Thursday: Watching Paint Dry

17 November 2017 — Friday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


It was a very quiet trading session on Thursday everywhere on Planet Earth — and the gold price traded three dollars either side of unchanged for the entire day.  The low of the day, if you wish to dignify it with that name, came around 3:15 p.m. China Standard Time — and from there it crawled higher until ten minutes before the COMEX close.  It was up 2 bucks and change at that juncture, but some kind soul made sure all those gains had vanished within the next forty minutes of trading.  The gold price traded pretty flat from there into the close.

The lows and highs certainly aren’t worth looking up.

Gold was closed in New York on Thursday at $1,278.30 spot, up 70 cents on the day.  Net volume was ‘only’ about 245,000 contracts, which is still a horrifically high number.  Welcome to the new normal!

Silver followed an almost identical price path as gold.  The low tick came at the same time as gold — and the high of the day came at, or just before, the London p.m. gold fix.  It traded sideways until 1:20 p.m. when the same “thoughtful seller” appeared.  It crawled a few pennies higher from there, before trading flat for the rest of the Thursday session.

The low and high ticks for silver aren’t worth looking up, either.

Silver finished the day at $17.05 spot, up 10 cents from Wednesday’s close.  Net volume was pretty light, whatever that means these days, at around 54,200 contracts.  Roll-over/switch volume out of December was pretty heavy in silver — and nothing special in gold.

Platinum did very little on Thursday — and its low tick, such as it was, came about thirty minutes before the Zurich close, which was 10:30 a.m. in New York.  It rallied a bit from there, with its high tick coming around 1:20 p.m. EST — and at that precise moment the same “thoughtful seller” showed up in that precious metal as well.  Platinum was closed in New York yesterday at $931 spot, up a buck from Wednesday.

The price activity in palladium was even more uneventful than it was for platinum, as it traded a small handful of dollars either side of unchanged throughout the entire Thursday session.  It rallied a bit into the COMEX close — and back into positive territory, with the “thoughtful seller” nowhere in sight.  Palladium finished the day at $983 spot, up 4 dollars.

The dollar index closed very late on Wednesday afternoon in New York at 93.92 — and traded less than 10 basis points either side of unchanged for all of the Thursday session.  It tried on several rather unenthusiastic attempts to break above the 94.00 mark, but didn’t/couldn’t — and finished the Thursday session at 93.91…which is basically unchanged.  Nothing to see here folks, please move along.

And here’s the 6-month U.S. dollar index — and from a currency perspective, it was a ‘nothing’ day as well.

Despite the fact that the gold price was always in positive territory during the entire time the equity markets were open in New York, they spent almost the entire Thursday trading session trading in slightly negative territory.  And that’s where they closed, as the HUI finished lower by 0.09 percent…basically unchanged.

The silver shares opened down a bit, but then rallied rather unenthusiastically to their respective highs, which came minutes after 11 a.m. EST in New York.  They sold down from there — and were back in negative territory once that “thoughtful seller” appeared ten minutes before the COMEX close.  They then chopped sideways for an hour or so, before catching a bit of a bid going into the end of the New York trading session.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up 0.10 percent.  Call it unchanged as well.  Click to enlarge if necessary.

And here’s the 1-year Silver Sentiment/Silver 7 chart.  Click to enlarge.

The CME Daily Delivery Report showed that 31 gold and 5 silver contracts were posted for delivery within the COMEX-approved depositories on Monday.  In gold, the only short/issuer worth noting was Goldman Sachs with 28 contracts from its client account.  There were six long/stoppers in total — and JPMorgan and Canada’s Scotiabank were the largest, with 13 and 7 contracts respectively…JPMorgan for its client account — and Scotiabank for its own in-house/proprietary trading account.  In silver, Morgan Stanley issued — and ADM stopped…all for their respective client accounts.  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 November dropped by 22 contracts, leaving just 40 left, minus the 31 contracts mentioned just above.  Wednesday’s Daily Delivery Report showed that 11 gold contracts were actually posted for delivery today, so that means that 22-11=11 contract holders exited the November delivery month by mutual agreement between those that held the short sides and long sides of those contracts.  Silver o.i. in November rose by 3 contracts, leaving 5 still open, minus the 5 contracts mentioned in the previous paragraph.  Wednesday’s Daily Delivery Report showed that 1 silver contract was actually posted for delivery today, so that means that 1+3=4 more silver contracts just got added to the November delivery month.


Once again there were no reported changes in either GLD or SLV.

And no sales report from the U.S. Mint, either.

