12 October 2018 — Friday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price didn’t do much of anything during most of the Far East trading session on their Thursday. But that all changed the moment that the 2:15 p.m. China Standard Time afternoon gold fix was put to bed. It began to head higher from there — and the rally gained even more steam once the afternoon gold fix in London was done for the day. The rally ended/was capped at 2 p.m. in after-hours trading in New York — and it chopped quietly sideways until trading ended at 5:00 p.m. EDT.
The low and high ticks were recorded by the CME Group as $1,194.70 and $1,230.00 in the December contract.
Gold finished the Thursday session at $1,223.60 spot, up $29.20 on the day…blasting through — and closing well above, it’s 50-day moving average in the process. Net gold volume was beyond Jupiter at a bit over 477,000 contracts — and roll-over/switch volume checked in at 27,200 contracts.
The price trading pattern in silver certainly appeared similar to gold’s in most respects, but there were some very important differences. The first being that any and all sharp rallies got capped almost instantly — and once silver broke above its 50-day moving average, which came minutes after 12 o’clock noon in New York, it was immediately hauled down. From that juncture, like gold, it chopped quietly sideways for the remainder of the Thursday session.
The low and high ticks in this precious metal were reported as $14.275 and $14.65 in the December contract.
Silver was closed in New York yesterday at $14.56 spot, up 29.5 cents from Wednesday. Net volume was very heavy at a bit under 91,500 contracts — and there was 4,680 contracts worth or roll-over/switch volume in this precious metal.
The platinum price didn’t do much for an hour and change once trading began at 6:00 p.m. EDT in New York on Wednesday evening. It was sold lower starting at that point — and the low tick of the day…down 9 bucks…came during the Shanghai lunch hour on their Thursday afternoon. It headed unsteadily higher from there until noon in Zurich — and it was quietly sold off until the equity markets opened in New York on Thursday morning. Then away it went to the upside. It obviously ran into some serious ‘resistance’ minutes after 12 o’clock noon EDT, just like in silver — and although it ticked a few dollars higher after that, it wasn’t really allowed to do much for the remainder of the day. Platinum was closed on Thursday at $839 spot, up 16 bucks on the day, but would have obviously closed at heaven only knows what price if had been allowed to trade freely.
The price path for palladium was similar in most respects to that of platinum, except ‘da boyz’ had to step in much sooner to prevent the price from blowing sky high…which it was in the process of doing starting around 10:30 a.m. in New York. By the 1:30 p.m. EDT COMEX close, all of the New York gains had vanished — and it wasn’t allowed to go anywhere after that. Palladium was closed at $1,075 spot, up 13 bucks on the day…but 29 dollars off its high tick which, like platinum, would have been some ridiculous free-market price if left to its own devices…which it obviously wasn’t.
The dollar index closed very late on Wednesday afternoon in New York at 95.46 — and when trading began at 6:00 p.m. EDT on Wednesday evening a few minutes later, it stair-stepped its way lower until until a minute or two before noon in Shanghai on their Thursday morning. From there, it crawled quietly higher until precisely 8:00 a.m. BST…the London open…and began to head lower. The usual ‘gentle hands’ appeared at the 94.99 mark around 8:40 a.m. in New York — and the subsequent ‘rally’ lasted until 11:25 a.m. EDT. It was down hill from there until 2:35 p.m…where it got ‘saved’ once again at the 95.00 mark — and from that point it chopped quietly sideways until trading ended. The dollar index finished the Thursday session at 95.04…down 42 basis points from Wednesday’s close.
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 33 basis points.
Once again, there was only a passing correlation between what was happening in the currency markets — and what was going on in the precious metals.
The gold shares gapped up a bit over a percent at the open — and except for a dip in mid-afternoon trading in New York, powered higher all day long. The HUI closed almost on its high tick of the day, up a yummy 7.53 percent.
