Ted Butler: JPMorgan Has Gone Long Silver at Last

02 October 2018 — Tuesday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price was sold quietly lower starting the moment that trading began at 6:00 p.m. EDT in New York on Sunday evening — and was down four bucks and small change by around 9:30 a.m. China Standard Time on their Monday morning.  Not that it matters for China anyway I would think, as they’re celebrating another one of their ‘Golden Weeks’.  From the 9:30 a.m. CST, it traded sideways until 2:15 p.m. CST, which just happened to correspond to the afternoon gold fix in Shanghai.  It was sold unsteadily lower from that point until shortly before 1 p.m. in London trading — and then it took off higher like the proverbial scalded cat.  It was capped and then sold lower starting around 8:45 a.m. in New York trading less than an hour later — and that sell-off lasted until a minute or so before 10:30 a.m. EDT.  It edged higher from there until shortly after 12:30 p.m.  — and really didn’t do much of anything after that.

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

Gold was closed in New York on Monday at $1,188.60 spot, down $3.60 on the day.  Net volume was on the lighter side at around 213,500 contracts — and there was exactly 8,000 contracts worth of roll-over/switch volume on top of that.

Silver followed the same general price path as gold, except there was no rally worthy of the name beginning a few minutes before 1 p.m. BST/8 a.m. EDT.  But, like gold, the price gold leaned on shortly before 9 a.m. in New York — and that lasted until about 9:10 a.m.   It inched unsteadily higher from there until the COMEX close — and didn’t do much after that.

The high and low ticks were reported by the CME Group as $14.725 and $14.395 in the December contract.

Silver was closed on Monday at $14.47 spot, down 17 cents from Friday.  Net volume was was up there at just under 82,500 contracts — and there was 3,507 contracts worth of roll-over/switch volume on top of that.

Platinum was sold down a few dollars in morning trading in the Far East — and from that juncture it traded sideways until shortly after the Zurich open.  It bounced back above unchanged for a bit, but around 10:30 a.m. CEST/04:00 EDT, a bit of price pressure appeared — and it was sold down to its low tick of the day a few minutes before 2 p.m. in Zurich/1 p.m. in London — and 8 a.m. in New York.  It began to chop impressively higher from there — and that state of affairs lasted until 1 p.m.  At that point, the rally either gave up the ghost, or was capped — and it twas sold down a dollar or two in after-hours trading.  Platinum finished the Monday session in New York at $821 spot, up 7 bucks on the day.

The price path for palladium was about the same as platinum’s…at least until shortly after 10 a.m. in Zurich.  The price was sold unevenly lower from there — and the low tick was set just after 9:30 a.m. in New York.  Shortly after the afternoon gold fix in London, it began to head higher — and that lasted until a few minutes after the 1:30 p.m. EDT COMEX close.  It was sold down about 6 dollars from there until 4 p.m. — and then didn’t do much for the last hour of trading.  Palladium was closed at $1,057 spot, down 13 dollars from Friday.

The dollar index closed very late on Friday afternoon in New York at 95.19 — and then dropped 10 basis points the moment that trading began at 6:00 p.m. EDT on Sunday evening.  It chopped higher from there until minutes before 3 p.m. China Standard Time on Monday afternoon, but began to head lower less than thirty minutes later.  It fell down to the 95.05 mark around 10:40 a.m. in London, but I suspect that the usual ‘gentle hands’ were there to save it.  The ensuing ‘rally’ looked really iffy — and it began to crash minutes after the COMEX open.  The ‘gentle hands’ were there once again at the 95.00 mark — and sent it sailing to the 95.39 mark by around 11:45 a.m. in New York.  It edged unsteadily lower from there until around 3:35 p.m. — and then crept quietly higher into the close.  The dollar index finished the Monday session at 95.32 — up 13 basis points from its Friday close.  Here’s the intraday chart, so you can get a look at Monday’s action in some detail.

And here’s the 3-day chart, so you can see the price action from the 6:00 p.m. open in New York on Sunday evening…plus Friday’s action as well.

