Incredible Activity in the COMEX Silver Depositories

31 March 2017 — Friday


The gold price was sold lower by about five bucks by around 10:20 a.m. CST [China Standard Time] on their Thursday morning.  It recovered a bit of those loses going into the London open — and then traded more or less sideways until ten minutes after the COMEX open.  At that point it had a five dollar or so down/up move that ended at, or shortly before, the London p.m. gold fix.  It continued to trade sideways from there until shortly before 1 p.m. when the powers-that-be hit the ‘Ramp the dollar index/spin precious metal prices lower’ button.  Gold was closed on its absolute low tick of the day.

The high and low for gold on Thursday were recorded as $1,256.50 and $1,246.60 in the June contract…which was about 3 dollars higher than April contract.

Gold was closed in New York yesterday at $1,242.50 spot, down $10.90 on the day.  Net volume was pretty decent at 157,000 contracts and, not surprisingly, roll-over/switch volume was much lower than on Tuesday or Wednesday.

Silver was also sold lower once trading began in New York at 6:00 p.m. EDT on Wednesday evening — and it was down a dime by around 11 a.m. CST on their Thursday morning.  It recovered a few pennies from there — and then proceeded to chop sideways until about 9:10 a.m. in New York.  It got hit for about 10 cents — and then rallied as high as the $18.25 spot mark — and it wasn’t allowed to trade over that amount.  By 11:30 a.m. ‘da boyz’ had the price heading lower — and it was closed down on the day as well.

The CME Group recorded the high and low in this precious metal at $18.315 and $18.07 in the May contract.

Silver finished the Thursday session at $18.085 spot, down 12.5 cents on the day.  Net volume was pretty heavy at 60,000 contracts.

Here’s the 5-minute silver tick chart courtesy of Brad Robertson — and as you can tell, the only volume that mattered occurred during the COMEX trading session…plus a bit beyond that.

The vertical gray line is 10:00 p.m. Denver time, midnight in New York — and noon China Standard Time [CST] the following day in Shanghai—and don’t forget to add two hours for EDT.   The ‘click to enlarge‘ feature is a must.

Platinum’s tiny rally in early Far East trading on their Thursday wasn’t allowed to get far — and from there it traded mostly sideways until, like gold, it got hit at 8:30 a.m. EDT in New York.  It was back up a few bucks by the Zurich close, but that was it, as ‘da boyz’ sold it lower on the day a well.  Platinum was closed in New York yesterday at $947 spot, down 5 bucks from Wednesday.

Palladium spent all of the Far East, plus most of the Zurich trading session a few dollars or more below unchanged.  It was back to unchanged about thirty minutes or so before the COMEX open — and then away it went to the upside.  That rally got capped at $803 spot…up 13 dollars on the day.  Then, shortly after the Zurich close, the short buyers and long sellers of last resort showed up — and by the time they were done, palladium finished the Thursday session at $794 spot, up only 4 bucks.

The dollar index closed very late on Wednesday afternoon in New York at 99.94.  From there, there were several attempts to break the index decisively about the 100.00 mark.  ‘Gentle hands’ were there a few minutes before the London open — and again at 9:30 a.m. in New York when the equity markets began to trade.  The ramp job really began in earnest around 12:45 p.m. EDT — and from there, short covering did the rest.  The 100.59 high tick was set a few minutes before 5 p.m. — and it sold off a bit more than 10 basis points going into the close.  The index finished the Thursday session at 100.53…up 59 basis points on the day.

The 12:45 p.m. ramp job had an effect on gold, but silver had already been taken off its high price tick long before that dollar index event began — and there’s no sign of it in either platinum or palladium.  Besides which, the dollar index was only up about 10 basis points, or less, before the jamb job on the dollar index began…so how does the precious metal price action prior to that event, jibe with what was going in the dollar index?

And here’s the 6-month U.S. dollar index — and it appears that the powers-that-be have got the rally they’ve wanted.  Let’s see how long it lasts — and what damage they can do to precious metal prices in the process.

The gold stocks gapped down a bit at the open — and continued to chop lower until around 1:15 p.m. in New York.  After that, they chopped more or less sideways into the close.  The HUI finished down 1.73 percent, taking all of Wednesday’s gains, plus a bit more…with it.

It was mostly the same for the silver equities, however they managed to close off their 1:15 p.m. low ticks by a bit.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed lower by 1.07 percent.  Click to enlarge if necessary.

