Gold Price Spike on Fed News Capped on Monstrous Volume

21 March 2019 — Thursday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price wandered around three or four dollars either side of unchanged until a few minutes before the equity markets opened in New York on Wednesday morning — and then it got sold down to its low tick of the day…a few dollars below $1,300 spot…by around 11:45 a.m. EDT.  It was back at the $1,302 spot mark at 2 p.m. when the smoke went up the chimney at the Eccles Building — and it blasted higher from there.  That price spike was accompanied by gargantuan volume, as the powers-that-be were laying in wait — and thirty-five minutes later, the rally was capped — and the price turned quietly lower until trading ended at 5:00 p.m. EDT.

The low and high ticks were reported by the CME Group as $1,298.10 and $1,317.20 in the April contract.

Gold was closed in New York yesterday at $1,312.40 spot, up only $6.40 from Tuesday.  Net volume was sky high at a bit under 306,000 contracts — and there was a hair under 65,000 contracts worth of roll-over/switch volume on top of that.

The price action in silver was the same as it was for gold, except the price swings before the Fed news yesterday, showed more ‘volatility’ — and the low tick was set shortly before 9 a.m. in London — and not in New York.

The low and highs in this precious metal were recorded as $15.265 and $15.565 in the May contract.

Silver was closed  on Wednesday at $15.45 spot, up 10.5 cents on the day.  Net volume was elevated, but not overly so…at least compared to gold…at a bit under 62,000 contracts — and there was about 4,300 contracts worth of roll-over/switch volume in this precious metal.

The price activity in platinum was a very mini version of what happened with silver and gold — and its tiny rally on the Fed news wasn’t allowed to get very far, either.  Platinum was closed at $861 spot, up 10 dollars on the day.

Palladium was up about five bucks by shortly after 11 a.m. China Standard Time on their Wednesday morning — and from that juncture, it chopped quietly and unevenly sideways for the remainder of the day.  It finished the Wednesday session at $1,578 spot, up 7 dollars from Tuesday’s close.

The dollar index closed very late on Tuesday afternoon in New York at 96.38 — and opened up 2 basis points once trading began around 7:45 p.m. EDT in New York on Tuesday evening, which was 7:45 a.m. CST in Shanghai on their Wednesday morning.  By 12:22 p.m. CST, it was up 10 basis points — and from that juncture, it traded quietly sideways until a few minutes before 2 p.m. EDT.  Then it cratered.  The 95.74 low tick was set at precisely 3:00 p.m. EDT — and it crept a bit higher into the close from there. The dollar index finished the Wednesday session at 95.76…down 64 basis points from Tuesday’s close.

I would suspect that the usual ‘gentle hands’ were out and about during that waterfall decline event yesterday…save it from oblivion at the 3:00 p.m. EDT mark.

Here’s the DXY chart courtesy of Bloomberg as usual.  Click to enlarge.

And here’s the 6-month U.S. dollar index chart from the folks over at stockcharts.com — and the delta between its close…95.20…and the close on the DXY chart above was 56 basis points on Wednesday.  Click to enlarge.

The gold stocks opened unchanged yesterday morning in New York, but were down a percent and change by around 10:15 a.m. EDT.  From there, they chopped sideways until shortly after 1 p.m. — and at that point began to creep higher.  They took off higher at 2 p.m. of course — and topped out around 2:40 p.m. EDT…sagging a hair into the close from there.  The HUI finished up 2.41 percent.

The silver equities followed a very similar price path, with the only stand-out exception being the big tick higher in that last five minutes of trading in New York.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed higher by 2.29 percent.  Click to enlarge if necessary.

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

The CME Daily Delivery Report showed that 2 gold and 56 silver contracts were posted for delivery within the COMEX-approved depositories on Friday.

In gold, ADM issued both contracts — and Advantage and Morgan Stanley picked up one each.  All of these transactions involved their respective client accounts.

