State Department Cable Confirms Gold Futures Market Was Created For Price Suppression

05 January 2017 — Thursday


The gold price was sold lower by a dollar or two in the first hour or so after trading began at 6:00 p.m. in New York on Tuesday evening.  It chopped quietly and unsteadily higher until shortly after 11 a.m. GMT in London — and then chopped mostly sideways with a slight negative bias for the remainder of the Wednesday trading session.

With the gold price trading within an ten dollar price range, the low and high ticks aren’t worth posting.

Gold finished the day at $1,163.10 spot, up $4.80 from Tuesday’s close.  Net volume was pretty heavy at just over 153,000 contracts.

It was mostly similar for silver, except for the fact that there was a bit of a rally in late-morning in New York, but most of those gains, plus a bit more, were taken away by 2:45 p.m. EST in the thinly-traded after-hours market.

The low and high ticks in this precious metal were reported by the CME Group as $16.30 and $16.57 in the March contract.

Silver was closed on Wednesday at $16.40 spot, up 13 cent on the day.  Net volume was pretty chunky at just over 50,500 contracts.

Platinum was sold off about 12 bucks in the first hour or so once trading began in New York on Tuesday evening.  It crawled higher from there, but once Zurich opened it rallied in fits and starts until the high tick was in around 9:30 a.m. in New York.  It was quietly sold lower from there, but still managed to finish up 5 dollars on the day at $941 spot.

The palladium price began to inch higher starting shortly before 11 a.m. in Shanghai — and was up 5 bucks by the Zurich open.  Then away it went to the upside as well.  Its price was capped at the 9:30 a.m. EST open of the equity markets in New York, just like it was for platinum.  It sold off a few dollars from there — and traded mostly ruler flat for the rest of the Wednesday session.  Palladium had another stellar rally, closing up an even $30 dollars at $938 spot but, like platinum, would have closed materially higher if JPMorgan et al hadn’t stepped in at 9:30 a.m. in COMEX trading in New York.

The dollar index closed very late on Tuesday afternoon in New York at 103.22 — and opened flat a few minutes later as trading began for the new day in the Far East.  It jumped up about 10 basis points a couple of hours later — and then didn’t do much after that until precisely 2:00 p.m. China Standard Time on their Wednesday afternoon.  It began to head lower at that point — and except for a two-hours 30 basis point up/down move in afternoon trading in New York, continued lower from there, with the absolute 102.39 low tick coming around 4:45 p.m. EST.  It recovered a bit after that, closing on Wednesday at 102.52…down 70 basis points from Tuesday.

As I’ve pointed out more times than I care to think about, what the precious metals do is no way, shape, or form related to what’s going on with the currencies.  It should be related, but it only happens when the powers-that-be find it useful as cover.

John Hathaway had a dollar index/gold price comparison chart in one of his quarterly reports early last year — and it showed the correlation between these two indexes at 0.31 — which is no correlation at all.

And here’s the 6-month U.S. dollar index which I post here for its usual entertainment value.

The gold shares opened up a bit — and then spent the rest of the Wednesday session mostly in positive territory, although it was a bit nip and tuck until the last seventy-five minutes of trading in New York.  The HUI closed higher by 1.25 percent when all was said and done.

The silver equities followed virtually the same price path as their golden brethren — and Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up 1.43 percent.  Click to enlarge if necessary.

The CME Daily Delivery Report showed that 13 gold and 110 silver contracts were posted for delivery within the COMEX-approved depositories on Friday.  All 13 gold contracts were stopped by Canada’s Scotiabank.  In silver, all 110 contracts were issued by ABN Amro out of its client account.  Scotiabank stopped 60 contracts — and JPMorgan stopped 45 contracts for its client account for a change.  The link to yesterday’s Issuers and Stoppers Report is here.

The CME Preliminary Report for the Wednesday trading session showed that gold open interest in January fell by 861 contracts, leaving 153 still around, minus the 13 mentioned just above.  Tuesday’s Daily Delivery Report showed that 875 gold contracts were actually posted for delivery today, so that means that another 875-861=14 gold contracts were added to the January delivery month.  Silver o.i. in January actually rose by 2 contracts, leaving 466 still open, minus the 110 contracts mentioned in the previous paragraph.  Tuesday’s Daily Delivery Report showed that 1 silver contract was posted for delivery today, so that means that 1+2=3 silver contract were added to January.

