A Quiet Trading Session…With Very Low Volumes

14 December 2018 — Friday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


It was basically a ‘nothing’ day in gold on Thursday — and the tiny gains that were there by the London open were all taken away, plus a bit more, by 11 a.m. GMT.  The price wasn’t allowed to do much after that.

Of course the high and low ticks, if you wish to dignify them with that name, certainly weren’t worth looking up.

Gold was closed at $1241.70 spot, down $3.30 from Wednesday.  Net volume was very quiet for the second day in a row at a bit over 142,000 contracts — and there was just under 7,000 contracts worth of roll-over/switch volume on top of that.

It was somewhat more interesting in the silver price action, but only just.  It crept quietly sideways until 3 p.m. China Standard Time on their Thursday afternoon — and then rallied a bit until a few minutes after the London open.  The price pressure appeared at that point — and the low tick of the day was set around 12:15 p.m. GMT, which may or may not have coincided with a late daily silver fix in London. It chopped generally higher from there — and the high price tick of the day in the spot month came a few minutes after 9 a.m. in New York.  It was sold down into the afternoon gold fix in London — and then rallied back a few pennies before trading mostly sideways for the remainder of the Thursday session.

The high and low ticks in this precious metal were reported by the CME Group as $14.90 and $14.765 in the March contract.

Silver was closed at $14.715 spot, down 0.5 cents on the day.  Net volume was pretty quiet as well, at just under 44,500 contracts — and there was 4,267 contracts worth of roll-over/switch volume in this precious metal.

The platinum price crept higher in Far East trading on their Thursday — and was up 4 dollars by the Zurich open — and that was its high of the day.  It was mostly down hill from there until a few minutes after the Zurich close — and it rallied quietly from there until shortly before 3 p.m. in the thinly-traded after-hours market.  It traded sideways into the close from there.  Platinum was closed yesterday at $794 spot, down 8 dollars on the day, giving up some of its Wednesday’s gains in the process.

The palladium price crawled sideways until 1 p.m. CST on their Thursday afternoon — and then edged higher into the Zurich open — and was up 5 bucks at that point.  From there it was sold quietly and unsteadily lower until the Zurich close — and it crept quietly higher from that juncture until around 3:30 p.m. EST in after-hours trading.  It didn’t do a thing after that.  Palladium finished the day at $1,243.00 spot, exactly unchanged.

The dollar index closed very late on Wednesday afternoon in New York at 97.04 — and traded sideways with a slight positive bias until around 1:55 p.m. China Standard Time on their Thursday afternoon.  At that juncture, it was up 7 basis points.  It sank into the red shortly thereafter — and the 96.89 low tick of the day was set at 8:24 a.m. GMT in London.  It began to chop quietly but unsteadily higher at that point, but really took of at 8:26 a.m. in New York.  But it wasn’t a smooth ride to its 97.29 high tick, which came at 10:24 a.m. EST.  It dipped briefly back below unchanged by 1:25 p.m. — and then edged quietly and unevenly higher until trading ended.  The dollar index finished the Thursday session at 97.06 spot, up 2 basis points from Wednesday’s close.

Without doubt, it was another day where the dollar index would have cratered if left to its own devices.

And here’s the 6-month U.S. dollar index chart.  Click to enlarge.

The silver equities opened unchanged and then chopped sideways, with their respective highs, such as they were, coming around 10:15 a.m. in New York trading.  They then sold unsteadily lower until minutes after 1 p..m…then chopped sideways until 2:30 p.m. EST.  They rallied quietly from there until trading ended at 4:00 p.m. — and couldn’t quite squeeze a positive close, as the HUI closed down 0.10 percent.

It was generally the same for the silver equities, except their ‘highs’ came about ten minutes after trading began in New York yesterday morning.  They chopped quietly lower from that point until around 1:20 p.m. EST and, like their golden brethren, began to head higher from there.  But they came nowhere near finishing in the green, as Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed lower by 0.77 percent.  Click to enlarge if necessary.

