26 April 2019 — Friday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The price action in gold was pretty quiet on Thursday. The only activity worth noting was the tiny ‘rally’ that began a minute or so after 9 a.m. in New York — and that was capped and turned lower around 10:50 a.m. EDT. The ensuing tiny sell-off lasted until about 12:40 p.m. — and it edged quietly sideways for the remainder of the day.
The low and high ticks definitely aren’t worth looking up.
Gold was closed on Thursday at $1,276.70 spot, up 70 cents on the day. Net volume wasn’t exactly light at a hair under 218,000 contracts — and there was only 5,600 contracts worth of roll-over/switch volume on top of that. I suspect that this heavier volume came as a result of the tiny rally going into the London open yesterday morning, as the volume change in the first hour of London trading was shockingly high.
‘Da Boyz’ were right there to sell silver lower the moment that trading began at 6:00 p.m. EDT in New York on Wednesday evening — and its low tick of the day came about twenty minutes before the COMEX open. Then, like gold, it rallied until at, or minutes before, the afternoon gold fix in London. About ninety minutes after that it was sold a bit lower until shortly after the COMEX close — and from that juncture, it struggled a bit higher until trading ended at 5:00 p.m. EDT.
Silver was forced to trade in a one percent range yesterday, so I shan’t bother looking up the low and high ticks in this precious metal, either.
Silver finished the Thursday session in New York at $14.95 spot, down 5 cents from Wednesday. Net volume was almost nonexistent at just under 29,500 contracts but, as expected, roll-over/switch volume out of May and into futures months was pretty enormous at 35,800 contracts.
The platinum price crawled very unevenly sideways until around 9:30 a.m. CEST in Zurich. Then it was sold lower until a minute or so after 9 a.m. EDT…just like for gold. It chopped very quietly higher from that point until 2 p.m. EDT in the thinly-traded after-hours market — and didn’t do a thing after that. Platinum was closed at $885 spot, up 3 bucks from Wednesday.
The palladium price crawled unevenly sideways all day long on Thursday. But a very few minutes before trading ended at 5:0 p.m. EDT in New York, it jumped higher by about ten bucks — and finished the day at $1,408 spot, up 9 dollars from Wednesday’s close.
The dollar index closed very late on Wednesday afternoon in New York at 98.17 — and opened down 8 basis points once trading began at 7:44 p.m. EDT on Wednesday evening, which was 7:44 a.m. China Standard Time on their Thursday morning. From that juncture, it crawled quietly and very unevenly lower until 8:15 a.m. in London. It began to ‘rally’ from there — and the 98.32 high tick came at 8:30 a.m. in New York. It was then sold back into the red until around 10:40 a.m. EDT — and from that juncture crept higher until 3:10 p.m. — and from there it edged a bit lower into the close. The dollar index finished the Thursday session at 98.20…up 3 basis points from Wednesday’s close.
Except for part of the rally in gold and silver, both of which were capped before the dollar decline ended at 10:40 a.m. EDT, you’d be hard pressed to see any correlation between the currencies and precious metal prices again yesterday.
Here’s the DXY chart, courtesy of Bloomberg. Click to enlarge.
Here’s the 6-month U.S. dollar index chart, courtesy of stockcharts.com — and the delta between its close…97.92…and the close on the DXY chart above, was only 28 basis points on Thursday. Click to enlarge as well.
The gold shares rallied a bit at the 9:30 open of trading, but the moment that ‘da boyz’ capped the gold price and turned it lower, the gold stocks followed — and their respective lows came at 2 p.m. EDT. From there,they crept a bit higher into the close. The HUI finished lower by 0.73 percent.
The price action in the silver equities was mostly similar, but the tiny rally off their respective lows didn’t begin until about ten minutes before trading ended at 4:00 p.m. EDT in New York. Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down 0.85 percent. Click to enlarge if necessary.
And here’s Nick’s 1-year Silver Sentiment/Silver 7 Index chart, updated with Thursday’s doji. Click to enlarge as well.
