The Dollar Index Closes Down Big Again

24 January 2017 — Tuesday


The gold price rallied until shortly after 10 a.m. China Standard Time on their Monday morning, it’s high of the day — and despite the fact that the dollar index was heading lower big time, the gold price was sold back to unchanged by a few minutes after 9 a.m. GMT in London.  It chopped mostly higher from there, with its low and high ticks in New York coming at the London p.m. gold fix and minutes before noon EST respectively.  The price didn’t do a lot after that.

The high and low ticks were reported by the CME Group as $1,219.40 and 1,209.00 in the February contract.

Gold finished the Monday session in New York at $1,217.70 spot, up $7.70 on the day.  Net volume was very chunky at a hair over 190,000 contracts.  Roll-over/switch volume out of February was decent as well, but not heavy.

The silver price was kept on the same path as gold up until around 9:30 a.m. GMT in London on their Monday morning — and at that point its price action separated from gold’s by a bit.  The silver price rallied until shortly after the 10:30 a.m. GMT London morning gold fix — and then chopped quietly sideways until around 4:20 p.m. EST in the thinly-traded after-hours market in New York.  It then tacked on a quick 6 or 7 cents in short order going into the 5:00 p.m. EST close of trading.

The high and low ticks in this precious metal were barely worth looking up, but were reported as $17.285 and $17.075 in the March contract.

Silver was closed in New York yesterday at $17.195 spot, up 14 cents from Friday.  Net volume was decent at just under 47,000 contracts.

The platinum price also rallied in early morning Far East trading on Monday, but by shortly after 10:30 a.m. in Zurich it was sold to a dollar or so below unchanged on the day.  From there it traded sideways in a five dollar price range — and finished the day at $980 spot, up 2 dollars.

Palladium was higher by five bucks in early afternoon trading in the Far East, but began to sell off quietly from there.  It really got kicked downstairs shortly after the equity markets opened in New York on Monday morning — and by shortly before the Zurich close, it was down 18 dollars.  It traded pretty flat from there until just before the COMEX close — and at that juncture began to rally quietly in the after-hours market, but was still closed down 11 bucks on the day at $776 spot.

The dollar index closed very late on Friday afternoon in New York at 100.82 — and began to head south almost immediately when it opened for trading shortly before 4 p.m. EST on Sunday afternoon..  Its low tick in the Far East came about 3:40 p.m. China Standard time around the 100.21 mark — and then began to chop higher.  That rally flamed out a minute or so after 9:30 a.m. EST.  It took at 45 basis point header between then and minutes before the 11 a.m. EST close of trading in London — and then had a feeble rally that rolled over minutes after 12:30 p.m. in New York.  The 99.94 low tick was printed a minute or two before 6 p.m. EST — and more or less closed there at 99.96.  The dollar index finished lower by 86 basis points.

Here’s the 3-day U.S. dollar index chart so you can put Monday’s move in some perspective.

And here’s the 6-month U.S. dollar index chart showing its attempts to seek out its intrinsic value, which is a long way down from here.

The gold shares open up a percent and change — and then proceeded to chop quietly higher until a minute or so before 3 p.m. EST — and then traded flat into the close.  HUI finished the day up 3.20 percent.

The silver equities followed an almost identical path — and Nick Laird’s Intraday Silver Sentiment/Silver 7 Index close higher by 3.35 percent.  Click to enlarge if necessary.

The CME Daily Delivery Report showed that 8 gold and 151 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday.  Once again it was Canada’s Scotiabank picking up all 8 gold contracts.  In silver, the lone short/issuer was International F.C. Stone from its client account.  The only three long/stoppers that mattered were Canada’s Scotiabank with 85 contracts for its own account — and JPMorgan and ADM picked up 42 and 19 contracts for their respective client accounts.  The link to yesterday’s Issuers and Stoppers Report is here.

The CME Preliminary Report for the Monday trading session showed that gold open interest in January declined by 9 contracts, leaving 61 left, minus the 8 mentioned just above.  Friday’s Daily Delivery Report showed that 10 gold contracts were actually posted for delivery today, so that means that 10-9=1 gold contract got added to the January delivery month.  Silver o.i. in January rose by 8 contracts, leaving 180 still open, minus the 151 contracts mentioned in the previous paragraph. Friday’s Daily Delivery Report showed that zero silver contracts were actually posted for delivery today, so that means that 8 silver contracts [net] were added to January.

