26 August 2016 — Friday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price traded higher by a dollar or two during most of the Far East session on their Thursday. But shortly after 9 a.m. BST in London, it was sold lower in two separate episodes, with the low tick coming at 8:40 a.m. in New York which, strangely enough, was the exact time that JPMorgan et al hammered precious metal prices on Wednesday. From that low, the price chopped quietly higher until shortly after 11 a.m. in New York. Then it was sold off equally quietly into the 1:30 p.m. COMEX close — and the price didn’t do much after that.
The high and low ticks, such as they were, were reported by the CME Group as $1,326.50 and $1,317.40 in the December contract.
Gold finished the Thursday session at $1,321.60 spot, down another $2.20 from Wednesday’s close. Net volume was rather quiet, relatively speaking, at just over 130,000 contracts — and that number includes both October and December volume. October volume was very decent at 11,786 contracts.
Silver traded mostly higher as well — and was up a dime by shortly after 11 a.m. Hong Kong/Shanghai time. It stayed around that price until just before 11 a.m. in London — and was sold back to unchanged by the noon silver fix. The spike low tick of the day came just after 8 a.m. EDT — and the rally that developed after that was of no consequence, but even it got sold back to unchanged by noon in New York. It traded flat from there into the close.
The high and low ticks aren’t worth my while to look up.
Silver was closed in New York yesterday at $16.505 spot, exactly unchanged from Wednesday. Net volume was pretty quiet as well, at just under 28,500 contracts. Roll-over volume out of September was decent, but not overly heavy.
The platinum price traded in a very similar fashion to both gold and silver. It was up a few bucks until noon Zurich time, which was 6 a.m. EDT — and then it was sold down until noon in New York, closing with a small 5 dollar loss on the day at $1,071 spot.
It was more or less the same story in palladium, at least until noon Zurich time. It was up 5 bucks at that juncture, but was then sold off to its low tick of the day a bit over an hour later. It chopped unsteadily higher until around 2:30 p.m. in the the thinly-traded after-hours market in New York — and didn’t do much after that. Palladium finished the Thursday session at $687 spot, up 6 dollars on the day.
The dollar index closed very late on Wednesday afternoon in New York at 94.77 — and really didn’t do much on Thursday. It had a down/up move of about 20 basis points between the Wednesday evening open in New York — and noon EDT yesterday. The high tick at noon was 94.83 — and it chopped quietly lower from there, closing at 94.72 — down 5 basis points on the day. Nothing to see here, please move along.
And here’s the 6-month U.S. dollar index chart, which you can read into whatever you wish.
The gold stocks spiked down a bit at the New York open on Thursday morning, but rallied to their highs around 11:15 a.m. EDT, which was the top of the gold ‘rally’ in New York — and the start of its quiet decline into the close. The shares mostly followed suit, as the HUI closed up 1.05 percent.
The silver equities followed a very similar price path, so I’ll spare you the play-by-play. Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up a respectable 1.34 percent. Click to enlarge if necessary.
The CME Daily Delivery Report showed that 45 gold and zero silver contracts were posted for delivery within the COMEX-approved gold depositories on Monday. The only two short/issuers were Goldman Sachs and Morgan Stanley with 31 and 14 contracts out of their respective client accounts. Not surprisingly, JPMorgan was the largest long/stopper with 41 contracts for its ‘client’ account. 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 August fell by 209 contracts, leaving 161 still around, minus the 45 mentioned above. Wednesday’s Daily Delivery Report showed that 214 gold contracts were posted for delivery today, so that means that 214-209=5 more gold contracts were added to the August delivery month. August silver o.i. dropped by 11 contracts, leaving just 6 left. Wednesday’s Daily Delivery Report showed that 11 contracts were posted for delivery today, so the numbers work out right on the money.
September open interest in gold declined by 597 contracts, leaving 3,275 still open, but October gold o.i. rose by a hefty 1,265 contracts — and that puts October open interest up to 47,849 contracts.
