Palladium Pulls Away From the Gold Price

09 January 2019 — Wednesday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price didn’t do much until shortly before 9:30 a.m. China Standard Time on their Tuesday morning — and at that point it was sold lower until noon over there.  From that juncture, it traded sideways until shortly before the COMEX opened — and was tapped down to its low tick of the day, such as it was, at the COMEX open.  It struggled weakly higher from there — and the high tick of the day, such as it was, came around 1 p.m. in New York trading.  It was sold a few dollars lower into the COMEX close — and didn’t do much after that.

Once again, the low and highs aren’t worth looking up.

Gold finished the Tuesday session in New York at $1,284.70 spot, down $3.60 from Monday’s close.  Net volume was pretty quiet at a bit over 170,000 contracts — but roll-over/switch volume out of February and into future months was very heavy at a bit over 58,000 contracts.

It was the same general price pattern in silver in morning trading in the Far East, except its low tick was set shortly before 2 p.m. CST on their Tuesday afternoon.  It began to chop unsteadily higher from there — and the New York high tick was set at the afternoon gold fix in London.  It then had a 3-hour long five cent down/up dip that ended shortly before 1 p.m. EST — and didn’t do much of anything from there until the market closed at 5:00 p.m.

The high and low ticks were reported by the CME Group as $15.745 and $15.56 in the March contract.

Silver was closed in New York yesterday at $15.61 spot, down half a cent on the day.  Net volume was nothing special at a bit over 55,000 contracts — and there was fairly heavy roll-over/switch volume in this precious metal as well, at a bit under 10,000 contracts.

Platinum traded a few dollars either side of unchanged through all of Far East and most of Zurich trading on Tuesday.  It was sold down a bit in early morning COMEX trading in New York — and the low tick in this precious metal was set about thirty minutes before the afternoon gold fix in London.  It rallied about five dollars or so from there, but still finished down on the day by 3 dollars at $817 spot.

Palladium chopped sideways until the Zurich open — and it rallied about eight bucks or so during the next hour…but gave all that away, plus a bit more by 9 a.m. in New York.  Then away it went to the upside — and was finally capped around 10:40 a.m. EST.  It was forced lower until shortly after 12 o’clock noon in New York — and then it chopped quietly higher until a few minutes after 4 p.m. in the thinly-traded after-hours market — and didn’t do a lot from there.  Palladium finished the day at $1,311 spot, up 24 bucks on the day.  It was yet another trading session for palladium where the price would have closed at heaven only know what, if it had been allowed to trade freely.  Palladium is now 40 dollars the ounce more expensive than gold.

The dollar index closed very late on Monday afternoon in New York at 95.67 — and began to head higher as soon as trading began at 7:44 p.m. EST on Monday evening.  The 95.96 Far East high came at 12:04 a.m. CST on their Tuesday afternoon — and then chopped very unsteadily sideways [with a negative bias] until 12:02 p.m. GMT in London.  It rallied sharply from there to its 96.02 high tick, which came at 8:50 a.m. in New York — and then proceeded to dip a bit, before revisiting its high tick of the day at 10:12 a.m. EST.  It was down hill from there until exactly 1:00 p.m. EST — and it edged very quietly and unsteadily higher into the close from there.  The dollar index finished the day at 95.90…up 23 basis points from Monday’s close.

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

And here’s the 6-month U.S. dollar index — and the delta between its close…95.48…and the close on the DXY chart above, was 42 basis points.  Click to enlarge.

The gold shares were sold lower as soon as trading began in New York at 9:30 a.m. on Tuesday morning.  Their respective low ticks were set minutes after 9:45 a.m. EST — and they chopped higher from there in a fairly wide range until around 12:20 p.m.  They were in positive territory by a bit at that juncture, but slid a bit from there — and then chopped quietly sideways from that point until trading ended at 4:00 p.m. EST.  The HUI closed higher up 0.03 percent…so call it unchanged once again.

The silver equities were sold down to their respective lows just minutes after trading began in New York on Tuesday morning — and their respective highs were set two hours later.  At that point, they were up a bit over two percent on the day.  But forty-five minutes later they were almost back at unchanged, but rallied quietly from there until around 12:35 p.m. EST — and from that juncture, they chopped quietly sideways for the remainder of the Tuesday trading session.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up 1.35 percent.  Click to enlarge.

