Gold: A Case of Extremes — John Hathaway

23 August 2018 — Thursday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price didn’t do much of anything until around 9:45 a.m. BST in London trading.  It began to edge unsteadily higher from there — and broke above the $1,200 spot mark briefly, minutes after the COMEX open.  That was summarily dealt with — and ‘da boyz’ sold it back to unchanged by shortly after the afternoon gold fix in London.  It didn’t do a lot after that — and the tiny price spike on the release of the FOMC minutes, was quickly capped and sold lower as well.

The low and high ticks certainly aren’t worth looking up.

Gold finished the Wednesday trading session in New York at $1,195.30 spot, down 20 cents from Tuesday’s close.  Net volume in October and December was certainly elevated at a bit over 233,500 contracts — and roll-over/switch volume was fumes and vapours once again at only 1,911 contracts.

The silver price activity was a bit more ‘animated’ — and its rally, also starting shortly before 10 a.m. in London, obviously had to be restrained on more than one occasions.  But, like for gold, it was capped and sold lower a few minutes after the COMEX open — and the powers-that-be had it down about a dime on the day around 10:30 a.m. in New York.  It struggled quietly higher from there, but wasn’t allowed to close in positive territory, either.

The high and low ticks in this precious metal were recorded by the CME Group as $14.875 and $14.67 in the September contract.

Silver was closed on Tuesday in New York at $14.73 spot, down 2.5 cents on the day.  Net volume wasn’t overly heavy at a bit over 52,800 contracts, but roll-over/switch volume out of September and into future months…mostly December…was very heavy at around 41,300 contracts.

‘Da Boyz’ ran the platinum price through the same price machinations as they did for silver and gold, so I won’t bother repeating the process for this precious metal.  It was closed at $793 spot, down a dollar from Tuesday.

It was almost ‘ditto’ for palladium as well, but its sell-off shortly after the COMEX open ran into some solid buying at the same time as gold and silver…about twenty minutes after the afternoon gold fix in London.  It then powered higher until around 2:30 p.m. EDT in the thinly-traded after-hours market — and traded flat from that point into the close.  Palladium finished the Wednesday trading session at $923 spot, up 11 bucks on the day.

Palladium is in a true supply/demand deficit — and for that reason ‘da boyz’ are having to let it run a bit.  But, like the other precious metals, its price would be significantly…and I mean significantly higher…if it was allowed to trade freely, which it obviously isn’t.

The dollar index closed very late on Tuesday afternoon in New York at 95.21 — and traded pretty flat right from the 6:00 p.m. EDT open on Tuesday evening.  It began to edge a bit higher starting around 2 p.m. China Standard Time on their Wednesday afternoon — and the 95.38 high tick was placed a minute or so after 9 a.m. in London.  It began to head sharply lower about thirty minutes later — and the low 94.93 low tick was set at 8:30 a.m. in New York, which turned out to be the lows of the day in all four precious metal.  It rallied weakly from there until shortly after the afternoon gold fix in London — and proceeded to chop generally sideways [except for a vicious down/’gentle hands’/up spike at 2 p.m. EDT] until shortly before 3 p.m. EDT.  From that juncture it sold off a handful of basis points into the close of trading.  The dollar index finished the Wednesday session at 95.09…down 12 basis points on the day.

For the most part, the precious metals followed the dollar index quite closely on Wednesday, but it was more than apparent that JPMorgan et al were keeping the precious metals on the proverbial short leash again yesterday.

And here’s the 6-month chart for the U.S. dollar index — and it should be obvious that despite the fall in the index over the last week and a bit, the precious metals [with the obvious exception of palladium] aren’t being allowed to reflect that fact to the extent that they normally would.

The gold stocks jumped up a percent and change at the 9:30 EDT open of trading in New York on Wednesday morning — and then sagged a bit until around 11:30 a.m.  They chopped very unevenly higher from there into the close — and the HUI finished higher by 1.01 percent.

The silver equities weren’t quite as frisky as their golden brethren — and were up a half a percent or so at the open — and sank into the red to their respective lows by a minute or so before 11 a.m. EDT.  They too then chopped unevenly higher for the remainder of the Wednesday session, as Nick Laird’s Intraday Silver Sentiment/Silver 7 Index finished up only 0.26 percent…which is certainly better than the alternative.  Click to enlarge if necessary.

And here’s Nick’s 1-year Silver Sentiment/Silver 7 Index chart.  Click to enlarge as well.

