Precious Metal Equities Rally For a Second Day in a Row

19 December 2018 — Wednesday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price really didn’t do much of anything anywhere on Planet Earth on Tuesday…or should I say, wasn’t allowed to do anything.  It was up three bucks by around 12:30 p.m. China Standard Time on their Tuesday morning, but all that was gone, plus a few dimes more by the London open — and that turned out to be the low tick of the day, such as it was.  It crawled higher from there, but under obvious price resistance — and the ‘high’ of the day was set shortly after 11 a.m. GMT.  It sagged a few dollars into the open of the equity markets in New York yesterday morning — and then crept higher into the COMEX close — and didn’t do anything after that.

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

Gold finished the Tuesday session in New York at $1,249.00 spot, up $3.80 on the day.  Net volume was very quiet at 155,000 contracts — and roll-over/switch volume in this precious metal was pretty decent at just under 17,000 contracts.

The silver price chopped around a nickel or so either side of unchanged on Tuesday, but wasn’t allowed past the $14.69 spot price during the morning trading session in London…then got sold lower on the dollar index ‘rally’ that began around 11:30 a.m. GMT.  It made it back to just above unchanged by the afternoon gold fix in London but, like gold, was sold lower into the COMEX close from there.  It chopped erratically sideways until trading ended at 5:00 p.m. EST.

The high and low ticks aren’t worth looking up in this precious metal, either.

Silver was closed at $14.60 spot, down 4 cents from Monday.  Net volume was very light at just over 44,000 contracts — and there was only 1,816 contracts worth of roll-over/switch volume on top of that.

The platinum price began to edge lower about an hour after trading began in New York at 6:00 p.m. EST on Monday evening — and that lasted until a few minutes after 3 p.m. CST.  It rallied a bit from there — and was up a dollar by shortly after 11 a.m. in Zurich trading.  But it was down hill from that juncture until around 9:40 a.m. in New York.  But by 1 p.m. EST, it was back at unchanged.  However, that wasn’t allowed to last — and it was sold quietly lower until 3 p.m. in after-hours trading — and didn’t do much after that.  Platinum finished the Tuesday session in New York at $789 spot, down 3 bucks from Monday’s close.

The palladium price chopped sideways-to-lower in Far East and morning trading in Zurich — and was back at the unchanged mark at, or just after, the afternoon gold fix in London.  It was all down hill from there until shortly after 3:30 p.m. in the thinly-traded after-hours market — and it didn’t do a lot after that.  Palladium was closed at $1,229 spot, down 12 dollars from Monday.

The dollar index closed very late on Monday afternoon in New York at 97.10 — and when trading began a few minutes later on Monday evening, it traded a handful of basis points either side of unchanged until the 97.16 high tick was set at exactly 3:00 p.m. China Standard Time on their Tuesday afternoon.  It began to head lower from that point — and the 96.71 low tick was set at 11:40 a.m. in London.  I would suspect that it was the usual ‘gentle hands’ that showed up at that juncture — and the ensuing ‘rally’ topped out in the green by a bit at 1:08 p.m. EST.  It chopped sideways-to-lower from there — and finished the Tuesday session at 97.02 — and down 8 basis points from its close on Monday.

Considering the big down/up move in the dollar index, the precious metals didn’t respond very much…in either direction.  Here’s the DXY chart from Bloomberg once again — and one of the things I like about this chart is that it shows the entire DXY trading session staring the previous evening in New York.  But, having said that, the folks at ino.com have their intraday chart fixed — and I’ll be reverting back to that in my Thursday column.  Click to enlarge.

And here’s the 6-month U.S. dollar Index chart — and the delta between its close…96.57…and the close on the DXY chart above, was 45 basis points yesterday.  But it should be noted that on this particular chart, that it broke below, but did now close below, its 50-day moving average yesterday.  Click to enlarge.

The gold shares opened about unchanged — and began to head higher almost right away.  Most of the gains that mattered were in by noon in New York trading — and they chopped mostly sideways for the rest of the Tuesday session.  The HUI closed up 2.30 percent.

