The Fed Caves — and Precious Metal Prices Pop Higher

31 January 2019 — Thursday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price began to crawl quietly higher starting shortly after 9 a.m. China Standard Time on their Wednesday morning — and that lasted until around 8:40 a.m. GMT in London.  Then it crawled equally quietly lower until ‘The Word’ came out at 2 p.m. EST in Washington.  The gold price shot higher at that juncture, as the dollar index cratered.  But it was obvious that the rally in the gold price ran into ‘resistance’ almost right away.  The high tick was set around 2:45 p.m. in after-hours trading — and it was sold lower over the the next thirty minutes before creeping a bit higher into the 5:00 p.m. close.

The low and high ticks in this precious metal were reported by the CME Group as $1,308.10 and $1,323.40 in the February contract — and $1,313.50 and $1,328.60 in the April contract, which is the new front month for gold.

Gold was closed in New York on Wednesday at $1,319.40 spot, up $8.10 on the day.  Net volume was a bit over 201,000 contracts, with most of that occurring in the April delivery moth.  Roll-over/switch volume was around 71,000 contracts.  But as I said in this space yesterday, I would take these numbers with a grain of salt, as they can be wildly distorted at this time of month when a delivery month follows.

The silver price followed the gold price pretty closely yesterday — and most of its 14 cent price gain that it enjoyed in early London trading, was gone by the time ‘The Word’ came from the Eccles Building yesterday afternoon.  Silver’s rally was manhandled in a similar as gold’s at that juncture, as its price wasn’t allowed to get far, either…although it was allowed to close above the $16 spot mark.

The low and high ticks were recorded as $15.825 and $16.12 in the March contract.

Silver was closed on Wednesday afternoon in New York at $16.04 spot, up 23.5 cents on the day.  Net volume was pretty healthy at about 72,500 contracts — and there was somewhere around 8,500 contracts worth of roll-over/switch volume in this precious metal.

The platinum price crept unsteadily higher…beginning at the same time as silver and gold…shortly after 9 a.m. in Far East trading.  Its Zurich high, such as it was, came around 12:15 p.m. CET and, like gold and silver as well, gave up all those gains by the time ‘The Word’ was spoken at 2:00 p.m. EST in New York.  Platinum’s sharp rally at that point was even more blatantly capped — and it finished the day at $815 spot, up 3 bucks from Tuesday’s close.

Palladium rallied a few dollars in Far East trading on their Wednesday, but gave that all back, plus a bunch more by shortly after 1 p.m. CET in Zurich trading.  From there it chopped quietly and unevenly higher until about 3 p.m. EST in the thinly-traded after-hours market — and didn’t do much after that.  Platinum finished the Wednesday session in New York at $1,340 spot, up 13 dollars on the day.

The dollar index closed very late on Tuesday afternoon in New York at 95.82 — and then dropped a few basis points at the 7:45 p.m. EST open on Thursday evening.  From that juncture it chopped quietly sideways until 12:15 a.m. in London — and it then rallied to its 95.98 high tick by around 9:12 a.m. in New York.  From that point it edged quietly sideways, with a slight negative bias until ‘The Word’ came down from on High.  Then the trap door opened.  The 95.25 low tick was set around 2:45 p.m. — and it ‘rallied’ a bit from there until shortly after 4 p.m…before fading a handful of basis points into the 5:20 p.m. EST  close.  The dollar index finished the Wednesday session in New York at 95.34…down 48 basis points from Tuesday’s close.

I suspect that the usual ‘gentle hands’ were the only thing that saved the U.S. dollar index from what mostly likely would have turned into a bloodbath.

Here’s the usual DXY chart from BloombergClick to enlarge.

And here’s the 6-month U.S. dollar index chart courtesy of stockcharts.com — and the delta between its close…95.03…and the close on the DXY chart above, was 31 basis points on Wednesday.  Click to enlarge.