The CME Daily Delivery Report, as expected, had the First Day Notice numbers for delivery into the April contract for gold and silver — and it showed that only 164 gold and a surprising 271 silver contracts were posted for delivery within the COMEX-approved depositories on Monday.  In gold, there were only two short/issuers…S.G. Americas and ABN Amro…with 129 and 35 contracts out of their respective client accounts.  There were thirteen long/stoppers in total.  HSBC USA was the big one with 95 contracts for its own account — and Morgan Stanley came in second with 24 contracts for its own in-house [proprietary] trading account as well.  International F.C. Stone was an ‘also ran’ with 11 contracts for its client account.  In silver, there were only two short/issuers — and the only one worth mentioning was International F.C. Stone with 265 contracts out of its client account.  The only two long/stoppers worth noting out of the six posted, were Canada’s Scotiabank with 197 contracts — and in distant second was Citigroup with 57 contracts for its client account.  JP Morgan was a no-show.  The link to yesterday’s Issuers and Stoppers Report is here.

The CME Preliminary Report for the Thursday trading session showed that gold open interest in April fell by 27,048 contracts, leaving just 5,450 still around, minus the 164 contracts mentioned just above.  I expect April’s o.i. in gold to decline a decent amount in today’s Preliminary Report as well.  Silver o.i. in April declined by 2 contracts, leaving 737 still open, minus the 271 mentioned in the previous paragraph.

There was a small withdrawal reported in GLD yesterday, as an authorized participant took out 38,081 troy ounces.  And as of 6:21 p.m. EDT yesterday evening, there were no reported changes in SLV.

After a long dry spell, there was finally another sales report from the U.S. Mint.  They sold 1,000 troy ounces of gold eagles — 1,500 one-ounce 24K gold buffaloes — and 296,000 silver eagles.

There were a couple of deposits involving gold over at the COMEX-approved depositories on the U.S. east coast on Wednesday.  There was 4,007 troy ounces deposited at Brink’s, Inc. — plus 33,114.500 troy ounces/1,030 kilobars [U.K./U.S. kilobar weight] deposited in Canada’s Scotiabank.  The link to this activity is here.

As for the activity in silver at these same COMEX warehouses, it was extensive.  There was 605,460 troy ounces received — and 2,023,837 troy ounces shipped out.  Of the ‘in’ amount, there was one container load…600,240 troy ounces…dropped off at CNT — and the rest went into Delaware.  In the ‘out’ category, there was an eye-opening 1,799,980 troy ounces…3 containers…shipped out of JP Morgan — and when I asked Ted what he though that this might represent, he said he wanted to think about until his weekly review on Saturday.

I was so surprised by this big JP Morgan withdrawal, that I totally missed the other really important changes in this report — and Ted finally had to point them out.  They were two monstrous switches in category in silver.  The first one was at Brink’s, Inc. — and that involved 2,547,164 troy ounces that were moved from the Registered to Eligible category.  There was an larger event of the same nature over at CNT, where 4,837,380 troy ounces were also switched over…for a total of 7,384,544 troy ounces.  I suspected that this silver now belonged to JP Morgan — and Ted said that was the simplest and most logical answer — and that the switch was made because Ted said that it was cheaper to store silver in the Eligible category.  It remains to be seen, as Ted also pointed out, whether or not they move it into their own depository, or leave it sit where it is.  I know that he’ll have lots more to say about this in his column on Saturday.

But I did pick up on the fact that 250,549 troy ounces were transferred from Eligible to Registered over at Scotiabank!  I would suspect that this may be related to either the March or April delivery months.  The link to all this action, which is worth a look if you have the interest, is here.

There was a decent amount of movement over at the COMEX-approved gold kilobar depositories in Hong Kong on their Wednesday, as 2,190 were received, but only 82 were shipped out.  All of this activity was at Brink’s, Inc. as per usual — and the link to that, in troy ounces, is here.

After a busy reading day in my Thursday column, I certainly don’t have much today.


Record margin debt may be a red flag, but analysts say don’t worry

The U.S. stock market keeps finding reasons to be cautious, and it keeps finding reasons to ignore them.

The latest warning sign — following underperformance by small-cap stocks, record inflows into exchange-traded funds and high levels of political uncertainty — is margin debt, which is seen as a measure of speculation and just broke a record that has stood for nearly two years.

Don’t worry.