There were withdrawals from both GLD and SLV yesterday. In GLD, an authorized participant took out 57,256 troy ounces — and that number in SLV was a pretty hefty 1,899,482 troy ounces. I would assume that all that silver is now owned by JPMorgan.
The folks over at Switzerland’s Zürcher Kantonalbank updated their website with the goings-on in their gold and silver ETFs as of the close of business on Friday, August 19 — and this is what they had to report. They added 19,471 troy ounces of gold, plus they added another 128,249 troy ounces of silver.
There was no sales report from the U.S. Mint.
There was very little movement in gold over at the COMEX-approved depositories on Wednesday. They received only 1,400 troy ounces at Brink’s, Inc. — and 4,070 troy ounces were shipped out, with virtually all of it coming from Canada’s Scotiabank. I shan’t bother linking that activity.
It was huge ‘in’ day for silver, as 1,780,980 troy ounces were reported receiving — and nothing was shipped out. Of the amount received, there was 1.20 million troy ounces deposited at Canada’s Scotiabank, with the rest going into HSBC USA. A link to that action is here.
Over at the COMEX-approved gold kilobar depositories in Hong Kong on their Wednesday, they reported receiving 1,580 of them — and only shipped out 77. All of the activity was at Brink’s, Inc. — and the link to that is here.
It’s another day where I don’t have all that many stories, but there are quite a few very decent ones in the mix — and I hope that some of them will float your boat.
CRITICAL READS
Years of Fed Missteps Fueled Disillusion With the Economy and Washington
Once admired globally for their command of the economic system, central bankers now are blamed by the left and right for bailouts during the financial crisis and for failing to foresee and manage forces suffocating the global economy in its aftermath.
Populist protest movements called “Fed Up,” “End the Fed” and “Occupy Wall Street” lashed out at the bank’s policies, and in the case of End the Fed, its very existence. Lawmakers of both parties want to subject it to more scrutiny or curb its powers.
David Einhorn, founder of the hedge fund Greenlight Capital, cites the fable of the ant and the grasshopper, in which a famished grasshopper begs a thrifty ant for help in wintertime after failing to stockpile food during warmer weather.
“We had the grasshoppers party from 2002 to 2007 and winter came and the Fed bailed them out,” said Mr. Einhorn, referring to financial firms and individuals who lived above their means. “Now the ants are pissed.”
Ain’t that the truth!!! This Wall Street Journal article by Fed mouthpiece Jon Hilsenrath yesterday, showed up on the msn.com Internet site — and it’s certainly worth your while. I thank reader ‘G.H.’ for sharing it with us. Another link to this worthwhile article is here.
“Central Banks Now Own $25 Trillion of Financial Assets“
With 85% of Wall Street telling Citi they expect a “dovish hike signal” from Yellen [today], which means a polite request for another BTFD opportunity, even if as BofA says “expectations for a dovish Fed are coinciding with macro strength in the U.S. (most obviously in housing and consumer spending) as well as highest level of wage inflation since Jan’10“…
… here is a quick reminder of where we currently stand from BofA’s Michael Hartnett, from a brief note titled The Liquidity Supernova & the “Keynesian Put.”
Risk assets are now supported by the new ”Keynesian Put”, the expectation that fiscal measures will be deployed to combat any renewed weakness in the economy/markets (independently of any larger political projects). But asset prices remain primarily supported by excess monetary abundance across the world:
There have been 667 interest rate cuts by global central banks since Lehman;
G7 central bank governors Yellen, Kuroda, Draghi, Carney & Poloz have been in their current posts for a collective 17 years, yet only one (Yellen in Dec’15) has actually hiked interest rates during this time;
Central banks own $25tn of financial assets (a sum larger than GDP of US + Japan, and up $12tn since Lehman);
There are currently $12.3tn of negative yielding global bonds (28% of total);
There is currently $8tn of negative yielding sovereign debt (54% of total).
Do not expect any unwind of this $25 trillion in risk asset support to be unwound any time soon, or perhaps ever, or else…!
This very interesting Zero Hedge piece appeared on their Internet site at 10:02 a.m. EDT on Thursday morning — and it’s the first of two contributions from Richard Saler. Another link to this article is here.
