Both Gold and Silver Now in ‘Overbought’ Territory

04 January 2019 — Friday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price jumped up about five dollars at the open at 6:00 p.m. EST on Wednesday evening in New York.  It was sold down to almost unchanged a bit over an hour later — and then chopped quietly higher until 3 p.m. China Standard Time on their Thursday afternoon.  From that point, the price was sold quietly lower until around the noon silver fix in London…7 a.m. EST in New York.  From there, it  chopped quietly higher until exactly 4:00 p.m. EST in the thinly-traded after-hours market — and didn’t do much after that.

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

Gold finished the Thursday session in New York at $1,293.90 spot, up $9.70 on the day.  Net volume was nothing out of the ordinary at just under 208,500 contracts — and there was just over 23,500 contracts worth of roll-over/switch volume in this precious metal.

It was the same price pattern for silver — and its London low came at the noon silver fix over there — and it rallied unevenly from that point into the COMEX close.  Except for a down/up dip immediately after, it traded pretty flat into the 5:00 p.m. EST close.

The low and high ticks in this precious metal was recorded by the CME Group as $15.55 and $15.815 in the March contract.

Silver closed yesterday at $15.705 spot, up 21.5 cents on the day.  Net volume was pretty heavy once again at a bit under 80,500 contracts — and there was a bit over 6,600 contracts worth of roll-over/switch volume on top of that.

The platinum price flopped and chopped around through all of Far East and most of Zurich trading on Thursday, but finally managed to rally starting shortly after the COMEX open.  That lasted until shortly after 3 p.m. in after-hours trading — and it didn’t do a lot after that.  Platinum finished the Thursday session at $796 spot, up 3 bucks from Wednesday’s close.

Palladium didn’t do much of anything on Thursday, but did have another one of those ferocious down/up dips in the spot month starting at 9 a.m. in New York.  It gained all that back by the time the equity markets opened at 9:30 a.m. EST — and then didn’t do much after that until well after the COMEX close.  At that juncture, it ticked higher for a bit — and finished the day at $1,254 spot, up 7 dollars.

The dollar index closed very late on Wednesday afternoon in New York at 96.82 — and dropped 11 basis points the moment that trading began in New York at 7:45 p.m. EST yesterday evening.  It traded unevenly lower until 2:54 p.m. China Standard Time on their Thursday afternoon — and then began to chop quietly higher from there.  That lasted until two minutes before the COMEX open — and from that point, a more serious sell-off began — and the 96.23 low tick was set at 11:22 a.m. EST…a data point it revisited at 4:22 p.m. — and it crawled a bit higher into the close from there.  The dollar index finished the Thursday session at 96.31…down 51 basis points from Wednesday’s close.

Here’s the DXY chart from Bloomberg once again.  Click to enlarge.

And here’s the 6-month U.S. dollar index chart — and you can read into it whatever you wish, which shouldn’t be much.  The delta between its close…95.88…and the close on the DXY chart above, was 43 basis points on Thursday.  Click to enlarge.

The gold shares gapped up a bit more than a percent at the open in New York on Thursday morning, but were back at almost the unchanged mark by 11 a.m. EST.  They began to rally anew at 11:30 a.m. — and continued to head unsteadily higher right into the 4:00 p.m EST close.  The HUI finished up by 1.93 percent.

The silver equities also gapped up a bit at the open, but sank back into the red by around 10:20 a.m. in New York trading — and that point was their collective low ticks of the day.  From there, it was onwards and ever upwards until a few minutes after 3 p.m. EST — and they sold off a bit into the close from that juncture.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up 2.25 percent.  Click to enlarge if necessary.

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

The CME Daily Delivery Report showed that 29 gold and 24 silver contracts were posted for delivery within the COMEX-approved depositories on Monday.

In gold, the sole short/issuer was RCG out of its in-house/proprietary trading account.  Morgan Stanley picked up 10 contracts…7 for its own account, plus 3 for its clients.  JPMorgan came in second with 8 contracts for its client account — and in third spot was Merrill with 7 contracts for its client account as well.

In silver, RCG was the biggest short/issuer also, with 20 contracts out its own account.  The biggest long/stoppers were Goldman Sachs with 10 contracts for its client account — and was tied for first place with JPMorgan, as they picked up 6 for their in-house account, plus 4 contracts for clients.

