A Strange Thursday Trading Session

08 March 2019 — Friday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


It was another day where the gold price didn’t do much…or wasn’t allowed to do much…you choose.  The attempt to smack it lower at the London open on Thursday morning, got bought immediately…but any of the tiny rallied that occurred after that, weren’t allowed to get far.  Except for the down/up spike at the London open, gold traded in a four dollar price range yesterday.  Nothing to see here…please move along.

Of course there were no high or low ticks worthy of the name.

Gold finished the Thursday session in New York at $1,285.20 spot, down 80 cents on the day.  Net volume was fairly quiet at a hair under 191,000 contracts — and there was a very chunky 73,000 contracts worth of roll-over/switch volume out of April and into future months.

The silver price chopped and flopped around until around 1 p.m. in London/8 a.m. in New York.  Then it was sold down to its low tick of the day, which came just before, or at, the afternoon gold fix in London — and it continued to chop and flop sideways from there until trading ended at 5:00 p.m. EST.

The high and low ticks aren’t really worth looking up for silver either, but here they are anyway…$15.13 and $14.985 in the May contract.

Silver was closed yesterday at $15.00 spot, down 4 cents from Wednesday.  Net volume was somewhat elevated at just under 55,000 contracts — and there was 6,900 contracts worth or roll-over/switch volume in that precious metal.

Platinum was sold a few dollars lower in Far East and early Zurich trading on their respective Thursdays, but was back at unchanged by 2 p.m. CET/8 a.m. EDT.  The engineered price decline commenced at that point — and that sell-off lasted until a few minutes after 12 o’clock noon in New York — and the price didn’t do much of anything after that.  Platinum was closed at  $812 spot, down another 13 bucks on the day…and right on its 50-day moving average, which it penetrated briefly intraday.

The palladium price crawled quietly sideways during Far East trading yesterday — and that lasted until a few minutes before the Zurich open.  It took flight at that point but, like the other three precious metals, it ran into ‘something’ about forty-five minutes later — and that was its high tick of the day — and at that juncture it was up 15 dollars.  It was sold a bit lower over the next hour — and then, like platinum, the price was engineered lower staring at 2 p.m. CET/8 a.m. EST.  That lasted until just before 10:30 a.m. in COMEX trading in New York — and then it edged unevenly higher for the rest of the Thursday session.  Palladium finished the day back above $1,500 spot, at $1,506…down 9 dollars from Wednesdays close.

The dollar index closed very late on Wednesday afternoon in New York at 96.87 — and really didn’t do much of anything once trading commenced at 7:45 a.m. EST on Wednesday evening.  It was basically comatose until it began to turn higher at precisely 11 a.m. GMT in London.  The rally became far more serious ninety minutes later — and it headed unevenly higher until 2:50 p.m. EST — and an hour or so later, crept a few basis points lower into the close.  The dollar index finished the Thursday session at 97.67…up 80 basis points from Wednesday.

This move in the U.S. dollar index yesterday had all the hallmarks of a short-covering rally that came on the news from the ECB yesterday.  And the fact that the gold and silver prices didn’t get pounded into the ground on that dollar index rally, should be carefully noted.

Here’s the 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…97.63…and the close on the DXY chart above, was 4 basis points on Thursday.  Click to enlarge.

The gold stocks opened unchanged, dipped into negative territory ever so briefly — and then began to chop quietly higher.  Their respective highs came around 12:45 p.m. in New York trading — and then slid a bit over the next fifteen minutes, before chopping quietly sideways for the rest of the day.  The HUI closed higher by 1.01 percent.

The silver equities opened down a bit, hit their respective lows just before 9:30 a.m. in New York trading.  They began to chop quietly higher from there — and their respective highs came around 2:25 p.m. EST.  They softened a a hair going into the 4:00 p.m. close.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up 0.93 percent.  Click to enlarge if necessary.

And here’s Nick’s 1-year Silver Sentiment/Silver 7 Index, updated with Thursday’s change.  Click to enlarge as well.

The CME Daily Delivery Report showed that 9 gold and 122 silver contracts were posted for delivery within the COMEX-approved depositories on Monday.