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

The CME Daily Delivery Report showed that 53 gold and 27 silver contracts were posted for delivery on Monday.

In gold, the only short/issuer that mattered was Advantage, with 48 contracts out of their client account.  Of the four long/stoppers in total, the largest was Goldman Sachs once again with 27 contracts for its own account, followed by Advantage and JPMorgan with 12 and 11 contracts for their respective client accounts.

In silver, the sole short/issuer was Advantage.  JPMorgan stopped 15 of them…14 for its client account — and the other contract for its own account.  In distant second was Advantage with 8 contracts for its client account.

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 December fell by 116 contracts, leaving 484 still around, minus the 53 contracts mentioned a few paragraphs ago.  Wednesday’s Daily Delivery Report showed that 71 gold contracts were actually posted for delivery today, so that means that 116-71=45 gold contracts vanished from the December delivery month.  Silver o.i. in December fell by 249 contracts, leaving 303 still open, minus the 27 contracts mentioned a few paragraphs ago.   Wednesday’s Daily Delivery Report showed that 279 silver contracts were actually posted for delivery today, so that means that another 279-249=30 gold contracts were added to December.


There were no reported changes in either GLD or SLV on Thursday — and no sales report from the U.S. Mint.

There was no reported activity in gold over at the COMEX-approved depositories on the U.S. east coast on Wednesday.

It was busier in silver, as 1,458,834 troy ounces were received, but only 87,842 troy ounces were shipped out.  There was one truckload…583,603 troy ounces…received at CNT in the Eligible category — and that was immediately transferred into the Registered category for delivery in December.  The other truckload…600,366 troy ounces…was dropped off at HSBC USA — and the remaining 274,864 troy ounces ended up at Delaware.  In the ‘out’ category, there was 64,779 troy ounces shipped out of CNT — and 21,065 troy ounce out of Loomis International.  The remaining 1,997 troy ounces departed Delaware.  The link to all this action is here.

It was another quiet day over at the COMEX-approved gold kilobar depositories in Hong Kong on their Wednesday.  They received only 32 of them — and shipped out 100.  This activity was at Brink’s, Inc. of course — and the link to it is here.


The Borovo Treasure, also known as the Borovo Silver Treasure, is a Thracian hoard of five matching silver-gilt items discovered in late 1974 while ploughing a field in Borovo, Bulgaria.  Unfortunately, the plow severely damaged the objects, but after extensive restoration work, the damage is nearly invisible.

The treasure consists of a table set of five silver-gilt items:

  • Three rhyta, each a different size, and with a different base. The largest has a figure of a sphinx and bears the inscription: “[Belongs to] Cotys from [the town of] Beos.”, as well as the name of the craftsman, Etbeos.  The second has a figure of a horse, and the third, the smallest, has a bull. Each are half figures.
  • A large, two-handled bowl: This item is decorated with a relief of a deer being attacked by a griffin.
  • A rhyta jug with images gods at a feast, scenes showing the mythological cycles, with images of Dionysus and Heracles, satyrs, griffons, and sphinxes.

I have a somewhat less than average number of stories for you today.


CRITICAL READS

Sell-offs could be down to machines that control 80% of the U.S. stock market, fund manager says

The phenomenon, also called algorithm or algo trading, refers to market transactions that use advanced mathematical models to make high-speed trading decisions.

Many believe that the different sell-off episodes seen throughout 2018 were caused by these machines, as they act on immediate data releases, without taking the time to digest them as humans would.

Eighty percent of daily volume in the U.S. is done by machines, so what you get is a lack of focus on earnings, a lack of focus on outlooks and you just get short-term movements based on very specific data that is released every day and that creates noise,” Guy De Blonay, fund manager at Jupiter Asset Management, told CNBC‘s “Squawk Box Europe.”

The daily volume of algo trading can change according to volatility. But over the last few years its impact has become more visible. In 2017, J.P. Morgan said that “fundamental discretionary traders” accounted for only 10 percent of trading volume in stocks. This is when traders look at companies’ performance and outlook before deciding whether to buy or sell the shares.

