12 February 2019 — Tuesday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price began to head quietly and unsteadily lower as soon as trading began at 6:00 p.m. EST in New York on Sunday evening — and the low tick of the day was set at the 9:30 a.m. open of the equity markets in New York on Monday morning. It rallied a bit from there until a few minutes before London closed — and didn’t do much of anything after that.
Once again, the high and low ticks aren’t worth looking up.
Gold was closed in New York on Monday afternoon at $1,307.80 spot, down $6.20 on the day. Net volume was exceedingly quiet once again at a bit over 140,000 contracts — and roll-over/switch volume was a hair under 11,000 contracts on top of that.
It was almost the same price pattern for silver — and its New York low came a few minutes before 9:30 a.m. EST. Its tiny rally after that was capped and turned lower shortly after 10:15. It was then sold a bit lower until around 1:00 p.m. EST — and chopped quietly sideways into the 5:00 p.m. close from there.
Silver traded within a one percent price range on Monday, so I shan’t bother with the high and low ticks in this precious metal, either.
Silver was closed yesterday at $15.675 spot, down 13 cents from Friday. Net volume was extremely quiet at hair over 37,000 contracts — and there was a bit over 16,500 contracts worth of roll-over/switch volume on top of that.
Platinum was also sold unsteadily lower until around 1 p.m. China Standard Time on their Monday afternoon — and then didn’t do a whole lot of anything until trading began on the COMEX at 8:30 a.m. EST in New York. From that juncture, the price descent continued — and the low tick was set a few minutes before 1 p.m. — and it ticked a few dollars higher in after hours trading. Platinum finished the Monday session in New York at $785 spot — down 13 bucks on the day.
The palladium price was sold lower until 11 a.m. CST on their Monday morning — and then traded sideways until the Zurich open. It got sold down pretty hard at that point, culminating in a sharp down/up spike shortly before 10 a.m. Central European Time [CET] in Zurich. It rallied back a bunch from there until shortly before the COMEX open in New York — and then was sold lower once again going into the 10 p.m. EST afternoon gold fix in London. It crawled a few dollars higher into the 5:00 p.m. close from there. Palladium was closed at $1,368 spot, down 18 dollars from Friday.
The dollar index closed very late on Friday afternoon in New York at 96.64 — and opened about unchanged once trading began around 6:35 p.m. EST on Sunday evening. From that point, it didn’t do much of anything until 2:15 p.m. CST on their Monday afternoon, which was the afternoon gold fix in Shanghai — and the subsequent rally lasted until around 10:05 a.m. in London. It was sold lower from that juncture until around 11:38 a.m. GMT — and then began to chop unsteadily higher until 1:00 p.m. in New York — and it didn’t do much of anything going into the close. The dollar index finished the Monday session at 97.06…up 42 basis points on the day.
Here’s the DXY chart, courtesy of Bloomberg. Click to enlarge if necessary.
And here’s the 6-month U.S. dollar index chart…and the delta between its close…96.86…and the close on the DXY chart above, was 20 basis points on Monday.
The gold stocks gapped down about a percent and a half at the New York open — and then crawled unsteadily higher until shortly before noon EST. From that juncture, they began to fade — and the HUI finished down 1.08 percent.
The silver equities followed a very similar price path — and they began to chop quietly lower staring at 12:30 p.m. in New York trading. Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down 1.46 percent. Click to enlarge if necessary.
And here’s Nick’s 1-year Silver Sentiment/Silver 7 Index chart as well. Click to enlarge.
The CME Daily Delivery Report showed that 73 gold and 2 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday.
In gold, the two short/issuers were ABN Amro and Advantage, with 50 and 23 contracts out of their respective client accounts. There were four long/stoppers in total — and the largest was JPMorgan, stopping 36 in total…29 for its own account, plus 7 more for its clients. And in second and third place came Advantage, with 19 for its client account — and Citigroup, with 15 for its in-house/proprietary trading account.
In silver, Advantage issued both contracts — and both were stopped by Morgan Stanley. Both transactions involved their respective client accounts.
The link to yesterday’s Issuers and Stoppers Report is here.
The CME Preliminary Report for the Monday trading session showed that gold open interest in February fell by 26 contracts, leaving 663 still around, minus the 73 contracts mentioned a few paragraphs ago. Friday’s Daily Delivery Report showed that 55 contracts were actually posted for delivery today, so that means that 55-26=29 more gold contracts were just added to the February delivery month. Silver o.i. in February declined by 5 contracts, leaving 3 still open, minus the 2 contracts mentioned a few paragraphs ago. Friday’s Daily Delivery Report showed that 7 silver contracts were actually posted for delivery today, so that means that 7-5=2 more silver contracts just got added to February.
