policy may be reaching its limits, as central bankers such as Draghi have reduced interest rates and bought up vast amount of assets to try to boost weak economic growth. The unusual costs to hold cash at clearinghouses suggest the measures are starting to have unintended consequences.
This Bloomberg story showed up on their website at 2:09 a.m. Denver time on Wednesday morning — and it’s the second contribution of the day from Elliot Simon. Another link to this rather convoluted story is here.
Deutsche Bank CEO Warns of “Fatal Consequences” For Savers
Deutsche Bank’s war of words with the ECB is not new: it was first unveiled in February when, as we wrote at the time “A Wounded Deutsche Bank Lashed Out At Central Bankers: Stop Easing, You Are Crushing Us.” Europe’s largest bank, with the massive derivatives book, then upped the ante several months later in June, when its chief economist Folkerts-Landau launched a shocking anti-ECB rant in which it warned of social unrest and another Great Depression.
Ironically, these infamous diatribes hurt more than helped: telegraphing to the market just how hurt DB was as a result of the ECB’s monetary policy, the market punished its stock, which has been recently trading within spitting distance of all time lows, in effect making Deutsche Bank’s life even harder as it now has to contend not only with its own internal profitability problems, but also has to maintain a market-facing facade that all is well. So far, it has not worked out very well, prompting numerous comparisons to another infamous bank.
So, in what may have been DB’s loudest cry for help against the ECB’s unwavering commitment to rock-bottom interest rates, the bank’s CEO, John Cryan, warned in a guest commentary ahead of the Handelsblatt Banking Summit titled, appropriately enough “Banks in Upheaval”, to be held in Frankfurt on August 31 and September 1, that “monetary policy is now running counter to the aims of strengthening the economy and making the European banking system safer.“
However, his most striking warning was not aimed at Mario Draghi, but at Germany itself – and ostensibly his own clients – implicitly suggesting that if Deutsche Bank goes down it is taking everyone down with it, when, as cited by Bloomberg, he warned of “fatal consequences” for savers and pension plans while “companies refrain from investments due to ongoing uncertainty and demand less loans.”
This longish news item showed up on the Zero Hedge website at 6:42 p.m. on Wednesday evening EDT — and my thanks go out to Elliot Simon for the third time today. Another link to this story is here.
Trouble between Moscow and Tehran?
While the granting of the use of the Iranian airbase in Hamedan to the Russian Aerospace forces was greeted with a lot of coverage, the recent departure from Hamedan of the Russian Tu-22M3 has attracted much less attention. The official Russian line on this was very neutral, as shown by this article in Sputnik.
What really took place, however, deserves some further scrutiny.
First, it should be said that the Russians had been using that airbase for a quite a while already, but that the deal between Russia and Iran had been kept secret. According to Russian sources, it appears that the Iranians were completely surprised when this information was made public and that some factions inside the ruling elites of Iran were outraged at what they saw as a public admission of a compromise of Iranian sovereignty. First, it was the Iranian Defense Minister, Hossein Dehghan, who expressed his outrage at what he saw was a Russian leak made without Iranian agreement. According to Dehghan, the Russians wanted to show that they were an influential superpower and that is why they made that information public. Soon after that, both the Iranian Foreign Ministry and the Russian ambassador to Tehran confirmed that the Russians had left Hamedan and that they would only come back when the two countries would agree to their return.
However, there might be more to this than meet the eye.
This short commentary by The Saker appeared on thesaker.is Internet site yesterday — and it’s certainly a must read if you’re a serious student of the New Great Game. Another link to this article is here — and I thank ‘aurora’ for pointing it out.
China’s runaway bosses a symptom of economic woes
Wanted posters for fugitive debtors, not commercials, are the main images that flash up on a big electronic screen in downtown Yixing, in the heart of the faltering Chinese industrial powerhouse that is the Yangtze River Delta.
The posters, from the local courts, show the identity card numbers and pictures of dozens of people who have fled unpaid debts. Rewards ranging from 20,000 yuan (HK$23,000) to 330,000 yuan are offered to anyone reporting their whereabouts.
But Hengsheng Square is the glitziest part of Yixing – with the most luxury stores, the brightest lights and the priciest office buildings – and few passers-by, their attention directed elsewhere, heed the wanted posters. They have little novelty value in any case, with the “runaway debtor” phenomenon now just part of daily life in the small city as economic growth slows.
In many ways, the square stands as a metaphor for the overall health of the Chinese economy. Under a prosperous surface, deep cracks have begun to emerge in its investment-led model, casting a shadow over the country’s economic growth prospects and even giving rise to doubts about the fundamental soundness of the world’s second-biggest economy.
This must read article put in an appearance on the South China Morning Post website at 3:26 p.m. Beijing time on their Wednesday afternoon — and was updated at 9:23 a.m. on their Thursday morning, which was 9:23 p.m. in New York Wednesday evening EST. The headline has been changed to read “Wanted posters for fugitive debtors and runaway bosses symptoms of China’s economic woes” — but that takes nothing away from the story. I thank Hong Kong subscriber Graham C. for sending it our way. Another link to this must read story is here.