The silver equities opened up a bit — and after chopping sideways for about an hour, began to head higher as well. From then on, the price path for them was almost a carbon copy of what happened with the gold stocks. They would have most likely closed much higher than they did, except for the fact that JPMorgan stepped in at silver’s 50-day moving average at noon in New York. As it was, Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up 4.98 percent. Click to enlarge if necessary.
And here’s the 1-year Silver Sentiment/Silver 7 Index courtesy of Nick as well. Click to enlarge.
The CME Daily Delivery Report showed that only 2 gold and 3 silver contracts were posted for delivery within the COMEX-approved depositories on Monday. JPMorgan picked up both gold contracts, plus one silver contract…all for their client account. Morgan Stanley picked up the other 2 silver contracts for its client account as well. The issuers are of no consequence. If you wish to look, the link to yesterday’s Issuers and Stoppers Report is here.
The CME Preliminary Report for the Thursday trading session showed that gold open interest in October dropped by another 102 contracts, leaving 1,321 still around, minus the 2 contracts mentioned just above. Wednesday’s Daily Delivery Report showed that only 1 gold contract was posted for delivery today, so that means that 102-1=101 more gold contracts vanished from the October delivery month. Silver o.i. in October rose by 1 contract, leaving 5 still open, minus the 3 contracts mentioned in the previous paragraph. Wednesday’s Daily Delivery Report showed that 1 silver contract was posted for delivery today, so that means that 1+1=2 more silver contracts just got added to October.
There were no reported changes in either GLD or SLV yesterday.
There was a smallish sales report from the U.S. Mint yesterday. They sold 3,000 troy ounces of gold eagles — and 500 one-ounce 24K gold buffaloes.
There was a small amount of gold received at the COMEX-approved gold depositories on the U.S. east coast on Wednesday. There was 3,668 deposited at Brink’s, Inc. — and that was all. Nothing was shipped out. I won’t bother linking this amount.
It was much busier in silver of course, as 825,037 troy ounces were received — and 671,882 troy ounces were shipped out. In the ‘in’ category, one truck load…604,943 troy ounces…was dropped off at JPMorgan — and the remaining 220,093 troy ounces found a home at Delaware. All the ‘out’ activity was an CNT — and the link to all this is here.
There was a bit of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Wednesday. They only reported receiving 24 of them — and shipped out 204. This all occurred at Brink’s, Inc. of course — and I won’t bother linking it, either.
Origin: Roman Empire Mint: Alba lulia Material: Gold Full Weight: 2.97 grams Price: €1,485
I don’t have all that many stories today, but the Jim Rickards video interview included in today’s list, is a must watch.
Does this 800-point drop mark the beginning of the end of the boom?
We don’t know. But it hardly matters. Because what we do know is that the end is coming. Booms don’t run out of money; they run out of time. And time can’t be cheated, stretched, or “printed” by the Fed.
Even a healthy boom – sustained by rising output, sales, incomes, and profits – runs out of time. Mistakes accumulate. They need to be corrected.
But this was never a “healthy” expansion – it was funded by stealing from the future. That is to say, it was made possible by some $250 trillion of worldwide debt borrowed at artificially low interest rates.
Fake money and fake interest rates produced a fake boom, with runaway asset prices on Wall Street and falling real incomes on Main Street.
The boom, in other words, is a fraud.
This worthwhile commentary by Bill appeared on the bonnerandpartners.com Internet site early on Thursday morning EDT — and another link to it is here.
A funny thing happened in the middle of one of Mike Maloney’s deep-research sessions recently. As you know, he just released a brand new presentation, but while analyzing the stock market he wasn’t satisfied with the way most valuation measures were calculated. With all due respect to Warren Buffet, even his indicator fell short in Mike’s view. It was time for something new, something more insightful, something more accurate.
Mike’s refusal to settle for “good enough” culminated in his own metric: the Market Fragility Index. Here’s your peek into this brand new economic indicator, found in Part II of his 5-part Early Warning Report…
This 6:18 minute video presentation by Mike is certainly worth your while. It was posted on the goldsilver.com Internet site on Thursday sometime — and I thank Roy Stephens for bringing it to our attention. Another link to it is here.
