The Commercial Traders Rig a Smallish Sell-Off

22 February 2019 — Friday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price began to wander sideways a few dollars either side of unchanged once trading began at 6:00 p.m. EST on Wednesday evening in New York.  That lasted until very shortly after the London open — and for no reason that made any sense, someone began to lean on the gold price.  That lasted for about two hours, before it began to edge higher until shortly after the COMEX open in New York.  The selling pressure reappeared — and the low tick of the day was set about 4:30 p.m. in after-hours trading.

The high and low ticks were recorded by the CME Group as $1,344.30 and $1,326.50 in the April contract.

Gold was closed on Thursday at $1,323.00 spot, down $14.80 on the day.  Net volume was pretty heavy at just under 276,000 contracts — and there was a bit over 11,500 contracts worth of roll-over/switch volume in this precious metal.

Silver’s price path was virtually identical to gold’s, so I won’t bother with the play-by-play in it, as the Kitco chart below says it all.

The high and low ticks in silver were reported as $16.08 and $15.775 in the March contract.

Silver was closed in New York yesterday at $15.76 spot, down 25.5 cents from Wednesday’s close — and firmly back below the $16 spot price.  Net volume was slightly elevated at a hair under 56,500 contracts, but roll-over/switch volume out of March and into future months was pretty heavy at a bit under 46,000 contracts.

The platinum price traded very unsteadily sideways in morning trading in the Far East on their Thursday — and the selling pressure in that precious metal commenced around 1:30 p.m. CST, with the low tick of the day coming a few minutes before 11 a.m. in Zurich trading.  From that juncture it didn’t do much until shortly before the COMEX open — and it began to edge a bit higher from there.  The high of the day, such as it was, came shortly after the equity markets opened in New York yesterday morning — and from that point it was sold quietly lower until a few minutes after 4 p.m. in the thinly-traded after-hours market.  Platinum finished the Thursday session in New York at $822 spot, down 4 dollars from Wednesday’s close.

The palladium price chopped very unevenly sideways until around 3:20 p.m. China Standard Time on their Thursday afternoon.  At that point someone dropped the hammer — and it was down 20+ dollars in a matter of minutes.  It struggled higher from there until shortly after the Zurich open — and like for silver and gold, was sold sharply lower for the next hour and change.  Then, like platinum, it crawled quietly higher until shortly after the 9:30 a.m. EST open of the equity markets in New York.  From there it was sold unevenly lower until shortly after COMEX trading ended — and it didn’t do much after that.  Palladium finished the Thursday session at $1,451 spot, down 14 bucks on the day.  I’m ignoring the vicious down/up spike shortly before the Zurich close, as it only occurred in the spot market.

The dollar index closed very late on Wednesday afternoon in New York at 96.45 — and rallied  bit once trading began at 7:45 p.m. EST/8:45 p.m. CST on their Thursday morning.  It chopped very nervously sideways until 9:50 a.m. in London — and at that point, it was up 19 basis points.  It began to slide from there — and the 96.36 low tick was set around 8:45 a.m. in New York.  It ‘rallied’ a bit from that juncture — and the 96.66 high tick of the day was set around 12:18 p.m. EST.  From that point it crept unsteadily lower until trading ended at 5:30 p.m. EST.  The dollar index finished the day at 96.61…up 16 basis points from Wednesday’s close.

If you can find any price correlation between what was happening in the currencies vs. the precious metal price activity on Thursday, I want some of whatever you’re smoking.

Here’s the DXY chart courtesy of BloombergClick to enlarge.

And here’s the 6-month U.S. dollar index chart courtesy of stockcharts.com — and the delta between its close…96.46…and the close on the DXY chart above, was 15 basis points on Thursday.  Click to enlarge.

The gold stocks gapped down a percent and change at the open of the equity markets in New York on Thursday morning — and from that point, they chopped sideways in a mostly very tight price range for the remainder of the day.  The HUI closed lower by 1.36 percent.

