03 October 2018 — Wednesday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price crawled quietly, but unevenly higher until shortly before 10 a.m. in London on their Tuesday morning. It sold off equally quietly until at, or just before, the noon BST London silver fix — and began to tick higher from there. Less than ten minutes after the COMEX open in New York, it really caught a bid — and away it went. It obviously began to run into some resistance shortly after the afternoon gold fix in London — and was capped and turned lower a few minutes before 10:30 a.m. in New York. It was sold lower until around 2 p.m. in after-hours trading — and then crept a few dollars higher into the 5:00 p.m. EDT close from there.
The low and high ticks in this precious metal were reported as $1,192.20 and $1,212.30 in the December contract.
Gold finished the Tuesday session on Wednesday at $1,202.80 spot, up $14.20 on the day — and less than a dollar a below its 50-day moving average. It certainly did spend some time above that price during the New York trading session yesterday. Net volume was very heavy at about 344,500 contracts — and roll-over/switch volume was only 7,070 contracts on top of that.
The silver price followed a very similar trading pattern, except its rally ran into resistance right at the 9:30 a.m. open of the equity markets in New York on Tuesday. The rally was basically done by minutes after the afternoon gold fix in London, although its high tick of the day came an hour later…a minute or so after the London close. By 11:30 a.m. EDT, the price was headed lower until 2 p.m. in after-hours trading — and it added a few pennies after that.
The low and high ticks in this precious metal were recorded by the CME Group as $14.47 and $14.95 in the December contract.
Silver was closed at $14.67 spot, up 20 cents on the day but, like gold, it spent a decent part of the Tuesday trading session in New York trading above its 50-day moving average, but was closed below it. Over half of silver’s gains were taken away after the 11 a.m. EDT London close. Net HFT silver volume was very heavy at just under 99,500 contracts — and roll-over/switch volume was 2,288 contracts in this precious metal.
It was mostly the same for platinum as well, with the low price tick coming minutes before the noon silver fix in London. The rally that began at that juncture was obviously capped at the afternoon gold fix in London — and its high tick of the day came shortly after 12 o’clock noon EDT. It was sold lower in the COMEX close from that point — and didn’t do anything in the thinly-traded after-hours market. Platinum was closed at $829 spot, up 8 dollars from Monday.
Palladium was up about 3 bucks by 2 p.m. China Standard Time in Far East trading on their Tuesday afternoon — and the selling pressure began at that point. The spike low tick came as it did in the other three precious metals…minutes before 12 o’clock noon in London. At that point, ‘da boyz’ had palladium down about 18 dollars. It rallied back to up 8 bucks by the afternoon gold fix, but was then sold back into negative territory by the Zurich close. It chopped erratically sideways until trading ended at 5:00 p.m. EDT in New York. Palladium was closed at $1,050 spot, down 4 dollars on the day…but would have closed well into positive territory, if allowed.
The dollar index closed very late on Monday afternoon in New York at 95.32 — and when trading began a few minutes later at 6:00 p.m., the index chopped quietly sideways until about 12:35 p.m. CST in Far East trading. It began to ‘rally’ at that point — and all the gains that mattered were in by shortly after 10 a.m. in London. It hung in there until about 11:45 a.m. BST — and it was all rather erratically downhill from there. The New York low was set around 11:20 a.m. EDT — and it crept higher until minutes after 2 p.m. — and then sank a bit into the close. The dollar index finished the Tuesday session at 95.49…up 17 basis points from Monday’s close.
Yesterday was yet another day where despite what the dollar index was doing, it was obvious that the precious metals wanted to blast higher in price. JPMorgan et al were equally obviously at battle stations throughout most, if not all, of the Tuesday trading session.
And here’s the 6-month U.S. dollar index chart — and the delta between its closing value — and the closing value on the intraday chart above, was 35 basis points.
The gold stocks gapped up a bunch at the open — and then from 9:45 a.m. EDT, crawled quietly higher until their respective highs were placed around 1:15 p.m. in New York trading. They gave back a bit of that over the next thirty minutes or so — and then crawled quietly sideways for the rest of the Tuesday session. The HUI closed up 3.60 percent.