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 January rose by 5 contracts, leaving 365 still around, minus the 29 contracts mentioned a few paragraphs ago.  Wednesday’s Daily Delivery Report showed that 1 gold contract was actually posted for delivery today, so that means that 5+1=6 more gold contracts just got added to the January delivery month.  Silver o.i. in January fell by 36 contracts, leaving 837 still open, minus the 24 contracts mentioned a few paragraphs ago.  Wednesday’s Daily Delivery Report showed that 40 silver contracts were actually posted for delivery today, so that means that 40-36=4 more silver contracts just got added to January.


There were no reported changes in GLD yesterday, but 128,314 troy ounces of silver were removed from SLV — and that looks like a fee payment of some kind.

When Ted and I were chatting on the phone yesterday, he raised some concern about the fact that despite the rise in the silver price over the last month, there has been no physical metal deposited in SLV.  As a matter of fact, there has been 5.8 million troy ounces of silver withdrawn from SLV since December 1, 2018.  Ted was speculating, probably correctly, that in lieu of depositing the physical metal itself, which is obviously in short supply, some entity [or entities] were shorting SLV shares in lieu of depositing physical metal.  Of course JPMorgan comes to mind.

The next short report for SLV is not due out until January 10 — and we’ll find out more then…hopefully.

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

But it was a busy day in silver, as 1,199,265 troy ounces were received — and 703,143 troy ounces were shipped out.  One truckload…599,949 troy ounces…arrived at CNT — and the other truckload…599,316 troy ounces…was left at Scotiabank.  In the ‘out’ category, there was 701,057 troy ounces shipped out of CNT — and the remaining 2,076 troy ounces departed Brink’s, Inc.  The link to all this, is here.

The only activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Wednesday was 201 kilobars that was shipped out of Brink’s, Inc.  The link to that, in troy ounces, is here.


The Eberswalde Hoard or Treasure of Eberswalde is a Bronze Age hoard of 81 gold objects with a total weight of 2.59 kg (83 troy ounces). The largest prehistoric assembly of gold objects ever found in Germany, it is considered to be one of the most important finds from the Central European Bronze Age. Today, it is in Russia, as part of the group of artifacts and works of art looted from Germany at the end of the Second World War.

The hoard was discovered 1 metre (3 ft) below the ground surface on May 16, 1913, during excavations for a house within the grounds of a brass factory at Finow (Oberbarnim), part of Eberswalde in Brandenburg.

The hoard had been deposited in a globular vessel with a lid. In it were eight gold bowls, which contained another 73 gold objects. The bowls were thin-walled chased gold vessels with copious ornamental decoration. The other objects included neck rings, bracelets and 60 wire arm spirals. 55 double spirals were tied into bundles. A gold ingot, a piece of metal shaped like a crucible and two smaller pieces probably represent raw material for the production of such objects.

The hoard is dated to the 9th century B.C.  Click to enlarge.

It was another very quiet news day on Thursday.


CRITICAL READS

2, 3 and 5-Year Treasury Yields All Drop Below the Effective Fed Funds Rate

Things are getting increasingly more crazy in bond land, where moments ago the 2Y Treasury dipped below 2.40%, trading at 2.3947% to be exact, and joining its 3Y and 5Y peers, which were already trading with a sub-2.4% handle. Why is that notable? Because 2.40% is where the Effective Fed Funds rate is, by definition the safest of safe yields in the market, that backstopped by the Fed itself. In other words, for the first time since 2008, the 2Y (and 3Y and 5Y) are all trading below the effective Fed Funds rate.

That the curve is now inverted from the Fed Funds rate all the way to the 5Y Treasury position suggests that whatever is coming, will be very ugly as increasingly more traders bet that one or more central banks may have no choice but to backstop risk assets and they will do it – how else – by buying bonds, sending yields to levels last seen during QE… i.e., much, much lower. [Click to enlarge]

The above two paragraphs and chart are all there is to this Zero Hedge story that appeared on their website at 2:56 p.m. EST yesterday afternoon.  I thank Richard Saler for sending it — and as he pointed out in the accompanying e-mail…”U.S. government bonds are signaling economic downturn.”  He would be right about that.  Another link to the hard copy is here.


Stocks Slide After FDIC Reassures That Banks Are “Superbly Capitalized

Curious what just pushed stocks back to session lows?

It may have been yet another unexpected report by Reuters according to which top U.S. Banking regulator, the Federal Deposit Insurance Corporation, said it had “no concerns” that volatility in the equities and futures markets posed a threat to the banking system, telling Reuters the country’s lenders have plenty of capital to weather further market swings.