The CME Daily Delivery Report showed that 46 gold and 1 silver contract were posted for delivery within the COMEX-approved depositories on Monday.
In gold, of the two short/issuers, the only one that mattered was Advantage, with 45 contracts out of its client account. The lone long/stopper was JPMorgan. All contracts were for its client account as well.
In silver, the lone short/issuer was ADM — and it was stopped by Advantage. Both transactions involved their respective client accounts.
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 April dropped by 339 contracts, leaving 247 still around, minus the 46 contracts mentioned a few short paragraphs ago. Wednesday’s Daily Delivery Report showed that 295 gold contracts were actually posted for delivery today. That means that 339-295=44 gold contracts vanished from the April delivery month. Silver o.i. in April remained unchanged at 1 contract still open, minus the 1 contract mentioned a few paragraphs ago. Wednesday’s Daily Delivery Report showed that zero silver contracts were actually posted for delivery today, so that means that 1 more silver contract just got added to the April delivery month.
There were no reported changes in either GLD or SLV on Thursday.
There was a small sales report from the U.S. Mint yesterday. They sold 500 one-ounce 24K gold buffaloes — and 900 one-ounce platinum eagles.
There was some activity in gold over at the COMEX-approved depositories on the U.S. east coast on Wednesday. Nothing was reported received, but 88,023 troy ounces departed HSBC USA. The link to that is here.
There was more activity in silver, as two truckloads were received…1,201,120 troy ounces. Of that amount, one truckload…600,424 troy ounces…ended up at Canada’s Scotiabank. The other truckload…600,695 troy ounces…landed outside the door at CNT. The link to this is here.
It was another pretty busy day over at the COMEX-approved gold kilobar depositories in Hong Kong on their Wednesday. They reported receiving 4,001 of them — and shipped out 330. All of this activity was at Brink’s, Inc. — and the link to that, in troy ounces, is here.
Here are three charts that Nick Laird passed around on Wednesday evening. The first one shows total Swiss gold imports and exports, updated with March’s data. During that month they imported 68.02 tonnes — and exported 88.15 tonnes. Click to enlarge.
The first of these next two charts shows the countries and tonnage that Switzerland received gold from — and the second shows the countries and tonnage that Switzerland shipped gold to during March. As always, exports to China, Hong Kong and India are the highlights on the export chart. Click to enlarge for both.
I don’t have all that many stories for you today.
Word on the street yesterday was that stocks were going up to record highs “on earnings.”
The casual listener was invited to believe that corporate America was earning more money; therefore, it should be worth more. Why else would people pay more for stocks?
Earnings come from Main Street. With hard work and luck, products and services are made and delivered. Wages are paid. Profits are what you have left over. If profits are rising, the economy must be doing well.
But where are the earnings?
Politicians of all flavors continually remind us social security is in danger of going bankrupt. Now our esteemed leaders want to fix it by increasing benefits. What could possibly go wrong?
Newsmax Finance reports on a recent interview with former fed head (Big Al) Alan Greenspan:
“Former Federal Reserve Chairman Alan Greenspan warns that cuts may be needed to eventually save the Social Security system.
Greenspan also predicted a slowdown in the U.S. economy could stem from an overloading of entitlement programs that aren’t being funded.”
…. He said “the actuaries of the Social Insurance system say…to be actuarially solvent through the life of the programs, we would have to cut benefits by 25 percent right now and extending into the future.”
This very interesting commentary from Dennis showed up on his Internet site on Thursday morning — and another link to it is here.
Argentina’s credit and FX markets are crashing for a second day, signaling an implied probability-of-default gauge over 60%, as investors rapidly lose faith that President Macri will fend off his populist foes and win re-election this year.
In comments, Macri admitted that the market volatility is stemming from the political uncertainty but said he believes it’s wrong to expect Argentines will elect his political opponents.
“The world isn’t sure whether Argentines want to go back, and that makes the world very concerned — sovereign risk goes up, they take more defensive positions,” Macri said in a radio interview.
“I think they’re wrong, they’re wrong. We Argentines aren’t going back” to the past.