This CNBC story is from way back on December 5 — and it’s the first of two items that I pulled from yesterday’s edition of the King Report.  Another link to it is here.


Another Hedge Fund Veteran Is Quitting a Brutal Market

Philippe Jabre is returning money to investors after an “especially challenging” year, adding to the swelling list of hedge-fund veterans giving up on an industry where money-making opportunities have dwindled.

Geneva-based Jabre Capital Partners SA is returning client money in the three funds personally managed by Jabre, said Mark Cecil, one of the firm’s founding partners. The remaining two funds, one focused on emerging markets and the other on European credit, will keep operating with outside money, he said.

This year has been an exceptionally tough one for hedge funds as asset prices tanked and volatility — usually a friend for money managers seeking benchmark-beating returns — returned after a period of calm. Wide price swings, a waning bull market and rising interest rates were seen as the elixir the $3.2 trillion industry needed to overcome years of subpar performance. Instead, many firms got pummeled in last month’s market swoon and are headed for their worst year since 2011.

Jabre, the founder and chief investment officer of his namesake firm, is selling positions in a “disciplined manner” and intends to return most of the proceeds by February, he wrote in an investor newsletter dated Dec. 12 and obtained by Bloomberg News. Jabre Capital managed about $1.2 billion of assets as of April with more than 40 employees.

This article appeared on the Bloomberg website at 4:50 p.m. PST [Pacific Standard Time] on Wednesday afternoon — and was updated about nine hours later.  I thank Swedish reader Patrik Ekdahl for sending it our way — and another link to it is here.  In a parallel Zero Hedge story from yesterday morning is this headline “Multi-Billion GAM Holdings Hedge Fund Reports Record Loss, Shocking Outflows, Mass Layoffs” — and it comes courtesy of Brad Robertson.


Wheels Come Off the Leveraged Loan Market: Banks Unable to Offload Loans Amid Record Outflows

To think it was less than three months ago that we wrote that “leveraged loan demand is off the charts as dangers mount.” Since then, a lot has happened in the credit market, with yields and spreads blowing out in credit in a much delayed response to said mounting dangers and turmoil in the equity market, eventually hitting the leveraged loan market too, where as we wrote last week, loan prices have fallen precipitously as loan funds suffered dramatic redemptions in recent days, most notably the Blackstone leverage-loan ETF, SRLN, which last week saw its largest ever one-day outflow since its inception.

Fast forward to today when while credit appears to have found a shaky, tentative floor over the last few days, leveraged loans – which started falling later than other markets this quarter – are still sliding, and as long as funds keep pulling money out, will probably keep falling.

It’s a bit of a catch up,” James Schaeffer, deputy CIO at Aegon Asset Management told Bloomberg. “Aggressiveness – on terms and structure – has created more price volatility than in the high-yield market, now that we’ve seen demand for loans slow a bit.”

That’s putting it mildly: as we noted last week, JPMorgan had to slash the price on a $210 million loan to 93 cents on the dollar from par to sweeten investor demand and help finance a private jet takeover. This represented one of the steepest discounts seen in the leveraged loan market this year. And with the market on the verge of freezing, the size of the deal was cut by $70 million from the originally targeted amount. Meanwhile, in Europe, the market appears to have already locked up, as three loans were scrapped over the last two weeks. To wit, movie theater chain Vue International withdrew a 833 million pound-equivalent ($1.07 billion) loan sale. While the deal was meant to mostly refinance existing debt, around 100 million pounds was underwritten to finance the company’s acquisition of German group CineStar.

This longish chart-filled Zero Hedge commentary showed up on their Internet site at 7:46 p.m. EST on Thursday evening — and I thank Brad Robertson for sending it along.  Another link to it is here.


U.S. Reports Biggest Ever Budget Deficit For November

Two months after the U.S. Treasury reported the widest annual deficit in six years for fiscal 2018, moments ago the U.S. posted the biggest November budget deficit on record as total government spending came in twice as much as revenue.

