Trump Speaks, the DXY Rallies — Gold and Silver Get Hammered

26 January 2018 — Friday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


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That should fix the problem. — Ed


It was a wild day in the currency markets yesterday — and except for what Trump had to say at 2 p.m. EST, thirty minutes after the COMEX close — none of it was allowed to have much effect on precious metal prices.

The gold price traded down a few dollar until around 9:30 a.m. CST on their Thursday morning — and began to head quietly higher, with the high tick of the day coming just a few minutes before 3 p.m. China Standard Time on their Thursday afternoon.  The price was sold quietly lower from there — and that sell-off lasted until around 8:40 a.m. GMT in London.  At that point, the gold price was down a few dollars.  But by minutes after 9 a.m. in New York, it was back in the plus column by the same amount, only to get sold lower into the afternoon gold fix in London.  Once that was put to bed, the gold price began to rally quietly — and that state of affairs lasted until a few minutes before the COMEX close.  Once the close was done, gold was sold down four or five dollars over the next thirty minutes or so until Trump spoke about a ‘strong dollar‘ — and that, as they say, was that.  The low tick was in about 2:45 p.m. — and its subsequent rally off that low wasn’t allowed to get far.  The price chopped sideways from there into the close.

The high and low ticks in gold were reported as $1,365.40 and $1,341.00 in the February contract.

Gold finished the Thursday session at $1,347.30 spot, down $10.40 on the day.  Gross volume was gargantuan once again — and the biggest one-day volume number I’ve ever seen, at 686,134 contracts — and net volume was a knee-wobbling 372,500 contracts.  And, not surprisingly, roll-over/switch volume was very heavy as well at just under 157,000 contracts.  What a day!

The silver price followed a similar path to gold…virtually tick for tick…although the price activity was far more muted, as was the sell-off when Trump spoke a minute or so after 2 p.m.  After that event, everything was the same as it was for gold once again.

The high and low ticks in this precious metal were recorded by the CME Group as $17.705 and $17.125 in the March contract.

Silver was closed in New York yesterday at $17.255 spot, down 28 cents from Wednesday.  It was another record volume day in silver as gross volume checked in at 138,138 contracts…net volume at 121,500 contracts — but not a lot of roll-over/switch volume…just under 8,300 contracts worth.

Platinum followed the silver and gold price pattern yesterday as well, but there was very little price movement at their common inflection points.  And also like gold and silver, platinum was also up on the day until Trump opened his mouth, but ended up getting closed at $1,012 spot, down two dollars from Wednesday.

Up until about 2:30 p.m. China Standard Time on their Thursday afternoon, the palladium price sort of matched what was going on in the other three precious metals.  But once the sell-off began at that point, it continued generally lower until the low tick was placed at, or minutes before, the afternoon gold fix in London.  It rallied a bit from there until shortly before the Zurich close — and then chopped sideways until Trump pontificated on the U.S. dollar at 2 p.m. EST…then down it went as well.  Palladium finished the Thursday session in New York at $1,087 spot, down 17 bucks on the day — and back below $1,100 spot.

The dollar index closed very late on Wednesday afternoon in New York at 90.21 — and after rallying a handful of basis points during the first two hours after trading began a few minutes later at 6:00 p.m. EST Wednesday evening, it began to head sharply lower.  That sell-off ended at the 88.80 mark just minutes before 2:30 p.m. CST on their Thursday afternoon.  By minutes before 9 a.m. GMT in London it was up to 89.22.  By minutes before 11 a.m. it was back at 89.00…but bounced off that mark — and chopped very quietly higher until Draghi spoke at 8:25 a.m. EST in New York.  It fell like a rock from there to its 88.44 low tick, which occurred at precisely 9:00 a.m. EST.  It should be obvious to anyone with even a room temperature I.Q. that the usual ‘gentle hands’ appeared at that time to prevent the dollar index from crashing once again.

The most amazing part of that precipitous decline was that there was nary a hint of it in the prices of any of the precious metals…nada!