The silver equities opened down a bit, but by 9:45 a.m. EST, they were back in the green to stay — and really began to rally shortly after 11 a.m.   That state of affairs lasted until about 3:20 p.m. — and they edge a hair lower into the close from there.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index finished higher by 2.85 percent.  Click to enlarge if necessary.

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

The CME Daily Delivery Report showed that 1 gold and 119 silver contracts were posted for delivery within the COMEX-approved depositories on Thursday.  In gold, the short/issuer was Advantage out of its client account — and Goldman stopped it for its own account.  In silver, there were five short/issuers in total — and the two largest were ABN Amro and International F.C. Stone with 56 and 39 contracts from their respective client accounts.  In distant third place was Advantage with 17 from its client account as well.  There were six long/stoppers in total — and the largest was the CME Group, stopping 60 contracts for its own account.  In second place was Advantage with 28 — and bringing up third place was JPMorgan, stopping 21 for its clients, plus 2 contracts for its own account.

The 60 contracts that the CME Group stopped for its own account were immediately reissued as 60×5=300 mini silver contracts…one good delivery bar per contract.  Of those 300 contracts, ADM stopped 216 for its client account — and Advantage picked up the other 84 for its client account as well.  The link to yesterday’s Issuers and Stoppers Report is here.

The CME Preliminary Report for the Tuesday trading session showed that gold open interest in December declined by 20 contracts, leaving 387 still around, minus the 1 contract mentioned just above.  Monday’s Daily Delivery Report showed that 3 gold contracts were actually posted for delivery today, so that means that 20-3=17 gold contracts vanished from the December delivery month.  Silver o.i. in December dropped by 34 contracts, leaving 257 still open, minus the 119 contracts mentioned two paragraphs ago.  Monday’s Daily Delivery Report showed that 38 silver contracts were actually posted for delivery on Wednesday, so that means that 38-34=4 more silver contracts were added to December.


After no activity for a week, there was a large deposit into GLD, as an authorized participant added 264,730 troy ounces…a bit over eight tonnes.  There were no reported changes in SLV.

There was no sales report from the U.S. Mint.

The only activity in gold over at the COMEX-approved depositories on the U.S. east coast on Monday was 160.755 troy ounces/5 kilobars [SGE kilobar weight] that were shipped out of Brink’s, Inc.  — and I won’t bother linking it.

And as a point of interested, this was exactly the same activity that was reported on Friday for gold movement…5 kilobars/SGE kilobar weight out of Brink’s, Inc.

It was much busier in silver — and although nothing was received, there was 1,621,011 troy ounces shipped out.  By the far the largest withdrawal was two truckloads…1,202,922 troy ounces…that departed the JPMorgan depository.  There were four other depositories that made up the balance of the withdrawals on Monday, with the next two biggest being Brink’s, Inc. and HSBC USA…with 240,419 and 122,113 troy ounces respectively.  The other surprise in this report was the 6,993,701 troy ounces that was transferred from Registered category — and back into Eligible at CNT.  The link to all this action is here.

There wasn’t much activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Monday.  Nothing was reported received — and only 125 were taken out.  This activity was at Brink’s, Inc., which I won’t bother linking.


The Reka Devnia Hoard was the most prolific find of Roman silver coins of the period from 64 to 251 A.D. to have ever been published. It was found near the town of Devnya, north-eastern Bulgaria. The hoard consisted of 81,044 denarii found in 1929. The earliest coins were those of Marc Antony of which twenty-nine were found, and the latest being one example of Herennius Etruscus. The hoard was broken into two, with 68,783 coins sent to the museum of Sofia, and 12,261 to Varna.

The publication of the find has been invaluable to researchers reconstructing a chronological sequence of the era’s coinage, and accessing the original volume of production of individual types.