In silver, JPMorgan and International F.C. Stone issued 46 and 10 contracts out of their respective client accounts.  Of the four long/stoppers in total, the three largest were JPMorgan, the CME Group and Morgan Stanley.  JPMorgan and Morgan Stanley picked up 23 and 11 contracts for their respective client accounts — and the CME Group stopped 19 contracts for its own account.  It immediately reissued them as 19×5=95 one-thousand ounce COMEX mini silver contracts — and ADM stopped them all.

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

The CME Preliminary Report for the Wednesday trading session showed that gold open interest in March dropped by 19 contracts, leaving 17 still around, minus the 2 contracts mentioned a few short paragraphs ago.  Tuesday’s Daily Delivery Report showed that 20 gold contracts were actually posted for delivery today, so that means that 20-19=1 more gold contract was just added to March.  Silver o.i. in March rose by 17 contracts, leaving 101 still open, minus the 56 mentioned a few paragraphs ago.  Tuesday’s Daily Delivery Report showed that 20 silver contracts were actually posted for delivery today, so that means that 20+17=37 more silver contracts were just added to the March delivery month.


There were no reported changes in either GLD or SLV yesterday.

There was another tiny sales report from the U.S. Mint on Wednesday.  They sold 500 one-ounce 24K gold buffaloes, plus 500 one-ounce platinum eagles.

Once again there was no in/out activity in gold over at the COMEX-approved depositories on the U.S. east coast on Tuesday.

There was some activity in silver, as one truckload…597,585 troy ounces…was deposited at CNT.  The only ‘out’ activity was 2,062 troy ounces that departed Delaware.  The link to that is here.

There wasn’t much going on over at the COMEX-approved gold kilobar depositories in Hong Kong on their Tuesday.  They didn’t report receiving any — and shipped out only 50 of them.  This activity was at Brink’s, Inc. of course — and I shan’t bother linking it.


Since yesterday was not only the first official day of spring in the Northern Hemisphere, it was also the 20th of the month.  And since that date fell on a weekday, the good folks over at The Central Bank of the Russian Federation updated their website with their February dataDuring that month they reported adding 1.0 million troy ounces of gold to their reserves.

That brings their total gold reserves up to the 69.1 million troy ounce/2,149 metric tonne mark — and here’s Nick’s most excellent chart, updated with that data point.  Click to enlarge.

Except for the Fed news, there wasn’t much happening yesterday.


CRITICAL READS

Recession Secured” — Bonds and Bullion Bid as Fed-Fold Sparks Dollar-Dump

The Fed folded entirely to the market today, slashing its rate trajectory dramatically lower nearer the market’s implied dovishness…

Bloomberg‘s Ye Xie noted that if we take the dot plot at face value (which, mind you, may not be a wise thing to do), then it seems the Fed will hold rates steady this year before raising one more time in 2020. If that pans out, it would be unprecedented. Since the 1970s, there have been three times when the Fed held rates steady for more than a year after raising them in the previous three months: 2006, 2000 and 1997. Invariably, the next move was a rate cut.

However, the market has shifted even more dovish, pricing in almost an entire rate-cut in 2019 now…

Stocks initially surged on the dovish surprise, dragging the Dow green, but as the last hour went on, traders wondered just how much fear The Fed must be feeling about growth to take such a machete to its rate forecasts and started to sell stocks…

Bank stocks did not like The Fed’s dovish message, as the BKX got hammered.

10Y yields are now trading where the 2Y yield was just 15 days ago, pushing down to 2.52% handle – the lowest since Jan 2018…and 30Y yields tumbled back below the 3.00% level to the lowest since Jan 7th…

The Dollar Index crashed to its lowest since early Feb – perfectly back to the Jan FOMC meeting levels…

Gold was smacked lower on huge volume before the FOMC, breaking back below the $1300 level, but the über-dovishness prompted huge volume buying in precious metals, sending gold soaring…

This chart-filled commentary showed up on the Zero Hedge website at 4:01 p.m. on Wednesday afternoon EDT — and another link to it is here. [And as Bill King said in his Thursday morning commentary: “CNBC’s Pisani said the market believes that all major central banks “have the backs of traders”.  We concur; and it is disturbing and disgusting.”]


