08 February 2017 — Wednesday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price really didn’t do much anywhere on Planet Earth on Tuesday. It was down by about 3 dollars around 11:30 a.m. in Shanghai — and back to about unchanged shortly after 2 p.m. over there. Then by shortly after the London open, the gold price was down by 6 dollars — and then didn’t do much until 8:30 a.m. in New York. Then it rallied back to unchanged once again by 12:45 p.m. EST — and quietly sold a few dollars lower into the close.
The low and high ticks definitely aren’t worth looking up.
Gold finished the Tuesday session in New York at $1,233.40 spot, down $1.80 on the day. Net volume was pretty heavy at 179,000 contracts, but how much of that was ‘real’ volume vs. day trading is hard to determine.
Silver more or less followed the same price path as gold yesterday, but it was far more ‘volatile’. The sell-off after the 2:10 p.m. China Standard Time Far East high took the silver price down about a percent by 8:15 a.m. GMT in London. It struggled higher until 8:30 a.m. in New York — and then took off higher, but as you can tell from the Kitco chart below, it was under considerable resistance right from the get-go. The price was capped at the 11:00 a.m. EST London close — and from there it chopped sideways, before getting turned lower at 12:45 p.m. EST…the same time as gold was. It was sold quietly lower until 2:30 p.m. in the thinly-traded after-hours market — and then traded sideways until the 5:00 p.m. EST close.
The low and high ticks in this precious metal, which are barely worth looking up, were recorded as $17.56 and $17.795 in the March contract.
Silver finished the Tuesday session at $17.67 spot, down 4 cents on the day. Net volume was slightly elevated at 42,500 contracts — and roll/over switch volume out of March was fairly decent.
The platinum price was sold lower in fits and starts all through Far East and most of Zurich trading on Tuesday — and was down 10 bucks the ounce by 8:30 a.m. in New York. It gained about 7 of that back by around 1 p.m. EST — and then was sold back to down 10 bucks shortly after 2 p.m. It didn’t do much after that. Platinum was closed in New York yesterday at $1,003 spot — and down 9 dollars from Monday’s close.
After opening flat, palladium was sold down three or four bucks by shortly after 9 a.m. China Standard Time on their Tuesday morning. From there the price didn’t do much until it was turned lower just after 3 p.m. CST. The low tick came shortly before 11 a.m. in Zurich — and it rallied quietly and steadily from there until a few minutes after Zurich closed. The New York traders were quick to sell it lower from there — and palladium finished the Tuesday session at $762 spot…down 8 bucks on the day.
The dollar index closed very late on Monday afternoon in New York at 99.90 — and once trading began a few minutes later at 6:00 p.m. EST, it continued the rally that had begun around 3:40 p.m. The index really took off to the upside in a somewhat stair-step fashion starting around 2 p.m. China Standard Time on their Tuesday afternoon — and most of the gains that mattered were in by around 9:15 a.m. GMT in London, when the index touched the 100.70 mark. At that time, it was up about 80 basis points. From there it began to chop very gently lower, but began to head sharply lower once the London p.m. gold fix was put to bed, which was just minutes after 10 a.m. EST. Three hours — and about 50 basis points later — the index was down to the 100.15 mark. From there it rallied quietly until just after 4:30 p.m. EST — and it traded flat into the close from there. The dollar index finished the Tuesday session at 100.40 — and up 50 basis points from Monday.
After such a wild ride — and its 82 basis point gain [at its high tick] from the Monday afternoon close, until the 9:35 a.m. GMT 100.72 high tick — I’m amazed that the precious metals did as well as they did. A normal dollar index rally of this size would have been an opportunity for ‘da boyz’ to have driven precious metal prices into the dirt. That didn’t happen — and I find myself asking…”Why not?” Maybe things are different this time, at least momentarily.
The other things that I noticed was that a large chunk of gold’s losses were recouped even before the dollar index took its 50 basis point header in the 3-hour time period between the 10 a.m. EST p.m. gold fix — and 1 p.m. I would suspect that both gold and silver — and perhaps platinum and palladium as well — would have closed in positive territory if the powers-that-be hadn’t been waiting for them in New York during that time period.