Doug Noland: The Consequences of Massive Credit [PART 2]
Doug Noland served as senior portfolio manager of Federated Prudent Bear Fund, Federated Prudent DollarBear Fund and Federated Market Opportunity Fund. With more than 20 years of investment experience, he leads the nine investment professionals who comprise Federated’s Alternative Equity Management Team. Before joining Federated, Doug was employed with David Tice & Associates, Inc. where he served as an assistant portfolio manager and strategist.
Of course Doug is know for his weekly Credit Bubble Bulletin as well — and it graces this column every Saturday that he posts one.
This is Part 2 of Doug’s interview with the guys over at the mcalvanyweeklycommentary.com Internet site. This 34:30 minute audio interview was posted on the youtube.com Internet site on Wednesday — and is certainly worth your while if you’re a Doug Noland fan. I thank Dennis Meredith for bringing it to our attention. Another link to this interview is here.
A $67,000 Home Robbery Exposes $500 Billion Problem in Argentina
The case of $67,000 stolen from Argentine Vice President Gabriela Michetti’s house should have ended when her bodyguard was arrested.
Instead, prosecutors have shifted to tracing the money’s origin, making her a public example of the challenges President Mauricio Macri’s faces in weaning the country off its reliance on cash, an age-old system that in many instances hides tax evasion.
Elected last November on a vow to reverse 12 years of leftist populism, Macri ended currency controls, reformed the statistics bureau and settled a toxic dispute over bond payments. Now his sights are set on modernizing the economy and pulling Argentines into the banking system. It’s a push that Macri’s predecessors tried many times before, to little avail, as an estimated $500 billion was stashed away over the past 30 years.
The case “shows that practices such as this carried out over decades have become part of the culture,” said Jorge Gaggero, founder of the Tax Justice Network for Latin America and the Caribbean. “A behavior that in other countries would seem dysfunctional for people here is natural.”
This very interesting, but not surprising story was posted on the Bloomberg Internet site at 3:00 a.m. Denver time on Thursday morning — and I thank West Virginia reader Elliot Simon for sharing it with us. Another link to this article is here.
Scotland’s North Sea Revenues Collapse By 97%
The Scottish government’s revenues from North Sea oil and gas collapsed by 97% to just £60m in the last financial year, according to new figures that have been seized on by pro-union politicians.
Receipts from the industry collapsed from a level of £1.8bn in 2014/15, according to the Government Expenditure and Revenue Scotland (GERS) data, amid a dive in the oil price.
It is a far cry from 2008/9 when Scotland’s share of North Sea revenues peaked at £11.6bn.
The latest figures showed that Scotland’s fiscal deficit – the gap between spending and borrowing – rose from £14.3bn to £14.8bn.
This news item showed up on the sky.com Internet site at 3:13 p.m. BST on Wednesday afternoon, which was 10:13 a.m. in New York. It’s the first offering of the day from Patrik Ekdahl — and another link to this story is here.
French support for the E.U. project is crumbling on the Left and Right
The drama of Brexit may soon be matched or eclipsed by crystallizing events in France, where the Long Slump is at last taking its political toll.
A democracy can endure deflation policies for only so long. The attrition has wasted the French centre-right and the centre-left by turns, and now threatens the Fifth Republic itself.
The maturing crisis has echoes of 1936, when the French people tired of ‘deflation decrees’ and turned to the once unthinkable Front Populaire, smashing what remained of the Gold Standard.
Former Gaulliste president Nicolas Sarkozy has caught the headlines this week, launching a come-back bid with a package of hard-Right policies unseen in a western European democracy in modern times.
But the uproar on the Left is just as revealing. Arnaud Montebourg, the enfant terrible of the Socialist movement, has launched his own bid for the Socialist Party with a critique of such ferocity that it bears examination.
This commentary by Ambrose Evans-Pritchard, which is certainly worth reading, was posted on the telegraph.co.uk Internet site at 12:43 p.m. BST on Thursday afternoon, which was 7:43 a.m. EDT in Washington. I thank Roy Stephens for pointing it out — and another link to it is here.
