Yet Another Day of “Care and Maintenance”

18 October 2018 — Thursday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price edged a bit higher in the first two hours of trading once it started in New York at 6:00 p.m. EDT on Tuesday evening.  But by 8 a.m. China Standard Time on their Wednesday morning, the price pressure began — and the low tick of the day, such as it was, came around 1:30 p.m. CST on their Wednesday afternoon.  It began to head a bit higher from there, but any and all rally attempts in both London and New York, were quickly turned aside.  The high tick of the day, such as it was, came shortly after the afternoon gold fix in London — and it was sold lower from there, with the absolute low tick of the day…such as it was…coming a minute or so before trading ended at 5:00 a.m. EDT.

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

Gold was closed in New York on Wednesday at $1,221.90 spot, down $2.60 on the day.  Net volume was nothing special at just under 231,000 contracts — and there was 5,011 contracts worth of roll-over/switch volume on top of that.

The silver price action was handled in a similar fashion to gold’s…and almost a carbon of it, so I won’t bother with the play-by-play.

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

Silver was closed yesterday at $14.58 spot, down 5.5 cents from Tuesday.  Net volume was nothing special in this precious metal either, at a bit over 58,000 contracts — and there was 2,037 contracts worth of roll-over/switch volume.

With some minor exceptions, it was mostly the same in platinum.  Its high of the day came shortly before 11 a.m. CEST in Zurich — and from that juncture it was sold unsteadily lower until around 2:20 p.m. in the thinly-traded after-hours in New York.  It wasn’t allowed to do much after that.  Platinum was closed on Wednesday at $830 spot, down 9 bucks on the day.

And as you can tell from the chart below, the palladium price was handled in a very similar fashion to platinum — and it was closed down 9 dollars as well.

The dollar index closed very late on Tuesday afternoon in New York at 95.09 — and proceeded to rally in stair-step fashion starting around 9:25 a.m. China Standard Time on their Wednesday morning.  All the gains that mattered were done by around 4:25 p.m. EDT in New York yesterday afternoon — and it didn’t do a lot after that.  The dollar index finished the Wednesday session at the 95.66 mark, up 57 basis points from Tuesday’s close.

Considering the big ‘rally’…I’m somewhat surprised that the precious metal weren’t hit harder than they were.  But it certainly appeared like they would have rallied if allowed…which they obviously weren’t.

And here’s the 6-month U.S. dollar index chart — and the delta between its close — and the close on the intraday chart above, was 36 basis points yesterday.

The gold shares dropped a percent and small change during the first ten minutes of trading in New York on Wednesday morning, but then quickly rallied to their respective high ticks, which came around 10:45 a.m. EDT.  They sank quietly lower from that point until the 1:30 p.m. COMEX close.  From there they chopped more or less sideways with a slight positive bias, but couldn’t quite squeeze a positive close.  The HUI finished the day down a tiny 0.05 percent, so call it changed.

In the early going, the price path for the silver equities was about the same as it was for gold, but their highs came a minute or so before 11 a.m. in New York trading.  They dipped briefly into negative territory a short while later, but bounced back into the green from there.  From that point the chopped quietly sideways for the rest of the Wednesday session — and Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up a smallish 0.24 percent.  Click to enlarge if necessary.

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

The CME Daily Delivery Report showed that 1 gold and zero silver contracts were posted for delivery within the COMEX-approved depositories on Friday.  In gold, Advantage issued the lone contract — and JPMorgan stopped it. Both transactions involved 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 October dropped by 87 contracts, leaving 766 still around, minus the one contract mentioned above.  Tuesday’s Daily Delivery Report showed that 87 gold contracts were actually posted for delivery today, so the drop in open interest — and the deliveries match.  Silver o.i. in October declined by 69 contracts, leaving just 1 contract left.  Tuesday’s Daily Delivery Report showed that 69 silver contracts were actually posted for delivery today, so the change in open interest and the deliveries match in silver as well.  Not that it means anything, but I don’t think I’ve ever seen that happen in both these precious metals at the same time.


For the second day in a row there were no reported changes in either GLD or SLV.