Here’s the 6-month U.S. dollar index — and it’s way too soon to read anything into it. The dollar index is definitely a work in progress, as the threat of a global currency war of some size may be taking shape.
The gold stocks opened down a percent or so — and rallied into positive territory for about an hour starting around 10:30 a.m. EST. By 11:45 a.m. they were back in negative territory to stay — and the low tick of the day came about 2:35 p.m. — and they rallied quietly from there into the close. The HUI finished down 0.82 percent.
It was more or less the same for the silver equities, as Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed lower by 1.08 percent. Click to enlarge if necessary.
The CME Daily Delivery Report showed that only 3 gold and 1 silver contract were posted for delivery within the COMEX-approved depositories on Thursday. HSBC USA stopped 2 gold contracts — and Canada’s Scotiabank stopped the other gold contract, plus the lone silver contract. I shan’t bother linking this activity.
The CME Preliminary Report for the Tuesday trading session showed that gold open interest in February dropped by 324 contracts, leaving 1,449 contracts left open. Monday’s Daily Delivery Report that only 111 gold contracts were actually posted for delivery today, so that means that 324-111=213 gold contract holders exited the February delivery month. Silver o.i. in February rose by 5 contracts, leaving 166 still around. Monday’s Daily Delivery Report showed that 1 lonely silver contract was posted for delivery today, so that means that 1+5=6 silver contracts were added to the February delivery month.
For the fifth business day in a row…which is every business day in February so far…there was another deposit in GLD. This time an authorized participant added a hefty 266,710 troy ounces. And as of 7:31 p.m. EST yesterday evening, there were no reported changes in SLV.
So far in February, there has been five consecutive deposits into GLD totalling 896,300 troy ounces. During the same time five days, there have been zero ounces of silver added to SLV. And, in actual fact, there have been two withdrawals from SLV so far this month…totalling 1,084,216 troy ounces.
Ted may or may not have something to say about this in his mid-week column this afternoon.
There was another smallish sales report from the U.S. Mint yesterday. They sold 1,500 troy ounces of gold eagles — 1,000 one-ounce 24K gold buffaloes — and 125,000 silver eagles.
February mint sales are off to a very slow start.
It was pretty quiet in gold over at the COMEX-approved depositories on the U.S. east coast on Monday. Nothing was reported received — and only 11,340 troy ounces were shipped out. There was 3,858.000 troy ounces/120 kilobars [U.K./U.S. kilobar weight] shipped out of Scotiabank, plus another 96.450 troy ounces/3 kilobars [U.K./U.S. kilobar weight] shipped out of Manfra, Tordella & Brookes, Inc. The remaining 7,386 troy ounces came out of Brink’s, Inc. I won’t bother linking this small amount.
In silver, there 602,702 troy ounces received — and all but two good delivery bars ended up at Canada’s Scotiabank. There was also 579,294 troy ounces shipped — all but two good delivery bars of that amount came out of CNT. Delaware was responsible for the in/out movement with the other four good delivery bars. The link to that action is here.
It was pretty busy over at the COMEX-approved gold kilobar depositories in Hong Kong on their Monday. There were 2,036 reported received — and a fairly hefty 5,809 shipped out. All of this action was at Brink’s, Inc. as per usual — and the link to that, in troy ounces, is here.
In Tuesday’s column, I had two of Nick Laird’s charts showing India’s gold imports for December — and for all of 2016. Now here are the same charts for silver. The first chart shows the monthly silver imports into India, updated with December’s data. They imported only 285.568 tonnes, or 9.18 million troy ounces, which isn’t a lot. Click to enlarge.
And here’s India’s yearly silver import chart updated with 2016’s data. As you can see, India imported about 5,000 tonnes less silver in 2016 than they did in 2015. That’s about 160 million ounces worth…a huge drop. Click to enlarge.
And I also note in another chart that Nick sent around yesterday evening, that China added 6.91 tonnes of gold to their reserves in January. The chart isn’t worth posting.