And credit risk has exploded…
The weakness is exacerbating the situation as rising borrowing costs and a weakening peso translate into higher inflation expectations, eroding support for Macri, JPMorgan analysts wrote in a note late Wednesday. That “negative feedback loop,” added to worse-than expected inflation, are the main drivers behind Argentina’s dire situation, they added.
This story showed up on the Zero Hedge website at 10:40 a.m. on Thursday morning EDT — and it’s the first contribution of the day from Brad Robertson. Another link to it is here.
“This is Much Worse Than Expected” — Lira Craters After Turkish Central Bank Ends Defense, Reserves Slide
What until this morning was a bad dream for Turkish Lira longs just became a full-blown nightmare.
While the Turkish Central bank kept its overnight lending rate, weekly repo rate and liquidity window rate all unchanged at 25.5%, 24% and 27%, respectively, some very critical language was removed from the latest Turkish Central Bank statement: the central bank’s prior pledge to deliver “additional tightening” if needed. And with that, the government’s defense of the lira – which according to Bloomberg cost the central bank between $10 and $15 billion in just the last few weeks of March – is now officially null and void.
The Turkish Monetary Policy Committee also tweaked its forward guidance saying its action “will be determined to keep inflation in line with the targeted path.” Just like with the BOJ and Riksbank earlier, investors interpreted the change in language as a dovish turn by the central bank.
“This is much worse than expected and supports the view that policy has gone off the rails,” said Win Thin, global head of currency strategy at Brown Brothers Harriman. “This signals that any orthodoxy at the central bank has effectively been crushed, since no sane central bank would be leaning dovish at a time like this for Turkey.”
Others were just as perplexed by the CBRT decision, with economist Timothy Ash saying asking if someone can explain “why the CBRT would remove the reference to further tightening, if required? What trends in inflation have there been to justify that change, I just don’t see it. The lira has been weaker and oil higher.”
He added “The only logical explanation for this move is that the CBRT is again coming under political pressure to cut, and this was a sop to those forces. But it will only make their problems worse. I still cannot see any justification in the data for this move.”
This Zero Hedge story put in an appearance on their website at 8:01 a.m. on Thursday morning EDT — and it’s also courtesy of Brad Robertson. Another link to it is here.
The summit between Vladimir Putin and Kim Jong-un is over. And their message was clear.
The U.S. is welcome at the negotiating table but they are not necessary to resolving the situation. Russia, however, is.
Kim went to Vladivostok to build a relationship with Putin and put the U.S. on the spot. Per Putin’s comments after the summit:
“We are going to discuss the situation with the US. Russia is always open on this – there are no conspiracies. More than that Kim Jong-un personally asked us to inform Washington of his position and the issues he wants to ask about.”
What Kim has done is elevated Russia and Putin to the level of mediator between North Korea and the U.S. Russia is now an equal partner in the process.
And the U.S. has been diminished in its position in these talks.
As I said yesterday, I expected something big to come from this meeting and this was it. Kim is no longer willing to talk with the U.S. directly and they must go through Putin and his staff of professional diplomats to do so.
This worthwhile commentary from Tom appeared on the Zero Hedge website at 3:55 p.m. EDT on Thursday afternoon — and I thank Brad Robertson for sending it our way. Another link to it is here. There was another ZH story from yesterday afternoon on this topic — and it’s headlined “North Korea Must Have “Security Guarantees” Before Giving Up Nukes, Putin Says” — and it comes courtesy of Brad as well.
Investor faith in Chinese dollar bonds backed by banks is about to be tested after a default by one of the country’s best known private conglomerates.
China Minsheng Investment Group Corp. said last week cross-default clauses have been triggered on dollar bonds worth $800 million. These include $300 million of debt that carries a standby letter of credit from China Construction Bank Corp. — effectively a pledge to repay if the borrower can’t.
So far investor confidence that banks will honor such an agreement is unshaken. While CMIG’s dollar bonds due in August — which aren’t backed by a letter of credit — traded at around 58 cents on the dollar, bonds with CCB’s backing due 2020 were indicated at about 99 cents on the dollar Thursday.