Last week, the yield on the 10-year U.S. Treasury bond broke new high ground for this credit cycle. The evolution of key moving averages in bullish sequence (for higher yields, but sharply lower bond prices) is a model example out of the chartist’s textbook. The underlying momentum looks so powerful that a quick rise to 3.5% and beyond appears to be a racing certainty. The credit cycle, transiting from a period of cheap finance into higher borrowing costs is clearly on the turn.
In the fiat-money world, everything takes its valuation cue from U.S. Treasury bonds. For equities it is theoretically the long bond, which is also racing towards higher yields. Having ignored rising yields for the long bond so far, the S&P500 only recently hit new highs. It has been a fantasy-land for equities from which a rude awakening appears increasingly certain. It is likely that the current downturn in equity prices is the start of a new downtrend in all financial assets that have been badly caught on the hop by the ending of cheap credit.
At some stage, and this is why the bond-yield break-out is important, we will face a disruption in valuations that undermines the relationship between assets and debt. This has been a periodic event, with central banks taking whatever action was needed to rescue the commercial banks. When the crisis happens, they reduce interest rates to support asset valuations, propping up government bond markets and ultimately equities. These actions are intended to rescue the banks, allow governments to fund their deficits, and to encourage recovery by stimulating an expansion of bank credit, which last time was bolstered by quantitative easing. Central bank rescues have succeeded every time so far, after some tricky moments, not least because we all want them to work.
There is a widespread feeling that a new unspecified crisis is in the wings, usually attributed to the latest signs of financial instability or economic weakness. Whether it is Italy, China’s debt, slowing money supply growth, or a flattening yield curve, they’ve all been identified as triggers or portents.
In general, central banks are adept at defusing individual problems. But there’s one difficulty central banks cannot deal with, and that’s the credit cycle, which they themselves create through their earlier inflationary actions.
This very long commentary by Alasdair showed up on the goldmoney.com Internet site on Thursday — and I found it on the gata.org Internet site. Another link to it is here.
They were once models of financial strength—corporate giants like AT&T Inc., Bayer AG and British American Tobacco Plc.
Then came a decade of weak sales growth and rock-bottom interest rates, a dangerous cocktail that left many companies feeling like they had just one easy way to grow: by borrowing heaps of cash to buy competitors. The resulting acquisition binge left an unprecedented number of major corporations just a rung or two from junk credit ratings, bringing them closer to a designation that historically has made it much more expensive to fund daily business and harder to navigate economic downturns.
In fact, a lot of these companies might be rated junk already if not for leniency from credit raters. To avoid tipping over the edge now, they will have to deliver on lofty promises to cut costs and pay down borrowings quickly, before the easy money ends.
By one key measure, more than half of the acquiring companies pushed their leverage to levels typical of junk-rated peers. But those companies, which have almost $1 trillion of debt, have been allowed to maintain investment-grade ratings by Moody’s Investors Service and S&P Global Ratings.
“The rating agencies are giving companies too much wiggle room,” said Tom Murphy, a money manager at Columbia Threadneedle Investments. “There’s been some pretty heroic assumptions around cost savings and debt repayments laid out by some borrowers involved in mergers.”
This longish, chart-filled essay was posted on the Bloomberg website on Thursday sometime — and it comes to us courtesy of Swedish reader Patrik Ekdahl. Another link to it is here.
This is an exclusive “Hedgeye Investing Summit” interview between Strategic Intelligence editor Jim Rickards and Hedgeye CEO Keith McCullough.
This video interview runs for 53:16 minutes — and for a while, I thought it might turn out to be a rehash of what he’s said in the past. It is in a way for a bit, but then after a while, he really lets it all hang out. I was impressed. It’s an absolute must watch in my opinion — and I thank Harold Jacobsen for sharing it with us. Another link to it is here.