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

The CME Daily Delivery Report showed that 46 gold and 22 silver contracts were posted for delivery within the COMEX-approved depositories on Thursday.

In gold, of the three short/issuers in total, the two largest were Advantage and RCG, with 22 and 21 contracts out of their respective client accounts.  There were five long/stoppers in total.  The biggest was RCG, stopping 12 — and tied for second were Advantage and JPMorgan…both stopping 11 contracts each for their respective client accounts.

In silver, ADM issued 20 contracts out of its client account.  JPMorgan was the biggest, picking up 9 contracts in total…5 for itself — and 4 for its clients.  The second largest was Goldman, stopping 8 contracts for its client account.

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 January fell by a chunky 251 contracts, leaving just 99 left open, minus the 46 mentioned a few paragraphs ago.  Monday’s Daily Delivery Report showed that 300 gold contracts were actually posted for delivery today, so that means that 300-251=49 more gold contracts just got added to the January delivery month.  Silver o.i. in January actually rose by 11 contracts, leaving 736 contracts will around, minus the 22 contracts mentioned a few paragraphs ago.  Monday’s Daily Delivery Report showed that 12 silver contracts were actually posted for delivery today, so that means that 12+11=23 more silver contracts were added to the January delivery month.

I’m somewhat surprised that there are still this many silver contracts [736-22=714] left at this point of the January delivery month — and I’m wondering not only who the short/issuers are, but why they’re being so reluctant to deliver because, as Ted Butler says, there’s no benefit whatsoever for them to delay delivery.


There was a smallish withdrawal from GLD yesterday, as 8,155 troy ounces was removed — and that certainly looks like it might be a fee payment of some kind.  There were no reported changed in SLV.

There was a small sales report from the U.S. Mint on Tuesday.  They sold 2,000 troy ounces of gold eagles — 500 one-ounce 24K gold buffaloes — 150,000 silver eagles — plus another 1,000 one-ounce platinum eagles.

Once again, there was no in/out movement in gold over at the COMEX-approved depositories on the U.S. east coast on Monday.

That certainly wasn’t the case in silver, as 1,539,617 troy ounces were received — and another 1,410,292 troy ounces were shipped out.  In the ‘in’ category, there was on big truckload…638,847 troy ounces…dropped off at Brink’s, Inc. — and another truckload…600,448 troy ounces…left at CNT.  There was also 298,324 troy ounces deposited at JPMorgan — and the remaining two good delivery bars…1,997 troy ounces…was picked up by Delaware.  In the ‘out’ category, two truckloads…1,162,439 troy ounces…departed CNT — and 144,598 troy ounces left Brink’s, Inc.  The remaining 103,255 troy ounces was shipped out of HSBC USA.  The link to all this action is here.

There was a bit of activity over at the COMEX-approved gold kilobar depositories in  Hong Kong on their Monday.  They received 500 of them — and shipped out 550.  All of this activity was at Brink’s, Inc. of course — and the link to that, in troy ounces, is here.


Here are four charts that Nick passed around the other day.  The first two 5-year charts show gold and silver bullion coin sales from the U.S. Mint, updated with December’s data.  The gold coin sales include both gold eagles and gold buffaloes — and the silver eagle sales also include sales of the 5-ounce ‘America the Beautiful’ series.  Click to enlarge for both.

The next two charts also show U.S. Mint sales, but on an historical basis.  The top half of the first chart shows annual gold sales of eagles and buffaloes going all the the way back to 1986 — and JPMorgan’s footprint of buying is clearly visible between 2008 and 2016.  The bottom half shows the break-down of the size of gold eagle coins sold over the same period of time.  Click to enlarge.

The second charts shows silver eagle/5-ounce American the Beautiful coin sales for the same period of time.  Once again, JPMorgan’s footprint of buying stands out like the proverbial sore thumb it was.  Click to enlarge as well.

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


CRITICAL READS

2019 Headwinds Are Getting Stronger — Jim Rickards

Much of the global slowdown has to do with the high degree of interconnectedness of the global economy and the extent of global supply chains. The flip side of synchronized growth is a synchronized slowdown. Just as growth in one economy can lead to increased exports for trading partners, a slowdown leads to reduced exports.