In gold, the sole short/issuer was Advantage.  JPMorgan picked up 4 of those contracts — and Advantage 4 as well.

In silver, the only short/issuer that mattered was International F.C. Stone, with 120 contracts out of their client account.  Of course the biggest long/stopper was JPMorgan with 81 contracts…31 for its own account, plus 50 for its client account.  Advantage was in distance second place with 33 contracts for its 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 March declined by 3 contracts, leaving 53 still around, minus the 9 contracts mentioned a few paragraphs ago.  Wednesday’s Daily Delivery Report showed that 8 gold contracts were actually posted for delivery today, so that means that 8-3=5 more gold contracts were added to March deliveries.  Silver o.i. in March fell by 19 contracts, leaving 535 still open, minus the 122 contracts mentioned a few paragraphs ago.  Tuesday’s Daily Delivery Report showed that 22 silver contracts were actually posted for delivery today, so that means that 22-19=3 more silver contracts were added to March.

I noted that total gold open interest blew out by 23,329 contracts in the above Preliminary Report — and I’m kind of wondering what that’s all about.  Maybe it was spread trade related.


There were no reported changes in GLD on Thursday, but an authorized participant, most likely JPMorgan, removed 703,325 troy ounces of silver from SLV.

And, for the third day in a row, there was no sales report from the U.S. Mint.

There was some activity in gold over at the COMEX-approved depositories on the U.S. east coast on Wednesday.  JPMorgan reported receiving 55,955 troy ounces of the stuff — and that was a transfer from Brink’s, Inc.  There was no other ‘in’ activity.  Besides the transfer out of Brink’s, Inc., there was 63,202 troy ounces shipped out of HSBC USA.  The link to that is here.

There was very little activity in silver.  All the ‘in’ activity was 45,839 troy ounces that JPMorgan [again] picked up in a transfer out of the Brink’s, Inc. depository.  The only other ‘out’ activity was one good delivery bar…1,000 troy ounces…that departed Delaware.  There was also a small paper transfer…19,743 troy ounces…from the Eligible category — and into Registered over at CNT.  That, I suspect, will be used for March deliveries.  The link to this is here.

It was fairly busy over at the COMEX-approved gold kilobar depositories in Hong Kong on their Wednesday.  They reported receiving 3,860 of them — and shipped out 1,097.  All of this activity was at Brink’s, Inc. as per usual — and the link to that, in troy ounces, is here.


I see that the People’s Bank of China added to their gold reserves in February for the third month in a row.  This time it was a smallish 380,000 troy ounces/11.82 tonnes…according to Nick Laird’s chart below.

I don’t get overly exited about such pronouncements from the PBOC, as it’s pretty common knowledge that they aren’t reporting all the gold reserves they actually have…releasing that information in dribs and drabs when it suits them.  That’s more than apparent in the chart below, which contains twenty years worth of data.  Click to enlarge.

I have an average number of stories for you today.


CRITICAL READS

Federal Reserve scraps ‘qualitative’ test for U.S. banks in 2019 stress tests

The U.S. Federal Reserve said on Wednesday it would no longer flunk banks based on operational or risk management lapses during its annual health check of the country’s domestic banks.

The “qualitative” portion of the 2019 test, however, will still apply to the U.S. subsidiaries of five foreign banks subject to the annual exam.

The move, which is a big win for major banks, such as Goldman Sachs Group Inc, Morgan Stanley and JP Morgan, Bank of America and Citigroup, forms part of a broader effort by the Fed to overhaul its annual “stress-testing” process, which the industry has long criticized as too onerous and opaque.

Since the 2007-09 global financial crisis, the Fed has put the country’s lenders through strict annual tests to see whether they would have enough capital to withstand a major economic downturn.

For the largest lenders, that test also included a so-called “qualitative objection,” that gives the Fed the discretion to fail banks due to risk management or operational failures, even if they have sufficient capital.

Lower the bar so all the banks can jump over easily.  Not exactly a big vote of confidence in the U.S. banking system.  This Reuters story, filed from Washington, was posted on their website at 1:24 p.m. EST on Wednesday — and it comes to us courtesy of Mike Easton.  Another link to it is here.