From that juncture, the DXY bounced around sideways until ‘The Donald’ spoke at 2 p.m.  — and the index blasted skyward in short order — and ‘da boyz’ began to lean on precious metal prices at the same moment.  The 89.55 high ticks came shortly before 3 p.m. EST — and although it rolled over hard from there, it was rescued once again about thirty minutes later.  It ‘rallied’ quietly into the close from there.  The dollar index finished the day at 89.46 — and up 25 basis points from its Wednesday close.

This is certainly no way for the world’s ‘reserve’ currency to behave.

And here’s the 6-month U.S. dollar index which, as always, is posted for its entertainment value only — and that’s particularly true after yesterday’s action.

The gold shares opened about unchanged — and then slid to their morning lows at the London p.m. gold fix, which was obviously 10 a.m. EST.  They rallied quietly back into positive territory, but began to roll over starting at the 1:30 p.m. COMEX close, as the gold price was rolled over.  Of course the real downside activity started when Trump spoke about a strong U.S. dollar.  The gold stocks hit their respective lows shortly before 3 p.m. — and closed off them by a hair, as the gold price recovered a bit after that.  The HUI closed down 2.32 percent.

The price pattern in the silver equities was almost identical to what happened in the gold stocks, but they barely made it back into positive territory by minutes before the COMEX close — and it was pretty much a bloodbath once ‘The Donald’ waxed philosophical about a “strong U.S. dollar” minutes after 2 p.m. EST.  Nick Laird’s Intraday Silver Sentiment/Silver 7 index closed down a chunky 3.73 percent.  Click to enlarge…if you dare!

I said in my Thursday column [about Wednesday’s silver price action] that the 2.03 percent increase in the Silver 7 Index that day on a 50 cent rally in the silver price was…”really underwhelming“.  On Thursday, silver was hit for 28 cents — and the carnage in the stocks was out of all proportion to that decline.  There’s a lot of day-trading going on in the precious metal stocks right now — and there was obviously some panic liquidation on Thursday.

Here’s the 1-year Silver Sentiment/Silver 7 Index — and all of this week’s gains, plus a tiny bit more, disappeared yesterday.  Click to enlarge.

The CME Daily Delivery Report showed that 1 gold and 1 silver contract were posted for delivery within the COMEX-approved depositories on Monday.  There were no issuers or stoppers of consequence.  After Monday, there are only two delivery days left in January — and there’s not much open interest left in either gold or silver, anyway.

The CME Preliminary Report for the Thursday trading session showed that gold open interest in January dropped by 2 contracts, leaving 4 still open, minus the 1 contract mentioned just above. Wednesday’s Daily Delivery Report showed that 3 gold contracts were actually posted for delivery today, so that means that 3-2=1 more gold contract was added to the January delivery month. Silver o.i. in January remained unchanged at 3 contracts, minus the 1 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 more silver contract got added to January.


There were no reported changes in GLD yesterday.  But, for the first time since December 12, there was a deposit in SLV, as an authorized participant, most likely JPMorgan, added 848,727 troy ounces of silver.

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

There was very little activity in gold over at the COMEX-approved depositories on the U.S. east coast on Wednesday.  There was 321.500 troy ounces/10 kilobars [U.K./U.S. kilobar weight] received at Canada’s Scotiabank — and the only other activity was a transfer of 22,041 troy ounces from the Eligible category — and into Registered over at HSBC USA.  I won’t bother linking this.

The only action in silver was two truck loads…1,199,756 troy ounces… that was deposited over at CNT.  Nothing was shipped out.  The link to that activity is here.

It was another pretty busy day over at the COMEX-approved gold kilobar depositories in Hong Kong on their Wednesday.  They reported receiving 6,529 of them, but shipped out only 1,210.  All of this activity was at Brink’s, Inc. — and the link to that, in troy ounces, is here.