There was another withdrawal from GLD yesterday, as an authorized participant removed 66,689 troy ounces on what looked like another one of Ted Butler’s conversions-of-shares-for physical that we have come to know and love. Based on the current price action since Christmas, gold should be moving into GLD, not out.  And as of 8:08 p.m. EST yesterday evening, there were no reported changes in SLV.

The folks over at Switzerland’s Zürcher Kantonalbank updated their website with the goings-on insider their gold and silver ETFs as of the close of business on Friday, January 20th — and this is what they had to report.  Their gold ETF rose by 7,038 troy ounces — and their silver ETF added 17,458 troy ounces.

There was no sales report from the U.S. Mint yesterday.

There wasn’t much activity in gold over at the COMEX-approved depositories on the U.S. east coast on Friday.  Nothing was reported received. There was 1,768.250 troy ounces/55 kilobars [U.K./U.S. kilobar weight] shipped out of JPMorgan — plus 3,215.000 troy ounces/100 kilobars [U.K./U.S. kilobar weight] shipped out of Canada’s Scotiabank.  I won’t bother linking this amount.

It was another busy day in silver, as 971,489 troy ounces were received —and 650,919 troy ounces shipped out.  Of the amount received and shipped out, there was a transfer of 649,911 troy ounces out of Brink’s Inc. — and into JPMorgan’s vault.  Their total COMEX silver inventory is now at 89.6 million troy ounces.  The link to that action is here.

It was fairly quiet over at the COMEX-approved gold kilobar depositories in Hong Kong on their Friday.  They received 3,198 — and shipped out 569.  All of that activity was at Brink’s, Inc. — and the link to that, in troy ounces, is here.

Here’s a chart that Nick Laird passed around on the weekend.  It shows the Dow Industrial Average plotted the U.S. deficit over the years.  The correlation is very striking.

Because I’m on the road, I’ve hacked and slashed the stories down to the minimum I thought I could get away with, which is still quite a few.


Trump Promises Business Leaders Major Border Tax, Rule Cuts

President Donald Trump told business leaders Monday he would impose a “very major” border tax on companies that move jobs outside the U.S. and said he would cut regulations by 75 percent.

A breakfast meeting with corporate executives at the White House kicked off the first working day of a president who made the promise of greater economic opportunity for American workers a centerpiece of his campaign. Trump continued the theme Monday by signing an order withdrawing the U.S. from the Trans-Pacific Partnership trade pact. He will meet in the afternoon with labor leaders and U.S. workers, an administration official said.

The meeting, with an advisory panel on manufacturing led by Dow Chemical Co. Chief Executive Officer Andrew Liveris, welcomed some of the nation’s most prominent corporate leaders to the White House. During the transition, Trump at times used his new power as a cudgel against companies that provoked his ire with plans to move jobs overseas or with prices for weapons systems he considered excessive.

The president effusively praised the business leaders as “great people,” yet put them on notice that he was serious about the warnings he issued during his campaign and transition against moving production overseas.

“If you go to another country” and cut U.S. jobs we are going to be imposing a very major border tax” on that product, he told the executives.

This Bloomberg news item appeared on their Internet site at 7:56 p.m. EST on Sunday evening — and was updated about eighteen hours later.  I thank Swedish reader Patrik Ekdahl for bringing it to our attention — and another link to it is here.

Trump’s nominee for Treasury backs off support for strong dollar

U.S. Treasury Secretary nominee Steven Mnuchin said an “excessively strong dollar” could have a negative short-term effect on the economy.

The strength of the dollar has historically been tied to the strength of the U.S. economy and the faith that investors have in doing business in America,” Mnuchin said in a written response to a senator’s question about the implications of a hypothetical 25 percent dollar rise. “From time to time, an excessively strong dollar may have negative short-term implications on the economy.”

The dollar slumped to the weakest in more than six weeks after the remarks, obtained by Bloomberg News on Monday. The comments were included in answers from Mnuchin to questions from U.S. senators following his confirmation hearing last week. In that session, he had said a strong dollar is important over the long term, while noting it’s currently “very, very strong.”