The silver equities were up over three percent in the first ten minutes of trading once the equity markets opened in New York yesterday morning — and they then drifted sideways until shortly after 1 p.m. EDT. They drifted quietly lower from there for the remainder of the day — and over half of their Tuesday gains disappeared in the process. Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed higher by only 1.67 percent. I was more than a bit underwhelmed. Click to enlarge if necessary.
And here’s the 1-year Silver Sentiment/Silver 7 Index courtesy of Nick Laird as well. Click to enlarge.
The CME Daily Delivery Report showed that 10 gold and 72 silver contracts were posted for delivery within the COMEX-approved depositories on Thursday. In gold, there were no stand-outs amongst the four short/issuers. HSBC stopped 5 contracts for its own account — and JPMorgan picked up 4 contracts for its client account. In silver, the three short/issuers were Advantage, International F.C. Stone — and ADM…with 28, 27 and 17 contracts out of their respective client accounts. The three long/stoppers were JPMorgan, Advantage — and Morgan Stanley, with 53, 14 and 5 contracts for their respective client accounts. The link to yesterday’s Issuers and Stoppers Report is here.
The CME Daily Delivery Report showed that gold open interest in October declined by 469 contracts, leaving 2,720 still open, minus the 10 contracts mentioned just above. Monday’s Daily Delivery Report showed that only 65 gold contracts were actually posted for delivery today, so that means that 469-65=404 gold contracts vanished from the October delivery month. Silver o.i. in September actually rose by 3 contracts, leaving 82 still around, minus the 72 mentioned in the previous paragraph. Monday’s Daily Delivery Report showed that 48 silver contracts were actually posted for delivery today, so that means that 48+3=51 more silver contracts were added to October.
There was another withdrawal from GLD yesterday. This time an authorized participant took out 75,701 troy ounces. There was also a withdrawal from SLV…134,722 troy ounces…and that amount looked to be a fee payment of some kind.
There was another sales report from the U.S. Mint. They sold 500 troy ounces of gold eagles — 500 one-ounce 24K gold buffaloes — and another 195,000 silver eagles.
There was no physical gold movement over at the COMEX-approved gold depositories on the U.S. east coast on Monday. But there was a paper transfer of 9,837.900 troy ounces/306 kilobars [U.K./U.S. kilobar weight] from the Registered category — and back into Eligible. I won’t bother linking this.
There was some activity in silver, as 584,382 troy ounces, one truck load, were reported received over at JPMorgan. There was a very large truck load…648,934 troy ounces…shipped out of CNT. The link to this activity is here.
With China shut tight for its ‘Golden Week’, there was no activity reported at the gold kilobar depositories in Hong Kong on their Monday. But they have opened on occasion during these ‘Golden Weeks’ in the past — and it wouldn’t entirely surprise me if they did this go around as well.
Here’s a chart that Nick Laird passed around on Sunday, but had to wait for today’s column. It shows Central Bank Gold Reserves going all the way back to 1950. You can see the big chunk that got sold off starting in 1992…but that trend reversed abruptly in 2008…about the time that Russia began openly adding to its reserves — and it’s shows no signs of stopping any time soon. Click to enlarge.
Of course it’s hard to know how accurate this data really is, considering the fact that the IMF allows central banks to record leased and swapped gold as part of their physical inventories…even though it has left their vaults, or is encumbered in some way. The other big unknown is just how much gold that China has squirreled away — and has yet to report as part of their Central Bank holdings. One would suspect that this chart will look radically different when they next update their reserve figure.
It was another very quiet news day — and I have very little for you.
The Dow ended the day up nearly 200 points yesterday. From CNBC:
“The biggest risk factor [in the market] is a trade war and we’ve dialed that down a bit,” said Mike Bailey, director of research at FBB Capital Partners. Bailey noted, however, the market may be going too high, too fast right now. “I’m not calling for a major correction or a bear market, but I think we’re getting a bit ahead of ourselves here.”