I spent some time talking about The Central Bank of the Russian Federation‘s new-found interest in silver bullion as a monetary metal while I was in Vancouver.  Here’s the link to the story in question about this that I carried in my column from two weeks ago — and the photos of “Russia’s Fort Knox” are more than impressive, especially the ones that show their massive silver bullion holdings.  By my count, there is around 7.7 million troy ounces — and that’s at a minimum, because that’s just what I can see in these pictures. Each stack holds 100,000 troy ounces. Here are the three pertinent photos from that story — and you can count them yourself if you wish.  Here are the three pertinent ones from that story.  The click to enlarge feature only helps a bit with the first photo — and not the other two.

I sent an e-mail off to Russia’s Central Bank about twenty-four hours ago asking some questions about these photos, plus a few other things that were on my mind — and I’ll let you know if I hear anything.

I only have a small handful of stories for you today.


CRITICAL READS

Draghi Hits Back at Mnuchin in Global Currency War of Words

European Central Bank President Mario Draghi attacked the U.S. Treasury Secretary’s comments on the dollar, saying he isn’t playing by the rules.

Speaking in Frankfurt on Thursday, Draghi said recent euro-dollar moves are partly down to Steven Mnuchin’s intervention at the World Economic Forum in Davos, at which he said a weaker greenback is good for U.S. trade.

The remarks breach a pledge by IMF members, Draghi said….

The exchange rate has moved in part because of endogenous reasons, namely the improvement in the economy, in part due to exogenous reasons that have to do with communication. But not by the ECB, but by someone else. This someone else’s communication doesn’t comply with the agreed terms of references.

The euro strengthened after Draghi’s comments, touching $1.2537, the strongest level since December 2014. It was up 0.8 percent at $1.2504 as of 4:55 p.m. Frankfurt time.

It was quite bold for Draghi to mention it,” said Viraj Patel, a currency strategist at ING Groep NV in London. “It’s going to be quite contentious going forward. I think it was a little message to the U.S. to say, let’s not get too carried away with trying to drive markets away from fundamentals.

This Bloomberg news item appeared on their Internet site at 7:37 a.m. Denver time on Thursday morning — and was updated about two hours later.  I thank Swedish reader Patrik Ekdahl for sending it our way — and another link to it is here.  The Zero Hedge spin on this, courtesy of Brad Robertson, is headlined “In Stunning Development, Draghi Slams U.S. Dollar Jawboning


Dollar Surges After Trump Says “Mnuchin Was Misinterpreted, Dollar Will Get Stronger

After Stephen Mnuchin failed to arrest the dollar’s free-fall this morning, it appears to have been left to President Trump to ‘fix’ it. In a brief clip from a longer CNBC interview, Trump explained “ultimately he wants to see a strong dollar” and the dollar spiked…

Trump said “Mnuchin’s comment was taken out of context” and added that “our country is becoming so economically strong again and strong in other ways, too… and the dollar will get stronger and stronger and ultimately I want to see a strong dollar

And the reaction was instant buying of the dollar…

We do note that actually this is exactly what Mnuchin said this morning… that in the long-run we want a strong dollar… and offers no content for the short-term plunge.

This brief news item showed up on the Zero Hedge website at 2:09 p.m. on Thursday afternoon EST — and I thank Brad Robertson for sharing it with us.  Another link to it is here.


You Can’t Outrun a Wasp! — Dennis Miller

My grandfather, William Paul Smith was an ordinary dairy farmer with a degree in common sense. One of his favorite sayings was, “It’s the same thing, only different.” 70 years ago, he warned me not to throw rocks at a wasps’ nest. As I cried and put ice on the sting, he explained what happened always happens – and I got stung! I thought I was different – and could outrun a wasp – and had to learn the lesson the hard way.

His sage wisdom does not just apply to children. Why is it that many lessons are constant, yet even as adults, we choose to ignore warnings and learn the hard way?

The four most expensive words in the English language are this time it’s different” – Sir John Templeton

Good friend Chuck Butler, writes for Dow Theory Letters, a terrific publication. Chuck recently asked, “Will This Time Be Different?

His headline reminded me of my grandfather. Warnings are appearing regularly – are they being ignored?

This commentary by Dennis put in an appearance on his Internet site on Thursday morning — and another link to it is here.


