02 November 2016 — Wednesday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price crawled sideways up and until shortly before 2 p.m. China Standard Time in Far East trading on their Tuesday afternoon. Then it rallied 3 bucks in short order, before crawling sideways until the London a.m. gold fix, which was 10:30 a.m. BST in London. It rallied in good fashion from there, but ran into “all the usual suspects” starting at 1 p.m. BST, which was twenty minutes before the COMEX open. All gold’s New York gains, such as they were, had vanished by the COMEX close. It rallied a bit from there, with the the high tick coming about 3:15 p.m…but even most of those gains disappeared before the 5:00 p.m. close of trading in New York.
The low and high ticks were recorded by the CME Group as $1,276.30 and $1,292.90 in the December contract.
Gold was closed in New York on Tuesday at $1,287.80 spot, up $10.80 on the day. Net volume was very heavy at a bit over 176,000 contracts — and that tells you all you need to know, as JPMorgan et al were there as short buyers and long sellers of last resort when required.
Here’s the 5-minute gold tick chart courtesy of Brad Robertson — and as you can tell, the volume picked up the moment that gold jumped higher in afternoon trading in the Far East, which was minutes before midnight Denver time on the chart below. Volume picked up substantially at the morning gold fix in London, which was shortly before 3:30 a.m. MDT on the chart below…10:25 a.m. in London. But, as always, the most volume occurred during the COMEX trading session — and it really didn’t back off to background levels until shortly after 2 p.m. Denver time, which was shortly after 4:00 p.m. EDT in New York.
The vertical gray line is 10:00 p.m. Denver time, midnight in New York — and noon China Standard Time [CST] the following day in Shanghai—and don’t forget to add two hours for EDT. The ‘click to enlarge‘ is a must here.
It was almost the same story in silver, except the rally after the morning gold fix in London was much more exuberant — and it took ‘da boyz’ until a minute or so after 12:30 p.m. in New York to finally tame it. By the time they were done at the 5 p.m. close, half of the New York gains had disappeared.
The low and high tick in this precious metal was reported as $17.85 and $18.51 in the December contract.
Silver was closed at $18.34 spot — and up 47 cents on the day. Not surprisingly, net volume was very heavy as well, at a hair under 77,000 contracts, as the powers-that-be were all over it in New York, like white on rice.
The price pattern for platinum was similar to what occurred in gold and silver — and with mostly the same price inflection points, so I’ll spare you the play-by-play. But it should be noted that it appeared that a “do not pass the $996 spot price” sign was posted the moment that Zurich was done for the day at 11 a.m. EDT on Tuesday. Platinum finished the Tuesday session at $990 spot, up 10 dollars from Monday’s close.
The palladium price chopped sideways in a tight price range until shortly after 12 o’clock noon China Standard Time — and had a five dollar up/down move between then and shortly after 11 a.m. Zurich Time. It then rallied until shortly after 9 a.m. in New York — and JPMorgan et al lowered the boom at that point, as its second attempt to rally above the $634 spot mark was turned back as well. Palladium closed on Tuesday at $631 spot, up 12 bucks on the day.
The dollar index closed very late on Monday afternoon in New York at 98.36 — and rallied quietly up to the 98.48 mark minutes before noon in Shanghai — and then sold off equally quietly until precisely 8 a.m. BST, which was the London open. At that juncture, the sell-off began much more serious — and relentless. The 97.64 low tick came around 2:20 p.m. in New York — and the index didn’t do a lot after that. It closed yesterday at 97.74 — down 60 basis points from Monday.
And it should be noted that 2:20 p.m. EDT was not only a turnaround in the U.S. dollar index, but the bottom was in for the Dow Jones Industrial average shortly before that — and it was closed back above the 18,000 mark. I’m sure that wasn’t a coincidence.
And here’s the 6-month U.S. dollar index chart — and it’s not the happiest looking thing at the moment, is it?
The gold stocks gapped up about 4 percent at the open — and once the London p.m. gold fix was in, began to move higher. The shares topped out when the gold price topped out — and that was shortly before 2:30 p.m. in New York. They sold off quietly into the close from there. The HUI finished higher by 3.26 percent.
The silver equities gapped up as well — and followed a similar pattern as the gold shares, except the silver equities topped out at silver’s high tick — and that was around 12:30 p.m. in New York. From there they sold off in a rather broad range from there — and Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up 3.33 percent. Click to enlarge if necessary.