There were no reported changes in GLD yesterday, but an authorized participant removed another 1,125,727 troy ounce of silver from SLV.
Since the SLV high inventory watermark back on 22 October 2018, there has been 26,635,420 troy ounces of silver removed from SLV on a net basis…114 days of world silver production.
The folks over at the shortsqueeze.com Internet site updated their website with the changes in the short position in both GLD and SLV as of the close of trading on Thursday, January 31 — and this is what they had to report. The short position in SLV only fell by a tiny 152,700 shares/troy ounce, which represents a drop of 1.4 percent. The short position in GLD took a big drop…from 1,661,430 troy ounces, down to 1,336,050 troy ounces…a decline of 19.6 percent.
The folks over at Switzerland’s Zürcher Kantonalbank updated their website with the goings-on inside their gold and silver ETFs as of the close of business on Friday, February 8 — and this is what they had to report. Both of these ETFs had withdrawals during the reporting week…9,806 troy ounces from their gold ETF — and 88,575 troy ounces from their silver ETF.
There was a sales report from the U.S. Mint on Monday. They sold 1,000 one-ounce 24K gold buffaloes — and 550,000 silver eagles.
There was some activity in gold over at the COMEX-approved depositories on the U.S. east coast on Friday. Nothing was reported received — and 111,350 troy ounces was shipped out. There was 64,194 troy ounces shipped out of JPMorgan — and the remaining 47,155 troy ounces departed Brink’s, Inc. The link to that is here.
There wasn’t much going on in silver. There was 473,546 troy ounces was received — and of that ended up in JPMorgan’s vault. All the ‘out’ activity was one good delivery bar…958 troy ounces…that was shipped from Delaware. The link to that is here.
There was very little activity at the COMEX-approved gold kilobar depositories in Hong Kong on their Friday. Nothing was reported received — and only 200 were shipped out. That activity was at Brink’s, Inc. of course — and the link to that, in troy ounces, is here.
Activity in Hong Kong should pick up substantially now that their Lunar/New Year holiday week is over and done with.
Here are the usual two charts that Nick Laird passes around on the weekend. They show the amount of silver and gold in all know depositories, mutual funds and ETFs, updated with last week’s data. During the reporting week there was a net 212,000 troy ounces of gold removed — and in silver, there was 2.02 million troy ounces removed on a net basis as well. These two charts cover about a 28-month time period. Click to enlarge if necessary.
Not including anything related to the ongoing 3-ring circus in Washington, I have a decent number of stories for you today.
Nobel laureate Paul Krugman is possibly the world’s most famous Keynesian economist thanks to his position on The New York Times editorial board. And he just joined the growing chorus of voices calling for a U.S. recession in the next two years.
The U.S. economy is struggling for two reasons: The scope for a powerful monetary and fiscal response is limited, and the current “leadership” under President Trump lacks the competence to adequately respond to a crisis, during an interview with Bloomberg in Dubai.
But moving past the U.S., Krugman echoed the IMF’s finding that the world is “dangerously unprepared” for the coming global recession, citing the slowdown in China, and a Europe inching ever-closer to a eurozone-wide recession, as the two biggest risks the global economy.
“I wouldn’t be as definitive, but it seems pretty likely. There seems to be an accumulation of smaller problems and then the underlying backdrop is that we have no good policy response. The Fed can’t cut rates very much, there is in fact fiscal space if we were prepared to use it but it’s hard to see that this current leadership is going to respond in any kind of nimble way so yeah I think there’s better than even odds that we do have a recession.”
And when the disaster finally arrives, not the U.S., nor China, nor Europe will be able to bring adequate policy responses to bear to combat the slowdown…because after a decade of rock-bottom interest rates (they’re still negative in Europe) and QE central banks are tapped out…and while there is still some wiggle room for the type of Keynesian fiscal-policy response that Krugman is so fond of, he believes governments will lack the political will when the time comes. Krugman’s comments notably follow the European Commissions’ own downgrade for the eurozone, which it now believes will expand at a pace of just 1.3% during 2019.
This story, the first of three from Brad Robertson, showed up on the Zero Hedge website at 9:15 a.m. EST yesterday morning — and another link to it is here.
This week, the threads come together… the lines converge… the dots connect…
The State of the Union…
The Republicans and Democrats…“Us vs. Them”…Our own wobbly “us”…and the coming financial catastrophe.
The problem with his SOTUS was that it failed to mention anything that might be meaningful or helpful. That is, it avoided any mention of the real state of the union.