We also saw an article from our old friend Mark Hulbert yesterday. He warned that it’s more important not to lose big than it is to win big:
…beating the S&P 500 (SPX) during bear markets is far more important than during bull markets, for two reasons. The first is mathematical: Big losses require even bigger gains to recover, and at some point, the required gains become so large as to become improbable. So if you lag during bear markets, you have to beat the S&P 500 by a lot during bull markets to come out ahead over the long term. […]
In other words, if you’ve stuck with the stock market so far, congratulate yourself on your gains (and kindly forget that we advised you to get out long ago).
But it is probably wise to move out of stocks now. A single big loss will undo a lot of small gains.
This very interesting commentary from Bill appeared on the bonnerandpartners.com Internet site very early on Tuesday morning EDT — and another link to it is here.
But wait — these are the Boom Times!
The U.S. gross national debt jumped by $84 billion on September 28, the last business day of fiscal year 2018, the Treasury Department reported Monday afternoon. During the entire fiscal year 2018, the gross national debt ballooned by $1.271 trillion to a breath-taking height of $21.52 trillion.
Just six months ago, on March 16, it had pierced the $21-trillion mark. At the end of September 2017, it was still $20.2 trillion. The flat spots in the chart below, followed by the vertical spikes, are the results of the debt-ceiling grandstanding in Congress.
These trillions are whizzing by so fast they’re hard to see. What was that, we asked? Where did that go?
Over the fiscal year, the gross national debt increased by 6.3% and now amounts to 105.4% of current-dollar GDP.
This rather brief but worthwhile article from Wolf, complete with an excellent chart, was posted on the wolfstreet.com Internet site on Monday — and I lifted it from an article on Zero Hedge. Another link to it is here.
Russia has formally announced that delivery of its feared S-300 surface-to-air missile system to the Syrian government is now complete. “The work was finished a day ago,” Defense Minister Sergei Shoigu told President Vladimir Putin during a televised meeting on Rossiya 24 TV on Tuesday, and noted that hardware supplied to Syria consists of 49 pieces of military equipment, including radars, control vehicles and four launchers.
The declaration comes after Russia’s Foreign Minister confirmed that transfer was in progress last Saturday, and that the move will “be devoted to ensure 100 percent safety and security of our men in Syria, and we will do this.” Moscow has followed through on its prior vow to move “swiftly and appropriately” in response to Israel’s massive September 17 airstrikes on Syria which resulted in the accidental downing of a Russian reconnaissance plane with 15 people on board by Syrian defenses.
Last Monday the Defense Minister indicated delivery would happen “within two weeks” — thus it appears Russia began prepping the transfer immediately. Russian advisers will now train Syrian personnel to operation the new weapons, which is expected to take up to a few months, with the likelihood that Russians will man the active systems in the meantime.
This worthwhile article, if you have the interest that is, showed up on the Zero Hedge website at 6:45 p.m. EDT on Tuesday evening — and another link to it is here. There was another story about this on The Christian Science Monitor website of all places — and it’s headlined “With new missile defense for Syria, Russia shifts its relationship with Israel” — and I thank Larry Galearis for that one.
Those rare moments that WikiLeaks gets invoked at the United Nations are always fun, especially when part of a tense feud between Middle East rivals and involving Hillary Clinton.
Iranian Ambassador to the U.N. Gholamali Khoshroo gave a fiery speech during the final days of the U.N. General Assembly meeting in New York wherein he responded to specific charges of Saudi Arabia that Iran sponsors terrorism and is waging proxy wars on Riyadh throughout the Middle East, saying that global terrorism actually originates with the Saudis.
The Iranian ambassador supported his case by appealing to a specific WikiLeaks email: “Everybody knows that Saudi Arabia supports terrorism in a very blatant and widespread manner,” he said. In a shock statement before his U.N. audience, he added, “in the framework of WikiLeaks in 2009, Hillary Clinton is said to have stated that Saudi Arabia is the greatest donor to terrorist groups around the world.”
Interestingly Khoshroo delivered his speech in Arabic, instead of his native Farsi, in order “to make sure that our position is rendered clear” to Riyadh.