The silver equities gapped down about two and half percent at the open.  They got back half that loss in the next twenty minutes, but promptly rolled over minutes before 10 a.m. EST, which mostly  likely coincided with the afternoon gold fix in London.  Their respective lows were set around 11:50 a.m.  From that juncture they rallied until 1 p.m. in New York trading — and really didn’t do much of anything after that.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down 1.68 percent.  Click to enlarge if necessary.

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

The CME Daily Delivery Report showed that 830 gold and 3 silver contracts were posted for delivery within the COMEX-approved depositories on Monday.

In gold, there were seven short/issuers in total — and by far the largest was Citigroup, with 740 contracts out of their in-house/proprietary trading account.  ADM was an ‘also ran’ in second place with 35 contracts out of their client account.  There were four long/stoppers in total — and by far the largest was JPMorgan once again, with 708 contracts…681 for its client account, plus another 27 for their own account.  In distant second spot was Advantage, with 109 contracts for its client account.

Of the 2,474 gold contracts that Citigroup has stopped for its own account in February, they’ve already re-issued 1,667 contracts of that amount, with JPMorgan picking up most of them.  As Ted Butler pointed out on Saturday, Citigroup has now turned into the new Goldman Sachs…stopping oodles of them for their own account — and then feeding them to JPMorgan at a future date.  One has to wonder what that’s all about.

In silver, the sole short/issuer was ADM.  Goldman Sachs and Morgan Stanley picked up 2 and 1 contracts for their respective client account.

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 February rose by another 77 contracts, leaving 1,151 still around, minus the 830 contracts mentioned a few paragraphs ago.  Wednesday’s Daily Delivery Report showed that 143 gold contracts were actually posted for delivery today, so that means that another 143+77=220 gold contracts were added to the February delivery month.  Silver o.i. in February rose by 1 contract, leaving 4 left…minus the 3 contracts mentioned just above.  Wednesday’s Daily Delivery Report showed that 2 silver contracts were actually posted for delivery today, so that means that 2+1=3 more silver contracts were just added to February.


After a smallish deposit on Wednesday, there was a fairly hefty withdrawal from GLD yesterday, as an authorized participant took out 160,618 troy ounces.   But there was a fairly big deposit in SLV on Thursday, as an a.p. added 1,688,324 troy ounces.

The U.S. Mint had a sales report yesterday.  They sold a fairly hefty 775,000 silver eagles — and that was all.

I received an e-mail from rare coin dealer Richard Nachbar early yesterday morning which included a note from the U.S. Mint saying that “This is to inform you that we have temporarily sold out of our inventories of 2019-dated American Eagle Silver Bullion Coins.  In addition, all remaining 2018-dated inventories have been sold too.  The West Point Mint is busy producing additional 2019-dated American Eagle Silver Bullion Coins.  We hope to be able to re-launch the 2019-dated coins in a few weeks.

A few weeks?  What the hell is that all about?  If you’re wondering how that’s possible with mint sales being as low as they are, you’re not alone.  I don’t have a clue.

The only activity in gold over at the COMEX-approved depositories on the U.S. east coast on Wednesday was 2,500.000 troy ounces that was received, which most likely represents 250 ten-ounce gold bars.  That deposit occurred at Delaware.  They also transferred 6,993 troy ounces from the Eligible category — and into the Registered category as well.  The link to this is here.

In silver, there was 586,683 troy ounces received, but only 30,313 troy ounces were shipped out. In the ‘in’ category, there was one truckload…585,723 troy ounces…received at CNT — and the remaining 960 troy ounces…one good delivery bar…was dropped off at Delaware.  There was also a paper transfer of 4,888 troy ounces from the Eligible category and into Registered over at Brink’s, Inc.  The link to this is here.

Over at the COMEX-approved gold kilobar depositories in Hong Kong on their Wednesday, they reported receiving 4,003 of them.  Except for the 3 kilobars left at Loomis International, the remaining 4,000 kilobars were dropped off at Brink’s, Inc.  Nothing was shipped out.  The link to this activity, in troy ounces, is here.


Here are two more charts that Nick passed around on Monday.   These show India’s gold and silver imports updated with December’s data.  During that month they imported 63.8 tonnes of gold — and 700 tonnes of silver.  In troy ounces, that’s  2.05 million troy ounces of gold — and 22.5 million troy ounces of silver.  Click to enlarge for both.