Who would report on a company and fail to mention that it was $22 trillion in debt… and was, at the time, losing money at the rate of approximately $100 billion per month… and that it had no plans – or even hope – of cutting its losses or heading off a monumental debt crisis?
Who would assess the state of a country without reference to the fact that it was slipping in every measure that matters – wealth per capita, business startups, patents, freedom, equality, and the integrity of its institutions?
What kind of a Commander in Chief would describe brave and heroic achievements from more than half a century ago, but lack the courage to confront an ongoing pattern of wasted lives and wasted trillions spent on military adventures with no coherent strategy, no possibility of victory, and no foreseeable end?
This commentary from Bill was posted on the bonnerandpartners.com Internet site early on Monday morning EST — and another link to it is here.
The good doctor and I had a chat about world affairs and precious metals for about twenty-five minutes on Sunday afternoon on all-talk radio WAAM 1600 out of Ann Arbor, Michigan.
In April of 2018, International Man published an essay in which I commented on the appointment by President Trump of John Bolton as U.S. National Security Advisor.
In that essay, I described the appointment as a warning that the U.S. government had reached a decision to pursue increased aggression toward Russia that could lead to direct warfare between the two countries.
On the surface of it, this would seem to be a somewhat rash conclusion to draw, as war has not been declared. And Mister Bolton would certainly not have the power to unilaterally declare war.
However, the reason for concern over such an appointment is that Mister Bolton is a one-trick pony who invariably characterizes Russia as evil and has, for years, fervently recommended major aggression against Russia. Since Mister Bolton never deviates from this zeal to aggress against Russia, he would not be appointed unless a path of significant aggression had already been decided.
Whenever any nation behaves this arrogantly with regard to aggression against another nation, it tends to end badly. And, historically, the outcome is almost always the defeat of the aggressor.
Arrogant leaders are vulnerable leaders, as they tend not to think things through.
This very interesting commentary from Jeff appeared on the internationalman.com Internet site on Monday morning sometime — and another link to it is here.
Following years of dismal performance, uncovered attempts at market manipulation and fraudulent activities, and painful corporate reorganizations which its latest earnings report showed have “cut deeply into the muscle”, Deutsche Bank is a shadow of its former self, with its stock price trading just shy of all time lows.
But an even bigger problem for Germany’s biggest lender is that it is now forced to pay the highest financing rates on the euro debt market for a leading international bank this year according to the Financial Times, and also the highest rates among large banks to raise debt this year according to Bloomberg, in a further sign of the German lender’s uphill struggle to turn its operations around and reduce its funding costs.
As the FT first reported, followed promptly by Bloomberg, the bank raised eyebrows last week when it sold a total of €3.6BN in euro-denominated debt, paying 180 bps over the benchmarks for a two-year bond, a steep rate for short-term funding. Deutsche Bank also paid 230 bps over benchmarks for a senior seven-year bond that can absorb losses in a crisis. By comparison, French banking giant BNP Paribas SA last month offered 50 bps less for equally-ranked notes that mature one year later. More embarrassing, Deutsche Bank paid a higher rate than Spanish lender CaixaBank, which recently raised five-year bonds at 225bp.
In a latest note to clients, Corinna Dröse, a Frankfurt-based bond analyst at DZ Bank, said: “The high spreads reflect [Deutsche’s] high idiosyncratic risk, which is rooted in the lender’s chronic weakness in earnings.”
This news item put in an appearance on the Zero Hedge Internet site at 11:16 a.m. on Monday morning EST — and it’s the first of two in a row from Brad Robertson. Another link to it is here.
Ever since Beijing allowed Chinese companies (even certain state-owned enterprises) to officially fail for the first time in 2016, and file for bankruptcy to restructure their unsustainable debt loads, it’s been a one-way street of corporate bankruptcies, one which we profiled last June in “Is It Time To Start Worrying About China’s Debt Default Avalanche“, and which culminated with a record number of Chinese onshore bond defaults in 2018, as a liquidity crunch sparked a record 119.6 billion yuan in defaults on local Chinese debt in 2018.
And by the early look of things, 2019 won’t be any better after two large Chinese borrowers missed payment deadlines this month according to Bloomberg, setting the scene for even more corporate defaults, and “underscoring the risks piling up in a credit market that’s witnessing the most company failures on record.”
The first one was China Minsheng Investment Group, a private investment group with interests in renewable energy and real estate, which failed to make a Feb. 1 bond payment to creditors. The Shanghai-based financial conglomerate didn’t repay investors in a 3 billion yuan bond that matured Jan. 29, then pledged to give them their money back three days late, Bloomberg News reported previously. But that didn’t happen.