This is another Bloomberg story.  This one showed up on their website at 2:51 p.m. EST on Monday — and was subsequently updated about two hour later.  I found this one embedded in a GATA release — and another link to it is here.

Chris Powell: Currency regime has run the world for ‘America first’ since 1945

President Trump’s inaugural address was based on the ridiculous conceit that he somehow had received a mandate for running second in the election with just 46 percent of the vote, almost 3 million votes behind the leader, who didn’t do so well herself. With his ascension, Trump said, “we are not merely transferring power from one administration to another, or from one party to another, but we are transferring power from Washington and giving it back to you, the American people.”

Or as the megalomanical politician invented by the Firesign Theater in 1970 said, “Now I am the people.”

Continuing to pander, Trump offered another ridiculous conceit — that “a small group in our nation’s capital” has been cheating all the good people of the country.

“We’ve made other countries rich while the wealth, strength, and confidence of our country have disappeared over the horizon,” the new president said. “The wealth of our middle class has been ripped from their homes and then redistributed across the entire world. … From this moment on, it’s going to be America first.”

Except that since 1945, when, by international agreement, the U.S. dollar was installed as the world reserve currency, the world itself has been run on an “America first” basis. That’s because for international trade the world has been required to use currency issued only by the U.S. government, allowing the United States to run huge trade deficits, thereby essentially taxing the world for using the dollar so Americans can consume far more than they produce.

This editorial by Chris Powell was posted in the Monday edition of the Manchester, Connecticut-based newspaper, the Journal Enquirer, where Chris is the editor.  It’s actually headlined “Trump’s Megalomaniac Delusion: ‘Now I Am the People’” — and another link to it is here.  It’s certainly worth reading.

Doug Casey: Making the Chicken Run, Part I

Making the chicken run” is what Rhodesians used to say about neighbors who packed up and got out during the ’60s and ’70s, before the place became Zimbabwe. It was considered “unpatriotic” to leave Rhodesia. But it was genuinely idiotic not to.

I’ve written many times about the importance of internationalizing your assets, your mode of living, and your way of thinking. I suspect most readers have treated those articles as they might a travelogue to some distant and exotic land: interesting fodder for cocktail party chatter, but basically academic and of little immediate personal relevance.

I’m directing these comments toward the U.S. mainly because that’s where the problem is most acute, but they’re applicable to most countries.

Now, in 2017, the U.S. is in real trouble. Not as bad as Rhodesia 40 years ago—and definitely a different kind of trouble—but plenty serious. For many years, it’s been obvious that the country was eventually going to hit the wall, and now the inevitable is rapidly becoming imminent.

This commentary by Doug put in an appearance on the Internet site on Saturday.  It — plus Part 2 that follows — are certainly worth your while if you have the time, or the interest.  Another link to it is here.

Doug Casey: Making the Chicken Run, Part II

Everybody gets hurt in a serious depression, but if you understand what’s going on and prepare for it, you can do well enough. Of course, political and social change always follow economic and financial upheaval, but I think it’s going to be much more drastic this time because the U.S. has been on the road to becoming a police state for quite a while. The trend was supercharged by the so-called War on Terror, starting in 2001. And it’s likely to go into hyperdrive in the months to come as the economy emerges from the eye of the storm. I know it seems asynchronous to think of a police state in a suburban country dotted with shopping malls. But not really.

Think in terms of science fiction, a genre that has far more predictive value than the work of any futurist or think tank.

Reality is mimicking art. In 1932, Aldous Huxley described a highly controlled utopia in Brave New World, where drugs made everybody think (actually feel, because thinking could only make you unhappy) that they were happy. The U.S. has pretty much done that drill, consuming massive quantities of everything on credit, watching American Idol and its clones in every spare moment, and using plenty of Ritalin and Prozac along the way.

Sixteen years later, George Orwell described an even more tightly controlled dystopia in 1984. Everybody knows that story, even if they haven’t read the book.

Here’s Part 2 — and it showed up in my in-box on Sunday.  Another link to it is here — and it’s certainly worth reading as well.