There was a small sales report from the U.S. Mint on Wednesday.  They sold 1,000 troy ounces of gold eagles — and 1,500 one-ounce 24K gold buffaloes.

There was no in/out gold activity over at the COMEX-approved depositories on the U.S. east coast on Tuesday.

It was far different in silver once again, as 658,201 troy ounces were reported received — and another 1,437,611 troy ounces were shipped out the door for parts unknown.  In the ‘in’ category, there was one truck load…612,201 troy ounces…received at Brink’s, Inc. — and the remaining 45,567 was dropped off at Canada’s Scotiabank.  In the ‘out’ category, there two truck loads…1,237,608 troy ounces…that departed CNT — and the remaining 200,003 troy ounces was shipped out of Scotiabank.  The link to all this activity is here.

There was decent activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Tuesday.  They reported receiving 1,133 of them — and shipped out another 4,184.  All this activity was at Brink’s, Inc. of course — and the link to that, in troy ounces, is here.

It was yet another slow news day — and I don’t have all that many stories for you once again.


CRITICAL READS

Who Bought the $1.6 Trillion of New US National Debt Over the Past 12 Months? — Wolf Richter

As a flood of US debt washes over the globe, someone has to buy.

So far in this fiscal year, which just started on October 1, the US gross national debt – the total debt issued by the US government – has jumped by $138 billion in just 11 business days, fueled by a stupendous spending binge and big-fat tax cuts, to a breath-taking $21.654 trillion, after having jumped $1.27 trillion in fiscal 2018. And these are the good times!

So who owns and buys all this debt? This is a critical question going forward, because the flood of new debt inundating the market is spectacular, and someone better buy it. Today we got another batch of answers from the US Treasury Department’s TIC data on this increasingly edgy topic.

In August, foreign private-sector investors (banks, hedge funds, individuals, etc. outside the US) and “foreign official” investors (central banks, governments, etc.) owned $6.287 trillion of marketable Treasury securities. This was up $37.6 billion from August last year but was about flat going back to the beginning of 2016.

Over the same 12-month period through August 31, 2018, the US gross national debt jumped by $1.614 trillion. So who bought it?

I had a story about this in my Wednesday column, but this worthwhile commentary on the subject by Wolf is so much better, that I thought it worth including in today’s column.  It was posted on his Internet site on Tuesday sometime — and I thank Paul Fillion for sending it our way.  Another link to it is here.


How Trump’s “Right-Hand Man” Drove Sears Into the Ground — Bill Bonner

In Washington, too, people believe we live in a kind of Eden, with ultra-low joblessness… ever-rising stock prices… and an economy guided by the greatest financial geniuses who ever lived – Donald J. Trump and his right-hand man at the Treasury, Steven Mnuchin.

The Donald’s genius is on display every day. Explaining Sears’ bankruptcy, for example, he hit the nail squarely on the head… that is, the head of his own Treasury secretary:

Sears has been dying for many years. It’s been obviously improperly run for many years and it’s a shame.

Yes, it was Mnuchin and his college pal, Eddie Lampert, who ran Sears into the ground. Mnuchin was on the board from 2005 until late 2016, when he took his current job.

But that doesn’t mean they did anything improper… or dumb.

They’re smart guys. They must have realized that the old retailer was doomed.

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


Mortgage Applications Collapse to 18-Year Lows

After sliding 2.1% the prior week, mortgage applications collapsed 7.1% last week as mortgage rates topped 5.00%…

Ignoring the collapses during the Xmas week of 12/29/00 and 12/26/14, this is the lowest level of mortgage applications since September 2000…

Still, The Fed should keep on hiking, right? Because – “greatest economy ever…” and so on…

As we noted previously, the refinance boom that rescued so many in the post-2008 ‘recovery’ is now over. If rates hit 5%, the pool of homeowners who would qualify for and benefit from a refinance will shrink to 1.55 million, according to mortgage-data and technology firm Black Knight Inc. That would be down about 64% since the start of the year, and the smallest pool since 2008.