U.S. criticises E.U. tax probes ahead of Apple ruling
The U.S. Treasury Department has warned the European Commission about taking action against U.S. companies over tax avoidance allegations.
The commission is investigating tax deals granted to U.S. companies for setting up headquarters in Europe.
Next month the E.U. is expected to deliver its decision on Apple. The company could be hit with a multi-billion pound bill for unpaid taxes.
The commission said there was “no bias against U.S. companies” in the probes.
In a report published on Wednesday, the U.S. regulator said action by Brussels would make it into a “supra-national tax authority” overriding the tax codes of its member states.
It sure sounds like the U.S. doesn’t consider the E.U. and its parliament to be legitimate. This news item appeared on the bbc.com Internet site on Thursday — and I thank Patrik Ekdahl for his second contribution to today’s column. Another link to this story is here.
Is Portugal the Next “Shoe to Drop” in Europe?
The fate of Portugal rests in the hands of DBRS, the last remaining credit rating agency assigning an investment grade rating to its sovereign debt (Fitch, Moody’s and S&P have all lowered the country’s debt rating to junk). Due to a requirement that participant countries have an IG rating from at least 1 rating agency, the DBRS rating is literally the only thing allowing Portugal’s bonds to remain eligible for the European Central Bank’s 1.7 trillion euro bond buying program. DBRS is set to update its Portugal rating on October 21 and investors in Portugal sovereign risk are starting to get a little nervous.
Until last week there seemed to be little worry about a potential downgrade among investors. That changed when the release of 2Q 2016 GDP showed minimal growth. Fergus McCormick, head of sovereign ratings at DBRS, recently noted in an interview with Reuters that although Portugal’s debt carries a “stable” rating that the situation appears to be deteriorating.
The socialist minority government that came to power in November 2015 has not helped the situation by raising the minimum wage, increasing the number of public holidays and reversing other key reforms, that will make it more difficult for the country to meet its EU fiscal targets. To be sure, the collapse in oil prices have indirectly taken a toll on Portugal as well with exports to it’s 4th largest trading partner, Angola, falling by 42% in the first half of 2016.
This story put in an appearance on the Zero Hedge website at 2:45 a.m. EDT on Thursday morning — and it comes courtesy of Richard Saler. Another link to this news item is here.
Italy quake toll hits 250 as rescuers search flattened towns
The death toll from a devastating earthquake in central Italy climbed to 250 on Thursday as rescue teams scoured mounds of rubble for a second day in towns and villages flattened by the natural disaster.
The 6.2 magnitude quake struck a cluster of mountain communities 140 km (85 miles) east of Rome early on Wednesday as people slept, destroying hundreds of homes.
Dozens of emergency workers with sniffer dogs clambered over piles of debris trying to find anyone still trapped, while cranes removed huge slabs of fallen masonry and trucks full of rubble left the area every few minutes.
“People like myself have lost everything, but at the same time the fact that we have survived means we have to move forward one minute at a time,” said Alessandra Cioni, 45, who managed to crawl out of her crumpled house after the quake.
This Reuters news item, filed from Amatrice in Italy, is datelined 4:35 p.m. EDT Thursday afternoon, but it has obviously been updated since it was first filed, as Brad Robertson sent it to me [via Zero Hedge] at 9:21 a.m. EDT yesterday morning. Another link to this story is here.
A Turkish “invasion” of Syria? Maybe not – let’s wait and see…
So the Turks have crossed into Syria. This everybody agrees upon. What remains completely obscure are the real goals of this operation.
I might be mistaken here, but I get the strong feeling that the Syrians are not really upset by this Turkish operation and that there are many indirect indicators that Russia, Iran and the USA might well all have given their green light to the Turks. If so, then the main victim of this will be the Kurds who will not be able to create a unitary Kurdish zone of control in northern Syria.
If that is indeed the goal of the Turkish operation, then all the panic about a “Turkish invasion” are premature.
Let’s give it all 48 hours and see what happens, okay?