A friend asked why I have an offshore account. I countered, “Do you REALLY trust the government?”
He felt the Fed saved us in 2008 with their Quantitative Easing (QE). The economy is great, and employment is rising.
Ten years after the massive bank bailouts, let’s take a closer look at who was really saved.
The government’s priorities are clear!
The Huffington Post reports, “Bank Bailout Now Hated More Than Ever: Study….”
“The disgust is bipartisan, with 87 percent of Republicans and Independents opposing future bank bailouts, along with 81 percent of Democrats.”
The bailout bill was passed, ignoring the will of the majority. The House voted no. The pot was sweetened. The New York Times reported, “Bailout Plan Wins Approval; Democrats Vow Tighter Rules”…
This longish commentary by Dennis put in an appearance on his Internet site on Thursday morning EDT — and another link to it is here.
Reuters reported that the ECB won’t come to Italy’s rescue if its government or banks run out of cash unless the Italian government first secures a bailout from the European Union. Of course, this would almost certainly require that the populist coalition end its ongoing game of fiscal chicken with Brussels and abandon its dreams of lowering the retirement age and extending a basic income to the Italian people – policies that would effectively secure a political future for M5S and the League.
In effect, the ECB’s latest trial balloon is tantamount to blackmail: Either the Italians agree to fall back in line and obey European budgetary guidelines, or the central bank will sit back and watch as bond yields surge, providing the ratings agencies even more ammunition to cut Italian debt to junk – effectively guaranteeing a Greece-style banking crisis as the liquidity taps are turned off.
And to eliminate any lingering doubts that this was a deliberate coordinated leak, Reuters cited “five senior sources familiar with the ECB’s thinking,” many of whom were “present at the economic summit in Indonesia.” Of course, the ECB sources explained that they are merely acting in the best interest of the monetary union. Because if Italy is allowed to shake off the yoke of European austerity and re-assert its sovereignty, then what would stop Spain or Portugal from doing the same?
Now, if Italy instead embraced the path of fiscal discipline, the ECB would be more than happy to backstop the country’s debt via Outright Monetary Transactions (the never-used program adopted by the ECB in 2012 to restore confidence in the euro and euro-area debt amid a burgeoning debt crisis).
But here’s the rub: Even if the populists ignore this threat and refuse to kowtow to the European Commission, the ECB could still step in and unilaterally strong-arm the government into abandoning its plans for fiscal stimulus. Because once Italian bonds lose their investment-grade status (a scenario that’s increasingly looking like a when not an if), Italian banks will be faced with an impossible choice: Unable to use the Italian debt on their balance sheets to secure more short-term liquidity, and unable to sell them back to the ECB as part of the central bank’s QE program, Italian banks that don’t have enough non-Italian debt on their books would be forced to ask for Emergency Liquidity Assistance from the Bank of Italy. But before the Bank of Italy could go ahead and disburse these funds, these banks would need to prove that they are solvent (which they wouldn’t be) or the Italian government would need to ensure that a program of fiscal discipline is in place. If they refuse, the savings of regular Italians would be in jeopardy.
This very interesting news item appeared on the Zero Hedge website at 4:46 p.m. EDT on Thursday afternoon — and I thank Brad Robertson for pointing it out. Another link to it is here. There was a somewhat related ZH story about Italy from Brad headlined “Italy Slumps Into Bear Market As European Stocks Hit 20-Month Lows“.
U.S. President Donald Trump is redirecting global oil flows.
West African and Latin American producers are sending ever-growing volumes of crude to China. America’s exports to the Asian country have slumped in favor of its neighbors. There’s an urgent global need to find replacement barrels for Iran’s, whose exports might just collapse next month.
The thing that connects the shifting flows is Trump’s foreign policy. China’s slumping purchases of American crude — and its extra buying from elsewhere — have coincided with a trade war between the U.S. and the Asian country. Likewise, reimposed sanctions on Iran, which start Nov. 4, have increased the need for the type of heavy, sour crude that the Persian Gulf state sells.