There were no reported changes in GLD yesterday, but there was a smallish withdrawal from SLV, as an authorized participant removed 148,263 troy ounces.  An amount this size usually represents a fee payment of some kind.

There was a fair amount of gold movement at the COMEX-approved depositories on the U.S. east coast on Tuesday.  There was 59,847 troy ounces received — and all of that went into JPMorgan’s vault — and 91,997 troy ounces was shipped out of Canada’s Scotiabank.  The link to that activity is here.

The three largest gold holdings in these east coast depositories are JPMorgan with 1.08 million…Canada’s Scotiabank is second with 1.15 million…and the gold king is HSBC USA with 5.69 million troy ounces.

It was a busy day in silver, as 902,609 troy ounces were received — and 486,364 troy ounces were shipped out.  Five different depositories were involved, so I shan’t bother breaking in down.  But it should be noted that JPMorgan took in another 303,586 troy ounces.  A link to this action is here.

When I was on the phone with Ted yesterday, he pointed out something in silver that I’d completely missed when I was looking at the in/out numbers.  That was a one-way adjustment over at the Delaware Depository, as its inventory in the Eligible category was ‘adjusted’ downward by a very chunky 1,519,209 troy ounces.  It didn’t show up as a transfer into Registered, it was simply adjusted out of existence.  Ted suggested that it might just as magically reappear in today’s report, so I’m just adding this paragraph for information purposes.  But I am grateful that one of the nut-ball lunatic fringe hasn’t spotted this yet, because I can just imagine the ‘headline hyperbole’ if they had.  I’ll keep you posted.

After a bit of a lull in activity over at the COMEX-approved gold kilobar depositories in Hong Kong lately, it was ‘business as usual’ on Tuesday, as they reported receiving 509 of them, but shipped out a very chunky 10,156.  All of this action was at Brink’s, Inc. as per usual — and the link to that, in troy ounces, is here.

It was a very quiet news day yesterday — and I don’t have much, so your editing job will be pretty easy.


Macy’s, Kohl’s Crash After Reporting Abysmal Holiday Sales; Cut Guidance; Announce Mass Layoffs, Store Closures

Remember when market cheerleaders said that holiday sales were expected to be far stronger than usual, if only as a result of the newly-discovered optimism from the Trump election? Well, at least when it comes to conventional retailers like Kohl’s and Macy’s… not so much.

First, it was Kohl’s, which announced it was slashing its full year forecast, and now sees FY2017 adjusted EPS of $3.60-$3.65, down from $3.80-$4.00 less than two months ago, in the day after the election (ironically). It wasn’t just the future: the company revealed that comp sales were also down 2.1{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e} y/y in fiscal months November and December combined.

As Kohl’s CEO Kevin Mansell said, “sales were volatile throughout the holiday season. Strong sales on Black Friday and during the week before Christmas were offset by softness in early November and December.”  

But an even greater surprise was revealed moments later by retail bellwether Macy’s, which not only reported a drop in same store sales, not only slashed guidance, but also announced it would close 68 stores and lay off over 10,000 workers.

Specifically, in its press release, the company announced that not only is it cutting its full year EPS to $2.95-$31.0 from $3.15-$3.40, but also another massive layoff and store closure as part of its latest set of operational restructurings which include “actions to streamline its store portfolio, intensify cost efficiency efforts and execute its real estate strategy. These actions bolster the company’s strategy to further invest in omni-channel capabilities, improve customer experience and create shareholder value.

Well, that didn’t take long — and this is just the beginning of the bad news in retail in 2017.  This Zero Hedge piece appeared on their website at 4:21 p.m. EST on Wednesday afternoon — and another link to it is here.  I thank Roy Stephens for bringing it to my attention yesterday evening Denver time.

‘Audit the Fed’ bill gets new push under Trump

Controversial legislation to subject the Federal Reserve’s monetary policy powers to outside scrutiny is getting new life in Washington.