But given the lack of precedent, investors should be watchful of how long a repayment could take, said Desmond How, head of fixed income at GaoTeng Global Asset Management. “The process of enforcement” could be “onerous and protracted,” he said.
Other credit enhancers have failed to result in quick payment. In May last year, two Chinese issuers defaulted on dollar notes that had keepwell provisions — a commitment to maintain an issuer’s solvency but that stops short of a payment guarantee. The two cases have yet to be resolved.
CCB’s media department didn’t immediately reply to an email seeking comment. Calls to China Minsheng Investment’s financing manager went unanswered.
This Bloomberg story appeared on their Internet site at 2:30 p.m. PDT on Wednesday afternoon — and was updated about six hours later. I found on the gata.org Internet site last night — and another link to it is here.
Foreign central banks are acquiring gold at the fastest pace in 50 years, and their purchases are not driven by investment considerations alone. The Central Bank of Russia, 2018’s largest official sector buyer of gold, wants to reduce Russia’s dependence on the dollar, while the Hungarian National Bank noted gold’s increasing strategic importance as underlying their recent purchases.
America cannot stop foreign central banks from buying gold or reintroducing gold into the international monetary order. We can, however, adopt policies that will attract more of the world’s gold to the United States and position ourselves to deal with the remonetization of gold from a position of strength.
At the end of the Second World War, the U.S. Treasury owned more than 30 percent of the world’s gold. Today, that same figure is less than 5 percent. America’s diminished share of the world’s gold is a result of our defense of the Bretton Woods System prior to its collapse in 1971 and subsequent failure to increase our gold reserves. The U.S. Treasury has not added to its gold reserves since 1969, and the Federal Reserve has not owned physical gold since the passage of the Gold Reserve Act in 1934.
American investors have also been largely absent from the physical gold market in recent years. In 2018, Americans purchased just 28 tonnes of gold coin and bars, less than 1 percent of global mine production. Americans’ lack of investment appetite for physical gold reflects more than our collective faith in the dollar. It also reflects American tax policy that subjects physical gold, even gold coined by the U.S. Mint, to a higher tax rate than many other investments, including some gold derivatives.
This very worthwhile commentary from GATA’s good friend Sean Fieler was posted on thefederalist.com Internet site on Thursday morning sometime — and I found it embedded in a GATA dispatch yesterday. Another link to it is here.
After a couple of anomalous months where the U.K. was by far the biggest recipient of Swiss gold exports, things seem to be getting back to near normal with India the biggest individual recipient, but lagging behind Mainland China and Hong Kong if the two are combined under the Greater China label given exports to Hong Kong are mostly ultimately destined for fabrication and re-export to the Chinese mainland. Volumes into the Asian major consuming nations are still down on previous years, but do seem to be picking up…
Recent Swiss import and export figures are considerably below those of prior years, but this does not necessarily mean overall global consumption is down by a similar amount. In recent years a number of competitive refineries have sprung up in Asia and the Middle East in particular, some of which are owned and operated by the Swiss refiners. So the lower Swiss figures perhaps represent diversification of refining options rather than an overall fall in gold demand. The latest Shanghai Gold Exchange gold withdrawal figures suggest that at least Chinese demand is holding up well — and recent higher gold price premiums there suggest that there could be an even bigger uptick this month. Indian gold demand also seems to be on the rise and the country’s central bank is among those seemingly adding gold to its reserves this year.
So while Switzerland remains one of the principal conduits for the ever-continuing movement of gold from west to east its importance in this respect may be diminishing. Even so, in March more than 72 tonnes of gold destined for Asia and the Middle East was refined in Switzerland, being more than 80% of the nation’s gold exports and equivalent to more than a quarter of the world’s newly mined gold that month. With direct exports from some gold producing or trading nations going to the regions directly gold demand in Asia and the Middle East seems to be holding up fairly well.