I have an average number of stories for you today, including two that I was going to save until Saturday. But because the issue is now front and centre at the White House…at least it was yesterday…I thought it best to include them in today’s column.
CRITICAL READS
Trump’s bonfire of banking rules could burn us all
“The last thing we want at this point in time is a relaxation of regulation,” said Mario Draghi, president of the European Central Bank on Monday. He is right to worry. Relaxation of financial regulation is exactly what Donald Trump has in mind and the effects could be felt around the world.
The U.S. president seems to have accepted the half-baked idea that US banks are somehow so tied down by international regulations that they are obliged to hoard capital that could be used for lending to the American economy. “I have so many people, friends of mine, who have nice businesses who can’t borrow money,” said Trump when he signed an executive order last week.
There is little evidence that banks are refusing to lend to creditworthy borrowers in the U.S. In fact, the reverse seems more likely: credit availability in the U.S. is strong, which is exactly what you’d expect given the healthy returns being reported by U.S. banks. But that hasn’t stopped the new administration from trying to blame the Dodd-Frank regulations, the country’s response to the financial crisis of 2008-09, for all manner of ills.
Others have gone further. Republican congressman Patrick McHenry, vice-chairman of the financial services committee, last week suggested that the U.S. should pull out of international bodies such as the Financial Stability Board (FSB) and the Basel committee that agrees standards for banks’ capital and supervision. McHenry’s argument is that US banks have been “unfairly penalised” by these “secretive” international forums.
It’s astonishing that a legislator from the country that inflicted Lehman Brothers on the world could be so critical of international efforts, with the U.S. in the vanguard, to improve banking safety. But, even in its own terms, his argument is nonsense. U.S. banks have been relative winners from reform. Their dominance of international financial markets is greater even than it was in 2008-09 and the explanation, in part, is surely that they were faster and more determined in raising the extra capital that the FSB and Basel committees requested. JP Morgan, Morgan Stanley, Goldman Sachs et al got back to the races years ago. By contrast, too many big European banks – think Deutsche Bank and Italy’s Unicredit – remain mired in crisis.
This commentary put in an appearance on theguardian.com Internet site at 7:14 p.m. GMT on Monday evening — and today’s first news item comes to us courtesy of Patricia Caulfield. Another link to it is here — and it’s worth reading.
Trump’s Dodd-Frank Do-Over Diverted to Slow Lane With Obamacare
President Donald Trump’s pledge to dismantle the Dodd-Frank financial overhaul is colliding with the same reality as his pledge to gut Obamacare: The Republican majority in Congress can’t decide how to make it happen and Democrats are vowing to fight.
Trump, who last month said Obamacare would be replaced “the same day or the same week,” or perhaps “the same hour,” acknowledged Sunday that the health-care law isn’t going away anytime soon. “We should have something within the year and the following year,” told Fox News’s Bill O’Reilly.
The Dodd-Frank directive he signed Friday is hitting the same road block on Capitol Hill and at federal agencies.
In both cases, Trump’s team has moved swiftly with a flurry of executive orders that largely promise action in the future. But Republicans in Congress aren’t close yet. On the House side, there’s no agreement on a plan to replace either Obamacare or Dodd-Frank. Even if they reach one soon, it’s almost certain to go beyond what Senate Republicans are likely to accept, and it won’t be able to attract Democratic votes. And putting forward new regulations will take years.
Trump’s executive action on Dodd-Frank has also galvanized Democrats to fight changes to a law enacted in response to the 2008 financial crisis.
This Bloomberg article was posted on their website at 3:00 a.m. MST on Tuesday morning, which was 5:00 a.m. in Washington. It’s from the Zero Hedge website via Brad Robertson — and another link to it is here.
U.S. government has only itself to blame for dollar strength, Bundesbank chief says
The U.S. administration should blame itself rather than Germany for a recent strengthening of the dollar against the euro, the head of Germany’s Bundesbank said on Tuesday.
Jens Weidmann said comments by a top trade adviser of U.S. President Donald Trump that Germany was exploiting the United States and its European partners with an overly weak euro were “more than absurd.”
“The thesis that foreign currency manipulations are to blame for the current strong U.S. dollar is not borne out by facts,” he told a gathering in this western German city.