The CME Daily Delivery Report showed that 381 gold and 12 silver contracts were posted for delivery within the COMEX-approved depositories on Thursday. In gold, the only short/issuer worth mentioning was S.G. Americas with 375 contracts out of its client account. Canada’s Scotiabank was the largest long/stopper by far with 348 contracts — and Goldman Sachs was the ‘also ran’ with 29 contracts for its client account. In silver, the biggest short/issuer was ABN Amro with 11 — and JPMorgan stopped 10 for its client account. The link to yesterday’s Issuers and Stoppers Report is here.
The CME Preliminary Report for the Tuesday trading session showed that gold open interest in November rose by 19 contracts, leaving 494 still open. Monday’s Daily Delivery Report showed that 13 gold contracts were actually posted for delivery today, so that means that 13+19=32 gold contracts were added to the November delivery month. Silver o.i. in November jumped by 42 contracts, leaving 51 still around. Monday’s Daily Delivery Report showed that zero silver contracts were actually posted for delivery today, so the net change was, obviously, that 42 silver contracts were added to the November delivery month.
There was a deposit in GLD yesterday, as an authorized participant added 85,820 troy ounces. An a.p. also added 569,316 troy ounces to SLV. Without doubt, both ETFs are owed metal after yesterday’s price performances.
There was a sales report from the U.S. Mint to start off the new month. They sold 1,000 troy ounces of gold eagles — 1,000 one-ounce 24K gold buffaloes — and 220,000 silver eagles.
There was a decent amount of gold deposited in one COMEX-approved warehouse on Monday. There was 36,169.875 troy ounces/1,125 kilobars [SGE 32.151 troy ounce kilobar weight] deposited over at the Malca-Amit USA warehouse — and nothing was reported shipped out. The link to that activity is here.
There was decent movement in silver, as usual. There was 484,461 troy ounces received, plus 350,238 troy ounces shipped out the door for parts unknown. The link to that action is here.
All of the ‘in’ activity was into JPMorgan’s vault — and their COMEX silver stash is now up to 80.81 million troy ounces — which is 46.6 percent of all the physical silver held on the COMEX.
It was another very busy day over at the COMEX-approved gold kilobar depositories in Hong Kong on their Monday, as they reported receiving 12,200 of them, plus they shipped 7,123 out the door. All of the action was at Brink’s, Inc. as per usual — and the link to that, in troy ounces, is here.
Once one got away from the U.S. presidential election debacle, it was a very quiet news day yesterday — and I don’t have a lot of stories for you today.
CRITICAL READS
“Dump all those e-mails“: Latest WikiLeaks tranche reveals #Podesta advice
The latest tranche consists of almost 2,500 e-mails, bringing the number released so far to almost 42,000. WikiLeaks has claimed it will publish 50,000 e-mails in total in the run up to the U.S. presidential election on November 8.
Yesterday’s e-mails revealed that Anthony Weiner was a cause for concern within the Clinton campaign as far back as 2011. E-mails from the former congressman’s laptop are key to the FBI’s decision to reopen an investigation into Clinton’s use of a private e-mail server.
“We are going to have to dump all those emails,” Podesta tells Clinton aide Cheryl Mills in an e-mail dated March 2, 2015, a week before Clinton addressed the e-mail scandal at a press conference, claiming there was no classified material sent via the private server.
It’s not clear which e-mails Podesta is referring to in the thread, but Podesta tells Mills: “better to do so sooner than later”.
“There is something to be said for the power of torture,” Clinton aide Neera Tanden tells Podesta in a July 2015 e-mail showing her frustration over Clinton’s use of a private e-mail server. Tanden had previously told Podesta that whoever told Clinton she could use the server should be “drawn and quartered”.
This news item showed up on the Russia Today website at 1:20 p.m. on Tuesday morning Moscow time, which was 6:20 a.m. in Washington — EDT plus 7 hours. Roy Stephens sent it our way yesterday evening Denver time — and another link to it is here.
Three of Fed’s Own Primary Dealers Warn Hikes on Hold Until 2017
Three of the Federal Reserve’s own primary dealers are warning bond traders that a growing consensus the central bank will raise interest rates by year-end is misguided.
