06 March 2019 — Wednesday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price rallied a few dollars once trading began at 6:00 p.m. EST on Monday evening in New York — and the high of the day came at 1 p.m. China Standard Time on their Tuesday afternoon. Ted’s “midnight move” commenced at that point — and the price was sold quietly lower until the 10:30 a.m. morning gold fix in London. It crept back to a bit above unchanged by the COMEX open, but was then sold lower until around 1 p.m. EST…however, the low tick of the day came on a very sharp spike down at the 10 a.m. EST afternoon gold fix. From 1 p.m. onwards it crawled a bit higher — and finished in positive territory by a bit.
The high and lows certainly aren’t worth looking up.
Gold finished the Tuesday session in New York at $1,287.30 spot, up 90 cents on the day. Net volume was nothing special at a hair under 196,000 contracts — and roll-over/switch volume was a bit over 22,500 contracts.
Silver was up about 7 cents by around 11:30 a.m. in Shanghai on their Tuesday morning — and that was its high of the day. It was sold unevenly lower from there until a few minutes after London opened — and it crawled quietly higher into the COMEX open from there. After that, it was more or less the same price path that gold was forced to follow — and silver closed up a bit on the day as well.
The high and low ticks really aren’t worth looking up in this precious metal, but here they are anyway…$15.175 and $15.06 in the May contract.
Silver finished the day at $15.10 spot, up 4 cents from Monday’s close. Net volume was very decent at a bit over 65,500 contracts — and there was around 3,250 contracts worth of roll-over/switch volume in that precious metal.
Platinum’s price path was very similar to both silver and gold, so I’m not going to spend any time on the play-by-play. Although I will point out that the low price tick in platinum came around 10:35 a.m. in New York, which was well after the afternoon gold fix in London. Platinum was closed at $835 spot, up a dollar on the day.
Palladium traded almost ruler flat in price right up until a few minutes after 1 p.m. CST on their Tuesday afternoon. Ted’s “midnight move” commenced at that juncture — and then palladium really had its lights punched out at the Zurich open. From that point it crawled higher until shortly before 9 a.m. in New York, but was then sold quietly lower until a few minutes before 1 p.m. EST. It crept higher from there until shortly before 3 p.m. in the thinly-traded after-hours market — and didn’t do much of anything after that. Palladium was closed at $1,496 spot, down 16 bucks on the day.
The dollar index opened unchanged at 96.68 once trading commenced at around 7:45 p.m. EST in New York on Monday evening, which was 8:45 a.m. China Standard Time on their Tuesday morning. It traded almost ruler flat until about 11:30 a.m. CST — and then jumped higher by 8 basis points. From there it chopped quietly sideways until a ‘rally’ began minutes before 10 a.m. in New York…very close to the time of the afternoon gold fix in London. The 97.01 high tick was set very close to 10:30 a.m. EST — and had given back a very decent chunk of its previous ‘rally’ by shortly before 2 p.m. It didn’t do a thing after that. The dollar index finished the Tuesday session at 96.87…up 19 basis points from Monday’s close.
Here’s the DXY chart from Bloomberg. Click to enlarge.
And here’s the 6-month U.S. dollar index chart, courtesy of the folks over at the stockcharts.com Internet site — and the delta between its close…96.79…and the close on the DXY chart above, was 8 basis points on Tuesday. Click to enlarge.
The gold shares opened a bit on the weaker side once trading began in New York at 9:30 a.m. on Tuesday morning — and their respective lows came a few minutes after 10 a.m. EST. They chopped very unevenly sideways, with a slightly positive bias, for the rest of the day — and managed to finish just above the unchanged mark, as the HUI closed higher by 0.43 percent.
The silver equities traded in a very similar fashion on Tuesday, except the rally off of their lows was somewhat more robust — and Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up 1.11 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 for Day 5 of March deliveries showed that 39 gold and 372 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday.
In gold, the largest short/issuer was ADM with 30 contracts out of its client account. JPMorgan stopped 25 contracts…3 for its own account, plus 22 for its client account. The only other long/stopper that mattered was Advantage, picking up 12 contracts for its client account.