This brief commentary the The Saker, appeared on his Internet site yesterday — and it’s certainly worth reading if you’re a serious student of the New Great Game. I thank Larry Galearis for sending it along — and another link to it is here.
Red Ponzi Ticking: China and the Dark Side of the Global Bubble, Part 1 — David Stockman
Donald Trump is absolutely correct that China is a great economic menace. But that’s not owing to incompetence at the State and Commerce Departments or USTR in cutting bad trade deals.
Nor is it even primarily due to the fact that China egregiously manipulates it currency, massively subsidizes its exports, wantonly steals technology, chronically infringes patents and hacks propriety business information like there is no tomorrow.
If that were the extent of China’s sins, a new sheriff in the White House wielding a big stick and possessing a steely backbone—-attributes loudly claimed by The Donald—-might be able to reset the game. After hard-nosed negotiations, he might even obtain a more level and transparent playing field, thereby eventually reducing our current debilitating $500 billion import trade with China and retrieving at least some of the millions of jobs which have been off-shored to the far side of the planet.
But as we demonstrated in Chapter 5, the world fundamentally changed in the early 1990s when Mr. Deng and Chairman Greenspan jointly initiated the present era of Bubble Finance. The latter elected to inflate rather than deflate the domestic U.S. economy and to thereby export dollar liabilities in their trillions to the rest of the world.
At the same time, having depreciated the yuan by 60%, Mr. Deng discovered that to keep China’s nascent export machine booming he needed to run the printing presses in the basement of the People Bank of China (PBOC) red hot, thereby sopping up the massive inflow of Greenspan’s dollars and keeping China’s exchange rate pegged to the U.S. dollar.
This longish commentary is another excerpt from David’s upcoming new book. In my opinion it easily falls into the absolute must read category — and I thank Roy Stephens for sending it our way. Another link to it is here.
Final Catastrophe of the Currency System — Egon von Greyerz
The fate of the global economy was decided decades ago as deficits, debts and derivatives started their exponential growth and reached the time bomb phase that we are now in. This final chapter of this 100-year era will end in “a final and total catastrophe of the currency system” as von Mises succinctly articulated.
It all started in 1910 when a few senators and bankers, led by JP Morgan, secretly met on Jekyll Island with the purpose to set up the Federal Reserve and so control the banking system. Thus, the Fed was a creation by private bankers and for the benefit of these bankers. Few of them could have imagined the enormous success of their venture as the control of the financial system led to vast fortunes for a very small elite. The back side of these fortunes is global debt of $230 trillion plus unfunded liabilities and derivatives. The total which is in the quadrillions is what the poor masses in the world are liable for. Not that they will ever be able to repay it but the implosion of these debts will lead to misery for the majority of people for generations to come.
This commentary by Egon put in an appearance on hi goldswitzerland.com Internet site yesterday — and it’s worth reading if you have the time. Another link to this commentary is here.
The PHOTOS and the FUNNIES
This is the last moose picture, I promise! Walking unimpeded through a mature canola field is a feat only possible with the longest of legs, or the shortest of legs. He walked about 300 metres into the field, laid down, lowered his head — and vanished from sight. After taking that photo, I turned around and walked across the road and took the second shot of a farmer straight-combining a wheat field. That’s the earliest that I can remember seeing a cereal crop get harvested in these parts. He must have got the seed in the ground the moment the snow was gone, as the rest of the crops in the area are many weeks away from maturity. The last photo is one I’ve posted before — and it’s of that same canola field as in the first photo, except I took this one on July 18 when it was flowering. The dividing line between the canola field in the background — and the wheat field in the foreground, is the creek where I took all the moose shots. Because of the topography of the land, there’s no hint whatsoever that it’s there, but it is. The ‘Click to Enlarge‘ feature works wonders here.
The WRAP
There was little sign that JPMorgan et al were lurking about yesterday, but if they were, they certainly weren’t pushing hard. However, after 16 years of watching the precious metal market this closely, I can’t shake the feeling that they’re micromanaging the markets at all times — and even though they were probably around yesterday, they weren’t overly obvious about it.