While none of the 23 banks that trade with the Fed expect a hike at the conclusion of Wednesday’s meeting, HSBC Holdings Plc, Royal Bank of Canada and Royal Bank of Scotland Group Plc remain steadfast that policy makers will choose to hold off on raising rates at the Fed’s Dec. 14 meeting as well.
History would seem to be on the trio’s side. Officials began the year anticipating they’d raise rates four times, only to repeatedly pare projections amid disappointing economic data. Yet a second-half uptick in growth and hawkish rhetoric from policy makers has prompted traders to price in more than a 70 percent chance that the Fed will pull the trigger by December. While they reserved the right to amend their calls over the next six weeks based on new data, economists at all three banks said the Fed needs to see clearer signs the economy is on the upswing and inflation is quickening before hiking.
“The FOMC has grounds for caution right now,” said Kevin Logan, chief U.S. economist at HSBC in New York. “Slow growth in the U.S. economy, low inflation and the international repercussions of the Brexit decision in the U.K. — there are plenty of signs of things slowing down globally and there will be too much risk in tightening policy.”
This Bloomberg article put in an appearance on their Internet site at 5:14 p.m. Denver time on Monday evening — and it was updated about 13 hours later. I found it embedded in a GATA release — and another link to it is here.
U.S. Yield Curve Steepens to 5-Month Highs as Rate-Hike Odds Soar
Since the last FOMC meeting (9/21) the probability of rate hike by December 2016 has soared from under 50% to 76% today (ahead of tomorrow’s Fed statement). At the same time, the U.S. yield curve has steepened drastically (with 2s10s up over 20bps to 5-month highs).
However, unlike the last 4 Fed meetings, the U.S. yield curve is steepening into the statement…
It seems something has changed this time. Whether it is technical pressure from Risk-Parity unwinds, or a growing concern of inflationary pressures building (as ISM/PMI pointed to this morning), it is clear bonds are starting to buy the Fed’s jawboning… no matter economic data expectations remain weak at best.
This brief 2-chart Zero Hedge article showed up on their website at 1:01 p.m. EDT yesterday afternoon — and the charts are worth a quick look. Another link to this short article is here.
October U.S. Auto Sales Post Slight Headline Beat on Massive GM Inventory Build
Headline auto sales appear to be slightly better than expected for the month of October with a total SAAR of 18.0mm vs. estimates of 17.6mm. That said, GM reported a substantial inventory build which added roughly 50,000 units to monthly sales and we’re still waiting for data from Ford after they delayed their release yesterday due to a “fire” at their corporate headquarters. On a positive note, incentive spending dropped MoM to 11.8% from the record high 12.6% recorded last month.
Among the large OEMs selling into the U.S. market, GM and Hyundai posted the largest beats while Toyota and VW both posted substantial misses versus expectations.
Meanwhile, headline numbers suggested that Wall Street and Silicon Valley billionaires were gobbling up luxury vehicles with Porsche volumes up +10.7% YoY. That said, a look beneath the surface reveals a slightly different trend with all of the headline “beat” coming from sales of Porsche’s new low-priced Macan model that carries a starting MSRP of $47,500. Meanwhile, the higher priced 911 was down 45% YoY and Boxster/Cayman sales were down 20%….anything to keep up appearances….
This story appeared on the Zero Hedge website at 6:40 p.m. EDT yesterday evening — and another link to it is here.
Gundlach: “We Got the Bearish Signal; Stocks Are Going Down – You Can Feel It“
After nearly three consecutive years of inflows, an unheard of feat, Jeff Gundlach’s $61.6 billion DoubleLine Total Return Bond Fund finally experienced its first outflow since January 2014, as investors took out $33 million from the California fund. With that the streak of 33 consecutive months of inflows was broken Reuters reports.
Repeating a position he has held for several months, Gundlach told Reuters that “bonds are headed toward outflow territory … rising rates mean negative returns are developing. Even DoubleLine is having ‘day in’ and ‘day out’ flows. It is not an inflow day every day.” Unless, of course, the market suffers a long overdue equity sell-off, in which case the flow will be in the other direction as debt of any kind will be immediately is seen as a “flight to safety” and the cycle will begin from scratch.
According to the new bond king, a few advisers in October made allocation and model changes away from the intermediate-term sector of the bond market, resulting in a few large redemptions in the DoubleLine TRBF which however moved into DoubleLine’s Flexible Income, Low Duration Bond and Core Fixed Income funds.