The CME Daily Delivery Report showed that 6 gold and zero silver contracts were posted for delivery today within the COMEX-approved depositories on Friday.  Advantage and ADM issued 4 and 2 contracts respectively — and the only long/stopper worthy of the name was JPMorgan, as they picked up 4 contracts.  All of the issued and stopped activity occurred in their respective client accounts.  The link to yesterday’s Issuers and Stoppers Report is here.

The CME Preliminary Report for the Wednesday trading session showed that gold open interest in August declined by 23 contracts, leaving 187 still around, minus the 6 mentioned just above.  Wednesday’s Daily Delivery Report showed that 16 gold contracts are posted for delivery today, so that means that 23-16=7 gold contracts vanished from the August delivery month.  Silver o.i. in August rose by 1 contract, leaving 23 left.  Wednesday’s Daily Delivery Report showed that zero silver contracts were posted for delivery today, so that means that 1 more silver contract was added to August.


There were no reported changes in either GLD or SLV yesterday.

There was a tiny sales report from the U.S. Mint yesterday.  They sold 1,500 troy ounces of gold eagles — and 25,000 silver eagles.

It was yet another day of all zeros in gold over at the COMEX-approved depositories on the U.S. east coast on Tuesday.

There wasn’t much activity in silver, as nothing was reported received — and only 94,587 troy ounces were shipped out.  That activity was split up between three different depositories…Brink’s, Inc., CNT — and the International Depository Services of Delaware.  If you want to check out the amounts from each, the link is here.

There was a decent amount of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Tuesday.  Nothing was reported received, but a very decent 5,211 kilobars were shipped out.  All of this occurred at Brink’s, Inc. — and the link to that, in troy ounces, is here.


Here are three charts that Nick Laird passed around yesterday evening.  They show Swiss gold imports and exports updated with July’s data.  The first chart shows the net number, as they imported 126.95 tonnes — and exported 116.48 tonnes during that month.  Click to enlarge.

This next chart shows the countries of origin of the imported gold — and the second chart shows the countries that received the exported goldClick to enlarge for both.

It’s another day where I only have a tiny handful of stories for you — and because of that, I’ve tossed in the latest Cohen/Batchelor interview.


CRITICAL READS

Wall Street Isn’t Ruling Out a Trump Move to Weaken the Dollar

The United States of America, a currency manipulator?

It’s a label more frequently slapped on developing export economies and one that President Donald Trump took up just this week to browbeat China and Europe in his increasingly pitched trade war.

But as outlandish as it sounds, some Wall Street observers say the possibility that Trump himself will launch a sustained campaign to weaken the dollar as a way to reduce the U.S. trade deficit can’t be dismissed.

The trade debate will increasingly include the currency issues,” said Charles Dallara, a former U.S. Treasury official and one of the architects of the Plaza Accord, the 1985 watershed agreement between the U.S. and four other countries to jointly depreciate the dollar. “It’s inevitable.”

Granted, Dallara didn’t specifically use the word manipulation. There’s something of a reluctance among analysts to associate the U.S., the standard-bearer for free-market principles, with the term. They prefer to refer to it as foreign-exchange intervention. Semantics aside, a shift to a more protectionist and interventionist policy, à la 1985, would not only reverberate across the $5.1 trillion-a-day currency market and undermine the dollar’s status as the world’s reserve currency, but could also weaken demand for U.S. assets.

Manipulation…currency wars…call it what you will, dear reader, but its a desperation move — and I await what Jim Rickards has to say about this.  This Bloomberg story was posted on their Internet site at 10:00 p.m. Denver time on Tuesday evening — and was subsequently updated at 11:30 a.m. MDT on Wednesday morning.  Before the Bloomberg ‘thought police’ got to it, the headline read…”Trump a currency manipulator?…Wall Street isn’t ruling it out“.  I found it in a GATA dispatch yesterday — and another link to it is here.


How Bill Clinton’s Fed Twisted the Economy — Bill Bonner

The man who made America great again in record time – only 18 months – with unemployment at half-century lows and stocks at all-time highs… now says he is “not thrilled” about the Fed’s tightening policy.

From CNBC:

The dollar weakened on Tuesday after U.S. President Donald Trump slammed the Federal Reserve for raising interest rates, while global equity markets rose as strong economic and earnings growth favored stocks in a relatively benign environment.

Trump said in an interview with Reuters on Monday that he was “not thrilled” with the Fed under his appointee, Chairman Jerome Powell, for raising rates and that the U.S. central bank should do more to boost the economy.

When it comes to increasing rates, Donald J. Trump is not loving it.