The second name is familiar ever since its woes first emerged in 2018: Wintime Energy, which defaulted last year, also didn’t honor part of a restructured debt repayment plan last week.
What is notable about these two latest payment failures is that both companies are “big borrowers” as Bloomberg put it, and their problems accessing financing suggest that “government efforts to smooth over cracks in the $11 trillion bond market aren’t benefiting all firms.”
In fact, when China Minsheng ends up defaulting, it would rank alongside Wintime Energy as one of China’s biggest failures, with 232 billion yuan ($34.3 billion) of debt as of June 30.
No surprises here — and this is just the thin edge of the proverbial wedge, dear reader. This news story showed up on the Zero Hedge website at 5:55 p.m. EST on Monday afternoon — and I thank Brad Robertson for pointing it out. Another link to it is here.
Venezuela’s most successful financial operations in recent years have not taken place on Wall Street, but in primitive gold-mining camps in the nation’s southern reaches.
With the country’s economy in meltdown, an estimated 300,000 fortune hunters have descended on this mineral-rich jungle area to earn a living pulling gold-flecked earth from makeshift mines.
Their picks and shovels are helping to prop up the leftist government of President Nicolas Maduro. Since 2016, his administration has purchased 17 tonnes of the metal worth around $650 million from so-called artisan miners, according to the most recent data from the nation’s central bank.
Paid with the country’s near-worthless bank notes, these amateurs in turn supply the government with hard currency to purchase badly needed imports of food and hygiene products. This gold trade is a blip on international markets. Still, the United States is using sanctions and intimidation in an effort to stop Maduro from using his nation’s gold to stay afloat.
The existence of Maduro’s gold program is well-known. How it functions, is not.
This long, photo-filled Reuters news story, filed El Callao in Venezuela, was picked up by the msn.com Internet site on Sunday. It came out in a GATA dispatch very late last week, but I thank Malcolm Roberts for reminding me about it. Another link to it is here.
Deutsche Bank has agreed to pay nearly C$5.5 million to settle class-action lawsuits in Canada accusing the bank of manipulating the gold and silver markets, according to the Toronto law firm representing the plaintiffs.
In e-mails sent to class members and statements posted on its internet site, the law firm, Sotos LLC, said Deutsche Bank “does not admit any wrongdoing or liability.”
The law firm said that if the settlement is approved by the Ontario Superior Court of Justice, the settlement funds, after payment of court-approved legal fees and disbursements, will be deposited into “an interest-bearing account for the benefit of the classes for distribution at a future date.”
This GATA dispatch, including a link to the law firm’s summary of the gold and silver class-action settlement, was posted on the gata.org Internet site at 2:18 p.m. EST on Monday afternoon — and another link to it is here.
Italy’s populists opened a new front in their clash with the country’s central bank, calling on lawmakers to pass legislation stating that its gold holdings worth almost $103 billion belong to the state.
The gold ownership bill presented by euroskeptic lawmaker Claudio Borghi of the League adds to an already tense relationship between the Bank of Italy and the coalition government. It’s also sparked criticism from opposition politicians, and some national media argue that it may allow the government to raid the gold reserves to fund spending promises.
Borghi has rejected the accusation and said he’ll ensure Parliament has ultimate power. His concern is that ambiguity of ownership means that a victorious legal action against the central bank — for inadequate supervision, for example — leaves open the possibility of a claimant getting compensation in gold.
“My bill only aims at making clear that the gold belongs to the state, not to the government,” he said in a telephone interview on Monday. “If there are doubts on our intentions, we can also pass another law saying none of the gold reserves can be sold unless there is a majority of two thirds or more of both houses of Parliament.”
The central bank says its €90.8 billion in gold is the fourth-largest reserve in the world. Borghi’s bill, being examined by the Lower House’s Finance Committee, calls for an explicit interpretation of legislation that the institute “holds and manages as deposits” the gold, while the state has ownership.
This Bloomberg news item appeared on their website at 5:29 a.m. Pacific Standard Time on Monday morning — and I found it embedded in a GATA dispatch. Another link to it is here. The Zero Hedge spin on this is headlined “Salvini Proposes Seizing Control of Italy’s Gold Reserves From Central Bank” — and that comes courtesy of Brad Robertson as well.
China has joined a global central bank gold rush in the last two months by increasing its official gold reserves, even though the purchase remains modest compared to the volume of the mainland’s foreign exchange reserves, according to data released by the People’s Bank of China today.
The country’s gold reserves rose slightly to 59.94 million ounces at the end of January from 59.56 million ounces at the end of December 2018, marking a second straight month of increase.