I have an average number of stories for you today — and a decent number of them are precious metal-related.


CRITICAL READS

For The First Time Since 2000, Most Assets Are Overbought

What a difference two months makes. Back in December, with virtually every asset class getting clobbered ahead of the year-end flood of hedge fund redemption requests, the most popular chart was one from Deutsche Bank showing how virtually every single asset class would post negative returns in 2018.

Fast forward to today when just days after we noted that stock market breadth had just hit an all time high, prompting some commentators to describe the move in January and February as a blow off top (similar to what we saw one year ago), the “buying panic” as Nomura described it earlier this week has spread to virtually every asset class.

In any case, as Bloomberg notes this morning, stocks, corporate bonds (both investment grade and junk), oil and gold have all been resounding winners in the new year. Each of the five asset classes – simultaneously – had a 14-day relative strength index at or above the overbought level of 70 on Wednesday.

That hasn’t happened since at least the year 2000, according to data compiled by Bloomberg.

Alas – for the bulls – with everything having triggered the overbought signal, it means that the good times are coming to an end. Because whatever the cause behind this buying euphoria – one made even more bizarre since both retail and institutional investors have been mostly selling for the duration of this rally – one hedge fund warns that the euphoria might be the last gasp in the 9-week old rally.

In our view, September of 2018 marked the peak of the economic cycle with U.S. stocks at record valuations across eight fundamental measures,” Crescat Capital’s Tavi Costa told Bloomberg. “We are now seeing a typical bear market rally, and the next downward leg is likely to be just as abrupt as the first one.”

The only question is what will be the catalyst for the next abrupt move lower.

This news item showed up on the Zero Hedge website at 11:42 a.m. EST on Thursday morning — and it comes to us courtesy of Brad Robertson.  Another link to it is here.


Shocking Philly Fed Collapse: Biggest Drop Since 2011 U.S. Rating Downgrade

Just in case U.S. stocks needed some more [terrible] data to surge on, they got it this morning when first the Durable Goods report disappointed, printing below expectations while core CapEx declined for the 3rd consecutive month — its longest stretch below zero since late 2015 — and then the latest Philly Fed print was an absolute shocker, as the regional manufacturing Business Index collapsed from 17.0 to -4.1, the first negative and the lowest print since May 2016…

… and the biggest drop in point terms since the U.S. downgrade in August 2011.

Both the new orders and shipments indexes also fell this month. The current new orders index decreased nearly 24 points to -2.4, and the current shipments index decreased 17 points to -5.3. In fact, the monthly drop in the New Orders index was the biggest since the Lehman bankruptcy.

This chart-filled Zero Hedge news item put in an appearance on their website at 9:01 a.m. on Thursday morning EST — and it’s from Brad Robertson as well.  Another link to it is here.


Will The Fed Bring Us More QE? Be Careful What You Wish For! — Dennis Miller

Mike Maloney’s video, “If You Don’t Think QE4 & QE5 Are Coming, You’re Smoking Something”, raised a red flag. The Fed did not raise rates and didn’t rule out more Quantitative Easing (QE) in the future. Mike fears QE may include bailing out companies that can’t pay their debts.

QE was different

Unlike historical fed interest rate adjustments, the Troubled Asset Relief Program (TARP – followed by doses of QE) bailed out banks directly by taking billions in bad loans off their hands.

Stretching even further, companies like GE received billions in bailout money. The New York Times Dealbook reported, “FDIC to Back $139 Billion in GE Capital Debt.”

GE Capital is not a bank, but granting it access to a new program from the Federal Deposit Insurance Corporation may reassure investors and help the lender compete with banks that already have government-protected debt,” a G.E. spokesman, Russell Wilkerson, told Bloomberg News.

This longish but interesting commentary from Dennis was posted on his website early on Thursday morning MDT — and another link to it is here.