High-frequency trading radio masts in U.K. criticized by planners

U.S. high-frequency traders aiming to build radio towers taller than the Shard in a tiny village in the English countryside have been criticized by local planning officials ahead of a crucial council meeting next week.

Three traders are behind plans to build two vast masts in Kent to clip milliseconds off trading speeds between London and Frankfurt, but the size of the towers has attracted local opposition.

The fate of the masts will be decided at a Dover council meeting on Thursday, which will judge whether to overrule residents’ protests and a report last week by a local planning official that they would damage views of the landscape, which contains the remnants of a Roman fort.

The standoff highlights the lengths to which electronic traders are prepared to go to receive valuable trading data before rivals, by beaming information over hundreds of miles using radio microwaves.

The above four paragraphs are all that are posted in the clear in this story the put in an appearance on the Financial Times website on Sunday sometime.  The rest is buried behind their subscription wall.  I found this news item on the Internet site.

Russian Finance Minister Proposes to Return to Idea of Limiting Cash Transactions

The Russian Finance Ministry is proposing to revive the idea of limiting cash transactions in Russia in a bid to reduce shadow economy, Finance Minister Anton Siluanov said on Saturday.

Maybe we should think about limiting cash transactions. Many countries are following this path … That is very right as it is an element of reducing shadow economy. This instrument may give an opportunity to raise more taxes and make our economy more transparent,” Siluanov said at the congress of the United Russia party.

The implementation of the new rules should be done gradually, to avoid any inconveniences, especially in those Russian municipalities and regions that do not have the infrastructure for cashless operations, the minister added.

The Russian Central Bank and the Ministry of Finance started to discuss the prospects of limiting cash transactions in 2012. The bill on cash limits was introduced to the Russian Parliament, but it was not adopted due to the economic downturn in Russia.

This story showed up on the Internet site early Saturday afternoon Moscow time — and I thank Larry Galearis for sharing it with us.  Another link to it is here.

Will Trump hop on an American Silk Road? — Pepe Escobar

A case can be made that Beijing has already landed a 1-2-3 punch, pre-empting the possibility of a US-initiated trade war.

It started with Jack Ma’s by now notorious visit to Trump Tower, when he developed his idea of helping small American businesses sell their products in China and across Asia through Alibaba’s network, thus creating at least “1 million jobs” (Ma’s number) in the U.S.

Then came President Xi Jinping’s master class at Davos, where he positioned himself as Ronald Xi Reagan selling “inclusive” globalization to the stalwarts of international turbo-capitalism.

Finally Ma again, also at Davos, came up with a crystal clear, cause-and-effect formulation on globalization and US economic distress.
Ma said, “In the past 30 years, companies like IBM, Cisco and Microsoft made tons of money.” The problem was how the U.S. spent the wealth: “In the past 30 years, America has had 13 wars at a cost of US$14.2 trillion.” So what if the US “had spent part of that money on building up their infrastructure, helping white-collar and blue-collar workers? You’re supposed to spend money on your own people. It’s not that other countries steal American jobs. It is your strategy – that you did not distribute the money in a proper way.

This commentary was posted on the Asia Times website yesterday sometime — and I thank Ellen Hoyt for pointing it out.  Another link to it is here.

Globalisation once made the world go around. Is it about to grind to a halt?

His speech was like one normally expected of an American president. Countries must resist the temptation to retreat into harbour, the world leader said to a packed and admiring audience, but instead have the courage to swim in the vast ocean of the global market.

This was the kind of paean to free trade that might have come from John F Kennedy, George W Bush or Bill Clinton – all occupants of the White House who saw it as the United States’ role to defend the open international trading system set up at the end of the second world war.

This, though, was China’s president, Xi Jinping, in Davos last week, making it clear that he was prepared to fill the vacuum if Donald Trump went ahead with the sort of protectionist policies he had proposed in his election campaign.

The new U.S. president has said he will renegotiate the Nafta free trade agreement between the U.S., Canada and Mexico and slap duties on imports from countries that don’t play by global trade rules. He also floated the idea of a 35{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e} tariff on goods from Mexico, a 45{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e} tariff on goods from China, and a border tax – which would impose a levy on imports but not exports.