Many rare personages were represented in the hoard. Rare denarii published from Varna include thirteen denarii of Nero, eight of Galba, seven of Otho, twenty-two of Vitellius, twenty-four of Aelius Caesar, twenty-one of Clodius Albinus, fifty-one of Macrinus, eighteen of Diadumenian, and forty-two of Julia Paula. However, it has been difficult to access the true comparative rarity of some of the scarcest types as undoubtedly examples from Varna were looted prior to the hoard’s publishing.

Dozens of scarce denarii of Pertinax, Aquilia Severa, and Sallustia Orbiana were found in the Sofia group while the Varna group was mysteriously devoid of all but one example of Pertinax and one example of Aquilia Severa.  The ‘click to enlargefeature only helps with the third photo.

I only have a tiny handful of stories for you today.


CRITICAL READS

The Fed Has the Shakes — Bill Bonner

Another big down day for the Dow. Yesterday, the index took another 2% hit… But, in keeping with our Advent Season optimism, if wealth is a burden, investors must have breathed a sigh of relief; they had $600 billion less of a burden at the end of the day than at the beginning of it.

And today, all eyes turn to the Fed. From a low of 6900 on the Dow in March 2009, to a high of 26,650 on September 20, 2018, the geniuses at the Fed created this bubble. Now, they own it.

But what will they do with it? Will they take away even more of the burden of wealth with one final rate hike as a Christmas present?

Central banks have no economic magic. No financial panaceas. No money miracles. They can’t really make an economy run better.

They can’t raise real wages or increase the wealth of a society. They don’t produce anything of value. They don’t provide any service that you would willingly pay for.

All they can do is manipulate the amount of money and credit. That is, they can mislead people about how much credit is available… and at what cost.

This commentary by Bill appeared on the bonnerandpartners.com Internet site early on Tuesday morning EST — and another link to it is here.


“Feel The Market”: Trump Warns Fed With Fed Not to Make Mistake and Hike Rates

As members of the FOMC gather at the Eccles building for the first day of the central bank’s December policy meeting, during which they’re widely expected to vote to raise the Fed funds rate for the fourth time this year, President Trump is once again urging the central bank to reconsider – this time urging Chairman Powell & Co. to read an editorial in Tuesday’s Wall Street Journal calling for a pause in rate hikes (which in turn followed a similar piece from Fed “hawks” Stanley Druckenmiller and Kevin Warsh).

Donald J. Trump@realDonaldTrump…”I hope the people over at the Fed will read today’s Wall Street Journal Editorial before they make yet another mistake. Also, don’t let the market become any more illiquid than it already is. Stop with the 50 B’s. Feel the market, don’t just go by meaningless numbers. Good luck!” 4:13 AM – Dec 18, 2018

The tweet followed a similar message from Monday where Trump pointed out the incongruity in the Fed raising interest rates while “the world is blowing up.”

This news item was posted on the Zero Hedge Internet site at 7:40 a.m. EST on Tuesday morning — and I thank Brad Robertson for pointing it out.  Another link to it is here.


Druckenmiller: “The Best Economist I Know is Saying Something is Not Right”

Stanley Druckenmiller established himself as one of the most successful hedge fund managers of his generation thanks to an uncanny ability for recognizing signals in asset prices that portended an coming recession. So when he warns about rough times ahead, it’s probably worth listening.

Though he’s kept a relatively low profile since closing Duquesne Capital in 2010 and opening a family office based in midtown, Druckenmiller’s name has been popping up in the headlines of the financial press more frequently lately where his criticisms of the Fed were ridiculed (back in September he warned that we we are at the point in the tightening cycle where “bombs are going off”)  before they were echoed by no less a figure than the president himself. Over the weekend, Druckenmiller offered his latest contrarian screed against Wall Street pearl clutchers by arguing in an op-ed published with former Fed Gov. Kevin Warsh that Trump has a point, and that the Fed already missed its opportunity to safely tighten monetary policy. Now, the Fed has two choices: either reconsider its plans to raise rates to 3% and beyond over the next year, or risk destabilizing asset markets and the broader economy.