Collapse of E.U. superstate? Euroskeptics could paralyze Brussels after May elections – study

Anti-E.U. parties are set to gain a third of European parliamentary votes in May, a new study says. Analysts warn it may bring down the whole political system in Europe, leaving Brussels powerless.
The European Council on Foreign Relations (ECFR) report describes the vote as “the most consequential parliamentary vote in the E.U.’s history” and says it is even possible for Euroskeptic parties to gain more than 30 percent of the EP’s seats “if their popularity continues to grow or if some of the fringe members of the mainstream join them.”

The report argues that if such a situation occurs, the E.U. could find itself “living on borrowed time” and outlines ways that various anti-E.U. parties could align with each other to garner more power in Brussels.

‘Too little, too late’

The shaky situation in Europe is the result of the E.U. “trying to get rid of nationhood” and the fact that EU institutions are “too remote from the individual citizens,” Jon Gaunt, a U.K. radio host, journalist and political commentator, told RT. That point was also reflected in the report which acknowledged that anti-E.U. parties are advocating a return to a “Europe of the nations” instead of what Gaunt described as a “non-democratic superstate.”

This very interesting, but not completely surprising article appeared on the rt.com Internet site at 8:32 a.m. Moscow time on their Thursday morning, which was 12:32 a.m. EST in Washington — EDT plus 8 hours.  I thank George Whyte for sending it our way — and another link to it is here.


World’s Largest Shipping Company Warns 2019 Global Economic Outlook Is Worse Than 2018

Denmark’s shipping Maersk is the world’s largest shipping company, and it is thus safe to say that what it sees in terms of global trade is indicative of real trade conditions around the globe. Which is bad news, because in an interview with Bloomberg TV on Thursday, shortly after reported dismal earnings, CEO Soren Skou said the global economic outlook for this year is looking bleaker than in 2018, which is affecting his business.

Skou said other factors impacting Maersk include the rising oil price, which affects input costs, adding that he sees no good reason why the price of oil might drop.

The reason behind Skou’s pessimism is that trade tensions had led to a lot of front-loading of trade in 2018, and that effect is now disappearing, which means that the fallout of trade tensions will be far bigger this year, even as the balance between supply and demand in the industry is improving.

This very brief 1-chart story was posted on the Zero Hedge website at 8:20 a.m. on Thursday morning EST — and I thank Brad Robertson for sending it.  Another link to it is here.


Trade War Goes Global: China “Indefinitely” Bans Australian Coal Imports

Just days after it warned its citizens against traveling to New Zealand, Beijing has reportedly cracked down on imports of coal from Australia, cutting off the country’s miners from their biggest export market and threatening the island nation’s economy at a time when it and its fellow “Five Eyes” members who have sided with the U.S. by blocking or banning Huawei’s 5G network technology.

Customs agents at the port of Dalian have banned imports of Australian coal “indefinitely” while reportedly capping all coal imports from all sources at 12 million tonnes per day, Reuters reported overnight. Elsewhere in China, Australian coal – the combustible rock is the country’s biggest export – has faced customs delays of up to 40 days, just as Rabobank analyst Michael Every anticipated when he pondered earlier this month whether Australian coal might face “bureaucratic delays” at Chinese ports following the country’s “Huawei moment.”

It would be hard to understate how big of a problem this is for Australia. The ramifications will be felt, not only by the country’s miners, but by the broader Australian economy, and as economist Robert Rennie notes, a ban would have a major impact on Australian exports as 22% of Australian coking coal exports  in 2018 went to China (39mt). 24% of Australian thermal coal exports  in 2018 went to China (49mt).

So will Australia capitulate on its decision to ban Huawei from building a 5G network in the country on national security grounds? Given Germany and the U.K.’s decisions to begrudgingly allow Huawei access following demands from their telecoms industries, and with the threat of losing one of its biggest trading partners, it at least has a convenient excuse.

This longish, but very worthwhile article appeared on the Zero Hedge website at 6:41 a.m. on Thursday morning EST — and another link to it is here.  I thank Brad Robertson for that one as well.