November outlays surged 18.4% to $411 billion last month from $347 billion a year ago, while receipts actually declined 1% to $206 billion from $208 billion in 2017, the Treasury Department said in a monthly report on Thursday. The biggest spending categories were Social Security ($84BN), Medicare ($77BN), National Defense ($62BN), Income security ($46BN) and Health ($42BN). Net interest on the U.S. debt of nearly $22 trillion came in at a hefty $33BN. Meanwhile, Individual Income Taxes and Social Security Taxes both generated $93BN in income each.

The result was a November deficit of $205 billion, a 48% increase from the $139 billion shortfall a year earlier, and the biggest November deficit on record.

For the first two months of the fiscal year which began Oct. 1, the deficit widened to $305.4 billion, up 50% compared with $201.8 billion the same period a year earlier.

On a LTM basis, the U.S. deficit has more than doubled from the $405BN it hit in February 2016 to $883BN as of the 12 months ended November. It was the second highest LTM number since early 2013.

This news item put in an appearance on the Zero Hedge website at 2:54 p.m. on Thursday afternoon EST — and another link to it is here.


U.S. Rejects the E.U.’s Trade Reform Proposal, Putting WTO at Risk

The U.S. rejected the European Union’s proposal to reform the World Trade Organization, dealing a blow to international efforts to bolster the Geneva-based body, which has come under attack from President Donald Trump’s administration.

At a WTO General Council meeting on Wednesday, the U.S. said it won’t support the E.U.’s plan to avert the paralysis of the organization’s appellate body, which mediates trade disputes that affect some of the world’s largest companies.

The proposals would not effectively address the concerns that members have raised,” Deputy U.S. Trade Representative Dennis Shea said in prepared remarks seen by Bloomberg. “With respect to the proposal advanced by the European Union, China, and India, it is hard to see how it in any way responds to the concerns raised by the United States.”

The move comes after the E.U. on Wednesday formally deposited blueprints aimed at addressing U.S. concerns that the appellate body has overstepped its mandate. The WTO now enters a precarious year in which it may lose its ability to mediate disputes.

This news item was posted on the Bloomberg website at 6:51 a.m. PST on Wednesday morning — and I found it in yesterday’s edition of the King Report.  Another link to it is here.


U.S. calls on Germany to drop Nord Stream-2, warns companies of sanctions risk

The United States urged Germany to drop its political support for Russian monopoly Gazprom’s Nord Stream-2 project and warned companies that are involved in the construction of the gas pipeline that they face the risk of sanctions unless they withdraw from the controversial project.
US Assistant Secretary for Energy Resources Frank Fannon told a conference call with reporters on December 11 that Nord Stream-2 and an expanded Turkish Stream Pipeline, both of which bypass Ukraine, are designed to deepen Europe’s dependency on Russian gas and weaken the bloc’s security architecture.

Germany can certainly remove their political support from the project…of the gas directive. That policy has been languishing for over a year and a half. That would be a positive step in advancing energy security,” Fannon said, fresh from a trip to the Czech Republic, Croatia, and Hungary.

Referring to the construction of the gas pipeline, which has an annual capacity of 55 billion cubic meters and connects Russia’s mainland pipelines to Germany through an underwater link in the Baltic Sea, Fannon said the U.S. government has the ability to sanction Russia’s energy export pipelines under Section 232 of the Counter-Americas Adversaries Through Sanctions Act.

Firms that are working with the Russian energy export pipeline sector are engaging in a line of business that carries a sanctions risk. We continue to review potential sanctions actions and encourage governments or companies to contact us if they have questions about this process,” Fannon said while shying away from discussing details about future any possible sanctions.

Not a new story, but the U.S. is rattling Germany’s chains again on this issue, just as a reminder.  This news item put in an appearance on the neweurope.eu Internet site at 9:36 a.m. CET on their Thursday morning — and I thank George Whyte for sliding it into my in-box in the very wee hours of Friday morning.  It’s worth reading if you have the interest — and another link to it is here.