And here’s the 6-month U.S. dollar index chart — and the delta between it and the close on the intraday charts above, was 39 basis points yesterday.

The gold stocks opened basically unchanged — and then dipped to their respective lows of the day by a minute or so before 11 a.m. EDT…the London close.  By noon EDT, they were up half a percent — and then chopped unsteadily sideways until minutes after 3 p.m. — and with the day traders selling their positions into the close from that point, the shares sank back to just about unchanged on the day.  The HUI finished up 0.16 percent.

The silver equities traded in very similar fashion, except they started from a lower base — and barely got a taste of unchanged during the Monday trading session.  They got sold lower in the last hour of trading as well — and Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down 0.50 percent.  Click to enlarge.

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

The CME Daily Delivery Report for Day 2 of October deliveries showed that 65 gold and 48 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday.  In gold, there were five short/issuers in total — and the two largest were Advantage and RCG with 29 and 21 contracts out of their respective client accounts.  There were five long/stoppers in total as well — and the two biggest were HSBC USA with 34 for its own in-house/proprietary trading account — and JPMorgan with 18 for its client account.  In silver, the two short/issuers were Advantage and ADM with 44 and 4 contracts out of their respective client accounts.  The three long stoppers were Advantage, JPMorgan and Morgan Stanley…with 27, 17 and 4 contracts for their respective client accounts.  The link to yesterday’s Issuers and Stoppers Report is here.

The CME Preliminary Report for the Monday trading session showed that gold open interest in October dropped by 808 contracts, leaving 3,189 still around, minus the 65 contracts mentioned just above.  Friday’s Daily Delivery Report showed that 772 gold contracts were actually posted for delivery today, so that means that 808-772=36 gold contracts vanished from the October delivery month.  Silver o.i. in October fell by 110 contracts, leaving 79 still open, minus the 48 contracts mentioned in the previous paragraph.  Friday’s Daily Delivery Report showed that 145 silver contracts were actually posted for delivery today, so that means that 145-110=35 more silver contracts just got added to October.


There was a withdrawal from GLD on Monday, as an authorized participant took out 66,238 troy ounces.  There were no reported changes in SLV.

The folks over at Switzerland’s Zürcher Kantonalbank updated their website with the goings-on inside their gold and silver depositories as of the close of trading on Friday, September 28 — and there were withdrawals from both.  The amount of gold taken out was 19,741 troy ounces — and in silver, that number was 36,041 troy ounces.

There was a worthwhile sales report from the U.S. Mint yesterday for the first business day of October.  They sold 2,000 troy ounces of gold eagles — 500 one-ounce 24K gold buffaloes — and 350,000 silver eagles.

There was very little physical activity in gold over at the COMEX-approved depositories on the U.S. east coast on Friday.  Nothing was reported received — and only 884 troy ounces were shipped out.  There was also a paper transfer of 68,475 troy ounces from the Eligible category — and into Registered.  That occurred at JPMorgan — and the link to that is here.

There wasn’t much activity in silver, as 132,509 troy ounces were received — and 88,760 troy ounces were shipped out the door for parts unknown.  The ‘in’ activity was at Delaware — and the ‘out’ activity at Canada’s Scotiabank.  There was also a paper transfer of 663,150 troy ounces out of the Eligible category — and into Registered.  This is obviously for delivery in October as well.  That occurred at CNT.  The link to all this is here.

There was some activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Friday.  They received 1,500 of them — and shipped out 727.  All of this occurred at Brink’s, Inc. of course — and the link to that, in troy ounces, is here.


Here are two charts that Nick Laird passed around on Sunday. They show gold and silver bullion coin sales for the U.S. Mint, updated with September’s data.  As Ted pointed out his weekly review on Saturday, if you take on January sales, which are always the highest of the year every year, this is the best silver eagles sale month since October 2016.  The first chart included both gold eagle and gold buffalo sales.  Click to enlarge for both.