When it comes to Davos, it’s inequality, stupid — Pepe Escobar

For billions of people, the Groucho Marx rule applies when talking about Davos. This is the exclusive club, which meets in the luxury Swiss resort each year to discuss the global business environment.

Groucho, of course, has been immortalized along with the rest of the Marx Brothers in the zany Hollywood movies of the 1930s, such as A Night a the Opera, A Day at the Races and Animal Crackers.

In one quick-fire response, he joked: “I sent the club a wire stating, ‘Please accept my resignation. I don’t want to belong to any club that will accept me as a member’.

Well, to start off with those billions of people would not get past the bouncers, because the self-defined World Economic Forum is about exclusion. Yet even if, by divine design, they were handed free passes, what would be the point?

This commentary by Pepe was posted on thesaker.is Internet site on Wednesday sometime — and I thank Roy Stephens for bringing it to our attention.  Another link to it is here.


Storm clouds gather over Ukraine — Alexander Mercouris

In a recent article for The Duran I wrote of how the economic situation in Ukraine appeared once more to be deteriorating, with economic statistics apparently being distorted to conceal the extent of the rise in inflation, making the claimed figure of 2% GDP growth in 2017 unlikely.

In a further sign of a deteriorating economic situation, recent reports from Ukraine speak of rolling electric power blackouts in some regions, suggesting growing energy shortages as the price of oil hikes.

In a symptom of how bad the situation has become, the Ukrainian government has quietly dropped its sanctions prohibiting coal imports from Russia, indicating that Ukraine is being forced to turn to Russia for imports of coal in light of the gathering energy crisis.

In this situation, as Paul Goncharoff has recently pointed out, the decision of the Stockholm Arbitration Tribunal to force Ukraine to resume gas purchases from Gazprom actually helps Ukraine,  since the gas Gazprom is able to supply Ukraine is actually cheaper than the gas Ukraine has up to now for political reasons been buying in Europe.

A further sign that economic pressures are causing a certain return to economic rationality in Ukraine is shown by a recent report from Interfax that Ukraine wants negotiations with Moscow to secure the transit of Russian gas to Europe across Ukraine.

This very worthwhile commentary by Alex appeared on theduran.com Internet site at 7:56 p.m. EST on Thursday evening — and it has obviously been updated, because Larry Galearis sent it tome about four hours before that time.  Another link to it is here.


Mike Kosares: Why gold can beat hyperinflation

USA Gold’s Mike Kosares, answering a question from the Netherlands, explains why gold prices are likely to outpace other prices during hyperinflation.

Kosares’ commentary is headlined “R.K. Asks for Some Specifics on Gold as a Hedge Against Hyperinflation” and it was posted on the usagold.com Internet site yesterday.  I borrowed the headline, plus the entire preamble, from a GATA dispatch yesterday.  Another link to it is here.


Nick Barisheff: Gold price manipulation isn’t mere conspiracy theory anymore

In an address this month to the Empire Club of Canada in Toronto, perhaps the country’s most esteemed public forum, Bullion Management Group founder, president, and chief executive officer Nick Barisheff said gold market manipulation is no longer mere conspiracy theory “promoted by gold bugs and organizations like GATA” but is becoming “self-evident.”

Barisheff described the suppression of the gold price through derivatives trading in which virtually no metal ever changes hands.

He quoted the deputy chairman of Russia’s central bank, Sergey Shvetsov, as saying, “The major gold-producing nations are tired of an international gold price that is determined in a synthetic trading environment having little to do with the physical gold market.

Barisheff added that he expects Asia to overthrow that system.

This very worthwhile gold-related news item was posted on the gata.org Internet site yesterday — and another link to it is here.


The PHOTOS and the FUNNIES

I was out for a drive past the old watering hole early yesterday afternoon — and it is, of course, snow-covered and frozen solid to great depth at this time of year.  Needless to say, there were no waterfowl to be seen…but just out of camera range was a small flock of about a dozen grey partridge, a member of the pheasant family, wandering through alfalfa stubble.  I hadn’t seen any of these critters for years — and it made the trip worthwhile.  Click to enlarge.