BlackRock CEO Larry Fink Says Modern Monetary Theory Is ‘Garbage

BlackRock Chief Executive Officer Larry Fink said he’s not a proponent of modern monetary theory.

That’s garbage,” Fink said in an interview with Erik Schatzker on Bloomberg Television Thursday. “I’m a big believer that deficits do matter. I’m a big believer that deficits are going to be driving interest rates much higher and it could drive them to an unsustainable level. ”

MMT economists argue that because the U.S. borrows in its own currency, it can print dollars to cover its obligations, and can’t go broke. The theory has won converts among freshman Democrats like Alexandria Ocasio-Cortez as a way to finance such social policies as the Green New Deal and Medicare For All.

The U.S. deficit is on course to top $1 trillion in the coming years, according to the Congressional Budget Office. Last week, Federal Reserve Chair Jerome Powell described that school of thought as “wrong,” while economists like Larry Summers and Paul Krugman have also denounced it.

But not everyone is so dismissive: Paul McCulley, former chief economist at Pacific Investment Management Co., says that he has a lot of sympathy for the doctrine although he’s “not a card-carrying MMTer.

This Bloomberg news item, with a 5:09 minute video clip embedded, put in an appearance on their Internet site at 4:01 a.m. PST [Pacific Standard Time] on Thursday morning — and was updated about ninety minutes later.  I thank Swedish reader Patrik Ekdahl for sending this along — and another link to it is here.


Surprise! Surprise! American Car Payment Delinquencies Set Record — Dennis Miller

Former Fed Chairs, Janet Yellen and Ben Bernanke took great credit for steering the world recovery from the great recession. When something good happens, it’s a result of their masterful strategic planning. Why are they totally surprised when negative news gets reported?

The Business Insider headline blared, “A record 7 million Americans have stopped paying their car loans, and even economists are surprised.”

Wolf Street headline, “Subprime Arrives: Auto-Loan Delinquencies Spike to Great Recession Levels”:

A development that is surprising during a strong economy and labor market”: New York Fed.

The Fed drives interest rates to historic lows, borrowing hits all-time highs and they’re surprised when auto loan delinquencies set new records?

Do their economists really wear those beanie hats with the propellers? At what point do these PhD’s lose their common sense? I’m serious! It doesn’t take a genius to understand cause and effect. Don’t they look at their own published data?

This long commentary from Dennis showed up on his website on Thursday morning sometime — and another link to it is here.


Consumer Credit Storms Above $4 Trillion, as Credit Card Debt Hits Record High

After a few months of wild swings, in January U.S. consumer credit normalized rising by $17 billion, in line with expectations, following December’s $15.4 billion increase. The continued increase in borrowings saw total credit storm above $4 trillion, and hitting a new all time high of $4.034 trillion on the back of a America’s ongoing love affair with auto and student loans, and of course credit cards.

Revolving credit increased by $2.6 billion, a rebound from December’s downward revised $939 million, and rising to $1.058 trillion, a new all time high in total credit card debt outstanding.

There was barely a change in the monthly increase in non-revolving credit, i.e. student and auto loans, which jumped by $14.5 billion, up from the $14.4 increase in December, and bringing the non-revolving total also to a new all time high of $2.977 trillion.

And while January’s rebound in credit card use may assuage some concerns about the sharp slowdown in spending in the end of 2018 and start of 2019, and the subsequent plunge in retail sales, as the household savings rate surged by the most in years, one place where there were no surprises, was in the total amount of student and auto loans: here as expected, both numbers hit fresh all time highs, with a record $1.569 trillion in student loans outstanding, an impressive increase of $10.3 billion in the quarter, while auto debt also hit a new all time high of $1.155 trillion, an increase of $9.5 billion in the quarter.

In short, whether they want to or not, Americans continue to drown even deeper in debt, and enjoying every minute of it.

This 4-chart Zero Hedge article was posted on their Internet site at 3:15 p.m. on Thursday afternoon EST — and I thank Brad Robertson for pointing it out.  Another link to it is here.