According to the most recent data available from NYSE, margin debt hit a record of $513.28 billion at the end of January, topping a previous record of $507.15 billion that had held since April 2015. Margin debt refers to the money that investors borrow to buy stocks, and high levels of it, in periods of market volatility, and can lead to sharper declines. Records preceded both the dot-com market crash and the financial crisis.

However, expecting a similar correction because debt is at a record now would be “naïve,” said Jeff Mortimer, director of investment strategy for BNY Mellon Wealth Management.

This isn’t a signal to me that markets are reaching an exuberant level like they did in the 1920s or 1990s, when speculation was rampant,” he said. “What our clients are doing is borrowing against the portfolios because interest rates are so low. They’re not leveraging up because they see the market exploding to the upside; they’re using leverage because they can pay it off at any time.”

The most infamous words in history…”It’s different this time.”  This story showed up on the Internet site back on March 16 — and another link to it is here.

Fed’s Dudley: “I Don’t Think We Are Removing the Punch Bowl Yet

In case there was still any doubt as to what the “data-dependent” Federal Reserve reacts to, it was once again removed today when speaking in remarks at the University of South Florida in Sarasota, Florida, NY Fed president Bill Dudley said that “it is important not to overreact to every short-term wiggle in financial markets.” Which confirms that the Fed has traditionally overreacted to every short-term wiggle in financial markets, and which contradicts what both Kocherlakota and what Rosengren said previously, namely that the market is “not a driving force” for the Fed’s outlook.

Of course, we appreciate Dudley’s wry humor in stating that the Fed should not unleash the Bullard every time there is an even 5{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e} S&P correction with threats of QE4, although with the elections now far in the past, we can see why the Federal Reserve would not mind a “modest correction” something both Evans and Rosengren warned yesterday could happen as the market is now clearly “frothy.”

That said, don’t assume the Fed will allow a full blown crash: because as Dudley also said in his speech,while the Fed is “not removing the punch bowl yet” – his words – it is “just adding a bit more fruit juice.”

Maybe not removing the punch bowl yet, but by stating clearly that it is being diluted, Dudley confirmed what Goldman said two weeks ago, when the bank warned that the market has misread the Fed’s recent hike, which was not dovish, but was meant to be a hawkish, if modest, tightening of financial conditions.

This news item appeared on the Zero Hedge website at 5:10 p.m. EDT on Thursday afternoon — and another link to it is here.

The Fed Is Bedeviled by Keynes’s Paradox

The economist John Maynard Keynes warned that ultra-low interest rates would backfire on central banks seeking to spur borrowing and spending, yet they seemed surprised that the current recovery is the weakest in postwar history after cutting rates to near zero, or even below in some cases.

Keynes is credited with popularizing the “paradox of thrift,” which is the economic theory that posits people tend to save more during recessions as rates fall to offset the income their savings is not generating. Of course it is the case that when you save more, you spend less. Since the U.S. economy is fueled by consumption, it also stands to reason that growth suffers as a result.

It’s been two years since Swiss Re produced a report that calculated U.S. savers had foregone some $470 billion in interest income. The analysis was based on what rates would have been had the Federal Reserve followed the Taylor Rule, which would have put rates, then at zero, at 1.7 percent.

Even as the Fed has begun to raise rates, it is clear that hundreds of billions of dollars have been squirreled away as savers play defense to counteract the Fed’s ultra-loose monetary policy. Some $11.7 trillion is sitting in bank deposits, up from $7.23 trillion at the start of 2009 shortly after the Fed cut rates to near zero, central bank data show.

This right-on-the-money commentary showed up on the Bloomberg website at 11:00 a.m. EDT on Thursday morning — and I found it in a GATA dispatch that Chris Powell filed from Hong Kong earlier this morning local time.  It’s worth reading — and another link to it is here.

What Will Happen to Dividend Stocks When the Fed Continues to Raise Rates? — Dennis Miller

What’s going to happen to dividend stocks when the Fed continues to raise rates?

In early 2016 San Francisco Fed President John Williams predicted, “I think something in that three-to-five-rate-hike range makes sense, at least at this time.” It didn’t happen; they waited until December 2016 to raise rates a quarter point.

Janet Yellen and her Federal Reserve Gang now appear to be hell-bent on raising interest rates 3 times in 2017. If they do, what will that mean to Baby Boomers, retirees and pension funds that have trillions of dollars invested in dividend paying stocks?

The stock market has almost tripled since the 2009 bottom. When looking at the charts, one would think we are in the roaring 20’s; happy days are here again.