We think we see where this is going. In preview, when it leads to where we think it leads, we’re not going to be loving it much, either.

This interesting commentary from Bill was posted on the bonnerandpartners.com Internet site very early on Wednesday morning EDT — and another link to it is here.


This Is What $4 Million Buys You In Vancouver’s “Housing” Market

We have written extensively about the surreal Vancouver real estate bubble in the past, but the following listing on Canada’s REW site, summarizes the current state of Vancouver housing in one image better than any article ever could.

We present the following house which could be yours for the low price of CAN$3,990.000

Did we say house. We meant tear-down.

Actually no, the tear-down has already happened — and it’s a pile of burned-down debris that’s hit the market for C$3,990,000 in Kitsilano.

According to the Vancouver Courier, the home at 2573 West 3rd Avenue was reduced to a heap of junk after a December 22, 2017 three-alarm fire on the premises (no one was injured). Perhaps those living there were renters, as one news report on the fire noted that the “registered owner on the land title is a numbered company“, also known as a Chinese “investor.”

And while the flames are long out at this address, the market remains hot, and it’s now listed at over $200,000 more, with 0 bedrooms and 0 baths.

Even if you can’t be bothered with the story, dear reader, you gotta look at the embedded photo!  It’s the very definition of insanity.  This Zero Hedge article appeared on their Internet site at 7:10 p.m. EDT on Wednesday evening — and another link to it is here.


Tales of the New Cold War: 1 of 2: John Brennan and the Criminalizing of Trump and Putin — John Batchelor interviews Stephen F. Cohen

Larry Galearis sent me this interview yesterday, but with no executive summary or commentary, as he knows that I’m trying to stay away from all things “Russiagate” as much as possible…as it’s all politically motivated — and you need a program to keep up with what’s happening with all the unbelievable bulls hit shenanigans going on in Washington these days.

To me, the entire situation is neatly summed up in the headline above.  This 2-part audio interview, with each part being about 20 minutes long, put in an appearance on the audioboom.com Internet site on Tuesday — and the link to Part 1 is in the headline and here — and the link to Part 2 is here.  I’ll also post this in Saturday’s missive as well, if you don’t have time for it just now.


Swiss Bank Freezes $5 Billion In Russian Money

For years, Russian oligarchs and robber barons seeking to park their “unsourced” capital offshore and away from the sticky fingers of the Kremlin, treated Swiss bank accounts (preferably anonymous) with their “no questions asked” customer policies as, well, Swiss bank accounts.

No more.

One of Switzerland’s largest banks, Credit Suisse, has frozen roughly 5 billion Swiss francs ($5 billion) of money linked to Russia to avoid violating U.S. sanctions, according to its accounts, further increasing pressure on Moscow which today saw the ruble tumble to the lowest level in over two years.

The crackdown on Russian funds by the second largest Swiss bank, which owned aircraft surrendered by Russian tycoon Oleg Deripaska and had lent money to Russian oligarch Viktor Vekselberg before the sanctions, is indicative of the widespread fear among European banks of retaliation by Washington for working with targeted Russian individuals and entities.

And more is expected to follow, as Trump scrambles to prove to Robert Mueller that he did no collude with Putin.

This is another Zero Hedge story from early yesterday evening EDT — and another link to it is here.


Australia Leadership Crisis: Aussie Dollar Tumbles After P.M. Turnbull Loses Cabinet Support to Populist Leader

In the latest populist crisis to strike a G-10 nation (it has not been blamed on Vladimir Putin yet), Australia’s Prime Minister Malcolm Turnbull – who narrowly survived a leadership challenge earlier this week – suffered what appeared to be a fatal blow to his leadership on Thursday after three key Cabinet ministers – including the Finance Minister – resigned, calling for an immediate meeting of the party and pledging support for right-wing populist Peter Dutton, Bloomberg reports.

After telling Turnbull that he should resign, Finance Minister Mathias Cormann, Communications Minister Mitch Fifield and Jobs Minister Michaelia Cash held a news conference to announce their resignations and demand a special meeting of Liberal Party lawmakers so a leadership ballot in which could be held.

The resignations “mean it’s game over for him and Australia will have a new leader by the end of day,” said Haydon Manning, an associate professor of politics and public policy at Flinders University. “My money would be on Dutton but you can’t rule out another candidate giving it a go.”

Dutton, who narrowly failed to unseat the prime minister earlier in the week, said on Thursday he had the party’s support and demanded that Turnbull call another leadership vote. Treasurer Scott Morrison – a Turnbull ally – is preparing to run against Dutton if a ballot is held on Thursday, Sky News reported, without saying where it got the information.