Of course, this is a carbon copy of what the OCC did yesterday, when the spokesman for the Office of the Currency Comptroller said that “the federal banking system … is strong with capital and liquidity near historical highs and improved earnings and risk management. From this strength, the federal banking system is well positioned to manage more adverse market conditions” and in the process unleashed yet another bout of selling.

Today, for some unexplained reason, it was the FDIC that decided to chime in, when Chairman Jelena McWilliams told Reuters that banking regulators had begun a review of the so-called CAMELS rating system used to assess the health of the nation’s banks.

Frankly, recent market movements have not given us any reason to be concerned,” she said in an interview. “Banks are well capitalized. Actually, they are superbly well capitalized at this point in time.”

And with this odd warning coming out of the blue, stocks promptly faded back near session lows as traders are once again left to wonder just why in the span of under 10 days we have gotten repeat assurances from banks, the OCC and the FDIC that “banks are fine” and “well positioned” for a crisis, when nobody was wondering the opposite in the first place.

In any case, a few more “assurances” such as this one – perhaps the Plunge Protection Team should address the nation next – and the investing world will observe first hand just how prepared for a crisis U.S. banks truly are.

This very interesting, but not at all surprising article showed up on the Zero Hedge website at 3:06 p.m. EST on Thursday afternoon — and it’s the second offering in a row from Richard Saler.  Another link to it is here.


Growth Has Stopped“: Manufacturing ISM Crashes Most Since the Financial Crisis

Yesterday, when Markit reported that the U.S. manufacturing PMI tumbled to a 15 month low, we were wondering how much longer the “other” PMI can continue to defy gravity by printing ridiculously high numbers month after month. The answer, it turns out, was about 24 hours, because moments ago the Institute for Supply Management reported that the December ISM plunged from 59.3 to 54.1 — precisely where the PMI print suggested it should – which was the lowest print in the Mfg ISM series since November 2016…and the biggest one month drop going back to the financial crisis, when in October 2008 it dropped by 9 points.  [Click to enlarge]

Printing just days after both Chinese manufacturing surveys printed in contraction territory, spooking markets, today’s ISM report was a disaster with virtually every sub-index tumbling…

That said, in light of the reported plunge in customer inventories, we are very skeptical this report is accurate in light of reports such as this one which we noted over the weekend, that “Overflowing With Excess Inventory, U.S. Companies Turn To Truck Trailers.”

In other words, the entire supply chain is now cho(ke)-full of excess inventory, and margin-crushing liquidation is coming. And confirming that was another key ISM series, namely the New Orders less Inventories which tends to hit zero every time there is far too much inventory in the supply chain.

The consistency with which global data is trailing estimates makes consensus forecasts for U.S. GDP for 2019 that have barely budged from their high of 2.6% highly laughable.

This story put in an appearance on the Zero Hedge website at 10:12 a.m. on Thursday morning EST — and I thank Brad Robertson for this one.  Another link to it is here.


The One Thing You Need in This Market — Bill Bonner

The credit markets are warning of an approaching recession. And the stock market rang its bell last year when the S&P 500 peaked at around 2,900 in September – warning of a bear market.

But there are no crystal balls in the financial markets.

Markets provide information. It has to be new, surprising information or it’s not information at all. “Tell me something I don’t know,” says the investor.

That’s why the Fed’s price fixing of short-term interest rates is so destructive. The big players game the system. They know what to expect… so the risk of speculating goes down.

And with the inflation-adjusted rate of interest on Fed Funds below zero, the cost of speculating goes down, too. No wonder the amount of speculating goes up!

And since most speculating is done with borrowed money… the amount of debt goes up. Then, like an overloaded ferry, the extra debt weighs down the economy. Riding low in the water, there is still no guarantee the boat will sink. But watch out.

This commentary by Bill was posted on the bonnerandpartners.com Internet site on Thursday morning EST — and another link to it is here.


Ukraine After Martial Law: Neither Peace, Nor War

The hypocrisy of the American and European leaders with their numerous “concerns about the state of democracy” became especially evident, when no one in the U.S. and the E.U. protested against Poroshenko’s decision to impose the martial law after the incident near Kerch Strait, which was no match to the tragic peak of the civil war in 2014-2015. According to Ukrainian opinion polls, no less than 60 percent of Ukrainians did not approve of Poroshenko’s decision, seeing in it only an attempt to stay in power, having nothing to do with defense of the country.