Sadly, that is not the case. In January 2008 the labor participation rate was 66.4{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e}. It currently sits around 63{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e}. Wages became stagnant. Pension funds, baby boomers and retirees are struggling to stay afloat. The US national debt doubled during that time period.

This commentary by Dennis was posted on his website on Thursday sometime — and another link to it is here.

Why Socialism is Here to Stay — Jeff Thomas

“[T]he government has to take resources from someone before it can dole them out to others. This act of taking destroys an economy. The more you take from the productive members of society, the less productive they become. That’s the primary lesson of the history of socialism.

The above quote is from Porter Stansberry – from his book, America 2020: The Survival Blueprint. It states a concept I’ve described for years, but Porter states it more succinctly than I ever have. In particular, it negates the argument by many “progressives” that, even if they don’t recommend full-on socialism, they believe in getting “just the right mix” of socialism and capitalism to create the ideal system.

Unfortunately, as viable as this concept may sound, even moderate socialistic national policies result in moderate deterioration of the system. It’s not unlike being “just a little” addicted to heroin.

It may be argued that, “That’s different. With heroin, the addict will always end up wanting more and he’ll become even more dependent.” Exactly so – and that’s unquestionably true for socialism as well. Once the concept of “free stuff” is part of a nation’s governing system, the desire for more free stuff will inexorably rise.

That Stansberry quote sounds like a modified version of Margaret Thatcher’s famous quote…”The problem with socialism is that sooner or later you run out of other people’s money.”  This commentary by Jeff turned up in the King Report the other day — and I’m not sure how old it is, as I can’t find it on the Internet site anymore.  Another link to it is here.

Doug Noland: Central Bank Credit Risks Reaching New Highs

-Global QE gas lost its effectiveness
-Find the credit growth, then determine where the inflation is
-Trump recognizes the distortions that QE created and won’t get along with the Fed

This 37:51 minute audio interview with Doug Noland is part infomercial as well, so be warned in advance.  But because I have so little for you today, I thought I’d throw it now, rather than wait for tomorrow’s column…where I already have lots of material lined up.

This interview with Doug was posted on the Internet site on Wednesday — and I thank Dennis Meredith for pointing it out.  Another link to it is here.

Political Noise Can’t Drown out Russia’s Potential — Jim Rickards

There’s a great amount of Russia hysteria in the air. You see it in the media, in political discourse and in popular conversation.

Much of this hysteria can be traced either to the unorthodox Trump campaign or its hyperbolic critics. It’s too bad, because Russia is an important country that deserves serious consideration, not the superficial caricature now on display.

Investors have a rare opportunity to make huge profits in Russian markets right now. They key to unlocking this profit opportunity is to ignore the political bombast and focus on the fundamentals.

Before diving in on the more sensitive aspects of U.S.-Russian relations, a reality check is in order.

Here are the facts: Russia is the largest country in the world by size, almost as large as the next two largest, Canada and the U.S., combined. Russia is one of two nuclear weapons superpowers, along with the U.S.

Russia is the world’s second-largest producer of oil and natural gas, ahead of Saudi Arabia. It has the 12th-largest economy in the world and the ninth-largest population. Russia is the third-largest gold producer in the world, at 250 metric tons per year, and has the sixth-largest gold reserves in the world, at 1,460 metric tons.

In short, Russia is too big to be ignored. Whatever politicians and the media may say, Russia is not going away. Russia will inevitably play an important role in geopolitics under any balance-of-power scenario.

This very worthwhile commentary put in an appearance on The Daily Reckoning website on Wednesday sometime — and it comes courtesy of Harold Jacobsen — and another link to it is here.

Top 20 Gold Producing Nations See Small Gain in Output in 2016 — Sharps Pixley

This week sees the publication of a series of detailed reports on gold supply and demand.  There are some differences likely – I have only seen one of them in detail so far – that is Metals Focus’ Gold Focus 2017 and for those interested I reproduce the table of the World’s Top 20 gold producing nations in 2016 as assessed by the Metal Focus analysts.  According to Metals Focus global production of new mined gold grew by 1.1{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e} in 2016 a growth matched almost exactly by that among the Top 20 countries – a slightly smaller increase than the 2.2{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e} increase suggested by the CPM Group which I wrote about on Monday.

The third major analytical report from GFMS is probably due out tomorrow and is likely to show broadly the same figures give or take a tonne or two for some countries.