Which Sector Is the Pin That Pricks the Everything Bubble? — Mike Maloney

With seemingly everything except precious metals in a bubble, it can be quite hard to keep your eye on the ball. Join Mike as he uncovers what could potentially be a huge factor in the next crash – insane levels of corporate debt.

This 7:11 minute video presentation from Mike appeared on the goldsilver.com Internet site on Thursday morning sometime — and I thank Jim Gullo for pointing it out.


Argentine Peso Plummets To Record Low As Inflation Soars

With inflation soaring (and forecast to accelerate further), the Argentine Peso has plummeted the last few days even as the central bank raised 7-day Leliq rate to 51.862%, according to two people with direct knowledge.

Peso has dropped 11% this year, making it the worst performer against USD.

Argentina, at the close of this article, maintains a high country risk. In fact, the second highest in Latin America and the third of the emerging countries if we include Turkey.

What is the country risk? It is the spread between the yield of the sovereign bond of a nation compared with the United States Treasury bonds, the lowest risk asset. Investors demand higher-yielding bonds due to the risk of the issuer’s economy, to compensate for the currency and solvency risk.

Argentina’s country risk increased by 130% in 2018 due to delayed reforms, constant devaluation and loss of foreign exchange reserves. The country risk has fallen significantly from its high of 817 basis points to the current 706. However, it remains the second highest in the region after Venezuela.

The only way that Argentina will erase its unnecessarily high country risk is by cutting bloated public spending, lowering taxes, attracting investment and improving ease of doing business. But more importantly, it needs to stop financing public spending by printing pesos for once and for all.

As if that’s going to happen, dear reader.  This Zero Hedge article appeared on their website at 1:28 p.m. on Thursday afternoon EST — and it’s from Brad Robertson.  Another link to it is here.


ECB Injects More Stimulus as Draghi Reveals Slashed Forecasts

The European Central Bank delivered a fresh round of monetary stimulus in a bid to shore up the weakening economy as it cut its growth forecast by the most since the advent of its quantitative-easing program four years ago.

ECB President Mario Draghi said the euro-zone economy will now expand only 1.1 percent this year, a drop of 0.6 percentage point from forecasts just three months ago. A package of assistance from new loans for banks to a longer pledge on record-low rates is intended to expand existing stimulus, he said.

The persistence of uncertainties related to geopolitical factors, the threat of protectionism and vulnerabilities in emerging markets appears to be leaving marks on economic sentiment,” Draghi told journalists in Frankfurt on Thursday. “The risks surrounding the euro area growth outlook are still tilted to the downside.”

The ECB is reverting to more monetary support just three months after policy makers decided to end their bond-buying program and hoped to start weaning the euro-area economy off its crisis-era stimulus.

This Bloomberg story was posted on their website at 5:56 a.m. PST on Thursday morning — and was updated a bit over ninety minutes later.  It’s the second offering of the day from Patrik Ekdahl — and another link to it is here.  There was a follow-on story to this from Reuters headlined “With friends like Draghi, banks don’t need enemies” — and that comes courtesy of Richard Saler.


China Has Printed More Money than Any Country in History — Kyle Bass

The Chinese print more money than any other country has printed, in gross terms, in world history… Since 2001, they’ve printed roughly $30 trillion worth of RMB (Chinese Yuan). Think about that for a second. The debate here in the U.S., about the Fed, is: ‘Is the Fed balance sheet too big? Is it too large? It got to $4.5 trillion. Should it be $3.5 trillion?’ China has printed $30 trillion worth of RMB in a decade (18 years). The scale to which they have printed is… unprecedented. Can the Chinese run their stock market up? Absolutely. They control the price. They control the printing press. They control the police and they control the narrative.  They can control that for a long time. They way they interact with the rest of the world is they actually have to spend Dollars, Euros, Yen, or Pounds for anything that they are trying to import… At some point in time economic gravity is going to catch them on the FX reserves side… By the way, they run a 10% of GDP fiscal deficit… We are up in arms about running a trillion here, which is roughly 4%…

This 11-minute CNBC video interview with Kyle was embedded in a story over at thesoundingline.com Internet site yesterday — and I thank Roy Stephens for sharing it with us.  Another link to it is here.