“The most recent rise in the dollar is likely to be homemade, triggered by the political announcements of the new government,” he said.
Separately, in an interview with Redaktionsnetzwerk Deutschland media group, Weidmann said there was no point in starting a currency war.
“If politicians erect trade barriers or start a currency depreciation race, there are only losers in the end,” he told RND, in comments due to be published Wednesday.
This Reuters news item, filed from Mainz in Germany, was posted on their Internet site at 4:55 p.m. EST on Tuesday evening — and I found it embedded in a GATA release. Another link to it is here.
A Quiet Giant of Investing Weighs In on Trump
He is the most successful and influential investor you have probably never heard of. His writings are so coveted and followed by Wall Street that a used copy of a book he wrote several decades ago about investing starts at $795 on Amazon, and a new copy sells for as much as $3,500.
Perhaps that’s why a private letter he wrote to his investors a little over two weeks ago about investing during the age of President Trump — and offering his thoughts on the current state of the hedge fund industry — has quietly become the most sought-after reading material on Wall Street.
He is Seth A. Klarman, the 59-year-old value investor who runs Baupost Group, which manages some $30 billion.
While Mr. Klarman has long kept a low public profile, he is considered a giant within investment circles. He is often compared to Warren Buffett, and The Economist magazine once described him as “The Oracle of Boston,” where Baupost is based. For good measure, he is one of the very few hedge managers Mr. Buffett has publicly praised.
This item showed up on The New York Times website on Monday sometime — and it’s the second contribution of the day from Patricia Caulfield. Another link to it is here.
Trump and Staff Rethink Tactics After Stumbles
President Trump loves to set the day’s narrative at dawn, but the deeper story of his White House is best told at night.
Aides confer in the dark because they cannot figure out how to operate the light switches in the cabinet room. Visitors conclude their meetings and then wander around, testing doorknobs until finding one that leads to an exit. In a darkened, mostly empty West Wing, Mr. Trump’s provocative chief strategist, Stephen K. Bannon, finishes another 16-hour day planning new lines of attack.
Usually around 6:30 p.m., or sometimes later, Mr. Trump retires upstairs to the residence to recharge, vent and intermittently use Twitter. With his wife, Melania, and young son, Barron, staying in New York, he is almost always by himself, sometimes in the protective presence of his imposing longtime aide and former security chief, Keith Schiller. When Mr. Trump is not watching television in his bathrobe or on his phone reaching out to old campaign hands and advisers, he will sometimes set off to explore the unfamiliar surroundings of his new home.
During his first two dizzying weeks in office, Mr. Trump, an outsider president working with a surprisingly small crew of no more than a half-dozen empowered aides with virtually no familiarity with the workings of the White House or federal government, sent shock waves at home and overseas with a succession of executive orders designed to fulfill campaign promises and taunt foreign leaders.
But one thing has become apparent to both his allies and his opponents: When it comes to governing, speed does not always guarantee success.
This interesting story, filed from Washington, appeared on The New York Times website yesterday. It’s the third contribution of the day — and the second in a row, from Patricia Caulfield. Another link to it is here.
Exposed: How world leaders were duped into investing billions over manipulated global warming data
The Mail on Sunday today reveals astonishing evidence that the organisation that is the world’s leading source of climate data rushed to publish a landmark paper that exaggerated global warming and was timed to influence the historic Paris Agreement on climate change.
A high-level whistleblower has told this newspaper that America’s National Oceanic and Atmospheric Administration (NOAA) breached its own rules on scientific integrity when it published the sensational but flawed report, aimed at making the maximum possible impact on world leaders including Barack Obama and David Cameron at the UN climate conference in Paris in 2015.
The report claimed that the ‘pause’ or ‘slowdown’ in global warming in the period since 1998 – revealed by U.N. scientists in 2013 – never existed, and that world temperatures had been rising faster than scientists expected. Launched by NOAA with a public relations fanfare, it was splashed across the world’s media, and cited repeatedly by politicians and policy makers.