He was referencing a 2009 intelligence memo released as part of Clinton’s e-mails which said that “donors in Saudi Arabia constitute the most significant source of funding to Sunni terrorist groups worldwide” — though she herself was not the author. The memo continued with “Saudi Arabia remains a critical financial support base for Al-Qaida, the Taliban… and other terrorist groups.”
The Iranian diplomat may have also been referencing another Wikileaks file which shows that in a private speech Hillary Clinton made in 2013, she said: “The Saudis and others are shipping large amounts of weapons – and pretty indiscriminately – not at all targeted toward the people that we think would be the more moderate, least likely, to cause problems in the future.”
No surprises here, dear reader. This Zero Hedge article put in an appearance on their Internet site at 7:58 a.m. EDT on Tuesday morning — and another link to it is here.
The Russian-Indian time-tested partnership has experienced an upward trend in all areas of cooperation in recent years. Last year, the two great powers marked the 70th anniversary of diplomatic relations. The leaders meet regularly and hold phone conversations to discuss acute problems. A very important event has just taken place to bring the two nations even closer.
The Indian Cabinet Committee on Security, chaired by PM Narendra Modi, approved the $6.2 billion S-400 Triumf deal with Russia on Sept.26. It’s rather symbolic that the final decision to purchase the five cutting-edge air defense systems to protect Indian critical infrastructure sites was taken just a few days before the Russian President Vladimir Putin’s visit to India scheduled on Oct.4-5. The Indian government defied the U.S. threats to impose sanctions for buying Russian weapons in accordance with the 2017 “Countering America’s Adversaries Through Sanctions Act” (CAATSA) the way it did to “punish” China for buying the same systems and Su-35 combat planes.
The law allows making a waiver for India but U.S. officials do not guarantee New Delhi will be exempt. It takes a risk by dealing with Russia. India has signed multiple multi-billion deals with U.S. weapons producers. Defense Secretary James Mattis and State Secretary Mike Pompeo tried to talk India out of the S-400 deal during the 2+2 talks in September. Randall G. Schriver, Assistant Secretary of Defense for Asian and Pacific Security Affairs, has warned that a waiver is not a slam dunk decision. Indeed, if an exemption is made, others will demand waivers too, but with no sanctions imposed, the CAATSA will be deprived of any purpose. The U.S. has put itself into an awkward situation and has to make a hard choice.
Russia and India are in talks on the way to make non-dollar payments. They could resort to clearing options, another currency, such as the Singapore dollar, or a go-between based in a third country. The US uses go-betweens to sell arms to the Syrian Kurds.
No doubt, the October summit will re-affirm the fact that the traditionally close relationship has been upgraded to a “special privileged strategic partnership” as the world is shifting from a unipolar order to a possible multipolar structure. The decision to purchase the S-400 and defy the U.S. exerting outright pressure proves the Indian government is adamant in its desire to boost cooperation with the old partner and friend.
This commentary/news item appeared on the strategic-culture.org Internet site on Sunday sometime — and it’s another article I found on the Zero Hedge website yesterday evening. Another link to it is here.
The Bank of Nova Scotia was charged by the Commodity Futures Trading Commission with multiple acts of spoofing in gold and silver futures between June 2013 and June 2016. Traders placed orders to buy or sell precious metals futures contracts with the intent to cancel the orders before execution, the CFTC said. The CFTC fine was $800,000, as the CFTC said the penalty was substantially reduced because it reported the conduct to the agency.
This is not new news, dear reader. This tiny one paragraph story showed up on the marketwatch.com Internet site on Tuesday morning — and I found it embedded in a GATA dispatch. The press release from the CFTC’s website about this coffee money fine is linked here.
Interviewed by Chris Marcus of the Miles Franklin coin and bullion dealership, GATA secretary/treasurer Chris Powell discusses what might end the gold and silver price suppression scheme of major governments.
Powell said that since the gold and silver mining industry and mining countries are too scared to protest the scheme, most investors are happy to invest in mere derivatives of the monetary metals, and financial journalists and market analysts refuse to question governments critically about their involvement with the monetary metals markets, GATA can’t do much more than continue to document the scheme as the organization has been doing for nearly 20 years.