CME Group renews discounts for secret trading by governments and central banks

Market manipulation by governments and central banks is right out in the open again, hiding in plain sight in the confidence that mainstream financial news organizations, financial letter writers, and gurus who purport to bring “technical analysis” to bear on markets will avert their gaze.

The CME Group, operator of the major U.S. futures exchanges, has just renewed its “Central Bank Incentive Program,” in which governments and central banks receive discounts for surreptitiously trading all major futures contracts on CME Group exchanges — not just financial futures but also monetary metals futures and even agricultural futures.

CME Group’s previous discount schedule, called to your attention by GATA a year ago January was dated December 2017.

Now a new one has been posted, dated last month — and has added bitcoin futures.

Some of the discounts have changed but governments and central banks continue to receive 15 percent discounts on fees for trading gold and silver futures.

Of course CME Group’s trading discount schedule doesn’t prove that any particular government or central bank has been trading any particular contract lately. But on Page 6 of its 2019 10-K form filed with the U.S. Securities and Exchange Commission, CME Group continues to acknowledge that “the customer base of our derivatives exchanges includes professional traders, financial institutions, institutional and individual investors, major corporations, manufacturers, producers, governments, and central banks.”

This link-filled commentary from GATA secretary/treasurer Chris Powell was posted on the gata.org Internet site late on Thursday morning EST — and another link to it is here.


Wedding Demand Props Up Indian Gold Imports for a Second Month

Gold imports by India climbed in February for a second straight month as retailers increased buying due to jewelry purchases for weddings in the world’s biggest consuming nation after China.

Overseas purchases advanced 5.5 percent to 70.7 tons last month from a year earlier, according to a person familiar with the data, who asked not to be named as the figures aren’t public. Imports during the April-February period declined 6.4 percent to 720 tons, the person said. Finance Ministry spokesman D.S. Malik wasn’t immediately available for comment.

Buying and wearing of gold during weddings and festivals is seen as auspicious in the majority Hindu country. Demand is set to recover this year as cash handouts and higher spending in an election year boost disposable incomes, according to the World Gold Council.

Rural demand is on the rise thanks to higher crop support prices and more rural-friendly schemes by the government,” Gnanasekar Thiagarajan, director at Commtrendz Risk Management Services, said by phone from Coimbatore in southern India.

This Bloomberg article put in an appearance on their Internet site at 9:13 p.m. PST on Wednesday evening — and it’s something I found on the Sharps Pixley website.  Another link to it is here.


China Gold Reserves Rise to 60.26 Million Ounces Worth Just $79.5 Billion

China increased its gold reserves for a third straight month in February, data from the People’s Bank of China (PBOC) showed this morning.

The value of China’s gold reserves rose slightly to $79.498 billion in February from $79.319 billion at the end of January, as the central bank increased the total amount of gold reserves to 60.260 million fine troy ounces from 59.940 million troy ounces.

Chinese foreign exchange reserves, the world’s largest, rose by $2.26 billion in February to $3.090 trillion, central bank data showed on Thursday, marking the highest level since August 2018. The U.S. trade deficit hit its highest in a decade in 2018, in a resounding failure for President Donald Trump’s global trade offensive, U.S. government data showed yesterday.

We have long pointed out two other entities, besides the PBOC, have also been buying gold – the State Administration of Foreign Exchange (SAFE) and the China Investment Corporation (CIC).

These potentially sizeable sources of demand are not included in the PBOC figures.

It is important to note this lack of transparency regarding total aggregate Chinese central bank and sovereign fund demand. Therefore, it is likely that we are underestimating Chinese and thus global gold demand.

That’s exactly right, dear reader.  This gold-related news story showed up on the goldcore.com Internet site yesterday sometime — and it’s another contribution from Richard Saler — and another link to it is here.


The PHOTOS and the FUNNIES

I only have two photos for you today and, like yesterday, both taken along the Kettle Valley Railway track bed on the way to the Othello Tunnels, which were closed for the winter, as these shots were taken on November 25.  The first is another shot along the KVR right-of-way — and the second is of the Coquihalla River which runs alongside the tracks.  It empties into the Fraser River at Hope, B.C., which is about a ten minute freeway drive from where I was standing — and thirty minutes or so by the back roads, which are far more scenic, as you’ll find out tomorrow.  Click to enlarge.