If Poroshenko needed additional powers to use arms against a possible Russian aggression, he did not have to impose a martial law,” said Mikhail Pogrebinsky, head of the Kiev-based Center for Conflict Studies. “In 2014 Poroshenko used aviation, artillery and tanks against the rebellion in Donbass, without any martial laws. He just called it an “anti-terrorist operation” and used the most destructive weapons, without any consequences from the West. So, people in Ukraine don’t trust the president now, they see in the martial law just another trick aimed at cancelling elections or winning them dishonestly.”

Macron’s and Merkel’s demand to Russia “to provide a secure, speedy and unhampered” passage of all international vessels through the Kerch Strait (something Russia has never refused to do) also smacks of hypocrisy. The Russian foreign ministry pointed to the fact that Ukraine’s military vessels passed through the Kerch Strait weeks before the incident of November 25. Nevertheless, American state department’s chief negotiator on the issues of Russo-Ukrainian conflict, Kurt Volker, threatened Russia with additional sanctions from both the U.S. and Europe for “hampering international navigation.”

We are used to sanctions and do not expect justice from the West,” explained Vladimir Zharikhin, the head of the Ukrainian department at the Moscow-based Institute for CIS Studies. “What is sad, it is the consequences of the confrontation for the Ukrainian election. A chance to change Ukraine’s disastrous policy line is being missed.”

This commentary/opinion piece was posted on the strategic/culture.org Internet site on Thursday — and I thank Roy Stephens for sending it along.  Another link to it is here.


From 2018 to 2019 – a quick survey of a few trends — The Saker

The year 2018 will go down in history as a turning point in the evolution of the geostrategic environment of our planet.  There are many reasons for that and I won’t list them all, but here are some of the ones which I personally consider the most important ones:

This is probably the single most important development of the year: the AngloZionist Empire issued all sorts of scary threats, and took some even scarier actual steps, but eventually it had to back down.  In fact, the Empire is in retreat on many fronts, but I will only list a few crucial ones…

All the internal problems resulting from the infighting of the U.S. elites (roughly: the Clinton gang vs Trump and his Deplorables) only make things worse.  Just the apparently never ending sequence of resignations and/or firing from the Trump Administration is a very important sign of the advanced state of collapse of the U.S. polity.  Elites don’t fight each other when all goes well, they do so when everything goes south.  The saying “victory has many fathers but defeat is an orphan” reminds us that when a gang of thugs begins to lose control of a situation, it rapidly turns into an “every man for himself”, everybody blames everybody for the problems and nobody wants to stay anywhere near those who will go down in history as the pathetic losers who screwed everything up.

As for the U.S. armed forces, they have been tremendously successful in killing a very large amount of people, as always, mostly civilians, but they failed to get anything actually done, at least not if one understands that the purpose of war is not just to kill people, but is the “continuation of politics by other means“.

This very long, but very worthwhile commentary was posted on thesaker.is Internet site yesterday sometime — and I thank Larry Galearis for pointing it out.  Another link to it is here.


Anheuser-Busch InBev Zimbabwe Charges Hard Currency to Fight Dollar Shortage

Delta Corp Ltd., part owned by Anheuser-Busch InBev SA/NV, told Zimbabwean customers it will only accept hard currency for its beverages as local businesses struggle to cope with foreign-exchange shortages.

The maker of Castle Lager, Chibuku sorghum beer and a range of soft drinks hasn’t been able to pay some international suppliers for “extended periods,” choking off access to further credit, the Harare-based company told retailers and wholesalers in a letter dated Jan. 2. Delta, which will implement the measure from Friday, isn’t receiving enough foreign currency from banks to pay for imports, it said.

Our business has been adversely affected by the prevailing shortages of foreign currency,” wrote Delta, about 23 percent owned by the world’s biggest brewer. This has led to orders not being met or prolonged stock shortages, the company said.

The southern African nation’s biggest company by market value is feeling the effects of a crisis that has its roots in Zimbabwe’s decision to abandon its own currency in 2009 in favor of the dollar. The central bank created electronic money, known as as Real Time Gross Settlement dollars, or RTGS$, to lend to the government and introduced bond notes backed the U.S. currency.

Zimbabwe is in the throes of its latest economic crisis, just over a year after President Emmerson Mnangagwa came to power following the ouster of Robert Mugabe. Rampant inflation has been exacerbated by the central bank’s decision in October to order lenders to separate dollars and RTGS$ — effectively recognizing that the country has two currencies and frightening away already wary foreign investors.