The interview is 19 minutes long — and the link is embedded in this GATA dispatch from yesterday. Another link to it is here.
In our August 21, 2018, strategy letter (“Gold: A Case of Extremes”), we focused on market structure and explained why we thought the chances were good that gold and mining shares were in the process of making an important low. In this letter, we focus on what we believe to be a key fundamental factor that could push the metal and share prices higher – the soon-to-be-obvious deterioration of U.S. sovereign credit:
- The U.S. fiscal deficit is out of control. The August monthly deficit was the fifth largest on record. The 11-month number has already exceeded CBO’s forecast for the entire year. If the deficit expands by $1 trillion for the next 5 years, the nation’s current debt load of $21.5 trillion will compound at over 4%, assuming no recession and no rise in interest rates. We believe that it would be a stretch to contend that comparable GDP growth is likely. We also believe that nominal interest rates are set to rise and that there is a good chance of a recession by 2023. If so, the U.S. debt burden will grow at a substantially faster pace than 4%. It is hard not to conclude that the U.S. credit rating will slide in future years, and that current dollar strength must give way to glaring dollar weakness.
- Crowding out. As the Fed winds down its balance sheet, public borrowing must increasingly fund the rising deficit. Treasury borrowing from the public through August 2018 was $970 billion, vs. negative $53 billion in 2017 from year over year through August. The planned winding down of Fed holdings of U.S. Treasuries will be compounded by the fact that Social Security is now running a deficit. Interest rates will surely rise.
- 60% of personal income tax receipts are paid by 5% of the population. This equates to slightly above $1 trillion, or about 30% of total tax receipts of $3.3 trillion. According to Luke Gromen (writer of the excellent newsletter Forest for the Trees), “Since the Clinton administration rendered executive cash compensation above $1mm non-deductible for tax purposes, compensation for this elite 5% of tax payers has shifted from straight salaries to equity options and other forms of deferred compensation highly sensitive to the stock market. A decline in the stock market is therefore likely to increase already high U.S. deficits in a non-linear fashion, putting further pressure on the U.S. fiscal picture, and with it the US credit worthiness.”
- The “jump to default risk” is high for U.S. sovereign credit, in our opinion. It would be triggered by rising interest rates, intractable fiscal deficits, and surging issuance of government debt. Higher interest rates threaten lofty financial-asset valuations. A sharp or prolonged decline in the equity market, because of its crucial linkage to government revenue, could quickly lead to a run on the U.S. currency.
According to Ray Dalio, in a Bloomberg interview (Sept. 12, 2018), there is a risk of a “30% depreciation of the dollar” over the next two years. His reasoning is the same as ours. We agree that a general loss of confidence in the U.S. currency is a credible risk. Dalio thinks that a dollar crisis is still two years away. We disagree; we believe that it could happen sooner. Investors, in our opinion, are generally complacent to this issue, but we believe that they will not remain clueless for that long, as there will be too many signs well in advance of the fiscal predicament.
We believe that the gold market bottomed in August, and that exposure to precious metals is a credible strategy to mitigate risk of a dollar collapse.
This commentary by John arrived in my in-box on Monday. It was posted on the tocqueville.com Internet site yesterday morning — and another link to it is here.
The Bank of Mongolia has purchased 14.3 tonnes of gold from legal entities and individuals in the first three quarters of the year.
The figure is a drop of 378 kg from the same period last year, the bank said in a statement on Monday.
As of September, the bank’s average gold purchase price was 96,204.31 Mongolian Tugrik (around 38 U.S. dollars) per gram.
The Bank of Mongolia plans to buy 22 tonnes of gold by the end of the year.
The country’s central bank launched a five-month campaign called National Gold to the Fund of Treasures in May, aiming to encourage gold miners and individuals to sell gold to banks.
The above five paragraphs are all there is to this brief gold-related news item that showed up on the xinhuanet.com Internet site yesterday sometime. It was filed from Ulaanbaatar — and I found it on the Sharps Pixley website yesterday. Another link to the hard copy is here.