There was a bit of movement in gold over at the COMEX-approved depositories on the U.S. east coast on Wednesday.  There was 65,829 troy ounces reported received — and 99 troy ounces shipped out.  In the ‘in’ department there was 56,056 troy ounces deposited over at HSBC USA — and the remainder…9,772 troy ounces…was dropped off at Canada’s Scotiabank.  The one good delivery bar shipped out came from Delaware.  The link to this activity is here.

It was very quiet in silver, as only 22,251 troy ounces were received at HSBC USA — and 3,000 troy ounces left Delaware.  I won’t bother linking this amount.

There was some activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Wednesday, as 955 were reported received — and 1,792 were shipped out.  All of this action was at Brink’s, Inc. — and the link to that, in troy ounces, is here.

It was a pretty quiet news day on Thursday, but I do have an average number of stories regardless of that fact.


CRITICAL READS

Einhorn: “None of the Problems From the Financial Crisis Have Been Solved

A month ago, a downbeat David Einhorn exclaimed “will this market cycle never turn?

Despite solid Q3 performance, Einhorn admitted that “the market remains very challenging for value investing strategies, as growth stocks have continued to outperform value stocks. The persistence of this dynamic leads to questions regarding whether value investing is a viable strategy. The knee-jerk instinct is to respond that when a proven strategy is so exceedingly out of favor that its viability is questioned, the cycle must be about to turn around. Unfortunately, we lack such clarity. After years of running into the wind, we are left with no sense stronger than, ‘it will turn when it turns’.

Such an open-ended answer, however, is a problem for a fund which famously opened a basket of “internet shorts” several years prior, and which have continued to rip ever higher, detracting from Greenlight’s overall performance.

This, in turn, has prompted Einhorn to consider the unthinkable alternative: “Might the cycle never turn?” In other words, is the market now permanently broken.

While the Greenlight founder did not explicitly answer the question, in a speech yesterday at The Oxford Union in England, Einhorn made it extremely clear just how farcical he believes this market, and world, has become, pointing out that the problems that caused the global financial crisis a decade ago still haven’t been resolved.

If you took all of the obvious problems from the financial crisis, we kind of solved none of them,” Einhorn said to a packed room at Oxford University’s 194-year-old debating society.  Instead, the world “went the bailout route.”…“We sweep as much under the rug as we can and move on as quickly as we can,” he said.

This news item appeared on the Zero Hedge website at 6:50 p.m. EST on Thursday evening — and another link to it is here.


Stock Market Rings Alarm Bells on Rising Corporate Leverage

Cracks in high-yield credit may have only started to emerge, but equity investors have been signaling growing preference for stronger balance sheets throughout the year, amid tightening monetary policies and booming debt issuance.

Global stocks with the lowest debt-to-equity ratios, a measure of balance-sheet strength, are outperforming those with the highest ratios, according to Bloomberg calculations. The data exclude financials, where gearing ratios tend to be higher than in other industries.

Aversion to highly leveraged companies is increasingly visible; over the last few weeks the beta of bad balance to good balance sheet companies has been negative,” said strategists at Société Générale SA including Andrew Lapthorne in a recent note. “To put it more simply, one group has been going up whilst the other has been going down.”

In another indication that money managers are showing a clear preference for cash-rich companies, a global strategy betting on highly leveraged companies while shorting the least geared, as measured by net debt to equity ratios, would have lost money for the past 10 months. That’s the longest losing streak since 2010, data compiled by Bloomberg show.

This Bloomberg news item appeared on their Internet site at 7:49 a.m. Denver time on Wednesday morning — and it’s something I found in yesterday’s edition of the King Report.  Another link to it is here.


New York Fed: “Underlying Inflation” Hits 11-Year High

Something is moving beneath the surface.

Today is inflation day. After the Bureau of Labor Statistics released its Consumer Price Index for October this morning, several other inflation gauges were released, all based on rejiggering in some way the minute disaggregated details of the BLS data pile. This includes the Atlanta Fed’s “Sticky-Price CPI,” which ticked up 2.2%, and the New York Fed’s “Underlying Inflation Gauge,” which hit the highest level since August 2006.

Inflation – when defined as increase in consumer prices – is very much in the eye of the beholder, or rather of the spender. Every household has its own inflation rate, depending on whether they have kids in college, have high medical expenses, or rent an apartment in a city where rents are high and soaring at double-digit rates.

And now that the New York Fed’s Underlying Inflation Gauge has hit an 11-year high, in a sign of things to come, we better take a look at it.