Similarly to CPM Group, which anticipates a 500,000 ounce addition to global new mine supply in 2017, Metals Focus also expects  that mine production will again edge higher in 2017, marking the ninth consecutive year of growth. That said, the consultancy notes that it feels the year-on-year increase is only anticipated to be marginal, and the near-term outlook for mine supply is more one of equilibrium, as gains from the project pipeline are balanced by ongoing declines at more mature operations.  It does not go as far as CPM in predicting an actual production decline beyond 2017, but the implication is there that peak gold will be reached during the current year and thereafter global new mined gold output is likely to be flat, at the very least, and probably be falling by the end of the decade, although perhaps not as fast as some commentators have been suggesting.

The ‘Top 20’ list that Lawrie provides is definitely worth your time.  This gold-related news item was posted on the Sharps Pixley website on Thursday — and another link to it is here.


Here are the last two ‘dogs and kids’ photos from photographer Andy Seliverstoff of St. Petersburg in Russia.  I’ve been feasting on them ever since Judy Sturgis sent them our way on February 27.  Click to enlarge.


Gold, in the end, is not just competition for the dollar; it is competition for bank deposits, stocks and bonds most particularly during times of economic stress – and that is the source of enduring interest among policymakers.” ~ Former Fed Chairman Paul Volcker

It was another day where the pundits were stating the the higher dollar index put the brakes on precious metal prices, but that was just the cover they used, as it obvious that correlation wasn’t that close, except for maybe gold.  But that’s what passes for ‘analysis’ these days.

Here are the 6-month charts for all four precious metals, plus copper, once again and, for the second time this week, the low closes for all four precious metals don’t appear on their respective Thursday price dojis because they occurred after the COMEX close.  The ‘click to enlarge’ feature helps with the first four charts.

And as I type this paragraph, the London/Zurich opens are less than ten minutes away — and I see that after trading flat for about three hours, the gold price was turned lower shortly before 9 a.m. China Standard Time on their Friday morning.  It began to inch higher starting around 11:30 a.m. in Shanghai — and is down only 50 cents an ounce at the moment.  It was the same price pattern in silver, except the current low tick in it came at 11 a.m. CST — and as the London open approaches, it’s down 4 cents.  Platinum and palladium were both sold lower starting about the same time as silver and gold — and both are down 3 dollars the ounce currently.

HFT gold volume is just under 30,000 contracts — and that number in silver is already at 8,600 contracts.

The dollar index rose a handful of basis points by shortly before noon CST, but has softened since then — and is now down 1 basis point as London opens.

Today, at 3:30 p.m. EDT we get the latest Commitment of Traders Report — and as I said in yesterday’s column, the appearance is that we’re set up for an engineered sell-off courtesy of JP Morgan et al similar to the one we had precisely one month ago.  But can they…or will they?

Silver analyst Ted Butler, whose word I consider definitive on these matters, had this to say about it in his Wednesday column…”About the worst possible price outcome I can see if there is a large increase in the net short commercial position in both gold and silver, is a sudden sharp sell-off designed to flush out whatever new managed money longs were established in the past week, similar to the price downdraft over the first two weeks of March. But if there is no big buildup in managed money longs in silver and gold in the reporting week ended yesterday, then the likelihood of a selloff is reduced, if not eliminated. In any event, should the signs of physical tightness in silver be genuine as is suggested in the March deliveries, and/or should there be the core long silver managed money position not about to be sold on lower prices, then all talk of a selloff becomes misplaced. Throw in the possibility that the 7 large silver shorts may be trapped and likely to panic at some point and any talk of a sell-off becomes absurd.

If there are added managed money longs to be liquidated in gold and silver that will be the only reason for a sell-off. But if no such selling occurs and JPMorgan decides the time is nigh for silver to run, then run to the upside is what we’ll do.

And as I post today’s missive on the website at 4:02 a.m. EDT, I note that the gold price continues to inch higher — and is up 40 cents an ounce now.  It’s been the same for silver — and it’s only down a penny.  Platinum and palladium haven’t done much since the Zurich open, with the former now down 4 bucks — and the latter down by only 1.

Net HFT gold volume has now risen to 35,000 contracts — and that number in silver is sitting at 10,000 contracts.

The dollar index has done very little in the first hour of London trading — and really hasn’t done much since it opened in New York at 6:00 p.m. EDT on Thursday evening.  It’s back at unchanged.

Today is Friday…the last day of the week, month and first quarter.  It should make for an interesting trading session in London — and later in New York.

Enjoy your weekend — and I’ll see you here tomorrow.


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