I don’t have much in the way of stories for you today.


CRITICAL READS

A Three-Way Train Wreck Is About to Derail the Markets — Jim Rickards

The U.S. trade war with China and China’s daunting debt problems are well understood by most investors. Coming U.S. sanctions on Iran and Iran’s internal economic problems are also well understood.

What is not understood is how these two bilateral confrontations are intimately linked in a three-way tangle that could throw the global economy into complete turmoil and possibly escalate into war. Untangling and understanding these connections is one of the most important tasks for investors today.

Let’s begin with the China debt bomb. China has the largest volume of dollar-denominated debt coming due in the next 15 months.

The chart shows China with almost $100 billion of external dollar-denominated liabilities maturing before the end of 2019. But this debt wall is just the tip of the iceberg. This chart does not include amounts owed by financial institutions nor does it include inter-company payables and receivables. China’s total dollar debt burden is over $200 billion and towers over other emerging-market economy debt burdens.

This wall of maturing debt might not matter if China had easy access to new finance with which to pay the debt and if its economy were growing at a healthy clip. Neither condition is true.

China has entered a trade war with the U.S., which will reduce the prospects of many Chinese companies and hurt their ability to refinance dollar debt. At the same time, China is trying to get its debt problems under control by restricting credit and tightening lending standards.

This commentary by Jim showed up on the dailyreckoning.com Internet site on Monday sometime — and another link to it is here.


As Debt Rises, the Government Will Soon Spend More on Interest Than on the Military

The federal government could soon pay more in interest on its debt than it spends on the military, Medicaid or children’s programs.

The run-up in borrowing costs is a one-two punch brought on by the need to finance a fast-growing budget deficit, worsened by tax cuts and steadily rising interest rates that will make the debt more expensive.

With less money coming in and more going toward interest, political leaders will find it harder to address pressing needs like fixing crumbling roads and bridges or to make emergency moves like pulling the economy out of future recessions.

Within a decade, more than $900 billion in interest payments will be due annually, easily outpacing spending on myriad other programs. Already the fastest-growing major government expense, the cost of interest is on track to hit $390 billion next year, nearly 50 percent more than in 2017, according to the Congressional Budget Office.

It’s very much something to worry about,” said C. Eugene Steuerle, a fellow at the Urban Institute and a co-founder of the Urban-Brookings Tax Policy Center in Washington. “Everything else is getting squeezed.

This worthwhile news story put in an appearance on The New York Times website last Tuesday — and I thank Streber [Steve] Kampf for pointing it out.  Another link to it is here.


U.S. Dollar Refuses to Die as Global Reserve Currency — But Loses Ground — Wolf Richter

Chinese RMB gains, but is inconsequential as central banks remain leery. Euro hangs on.

Those who’re eagerly awaiting the end of the “dollar hegemony,” or the end of the dollar as the top global reserve currency, well, they’ll need some patience, because it’s happening at a glacial pace – according to the IMF’s just released data on the “Currency Composition of Official Foreign Exchange Reserves” (COFER) for the second quarter 2018.

What it confirms: Global central banks are ever so slowly losing their appetite for being over-exposed to U.S.-dollar-denominated assets, though they’re not dumping them from their foreign exchange reserves; they’re just tweaking them.

They’re not dumping euro-denominated assets either; au contraire. But they’re giving up on the Swiss franc. And they remain leery of the Chinese renminbi though they’re starting to dabble in it – it seems at the expense of the dollar.

This 3-chart article was posted on the wolfstreet.com Internet site on Sunday — and I thank Clive Sutherland for sending it our way.  Another link to it is here.


Italian Bonds Resume Slide After Report Europe Will Reject Budget Proposal

Italian bonds resumed their slide, dropping for a third day as investors were spooked by the looming conflict between the populist government and European Union over the country’s budget proposal. Today’s selloff catalyst was a report by Italy’s La Repubblica newspaper which reported that there had been “rumors” that the E.U. would reject the country’s proposals. European Commission Vice President Valdis Dombrovskis said Friday that Italy’s plans did not seem in line with the bloc’s stability and growth pact, even though the E.U. had made such concessions in previous years to Spain and Portugal.