Still, why has growth slowed down at all?

The answer has to do with debt, Fed policy, political developments, as well as trade wars.

Specifically, the U.S. and China, the world’s two largest economies, are discovering the limits of debt-fueled growth.

The U.S. debt-to-GDP ratio is now 106%, the highest since the end of the Second World War. The Chinese debt-to-GDP ratio is a more reasonable 48%, but that figure is misleading because it does not include the debts and guarantees of provinces, state-owned enterprises, banks, wealth management products and numerous other entities that the government in Beijing is directly or indirectly obligated to support.

When that additional debt is taken into account, the real debt-to-GDP ratio is over 250%, about the same as Japan’s.

Debt-to-GDP ratios below 60% are considered sustainable; ratios between 60% and 90% are considered unsustainable and need to be reversed; and ratios in excess of 90% are in the red zone and will produce negative growth along with default through nonpayment, inflation or other forms of debt repudiation. The world’s three largest economies — the U.S., China and Japan — are all now deep in the red zone.

This very worthwhile commentary from Jim put in an appearance on the dailyreckoning.com Internet site on Tuesday — and another link to it is here.


Jerome Powell Caves to the Market — Jim Rickards

Fed Chair Jay Powell just sent the most powerful signal from the Fed since March 2015.

He has pretty much taken a March 2019 rate hike off the table until further notice. At a forum hosted by the American Economic Association in Atlanta last Friday, Powell used the word “patient” to describe the Fed’s approach to the next interest rate hike.

When Powell did this, he was reading from a script of prepared remarks in what was otherwise billed as a “round-table discussion.”

This is a sign that Powell was being extremely careful to get his words exactly right. When Powell said the Fed would be “patient” in reference to the next rate hike, this was not just happy talk. The word “patient” is Fed code for “no rate hikes until we give you a clear signal.

This was a signal that there would not be a rate hike at the next FOMC meeting. Investors could do carry trades safely. Only when the word “patient” was removed was the Fed signaling that rate hikes were back on the table.

In that event, investors were being given fair warning to move to risk-off positions.

This is another article from Jim that showed up in the public domain on the dailyreckoning.com Internet site yesterday — and it’s worth reading as well.  Another link to it is here.


Trump Is Trapped — Bill Bonner

Stocks advanced a little yesterday…Monday. Investors were said to be hopeful about the upcoming trade talks with the Chinese.

With a little luck, President Trump will talk to Chinese President Xi Jinping about the ongoing trade war. He’ll announce a big victory – just as he did following talks with North Korea last year.

Then, he’ll let things go back to where they were before.

His modus operandi is now well known. He stirs up a fight. Then, he moves on to another fight… while the dust settles quietly over the last combat.

Most important, a president who only fights fake battles does little harm. If presidents were rated properly, the one who did the least would be the one who got a big monument on the Potomac.

Doing nothing is generally underrated. And, in today’s case, neither the president nor the Fed can do much anyway.

The problem with the Fed is that it is trapped by its own fraud. That is, it has created a fake economy, one that depends on phony interest rates.

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


U.S. Consumer Credit Hits All Time High Amid Surge in Student and Auto Loans

After a surprising slump in the use of revolving debt in September, when US consumers unexpectedly paid down a total of $23 million (revised)on their credit cards, followed by a sharp rebound in credit card usage in October, moments ago the Fed reported that in November, the surge consumer credit continued, rising by $22.1 billion, above the $17.5 billion expected, after October’s whopping $25 billion increase as non-revolving credit surged by the most since December 2017. The surge in borrowing in November brought the total to $3.979 trillion, new all time high, largely on the back of a newfound love with auto and student loans.

After a brief, one-month dormancy in credit cards usage in September, American consumers have clearly returned to doing what they do best – spending money they don’t have – with revolving credit jumping by $4.8 billion, one month after it surged by $9.3 billion. The latest monthly increase brought the total credit card debt to a new all time high of $1.042 trillion.