And in an interview that bears similarities to Jeff Gundlachs’ “truth bomb”-strewn chat with CNBC, Druckenmiller sat down with Bloomberg for an hour-long interview where he warned that market conditions are about to get a lot worse.

The only question, in Druckenmiller’s mind, is not whether the selloff will worsen, but by how much? Because the indicators that Druckenmiller used to anticipate the last four downturns are once again turning red, suggesting the “highest probability is that we struggle going forward.”

This item showed up on the Zero Hedge website at 8:05 p.m. EST on Tuesday evening — and another link to it is here.


Who Exactly Mopped up $1.33 Trillion of New U.S. Government Debt over the Past 12 months? — Wolf Richter

Debt out the wazoo, but someone is still buying it.

The U.S. gross national debt has ballooned by $1.33 trillion over the past 12 months to $21.8 trillion as of December 14, according to Treasury Department data. Over the past six months alone, this debt has ballooned by $740 billion, despite a strong economy: Fueled by a stupendous spending binge and big-fat tax cuts, the government has been increasing its debt at a rate of $123 billion a month on average over the past six months.

U.S. government debt is an income-producing asset for investors — the creditors of the U.S. And when the pile of U.S. debt increases, by definition, someone has to buy it. But who? China, Japan, and other foreign investors? Nope. They’re shedding this debt. So here we go.

Foreign investors in total reduced their holdings of marketable Treasury securities in October by $25.6 billion from September, to $6.2 trillion, having shed $125 billion since the end of October 2017, according to the Treasury Department’s TIC data released Monday afternoon.

This 4-chart article was posted on the wolfstreet.com Internet site on Tuesday sometime — and the first person through the door with it was reader George Whyte.  Another link to it is here.


Mnuchin Blames High Frequency Trading For Exploding Market Volatility

It was back in 2014, right around the time Michael Lewis published Flash Boys that the public’s attention first fully focused on High Frequency Trading, and when we said that it was only a matter of time before HFT became the ultimate scapegoat du jour of all that is wrong with capital markets, “because since virtually nobody really understands what HFT does, it can just as easily be flipped from innocent market bystander which “provides liquidity” to the root of all evil” we said.

In other words: the high freaks are about to become the most convenient, and “misunderstood” scapegoat, for when the market finally does crash. Which means that those HFT-associated terms which very few recognize now, especially those on either side of the pro/anti-HFT debate who have very strong opinions but zero factual grasp of the matter, will become part of the daily jargon as the anti-HFT wave sweeps through the land.

To underscore this prediction, we made it vividly clear what would happen: @LongOnlyTrader Only until market crashes. Then HFT will be the torches and pitchforks scapegoat. Not the Fed.  4:00 PM – Mar 30, 2014

In other words, while for over a decade, HFTs – in coordination with the Fed – were happily bidding up stocks and lifting risk assets higher to everyone’s delight, nobody had any problems with the algos that have come to dominate market structure while soaking up liquidity and making the market increasingly more fragile and susceptible to flash crashes.

[J]ust two months of selling by various quants, algos and of course, HFTs, and lo and behold, it’s time for a comprehensive market overhaul because – you know – it’s all the algos fault (just ignore the $4.5 trillion elephant in the room please).

This longish chart-filled commentary put in an appearance on the Zero Hedge website at 2:07 p.m. on Tuesday afternoon — and another link to it is here.


Gold purchases by Mongolia’s central bank expected to reach 21 tonnes this year

Gold purchases by the Bank of Mongolia are expected to reach 21 tonnes by end of this year, according to the central bank.

The Bank of Mongolia, which bought 20.01 tonnes of gold last year, has set a goal to increase its gold purchases by at least 10 percent this year. But it is now expected that the bank will fail to achieve its goal due to several factors, including a low rate on the London Metal Exchange,” the bank’s spokesperson Ariun Dagva told Xinhua on Tuesday, adding that the three-month peak season for gold mining in the country ended in October.

Our experts now expect that the volume of gold purchases will reach 21 tonnes by end of this year,” Ariun said.