In silver, the two biggest short/issuers were ADM and Morgan Stanley. ADM issued 148 contracts from its client account — and M.S. issued 147 contracts from its in-house/proprietary trading account. In distant third spot was ABN Amro with 41 contacts from its client account. Of course the tallest hog at the long/stopper trough was JPMorgan, as they stopped 237 contracts in total…81 for their own account, plus another 156 for its client account. In distant second spot was Advantage, with 98 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 March dropped by 54 contracts, leaving 87 left, minus the 39 mentioned a few paragraphs ago. Monday’s Daily Delivery Report showed that 19 gold contracts were actually posted for delivery today, so that means that 54-19=35 gold contracts disappeared from the March delivery month. Silver o.i. in March rose by 61 contracts, leaving 906 still open, minus the 372 contacts mentioned a few paragraphs ago. Monday’s Daily Delivery Report showed that 108 silver contracts were actually posted for delivery today, so that means that 108+61=169 more silver contracts just got added to March.
There were no reported changes in either GLD or SLV on Tuesday.
And there was no sales report from the U.S. Mint, either.
There was a bit of movement in gold over at the COMEX-approved gold depositories on the U.S. east coast on Monday. Nothing was reported received — and only 10,375 troy ounces were taken out — and that occurred at Delaware. The link to that activity is here.
Surprisingly enough, there was even less activity in silver. There was 2,069 troy ounces received…two good delivery bars…that arrived at CNT. Nothing was shipped out — and I won’t bother linking this amount.
It was much busier over at the COMEX-approved gold kilobar depositories in Hong Kong on their Monday. There were 6,155 kilobars received — and only 266 were shipped out. All of this activity was at Brink’s, Inc. of course — and the link to that, in troy ounces, is here.
Nick passed around these two charts late on Tuesday afternoon. They show sales from The Perth Mint, updated with February’s sales data. For that month, they sold 19,524 troy ounces of gold coins — and 584,310 troy ounces of silver coins. Like the U.S. Mint, their bullion coin sales of late aren’t exactly setting the world on fire — and have been on an overall declining trend for the last six month. Click to enlarge for both.
The Commitment of Traders Report, for positions held at the close of COMEX trading on Tuesday, February 26, showed a further increase in the Commercial net short position in silver — and rather smallish decline in the commercial net short position in gold.
In silver, despite what the 6-month silver chart showed in yesterday’s column, the Commercial net short position increased by 4,295 contracts, or 21.5 million troy ounces of paper silver.
Ted says this deterioration came about because silver rallied to its recent high on the first day of the reporting week — and the ensuing price decline during the next four reporting days wasn’t enough to negate all the shorting that the Commercial traders did on that one day.
They arrived at that number by decreasing their long position by 8,721 contracts — and they also reduced their short position by 4,426 contracts. It’s the difference between those two numbers that represent their change for the reporting week.
Under the hood in the Disaggregated COT Report, it was all Managed Money traders, plus much more, as they added 2,610 long contracts — and they reduced their short position by 6,352 contracts. It’s the sum of those two numbers…8,962 contracts…that represents their change for the reporting week.
And, as is always the case, the difference between what the Managed Money traders did — and the change in the Commercial net short position…8,962 minus 4,295 equals 4,667 contracts…was made up by the traders in the other two categories. Both decreased their net long long positions during the reporting week…the ‘Other Reportables’ by 918 contracts — and the ‘Nonreportable’/small traders by 3,749 contracts. Here’s the snip from the Disaggregated COT Report so you can see these changes for yourself. Click to enlarge.
In the Commercial category, the banks in the Producer/Merchant category decreased their long position by 2,373 contracts — and the traders in the ‘Swap Dealer’ category increased their net short position by 1,922 contracts — and the sum of those two numbers equals the change in the Commercial net short position.
Ted said that JPMorgan was pretty much responsible for all the new shorting by the Commercial traders during the reporting week — and he estimates JPMorgan’s short position at around 28,000 contracts, up 3,000 contracts from his estimate on Saturday, from last Friday’s COT Report. This Friday’s Bank Participation Report will enable Ted to recalibrate that number.
The Commercial net short position is now up to 78,169 contracts, or 390.8 million troy ounces of paper silver held short.