As a result, Italy’s two-year yields rose as much as 14 basis points to 1.17%, while yields on 10-year notes rose 7 bps to 3.22% with the yield spread over their German peers at 274 basis points, just short of Friday’s highs. However, after an initial selling burst, yields have since pared much of the losses.

Headlines suggesting the E.U. will look to reject the budget all but places the populist coalition and the E.U. on a potential collision course,” said Rabobank’s Matthew Cairns “That is feeding straight into BTP levels this morning.”

While the early rumors were largely discounted, investors braced themselves for any comments from E.U. leaders on the sidelines of a Eurogroup meeting in Luxembourg. Meanwhile, as Bloomberg reports Italy’s Five Star Movement-League coalition has yet to lay out growth targets that formed the basis for the 2019 deficit target of 2.4%, which spooked investors Friday and prompted a hostile response by the E.U.

This news item put in an appearance on the Zero Hedge Internet site at 6:05 a.m. on Monday morning EDT — and it comes to us courtesy of Brad Robertson.  Another link to it is here.


As Killings of South African Politicians Surge, ANC Ignores Pleas For Help

White South African farmers aren’t the only ones who are fearing for their lives in the face of persecution by the African National Congress. Increasingly, members of the party have been struggling to survive amid a surge in violent retribution. As The New York Times reports, South African politicians are being assassinated with alarming frequency as party members hire mercenary assassins to eliminate rivals (or, more often, anti-corruption whistleblowers). Even as murders proliferate and public outrage intensifies, prosecutions are rare. Killings soared under former President Jacob Zuma, but Cyril Ramaphosa, the “reform” candidate who ousted Zuma, has ignored calls to try and stop them, fostering suspicions that these lethal intra-party feuds extend all the way to the party’s leadership.

With political will to stamp out the killings within the ANC virtually nonexistent, they have become a potent reminder that the rule of law in one of Africa’s largest economies is virtually nonexistent. They’re also a sign of just how far the party has strayed from its roots. One politician who took a stand against corruption in a rural South African province told the NYT that he felt like he was being “hunted like an animal.” In its story, the NYT shares how one local politician, a man named Sindiso Magaqa, was ambushed in his red BMW by a hit squad who riddled him with bullets. He survived the attack, but died a few weeks later from his wounds.

The wave of killings has done so much damage to the national psyche, that some believe the country was better off before it achieved democracy.

It was better before we attained democracy, because we knew the enemy – that the enemy was the regime, the unjust regime,” said Mluleki Ndobe, the mayor of the district where Mr. Magaqa and five other A.N.C. politicians have been assassinated in the past year.

Now, you don’t know who is the enemy,” he said.

In a sign that the people could soon act to unseat the corrupt ANC, dissatisfaction has festered even as Ramaphosa has pushed the expropriation of land from white farmers (while also tacitly endorsing violence against white farmers). Markets have lost confidence, too, sending the South African rand spiraling lower earlier this year, though it has begun to claw back some of its losses in recent days. But exactly one year from now, South Africans will have an opportunity to vote out the ANC during a general election in October 2019. But given this propensity for violence, we imagine it wouldn’t go peacefully.

This not surprising story appeared on the Zero Hedge website at 11:05 p.m. on Monday night EDT — and another link to it is here.


They Are Worried About Panic“: China Blocks Bad Economic News As Economy Slumps

China’s Shadow-banking system is collapsing (and with its China’s economic-fuel – the credit impulse), it’s equity market has become a slow-motion train-wreck, its economic data has been serially disappointing for two years, and its bond market is starting to show signs of serious systemic risk as corporate defaults in 2018 hit a record high.

But, if you were to read the Chinese press, none of that would be evident, as The New York Times reports a government directive sent to journalists in China on Friday named six economic topics to be “managed,” as the long hand of China’s ‘Ministry of Truth’ have now reached the business media in an effort to censor negative news about the economy.