Naturally, hardest hit by the rising rates will be young and first-time buyers who tend to make smaller down payments than older buyers who have built up equity in their previous homes, and middle-income buyers, who can least afford the extra cost. Khater said that about 45% of the loans that Freddie Mac is backing are to first-time buyers, up from about 30% normally, which also means that rising rates could have an even bigger impact on the market than usual.

This rather brief 2-chart Zero Hedge story was posted on their website at 8:11 a.m. EDT yesterday morning — and it’s the first of two contributions from Brad Robertson.  Another link to it is here.


Ex-Deutsche Bank traders guilty in U.S. Libor-rigging trial

A U.S. crackdown on the people who rigged key financial-market benchmarks suffered a stinging setback last year when an appeals court tossed out the conviction of two former Rabobank Groep traders.

Prosecutors got a measure of redemption on Wednesday.

A federal jury returned guilty verdicts in a separate case against two ex-traders at Deutsche Bank AG. The company was one of the worst offenders in a scandal that led to billions of dollars in fines to settle government claims that companies rigged Libor, a global interest-rate benchmark.

Matthew Connolly, 48, of Basking Ridge, New Jersey, and Gavin Black, 53, of London, were convicted of conspiring to manipulate the London interbank offered rate, which is used to value trillions of dollars of financial products, from 2004 to 2011. After a monthlong trial in Manhattan federal court, the jury of seven men and five women deliberated for less than seven hours before reaching their verdict.

The two men “undermined the integrity of our financial markets,” Assistant U.S. Attorney General Brian A. Benczkowski said in a statement. “The Justice Department and its law-enforcement partners will aggressively investigate and prosecute individuals and financial institutions who engage in this sort of misconduct.”

Since regulators began a global crackdown on how the Libor benchmark is set, banks including Deutsche Bank and Barclays Bank Plc have agreed to pay more than $9 billion in fines. Dozens of traders have been fined, barred from the financial industry or criminally charged in different countries. But only four, including Connolly and Black, have been found guilty at a U.S. trial, including the two Rabobank traders whose convictions were reversed.

When I see Jamie Dimon on trial for what JPMorgan has done in the precious metal markets over the last ten years, then I’ll jump up and down.  This Bloomberg story showed up on their website at 11:34 a.m. BST — and was updated at 4:00 p.m. London time…7:34 a.m. and 11:00 a.m. in New York — EDT plus 5 hours.  I found this in a GATA dispatch yesterday — and another link to it is here.


Italian Bonds Slide After Official Warns Credit Rating Downgrade Possible

After starting off strong, Italian 10Y Yields have leaked wider all morning after a senior government official said on Wednesday that Italy’s 2019 budget may be rejected by the European Commission and a credit rating downgrade is also possible.

Let’s say that the premise is there” for the commission to start an infraction process over the budget, Stefano Buffagni, cabinet undersecretary for regional affairs, said in an interview with Radio Capital cited by Reuters.

With Moody’s and Standard & Poor’s due to review Italy’s credit rating this month, Buffagni said a downgrade “can’t be excluded and we must be ready” in case it happens. He added, however, that he did not think a downgrade would be justified because “Italy has very solid economic fundamentals”.

Meanwhile, Deutsche Bank economists said they think that Italy is squarely on a collision course with the European Commission, whose President Juncker said yesterday that there would be a “violent reaction” from other euro area countries if the Italian budget were to be approved.

This Zero Hedge article put in an appearance on their Internet site at 7:36 a.m. EDT on Wednesday morning — and it’s the third and final contribution of the day from Brad Robertson.  Another link to it is here.


E.U. Commission to Reject Italian 2019 Budget Plan

Earlier this morning, we reported that according to Deutsche Bank economists – and virtually everyone else except for those who were apparently waving in BTPs yesterday – Italy was squarely on a collision course with the European Commission, whose President Juncker said yesterday that there would be a “violent reaction” from other euro area countries if the Italian budget were to be approved.

Moments ago, Spiegel confirmed this when it reported that the “dispute between the E.U. Commission and Italy’s populist government is entering the next round” after E.U. Commissioner Guenther Oettinger said that the E.U. Commission would reject Italy’s 2019 budget plan, which is not compatible with E.U. rules.