This commentary by Wolf Richter put in an appearance on the wolfstreet.com Internet site on Tuesday — and I thank Dennis Miller for pointing it out.  Another link to it is here.


Household debt rises by $116 billion as credit-card delinquencies pile up

Household debt rose by $116 billion, or 0.9%, to $12.96 trillion in the third quarter, the New York Fed said Tuesday. That’s the highest level in nominal terms, though not when compared to the size of the economy. Credit-card debt rose by 3.1% while home equity lines of credit, or HELOC, balances fell by 0.9%. There were small gains in mortgage, student and auto debt.

Flows into credit-card and auto loans delinquencies rose, with 4.6% of credit card debt 90 days or more delinquent, up from 4.4% in the second quarter, and 2.4% of auto loan debt seriously delinquent, up from 2.3%. That’s still nowhere near the 9.6% of student loan debt that is delinquent, which itself is understated because about half of those loans are currently in deferment, grace periods or in forbearance.

Student and auto loans have grown rapidly, though not so much this quarter. Auto loans have grown for 26 straight quarters. But there are some worries as subprime auto loan performance continues to deteriorate — the delinquency rate for auto finance companies have grown by more than 2 percentage points since 2014, the New York Fed said.

Another concern is the upturn in serious delinquent credit-card debt, at a time when the job market is in strong shape.

This is a news item from the marketwatch.com Internet site.  It was posted there at 4:45 p.m. EST on Tuesday afternoon — and it’s the second story of the day that I lifted from yesterday’s edition of the King Report.  Another link to it is here.


The “Asymmetric Trade” in Gold — Jim Rickards

Gold opened last week at $1,270 per ounce and finished the week at $1,276, about where it is now.

There were some spills and thrills along the way. Gold rallied to $1,287 per ounce last Thursday before hitting one of those “paper gold” air pockets we’re all too familiar with and falling $10.00 per ounce within minutes last Friday.

Still, in all, not much change.

The reason for this is that the market is waiting for Godot, or more precisely the Fed FOMC meeting on Dec. 13.

Starting last Sept. 20, immediately after the Fed’s “pause” on rate hikes, the market began to price in a Fed rate hike for December. Asset classes adjusted in line with those expectations.

Treasuries, gold, euros and yen all fell. Bond yields and the dollar both rose. Tight money was on the way.

The problem is that the markets have now priced in a 100% chance of a Fed rate hike in December. You can’t get any more sure of yourself than that. This means that Treasuries, euros, gold and yen have all found a bottom.

This commentary by Jim showed up on the dailyreckoning.com Internet site yesterday sometime — and it comes to us courtesy of Brad Robertson.  Another link to it is here.


Dollar Cost Averaging versus Stop Losses — Dennis Miller

Subscriber Rick G. recently asked a great question.

What do you think about the theory of ‘buying on dips’ and ‘dollar cost averaging’?

If the price of a dividend paying stock goes down, buying more will increase your yield; however, that seems to be at odds with the idea of why an investor should have stop losses. How does this affect retirement investors?”

Dollar cost averaging is a simple premise. If you spent $1,000 for 100 shares of XYZ stock, your cost per share is $10. If the market price drops to $5/share, and you buy another 100 shares ($500), you would now own 200 shares. With $1,500 invested, your average cost per share is $7.50.

This interesting commentary by Dennis was posted on his Internet site yesterday — and another link to it is here.


Russia Names the 9 U.S. News Outlets It Will Retaliate Against

After hinting that retaliation was imminent, Russian lawmakers in the Duma — Russia’s lower house of Parliament – have approved a law that would require nine U.S. news outlets to be labeled “foreign agents” in response to Washington’s decision to require Russia Today to register as a foreign agent last week, a decision that Moscow has slammed as hypocritical and infringing on free speech.

Reuters reports that Russia’s lower house of Parliament has approved the law – which allows Moscow to force foreign media to brand news they provide to Russians as the work of “foreign agents” and to disclose the source of their funding.

The law must now pass the upper house, which is likely to happen next week. Once President Vladimir Putin signs it, it will become law. The path to passage looks relatively straightforward, and it’s likely the bill will become a law.

The Russian Justice Ministry on Thursday published a list of the news outlets that it said could be affected by the law.

Meanwhile, the outlets are the U.S.-government-sponsored Voice of America (VOA) and Radio Free Europe (RFE), otherwise known as Radio Liberty, radio channels, along with seven separate Russian or local-language news outlets run by Radio Free Europe and Radio Liberty.