According to ABC, Malcolm Turnbull was told he has lost the support of the Liberal party room and should step down as Prime Minister, while Labor leader Bill Shorten said Australia no longer has a functioning Government.

This interesting story was posted on the Zero Hedge website at 10:24 p.m. on Wednesday night EDT — and another link to it is here.


A Gold Bloc For Iran, Russia, and Turkey…Oh My! — Steve Hanke

This brings me to today’s favorite weapon of war: financial sanctions. With each passing day, the U.S. Treasury rolls out, or threatens to roll out, more sanctions. We all know about the sanctions that cover Iran like a wet blanket. We also recently witnessed the imposition of sanctions on Turkey, where the pretense for imposing them was a U.S. pastor who was allegedly not tending his Turkish flock properly. When it comes to Russia, new U.S. sanctions are an almost daily affair.

The weight of sanctions has clearly created great difficulties for the Iranian rial, Russian ruble, and Turkish lira. Indeed, even in the best of times, these are all half-baked currencies with long troubled histories. They are all vulnerable to sanctions. Indeed, their vulnerability should be viewed as threats to national security.

So, how can Iran, Russia, and Turkey escape the sanctions stick? They could make their currencies as good as gold. This would provide an attractive escape. Gold is already an international currency that holds its purchasing power over time. It is also a currency that is not issued by a sovereign. So, it has no political baggage to carry. In addition, gold is already widely revered and used in Iran, Russia, and Turkey.

In 1997, Bob Mundell predicted that “Gold will be part of the structure of the international monetary system in the twenty-first century.” As has often been the case, Mundell’s prediction might just be prescient. Indeed, Iran, Russia, and Turkey could, and just might, make Mundell’s prediction a reality. One foolproof way to do that is via gold-based currency boards. Currency boards have existed in more than 70 countries, and a number are in operation today. Countries with such monetary institutions have experienced more fiscal discipline, superior price stability, and higher growth rates than comparable countries with central banks.

This opinion piece by Steve, who is a professor of applied economics at The Johns Hopkins University and senior fellow at the Cato Institute, showed up on the forbes.com Internet site at 3:30 p.m. EDT on Wednesday afternoon — and I found it on the Sharps Pixley website this morning.  It’s definitely worth your while — and another link to it is here.


Gold output in key countries to slump to ‘generational’ lows — report

Gold output in key producing countries, such as Australia and Peru, is set to slump to generational lows in the mid-term even though bullion production grew for nine consecutive years, reaching an all-time high in 2017, a new report shows.

While S&P Global Market Intelligence does expect output to rise reach new highs this year, to 108 million ounces, as well as in 2019 and 2020, it doesn’t see growth across the board.

In the case of Australia, despite production being on track to hit a 26-year high of 10.2 Moz in 2019, we estimate that Australian gold production will start to decline thereafter,” says S&P analyst Chris Galbraith.

In its the Gold Pipeline report, S&P forecasts a 9% fall in gold production for Australia in 2020 and expects the country’s production to reach a generational low of 6.8 million ounces by 2022. That is a 33% drop in only three years.

Peruvian production is also expected to decline the most by 2022 — by 1.9 million ounces to be exact. This, as no new gold mines have begun production in the country since the start of 2017, and only one project seems likely to go online in the next five years: Southern Copper’s Los Chancas, slated to begin operations in 2022.

This gold-related new item appeared on the mining.com Internet site very early on Wednesday morning EDT — and I found it over at Sharps Pixley.  It’s definitely worth reading — and another link to it is here.


Gold: A Case of Extremes — John Hathaway

Intense liquidation of gold mining shares during the week of August 13, 2018 could, in our opinion, mark a trading bottom, if not the terminal point in the lengthy consolidation of the sector since the bottom of December 2015.

To support our view, we note:

– Extreme bearish positioning of COMEX gold speculators;
– Extreme bullish positioning of U.S. dollar long speculative positions
– Extreme bearishness in gold sentiment indicators;
– Extreme washout volume on downward spikes of GDX, the Van Eck gold mining share ETF; and
– Extreme improvement in broad macroeconomic and gold-specific microeconomic fundamentals.
– Extreme positioning of COMEX speculators

According to Ted Butler (Butler Research, 8/18/18), a keen observer of commodity markets, an increase in the price of gold of only $45/oz., or 3.8%, from the current level of $1,185, would wipe out the unrealized aggregate profit of the massive COMEX short position.  The current futures market structure appears to be a set up for a dramatic short covering rally that will end up in losses for speculative shorts.