It has been confirmed that Italy’s budget for 2019 is not compatible with the commitments that exist in the E.U.,” Oettinger said. The official rejection of Italy’s budget in the form of a letter from Economic and Financial Commissioner Pierre Moscovici is due to arrive in Rome on Thursday or Friday.

Italy submitted its budget draft at the last minute on Monday night, giving the Commission two weeks to respond, but it appears it won’t need that long. Moscovici will reportedly not to submit any counterproposals to the Italian budget, but merely point out the breach of the agreed framework data.

As a reminder, Italy’s coalition of a nationalist and populist forces plans to increase the country’s deficit to 2.4% GDP next year to finance its expensive campaign pledges. This is three times more than the 0.8% that the Italian previous government had agreed with the European Commission, and it could become even more, as the 2.4% forecast is based on the Italian government’s highly optimistic assumptions about economic growth.

Still, many have accused the E.U. of hypocrisy in cracking down on Italy while letting other, just as egregious budgets slide in recent years.

This article appeared on the Zero Hedge website at 9:50 a.m. EDT on Wednesday morning — and it comes to us courtesy of Brad Robertson.  Another link to it is here.


IMF Issues Dire Warning – ‘Great Depression’ Ahead?

–  “Large challenges loom for the global economy to prevent a second Great Depression” warn IMF
–  Massive government debts and eroded fiscal buffers since 2008 suggest global dominos await a single market crash
–  2008 crisis measures cast long, dark “terrifying” shadow

Is another “Great Depression” on the horizon?

It would be easier to dismiss these words from Nouriel Roubini, Marc Faber or other doom-and-gloom prognosticators. Coming from Christine Lagarde’s team, though, they take on a new dimension of scary.

The International Monetary Fund head isn’t known for breathlessness on the world stage. And yet the IMF sounded downright alarmist in its latest Global Financial Stability report, stating that “large challenges loom for the global economy to prevent a second Great Depression.

Even some market bears were taken aback. “Why,” asks Michael Snyder of The Economic Collapse Blog would the IMF use this phrase “in a report that they know the entire world will read?

This very worthwhile commentary was posted on the goldcore.com Internet site on Wednesday sometime — and another link to it is here.


Central Bank gold buying: New kids on the block — Lawrie Williams

Over the past few years one of the most cited demand elements in the gold supply/demand equation has been the switch from the world’s central banks’ positions as gold sellers to being gold buyers.  However there have actually been very few reported buyers, but those which have been buying are, for the most part, significant ones – namely China (which is probably still adding to its reserves but not reporting this to the IMF) and Russia (which has been adding to reserves at a rate of  over 200 tonnes a year).  Kazakhstan has also been a consistent gold buyer, currently taking in around 4 tonnes a month into its reserves, but a small number of other central bank purchasers have not, in total, been adding what could be considered significant amounts until the past year or so.  The vast majority of the 100 countries for which the IMF publishes in its monthly tables of global gold holdings, consistently report zero changes in their holdings

But. against the zero increase trend, the Turkish central bank has now for the past couple of years added significant amounts to its reported holdings. And recently three more central banks appear to have joined the array of gold purchasers – India, Poland and, as recently announced, Hungary.

India has had a long association with gold and will be remembered as buying 200 tonnes of gold from the IMF back in 2009, but since then its central bank gold purchases have been mostly dormant – until last year when it added a small amount (0.3 tonnes) to its reserves while it has added 15 tonnes up until August this year according to IMF figures as published on the World Gold Council website.

This commentary by Lawrie appeared on the Sharps Pixleywebsite on Wednesday sometime — and another link to it is here.