I was somewhat surprised that ‘da boyz’ didn’t hammer the snot out of the precious metals on Thursday, because it was options expiry for both gold and silver yesterday — and the lower the closing price, the more options that expire out of the money — and all the more profits that go into the pockets of the commercial traders.
Gold was closed at a new low for this move down on Thursday — and below its 50-day moving average for the second day in a row. The Managed Money traders were certainly selling longs and going short yesterday, but the net volume number shows plainly that there wasn’t a lot of either trade going on.
Silver was also closed at a new low for this move down — and all my comments about gold in the previous paragraph, applies to this precious metal as well. The other thing to note about silver is that the Relative Strength Indicator [RSI] is approaching oversold. Platinum also closed below its 50-day moving average for the second day in a row, but palladium has got a ways to go yet.
Here are the 6-month charts for all four precious metals.
But despite the fact that the 50-day moving averages have been broken to the down side in the most important of the four precious metals, the COMEX futures market is still wildly bearish. Ted Butler’s mid-week review on Wednesday was headlined “Still Unresolved” — and as he’s been saying for most of this year…”regardless of the actual number [in today’s, or any recent COT Report – Ed], the market structure will remain extreme.”
As to how low we go — and over what period of time — is unknown. And to steal another sentence from Ted…”To be objective, by virtue of the lowest prices in silver, gold, copper, platinum and palladium in one to two months, it must be said that the commercials have been in control, at least for this time period. If they stay in control, still lower prices will be seen.”
And as I type this paragraph, the London open is less than ten minutes away — and I note that the gold price didn’t do much in early morning trading in the Far East on their Friday morning. But by 11 a.m. Hong Kong/Shanghai time it was up a couple of bucks — and it’s still up that amount with a few minutes to go before the London open. The same can be said of the silver price, but it’s obvious from the saw-tooth price pattern in morning trading in the Far East, that not even the tiniest rally was allowed to get far — and it’s currently up 8 cents the ounce. The trading pattern in platinum was similar to gold’s — and it’s up 2 dollars at the moment. The price pattern in palladium was somewhat more frisky — and it was up 8 bucks by 2:30 p.m. HKT, but has been sold down to up only 5 dollars.
HFT gold volume is ultra quiet at just under 18,500 contracts — and that includes October volume as well as December’s. HFT volume in silver is sitting at 4,600 contracts, which is ultra light as well, but roll-over volume out of September is heavy. The dollar index traded almost ruler flat until shortly before 2 p.m. Shanghai time — and then it rolled over pretty good — and although its off its low tick by a decent amount, it’s still down 12 basis points as London opens.
Of course all eyes [and ears] will be on what Janet Yellen has to say later today — and how the markets “react” to that news or, more appropriately, how they will allowed to react. That particularly applies to the precious metals — and I’m still not sure if what she has to say will happen while the markets are open tomorrow, but I’m presuming that they will be.
Today, at 3:30 p.m. EDT, we get the latest Commitment of Traders Report for positions held at the close of COMEX trading on Tuesday. And as I said in my Wednesday missive, I’m expecting some improvement in both gold and silver, with the largest improvement coming in silver, as it broke below its 50-day moving average with real authority during the reporting week.
And as I post today’s column on the website at 4:00 a.m. EDT, I see that not much has changed now that London and Zurich have been open for an hour. All four precious metals are up a bit more, but not by material amounts.
Net HFT volume in gold is right at the 23,000 contract mark, including both October and December — and silver’s net HFT volume is only at 5,300 contracts, but roll-over activity is very heavy — and almost half of the gross volume. The dollar index is now down 14 basis points after rallying up to unchanged a few minutes after London opened.
I’m wide open to anything that happens in the precious metal markets, plus the equities and dollar index during the Friday session in New York. It’s very quiet out there at the moment, as the world awaits ‘the word’ from Jackson Hole. But I’ll be surprised if it remains that way in the aftermath of whatever Yellen has got to say and, except for the SDR/gold card, the world’s central bankers are all out of aces.
So we wait some more.
Enjoy your weekend — and I’ll see you here tomorrow.
Ed
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