The WRAP

It was a very different trading session on Thursday.  The sell-off at the London open in gold — and a bit in silver, ran into pretty ferocious buying, but the ensuing rallies in both [and the other two precious metals] ran into ‘something’ just before 9 a.m. GMT/10 a.m. CET.  From there they both chopped nervously sideways, with ‘da boyz’ setting a new low close in silver for this move down

All this happened on trading volume that was pedestrian at best.

But with the dollar index soaring, it was a table set for a price smash to the downside in all four.  But there was nary a hint of that — and you have to wonder why that was.  I know I certainly am.

Then, despite the fact that the general equity markets were down all day long in New York on Thursday, the precious metal equities put in a very respectable performance….all things considered.

Here are the 6-month month charts for the four precious metals, plus copper and WTIC.  Gold was the only precious metal that didn’t have a new low close for this engineered move down.  And as I pointed out earlier, platinum was closed right on its 50-day moving average, after being closed below its 200-day moving average on Wednesday.  Click to enlarge.

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 once trading began at 6:00 p.m. EST in New York on Thursday evening.  That ended shortly after 9 a.m. China Standard Time on their Friday morning — and it began to head quietly higher from there.  The price was capped a bit after 3:30 p.m. CST, but has rallied a tiny bit since.  At the moment, gold is up $7.90 an ounce.  It was the same price path for silver — and it’s up 9 cents.  Platinum was down a dollar or so until shortly after 1 p.m. CST — and at that point it crept higher until exactly 3 p.m. CST — and hasn’t done much since — and is up 3 bucks.  Palladium inched unsteadily lower until shortly after 3 p.m. CST — and then it got kicked downstairs — and back below $1,500 spot.  It was down 14 bucks at its current low tick, but has jumped a higher since — and is down only 6 dollars as Zurich opens.

Net HFT gold volume is around 44,000 contracts — and there’s 2,965 contracts worth of roll-over/switch volume in this precious metal.  Net HFT silver volume is a bit over 12,500 contracts — and there’s only 158 contracts worth of roll-over/switch volume on top of that.

The dollar index opened down 4 basis points once trading began around 7:45 p.m. EST on Wednesday evening in New York, which was 8:45 a.m. China Standard Time on their Friday morning.  It chopped quietly lower until precisely 3:00 p.m. CST — and from there it jumped up a bit, but has turned lower once again — and as of 7:45 a.m. GMT in London/8:45 a.m. CET in Zurich, the dollar index is down 20 basis points.

Today, around 3:30 p.m. EST, we get the new and completely up-to-date COT Report and Bank Participation Report for positions held at the close of COMEX trading on Tuesday — and I know that Ted will be delighted to be working with current data.  So will I.

And as I’ve mentioned several times this week already, Ted is expecting huge improvements in the commercial net short positions in both silver and gold…hoping for at least 20,000 COMEX contracts in silver — and 50,000 in gold.  Of course, more is better!

And as I post today’s column on the website at 4:02 a.m. EST, I note that the gold price has continued to crawl quietly and unevenly higher during the first hour of London trading — and is currently up $8.50 an ounce. Silver is now up 13 cents. Platinum is now up 5 dollars — and palladium is now down 4 as the first hour of Zurich trading draws to a close.

Gross gold volume is coming up on 61,000 contracts — and minus roll-over/switch volume, net HFT gold volume is now up to 53,500 contracts. Net HFT silver volume is around 14,400 contracts — and there’s only 188 contracts worth of roll-over/switch volume in this precious metal.

The dollar index has been chopping quietly sideways during the first hour of London trading — and is still down 20 basis points as of 8:45 a.m. in London/9:45 a.m. in Zurich.

Today is not only Friday, but we also get the jobs report from the folks living in Never-Never Land over at the BLS.  That appears at 8:30 a.m. EST.  And after the rather weird trading action in the precious metals, not only yesterday, but all week long…nothing will surprise me when I check the charts after I roll out of bed later this morning.

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

Ed