As of mid-December, the Bank of Mongolia purchased 20 tonnes of gold from legal entities and individuals, up 3 percent compared with the same period last year, she said.

This gold-related news item, filed from Ulaanbaatar — and posted on the china.org.cn Internet site on Tuesday sometime, was something I picked up off the Sharps Pixley website — and another link to it is here.


The PHOTOS and the FUNNIES

Today’s photos are the last two from the Siena International Photo Awards — and the first one, in the ‘Remarkable Award’ category, was taken by Russian photographer Sergey Gorshokov — and it’s entitled “Kitten”.  Click to enlarge.

 

The last photo in this series is by German photographer Christoph Kaula — and is entitled “Run!”.  Click to enlarge as well.


The WRAP

Despite the super-low volumes in both precious metal, it was obvious that silver and gold prices were being kept under wraps — and that was certainly true of silver once again.  It should be noted on the 6-month chart below, that gold is closing in on its 200-day moving average…but JPMorgan has barely allowed silver to get above its 50-day moving average.  However, both copper and WTIC got hammered to new lows for this move down, although natural gas rallied yesterday.

Here are the 6-month charts for the Big 6 commodities…plus natural gas again today — and yesterday’s changes of interest to you, should be noted.  Click to enlarge.

And as I type this paragraph, the London open is less than ten minutes away — and I see that the gold price crept higher at glacial speed until around 1 p.m. China Standard Time on their Wednesday morning — and hasn’t done anything since. It’s currently up 80 cents the ounce. The silver price didn’t do much of anything until 9 a.m. CST on their Wednesday morning. It rallied until noon over there — and has been chopping very quietly sideways since — and is up 7 cents at the moment. The platinum price has been wandering around a small handful of dollars above unchanged throughout the entire Far East trading session — and is up a dollar. Like silver, palladium began to jump higher in price starting at 9 a.m. CST — and it was up 12 bucks by noon CST, but has backed off a bit since — and is up only 9 dollars as Zurich opens.

Net HFT gold volume is a bit over 33,000 contracts — and there’s only 289 contracts worth of roll-over/switch volume in that precious metal. Net HFT silver volume is around 6,400 contracts — and there’s 506 contracts worth or roll-over/switch volume on top of that.

The dollar index has been chopping quietly and unsteadily lower since trading began in New York at 6:00 p.m EST in New York yesterday evening — and as of around 7:40 a.m. in London, it’s down 20 basis points.

The cut-off for this Friday’s Commitment of Traders Report was yesterday at the close of COMEX trading.  Just eye-balling the above charts for both gold and silver, I’m certainly expecting a further increase in the commercial net short positions in both those metals.  But, as I’ve pointed out before, Ted Butler is the real authority on all this — and I expect he’ll have something to say about it in his mid-week commentary to his paying subscribers this afternoon sometime.

And as I post today’s column on the website at 4:04 a.m. EST, I note that gold is up $1.40 the ounce as the first hour of London trading draws to a close. Silver is now up 8 cent, but has run into that same $14.69 price ceiling that was set for it on Tuesday…at least for the moment. Platinum and palladium haven’t done much during the first hour of Zurich trading — with the former now down a dollar — and the latter up by 9.

Gross gold volume is a bit over 40,500 contracts — and net of what little roll-over/switch volume there is, net HFT gold volume is 40,000 contracts. Net HFT silver volume is about 7,900 contracts — and there’s 513 contracts worth of roll-over/switch volume in that precious metal.

The dollar index hit its current 96.77 low tick about fifteen minutes before the London/Zurich opens — and it’s off that mark by a bit now, but is heading lower once again — and is down 20 basis points as of 8:45 a.m. GMT/9:45 a.m. CET.

Well, today’s the day.  What is Powell going to say at 2 p.m. EST…thirty minutes after the COMEX close — and two hours before the equity markets close in New York.  Get out your lucky rabbit’s foot..place your bets — and blow the froth off a cold one, as things could get interesting.

I’ll see you here tomorrow.

Ed