The Big 4 commercial traders are short 35.4 percent of the entire open interest in the COMEX futures market in silver — and the Big 8 traders [which includes the Big 4, of course] are short 50.4 percent of the entire open interest in COMEX silver…104,049 contracts…which is another new record high in contract terms.
104,049 COMEX silver contracts equals to 520.2 million troy ounces of paper silver — and that’s equal to about 223 days of world silver production…about seven and a half months. That’s even more perverted and grotesque than the numbers that Ted pointed out in his Saturday missive.
Here’s the 3-year COT chart for silver, courtesy of Nick Laird — and the change should be noted. Click to enlarge.
Of course, this report is already very much yesterday’s news, as the engineered price decline in silver didn’t get started until the day after the cut-off for this report, which was certainly deliberate. This Friday’s COT Report will show a remarkable improvement, as both the 50 and 200-day moving averages were broken to the downside during the reporting week.
In gold, the commercial net short position declined by 6,632 COMEX contracts, or 663,200 troy ounces of paper gold.
They arrived at that number by reducing their long position by 119 contracts, but they also reduced their short position by 6,751 contracts — and it’s the difference between those two numbers that represents their change for the reporting week.
Under the hood in the Disaggregated COT Report, the Managed Money traders made up only part of the change during the reporting week, as they reduced their long position by 12,194 contracts — and they also reduced their short position by 8,376 contracts — and it’s the difference between those two numbers…3,818 contracts…that represented their change for the reporting week.
The difference between that number — and the commercial net short position…6,632 minus 3,818 equals 2,814 contracts…was made up by the traders in the ‘Other Reportables’ and ‘Nonreportable’/small trader category. But each group went about it in entirely separate fashions, as the first group decreased their net long position by 6,133 contracts — and the ‘Nonreportable’/small traders increased their long position by a net 3,419 contracts. Here’s the snip from that report so you can see these changes for yourself. Click to enlarge.
The big banks in the ‘Producer/Merchant’ category reduced their short position by 2,688 contracts — and the traders in the ‘Swap Dealer ‘ category reduced their short position as well, by a net 3,944 contracts. The sum of those two numbers is, as it mathematically has to be, the change in the commercial net short position in gold.
The commercial net short position in gold is down to 15.98 million troy ounces of paper gold — and is not a material change from last Friday’s COT Report.
Here’s the 3-year COT chart for gold. Click to enlarge.
Like for silver, these gold numbers are ancient history because of the engineered price decline that commenced the day after the cut-off for the above COT Report. And with gold back below its 50-day moving average, the new and completely up-to-date COT Report we get on Friday, will be a totally different animal.
Just as point of interest, the commercial traders in copper [the U.S. banks are barely involved in copper] increased their short position in that metal by a very hefty 24,184 COMEX contracts during the reporting week just past. And in platinum, the Managed Money traders reduced their short position by a whopping 16,779 contracts…just under twenty percent of the total open interest. Ted pointed out a week or so ago that the reason platinum was rising was because of that — and had nothing to do with supply/demand issues. The above short covering by these Managed Money traders is certainly all the proof necessary.
Here’s Nick Laird’s “Days to Cover” chart updated with last Tuesday’s COT data for positions held at the close of COMEX trading on that day. It shows the days of world production that it would take to cover the short positions of the Big 4 — and Big ‘5 through 8’ traders in each physically traded commodity on the COMEX. Click to enlarge.
I’m not going to bother with any further commentary on this chart, as it’s already ancient history, but I just thought I’d stick it in here so I can record this high water mark of the record high COMEX contract short position held by the Big 8 traders in silver.
When the new and current COT Report comes out on Friday, then I’ll resume my commentary on this data.
I have an average number of stories for you today.
Another month, another frightening jump in the U.S. budget deficit.
According to the latest Treasury data, the U.S. budget surplus in January – traditionally one of the few surplus months of the year due to tax receipts vs refunds timing – was only $9 billion, badly missing the $25 billion surplus expected, and far below the $49 billion surplus recorded last January; it was the smallest January gain since 2015.