Rep. Thomas Massie, R-Ky., and Sen. Rand Paul, R-Ky., have re-introduced legislation to “audit the Fed” after a similar effort stalled in the last Congress.

But such a proposal, which has been vocally opposed by Federal Reserve Chairwoman Janet Yellen, may face its best odds ever of becoming law. Both chambers are controlled by Republicans long critical of the Fed’s policies, and President-elect Donald Trump has heaped scorn on the central bank since the beginning of his presidential campaign.

Paul specifically mentioned Trump in a statement about the bill today, making clear the measure’s proponents believe they have an ally in their cause coming to the White House.

This news item appeared on Internet site at 12:06 p.m. on Wednesday morning EST — and the first person through the door with it yesterday was Roy Stephens.  Another link to it is here.

U.S. banks gear up to fight Dodd-Frank Act’s Volcker rule

Big U.S. banks are set on getting Congress this year to loosen or eliminate the Volcker rule against using depositors’ funds for speculative bets on the bank’s own account, a test case of whether Wall Street can flex its muscle in Washington again.

In interviews over the past several weeks, half a dozen industry lobbyists said they began meeting with legislative staff after the U.S. election in November to discuss matters including a rollback of Volcker, part of the Dodd-Frank financial reform that Congress enacted after the financial crisis and bank bailouts.

Lobbyists said they plan to present evidence to congressional leaders that the Volcker rule is actually bad for companies, investors and the U.S. economy.

Big banks have been making such arguments for years, but the industry’s influence waned significantly in Washington after the financial crisis. The Obama administration’s regulators and enforcement agencies have been tough on banks, while lawmakers from both parties have seized opportunities to slam Wall Street to score political points.

Banks now see opportunities to unravel reforms under President-Elect Donald Trump’s administration and the incoming Republican-led Congress, which appear more business-friendly, lobbyists said.

This Reuters article showed up on their website at 1:05 a.m. on Wednesday morning EST — and it’s from the Zero Hedge website courtesy of Brad Robertson.  Another link to it is here.

U.S. Libor breaks above 1 percent for first time since 2009

The interest rate banks charge each other to borrow dollars for three months rose above 1 percent on Wednesday for the first time since May 2009 as global rates extended their climb on expectations of accelerating growth and inflation.

The London interbank offered rate, or Libor, for three-month dollars was fixed at 1.00511 percent, the highest level since 1.00688 percent on May 1, 2009, which was also the last date the rate topped 1 percent.

That compared with Tuesday’s rate of 0.99872 percent.

Libor, which is a global rate benchmark for $350 trillion worth of financial products worldwide, has risen nearly 0.40 percentage point from a year earlier.

This Reuters article was posted on their website at 3:47 p.m. EST yesterday afternoon — and I found it embedded in a GATA release.  Another link to it is here.

Peso Plunges to Record Low After Trump Tweet

The Mexican Peso is plunging once again this morning – very close to all-time record lows – as fears spread that Ford’s decision yesterday may become the norm following president-elect Trump’s tweet that “this is just the beginning.”

Bloomberg notes that Ford’s move, which follows a similar decision by United Technologies Corp.’s Carrier in November, makes it all the more important for Mexican President Enrique Pena Nieto to dissuade other foreign companies from following suit in the face of Trump’s wrath. Mexico’s northern neighbor buys 80 percent of the Latin American nation’s exports, and luring U.S. companies is a cornerstone of the government’s plans to modernize industries from construction to oil.

“A lot’s at stake, considering that since 1999 close to 46 percent of foreign direct-investment flows into Mexico originated in the U.S.,” said Alonso Cervera, chief Latin America economist for Credit Suisse Group AG. “Investors will likely be anxious to see which other companies may do the same.”

The damage caused by companies buckling under political pressure offers a preview of the ripples that could jolt Mexico’s economy should Trump also follow through with threats to tear up free-trade agreements and to build a border wall. Economists in Bloomberg surveys have already cut their median forecasts for GDP growth in 2017 to 1.7 percent from an estimate of 2.3 percent before Trump was elected.