Gundlach remains skeptical on rates, and in what was – how should one put it – a humble brag, the bond manager indirectly accused himself of causing his fund’s first outflow in just under three years: “I have been vocally bearish on Treasuries for months, and, being one of the most influential in the industry, it should not be a surprise that investor behavior is influenced by me,” Gundlach said modestly.
“Lastly, we have had terrific performance in DBLTX since rates bottomed: we are up in a meaningfully down market.“
This is the Zero Hedge spin on a Reuters story from yesterday. It was posted on their Internet site at 5:26 p.m. on Tuesday afternoon EDT — and it’s certainly worth reading. Another link to it is here.
Foreign appetite for gilts revives as bond worries shift back to eurozone — Ambrose Evans-Pritchard
Foreign investors returned in force to the U.K. bond market in September, snapping up a net £13.3bn in gilts as fears of a full-blown Brexit crisis faded.
The purchases are the highest in almost a year and allay fears that central banks, sovereign wealth funds, and Asian institutions may be losing confidence in the blue chip fundamentals of the British state.
The figures suggest that fund managers rebalanced their core bond portfolios in September by buying more gilts as sterling drifted down, the normal reflex for holdings in a world reserve currency. Foreign buyers had sold gilts in July and largely stayed away in August.
Yields on 10-year Gilts have stabilized over recent days at around 1.24pc after surging 73 basis points since June.
The spike in borrowing costs is part of a broader jump in global yields as hedge funds pile into the “reflation trade”. The effect has been turbo-charged in Britain due to the weaker pound, which pushes up future inflation rates and automatically reprices debt contracts.
This commentary by Ambrose was posted on the telegraph.co.uk Internet site at 2:28 p.m. BST on Monday afternoon in London — and comes to us courtesy of Roy Stephens. Another link to it is here.
How Putin Derailed the West — Mike Whitney
“Nation state as a fundamental unit of man’s organized life has ceased to be the principal creative force: International banks and multinational corporations are acting and planning in terms that are far in advance of the political concepts of the nation-state.” — Zbigniew Brzezinski, “Between Two Ages: The Technetronic Era”, 1971
This is hard for ordinary people to understand. They can’t grasp why elite power brokers would want to transform functioning, stable countries into uninhabitable wastelands overrun by armed extremists, sectarian death squads and foreign-born terrorists. Nor can they understand what has been gained by Washington’s 15 year-long rampage across the Middle East and Central Asia that has turned a vast swathe of strategic territory into a terrorist breeding grounds? What is the purpose of all this?
First, we have to acknowledge that the decimation and de facto Balkanization of these countries is part of a plan. If it wasn’t part of a plan, than the decision-makers would change the policy. But they haven’t changed the policy. The policy is the same. The fact that the U.S. is using foreign-born jihadists to pursue regime change in Syria as opposed to U.S. troops in Iraq, is not a fundamental change in the policy. The ultimate goal is still the decimation of the state and the elimination of the existing government. This same rule applies to Libya and Afghanistan both of which have been plunged into chaos by Washington’s actions.
But why? What is gained by destroying these countries and generating so much suffering and death?
Here’s what I think: I think Washington is involved in a grand project to remake the world in a way that better meets the needs of its elite constituents, the international banks and multinational corporations. Brzezinski not only refers to this in the opening quote, he also explains what is taking place: The nation-state is being jettisoned as the foundation upon which the global order rests. Instead, Washington is erasing borders, liquidating states, and removing strong, secular leaders that can mount resistance to its machinations in order to impose an entirely new model on the region, a new world order. The people who run these elite institutions want to create an interconnected-global free trade zone overseen by the proconsuls of Big Capital, in other words, a global Eurozone that precludes the required state institutions (like a centralized treasury, mutual debt, federal transfers) that would allow the borderless entity to function properly.
This absolute must read commentary, especially for any serious student of the New Great Game, was posted on the counterpunch.org Internet site on November 1 — and I thank Roy Stephens for sending it along. Another link to this must read article is here.
Done in by Overcapacity, Stagnant World Trade, and China, Korean Shipbuilders Collapse on Top of Taxpayers
The ravaged shipbuilding industry in South Korea, deemed too big to fail, is getting its largest taxpayer bailout yet, totaling $9.6 billion, on top of the bailout funds already handed out last year, and on top of another $9.6 billion this year to bail out state-owned banks that were getting slammed by defaulting loans extended to the shipping industry.