The latest gold purchase by the world’s second-largest economy came at a time when global central banks are hoarding the precious metal. According to the World Gold Council, the amount of gold bought by central banks in 2018 reached the highest annual volume on record since 1971, the year that former U.S. President Nixon Richard scrapped the dollar’s peg to bullion.
China, the world’s largest foreign exchange reserve holder, has been reluctant in diversifying its US$3 trillion foreign exchanges into gold. Official gold reserves remained unchanged for 26 months at 59.24 million ounces from October 2016 to November 2018.
I highly suspect that China is reporting reserves that are already in their vault, but that have not been made public yet. It appears that they’re doing that now, but in dribs and drabs. This very worthwhile gold-related news story showed up on the South China Morning Post website at 8:49 p.m. China Standard Time on their Monday evening, which was 7:49 a.m. in Washington on their Monday morning — EST plus 13 hours. I found this on the gata.org Internet site as well — and another link to it is here.
The PHOTOS and the FUNNIES
Here are two more photos from the “Ocean Art” series that I thank Mike Easton for sending our way.
The first photo taken by Alvin Cheung — and is captioned: “A giant manta ray faces off with a diver in Socorro, Mexico“.
The low volume trading days continue in both gold and silver — and so do the quiet price declines. It remains to be seen how low these sell-offs will take us, but I get the impression that it won’t be overly dramatic — and I’ll be really surprised if even get anywhere near the current 50 or 200-day moving averages in gold..or silver for that matter. And the precious metal equities are hanging in there pretty good.
One reason for the low volumes in gold and silver in the COMEX futures market is something that never dawned on me until silver analyst Ted Butler mentioned it his weekly review on Saturday — and that was this: “…price action is different than I ever recall, including a decisive fall off in trading volume (directly a result of the sudden lack of spoofing).”
That makes sense to me, considering the fact that an ex-JPMorgan trader in the precious metals is about to be sentenced for that very thing. The only question to be asked here, is why it took so long, as this DoJ conviction has been in the public domain for three months now.
Of course others may say these declines in the precious metals has something to do with the rally in the dollar index. But as I’ve pointed out on too many occasions to count, that’s just a fig leaf that the commercial traders use to hide their dirty work.
Here are the 6-month charts for the Big 6 commodities — and there really isn’t much to see once again. Click to enlarge for all.
And as I type this paragraph, the London open is less than ten minutes away — and I see that the gold price began to chop quietly sideways once trading began at 6:00 p.m. EST in New York on Monday evening. That lasted until shortly before 2 p.m. China Standard Time on their Tuesday afternoon — and the gold price began to head higher from there. It got tapped lower around 3:15 p.m. CST — and is currently up $4.00 an ounce. The silver price traded sideways until 10 a.m. CST — and after that it’s price path was similar to gold’s — and it’s up 9 cents at the moment. Platinum edged a bit higher in Far East trading — and it’s up 4 bucks. Palladium traded flat until shortly before noon over there — and by 1 p.m. CST, was up 7 dollars — and it’s still up that amount as Zurich opens.
Net HFT gold volume is pretty light at a bit over 30,500 contracts — and there’s only 597 contracts worth of roll-over/switch volume in this precious metal. Net HFT silver volume is coming up on 7,100 contracts — and there’s only 682 contracts worth of roll-over/switch volume in this precious metal.
The dollar index has been chopping aimlessly and quietly sideways in Far East trading on their Tuesday — and as of 7:45 a.m. GMT in London, it’s down 2 basis points.
Today we get yet another Commitment of Traders Report, this one for positions held as of Tuesday, January 15…so we are getting caught up, albeit slowly — and I’ve mentioned at least once before, we won’t be caught up until the COT Report that comes out on Friday, March 1.
And as I post today’s column on the website at 4:02 a.m. EST, I note that all four precious metals ran into some ‘resistance’ shortly after the London/Zurich opens. Gold is only up $3.70 the ounce now — and silver is up 8 cents. Platinum and palladium are now up only 2 and 3 dollars respectively.
Gross gold volume is a bit over 42,000 contracts — and minus what little roll-over/switch volume there is, net HFT gold volume is around 40,500 contracts. Net HFT silver volume is coming up on 9,800 contracts — and there’s 1,603 contracts worth of roll-over/switch volume in that precious metal.
The dollar index hit its current 96.97 low tick six minutes after the London open — and it looks like those ‘gentle hands’ appeared at that juncture — and the dollar index has gone from down 12 basis points points to up 12 as of 8:45 a.m. GMT/9:45 a.m. CET in Zurich. I guess that explains the sudden ‘weakness’ in the precious metals.
That’s all I have for today, which is more than enough — and I’ll see you here tomorrow.