This is another breathlessly not-quite-so-truthful Zero Hedge story, which is proven to be so in the very first paragraph.  This ‘news’ item put in an appearance on their Internet site at 10:26 a.m. on Wednesday morning EST — and I thank Richard Saler for pointing it out.  Another link to it is here.

British consumers borrow at fastest rate in 11 years as inflation threat rises

British consumer borrowing increased by the biggest amount in more than 11 years in November, boosting the unexpectedly robust post-Brexit vote economy in what could prove to be a big spending spree ahead of an expected rise in prices.

Net consumer lending beat expectations to jump by 1.926 billion pounds ($2.36 billion) in November – the biggest monthly rise since March 2005 – and is 10.8 percent higher than a year earlier, Bank of England data showed on Wednesday.

Overall economic growth in Britain is likely to have been among the fastest of advanced economies in 2016. But it will face a tougher test this year as the effect of sterling’s sharp fall since June’s Brexit vote to leave the European Union starts to show up in consumer prices.

Consumer spending was the main motor for British growth in the three months after the referendum, with households saving the smallest share of their income since 2008.

Wednesday’s figures suggest this trend continued into the end of 2016, but it is unclear how much longer it will last.

This Reuters article, filed from London, was posted on their Internet site at 7:23 a.m. on Wednesday morning EST — and it’s the second Zero Hedge article that comes to us via Brad Robertson.  Another link to it is here.

Infographic: Gold ETF Mechanics

Gold-backed Exchange Traded Funds (ETFs) have grown strongly in scale and popularity over the last decade and their combined gold holdings now surpass all but the largest central bank gold reserve holdings. However, its important to understand the mechanics of these gold-backed ETF investment vehicles and to appreciate what they can and can’t provide to gold investors.
This infographic takes you on a tour of gold-backed ETFs and illustrates insights into how these products really work, including the following:

  • The contemporary gold holdings of the world’s largest gold-backed ETF platforms
  • Why holders of gold ETFs are holders of units / shares, not gold holders
  • The characteristics and common objectives of gold-backed ETFs
  • How the world’s largest gold ETFs support and perpetuate the opaque practices of the London Gold Market
  • The secretive vault network within which many large gold-backed ETFs allocate and store their gold in
  • How the amount of gold represented by an ETF unit erodes over time
  • The summary mechanics and infrastructure of many of these gold ETF vehicles

This very interesting pictorial essay, which really doesn’t contain anything you should already know, was posted on the Internet site yesterday — and the first reader through the door with it was Scott Otey.  But if this is all news to you, then it’s a must read for sure.  Another link to it is here.

Turkey’s gold imports surge 688 pct in December after Erdoğan’s call

Gold imports to Turkey jumped to 36.7 tonnes in December recording a 688 percent increase compared to the same month in 2015, data from Borsa Istanbul showed on Jan. 4, as reported by Reuters.

Turkey’s gold need surged in December after President Recep Tayyip Erdoğan’s calls for Turkish citizens to convert their foreign exchange into Turkish Liras or gold.   The previous highest figure was reached in November 2014 with 47.1 tons.

The country’s gold imports reached 106.19 tonnes throughout 2016 with a 118 percent increase from the previous year, data from the bourse’s Precious Metals and Precious Stones Market showed.

In December 2015, Turkey imported 4.65 tonnes of gold.

Turkey’s gold imports decreased by 63 percent to 48.7 tons in 2015 compared to the previous year as the demand saw a sharp decrease due to a strengthening U.S. dollar against the lira.

This brief gold-related Reuters news item, filed from Istanbul, put in an appearance on the Internet site yesterday — and it’s something I found on the Sharps Pixley website early yesterday evening Denver time.  Another link to it is here.

Huge rise in Turkish gold imports in December — Lawrie Williams

The political dissent in Turkey and the accompanying government clampdown on accused dissidents, coupled with the country’s active participation in the civil war in neighbouring Syria and the raised terrorist threat and action, has seen a big increase in gold imports into the country in December.

According to Reuters. gold imports to Turkey rose to 36.7 tonnes in December, up from 4.65 tonnes in the same period a year earlier, their highest monthly level in just over two years.  And, for 2016 as a whole, imports more than doubled to 106.2 tonnes from 48.7 tonnes in 2015, the latest data shows.