But the big reason behind the November surge in consumer credit was nonrevolving credit, i.e. student and auto loans, which soared by $17.4 billion, the highest monthly total since 2017, and bringing the non-revolving total to a new all time high of $2.937 trillion.

This Zero Hedge news item appeared on their website at 3:25 p.m. on Tuesday afternoon EST — and I thank Brad Robertson for sharing it with us.  Another link to it is here.


All hands on deck: the Caspian sails towards Eurasia integration — Pepe Escobar

The long-awaited deal on the legal status of the Caspian Sea signed on Sunday in the Kazakh port of Aktau is a defining moment in the ongoing, massive drive towards Eurasia integration.

Up to the early 19th century, the quintessentially Eurasian body of water – a connectivity corridor between Asia and Europe over a wealth of oil and gas – was exclusive Persian property. Imperial Russia then took over the northern margin. After the break up of the USSR, the Caspian ended up being shared by five states; Russia, Iran, Azerbaijan, Turkmenistan and Kazakhstan.

Very complex negotiations went on for almost two decades. Was the Caspian a sea or a lake? Should it be divided between the five states into separate, sovereign tracts or developed as a sort of condominium?

Slowly but surely, the five states reached difficult compromises on sovereign and exclusive rights; freedom of navigation; “freedom of access of all the vessels from the Caspian Sea to the world’s oceans and back” – in the words of a Kazakh diplomat; pipeline installation; and crucially, on a military level, the certitude that only armed forces from the five littoral states should be allowed in Caspian waters.

No wonder then that President Putin, in Aktau, described the deal in no uncertain terms as having “epoch-making significance.”

This commentary by Pepe was posted on the Asia Times website way back on August 14 of last year — and I don’t know how I missed it.  It’s an interesting read, if you have the interest that is — and I thank Sonia Marlowe-Marais for pointing it out.  Another link to it is here.


The dystopian view: Is this the year the world falls apart? — Ambrose Evans-Pritchard

This is the year that mounting hammer blows to the Western alliance system and the edifice of global governance threaten to bring the old order tumbling down.

The geopolitical environment is the most dangerous it’s been in decades,” warns Eurasia Group, political risk-adviser to the world’s elites, and a voice of globalist ideology.

Pax Americana is unravelling. The transatlantic concord underpinning the West since the Fifties is dying. NATO, the G7, the G20, the WTO and the E.U. are all in varying degrees of crisis. Vladimir Putin’s Russia has an open goal. “Every single one of these is trending negatively. And most in a way that hasn’t been in evidence since the Second World War,” it said.

Anti-liberal strongmen are tugging away at the edges in Turkey, Brazil and Hungary. Some in the twilight zones of the democratic world are drifting – towards the Putin-Xi camp.

U.S. alliances everywhere are weakening. The limited trust that underpins the U.S.-China relationship appears to be gone,” said Eurasia in its annual outlook.

The dystopian picture is grim enough even at this late stage of global economic expansion, which begs the question: what would happen in a deep recession with mass unemployment?

This interesting commentary from Ambrose appeared on The Sydney Morning Herald website at 10:55 a.m. local time ‘down under’ on their Tuesday morning — and I plucked it from a Zero Hedge article that Brad Robertson sent our way.  Another link to it is here.


India’s gold imports dip 14.5% to 759 tonnes in 2018 on tepid demand, rule changes

India’s gold imports have declined by 14.5 per cent in 2018 to 759 tonnes from 876 tonnes the previous year. The reason are, sluggish demand, changes in regulations such as alteration of criteria for nominated agencies to import gold and the ban on export of 24 carat jewellery to stop misuse.

According to data compiled by the GFMS Thomson Reuters, the drop in import volumes is matched by a decline in the value of inward shipments, which were estimated to be lower by 13.4 per cent to $31.37 billion in 2018.

The fall in imports is attributed to weak rural demand and to higher gold prices brought about by a weak rupee which reduced the metal’s appeal to price-sensitive investors.

Debajit Saha, Senior Analyst, GFMS Thomson Reuters, says, “Sluggish demand for gold jewellery on account of price, and a not so good monsoon resulted in lower disposable liquidity in the hands of the farming community. Consumers’ reluctance to buy jewellery in cash beyond a small limit fuelled the drop in demand in the market. After demonetisation and introduction of GST, consumers have been very careful in buying gold in cash.”