Their problem: according to trade ministry, cited by the Wall Street Journal, orders for new ships to be built in South Korea have collapsed by 87% over the past nine months from the already terrible 9-month period last year, to almost nothing.
South Korean container carrier Hanjin was allowed to collapse in August. It “shattered the complacency” that TBTF carriers “are immune to failure.” It is now getting chopped into pieces to be sold off under bankruptcy court orders. Its rival, Hyundai Merchant Marine, was bailed out and restructured earlier this year. Other carriers around the globe have been sunk by two years of excruciating low shipping rates, triggered by rampant overcapacity and stagnating world trade. Larger carriers are consolidating to survive. Just on Monday, Japan’s Big Three – Nippon Yusen, Mitsui O.S.K. Lines, and Kawasaki Kisen Kaisha – announced that they would merge to form the world’s sixth largest container carrier.
These carriers have stopped ordering ships, and many have canceled orders, and Chinese shipbuilders have muscled into the market years ago to grab share by slashing prices, and they too are going bankrupt.
This news item was posted on the wolfstreet.com Internet site yesterday — and it’s courtesy of Roy Stephens as well. Another link to it is here.
CME Group to start London gold contract in challenge to ICE, LME
CME Group Inc. will start London gold and silver contracts in January to offer a spread between spot prices and benchmark U.S. futures, competing with similar planned contracts from Intercontinental Exchange Inc. and the London Metal Exchange.
CME’s new contracts will be listed on Comex in New York and begin trading on Jan. 9, pending a regulatory review, the world’s largest futures exchange told reporters at a briefing in London on Tuesday. The spread will be based on the new spot contracts and active Comex futures, it said.
Exchanges are fighting for a share of London’s $5 trillion-a-year gold market as scrutiny from regulators triggers a shake up of the city’s over-the-counter trading. ICE said last month it will start a new contract for London and use it to clear its daily auction for the metal. Separately, the LME, World Gold Council and several banks plan to introduce centrally cleared gold and silver contracts in the first half of next year.
“There is a risk that liquidity is split too thin,” David Govett, head of precious metals trading at Marex Spectron Group Ltd. in London, said by phone. “With three exchanges, that will just be multiplied.”
“Everyone’s out there trying to pitch their own solutions,” Derek Sammann, CME’s global head of commodities and options products, said at the briefing. “Nobody likes umpteen different liquidity pools,” so it’s likely that trading will become concentrated on one exchange, he said.
I’m not sure what to read into this, but when I see the CME Group, COMEX and LBMA all in the same story about precious metal pricing, it does give me pause. This news item appeared on the Bloomberg website at 6:00 a.m. Denver time on Tuesday morning — and it was updated a couple of hours later. It’s another story that I found on the gata.org Interne site — and another link to it is here.
The Great Silver Rush of 2016 — Mike Kosares
Silver demand is running at record levels and the price is up over 30% on the year. Volume for the physical metal among USAGOLD’s clientele, mostly in the form of one-ounce silver bullion coins and 100 troy ounce bars, is running at levels apace the strong global trend. This series of charts provides an overview of the Great Silver Rush of 2016.
Global investors snapped up a record 89.6 million one ounce silver coins in 2015, according to USAGOLD’s annual survey of global bullion coin sales, and the strong demand has continued at a comparable pace in 2016. The U.S. Mint reports sales of just over 30 million one-ounce silver American Eagles thus far this year with another big demand pick-up in October. American Eagle sales are just one component of our four coin annual grouping and a bellwether for the rest of the global market. We suspect that once we compile the statistics from the four top mints for 2016, the chart will show volumes approaching the record performance of last year.
As you can see by the chart immediately below, China has put its foot on the accelerator with respect to its silver purchases – a development widely neglected by the financial media. Take a look at the ramp-up of physical demand in China over the past two years (bottom bar chart). China’s quiet, nascent interest gives credence to silver’s graduation from commodity status to a monetary metal utilized by many investors as an asset of last resort, i.e., the other metal, besides gold, that separates itself from the pack as an asset that is not someone else’s liability. China, the largest single source of silver demand in Asia, is buying silver as a means to augmenting its attention-grabbing gold acquisition program.