The gold stocks opened down a bit — and then chopped quietly sideways just below unchanged until Powell opened his pie hole at 2:00 p.m. EST.  They rallied sharply from there until a few minutes before 3 p.m…but then gave up over half those gains when the gold price was capped and sold lower.  The HUI closed up 1.08 percent.

The silver equities opened down a bit as well, but were back in positive territory to stay shortly after that — and they then chopped quietly sideways just above the unchanged mark — and you know the rest.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed higher by 1.81 percent, but was up over three percent at its high.  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 First Day Notice figures for gold and silver deliveries on Friday, February 1 — and there were 939 gold and 286 silver contracts posted for delivery on that day.

In gold, there were five short/issuers in total — and by far the largest was JPMorgan with 828 contracts out of their client account.  In very distant second and third spots were ADM and Morgan Stanley with 60 and 44 contracts out of their respective client accounts as well.  There were nine long/stoppers in total — and by far the largest was JPMorgan with 540 contracts…286 for its client account, plus another 254 for its own account.  Citigroup was in second spot with 240 for its in-house/proprietary trading account — and in very distant third place was Morgan Stanley, with 87 contracts for its own account as well.

In silver, there were five short/issuers.  ABN Amro was the largest with 148 contracts out of its client account — and in second and third place came Goldman and Advantage with 52 and 49 contracts out of their respective client accounts as well.  Of the four long/stoppers in total, the largest by far was JPMorgan, with 186 contracts for its client account — and in distant second place came HSBC USA with 73 contracts for its own account.

The link to yesterday’s Issuers and Stoppers Report is here.

The CME Preliminary Report for the Wednesday trading session showed that gold open interest in January is zero, as the remaining contract outstanding were posted for delivery yesterday.  Silver o.i. in January is also zero, as the remaining 8 contracts are out for delivery today.

Gold open interest in February cratered by 25,382 contracts, leaving a hefty 10,648 still around, minus the 939 contracts mentioned several paragraphs ago.  I expect February open interest in gold to decline a bit more today.  But having said that, there certainly appears to be a large number of gold contracts left to be delivered this month.  Silver o.i. in February actually rose by 5 contracts, leaving 410 still open, minus the 286 contracts mentioned a few paragraphs ago, so silver deliveries are already well advanced after Day One of February deliveries.


There were no reported changes in GLD yesterday.  But for the second day in a row there was a deposit in SLV, as an authorized participant added 938,232 troy ounces.

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

The only activity in gold over at the COMEX-approved depositories on the U.S. east coast on Tuesday, was 16,014 troy ounces that was received at Canada’s Scotiabank.  Nothing was shipped out.  The link to that is here.

For a change, there wasn’t that much activity in silver.  Nothing was reported received — and 600,367 troy ounces were shipped out the door for parts unknown.  A truckload…570,293 troy ounces…departed Scotiabank — and the remaining 30,073 troy ounces left the CNT Depository.  The link to that is here.

There was some activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Tuesday.  They reported receiving 1,300 of them — and shipped out 1,150.  All of this occurred at Brink’s, Inc. as per usual — and the link to that, in troy ounces, is here.


Nick sent around a bunch of charts showing December import and exports into and out of Switzerland yesterday evening, plus the import/exports charts for their entire year just past.  However, I only have space for the December charts here — and the 2018 calendar year charts will have to wait until tomorrow’s column.

For December, they imported 80.1 tonnes — and shipped out 125.1 tonnes.  This first chart is updated with December’s data.  Click to enlarge.

The first chart below shows what amounts and what countries they received gold from — and the second chart shows the amounts and the countries that they shipped gold toClick to enlarge for both.

And as I stated above, I’ll have the yearly Swiss import/export numbers in tomorrow’s column.


The Bergamo Treasure is a large Lombardic and Ostrogothic hoard found near the city of Bergamo in northern Italy in the nineteenth century. It was mostly acquired by the British Museum in 1897.

The hoard was supposedly unearthed in three different graves near Bergamo in the province of Lombardy, Italy. From the 6th century A.D., Bergamo was the seat of one of the most important Lombard duchies of northern Italy. Dating from this era, the prestigious items from the grave groups suggest they belonged to important figures at the Lombardic court.