Turkey has been a key conduit for gold flowing into other Middle Eastern nations – notably Iran when the latter had sanctions imposed on it.  Turkey is a big importer of Iranian natural gas, and paying for this in gold enabled monetary sanctions to be circumvented.  Turkey does have a burgeoning gold mining sector, but overall only produced around 27.4 tonnes in 2015 – a fall from the two previous years according to consultancy Metals Focus.  Its mine production apparently peaked in 2013 at 33.6 tonnes, but there has been a considerable amount of gold exploration and some good sized deposits have been delineated.  One can probably expect gold output to rise in the years ahead.

This very worthwhile commentary by Lawrie was posted on the Sharps Pixley website yesterday sometime — and another link to it is here.

State Department cable confirms gold futures market was created for price suppression

The U.S. gold futures market was created in December 1974 as a result of collusion between the U.S. government and gold dealers in London to facilitate volatility in gold prices and thereby discourage gold ownership by U.S. citizens, according to a State Department cable written that month, obtained by Wikileaks, and disclosed today by the TF Metals Report.

The cable was sent to the State Department from the U.S. embassy in London and signed by someone named Spiers, apparently Ronald I. Spiers, the embassy’s deputy chief at that time.

The cable describes the embassy’s extensive consultations with London bullion dealers about the imminent re-legalization of gold ownership in the United States and possible substantial gold purchases by oil-exporting Arab nations.

The cable reads: “The major impact of private U.S. ownership, according to the dealers’ expectations, will be the formation of a sizable gold futures market. Each of the dealers expressed the belief that the futures market would be of significant proportion and physical trading would be minuscule by comparison. Also expressed was the expectation that large-volume futures dealing would create a highly volatile market. In turn, the volatile price movements would diminish the initial demand for physical holding and most likely negate long-term hoarding by U.S. citizens.

The cable is interesting not just for confirming the assertions by GATA and others in the gold-price suppression camp that futures markets function largely as mechanisms of commodity price suppression and support for government currencies, an assertion perhaps first made comprehensively in 2001 by the British economist Peter Warburton, but also for showing the close connection between the U.S. government and London gold dealers, some of which are cited by name, including Samuel Montagu & Co., Sharps Pixley & Co., Mocatta & Goldsmid, and Consolidated Gold Fields.

This link-filled commentary by Chris Powell was posted on the Internet site at 11:31 a.m. EST on Wednesday morning — and it’s definitely worth your while if you have the time.  Another link to it is here.

Gold Manipulation: The “London Bias”…1970-2014 — Ed Steer

In theory and without considering commissions, what this chart shows in plain English is that if you invested $100 at the London a.m. gold fix on January 2, 1970, sold your position at the London p.m. gold fix the same day, then reinvested the proceeds the next day at the London a.m. fix and sold at the p.m. fix once again—and did that every business day for 45 years in a row—you’d have had the magnificent sum of $12.13 in your trading account at the close of business on February 27, 2015.

This is what I call the “London bias”—and for most of the last 45 years, it’s been negative regardless of the gold price trend indicated by the Y axis.

In other words, since January 2, 1975—and with the very odd exception in the interim—the gold price has closed for a loss between the London a.m. and p.m. gold fixes for 40 years in a row regardless of what was happening in the overall gold market.

Also note on this chart that during the biggest gold bull market in history between 1999 and 2011, the “London bias” continued to be negative, as the gold price closed down every year between the fixes.

How is that possible in a free market, you might ask. Well, the answer is that it ain’t.

This is commentary I posted on the Casey Research website back on March 9, 2015 — and in light of what was revealed in the GATA release above it, it’s definitely a must read again.  Another link to it is here.  I’m afraid that the Click to Enlarge feature doesn’t work with the charts in this essay.  But I have them full-size if anyone wants them.



Most importantly, I don’t think JPMorgan has added at all to its short silver position of 18,000 contracts and may have continued to buy back short positions. This coming Friday’s release of the monthly Bank Participation Report should help clarify JPM’s short position. Bottom line is that both the silver and gold COT reports [last] week were bullish surprises on top of what was already an extremely bullish market structure set up.