No surprises here.  This brief Bloomberg article showed up on their Internet site at 5:59 a.m. Pacific Standard Time on Thursday morning — and I found it embedded in a GATA dispatch yesterday.  Another link to it is here.


I didn’t find any precious metal stories today that I though worth posting.


The PHOTOS and the FUNNIES

Today’s photos are more in the series from theguardian.com Internet site that Patricia Caulfield sent our way.  The first one carries the caption…”A seal pup on the Farne Islands off the coast of Northumberland, U.K., where the National Trust has said Atlantic grey seal pup numbers are rising thanks to a good supply of food and lack of predators“.  Photograph: Owen Humphreys.  Click to enlarge.

This second photo is captioned “Blackbucks run in a field near Bhetnoi village in Ganjam, India“.  Photograph: Dibyangshu SarkarClick to enlarge.


The WRAP

I’m not going to read too much into yesterday’s price action in the precious metals, although I did note the fact that both silver and gold began to head higher once the noon silver fix was put to be in London.

Both gold and silver poked their respective noses into overbought territory for the first time on Thursday — and silver posted another new intraday and closing low yesterday as well.

Here are the 6-month charts for the Big 6 commodities — and the above highlights should be noted.  Click to enlarge.

And as I type this paragraph, the London open is only ten minutes away — and I see that the gold price rallied a few dollars in early morning trading in the Far East — and the current high…such as it was…was set shortly before 9:30 a.m. China Standard Time on their Friday morning. Almost all of that gain has vanished since — and gold is currently up 40 cents the ounce. The silver price was up a penny or two by 9 a.m. CST — and then it jumped sharply higher, only to get capped minutes after that. It has been quietly sold lower since — and is up only 1 cent currently. The platinum price crawled higher until shortly before 10:30 CST — and that was as high as it was allowed to get, as it has been chopping sideways since — and is up 6 bucks at the moment — and back over $800 spot by a few dollars. Palladium has been edging unevenly sideways in Far East trading — and is up 2 dollars as Zurich opens.

Net HFT gold volume is already pretty heavy at a bit over 57,000 contracts — and there’s only 1,211 contracts worth of roll-over/switch volume on top of that. Net HFT silver volume is very heavy as well…17,500 contracts — and there’s only 264 contracts worth of roll-over/switch volume in that precious metal. ‘Da boyz’ are obviously hard at work as short sellers of last resort defending the $1,300 spot price mark.

The dollar index opened down a small handful of basis points once trading began at 7:44 p.m. EST on Thursday evening in New York. The current 96.17 low tick was set at 9:32 a.m. China Standard Time on their Friday morning — and less than an hour later it was back in the green by a bit. That lasted until 2:45 p.m. CST — and it has now fallen back below unchanged — and is down 6 basis points as of 7:45 a.m. GMT in London/8:45 a.m. CET in Zurich.

Today, at 8:30 a.m. EST, we should get the latest jobs report from the BLS, unless they too are not going to be available because of the U.S. government shut-down.  If they are, I expect that gold and silver prices will ‘react’ in some way.

And as I post today’s column on the website at 4:02 a.m. EST, I note that despite the fact that the dollar index is back to its low tick of the day, the gold price is now down $2.10 the ounce as the first hour of London trading draws to a close. And after bouncing up a bit at the London open, silver is now down 3 cents. Platinum is up 5 dollars — and palladium is up 2.

Gross gold volume continues to climb — and is now up to just under 67,000 contracts — and net of what little roll-over/switch volume there is in this precious metal, net HFT gold volume is around 64,300 contracts. Net HFT silver volume is coming up on 20,500 contracts — and there’s only 465 contracts worth of roll-over/switch volume on top of that.

The dollar index, as I mentioned a few paragraphs ago is now down 14 basis points as 8:45 a.m. in London/9:45 a.m. in Zurich.

It certainly appears that the powers-that-be are trying to turn gold and silver lower — and aren’t about to let it break through the psychologically important $1,300 spot price mark. Let’s see how successful they are. But with today being Friday, plus a jobs report…maybe, be prepared for anything.

With no Commitment of Traders Report today, my Saturday column will be the same as any of my week-day columns…except for a few extra charts — and the ‘blasts from the past’.

Have a good weekend — and I’ll see you here tomorrow.

Ed