Paul Volcker Can’t Save Us This Time — Bill Bonner

Still no visible crack in the stock market. But the economy may be breaking down.
First, there is growing recognition that the Obama/Trump recovery has been a flop.

A headline at Yahoo Finance:

Jamie Dimon: The U.S. economy should have grown 40% in the last decade, not 20%

Hardly a week has gone by since the White House proposed its new budget, counting on 3% growth. Now, it too is already admitting that it won’t work. The New York Times:

The Trump administration pushed a $1.5 trillion tax cut through Congress in 2017 on the promise that it would spark sustained economic growth. While the tax cuts have goosed the economy in the short term, officials now concede they will not be enough to deliver the 3 percent annual growth the president promised over the long term.”

Second, more signs are appearing that the recovery – weak as it is – is reaching its end.

This commentary from Bill was posted on the bonnerandpartners.com Internet site on Wednesday morning EDT — and another link to it is here.


FedEx is Talking as if a Global Recession Has Already Begun…and the Numbers Back That Up

Slowing international macroeconomic conditions” is just a fancy way to say that the global economy is in big trouble.

For months, I have been warning that economic conditions are deteriorating, and we just keep getting more confirmation that we are facing the worst global downturn since the last financial crisis.  For the second time in three months, FedEx has slashed its revenue forecast for this year.  In an attempt to explain why revenue is declining, FedEx’s chief financial officer placed the blame squarely on the faltering global economy.  The following comes from CNBC

The multinational package delivery service reported declining international revenue as a result of unfavorable exchange rates and the negative effects of trade battles.

Slowing international macroeconomic conditions and weaker global trade growth trends continue, as seen in the year-over-year decline in our FedEx Express international revenue,” Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer, said in statement.

The use of the word “trends” implies something that has been going on for an extended period of time, and obviously FedEx doesn’t expect things to get better any time soon if they have cut profit projections twice in just the last three months.

And FedEx certainly has a lot of company when it comes to having a gloomy outlook for the global economy.  In one recent article, Bloomberg boldly declared that the global economy is in the worst shape it has been “since the financial crisis a decade ago“.

This longish, but worthwhile commentary by Michael Snyder, appeared on this Internet site very recently I would think, but there’s no dateline.  I found it embedded in a Zero Hedge article that was posted on their website at 10:0 a.m. EDT on Wednesday morning.  It comes to us courtesy of Brad Robertson — and another link to it is here.


UBS Warns Q1 “One of the Worst” in Recent History as I-Banking Revenue Implodes

Just as it appeared that European stocks, whose shorts are supposedly the “most crowded trade” on Wall Street, were set for a major breakout, here comes UBS.

After a painful close to 2018 for most banks, when despite a surge in volatility most flow and prop desks suffered major losses, investors had great hopes for the start of 2019, if for no other reason than the 20% surge in the S&P500 in the past three months.

Alas, at least for the largest Swiss bank it was not meant to be.

Speaking at the Morgan Stanley London European Financials conference, UBS CEO Sergio Ermotti gave a dismal outlook for his bank’s prospects, saying conditions in the first three months have been among the most difficult in recent years.

The investment bank had “one of the worst first-quarter environments in recent history,” Ermotti said Wednesday, blaming it on the lack of merger or IPO activity outside of the U.S. As a result, UBS investment banking revenues were down about one third compared with a year ago. The bank is slowing hiring and some IT projects as it seeks to make up for weak markets.

Ermotti’s comments mean the quarter has deteriorated even more than the bank suggested last week, when it said clients remained cautious in the first months of this year. Similar to Deutsche Bank, UBS has cut thousands of investment banking jobs over the last decade as it tilted to private banking. While the pro-cyclical strategy has become a blueprint for rivals including Credit Suisse, it has left the bank open to revenue dips after market corrections and when clients trade less, like right now.

This news item put in an appearance on the Zero Hedge website at 6:42 a.m. EDT on Wednesday morning — and it’s another contribution from Brad Robertson.  Another link to it is here.