The New York Times lists the topics that are to be “managed” as:

  • Worse-than-expected data that could show the economy is slowing.
  • Local government debt risks.
  • The impact of the trade war with the United States.
  • Signs of declining consumer confidence
  • The risks of stagflation, or rising prices coupled with slowing economic growth
  • Hot-button issues to show the difficulties of people’s lives.”

The government’s new directive betrays a mounting anxiety among Chinese leaders that the country could be heading into a growing economic slump. Even before the trade war between the United States and China, residents of the world’s second-largest economy were showing signs of keeping a tight grip on their wallets. Industrial profit growth has slowed for four consecutive months, and China’s stock market is near its lowest level in four years.

“It’s possible that the situation is more serious than previously thought or that they want to prevent a panic,” said Zhang Ming, a retired political science professor from Renmin University in Beijing.

Mr. Zhang said the effect of the expanded censorship strategy could more readily cause people to believe rumors about the economy. “They are worried about chaos,” he added. “But in barring the media from reporting, things may get more chaotic.”

This news item was posted on the Zero Hedge website at 11:45 p.m. on Monday night EDT — and another link to it is here.


Poland increases gold reserves: Financial Times

If confirmed, it is the first such purchase by an E.U. member state this century, the paper said, citing a report of global advisory firm Macquarie Group.

The National Bank of Poland (NBP) acquired gold in two batches: two tonnes in July and seven tonnes in August, according to IMF data cited by the paper.

The National Bank of Poland, however, refrained from commenting on the purchase, the Rzeczpospolita daily said.

Central banks in countries such as Poland, Russia, Turkey and Kazakhstan have purchased 264 tonnes of gold this year, “by far the most at this stage of the year of any period in the last six years,” Macquarie Group said, according to FT.

This news item from the Financial Times, was posted in the clear on the Radio Poland website at 10:30 a.m. CEST on Saturday morning — and I found it on the Sharps Pixley website last night.  Another link to it is here.


You’re not invited as World Gold Council teaches central banks about gold

While bigwigs from Franco-Nevada’s Pierre Lassonde to crypto-anarchist Doug Casey insist that central banks don’t care about gold, the World Gold Council still is planning to invite central bankers and finance ministry and sovereign wealth fund officials to another “executive program in gold reserve management” The program will be held from November 26 to 28 in Singapore, and unless you’re connected to a government, you’re not invited.

While he scoffs at the idea that central banks might be interested in gold, Lassonde is a former chairman of the World Gold Council, which seems to continue to insist that central banks are or should be interested.

Our purpose,” the World Gold Council says, “is to stimulate and sustain demand for gold, provide industry leadership, and be the global authority on the gold market.” There’s nothing there about letting ordinary gold investors in on central banking’s secrets.

This commentary by GATA secretary/treasurer Chris Powell, along with the link to the announcement from the World Gold Council, is posted in this GATA dispatch from 9:30 a.m. EDT on Monday morning.  Another link to it is here.


Ted Butler: JPM has Gone Long Silver at Last

Already hoarding a world-record 750 million ounces of physical silver, JPM has managed to accumulate another 21+ million ounces in just the past 6 weeks. This amassing of physical was further accompanied by selling off their 200M oz paper short position from June to 100M oz short in Aug and now zero ounces short — and even net long paper silver. This is the first time JPM has been long both physical and paper silver simultaneously, positioning them to capitalize on a potentially massive upward move in silver price.

Renowned silver analyst Ted Butler of Butler Research returns to Reluctant Preppers to lay out this unprecedented setup!

This 40-minute audio interview showed up on the youtube.com Internet site on Sunday — and it’s certainly worth your time.  The actual interview begins at the 1:15 minute mark.  Another link to it is here.