As a result, the budget deficit for the first four months of the fiscal year, widened to $310 billion, a whopping 77% higher than the $175.7 billion reported for the same period last year, largely the result of the revenue hit from Trump’s tax cuts and the increase in government spending. The deficit was the result of a 2% drop in fiscal YTD receipts to $1.1 trillion, while spending jumped 9% to $1.4 trillion.
The jump in the deficit was despite the bump in customs duties, which almost doubled to about $24.5 billion this fiscal year from $12.6 billion a year ago, reflecting the Trump administration’s tariffs on Chinese imports.
What was more concerning perhaps is that rolling 12 month receipts declined 1.5% Y/Y, after posting a 0.4% drop last month which marked the first decline since March 2017. Worse, the absolute drop in tax receipts, which declined for both corporations and individuals, was the biggest since the financial crisis; and, as shown in the chart below, every time that receipts have posted an annual decline, a recession either followed shortly or had already arrived.
Why am I not surprised. This very interesting 4-chart Zero Hedge article was posted on their website at 4:08 p.m. EST on Tuesday afternoon — and I thank Brad Robertson for pointing it out. Another link to it is here.
Mike Pence told the crowd at CPAC (Conservative Political Action Conference) that “we will never be a socialist country.”
What was that? A prediction? Or just political B.S.?
Already, America’s medical system – 17% of the economy – is largely socialized. So is the education system – another 7.3%. And its national pension system… Social Security… is run by the feds and takes up about 5% of GDP.
If you add in all the industries and activities that are required by the feds, or heavily controlled by them… the total comes to about half the GDP. How much of an economy do you have to socialize before you have a socialist country?
We don’t know. And we don’t want to find out. But we suspect the answer has something to do with another bit of political puffery at the “conservative” confab.
This longish, but interesting commentary from Bill was posted on the bonnerandpartner.com Internet site on Monday morning EST — and another link to it is here.
Over the past year, one of the key concerns to emerge in the $6.4 trillion investment grade corporate bond market is when and how will BBB-rated bonds, which now comprise 60% of all outstanding investment grade names in the U.S., be downgraded and whether a new financial crisis will follow.
We addressed this issue most recently in “The $6.4 Trillion Question: How Many BBB Bonds Are About To Be Downgraded” while the broader question of the “next bond crisis” was address in “Over $1 Trillion In Bonds Risk Cut To Junk Once Cycle Turns.” It wasn’t just us, however, with financial luminaries, regulators and investors such as the Fed, the BOE, the IMF, Oaktree’s Howard Marks, Doubleline’s Jeff Gundlach, JPMorgan, and Guggenheim all warning that the “fallen angel” threat is arguably the most serious challenge facing the U.S. corporate bond market during the next recession.
And now, it’s the turn of the central banks’ central bank, the Bank of International Settlements, to join the bandwagon, warning that the surging supply of corporate debt in the riskiest, BBB investment-grade category has left markets vulnerable to a crash once economic weakness triggers a bout of rating downgrades, and sends over $1 trillion in IG bonds, or fallen angels, right into junk bond purgatory.
This 4-chart Zero Hedge article appeared on their website at 3:51 p.m. on Tuesday afternoon EST — and is another contribution from Brad Robertson. Another link to it is here.
Washington “intends to terminate India’s and Turkey’s designations as beneficiary developing countries under the Generalized System of Preferences (GSP) program because they no longer comply with the statutory eligibility criteria,” the Office of the U.S. Trade Representative said in a statement.
India has failed to provide assurances that it would allow required market access, while Turkey is “sufficiently economically developed” that it no longer qualifies, it added.
Under the GSP program, “certain products” can enter the U.S. duty-free if countries meet eligibility criteria including “providing the United States with equitable and reasonable market access.”
India, however, “has implemented a wide array of trade barriers that create serious negative effects on United States commerce,” the statement said.
It said Turkey, after being designated a GSP beneficiary in 1975, has meanwhile demonstrated a “higher level of economic development,” meaning that it can be “graduated” from the program.
This news item showed up on the france24.com Internet site at 8:37 a.m. Central European Time on Tuesday morning, which was 2:37 a.m. in Washington — EST plus 6 hours. I thank Roy Stephens for pointing it out — and another link to it is here. There was another story about this on the businessinsider.com Internet site yesterday. That one is headlined “Trump moves his trade war to a new frontier as he kicks India and Turkey out of a $19 billion agreement” — and it comes to us courtesy of Swedish reader Patrik Ekdahl.