It was largely composed of ecclesiastical and secular jewellery that reflect the contemporary tastes of Lomardic and Ostrogothic cultures. It includes two gold appliqué crosses and seven rectangular gold mounts that were probably attached to an item of clothing, various glass beads and bronze buckles, an agate pendant and several finger-rings and ear-rings. One of the finger rings is incised with the bust of a noble lady wearing a diadem and a pair of pendant earrings, inscribed either side with the lettering ‘GUMED/RUTAVE’.  Click to enlarge.

Except for ‘The Word’ from the Eccles Building, it was another fairly quiet news day — and I don’t have a lot for you.


CRITICAL READS

Patient” Fed Capitulates to Market, Surprises With Unexpected Balance Sheet Unwind Clarification

With a 1% probability of a rate-hike today, all that matters is The Fed’s tone (better be über dovish) and any language shifts on the balance sheet normalization. And, by the looks of things, the now “patient” Fed capitulated to both Trump and the market:

In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.”

Since The Fed hiked rates in December, Gold is the clear winner…

So, did The Fed deliver?

They appeared to do so – folding entirely to the market –

  • Fed removes reference to further gradual rate increases
  • Fed says it plans to continue with current floor approach
  • Fed says it’s prepared to adjust balance-sheet normalization
  • Fed reiterates federal funds target is primary policy tool
  • Fed says economic activity rising at solid rate, jobs strong
  • Fed says labor market strengthened, unemployment remained low
  • Fed says spending grew strongly, investment moderated
  • Fed says core and headline inflation remain near 2%

The Fed is saying everything is awesome with the economy but we are panicking out of our rate-hike and balance sheet normalization process because the market shit the bed?

This longish chart-filled commentary appeared on the Zero Hedge website at 3:04 p.m. EST on Wednesday afternoon — and I thank Brad Robertson for sending it our way.  Another link to it is here.  There was a companion ZH story about all this headlined “Dollar Dumps, Curve Steepens, Stocks Soar As Fed Sets Stage For QE4“.  I thank Brad Robertson for that one as well.


Jeff Gundlach Slams “Embarrassed” Fed’s Powell For “Caving to the Stock Market

Having earlier in the week indicated his grave  concern that a recession looms, signaled by Conference Board sentiment extremes…noting the spread between the Conference Board’s current sentiment and expectations is the widest since March 2001, the first month of the U.S. recession that year.

The bond guru told Reuters in an interview tonight that fragile equity markets forced Fed Chair Jerome Powell to pledge on Wednesday that the U.S. central bank will be patient with future interest rate hikes.

He’s caving to the stock market. The stock market scared him,” in late 2018.

And while Powell umm’d and agh’d through his press conference, truly unable to draw the line between optimistic economic outlooks and his unprecedented reversal of policy (which plunged market expectations from a 50bps hike in 2019 to a 25bps cut in a few weeks)…

Gundlach explained that this is laying the ground work for QE4…

“Even though they won’t say so, this shows that Quantitative Tightening will be slowed down,” Gundlach said.

And if need be, the Fed will expand the balance sheet. QE (Quantitative Easing) is the ‘unnamed’ other policy tool he referenced in case lowering the Fed funds rate proves not to be enough to strengthen the economy/markets.”

Which explains the plunge in the dollar — and surge in stocks, bonds, and gold…

This commentary showed up on the Zero Hedge website at 8:55 p.m. on Wednesday evening EST — and another link to it is here.


In First Phone Call, Trump Congratulates Guaido on Becoming President of Venezuela

President Trump started a Tuesday morning twitter storm with a tweet warning that Maduro will be “willing to negotiate” after the U.S. starves his teetering regime of badly needed funding via the sanctions that were levied earlier this week.