Something Positive For The Holidays — Dennis Miller

I was in a quandary. Around the holidays I like to write upbeat articles about life and get away from the political melodrama and investment concerns. If I can’t come up with ideas, I sleep on it. Magically, in the middle of the night, an idea pops up.

I began daydreaming about my childhood. When I was in first grade my grandmother lived on a dairy farm. When the school year ended, my mother took me to Union Station, gave the conductor $1.00, and told him to get me off the next day in Cambridge, Ohio. Armed with my pillow, suitcase and $1.00 in my pocket, my adventure began.

I was instructed not to spend my $1.00 until a man got on the train in Lima, Ohio selling sandwiches. A sandwich and carton of milk cost exactly $1.00, no change left for a Hershey Bar.

My grandmother met me the next morning and took me to the farm. There were no kids to play with. My grandparents worked from the crack of dawn until sundown every day of the week. My great-grandmother also lived there. What a grand lady she was, born in 1865.

The farm was a wonderful part of my life. I spent countless hours helping in the garden. I drove the horses when we bailed hay. I learned how to use a flat-blade shovel to clean out the manure trough when the cows were done with milking – twice a day. The manure dried over the winter and was used as fertilizer when the hay was planted in the spring.

This long holiday commentary from Dennis was posted on his Internet site yesterday morning — and another link to it is here.


Paulson Wins Control of Detour Board in Key Shareholder Vote

Paulson & Co. has convinced shareholders of Detour Gold Corp. to overthrow the bulk of the Canadian miner’s board of directors, including its interim CEO, ending a nasty six-month proxy battle.

Five of the Paulson-backed nominees were chosen, while Detour Chairman Alex Morrison and interim Chief Executive Officer Michael Kenyon were removed from the board during a special shareholders’ meeting Thursday in Toronto, the miner said in a statement, confirming an earlier report by Bloomberg.

Kenyon has resigned as CEO and James Gowans, who was one of three new directors appointed in August, will become chairman, Detour said. The board will be fixed at nine members.

Marcelo Kim, a partner at Paulson who was on the hedge fund’s slate of board nominees, was not elected.

Seven out of eight directors have changed since we started this campaign,” Kim said at the 18-minute shareholders’ meeting that was closed to media. “But it’s not about who won or who lost, it’s about what’s best for the company.

That’s bulls hit, of course, dear reader.  Paulson has had it explained to him chapter and verse as to the real reason why all precious metal mining companies aren’t performing, but he won’t go there.  This guy is next to useless, so don’t get your hopes up that he [and his group of not-so-merry-men] will make any positive changes.  This Bloomberg story showed up on their website at 7:25 a.m. PST on Thursday morning, which was 10:25 a.m. in New York.  I found it on the gata.org Internet site — and another link to it is here.


Gold: A Perfect Storm For 2019 — Alasdair Macleod

This article is an overview of the principal factors likely to drive the gold price in 2019. It looks at the global factors that have developed in 2018 for both gold and the dollar, how geopolitics are likely to evolve, the economic outlook and how it is worsened for the dollar by President Trump’s tariff war against China, the availability and likely demand for bullion, and the technical position in paper markets. Taken together, the outlook is bullish for gold.

This very long article by Alasdair was posted on the goldmoney.com Internet site on Thursday sometime — and in its broad strokes, I certainly agree with almost everything he has to say.  I did note that he posted a chart featuring the Managed Money traders without accreditation to Ted Butler, the person that cottoned on to this many years ago.  But the most glaring error of omission is the complete absence of any discussion of Ted’s 800-lb gorilla sitting in the middle of the room.  That’s JPMorgan — and their iron grip on precious metal prices as short seller of last resort — and also first resort at times as well.  The fundamentals of which Mr Macleod speaks have been in place for years now, but that matters not…for as long as precious metal prices are being managed by them in the COMEX futures market, these “fundamentals” mean diddly squat.  I found this commentary in a GATA dispatch — and another link to it is here.