One of the seven outlets provides news on Crimea, which Russia annexed from Ukraine in 2014, one on Siberia, and one on the predominantly Muslim North Caucasus region. Another covers provincial Russia, one is an on-line TV station, another covers the mostly Muslim region of Tatarstan, and the other is a news portal that fact-checks the statements of Russian officials.

Russia’s attack on U.S.-funded media is part of the fallout from allegations that the Kremlin interfered in the U.S. presidential election last year in favor of Donald Trump, Reuters noted.

This news item was posted on the Zero Hedge Internet site at 6:30 p.m. yesterday evening — and another link to it is here.


Saudi Arabia Offers Arrested Royals a Deal: Your Freedom For Lots of Cash

Saudi Arabia just introduced a new wealth tax — and it did so in a most original way…

As we noted shortly after the Crown Prince’s purge of potential rivals within Saudi Arabia’s sprawling ruling family, while the dozens of arrests were made under the pretext of an “anti-corruption crackdown”, Mohammed bin Salman’s ulterior motive was something else entirely: Replenishing the Kingdom’s depleted foreign reserves, which have been hammered for the past three years by low oil prices, with some estimating that the current purge could potentially bring in up to $800 billion in proceeds.

Furthermore, the geopolitical turmoil unleashed by the unprecedented crackdown helped push oil prices higher, creating an ancillary benefit for both the kingdom’s rulers and the upcoming IPO of Aramco.

And, in the latest confirmation that the crackdown was all about cash, the Financial Times reports today that the Saudi government has offered the new occupants of the Riyadh Ritz-Carlton a way out….and it’s going to cost them: In some cases, as much as 70% of their net worth.

Saudi authorities are negotiating settlements with princes and businessmen held over allegations of corruption, offering deals for the detainees to pay for their freedom, people briefed on the discussions say.

In some cases the government is seeking to appropriate as much as 70 per cent of suspects’ wealth, two of the people said, in a bid to channel hundreds of billions of dollars into depleted state coffers.

The arrangements, which have already seen some assets and funds handed over to the state, provide an insight into the strategy behind Crown Prince Mohammed bin Salman’s dramatic corruption purge.

This Zero Hedge story, centered around a Financial Times article, put in an appearance on the ZH website at 12:07 p.m. on Thursday afternoon EST — and another link to it is here.


Jim Rickards and Gold:  A ‘Double Header’

Here are two more gold-related news items courtesy of Jim — and both are different that the one that was posted further up in today’s column.  The first is headlined “Gold, Interest Rates and Super Cycles“.  It’s linked in the headline — and here.  I thank Brad Robertson for that one.  The second one is titled “Golden Catalysts” — and it’s linked here.

Both were posted on the dailyreckoning.com Internet site yesterday — and both are worth reading.


India’s gold imports fall 16% in October

India’s gold imports dipped by 16 per cent in value terms to $2.94 billion in October from $3.5 billion in the corresponding period last year, said the commerce ministry while releasing overall trade data for October. The reason for the decline, according to gold trade officials, was that Dusshera and the poojas associated with it fell in September this year, while Diwali fell in October.

Against this, all the festivals were concentrated in October of last year, said jewellers.

The main reason for the decline in gold imports is that while last year Dusshera and Diwali were in the same month, this time around they were split between the two months of September and October,” said Sandeep Kulhalli, senior vice-president, retail and marketing, Tanishq.

This brief news item appeared on The Economic Times of India website at 9:42 a.m. IST on their Wednesday morning.  These gold import numbers aren’t the ‘official’ ones for October, as they aren’t released by the government for about another two weeks, so the above number should be taken with a grain of salt.  I found it on the Sharp Pixley website early yesterday evening — and another link to it is here.


Leonardo Painting Sells For a Record $450 Million

How do you know we are living through the biggest bubble in history? Simple: when a painting, doesn’t matter who the artist is, doesn’t matter how rare and prized, sells for half a billion dollars.

A rediscovered painting by Leonardo da Vinci broke the record price for art at an auction on Wednesday night, selling for just over $450 million (or a bargain basement 62,500 bitcoin to the Chinese money launderer who bought it) at Christie’s in New York. The last da Vinci in private hands sold nearly 4 times above its estimated price after a fevered, 90-minute long round of bidding. It is widely believed to be the most expensive piece of art ever sold.

The 500-year-old “Christ as Salvator Mundi,” which was originally estimated at $100 million, was the star of Christie’s evening sale of postwar and contemporary art, what Bloomberg described an unconventional move by the auction house because of its vintage. The previous auction record for an Old Master painting was held by Peter Paul Rubens, whose “The Massacre of the Innocents” fetched $76.5 million in 2002.