But the whistleblower, Dr John Bates, a top NOAA scientist with an impeccable reputation, has shown The Mail on Sunday irrefutable evidence that the paper was based on misleading, ‘unverified’ data.
It was never subjected to NOAA’s rigorous internal evaluation process – which Dr Bates devised.
His vehement objections to the publication of the faulty data were overridden by his NOAA superiors in what he describes as a ‘blatant attempt to intensify the impact’ of what became known as the Pausebuster paper.
This very long, but very excellent exposé showed up on the dailymail.co.uk Internet site very late on Saturday night GMT — and I received it from ‘aurora’ very early on Monday. As I’ve said since Day One of this global warming/climate change bulls hit ‘controversy’, it has always been a Trojan Horse for the New World Order crowd — and here’s yet another top U.S. atmospheric scientist saying the same thing. I had a commentary about this from an MIT atmospheric physicist in Saturday’s missive, if you remember. It’s a must read if you have the interest — and another link to it is here. It’s the first of the two stories on this issue.
NOAA agrees to review scientist’s claim that data manipulated to discredit warming ‘pause’
The National Oceanic and Atmospheric Administration said Monday that it would review a whistleblower’s allegations that the agency manipulated climate data in order to eliminate the global warming “pause” for political reasons.
The whistleblower, John Bates, who retired in December as principal scientist of the National Climatic Data Center, rocked the climate change debate Sunday with his claim that a top NOAA climate scientist selectively used data to discredit the global warming hiatus in a key 2015 study.
“NOAA is charged with providing peer-reviewed data to the American public and stands behind its world-class scientists,” a NOAA spokesman said in an email. “NOAA takes seriously any allegation that its internal processes have not been followed and will review the matter appropriately.”
Mr. Bates laid out his allegations in a lengthy article Saturday on the Climate Etc. blog, run by former Georgia Tech climatologist Judith Curry, and in a Sunday interview with the United Kingdom’s Daily Mail.
He criticized the June 2015 “pausebuster” paper’s lead author, Thomas Karl, then director of the National Centers for Environmental Information, for what Mr. Bates described as a failure to archive and document his climate data sets.
This related news item was posted on The Washington Times website on Monday — and I found it all by myself. Another link to it is here.
U.S. refiners face weakening demand at pump for first time in 5 years
U.S. refiners are facing the prospects of weakening gasoline demand for the first time in five years, stoking fears that earnings this year may be even worse than the dismal performances seen in 2016.
The sign of weakening U.S. gasoline demand comes as U.S. refiners are in the midst of reporting their worst year of earnings since the U.S. shale boom started in 2011. The oil boom turned to bust in 2014, and U.S. independent refiners reaped the profits as plunging pump prices and a growing economy helped fuel a surge in demand.
U.S. refiners amassed large inventories that punished margins last year, but record gasoline demand and robust exports helped provided a firewall against further slippage. Now the industry faces the prospects of higher crude prices following global production cuts and fresh federal data that suggests their gasoline demand safety net may be eroding. “We are very cautious on refining margins, and on demand,” Sarah Emerson, a managing principal at ESAI Energy LLC, said. “When oil prices goes up, gasoline demand is going to go down.”
The U.S. Energy Information Administration said Wednesday that the four-week average of gasoline supplied in the United States was 8.2 million barrels per day, lowest since February 2012. U.S. gasoline demand is closely watched by traders since it accounts for roughly 10 percent of global consumption.
Gasoline use has grown every year since 2012, despite fears that demand has topped out amid the growth of fuel efficient cars, urbanization and a graying population.
This Reuters article, filed from New York, was posted on their website early on Sunday morning EST — and I plucked it from a Zero Hedge piece that was posted on their website last night EDT. Another link to it is here.
At Over $2.5 Trillion, U.S. Student And Auto Loans Hit New All Time High
Following a burst in consumer credit growth in the past few months, driven by both revolving, or credit card, debt as well as non-revolving auto and student loans, in December the US consumer took a breather, and total consumer credit grew by only $14.2 billion, nearly half of last month’s $25.2 billion, and lowest monthly increase since February.