But tweeting isn’t all the president did. According to Press Secretary Sarah Sanders, Trump spoke with Guaido for what appears to be the first time on Wednesday. A readout of the call revealed that Trump “congratulated” Guaido on his “historic assumption of the presidency of Venezuela,” and promised to keep in regular contact to “support Venezuela’s path back to stability.”

Roughly two dozen countries have recognized Guaido as the legitimate ruler of Venezuela, and a handful of European nations have demanded that Maduro either commit in the coming days to holding free elections or they too will officially recognize Guaido.

The conversation followed a crackdown by the country’s Supreme Court, which banned Guaido from leaving the country. Given Russia and China’s demands that the U.S. refrain from interfering in Venezuela, President Xi and President Putin aren’t going to like this.

No, they won’t…but they won’t be able do much about it.  This Zero Hedge article was posted on their Internet site at 10:24 a.m. on Wednesday morning EST — and it’s another offering from Brad Robertson.  Another link to it is here.


Trump Warns Europeans Not to Defy U.S. Sanctions Against Iran

With reports that the European Union is close to establishing its trade vehicle for facilitating trade with Iran, the Trump Administration has issued a statement warning them not to defy the U.S. sanctions, in any way.

The choice is whether to do business with Iran or the United States,” Sen. Tom Cotton (Republican-Arkansas), told the AP.  “I hope our European allies choose wisely.”

The U.S. reimposed sanctions on Iran after withdrawing from the P5+1 nuclear deal. E.U. nations did not withdraw from the deal, and companies are still allowed to trade with Iran. This, however, is difficult because U.S. sanctions are scaring most banks away.

The E.U. solution is a clearing house for the trades, which allow companies to pay for Iranian goods, and Iran to pay E.U. companies for services, without any money crossing borders, cutting the banks out of it.

This commentary/news item comes from the antiwar.com Internet site — and was posted on Zero Hedge at 3:30 a.m. EST on Wednesday morning.  It’s another contribution from Brad Robertson — and another link to it is here.


Buy Gold Before the Everything Bubble Blows Up — Chris Martenson

Futurist and economic researcher Chris Martenson says central banks cannot stop the money printing without the whole system blowing up.  Maybe that is why gold is going up?  Martenson says, “I believe it is. . . . I buy gold because gold is the only form of money that is not simultaneously someone else’s liability.  We are talking about a world so saddled with debt, I am not sure where all the liabilities lie.  I don’t trust . . . the accounting of major corporations.  I don’t trust what derivatives will do in a crisis. . . . This is the ‘Everything Bubble.’  What happens when it bursts?  We don’t know.  So, gold, to me, is the thing I want to own and hold when you have a systemic crisis.”

Join Greg Hunter of USAWatchdog.com as he goes One-on-One with Chris Martenson, co-founder of PeakProsperity.com.

This 43-minute video interview showed up on the youtube.com Internet site on Tuesday sometime — and their chat is very wide-ranging…covering a lot of topics.  I’ve just skimmed it here and there, so you’re on your own with this one.  I thank Phil Manuel for sending it our way — and another link to it is here.


Venezuela Has 20 Tonnes of Gold Ready to Ship. Address Unknown

Venezuelan lawmaker Jose Guerra dropped a bombshell on Twitter Tuesday: The Russian Boeing 777 that had landed in Caracas the day before was there to spirit away 20 tonnes of gold from the vaults of the country’s central bank.

The claim set off a welter of social media speculation and outrage. When asked how he knew this, Guerra provided no evidence.

Just another outlandish comment from a lawmaker trying to draw attention to the plight of crisis-torn Venezuela? Perhaps not. For one thing, Guerra is a former central bank economist who remains in touch with old colleagues there. For another, a person with direct knowledge of the matter told Bloomberg News Tuesday that 20 tonnes of gold have been set aside in the central bank for loading. Worth some $840 million, the gold represents about 20 percent of its holdings of the metal in Venezuela, the person said. He provided no further information on plans for those bars.