“Salvator Mundi,” Latin for Saviour of the World, was one of only 15 surviving works by Leonardo da Vinci and depicts Jesus Christ in a flowing robe, holding a crystal orb and raising his right hand in benediction.

The 67.5cm tall portrait, which once belonged to England’s King Charles I in the 17th century, disappeared around 1900. In 2005, it was bought at an estate sale and, after six years of research and restoration, attributed to da Vinci, the first such rediscovery in more than 100 years. Before the auction, Christie’s secured an irrevocable $100 million bid by an anonymous investor meaning it was sure to sell.

The first sentence of this Zero Hedge story says it all…”How do you know we are living through the biggest bubble in history?”  This article is now datelined 5:28 a.m. EDT on Thursday morning, but has obviously been updated, as the story has been around for at least 48 hours.  The photo is worth the trip.  I thank Brad Robertson for his final contribution to today’s column.  Another link to it is here.


The PHOTOS and the FUNNIES

Today’s critter is the horned lizard.  Of the fifteen known species…eight of them are in the U.S. — and are adapted to desert areas.   The largest-bodied and most widely distributed of the U.S. species is the Texas horned lizard — and is historically known as the “horny toad”.  Of course it’s not a toad at all — and not even remotely related to them.  The ‘click to enlarge‘ feature helps with all three photos.


The WRAP

A major objective of central banking is “to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful“. — BIS official William R. White, 2005


Yesterday was a very quiet day in the precious metal and currency markets, but the powers-that-be were in the precious metal markets when required — and didn’t let anything get out of hand.  That was particularly true at 1:20 p.m. EST when gold, silver and platinum had most of their Thursday gains nullified going into the COMEX close.  Their continued presence in the precious metals is entirely in keeping with the William R. White quote mentioned just above — and the Commercial traders are making ten of billions of dollars in the process.

Here once again are the 6-month charts for all four precious metals, plus copper — and like the 6-month charts all this week, there isn’t much to see.  The ‘click to enlarge‘ feature helps a bit with the first four graphs.

And as I type this paragraph, the London open is less than ten minutes away — and I note that the gold price began to head higher around 6:30 p.m. EST in New York on Thursday evening — and was capped around 10:30 a.m. China Standard Time on their Friday morning. It’s been chopping quietly lower since — and is currently up $3.80 an ounce. Silver’s rally was far more subdued — and was only allowed to rise 8 cents or so — and that’s all been taken back — and it’s only up a penny at the moment. Platinum followed a similar price path, but it’s also been sold off its earlier high — and is only up 2 bucks. Palladium didn’t do much until around 11 a.m. CST — and then it popped for three or four bucks — and proceeded to trade sideways until shortly after 2 p.m. over there. It began to rally at that point — and as Zurich opens, it’s up 6 dollars the ounce.

Net HFT gold volume is extremely heavy — and coming up on 69,000 contracts, with not much in the way of roll-over/switch volume. Silver’s net HFT volume is right at the 10,000 contract mark, with barely any switch volume out of December.

The dollar index began to crater just minutes after trading began at 6:00 p.m. EST in New York yesterday evening — and it looks like it had to be saved by the usual ‘gentle hands’ — and that moment came a minute or so before 11 a.m. in Shanghai. At that low, it was down 40 basis points from Thursday’s close. It’s been chopping erratically higher since — and is down only 21 basis points as London opens.

Today, at 3:30 p.m. EST, we get the latest Commitment of Traders Report for positions held at the close of COMEX trading on Tuesday — and as I mentioned in Wednesday’s missive, I’m not about to hazard a guess as to what it might show.

And as I post today’s column on the website at 4:02 a.m. EST, I see that the gold price has continued to tick lower in price during the first hour of trading in London — and it’s currently up $3.10 an ounce. Silver is now down 2 cents — and platinum and palladium are only up a dollar — and 4 dollars respectively.

Gross gold volume is a bit over 84,000 contracts — and net of what roll-over/switch volume out of December that there is, net HFT gold volume is about 79,000 contracts. Net HFT silver volume is around 12,900 contracts.

The dollar index rallied topped out and then rolled over a bit during the first hour of London/Zurich trading — and is still down 20 basis points.

Just looking at these volume levels, coupled with the precipitous decline in the dollar index — and the truncated price ‘rallies’ in both gold and silver, it’s a given that ‘da boyz’ have been the short sellers of last resort where required in Far East and London trading. Without their intervention, precious metal prices would certainly be appreciably higher than they are now.

That’s it for yet another day. Enjoy your weekend — and I’ll see you here tomorrow.

Ed