This commentary by Mike Kosares over at usagold.com showed up on their website yesterday. Of course Mike makes no mention of the ugly short positions in both silver and gold in the COMEX futures market, nor does he mention the fact that silver analyst Ted Butler puts JPMorgan’s physical silver stash well north of 500 million troy ounces. He also states that “strong demand has continued at a comparable pace in 2016“. This is demonstrably false, as John Q. Public as been M.I.A. in the retail silver market, except for the odd buying spurt, everywhere in North America for a very long time. But retail demand has certainly shown signs of strengthening just recently. I thank Scott Otey for pointing it out — and another link to it is here.
Silver Krugerrands By South African Mint Coming Soon – New Source Of Demand For Silver Coins
As interest in silver investment expands throughout the world, the South African Mint will produce its first Silver Krugerrand (1 oz) which will be released this month.
As reported by Steve St. Angelo on silverseek.com:
“This is quite remarkable as the South African Mint has been producing Gold Krugerrands since 1967.
As a matter of fact, the South African Mint has produced over 50 million oz of Gold Krugerrands over the past 49 years. It is the largest Official Gold coin producer in the world. The U.S. Mint’s Gold Eagle comes in second with over 22 million oz. produced since the program started in 1987.
With the 50-year anniversary of the minting of the Gold Krugerrand in 2017, the South African Government will also release a new 1 oz Platinum Krugerrand along with its new silver coin. They also plan on adding some addition sizes of the Gold Krugerrand, such as a 1/20th, 1/50th oz variants as well as a 5 oz. coin.
However, the big deal for the silver investor will be the new 1 oz. Silver Krugerrand. The South African Mint plans on releasing 500,000 of the 1 oz. 2017 Silver Krugerrand next year, along with 15,000 proofs.”
I’d be happy to own some of these, but at only 500,000 mintage, I doubt many will come for sale in our city. This news item was posted on Mark O’Byrne’s goldcore.com Internet site yesterday — and it’s certainly worth reading if you have the interest. Another link to it is here.
Buy Gold No Matter Who Wins the Election, HSBC Says
There’s one certain winner of next week’s presidential election, according to HSBC Holdings Plc: investors in gold.
Although they deem a Donald Trump victory more supportive for the price of the metal than a win by Hillary Clinton, the bank’s Chief Precious Metals Analyst James Steel says it’ll enjoy at least a 8 percent jump whoever wins the race.
Both candidates have espoused trade policies that could stimulate demand, with gold offering a potential “protection against protectionism,” he says. Even the relatively more internationalist Democratic candidate has argued for the renegotiation of longstanding free-trade agreements. That’s positive for gold — even if “not on the scale of Mr. Trump’s agenda.”
If the real-estate magnate triumphs, gold could rise to $1,500 an ounce, according to HSBC, up from around $1,289 at 10:55 a.m. in New York.
This Bloomberg news item was posted on their Internet site at 9:03 a.m. on Tuesday morning EDT — and I found it on the Sharp Pixley website late last night MDT. Another link to it is here.
A new Shari’ah Standard for Gold
Gold investing has traditionally been fraught with challenges for Islamic institutional and individual investors. Now the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) has joined forces with the World Gold Council to create a new Shari’ah Standard for gold. Dr. Hamed Hassan Merah, Secretary General of AAOIFI, and Natalie Dempster, Managing Director, Central Banks and Public Policy, World Gold Council explain why the collaboration took place and what it will achieve.
What is AAOIFI?
Dr. Merah: AAOIFI is an Islamic, international, autonomous not-for-profit corporate body that develops accounting, auditing, governance, ethics and Shari’ah standards for Islamic financial institutions (IFIs) and the industry. As an independent, international organisation, AAOIFI is supported by 200 institutional members from around 45 countries, including the Islamic Development Bank, central banks, Islamic financial institutions, and other participants from the international Islamic banking and finance industry, worldwide. AAOIFI standards have introduced greater harmonisation of Islamic finance practices across the world.
And how do institutions adopt AAOIFI standards?
Dr. Merah: AAOIFI standards are followed – as part of regulatory requirements or Islamic Financial Institutions’ internal guidelines – in jurisdictions that offer Islamic finance across the Middle East, Asia, Africa, Europe, and North America, as well as, the Islamic Development Bank Group. In addition, there are jurisdictions where the local set of regulations or Shari’ah requirements are based primarily on the principles setup by the AAOIFI standards. And there are numerous institutions across the globe that follow the principles set by AAOIFI standards, even if there is no regulatory pressure to do so.