Despite the modest slowdown, total U.S. credit card debt was just a fraction away from $1 trillion, and just a few months away from regaining its previous record of $1.02 trillion attained just prior to the last financial crisis.
But while U.S. consumers may have stepped back from a credit-card funded splurge in the last month of 2016, the far more troubling trend in student and auto loans remains, and as the following chart shows, as of Q4, both car and student debt hit all time highs of $1.407 trillion and $1.11 trillion, respectively.
Unless the Trump administration somehow finds a way to contain the unbridled expansion of “cheap” student debt, which is encumbering an entire generation with loans that can never be paid off, we are confident that it will be virtually impossible for the U.S. economy to truly undergo a sustained period of strong growth in the foreseeable future.
This brief 4-chart Zero Hedge article was posted on their Internet site at 3:27 p.m. on Tuesday afternoon EST — and another link to it is here.
High risk of imminent large scale military operations in the Donbass — The Saker
Most of you must by now have heard various reports about the rapidly deteriorating situation in the Ukraine. Many, however, might have dismissed them because, let’s be honest here, we have had so many false warnings about an imminent Ukronazi attack that we got used to them. In fact, there have been numerous previous incidents, but this time around I see enough indicators and warnings to warrant another warning. Here are the new elements:
1. Over the past couple of months the Ukrainians have gradually amassed a very large force estimated by most observers are 120’000 soldiers. Some units were moved away from the Crimean border and the city of Mariupol and deployed all along the line of contact in the Donbass.
2. The Ukronazis have officially admitted that they are implementing what they call a “frog leap” tactic in the Donbass which consists of slowly but constantly taking control of the gray zone supposed to separate the two sides and they are not reporting about the territories they have “liberated”.
3. Poroshenko is, by all accounts, totally clueless as how to proceed. This weakness if felt by key Ukrainian politicians who recently have made strong statements in support of a military “solution”. Those politicians include Yulia Timoshenko and Dmitry Iarosh. If Poroshenko does nothing, they call him a coward, if he orders an attack on the Donbass they will call him a loser. For the Nazis, this is a win-win situation.
4. There is a consensus opinion amongst experts that the Ukronazi junta is horrified by the election of Donald Trump and that they see only one option to force the hand of Trump: to force Russia to openly intervene in defense of the Novorussian Republics which would, of course, result in a military defeat for the Ukraine but also a political victory as the US and EU cannot allow Russian to openly defeat the Ukrainians without reacting.
This rather brief 12-point presentation appeared on thesaker.is Internet site yesterday — and it’s certainly worth reading, even if you’re not a serious student of the New Great Game. It comes to us courtesy of ‘aurora’ — and I thank him for sending it our way. Another link to it is here.
Putin, Merkel urge immediate ceasefire in Ukraine
Russian President Vladimir Putin and German Chancellor Angela Merkel called for an immediate restoration of a truce in southeastern Ukraine, the Kremlin said Tuesday.
The two leaders expressed serious concern during a phone conversation over the recent escalation of the armed conflict between Ukrainian government troops and local militias in the Donbass region, said a Kremlin statement.
Putin told Merkel that there was “a clear desire for Kiev to disrupt the implementation of the Minsk agreements and use the Normandy format as a cover for its destructive steps.”
The Normandy format is a group composed of Russia, France, Germany and Ukraine aimed at resolving the conflict in eastern Ukraine.
According to the Kremlin, Putin and Merkal agreed to step up diplomatic efforts to promote a peaceful settlement to the crisis and hold further Normandy group meetings.
This Xinhua news item, filed from Moscow, was posted on their Internet site on Tuesday sometime — and I found it in today’s edition of the King Report. Another link to his story is here.
Greek Two-Year Yields Approach 10% Amid IMF Standoff With E.U.
Greece’s two-year note yields neared 10 percent as a quarrel between the nation’s creditors over its fiscal targets boosted concern the country is running out of time to complete yet another review of its bailout program before Europe gears up for a busy election season beginning in March.
Yields on Greece’s notes due in 2019 rose 84 basis points to 9.77 percent as of 3:10 p.m. in Athens, the highest since September. The notes were sold in April 2014 as part of a series of flagship sales that marked Greece’s brief return from market exile.