Oil profits grease Trump administration’s move to recognize Israeli annexation of the Golan Heights — Finian Cunningham

Washington last week gave another sign that the Trump administration is moving towards declaring the Golan Heights to be Israeli sovereign territory. At the heart of the move are huge anticipated U.S.-Israeli oil profits.

In an annual human rights report, the State Department referred to the Golan Heights as “Israeli-controlled,” dropping the international norm of citing the contested area as “Israeli-occupied.” The change in wording is significant.

The Golan Plateau is considered to be Syrian territory under international law, according to UN resolutions. Israel has occupied the strategically important area overlooking the Jordan Valley since the 1967 Six Day War. In 1981, Israel formally annexed the land, but the self-declared claim has never been recognized internationally.

Hence, the normative term “Israeli-occupied Golan” in U.N. terminology, not “Israeli-controlled.”

The Trump administration, however, seems to be edging towards a landmark shift in US policy, which would officially recognize the Golan as part of Israel. A senior White House official was quoted last week as denying there was a change in U.S. policy regarding the disputed territory. But several signs suggest otherwise.

This slightly longish commentary/opinion piece by Finian appeared on the rt.com Internet site at 4:30 p.m. Moscow time on their Tuesday afternoon, which was 9:30 a.m. in Washington — EDT plus 7 hours.  I thank George Whyte for pointing it out — and another link to it is here.


South Korean Chip Exports Collapse 25% — Worst Since 2009

South Korea’s exports are headed for another monthly drop amid slowing economic growth in China and weak demand for semiconductors, preliminary trade data for March shows.

The preliminary data – for the first 20 days of the month – saw exports fell 4.9% from a year earlier, putting them on course for a fourth consecutive monthly decline.

Imports in the first 20 days of March fell 3.4%, from a year earlier.

Shipments to China slid 12.6% while overall sales of semiconductors, a key driver of Korea’s economy, decreased by 25% – the biggest YoY decline since March 2009…

This story was posted on the Zero Hedge website at 8:38 p.m. on Wednesday evening EDT — and another link to it is here.


Citigroup to sell Venezuelan gold in setback to President Maduro, sources tell Reuters

Citigroup Inc. plans to sell several tons of gold placed as collateral by Venezuela’s central bank on a $1.6 billion loan after the deadline for repurchasing them expired this month, sources said, a setback for President Nicolas Maduro’s efforts to hold onto the country’s fast-shrinking reserves.

Maduro’s government has since 2014 used financial operations known as gold swaps to use its international reserves to gain access to cash after a slump in oil revenues left it struggling to obtain hard currency.

In the past two years, however, it has struggled to recover its collateral.

Under the terms of the 2015 deal with Citigroup’s Citibank, Venezuela was due to repay $1.1 billion of the loan on March 11, according to four sources familiar with the situation. The remainder of the loan comes due next year.

Citibank plans to sell the gold held as a guarantee — which has a market value of roughly $1.358 billion — to recover the first tranche of the loan and will deposit the excess of roughly $258 million in a bank account in New York, two of the sources said.

This Reuters story showed up on their website at 12:04 p.m. EDT on Wednesday afternoon — and was updated late early on Wednesday evening.  I plucked it from a GATA dispatch that Chris Powell filed from Saigon on their Thursday morning — and another link to it is here.


Silver Demand in India Set for 4-Year High on Farm Cash Payout

Silver will see a resurgence in demand this year from rural Indians spending cash handouts from the government designed to aid local economies ahead of the general election, according to Metals Focus Ltd.

Purchases are set to rise to about 6,590 tons, beating the 6,442 tons bought in 2018 and marking the best year since record consumption in 2015, Chirag Sheth, an analyst for the London-based research firm, said in an interview in Mumbai. The demand recovery will continue over the next few years “because of economic growth, higher income, and relatively low silver prices and penetration of sterling silver,” he said.

India last month started distributing the first installment of 2,000 rupees ($29) to smallholders, under a program that proposes to spend 750 billion rupees in the year beginning April. “The government cash handouts to farmers will help silver demand much more than gold,” as many recipients only have the purchasing power to buy the cheaper metal, said Sheth.