With the U.S.’s attempt at regime change in Venezuela going nowhere fast it’s becoming increasingly obvious that major vassals allies aren’t scared of the consequences of defying us.
India, in particular, has been quite clear in its opposition to Trump’s edicts on who they can and cannot trade with. And with Prime Minister Narendra Modi reeling from a corruption scandal it’s clear he isn’t going to give Trump an inch on important trade issues, especially with Modi in full re-election mode.
Not only has India defied the U.S. over buying Iranian oil and Russian S-400 missile defense systems but now they continue to flaunt U.S. sanctions on Venezuela upping its purchases from 400,000 barrels per day to more than 600,000.
The quantity of exports to India has jumped 66 per cent to 620,000 barrels a day and the boost is being driven by refiners like Reliance Industries Ltd and Nayara Energy Ltd, backed by Rosneft, Russia.
Overall though, Venezuela’s crude exports have taken a dip as the U.S. has intensified the sanctions against the Latin American nation’s oil company.
The response from the U.S. was the nearly inconsequential removing India from the Generalized System of Preferences which created tariff-free trade on a number of products between the U.S. and India.
This longish, but interesting background story put in an appearance on the Zero Hedge website at 8:45 p.m. on Tuesday evening EST — and another link to it is here.
As President Trump flew home from his Hanoi summit with Kim Jong Un, Mike Pompeo peeled off and flew to Manila. And there the Secretary of State made a startling declaration.
Any armed attack by China on a Philippine ship or plane in the South China Sea, he told the Philippine government, will be treated as an attack on an American ship or plane, bringing a U.S. military response.
“China’s island building and military activities in the South China Sea threaten your sovereignty, security and, therefore, economic livelihood, as well as that of the United States,” said Pompeo.
“As the South China Sea is part of the Pacific, any armed attack on Philippine forces, aircraft or public vessels in the South China Sea will trigger mutual defense obligations under article 4 of our mutual defense treaty.”
Article 4 requires the U.S. and the Philippines to come to the defense of the other if one is attacked. The treaty dates back to August 1951. There are Americans on Social Security who were not born when this Cold War treaty was signed.
Pompeo’s declaration amounts to a U.S. war guarantee.
Why would we make such a commitment? Why take such a risk?
This commentary by Patrick put in an appearance on his Internet site on Monday sometime — and I thank Brad Robertson for sending it our way. Another link to it is here.
GS expect the bullish gold trend to continue. New forecasts, each up by 25 USD
- three months $1,350
- six month $1,400
- 12 month $1,450
Also, silver forecasts:
- three month $16.50
- six month $17.00
- 12 month $17.50
each up 25 cents from previous
That’s mighty big of them. But if ‘da boyz’ take their feet of their respective prices, they’ll rise far higher than that — and a lot sooner. This precious metal-related news story showed up on the forexlive.com Internet site at 12:48 a.m. GMT in London on their Tuesday morning, which was 7:48 p.m. in New York — EST plus 5 hours. I found this on the Sharps Pixley website — and another link to it is here.
The concept of peak gold is something that investors should get used to as one Canadian bank sees gold production falling through 2020 at least.
Looking at the global gold supply, Colin Hamilton and Andrew Kaip, analysts at BMO Capital Markets, said that with most of the 2018 numbers out, it looks like gold production has dropped for the second consecutive year. The analysts added that this trend is not expected to shift for at least the next two years.
“We anticipate that, with existing operations continuing to be a drag on supply volumes, and Chinese output in trend decline, a renewed focus on exploring for and developing large, longer-dated gold projects will be required,” the analysts said in their report.
Although mining companies are increasing their exploration budget, the analyst said that the problem remains the dearth of significant deposits.
“When we look out over the next five years, there are very few large scale new gold projects earmarked to come on-stream,” the analysts said. “The only large-scale gold projects that we see as probable to enter the top 10 producing gold mining operations by 2025 are Donlin Creek project, owned by Barrick and Novagold, and Sukoi Log owned by Polyus Gold.”
The bank noted that even if major deposits are discovered, they still face development hurdles.