“If you combine the impact of U.S. sanctions on Iran and the U.S. trade war with China, it is Trump’s foreign policy which is reshaping oil flows,” said Olivier Jakob, managing director of consultancy Petromatrix GmbH. “The U.S. is becoming a great energy power and they will use that, we are starting to see the implementation of that in different parts of the energy scene, part of that is being seen today in the oil flows.”
This Thursday news item from Bloomberg was reposted on the rigzone.com Internet site yesterday — and I thank Roy Stephens for his second contribution to today’s column. Another link to it is here.
India’s gold imports in September dropped more than 14 percent from a year ago as a rally in local prices due to a depreciating rupee reduced demand in the world’s second-biggest consumer of bullion, provisional data from precious metals consultancy GFMS.
The drop in demand from Indian importers could weigh on global prices, which have dropped 8.8 percent so far this year.
But lower imports could help the South Asian country reduce its trade deficit and support the rupee, which hit a record low this week.
“In August demand was good but it fell in September due to higher prices,” said Asher O., managing director of the India operations at Malabar Gold and Diamonds, a leading jeweller.
The Indian rupee has fallen almost 14 percent in 2018, lifting local gold prices to 31,531 rupees per 10 grams earlier this week, the highest level in nearly five months.
This Reuters story, filed from Mumbai, showed up on their Internet site at 6:08 a.m. BST on Wednesday morning — and it’s something I found on the Sharps Pixley website. Another link to it is here.
We wrote here recently about the short term headwinds facing gold and the longer term positives, but some of the short term negatives seemed as if they fell away at a single swoop yesterday! Could the 800 point fall in the Dow be the start of the much predicted equities collapse? Indeed the Dow and the S&P 500 were both down around 3% on the day and the NASDAQ down a massive 4%. These falls have been mirrored by big falls in general equities in Asia and Australia, and this morning in Europe.
And yesterday a massive 273,851 ounces of gold were added to the SPDR Gold Shares ETF (GLD) – that’s over 8.5 tonnes and is the first positive movement of gold into GLD for nearly 3 months, and a very sizeable amount to boot. We have stated here before that one should watch GLD additions or withdrawals as a guide to institutional sentiment towards gold and since April we have mostly seen withdrawals – an enormous 141 tonnes of gold had been taken out from GLD from end-April until yesterday. Again could this be a turning point for gold? One day’s figures are perhaps not a sufficient indicator of what’s to come, but are a start and it is essential to monitor this indicator as a guide to precious metals sentiment.
This article by Lawrie showed up on the Sharps Pixley website yesterday sometime — and another link to it is here.
The PHOTOS and the FUNNIES
No ‘critter’ photos again today, just more medieval buried treasure. This one is called the Pereshchepina Treasure. It’s a major deposit of Bulgarian, Sassanian, Sogdian, Turkic and Avarian objects from the Migration Period. The deposit was discovered in 1912 in the village of Mala Pereshchepina (20 km from Poltava, Ukraine) by a boy shepherd who stumbled over a golden vessel — and fell into what is sometimes believed to be the grave of Kubrat, the founder of Great Bulgaria — and father of Asparuh, the founder of the First Bulgarian Empire. The hoard contains more than 800 pieces, now preserved in the Hermitage Museum, Saint Petersburg. The total weight of gold from the deposit exceeds 21 kilograms — and that of the silver objects, 50 kilograms.
I was certainly happy to see the rallies in the precious metals yesterday…none of them were allowed to run away to the upside. That was particularly true in silver, as it was hauled back below its 50-day moving average the moment that it broke through it minutes after 12 o’clock noon in New York.
Yesterday’s price action in gold and silver certainly appeared as if they were being carefully managed — and that extended into the rallies in platinum and palladium as well.