The PHOTOS and the FUNNIES

Today’s photos are two more from the Siena International Photo Awards — and the first one, in the ‘Remarkable Award’ category, was taken by French photographer Greg Lecoeur — and it’s entitled “Dolphin Hunting”.  Click to enlarge.

The second photo from the ‘Remarkable Award’ category is by South African photographer Willem Kruger — and is entitled “Vulture and Jackal”.  Click to enlarge as well.


The WRAP

Except for platinum, which was forced to give up a decent chunk of its Wednesday’s gains yesterday, not much happened…or allowed to happen in the precious metals on Thursday.  Volumes were very low in both silver and gold — and Ted and I were discussing the possibility that holiday season volumes could already be upon us, but we both felt it was a bit early for that…but who really knows.  If it’s still like that during the Friday trading session, then we’ll know for sure…as things will really start to slow down next week.

Here are the 6-month charts for all four precious metals, plus copper and WTIC once again — and there really isn’t much to see.  The ‘click to enlarge‘ feature works for all six charts.

And as I type this paragraph, the London open is less than ten minutes away — and I see that the gold price traded sideways until around 10 a.m. China Standard Time on their Friday morning — and has been heading lower ever since…but got tapped even lower starting about twenty minutes before the London open.  At the moment, it’s down $3.80 the ounce — and off its low tick by about a dollar.  The silver price began to head lower the moment that trading began at 6:00 p.m. EST in New York on Thursday evening –and it’s down 11 cents currently.  Platinum traded sideways until minutes after 2 p.m. CST — and began to edge lower from there.  It’s down 3 bucks.  The long knives appear to be out for palladium once again — and it’s down 11 dollars as Zurich opens.

Net HFT gold volume is exceedingly light once again at about 27,500 contracts — and there’s only 341 contracts worth of roll-over/switch volume in that precious metal.  Net HFT silver volume is pretty heavy already at around 10,400 contracts — and there’s only 160 contracts worth of roll-over/switch volume on top of that.

The dollar index began to chop unsteadily sideways once the market opened in New York yesterday evening.  That state of affairs lasted until precisely 2:00 p.m. China Standard Time on their Friday morning — and then it jumped up a bit from there — and as of 7:45 a.m. in London, the index is up 19 basis points.

One chart that I check every day, but never post in my column, is the KWB Bank Index [BKX].  But when I saw it yesterday before I started on today’s column, I thought it worth posting.  It certainly isn’t very happy looking — and has been falling for the last seven business days in a row, regardless of what the general equity markets were doing.  I’m not sure what to read into it, but it’s not positive — and is down ten percent from its mid-August highs, with most of that occurring in the last seven days.  Click to enlarge.

And as I post today’s column on the website at 4:02 a.m. EST, I note that gold is a bit lower as the first hour of London trading draws to a close — and is down $4.70 an ounce. Silver is lower by 14 cents. Platinum and palladium are down 4 dollars and 19 dollars respectively.

Gross gold volume is a bit over 41,500 contracts — and net of roll-over/switch volume, net HFT gold volume is 38,500 contracts. Net HFT silver volume is getting up there at around 14,100 contracts — and there’s only 215 contracts worth of roll-over/switch volume in that precious metal.

The dollar index had a down/up dip during the first hour of London/Zurich trading — and it’s been screaming higher since — and is now up 39 basis points.

Today, at around 3:30 p.m. EST, we get the latest Commitment of Traders Report for positions held at the close of COMEX trading on Tuesday.  In his mid-week commentary on Wednesday, Ted had this to say…”I’m guessing there was further deterioration, namely, managed money buying and commercial selling, along the lines of what I guessed at the prior week, say 10,000 contracts in silver and 25,000 contracts in gold. As always, the lower, the better.”

I’m sure hoping he’s wrong…however, I wouldn’t bet against him.  But whatever the number are, I’ll have it all for you in my Saturday column.

That’s it for today.  Have a good weekend — and I’ll see you here tomorrow.

Ed