Greece won’t meet fiscal surplus targets set by its euro-area creditors, the International Monetary Fund said on Monday, after executive directors met to discuss the fund’s annual assessment of the nation’s economy. The IMF’s assumptions aren’t based in reality and don’t take into account the reform of Greece’s public finances, according to a European Union official who spoke on condition of anonymity because the discussions are sensitive.
The impasse is the latest in a long line of disputes that have buffeted Greek securities since the nation regained market access. While the nation’s bonds trade with thin volumes and have a largely specialized investor base, flare-ups in its debt talks have previously spilled into other markets, spurring increased volatility.
The yield on the 2019 notes, which was below 4 percent in 2014, climbed to as much as 37 percent in 2015, when failed negotiations led to a referendum that threatened Greece’s position in the euro-area.
This Bloomberg news item appeared on their Internet site at 3:42 a.m. Denver time on Tuesday morning — and was updated less than three hours later. I thank Richard Saler for pointing it out — and another link to it is here.
Chinese Reserves Unexpectedly Drop Below $3 Trillion For The First Time Since 2011
Beijing surprised China-watchers this morning, when the PBOC announced that in January, China’s foreign-currency reserves dipped by $12.3 billion, below the key “psychological level” of $3 trillion, or $2.998 trillion to be exact, declining for the 7th consecutive month, and dropping to the lowest since early 2011. Consensus had expected a drop of $10.5 billion to just above $3 trillion.
According to the PBOC, holdings of SDRs decreased to 2.21 trillion from 2.24 trillion in December. Gold reserves remained at 59.24mm troy ounces, however rose in dollar terms due to the increase in the price of gold from $67.9BN to $71.3BN.
The central bank’s intervention in foreign-exchange markets drove the drop, as did seasonal factors such as high demand for other currencies during the week-long Lunar New Year holiday, the State Administration of Foreign Exchange said in a statement.
The January decline was much smaller than the $41 billion reported in December, and was the smallest in seven months, indicating China’s renewed crackdown on outflows appears to be working, at least for now. China has taken a raft of steps in recent months to make it harder to move money out of the country and reassert a firmer grip on its faltering currency, even as U.S. President Donald Trump steps up accusations that Beijing is keeping the yuan too cheap.
This longish commentary is the Zero Hedge spin on a Bloomberg story from yesterday. It showed up on their Internet site at 6:57 a.m. on Tuesday morning EST. It’s the second offering in a row from Richard Saler — and another link to it is here.
New gold futures contracts in London are open but no one trades them — Ronan Manly
Gold researcher Ronan Manly reports last night that two new gold futures contracts that recently opened for business in London and were announced with great fanfare — one created by the London Metal Exchange, the other by the Intercontinental Exchange — have yet to trade even a single contract.
With British understatement Manley’s report is headlined “Lukewarm Start for New London Gold Futures Contracts” — and it’s posted on the Singapore-based bullionstar.com Internet site. I found it on the gata.org website.
January Shanghai Gold Exchange withdrawals hold up in short month — Lawrie Williams
January’s Shanghai Gold Exchange gold withdrawals totalled 184.4 tonnes, admittedly down on the high 2016 figure of 225.1 tonnes which was the biggest monthly total of last year, and also well down on 2014 and 2015 figures, but…… This year the Chinese New Year fell early – on January 28 which meant the SGE effectively ceased trading on the 26 and restocking by traders and fabricators would have been running down by then anyway, so the 184.4 tonne figure suggests that gold demand during the month was reasonably strong – borne out by the exceptionally high export figures for Swiss gold flowing into the Chinese mainland in December of 154 tonnes.
Together with Hong Kong net gold exports to the mainland of 47 tonnes, these two countries/regions alone exported over 200 tonnes of gold into the Chinese mainland during December, while China’s own gold production will have added around a further 35-40 tonnes and there will also have been other direct imports from gold producing/trading nations around the world. China’s gold demand remains high.