The PHOTOS and the FUNNIES

Today’s ‘critter’ today is the moose.  It’s the largest and heaviest extant species in the Deer family — and I’m only featuring it because of the photo that subscriber ‘Zoe’ sent me yesterday.  A full-grown bull moose, if you’ve never seen one, is a very big critter indeed.  The really big bulls would tip the scales at close to 700 kilograms/1,500 pounds…equal to ten or more mule deer rolled into just one animal.  Most photos of these creatures barely hint at their size in relation to everyday objects…not only their weight, but their leg length and height.  But this rather large bull moose walking through a parking lot gives you some idea of scale — and why they’re such a danger on the highway…especially at night.  I’ve hit one at night — and lived to tell about it, so I know. This isn’t the biggest one I’ve ever seen, but its plenty big enough.  Photo #3 gives more than a hint of the danger.  But properly aged and prepared, they’re rather tasty as well.  Click to enlarge.


The WRAP

Wednesday’s trading action had all the hallmarks of just another ‘care an maintenance’ session in the precious metals. However, it certainly appeared that…despite the strong ‘rally’ in the dollar index…they wanted to rally, but the powers-that-be wouldn’t allow that to happen.

Here are the 6-month charts for the four precious metals, plus copper and WTIC.  There’s nothing to see in the precious metals, but the big drop in WTIC below its 50-day moving average yesterday would have had the Managed Money traders selling long positions for a loss — and piling onto the short side in droves.  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 chopped sideways until 10 a.m. China Standard Time on their Thursday morning — and then rallied a couple of dollars until around 12:30 p.m. CST. It began to head lower from there — and is currently down $2.90 the ounce. The silver price was down a few pennies in Far East trading on their Thursday but, like gold, began to sell off around 12:30 p.m. CST over there — and it’s now down 12 cents an ounce. Platinum traded flat until shortly after 1 p.m. CST — and it has been sold lower as well — and is down 2 bucks. Palladium chopped a dollar or two around unchanged until minutes after 2 p.m. CST — and it got knocked down as well — and is currently down 4 dollars as Zurich opens.

Net HFT gold volume is coming up on 41,000 contracts — and there’s only 167 contracts worth of roll-over/switch volume in that precious metal. Net HFT silver volume is 12,500 contracts already — and there’s only 129 contracts worth of roll-over/switch volume on top of that.

The dollar index began to chop quietly sideways the moment that trading began at 6:00 p.m. EDT in New York on Wednesday evening. That lasted until exactly 1 p.m. CST on their Thursday afternoon — and it’s been crawling higher since — and is currently up 7 basis points about thirty minutes before the London open.

So when will they/JPMorgan allow gold and silver prices to rise without restriction, you ask?  I know a lot of readers are getting impatient about this, as the bullish set-up in the COMEX futures market is still intact — and has been for a month or more.  That’s a good question — and only Jamie Dimon might know the answer — and he isn’t returning anyone’s e-mails…including Ted’s.

It will happen whenever they’re ready — and not a moment before.  And when it does, “you won’t“…as Ted has said over the years…”have to ask whether “this is it?” or not, as it will be evident in the price action — and the price itself.”

So we wait some more.

And as I post today’s column on the website at 4:02 a.m. EDT, I see that all four precious metals hit their current low ticks a few minutes before the London/Zurich opens — and at the moment, gold is now up 20 cents an ounce…and silver is still down 9 cents.  At its low tick just before the London open, JPMorgan punched silver back below its 50-day moving average briefly.  Platinum and palladium are now up a dollar apiece.

Gross gold volume is about 55,000 contracts — and net of what little roll-over/switch volume there is, net HFT gold volume is 54,500 contracts.  Net HFT silver volume is now up to 17,400 contracts — and there’s still only 199 contracts worth of roll-over/switch volume in this precious metal.

The dollar index has been edging quietly lower since the 2:15 p.m. afternoon gold fix in Shanghai — and is now down 5 basis points as of 8:30 a.m. BST/9:30 a.m. CEST…3:30 a.m. in New York.

Ted mentioned in his Wednesday missive that it wouldn’t surprise him in the slightest if JPMorgan smacked gold and silver price back below their respective 50-day moving averages in order to blow the Managed Money traders out of their newly-minted long positions — and back onto the short side.  That’s already happened in silver for a bit already this morning — and it remains to be seen if that will occur to the gold price as well.  So don’t be surprised/depressed if that in fact happens.

See you here tomorrow.

Ed