This very interesting and rather in-depth article, filed from London, appeared on the scrapregister.com Internet site yesterday sometime, although there’s no dateline. It’s another gold-related article I found on the Sharps Pixley website. Another link to it is here.
Bank of Italy’s Governor Ignazio Visco said on Monday the country’s reserves of gold belonged to the central bank and could not be used to fund government spending.
“Bank of Italy’s golden reserves amount to between €80 and €90 billion … less than 10 percent of its total assets,” he said during a panel discussion.
“Like the rest of its assets, it cannot be used for monetary financing by the Treasury. These things are not hard to understand,” he added.
The above three paragraphs are all there is to this brief Reuters news item, filed from Milan, that was posted on their Internet site at 5:28 a.m. EST on Monday morning — and it’s the third and final story that I ‘borrowed’ from the Sharps Pixley website.
The PHOTOS and the FUNNIES
These next three photos were taken just south of Merritt along the now-abandoned Kettle Valley Railway line. The first two show the tiny ghost town of Kingsvale, along with a portion of the track bed just across the road. The rail line was opened in 1915 — and the last vestiges of it were closed in 1989. The last shot is of the next stop down the KVR line…Brookmere…which is a tiny village of under 100 people. The water tower for the steam locomotives still stands, with the rail bed running along in front of it. Click to enlarge.
There were new intraday or closing lows in all four precious metals on Tuesday…but except for palladium, none were of significance.
So, is this the bottom or not? Frankly, I don’t know…but I must admit that I’m more than impressed with how the precious metal equities have been holding up/performing this week.
Here are the 6-month charts for all four precious metals, plus copper and WTIC…and the changes in the four precious metals should be noted. I will also point out that copper has been sold lower in price since last Tuesday’s COT Report — and it remains to be seen as to how much more Managed Money selling there’s going to be in that metal. 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 chopped quietly sideways in Far East trading up until shortly after 1 p.m. China Standard Time on their Wednesday morning. It edged a bit higher from there — and is currently up $1.70 the ounce. Silver didn’t do much until shortly before 10 a.m. CST– and then was sold down a bit — and then didn’t do much until shortly after 1 p.m. CST as well. It has rallied a bit since — and is now up a penny on the day. Palladium was sold 7 dollars lower by around 11:45 a.m. CST on their Wednesday morning — and it didn’t do much of anything until shortly after 2 p.m. — and then crawled a few dollars higher, but is still down 4 bucks currently. The palladium price has been edging unevenly lower throughout all of Far East trading — and is down 9 dollars as Zurich opens.
Net HFT gold volume is coming up on 42,500 contracts — and there’s only 1,572 contracts worth of roll-over/switch volume in this precious metal. Net HFT silver volume is already up to around 13,700 contracts — and there’s a tiny 122 contracts worth of roll-over/switch volume on top of that.
The dollar index opened up a small handful of basis points once trading began around 7:45 p.m. EST in New York on Tuesday evening, which was 8:45 a.m. in Shanghai. It has chopped quietly and unevenly higher since then, not quite making it to the 97.00 mark, but has turned lower since — and as of 7:45 a.m. GMT in London, is up only 3 basis points.
Yesterday, at the close of COMEX trading, was the cut-off for this Friday’s COT Report — and as I said further up in this column…this COT Report, plus the companion Bank Participation Report, will finally be current after an almost 3-month wait since the U.S. government shut-down began in December.
And as I post today’s column on the website at 4:02 a.m. EST, I note that the gold price, which was up $2.40 at it high, is now down 40 cents as the first hour of London trading draws to a close — and ‘da boyz’ have silver down 3 cents currently. Platinum is now down 7 bucks — and palladium by 8.
Gross gold volume is 55,000 contracts — and minus what little roll-over/switch volume there is, net HFT gold volume is a bit under 51,500 contracts. Net HFT silver volume is 15,500 contracts — and there’s still only 137 contracts worth of roll-over/switch volume in that precious metal.
The dollar continued to crawl quietly lower during the first hour of London trading — and it’s now back at unchanged as of 8:45 a.m. GMT/9:45 a.m. CET.
That’s all I have for today, which is more than enough — and I’ll see you here tomorrow.