For now the jury remains out as to whether Chinese gold demand, as represented by SGE gold withdrawal figures, will rise or fall this year. With the Chinese on holiday until last Thursday (Feb 2), February will also be a short month for SGE gold withdrawals too, but not as short a trading month as last year when the Lunar New Year fell on February 8 and SGE gold withdrawals totalled 107.6 tonnes. We should, however, be able to get an indication of current relative demand strength by the end of February by adding the first two months’ figures together and comparing those with previous years. We suspect withdrawals may well prove to be at least on a par with 2016 figures, but probably still well down on those for the record 2015 total. However what kind of anti-China stance President Trump may take, given his campaign rhetoric, may well influence Chinese gold purchasing levels through the year with uncertainty of the economic effects of any anti-China trade moves driving Chinese investors into gold as the ultimate safe haven.
This worthwhile commentary by Lawrie put in an appearance on the Sharps Pixley website yesterday sometime — and another link to it is here.
The PHOTOS and the FUNNIES
The Click to Enlarge feature is really helpful for both these photos.
The WRAP
It was another rather strange day for the precious metals on Tuesday. As I mentioned at the top of this column when discussing the antics in the dollar index, the gold price rallied back to almost unchanged long before the dollar index began to head south at the 10 a.m. EST afternoon gold fix in London — and silver made it back to that level shortly after.
Why they weren’t both pounded into the ground on the big rally in the dollar index yesterday is somewhat of a mystery. And as I also stated, both metals would have probably closed in positive territory if they hadn’t run into ‘da boyz’ between 10 a.m. and 1 p.m. EST in COMEX trading in New York, as the dollar index shed 50 basis points during that 3-hour time period.
Here are the 6-month charts for all four precious metals, plus copper, once again — and here’s not much to see as we await developments in the days ahead.
And as I type this paragraph, the London open is less than ten minutes away — and I note that the gold price has been trading a few dollars either side of unchanged through the Far East trading session on their Wednesday. At the moment it’s down $2.40 an ounce. The trading pattern in silver has been mostly the same as well — and it’s down 4 cents currently. Platinum has been all over the place from a price perspective, but is currently up two bucks. Palladium has been trading mostly lower — and is down 3 dollars as the Zurich open approaches.
Net HFT gold volume is just over 39,000 contracts — and that number in silver is just under 10,000 contracts, with no March roll-over/switch volume worthy of the name.
The dollar index jumped about 12 basis points the moment that trading began at 6:00 p.m. EST on Tuesday evening in New York, but was down about 10 basis points in mid-morning trading in Shanghai on their Wednesday. Then shortly after 12 o’clock noon China Standard Time, the index began to chop higher — and is now up 16 basis points as London opens.
Yesterday, at the close of COMEX trading, was the cut-off for this Friday’s Commitment of Traders/Bank Participation Reports. Just eye-balling the above charts, I would guess that we’ll see some deterioration in the commercial net short position in gold — and some in silver as well. But they shouldn’t be material amounts, unless there was a lot of carry-over from the big rallies in both that occurred on the cut-off day for last week’s COT Report.
I’m not about to really stick my neck out too far on this one, as the COT Reports have been full of mostly positive surprises recently — and I would think that Ted will have something to say about this in his mid-week commentary today — and I’ll report on that in my Friday missive.
And as I post today’s column on the website at 4:05 a.m. EST, I see that all four precious metals jumped up in the first hour of London/Zurich trading. Gold is now up $3.20 on the day — and silver is up 6 cents. Platinum is now up 7 dollars — and palladium by 2.
Net HFT gold volume is 47,000 contracts — and that number in silver is sitting right at 11,000 contracts. I note with some interest that silver’s net volume is only up about 1,000 contracts or so in the first hour of London trading — and that’s not a lot considering the positive price action.
The dollar index was up about 22 basis points ten minutes after London opened, but has backed off a hair — and is up 13 basis points currently.
This is the third day in a row where we’ve seen positive price action in the precious metals while the dollar index has been rising. And as I said further up, the precious metals probably would have closed in positive territory yesterday if allowed…so what today brings, is unknowable, but the market certainly has a different feel to it now.
That’s all I have for today — and I’ll see you here tomorrow.
Ed
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