John sent me this commentary early on Tuesday morning MDT, but it wasn’t posted on their website until yesterday afternoon, so I couldn’t link it until now.  This must read article showed up on the tocqueville.com Internet site — and another link to it is here.


The PHOTOS and the FUNNIES

Here are three photos I took at the pond on Tuesday.  The first is a cedar waxwing, which was kind enough to sit in one spot long enough so I could get some pictures.  I took three — and this was the best one.

This second shot is of a juvenile red-necked grebe trying out his/her young wings.  They aren’t developed enough for flight at the moment, but he/she is giving it the old college try anyway.  Click to enlarge.

This shot is of the south end of a north-bound pigeon/rock dove that actually landed in the water to pick up something that was obviously floating on the surface.  I was so astonished that I wasn’t ready for the shot — and this is the best of two photos that I did get.  And I thought I’d seen everything down at the old pond!


The WRAP

With the exception of palladium, yesterday’s trading action in the precious metals looked to me like ‘da boyz’ had the precious metals on ‘care and maintenance’…not letting anything get of hand to the upside, particularly in silver.  Ted’s mid-week commentary yesterday to his paying subscribers was headlined “Locked and Loaded” — and that pretty much sums up the situation in all the COMEX precious metals, plus copper.  All we’re waiting for is the ‘event’ that the deep state have planned that will finally be allowed to set it off.

Here are the 6-month charts for all four precious metals, plus copper and WTIC — and all the positive price action was in palladium and West Texas Intermediate.  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 see that all four precious metals got sold lower starting about an hour after trading began at 6:00 p.m. EDT on Wednesday evening in New York.  But the big ‘rally’ in the dollar index began right at the 6:00 p.m. open yesterday evening, so it’s more than obvious that precious metal prices had a lot of help on their respective downward price journeys.  Their current low ticks came long before the dollar index ‘rally’ ended.  They rallied a bit going into the 2:15 p.m. CST afternoon gold fix in Shanghai, but all were turned lower shortly after that.  At the moment, gold is down $5.50 an ounce — and silver is lower by 18 cents.  Platinum is down 10 dollars — and palladium by 7.

Net HFT gold volume in October and December combined is coming up on 54,500 contracts — and roll-over/switch volume in that precious metal is only 131 contracts.  Net HFT silver volume is a bit under 11,000 contracts — and there’s 2,625 contracts worth of roll-over/switch volume out of September and into future months…mostly December.

As I mentioned two paragraphs ago, the dollar index began to ‘rally’ moments after trading began in New York yesterday evening — and the current 95.49 high tick was set a minute or so after 12 o’clock China Standard Time on their Thursday afternoon.  It has been trending lower since, but really began to sink starting at precisely 2:00 p.m. CST.  The dollar index is currently up 25 basis points as London opens — and was up 41 at its earlier high.

Well, the FOMC minutes weren’t allowed to be reflected in precious metal prices yesterday.  They all ticked higher by just a bit — and it was an easy job to cap them — and then take away what little gains were made.

Tomorrow, Fed chairman Jerome Powell opens his pie hole in Jackson Hole — and we’ll see what happens when that occurs, especially after existing home sales in the U.S. fell for the fourth month in a row, which is an ugly sign during what is normally the peak house-buying part of the year.  I also note that the ‘Sentiment for Home-Buying Conditions’ are the worst since Lehman went under.  Zero Hedge had a story about all of this yesterday morning — and it’s linked here.

And as I post today’s column on the website at 4:02 a.m. EDT, I note that all four precious metals got smacked lower at the London/Zurich opens, but all are off their low ticks by a bit now.  Gold is now down $7.00 an ounce — and silver is lower by 20 cents.  Platinum and palladium are down by 13 and 10 bucks respectively.  It’s a safe bet that most new long positions put on in the COMEX futures market this week, all got blown out in the last few hours of trading.

Gross gold volume is now up to a bit over 84,000 contracts — and roll-over/switch volume is still microscopic at 180 contracts.  Net HFT gold volume in October and December combined is around 83,600 contracts.  Net HFT silver volume is very heavy as well at a bit under 19,000 contracts — and roll-over/switch volume in that precious metal is now up to 4,505 contracts.

The dollar index trended lower until exactly 8:00 a.m. BST, which were the London/Zurich opens — and has been chopping mostly sideways since — and is up 26 basis points at the moment.

Based on what I see in front of me right now, the rest of the Thursday session may not be very pretty.

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

Ed