With strongman President Nicolas Maduro losing control of the country’s already-scant finances and reserves thanks to U.S. sanctions, who can put his hands on the nation’s estimated 200 tons of gold at home and abroad has become a key question. The nation owes billions to its patrons Russia and China as well as bondholders, and also needs hard currency to buy food for its starving people.

U.S. National Security Advisor John Bolton on Wednesday warned on Twitter against trading with the nation: “My advice to bankers, brokers, traders, facilitators, and other businesses: don’t deal in gold, oil, or other Venezuelan commodities being stolen from the Venezuelan people by the Maduro mafia.”

I’m not sure about the veracity of this story…so be careful with it.  It put in an appearance on the Bloomberg website at 4:40 p.m. Pacific Standard Time on Tuesday afternoon — and was updated about sixteen hours later.  I found it in a GATA dispatch — and another link to it is here.  The Zero Hedge spin on this is headlined “Maduro “Open To Talks” As 20 Tons Of Gold Mysteriously Disappear From Venezeula’s Vaults” — and it comes courtesy of Brad Robertson as well.


West Virginia Legislator Proposes Eliminating ALL Taxation on Gold and Silver

West Virginia legislator Delegate Pat McGeehan has introduced the West Virginia Sound Money Act, House Bill 2684, to eliminate all tax liability on gold and silver in the state.

Following in the footsteps of the Wyoming Legal Tender Act, which passed in Wyoming overwhelmingly last year, the West Virginia Sound Money Act is a similar measure that will remove all taxation against gold and silver, including sales and use tax, property tax, individual income tax, and corporate income tax.

Under current law, West Virginia citizens are discouraged from insulating their savings against the devaluation of the dollar because they are penalized with taxation for doing so. House Bill 2684 removes the disincentives to using gold and silver for this purpose.

West Virginia, unfortunately, ranks 50th out of all 50 states according to the 2018 Sound Money Index. West Virginia could restore constitutional money and help savers, wage earners, pensioners, those on fixed incomes, and more by eliminating taxation on the exchange, use, or sale of real money, i.e. gold and silver.

This news item, filed from Charleston in West Virginia, was posted on the moneymetals.com Internet site on Wednesday — and I found this in a GATA dispatch as well.  Another link to it is here.


Crossing Borders with Gold and Silver Coins — Doug Casey

It’s well-known that you have to make a declaration if you physically transport $10,000 or more in cash or monetary instruments in or out of the US, or almost any other country; governments collude on these things, often informally.

Gold has always been in something of a twilight zone in that regard. It’s no longer officially considered money. So it’s usually regarded as just a commodity, like copper, lead, or zinc, for these purposes. The one-ounce Canadian Maple Leaf and US Eagle both say they’re worth $50 of currency.

But I’ve had some disturbing experiences over the past couple of years crossing borders with coins. Of course, crossing any national border is potentially disturbing at any time. You might find yourself interrogated, strip searched, or detained for any reason or no reason. But I suspect what happened to me crossing a few borders in recent times could be a straw in the wind.

I’ve gradually accumulated about a dozen one-ounce silver rounds in my briefcase, some souvenirs issued by mining companies, plus others from Canada, Australia, China, and the US. But when I left Chile not long ago, the person monitoring the X-ray machine stopped me and insisted I take them out and show them to her. This had never happened before, but I wrote it off to chance. Then, when I was leaving Argentina a few weeks later, the same thing happened. What was really unusual was that the inspector looked at them, took them back to his supervisor, and then asked if I had any gold coins. I didn’t, he smiled, and I went on.

Doug has written about this before — and I’m not sure if this is new material, or a rehash of what he’s written earlier on this subject.  It was posted on the internationalman.com Internet site a few days ago — and it slipped my mind to post it until I saw it show up on the gata.org Internet site yesterday.  New, or rehash, it’s certainly worth reading — and another link to it is here.


The PHOTOS and the FUNNIES

Here are two more photos from The Guardian — and courtesy of Patricia Caulfield.  This series is headlined “The best of 2018 wildlife photography awards“.

This first shot is entitled: ‘European robin’ by Greek photographer Nikos Bukas.  There was no caption with this photo, but none is really needed.  Click to enlarge.