Someone Puked $1.5 Billion of Notional Gold, and the Selling Continues
Gold continues to be pummeled having broken through its 50-day moving average at $1,338.
As we detailed earlier, it made perfect sense – someone just decided in keeping with their fiduciary duty, 0840ET was the perfect time to unleash $1.5 billion of gold notional into the futures markets….
Over 10,000 contracts dumped in 1 minute… “normal”
Well, dear reader, whoever wrote this chart-filled Zero Hedge piece yesterday afternoon doesn’t have it exactly right — and I’ll have more about this in The Wrap further down. I thank Richard Saler for bringing this ZH piece to our attention — and another link to it is here.
Gold to Hit $1,600 by Christmas: ScotiaWealth’s Fishman
Elliott Fishman, Director, U.S. & International Trading, ScotiaWealth joins Bloomberg TV Canada’s Pamela Ritchie to discuss why he’s bullish on gold and expects it to go as high as $1,800.
This 1:04 minute video clip showed up on their website at 5:22 p.m. Denver time on Tuesday afternoon — and I thank Elliot Simon for finding this for us.
Victorian prospector unearths 145-ounce gold nugget
At first glance, the small lump in the earth looked like worthless scrap.
On closer examination, the prospector guessed it was the tip of an old horseshoe.
He dug deep into the soil – unearthing 30 centimetres – before finding the unthinkable.
Gold!
This very interesting gold-related news item appeared on The Sydney Morning Herald website at 1:54 p.m. AEST [Australia Eastern Standard Time] on their Thursday afternoon — and it’s definitely worth your while, even if you only look at the pictures. I thank Australian subscriber ‘J.W.’ for bringing it to my attention — and now to yours. Another link to this news item is here.
The PHOTOS and the FUNNIES
The first photo is similar to the one I posted yesterday, except it’s cropped vertically rather than horizontally. To find a moose framed by grass and little else, is rarity, as they are creatures of the bush and the forest. The second shot shows him climbing up from the creek to reenter the canola sea in front of him which, like I said yesterday, is virtually impenetrable to anything with two or four legs, with the exceptions being moose and mice. The click to enlarge feature only helps on the second photo.
The WRAP
At 8:40 a.m. in New York, JPMorgan et al, along with their HFT buddies, pulled every dirty and illegal trick in the book — bid pulling, spoofing, and high-frequency trading techniques to set prices lower through the various sell stops — and then sat back and watched the Managed Money traders and their black boxes sell longs in a panic — and lay on short positions. That’s when the real big volumes and price declines appeared — and the Commercial traders were there to scoop up the other side of these trades and reduce their short positions in the process.
Ted Butler has pointed this out many times over the past number of years, but like the erroneous conclusions of the Zero Hedge article in the Critical Reads section above, most so-called analysts still don’t understand the routine that JPMorgan et al use when they’re slicing the salami to the downside like they were yesterday.
Ted mentioned in his mid-week commentary on Wednesday that the commercial traders, as of yesterday’s closing prices, are still sitting on unrealized combined loses in gold and silver that total $1.7 billion — and he doesn’t know if they’re completely out of danger or not.
Here are the 6-month charts for all four precious metals as of the close of COMEX trading yesterday — and they’re certainly different looking animals now than they were in yesterday’s column.
And as I type this paragraph, the London open is less than ten minutes away — and I note that the gold price has been chopping sideways, mostly a bit above unchanged in Far East trading on their Thursday — and is currently up 2 bucks. The same in silver — and it’s up only a nickel at the moment. Ditto for platinum — and it’s up 2 dollars at the moment. Palladium was up as much as 8 dollars around 1 p.m. HKT, but is now up only 3 bucks.
Net HFT gold volume is very much on the lighter side at 24,000 contracts — and that volume number includes October and December. In silver, the HFT volume is sitting at 8,300 contracts, with very decent roll-over activity out of September and into the new front month which, like gold, is December. The dollar index hasn’t been doing much since trading began at 6 p.m. in New York on Wednesday evening — and it’s down 3 basis points as London opens.
Despite the improvements in the Commercial net short positions after yesterday’s engineered price declines, the COT structure is still wildly bearish in all four precious metals — and how much lower prices will go from here is very much an unknown at the moment.
The annual Jackson Hole Symposium is upon us starting today — and runs through Saturday. The topic this year is “Designing Resilient Monetary Policy Frameworks for the Future” — and I would guess that SDRs, Special Drawing Rights, with or without gold being included as one of the ‘currencies’, will be high on the agenda.
Yellen speaks on Friday — and if it occurs during normal business hours, it can be assumed that the precious metals will ‘react’ once again, most likely with another pounding courtesy of the New York bullion banks et al.
And as I post today’s column on the website at 4:00 a.m. EDT, I see that absolutely nothing happened in the first hour of trading in London and Zurich this morning. All four precious metals continue to chop quietly sideways — and volumes are very quiet as well. The dollar index isn’t doing anything either.
There hasn’t been much if any sign of ‘da boyz’ so far today, but all bets will be off once COMEX trading begins — and it remains to be seen if they show up with their bag of tricks again.
That’s it for today — and I’ll see you here tomorrow.
Ed
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