How will the Standard impact the gold market?
Natalie Dempster: We believe the Standard will have a direct and significant impact on gold demand. Our research and industry engagement suggest that demand will come from both individual and institutional investors looking to grow their overall wealth, diversify existing portfolios and hedge against tail risk through gold exposure. Given that Islamic finance is growing on average by 16% per year, and Islamic finance assets are projected to reach US$2 trillion by 2020, a very conservative 1% allocation to gold would increase gold demand by US$20 billion or around 500 tonnes 2020.
I’ve had several reader send me stories about this issue over the weekend — and because of the websites they appeared on and the products they were promoting, I decided not to post them. But this iteration, without all the hype, appeared on the commoditonline.com Internet site at 9:50 a.m. IST [India Standard Time] on their Tuesday morning. I found it on the Sharps Pixley website last night — and another link to it is here.
The PHOTOS and the FUNNIES
Here’s another photo from Bob Anthony’s trip to South Africa. It’s of a female nyala antelope. Click to enlarge.
The WRAP
It’s hard to say what set off precious metal prices yesterday during the afternoon trading session in the Far East — and then again once the London morning gold fix was in. However, the possible reasons are legion. But what you can be 100 percent certain of is that it was, as Ted Butler said on the phone yesterday, the Managed Money traders piling in on the long side, with JPMorgan et al standing right there as short buyers and long sellers of last resort once things began to get out of hand to the upside. He also mentioned the possibility that this could be the first stage of the Commercial traders getting over run. But that remains to be seen, of course.
This was particularly true in silver where ‘da boyz’ stopped that particular rally dead in its tracks just pennies below its 50-day moving average, because it would certainly have broken above it with some authority if allowed to do so.
And as Ted also pointed out, the concern of breaking below gold and silver’s respective 200-day moving averages has vanished for the moment — and all eyes should now be focused on breaking through their respective 50-day moving averages to the upside. My, how the worm has turned!
As I’ve said on a number of occasion over the last week or so, because of the oversold condition in both silver and gold, a countertrend rally could be in the cards — and this might be it. We’ll find out soon enough I would suspect.
Here are the 6-month charts for all four precious metals — and they speak for themselves.
And as I type this paragraph, the London open is less than ten minutes away — and I see that the gold price has been crawling unsteadily higher throughout the Far East trading session on their Wednesday — and is currently up $6.30 the ounce. Silver is up 13 cents. Platinum and palladium have been trading mostly lower, with former being down 2 dollars — and the latter by 3.
Net HFT gold volume is just over 25,000 contracts, with very few roll-overs — and in silver that number is around 8,500 contracts. The dollar index didn’t do a lot until just before 9:30 a.m. China Standard Time — and at that juncture, began to head lower — and is down 7 basis pints as London opens.
As I mentioned in yesterday’s column, the cut-off for this Friday’s COT/Bank Participation Report was at the close of COMEX trading yesterday afternoon — and the price action of the last five trading days to be included in that report should leave no doubt that there will be further deterioration in the Commercial net short positions in both precious metals, particularly in silver. Just how bad the numbers will be, will be determined by how much of yesterday’s price/volume data gets reported in a timely manner, as a lot of the big activity came late in the COMEX trading session, plus in the after-hours trading session as well. However, the after-hours price/volume action won’t be in Friday’s COT report at all.
Just how far the commercial traders [especially the raptors] stuck their collective heads back in the lion’s mouth is still up in the air — and we won’t have any hard numbers until Friday. At one time during the summer, they were $4 billion in the hole — and it remains to be seen, as Ted has mentioned on several occasions, how far they’re prepared to go this time around. So we wait some more.
And as I post today’s column on the website at 4:00 a.m. EDT, I see that gold is up $6.50 the ounce. The silver price got smacked right at the London open — and is only up 7 cents currently. Both platinum and palladium have rallied back to unchanged.
Net HFT gold volume is now up to 32,500 contracts so, like yesterday, this rally isn’t going unopposed either. The same can be said about silver, as net HFT volume is pretty chunky at 11,500 contracts — and the dollar index is now down 11 basis points.
The FOMC meeting started yesterday with little fanfare — and the white smoke goes up the proverbial chimney at 2:00 p.m. EDT this afternoon. How the markets react, or are allowed to react at that time, is a crap shoot.
That’s all I have for today — and I’ll see you here tomorrow.
Ed
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