This 2-chart commentary from Lawrie showed up on the Sharp Pixley website on Thursday sometime — and another link to it is here.
The PHOTOS and the FUNNIES
After traipsing around Riverside Park in downtown Kamloops, my daughter and I headed up to one of the newer residential subdivisions high on a ‘hill’ northeast of the downtown. It’s wrapped around a rather imposing-looking golf course called Sun Rivers. The first shot is the view from subdivision looking about ESE — and that’s the South Thompson River and its associated valley in the background. The second photo is from one of the tee-boxes on the golf course. If someone put a gun to my head, I suppose I could live there! Click to enlarge for both. There are more photos at the Sun Rivers link above.
The Thursday trading session looked like another “care and maintenance” sort of session to me, as nothing was allowed to get too far in either gold or silver. And in silver, it appears that the $15 spot price is a ceiling at the moment.
Here are the 6-month charts — and there’s not a lot to see except the fact that copper was closed below its 50-day moving average by a few pennies on Thursday. 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 began to head unevenly higher as soon as trading began at 6:00 p.m. EDT in New York on Thursday evening — and is currently up $5.10 an ounce. Silver was sold down a bit once trading began in New York yesterday evening, but it has fought back — and is currently up 4 cents. Platinum followed a similar path as silver — and it’s up 5 bucks. In Palladium, the moment that trading began at 6:00 p.m. EDT in New York yesterday evening, its pre-5:00 p.m. EDT close on Thursday afternoon was immediately reversed — and it was down twelve bucks at one point, but is now down only 6 dollars as Zurich opens.
Net HFT gold volume is 36,000 contracts — and there’s only 541 contracts worth of roll-over/switch volume in this precious metal. Net HFT silver volume is 6,400 contracts — and roll-over/switch volume is pretty heavy already at 4,700 contracts.
The dollar index opened down 8 basis points the moment that trading began at 7:44 p.m. EDT on Thursday evening in New York, which was 7:44 a.m. CST. It then chopped very quietly and somewhat nervously higher by a bit until the 2:15 p.m. CST afternoon gold fix in Shanghai — and began to head lower from there — and is down 10 basis points as 7:45 a.m. in London/8:45 a.m. in Zurich.
Today, at the close of COMEX trading, all the large traders in COMEX silver futures that aren’t standing for delivery in May, have to roll or sell their positions. This is normally the highest gross volume day of the month, along with the biggest roll-over/switch volume as well.
There are still 34,884 silver contracts open in April — and it will be interesting to see how many of those are still around when the First Day Notice for May deliveries are posted on the CME’s website around 10 p.m. EDT on Monday evening.
And as I post today’s missive on the website at 4:02 a.m. EDT, I note that after a brief pause at the London open, both gold and silver have edged a bit higher. Gold is up $5.10 at the moment — and silver by 5 cents. Platinum is only up 4 now — and palladium is now down 7 bucks.
Gross gold volume is a bit under 46,500 contracts — and minus what little roll-over/switch volume there is, net HFT gold volume is a bit over 45,000 contracts. Net HFT silver volume is coming upon 7,900 contracts — and there’s already a heavy 7,400 contracts worth of roll-over/switch volume out of May and into future months.
The dollar index hit its current low tick about four minutes before the London/Zurich opens — and has been trading sideways since. It’s down 11 basis points as of 8:45 a.m. BST in London/9:45 a.m. CEST in Zurich.
Today, around 3:30 p.m. EDT, we get the latest Commitment of Traders Report for positions held at the close of COMEX trading on Tuesday, April 23.
Silver analyst Ted Butler had this to say about it in his mid-week commentary to his paying subscribers on Wednesday…”As far as the new COT report for Friday, it’s hard to guess how many managed money contracts were sold and sold short. Not because the price prompts weren’t there to induce such selling, but because so much selling had already taken place that it becomes a question of how much selling is left. So I’m hoping for big numbers, but won’t be terribly disappointed by less.”
Whatever the numbers, dear reader, I’ll have all that for you in my Saturday column.
Have a good weekend — and I’ll see you here tomorrow.