Shareholders’ Gold Council doesn’t want to hear about market rigging

The Shareholders’ Gold Council, started last year by fund manager John Paulson “to conduct research reports and studies of interest to investors in the gold industry“, has rejected GATA’s requests for membership and to make a presentation about manipulation of the gold market by central banks and their bullion bank agents.

A representative of the council has told GATA that “our focus is on the companies themselves, not the gold market.”

Of course that’s not quite how the council’s internet site describes it, but the council is entitled to what seems to be its opinion that the manipulation of the price of the metal produced by gold-mining companies is of no interest to the companies themselves.

Shareholders in gold-mining companies might be equally entitled to some puzzlement about this.

Well, dear reader, why am I not surprised.  Insiders in this organization have already told GATA that Paulson is next to clueless/useless — and the organization basically won’t be doing much of anything.  This commentary by Chris Powell put in an appearance on the gata.org Internet site yesterday — and another link to it is here.


Citi in Talks With Treasury Over $1.1 Billion Maduro Gold Deal

Citigroup bankers have been holding talks with U.S. Treasury officials to figure out how to handle a gold deal they had arranged with Nicolas Maduro’s regime in Venezuela, people familiar with the matter said.

The deal — a $1.1 billion swaps contract backed by gold held by the Venezuelan central bank — was struck before the U.S. stepped up sanctions on Maduro’s government. But it’s due to expire early next month and Citigroup bankers are seeking to make sure they avoid making a move now that would violate the sanctions, according to Senator Marco Rubio and other U.S. and Venezuelan officials familiar with the matter.

The one thing, no banker, global or financial institution is going to do is run the risk of secondary sanctions,” Rubio, who’s been helping drive the U.S. push to oust Maduro, said in a telephone interview late Wednesday. “The sale of gold is another revenue source that the Maduro regime is using and I know for a fact that Citibank has had multiple meetings with Treasury seeking guidance, trying to figure out how to avoid exposure.”

This gold-related Bloomberg news item was posted on their Internet site at 7:03 a.m. PST on Thursday morning — and was updated two hours later.  I found it in a GATA dispatch yesterday — and another link to it is here.


The return to a gold exchange standard — Alasdair Macleod

In my last Goldmoney article I explained why the monetary policies of inflationist economists and policy makers would end up destroying fiat currencies. The destruction will come from ordinary people, who are forced by law to use the state’s money for settling their day-to-day transactions. Ordinary people, each one a trinity of production, consumption and saving, will eventually wake up to the fraud of monetary inflation and discard their government’s medium of exchange as intrinsically worthless.

They always have, eventually. This has been proved by experience and should be uncontroversial. For the issuer of a currency, the risk of this happening heightens when credit markets become destabilised and confidence in the full faith and credit, which is the only backing a fiat currency has, begins to be questioned either by its users or foreigners or both. And when it does, a currency starts to rapidly lose purchasing power and the whole interest rate structure moves higher.

The state’s finances are then ruined, because by that time the state will have accumulated a lethal combination of existing unrepayable debt and escalating welfare liabilities. Today, most governments, including the US, are already ensnared in this debt trap, only the public has yet to realise the consequences and the planners are not about to tell them. The difficulty for nearly all governments is the deterioration in their finances will eventually wipe out their currencies unless a solution is found.

This long commentary from Alasdair, which I haven’t had time to read yet, showed up on the goldmoney.com Internet site on Thursday sometime — and I found in this in a GATA dispatch yesterday as well.  Another link to it is here.  I suspect that it would be worth reading.


Mr. Butler’s Silver Newsletter: Icing on the Cake — James Cook

Silver analyst Theodore Butler writes a twice weekly newsletter on precious metals. Only a few people get to read this important newsletter. I’ve been talking to Ted about releasing one full issue for people to read. It’s important for investors to see the scope of his analysis. Mr. Butler has been a paid consultant to my company Investment Rarities for almost 20 years. I can vouch for his absolute integrity and his cautious approach in analyzing silver and gold. He relies on evidence and facts in arriving on his conclusions. He analyzes every known fact about silver and his knowledge of the silver market is unsurpassed. It’s no exaggeration to call him a silver genius. He has agreed to release the following current newsletter which gives insight into the thoroughness of his approach.