Of course, there never has been a bullish COT market structure that has gotten that way without the pain of lower prices and if I could tell you what the precise price bottoms were or will be, I would gladly do so. As I am sure you know, I can’t do that. But if the bottom isn’t here already, it’s awfully close by every measure I consider legitimate. Above all, I do know that it is up to JPMorgan.” — Silver analyst Ted Butler: 31 December 2016

Make no mistake about it.  The heavy volume in both gold, silver again yesterday was a sure sign that the powers-that-be were all over their respective prices for virtually the entire Wednesday trading session.

If this is the beginning of the ‘big move’ up, it’s off to a pretty rocky start.

But for the second day in a row, they allowed palladium and platinum to rise by very large amounts before finally putting the kibosh on their respective prices at the open of the equity markets in New York yesterday morning.  The reason that platinum didn’t close higher in price, is because someone carved a big hole for it to climb out of in the first hour of trading at the 6 p.m. open in New York on Tuesday evening, which it managed to do with little trouble.

Here are the 6-month for all four precious metals, plus copper.  Gold closed above it’s 20-day moving average for the second day in a row yesterday — and silver closed above its for the first time.  There’s still a decent ways to go for both precious metals before they hit the first really critical moving average — and that’s the 50-day.  But the 20-day is important for some Managed Money traders — and that’s certainly been part of the volume activity we’ve been seeing for the last two business days.

Ted said that these gold and silver rallies of the last few days, such as they were, has almost certainly caused the largest of the Managed Money traders to hightail it off the short side in the Big 4 and Big 8 categories in the COMEX futures market.  But as to how much of this will show up in tomorrow’s COT Report, remains to be seen.

As Ted also mentioned in his quote above, we also get the companion Bank Participation Report on Friday — and that will allow him to recalibrate JPMorgan’s short position in silver.

And as I type this paragraph, the London open is less than ten minutes away — and I see that all four precious metals have been in rally mode almost since trading began in New York at 6:00 p.m. on Wednesday evening.  The dollar index has been crashing — and JPMorgan et al are obviously at battle stations, as volumes are enormous already.

Gold is currently up $13.90 an ounce, silver is up 23 cents, platinum is up 16 bucks — and palladium, after rallying in the first few hours of Far East trading on their Thursday morning, has been trading almost ruler flat since — and is up 7 dollars an ounce at the moment.

Net HFT gold volume is sky high at just over 66,000 contracts — and that number in silver is 17,500 contracts.  There’s only a tiny amount of roll-over/switch volume out of February in gold and March in silver, so all this volume is for price suppression purposes only.

The dollar index has been heading down all Thursday long in Far East trading — and it’s back below the 102.00 level at 101.85 — and down 67 basis points as London opens.

Besides the COT and Bank Participation Reports tomorrow, we also get the job numbers as well, so it will be a busy day.  Normally I would suspect that precious metal prices would get slammed on that news, but that didn’t happen in December — and things appear to be ‘different’ so far this year.  So rather than try to handicap this event, I’ll just wait and see what happens.

And as I post today’s column on the website at 4:05 a.m. EST this morning, I see that ‘da boyz’ have turned the dollar index higher — and began hammering precious metal prices lower shortly after the London/Zurich open.  At the moment, gold is only up $10.00 the ounce, silver is up only 14 cents, platinum by 11 bucks — and they actually have palladium down 3 dollars on the day.

Net HFT gold volume is sitting at an enormous 78,000 contracts — and that number in silver is almost 20,500 contracts.  There’s still only microscopic roll-over/switch volume, so as I said earlier, this huge volume is all for price management purposes.

The dollar index, which had been down over 70 basis points around 2:30 p.m. China Standard Time, has now ‘rallied’ to down only 21 basis points.

This price/volume action pretty much spells the certain end to these rallies in the precious metals at some point.  The only thing we don’t know is when.  But they don’t appear to be the ‘big ones’ that we were hoping for…more like the ‘same old, same old’ that we’ve come to know in the past.

Heaven only knows what JPMorgan et al will have done by the time I roll out of bed later this morning, but it sure ain’t looking promising at the moment.

See you tomorrow.


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