Those attending Davos reassured themselves that Trump would ditch all these proposals once he was in office. But if he doesn’t, the consequences are obvious: the world will be plunged into a trade war that will bring the globalisation of the past quarter of a century to a juddering halt.

This article appeared on Internet site at 4:00 p.m. GMT on Saturday — and it’s the second offering of the day from Patrik Ekdahl.  Another link to this news item is here.

The Gold Chronicles: January 17th, 2017 Interview with Jim Rickards and Alex Stanczyk

Topics Include:

*Power Triad Dynamics, USA, China, Russia
*Why China is concerned about a Trump Presidency
*Capital flows out of China continue at a robust pace
*China will burn through all of its liquid reserves in one year at the current pace

*Why gold moving into China is like going into a “Black Hole”
*Physical gold flows from west to east are exacerbating tightness in physical supply, and could lead to strong price moves when the west steps back into the market

This 48:28 minute audio interview was conducted on January 17 — and posted on the Internet site last Thursday.  I thank Harold Jacobsen for sending it our way — and another link to it is here.

LME’s pitch for share of gold market faces bumpy ride

Fears of inflexibility and rising costs are sapping enthusiasm for the London Metal Exchange’s new suite of gold contracts, potentially leaving the exchange reliant on the threat of an increasing regulatory burden to drive uptake.

London’s $5 trillion-a-year gold trade has, along with the rest of the City of London, found itself under increased scrutiny since the Libor scandal, with U.S. lawsuits alleging rigging against the banks that set bullion prices.

Regulatory pressure sparked the fall of the near century-old telephone-based gold fix, or benchmark pricing, which was replaced by an electronic alternative in 2015, and reform of the management structure of the London Bullion Market Association.

The LME, owned by Hong Kong Exchanges and Clearing Ltd., says its contracts, which include spot, futures, and options, would bring price-setting out of the back rooms of banks by creating a published forward pricing curve for gold and sliver out to five years.

It also says the contracts’ central clearing would free the banks and brokers that dominate London’s over-the-counter gold market from increasingly onerous capital requirements, creating savings that could be passed to others in the industry.

But a source at a major gold trading bank said: “There’s a lot of caution and probably outright scepticism from market participants whether this will add anything but another cost to the bottom line.”

This Reuters news item, filed from London, showed up on their website at 8:41 p.m. GMT on their Sunday evening, which was 3:41 p.m. in New York — EST plus 5 hours.  I found it in a GATA release — and another link to it is here.

Ireland’s Monetary Gold Reserves: High Level Secrecy vs. Freedom of Information – Part I

Gold researcher Ronan Manly begins a two-part series of essays showing how Ireland’s central bank is striving to conceal basic information about the country’s gold reserves. Manly’s essay is headlined “Ireland’s Monetary Gold Reserves: High-Level Secrecy vs. Freedom of Information — Part I” and it was posted at the Singapore-based Internet site Internet site yesterday.  I found this very long commentary on the Internet site as well.

Central bank gold purchasing drops sharply in 2016 — Lawrie Williams

A week or so ago, we reported that far from increasing its gold reserves in December, China reduced them by a significant 20.98 tonnes based on a report from the usually very accurate website from Nick Laird, who follows these things closely.  Since then I’ve heard from Matthew Turner, of Macquarie, another close follower of these statistics, that this report is incorrect and Chinese gold reserves actually remained unchanged in December.  I have not yet been able to confirm which of these reports is correct and thus will probably have to await the IMF tally of global central bank gold holdings to find out whether there was a reduction in Chinese holdings in  December or if there was no change (which I have to admit seems the more likely of the two).  China has been known to misreport its gold holdings in the past, so the conflicting reports may just be yet another instance of obfuscation of Chinese statistics – who knows?

But now we have the Russian central bank’s latest monthly report on its gold holdings and here we have to note that it too, apparently, ceased to add to its gold reserves in December and they remained unchanged following two months of very large increases.  Indeed Russia has added a shade less than 200 tonnes to its gold reserves in 2016.  They now stand at 51.9 million troy ounces, or about 1,614 tonnes, which keeps them in sixth place among global national holders of gold as reported to the IMF.  This is still a couple of hundred tonnes below fifth placed China whether or not it actually reduced its holdings in December.  But overall the gap between the two countries has been closing.