This second photo is entitled “Stand Out From the Crowd” by South African photographer Chris Oosthuizen.  It’s captioned “An adult king penguin is surrounded by chicks at a large breeding colony. Populations of the species inhabiting sub-Antarctic islands face an uncertain future, as climate change threatens to shift oceanic fronts where the animals feed, pushing them further away from breeding sites.”  Click to enlarge.


The WRAP

The gold price didn’t do much on Wednesday before ‘The Word’ came out…rising and falling five bucks or so between the Tuesday night open in New York and 2 p.m. EST on Wednesday afternoon.  Considering the total capitulation by the Fed to the equity and bond markets, a rally in the precious metals was no surprise.

And also what came as no surprise, was the obvious intervention, not only in gold, silver and platinum prices…but the rescue of the dollar index as well.  So ‘da boyz’ are still obviously out and about — and what still remains unknown is JPMorgan’s part in yesterday’s price capping episode.

Unfortunately, there’s no way of knowing that — and we won’t be able to get a handle on this until three weeks from now when the CFTC finally gets caught up on their five weeks worth of missing COT Reports.  The fact that they’re starting to issue the oldest COT Report first is no accident, as they could have just as easily posted the current situation in the next COT Report — and then work backwards, but they chose not to.  Ted was not amused — and rightfully so.

Here are the 6-month charts for all four precious metals, plus copper and WTIC — and because the highs of the day in all four precious metals occurred after the COMEX close once again, they don’t show up on Wednesday’s dojis on the charts below.  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 traded a bit below unchanged until the 2:15 p.m. CST afternoon gold fix in Shanghai. It made it back in to positive territory about an hour later — and is currently up 40 cents an ounce. The silver price pattern was very similar — and it was sold back below the $16 spot mark going into the afternoon Shanghai gold fix. It’s back above that mark now, but currently down 4 cents the ounce. Platinum chopped quietly sideways throughout the entire Far East trading session on their Thursday — and is up a buck. The palladium price traded sideways until shortly after 1 p.m. China Standard Time — and has been heading unsteadily higher since — and is also up a dollar as Zurich open.

Net HFT gold volume is just over 36,500 contracts — and there’s around 2,535 contracts worth of roll-over/switch volume on top of that. Net HFT silver volume is fairly heavy already at a bit over 12,500 contracts — and there’s only 268 contracts worth of roll-over/switch volume in that precious metal.

The dollar index opened higher by a few basis points once trading began at 7:45 p.m. EST in New York on Wednesday evening, which was 8:45 a.m. the following morning CST. It has been heading quietly and erratically lower since — and is down 17 basis points as of 7:48 a.m. GMT in London.

As I touched on earlier, we get the next COT Report on Friday, but the data is basically six weeks old — and I will have virtually nothing to say about it in my Saturday column, as it’s very much ‘yesterday’s news’.  However, Ted may get some indication as to whether JPMorgan had been active during that particular reporting week — and whatever he has to say, you’ll get the Reader’s Digest version of that.

And as I post today’s column on the website at 4:02 a.m. EST this morning, I see that the gold price hasn’t done much during the first hour of London trading — and is currently up 40 cents. Silver hasn’t done much, either — and is down 3 cents. Platinum is up 2 dollars, but palladium is now up 4 bucks.

Gross gold volume is a bit over 50,500 contracts — and minus what roll-over/switch volume there is, net HFT gold volume is around 44,000 contracts. Net HFT silver volume is coming up on 14,500 contracts — and there’s still only 320 contracts worth of roll-over/switch volume in this precious metal.

The dollar index has been chopping quietly and unsteadily sideways for the last hour — and as of 8:45 a.m. GMT in London/9:45 a.m. CET in Zurich, it’s down 6 basis points.

That’s all I have this time, which is more than enough.

With today being the last trading session of January, nothing much will surprise me when I check the charts after rolling out of bed later this morning.

See you here tomorrow.

Ed