The PHOTOS and the FUNNIES
Today’s ‘critter’ is the blue-throated mountaingem hummingbird. It’s a fairly large hummingbird, reaching 11.5 to 12.5 cm (4.5 to 4.9 in) in length and 6 to 10 grams in weight. The species gets its name from the adult male’s iridescent blue throat patch (gorget), but the female lacks this, having a plain gray throat. It’s native to mountain woodlands of Mexico, although during the summer it is an uncommon-to-rare resident of moist, wooded canyons in the Madrean sky islands of southeastern Arizona, southern New Mexico, and western Texas. Click to enlarge.
I’m not entirely sure what set off yesterday’s rallies in all four precious metals, but it certainly looked somewhat orchestrated to me, as the low tick in all four were set at exactly the same time…at, or minutes before, the noon silver fix in London. After that their price paths were identical, with the only real differences between them being as to what time that JPMorgan et al stepped in to cap their respective rallies…if JPMorgan was involved at all, that is.
Since the 50-day moving averages in both gold and silver were penetrated with some authority during the New York trading session on Tuesday, their associated volumes certainly indicate that there was Managed Money short covering — and Ted’s raptors, the small commercial traders other than the Big 8, were selling long positions to them for big profits.
As for what else may have been going on during the Tuesday session, we’ll have to wait for Friday’s Commitment of Traders Report — and companion Bank Participation Report, to get some clue. Yesterday, at the close of COMEX trading, was the cut-off for these reports, so it can only be hoped that all of Tuesday’s trading activity will be reported in a timely manner by the firms involved.
Here are the 6-month charts for all four precious metals, plus copper and WTIC as well. The ‘click to enlarge‘ feature only helps with the four precious metal charts.
And as I type this paragraph, the London open is less than ten minutes away — and I note that the gold price rose about four bucks or so by 10 a.m. CST in Far East trading on Wednesday morning over there. But it was quietly sold lower starting around noon CST — and is now back at unchanged. The price pattern for silver was very similar, but it’s currently up 4 cents. Platinum hasn’t done much — and is currently up by a dollar. Palladium was up 4 dollars by around 2 p.m. CST, but has been sold a bit lower going into the Zurich open — and is only up 1 buck as well.
Net HFT gold volume is a bit over 52,500 contracts — and there’s only 325 contracts worth of roll-over/switch volume in that precious metal. Net HFT silver volume is coming up on 13,000 contracts — and there’s only 57 contracts worth of roll-over/switch volume on top of that.
The dollar index didn’t do a lot once trading commenced at 6:00 p.m. EDT on Tuesday evening in New York, but took a 20+ basis points face plant starting minutes before 10 p.m. CST. It has been chopping quietly sideways since then — and is down 21 basis points thirty minutes before the London open.
I’ll be very interested in anything Ted has to say about the price action since last Friday, if anything, as he posts his mid-week commentary to his paying subscribers this afternoon. His comments on the phone yesterday were about the Managed Money short covering — and raptor selling that obviously occurred on Tuesday — and whether or not JPMorgan was involved in any of this.
And as I post today’s column on the website at 4:02 a.m. EDT, I see that not much happened during the first hour of London/Zurich trading. Gold is up 40 cent — and silver is up 4 cents. Platinum is up 2 bucks — and palladium is now back at unchanged.
Gross gold volume is pretty decent already at a bit over 64,000 contracts — and net of what little roll-over/switch volume there is, net HFT gold volume is a bit over 63,000 contracts. Net HFT silver volume is getting up there as well, around 15,500 contracts — and there’s still not much roll-over/switch volume in this precious metal…65 contracts worth.
The dollar index is off its low tick by a bit — and down 11 basis points as of 8:30 a.m. BST in London.
It could turn into another very interesting trading session on Wednesday. With the cut-off for Friday’s reports out of the way, if ‘da boyz’ are up to something that they want to keep hidden from prying public eyes for as long as possible, this is the day they start.
That’s all I have for today — and I’ll see you here tomorrow.