While this may have a significant effect on gold supply/demand fundamentals, we’re not sure that this even matters in the current gold pricing scenario.  You can’t treat gold like just any other commodity where pricing should be hugely influenced by the supply/demand balance, but rather by perception and other extraneous factors which is why the price pattern is so hard to call.  We think, for example, that the aftermath of President Trump taking office will have a far bigger impact on price than supply/demand fundamentals and, on the evidence of some of the rhetoric coming out of the White House over the weekend, this will likely prove positive for the yellow metal.

This commentary by Lawrie put in an appearance on the Sharps Pixley website yesterday — and another link to it is here.


Here’s an arctic fox all fluffed up in his/her winter outfit.  They’re considerably smaller and less impressive looking once they’ve shed that white coat in the summertime.  I lived in the Canadian arctic for 8 years — and they’re very common and quite tame in areas where they have no experience with man as a predator.  That goes for the arctic wolves as well.  Click to enlarge.


Even though the dollar index got hammered hard, it was obvious from the precious metal price ‘action’ that they weren’t going to be allowed to reflect that fact once again.  But, having said that, their respective equities turned in a decent performance — and it remains to be see how these comments coming from the U.S. about an overpriced U.S. dollar will play out in the days and weeks ahead.

Here are the 6-month charts for all four precious metals, plus copper — and any price action that occurred after the 1:30 p.m. EST COMEX close yesterday, don’t appear in the current doji.

And as I type this paragraph, the London open is less than ten minutes away — and I note that the gold price spiked higher right at the 6:00 p.m. open in New York on Monday evening — and that was dealt with in seconds — and it’s been chopping quietly lower since then, but took a header in just the last few minutes — and is down $5.10 at the moment.  The price activity in silver was similar — and it’s down 12 cents the ounce.  The platinum price was about 6 dollars higher in late morning trading in the Far East on their Tuesday, but was sold down to a dollar below Monday’s New York close by 3 p.m. China Standard Time — and is now down 2 dollars.  Palladium traded flat until shortly before 10 a.m. CST — and then it got hit for about 4 bucks — and it’s been trading sideways since — and is still down that same 4 dollars.

Net HFT gold volume is approaching 36,000 contracts — and that number in silver is 8,300 contracts, which is pretty light, relatively speaking.

The dollar index set a double bottom shortly before noon in Shanghai — and has been chopping mostly higher since — and is up 29 basis points as London opens.

Today, at the close of the COMEX trading is the cut-off for this Friday’s Commitment of Traders Report — and I may have something to say about the prospects for Friday’s numbers in my column tomorrow.  However, I may just keep my mouth shut like I did last week after the surprise of two weeks ago, plus the very small changes in last Friday’s Report.

You may recall from my Saturday column that I wasn’t able to talk to Ted on Friday regarding the current COT Report, so when I spoke to him on the phone from the resource conference in Vancouver yesterday, I told him that I was going to ‘borrow’ from this Saturday column in lieu of…so here’s what he had to say in general, without getting into the nuts and bolts of the numbers themselves…

“I’ve often said that predictions about what an upcoming COT report might indicate must be viewed not with an expectation of pinpoint accuracy, but in line with the precision of tossing horse shoes, hand grenades or atomic weapons…where close enough is good enough. This week, I’m happy to report, my prediction for what would be reported in the gold COT was akin to nuking the wrong target by 1,000 miles – I was that far off.  I’m happy because the actual results augment my already bullish market structure conclusion.”

“As a reminder, on Wednesday I had predicted an increase in the headline number of the total commercial net short position in COMEX gold futures of 30,000 to 40,000 contracts, the same prediction I had made for the previous report and on which I came up way short (fortunately). This week, I missed more badly than I can recall. I’m glad to have been wrong, since the misses only cement my bullish interpretation of the current COMEX market structure in gold. I am tempted to continue missing badly on purpose on some superstitious level. By the way, I was much closer on silver, but the commercial selling was less than what I expected – also good news.”Silver analyst Ted Butler:  21 January 2017

I have a plane to catch this morning, so my column is going out the door now at 3:05 a.m. EST, instead of an hour later.

See you on Wednesday.


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