This item from the silverseek.com Internet site yesterday afternoon Mountain Standard Time is what Ted had to say in his mid-week review on Wednesday — and it certainly falls into the must read category.  Another link to it is here.


The PHOTOS and the FUNNIES

These three photos were taken on the 65-kilometer drive along the Nicola River between Merritt and a 2-horse town on the Trans Canada Highway called Spence’s Bridge.  The views were magnificent along the way, as the first photo indicates.  We ran into a large herd of bighorn sheep on the highway — and this group in the middle of the road was a small part of the main herd.  It’s the first time I’d seen these animals outside of a national park.  Click to enlarge.


The WRAP

Well, there was no reason for the powers-that-be to hit the precious metal prices in the thinly-traded overnight markets in late Far East and early London trading on Thursday.  But as I mentioned in my Wednesday column, gold was already way overbought, so maybe it became a self-fulfilling prophecy.  Or maybe it could have been because of the plethora of bad economic news that came out early in the morning in New York.

Regardless of that — and as I’ve said before…any correction going forward, shouldn’t be too long, or too deep.  But I suppose that one should not underestimate the treachery of JPMorgan et al.  But to do it with the DoJ investigation going on over at JPMorgan would, as I’ve said before, be a big “up yours” to the DoJ — and I just don’t think it’s going to happen.

And I was also encouraged by the fact that despite the continuing lower prices in both silver and gold during the New York trading session, it had minimal effect on the prices of the precious metal equities.

Here are the 6-month charts for the Big 6 commodities — and it should be noted yet again that because their lows of the day came after the COMEX close, those lows do not appear on the Thursday 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 crawled higher by a few dollars in the first two hours of trading once it began at 6:00 p.m. EST on Thursday evening in New York — and at the moment it’s up $3.00 an ounce. It was about the same for silver, except it began a tiny rally starting around 3 p.m. CST — and it’s now up 9 cents. Platinum quietly stair-stepped its way higher throughout all of Far East trading on their Friday, but that process really began to accelerate in their afternoon — and it’s up 8 bucks currently. Palladium has been edging unsteadily higher as well — and has jumped up a bit more in the last thirty minutes — and it’s now up 9 dollars as Zurich opens.

Net HFT gold volume is coming up on 38,500 contracts — and there’s only 923 contracts worth of roll-over/switch volume in that precious metal. Net HFT silver volume is about 7,900 contracts — and there’s already 3,612 contracts worth of roll-over/switch volume out of March and into future months.

The dollar index opened down a hair once trading commenced at 7:45 p.m. EST on Thursday evening in New York, which was 8:45 a.m. in Shanghai on their Friday morning. It struggled higher by a small handful of basis points until around 12:30 p.m. China Standard Time — and then began to head lower from there. At the moment, the dollar index is down 7 basis points as of 7:45 a.m. GMT in London/8:45 a.m. CET in Zurich.


Today we get another Commitment of Traders Report — and this will be the one for positions held at the close of COMEX trading on Tuesday, February 5…so we’re slowly getting caught up.  As I’ve mentioned in this space a couple of times this week, I’m expecting further increases in the commercial net short positions in both gold and silver.  However, I’m not expecting these increases to be anywhere near the numbers we saw in the COT Report that was issued on Tuesday.  But whatever they are, I’ll have that all for you in Saturday’s column.

And as I post today’s column on the website at 4:02 a.m. EST, I see that gold is up $3.00 an ounce as the first hour of London trading draws to a close — and silver is up 9 cents. Platinum and palladium were sold down a tad at the Zurich open, with the former up only 7 — and the latter by 8.

Gross gold volume is coming up on 52,000 contracts — and minus what little roll-over/switch volume there is, net HFT gold volume is around 49,500 contracts. Net HFT silver volume is about 9,500 contracts — and there’s already a pretty healthy 4,577 contracts worth of roll-over/switch volume out of March and into future months.

The dollar index hasn’t done much — and as of 8:45 a.m. GMT in London/9:45 a.m. in Zurich, it’s down 7 basis points.

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

Ed