It’s a certainty that there was big Managed Money short covering yesterday, particularly in gold and, without doubt, Ted’s raptors…the small commercial traders other than the Big 8 were dumping their long positions for huge profits. Ted’s concern was whether or not JPMorgan was involved in any of that or not…a good question that can’t be answered in full or in part until next Friday’s Commitment of Traders Report. But in looking at Thursday’s Preliminary Report, the big blow-out in open interest in gold during yesterday’s trading session, was not what I wanted to see. Silver’s total open interest in that same report only rose by a very small amount — and that’s most likely because the technically inclined Managed Money traders were sitting on their hands, because silver’s 50-day moving average hadn’t been violated to any great degree.
Here are the 6-month charts for all four precious metals, plus copper and WTIC. The Thursday doji in silver should be noted, as the 50-day moving average was certainly a line in the sand for some entity…most likely JPMorgan. WTIC got hit again. 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 see that there certainly hasn’t been any price follow-through in the precious metals in Far East trading on their Friday. Both gold and silver have been sold mostly quietly lower — and the former is currently down $7.70 — and the latter by 5 cents…although it had been up a few pennies earlier. Platinum was down a few dollars in morning trading in the Far East — and is still down a dollar as Zurich opens. It was the same for palladium, except that once its morning low was set in Far East trading, it bounced back above unchanged — and is up a dollar currently.
Net HFT gold volume is coming up on 70,000 contracts — and there’s 2,312 contracts worth or roll-over/switch volume on top of that. Net HFT silver volume is about 13,700 contracts already — and there’s only 61 contracts worth of roll-over/switch volume in that precious metal.
The dollar index began to chop very quietly lower as soon as trading began in New York at 6:00 p.m. on Thursday evening. It dropped below the 95.00 mark by a few basis points on a number of occasions in morning trading in the Far East, but got ‘rescued’ every time. It crept above that mark starting around 1:05 p.m. China Standard Time on their Friday morning — and is currently up 2 basis points about thirty minutes before the London open.
Today, around 3:30 p.m. EDT, we get the latest Commitment of Traders Report — and in most respects it will be “yesterday’s news” once again. But it will give Ted important clues as to how much short covering was done in the commercial category in silver by JPMorgan — and how much further on the short side that the brain-dead Managed Money traders went. It will certainly provide a good starting point/base line for what has happened since. Whatever the numbers show, I’ll have it all for you in tomorrow’s column.
And as I post today’s missive on the website at 4:02 a.m. EDT, I note that the gold price rallied a bit starting at the London open, but it’s still down $5.30 an ounce. Silver is still down 3 cents. Platinum is now back at unchanged, but palladium has shot higher — and was up 9 bucks earlier, but is only up 6 at the moment.
Gross gold volume is just about 92,000 contracts — and net of roll-over/switch volume, net HFT gold volume is just over 85,000 contracts. Net HFT silver volume is 16,400 contracts — and there’s now 136 contracts worth of roll-over/switch volume in that precious metal.
The tiny rally in the dollar index ended a few minutes before the London open, but has dipped lower — and back below the 95.00 mark by a few basis points — and is down 6 basis points by around 8:30 a.m. BST. In actual fact the dollar index has been chopping sideways a small handful of basis points either side of the 95.00 mark since trading began in New York yesterday evening.
So, is the start of the ‘Big One’ or not, you ask? Ted said that it’s too soon to tell — and with silver being deliberately held below its 50-day moving average, I certainly agree with his prognosis. We’ll just have to see how this unfolds…or is allowed to unfold…in the days ahead.
I note that the Far East markets finished in the green on their Fridays — and the European bourses are up at their opens as well. I’m sure that the powers-that-be will want to close the week on a positive note, so a ramp job in the New York equity markets today wouldn’t surprise me in the slightest. If that turns out to be the case, I’m already wondering in advance how precious metal prices will ‘react’ in the face of all that.
We’ll find out soon enough I would think.
That’s all I have for today. I hope you have a good weekend — and I’ll see you here tomorrow.