The WRAP

It was amazing to watch grown men duke it out in a verbal ‘currency wars’ food fight yesterday.  If that international pissing match between the most powerful of the financial elite on both sides of the Atlantic didn’t want to make you run screaming from fiat currencies, I don’t know what would.

But the big surprise for me yesterday was the 70 basis point decline in the U.S. dollar index in the 35-minute time period between 8:25 and 9:00 a.m. EST in New York.  Gold and silver prices barely moved in either direction.  Then when Trump opened his pie hole at 2 p.m…the DXY screamed higher by about 80 basis points — and “the seas boiled — and the sky fell” in the precious metals, taking their associated equities with them.

I’d be careful about reading too much into yesterday’s price action, because one trading day does not make for a trend.  But I am somewhat gobsmacked at the volumes we’ve been seeing in both gold and silver most of this week, particularly during the last couple of days.  I know that options and futures are expiring next week, but these volume numbers are almost without precedence regardless of that fact.

Here are the 6-month charts for all four precious metals, plus copper once again.  Without exception, the lows in all four precious metals [plus copper, I would think as well] came after the COMEX close — and don’t show up Thursday’s dojis.  The ‘click to enlarge‘ feature helps a bit with the first four charts.

And as I type this paragraph, the London open is less than ten minutes away — and I note that the gold price began to edge higher about an hour after trading began in New York on Thursday evening. It rallied until the decline in the dollar index took a bit of a rest — and then chopped sideways until just before 2 p.m. China Standard Time on their Friday afternoon — and it began to edge higher anew. At the moment, gold is up $7.80 an ounce. Silver took the same price path — and it’s up 21 cents currently. It was much the same for both platinum and palladium, with the former up 5 dollars — and the latter by 4 as the Zurich open looms.

Net HFT gold volume is only around the 46,000 contract mark, but there’s heavy roll-over/switch volume to the tune of about 31,000 contracts — and the net HFT volume in silver is a very chunky 20,500 contracts, with fumes and vapours in the roll-over/switch category.

The dollar index rallied for a tiny bit once trading began at 6:00 p.m. EST on Thursday evening in New York, but then sharply reversed until halting minutes before 10 a.m. CST. It didn’t do a lot from that juncture until shortly after 2 p.m. CST — and then began to head sharply lower once again. It’s down 66 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, January 23. Just eye-balling the five days of the reporting week, there shouldn’t be much change in gold — and there’s a chance that there might be a slight improvement in the commercial net short position in silver for the reporting week. And as Ted correctly pointed out in his mid-week commentary to his paying subscribers yesterday afternoon…”But as has been the case over the past month or so, I get the feeling that the nuances in the silver report will be of interest.” I couldn’t agree more — and that may turn out to be the case in gold as well.

Whatever the numbers are, I’ll have them for you in Saturday’s missive.

And as I post today’s column on the website at 4:02 a.m. EST, I see that gold continued to rally a bit after London opened, but with the dollar index currently off its low tick, the gold price was turned a bit lower at the same time — and it’s up $7.30 an ounce as the first hour of trading in London draws to a close. It was the same in silver — and it’s up 20 cents. Platinum and palladium are up 6 and 5 bucks respectively.

Gross gold volume is monstrous at about 128,000 contracts — and net of huge roll-over/switch volume…around 37,000 contracts worth, net HFT gold volume is something over 54,500 contracts. Net HFT silver volume is now up to about 23,700 contracts, with still very little in the way of roll-over/switch volume.

The dollar index continued to slide to its current 88.73 low tick — and that came about five minutes or so after the London open — and as I said before, it’s off that low by a bit — and down ‘only’ 56 basis points. And it certainly appears to have all the hallmarks of an ‘engineered’ dollar rally.

With today being Friday — and with options and futures expiry on Monday, Tuesday and Wednesday of next week, absolutely nothing will surprise me when I check the charts later this morning.

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

Ed