This silver-related Bloomberg article appeared on their Internet site at 3:54 p.m. PDT on Tuesday afternoon — and I found it on Sharps Pixley yesterday evening.  Another link to it is here.


The PHOTOS and the FUNNIES

After the swan photos in yesterday’s column, my daughter and I explored Princeton — and this shot of a mule deer doe was taken on the edge of town. Then we headed up a paved mountain road to the semi-ghost town of Coalmont…then on to picturesque Tulameen.  The second shot was taken en route.  And if you look closely, you can see part of the Kettle Valley Railway track bed running along side the highway in the valley below.  Click to enlarge.


The WRAP

Faced with the choice between changing one’s mind, or proving that there is no need to do so, almost everyone gets busy on the proof.” – John Kenneth Galbraith


The price spike in gold at 2 p.m. EDT yesterday was met by ferocious selling, with net volume a bit over 300,000 contracts.  It was obvious that the powers-that-be weren’t going to let the gold price reflect the precarious situation the exists in the world’s financial and equity markets…a situation that grows worse with each passing day.

As all the various and sundry pundits have pointed out, the Fed has now totally prostituted itself to the equity and bond markets.  And as Bill King said in this morning’s edition of the King Report this morning…”CNBC’s Pisani said the market believes that all major central banks “have the backs of traders”.  We concur; and it is disturbing and disgusting.”

Here are the 6-month charts for all four precious metals, plus copper and WTIC.  And because all of the price/volume activity that mattered occurred thirty minutes after the COMEX close, it won’t show up until Thursday’s dojis appear on the stockcharts.com Internet site late tomorrow afternoon.  I’ll have that in my Friday missive.  Click to enlarge.

And as I post today’s column on the website at 4:02 a.m. EDT this morning, the London open is upon us — and I note that the gold price crawled quietly higher until shortly before 11 a.m. China Standard Time on their Thursday morning — and then traded quietly sideways from there — and is up $6.00 an ounce at the moment. Silver followed exactly the same price pattern as gold until the 2:15 p.m. CST afternoon gold fix in Shanghai — and it began to head a bit higher from there. It’s up 13 cents currently. Platinum crept higher until shortly before 9:30 a.m. CST — and hasn’t done much since — and is up 7 bucks. Palladium traded the same as gold — and since its rally ended/was capped shortly before 11 a.m. in Shanghai, it’s been trading unevenly sideways — and is up 10 dollars as Zurich open.

Gross gold volume is reasonably heavy at around 59,500 contracts — and minus what roll-over/switch volume there is, net HFT gold volume is noting really unusual at just under 47,000 contracts. But net HFT silver volume is really getting up there at 16,800 contracts — and there’s 616 contracts worth of roll-over/switch volume in that precious metal.

The dollar index jumped up 16 basis points the moment that trading began around 7:45 p.m. EDT in New York on Wednesday evening, which was 7:45 a.m. China Standard Time on their Thursday morning. It has been chopping quietly but unevenly sideways ever since then — and is up 17 basis points as of 7:45 a.m. GMT in London/8:45 a.m. CET in Zurich.


NOTE: Because of the switch over to Daylight Saving Time in North America two Sunday’s ago, I’m not staying up the extra hour to record the first hour of London/Zurich trading.  Britain and Europe don’t go on British Summer Time [BST] and Central European Summer Time [CEST] until this Sunday.  Once they do the switch-over to BST and CEST, then I’ll resume the usual routine of commenting on the first hour of trading in both those markets.


And in closing, I have no idea what to expect as far as precious metal price action is concerned today.  But yesterday’s immediate and ferocious price-capping exercise, particularly in gold…was carefully noted.  However, because that price activity occurred a day after the cut-off for tomorrow’s Commitment of Traders Report, we won’t know the ‘who and what’ of Wednesday’s trading session until next Friday.

That’s all I have for today — and I’ll see you here tomorrow.

Ed