It’s worth noting that India hasn’t reported gold imports for either November or December as of yet, so I get the impression that the number being used here is an educated guess, because it can’t be based on actual data.  This gold-related news story, filed from Mumbai, showed up on the business-standard.com Internet site at 11:15 p.m. IST on their Tuesday evening, which was 12:15 p.m. in New York — EST plus 11 hours.  Another link to it is here.


The PHOTOS and the FUNNIES

Here are two more photos from The Guardian article that Patricia Caulfield shared with us.  The first one comes with this comment: “A Euroasian beaver eating willow on the River Ericht near Blairgowrie, Scotland. Scottish ministers were urged this week to honour a pledge to protect beavers.” — Photograph by: Ian Sherratt  Click to enlarge.

Photo number two comes with the caption “A humpback whale off the coast of San Francisco, California. It was reported this week that Japan is to withdraw from the International Whaling Commission (IWC) and resume commercial whaling next year.” — Photograph by: Anton Sorokin  Click to enlarge.


The WRAP

With the obvious exception of palladium, it was yet another day where precious metal prices were kept well contained.  There wasn’t much in the way of volume in either gold or silver, so the powers-that-be had a pretty easy time of it — and it was also helped by the ‘rally’ in the dollar index as well.

Here are the 6-month charts for the Big 6 commodities — and with the exception of palladium, there’s not a lot to see, although the price of WTIC continues to sneak higher.  Click to enlarge.

And as I type this paragraph, the London open is less than ten minutes away — and I note that the gold price crawled a few dollars higher once trading began in New York at 6:00 p.m. EST on Tuesday evening. But shortly before 10 a.m. China Standard Time on their Wednesday morning, it was sold quietly lower until around 1 p.m. over there — and it has been chopping equally quietly sideways since. At the moment, gold is down $2.80 an ounce. The silver price chopped sideways until a very few minutes before 12 o’clock noon CST — and it was sold unsteadily lower from there — and is currently down 5 cents the ounce. The platinum price edged unevenly higher until shortly before noon CST as well — and it hasn’t done much since. It’s up 4 dollars at the moment. The palladium price traded sideways for the first two hours once trading began in New York yesterday evening. At that point, it jumped up about twelve bucks or so — and that spike higher was promptly capped, as was the rally that began minutes before noon CST. It has been trading mostly quietly sideways since — and is up 9 dollars as Zurich opens.

Net HFT gold volume is about 38,000 contracts — and there’s 2,085 contracts worth of roll-over/switch volume on top of that. Net HFT silver volume is 8,800 contracts — and there’s an insignificant 66 contracts worth of roll-over/switch volume in that precious metal.

The dollar index opened down about 10 basis points as soon as trading began at 7:44 p.m. EST on Tuesday evening in New York — and has been chopping very quietly sideways in a ten basis points range ever since, but has dipped a bit lower over the last hour. And as of 7:45 a.m. GMT in London, the index is down 17 basis points.

As the headline to today’s column stated, the palladium price is now a very reasonable amount higher than the gold price. And as interesting as that headline is, it still doesn’t reflect any kind of reality, as all four precious metals would be an order of magnitude higher that they are now if they were all allowed to trade freely — and that includes palladium. Based on that, one should read too much into the price difference…although there are supply/demand issues at the moment.

And as I post today’s column on the website at 4:02 a.m. EST, I see that the gold price is a few dimes higher as the first hour of London trading draws to a close — and it’s currently down $2.30 an ounce. Silver is back at unchanged now. Platinum is up 5 dollars now — and palladium is up 10 bucks.

Gross gold volume is just under 49,000 contracts — and net of roll-over/switch volume, net gold volume is around 42,500 contracts. Net HFT silver volume is about 10,500 contracts — and there’s still only 77 contracts worth of roll-over/switch volume on top of that.

The current 95.69 low tick of the day was set around 8:42 a.m. GMT — and it’s off that mark by a hair now — and down 21 basis points as 8:45 a.m. GMT/9:45 a.m. CET.

That’s all I have for today — and I’ll see you here tomorrow.

Ed