The PHOTOS and the FUNNIES

Today’s ‘critter’ is the rather disgusting lamprey — and they’re an ancient lineage of jawless fish.  The adult lamprey may be characterized by a toothed, funnel-like sucking mouth.  “Parasitic” carnivorous species are the most well-known, and feed by boring into the flesh of other fish to suck their blood.  JPMorgan and Goldman Sachs are distant relatives that have learned to live on land.  Click to enlarge.


The WRAP

I was certainly not happy to see the precious metals get sold quietly lower at the 6:00 p.m. EDT in New York on Sunday evening, but in retrospect, it was just another day of ‘care and maintenance’ from JPMorgan.  Gold was closed a bit over ten bucks below its 20-day moving average — and silver about two bits below its 50-day moving average now.

In some respects this price action on Monday, when you combine it with what happened on Friday, has most of the hallmarks of one of Ted’s “scams within a scam“…where his raptors set up the brain-dead managed money faces on one day…Friday; then rip their faces off on Monday.  My choice of ‘critter of the day’ may have been very apropos.

Here are the 6-month charts for the Big 6 commodities — and you can see the action for yourself.  I’m not particularly surprised that ‘da boyz’ hit palladium yesterday, as it was hugely overbought, as the Managed Money traders had been covering their short positions like mad for the last month.  Plus I’d been talking about a top in this precious metal several times late last week.  WTIC is looking a little parabolic — and the brain-dead Managed Money traders in this Big 6 commodity are getting set up to get their lungs ripped out at some point here as well.

That is, of course, unless something blows up or melts down in the Middle East, or in Washington.  Click to enlarge.

And as I type this paragraph, the London open is less than ten minutes away — and I see that the gold price rallied quietly — and very unevenly higher once trading began at 6:00 p.m. EDT in New York on Monday evening. That continued throughout the entire Far East trading session. At the moment, gold is up $3.90 the ounce — and off its current high tick by 2 bucks or so. It was almost the same for silver, except it traded unevenly sideways throughout the Far East trading day on their Tuesday — and it’s currently up 8 cents. Platinum has been edging higher by a few dollars as well — and is up 2 bucks. Palladium was up 3 dollars by 2 p.m. China Standard Time on their Tuesday afternoon, but is now back at unchanged as Zurich opens.

Net HFT gold volume is a bit over 43,000 contracts — and there’s only 129 contracts worth of roll-over/switch volume on top of that at the moment. Net HFT silver volume is a bit over 9,700 contracts — and there’s only 23 contracts worth of roll-over/switch volume in that precious metal.

The dollar index chopped mostly sideways until around 1:35 p.m. CST in Far East trading — and began to shoot higher at that point — and is currently up 18 basis points about thirty minutes before the London open.

Today, at the close of COMEX trading, is the cut-off for this Friday’s Commitment of Traders Report, plus the companion Bank Participation Report.  Once Ted has a look at these numbers on Friday, it should give him a better indication who has been up to what during the reporting week, especially JPMorgan.  There’s certainly lots of things going on well beneath the surface that won’t be know to us until Friday.

And as I post today’s column on the website at 4:02 a.m. EDT, I note that the gold price continues to chop erratically higher, despite a stronger dollar index — and it’s up $5.10 currently. And as the first hour of London trading draws to a close, the silver price continues to chop mostly sideways — and is up 10 cents. Platinum is 3 bucks — and palladium is down 2.

Gross gold volume is about 56,000 contracts — and net of what little roll-over/switch volume there is, net HFT gold volume is 55,500 contracts. Net HFT silver volume is up quite a bit to around 12,600 contracts — but there’s still only 27 contracts worth of roll-over/switch volume in this precious metal…unchanged from an hour ago.

The dollar index continues to rise, but now more unsteadily — and with the first thirty minutes of the London/Zurich trading session done, it’s currently up 25 basis points.

With precious metal prices rallying in the face of a rising dollar index so far today, it will be interesting to see what JPMorgan does with all this once the COMEX opens at 8:20 a.m. EDT this morning.

That’s all I have for today — and I’ll see you here tomorrow.

Ed