30 May 2019 — Thursday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price didn’t do much in Far East trading on their Wednesday morning — and rallied a bit starting at noon China Standard Time. Its high tick of the day, which briefly touched its 50-day moving average, came at 9 a.m. in London — and from that point it was sold quietly and unevenly lower until trading ended at 5:00 p.m. EDT in New York. Nothing to see here.
The low and high ticks certainly aren’t worth looking up.
Gold finished the day at $1,279.30 spot, up 40 whole cents from Tuesday’s close. Net volume was almost non-existent at a bit under 26,000 contracts — and most of that occurred in the new front month for gold, which is August. Roll-over/switch volume was heavy at around 190,000 contracts — and on this particular day, Wednesday [and today]…going into a delivery month, these above numbers are very approximate.
Silver didn’t do much/wasn’t allowed to do much in Wednesday trading, either. There was a tiny bit of a rally that began around 8:30 a.m. in New York, but that ended at 9 a.m. — and it was sold bit lower after that, before edging sideways for the remainder of the day.
The low and high ticks aren’t worth looking up in this precious metal, either.
Silver was closed at $14.395 spot, up 6 cents from Tuesday. Net volume was very decent at just under 65,000 contracts — and roll-over/switch volume was a hair under 8,500 contracts. These numbers in silver are far more representative of the truth than these same numbers in gold.
The platinum price was stair-stepped very quietly lower in price until noon in Zurich, but managed to recover a few dollars before trading ended at 5:00 p.m. EDT in New York. Platinum was closed at $791 spot, down another 5 bucks — and a new low for this engineered price decline.
The palladium price didn’t do much of anything until around 3 p.m. China Standard Time on Wednesday, but it was then sold sharply lower until the Zurich open. At that juncture, there was a vicious down/up price spike. But twenty or so minutes later, it was back at its Zurich open price. It crept quietly higher from there until 1 p.m. in New York — and was sold a bit lower into the 5:00 p.m. close of trading from there. Palladium finished the Wednesday session at $1,326 spot, up 3 dollars from Tuesday.
The dollar index closed very late on Tuesday afternoon in New York at 97.95 — and opened down 3 basis points once trading commenced at 7:45 p.m. EDT on Tuesday evening, which was 7:45 a.m. China Standard Time on their Wednesday morning. It traded unevenly sideways until about 1:40 p.m. CST — and the began to head quietly and unsteadily higher. The ‘rally’ gained more momentum around 8:38 a.m. in New York — and most of the gains that mattered [such as they were] were in by 11:22 a.m. EDT. From that juncture it edged very unevenly sideways-to-lower until trading ended at 5:30 p.m. The dollar index finished the Wednesday session in New York at 98.14…up 19 basis points from its close on Tuesday.
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 the stockcharts.com Internet site. The delta between its close…97.84…and the close on the DXY chart above, was 30 basis points on Wednesday. Click to enlarge as well.
The gold stocks opened up a tad — and then proceeded to chop very quietly and unevenly sideways…mostly in positive territory…and managed to close there as well. The HUI finished higher by 0.22 percent.
It was about the same for the silver equities, except Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up 0.42 percent. Click to enlarge if necessary.
The CME Daily Delivery Report showed that 49 gold and 119 silver contracts were posted for delivery within the COMEX-approved depositories on Friday.
In gold, the sole short/issuer was JPMorgan from its in-house/proprietary trading account. There were five long/stoppers in total — and the only two that mattered were JPMorgan and Advantage…stopping 24 and 20 contracts for their respective client accounts.
In silver, there were two short/issuers — and the only one that counted for anything was HSBC USA, as the issued 118 contracts in total…113 from their own account, plus another 5 from their client account. The sole long/stopper was the CME Group, stopping all 119 contracts…which it immediately reissued as 119×5=595 one-thousand ounce 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 May remained unchanged at 49 contracts, minus the 49 contracts mentioned a few paragraphs ago. Tuesday’s Daily Delivery Report showed that zero gold contracts were posted for delivery today. Silver o.i. in May declined by 76 contracts, leaving 119 left, minus the 119 contracts mentioned a few short paragraphs ago. Tuesday’s Daily Delivery Report showed that 77 silver contacts were actually posted for delivery today, so that means that 77-76=1 more silver contract was added to the May delivery month yesterday.
That takes care of the May delivery month, as the remaining contracts in both silver and gold are out for delivery tomorrow.
For the month of May, there were 363 gold contracts issued and stopped — and that number in silver was 3,770.
Gold open interest in June crashed by 56,117 contracts, leaving 31,346 left — and another big chunk of that amount will disappear in today’s Preliminary Report. Silver o.i. in June dropped by 156 contracts, leaving 306 still around. That will also decline by a bit more in Thursday evening’s Preliminary Report as well.
After a decent sized withdrawal on Tuesday, there was a far bigger deposit into GLD on Wednesday, as an authorized participant added 113,255 troy ounces. There were no reported changes in SLV.
There was no sales report from the U.S. Mint.
It was another quiet day in gold over at the COMEX-approved depositories on the U.S. east coast on Tuesday. Nothing was reported received — and only 2,170 troy ounces were shipped out. That activity occurred at Brink’s, Inc. — and I won’t bother linking it.
It was very quiet in silver as well. Nothing was reported received there either — and only 148,719 troy ounces was shipped out…118,870 troy ounces from Brink’s, Inc…and the remaining 29,848 troy ounces departed CNT. But there was a big paper transfer from the Registered category — and back into Eligible at CNT…1,564,601 troy ounces. I would suspect that this silver is owned by JPMorgan — and it’s being transferred back, as storage charges are cheaper in that category. I’ll wait for final word on this from Ted, as he may have something to say about it in his weekly review on Saturday. A link to this is here.
There was decent activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Tuesday. They reported receiving 1,550 of them — and shipped out 1,753. All of this occurred at Brink’s, Inc. — and the link to that, in troy ounces, is here.
Nick Laird passed around some charts on Tuesday evening, that were just too late to make Wednesday’s column. This first chart shows Swiss gold imports and exports updated with April’s data. It shows that they imported 105.6 tonnes — and exported 141.4 tonnes during that month. Click to enlarge.
These next two charts show the countries and tonnage that Switzerland received during April — and the second shows the countries and tonnage that they shipped gold to during that month. Click to enlarge for both.
It was another very slow news day — and I have very few stories for you once again.
After a strong 2Y, mediocre 5Y, we concluded this week’s trifecta of coupon auctions with, as one may expect, an abysmal sale of $32 billion in 7Y bonds.
With yields sliding lower all day, perhaps it had to do with the concessions into the 1pm auction, but whatever the reason, the 7Y auction stopped at a high yield of 2.144%, which while the lowest since September 2017, also tailed the When Issued by 1.9bps, the biggest tail in at least 4 years.
The internals were just as ugly, with the Bid to Cover tumbling from 2.492 to just 2.298, not only far below the 6 auction average of 2.53, but the lowest since February 2016, and second lowest since 2009.
And with both Direct and Indirect take-down sliding, as Directs took down only 11.3% from 19.1% last month, and half the 6 auction average of 22.5% and Indirects ending up with 58.3% of the auction, Dealers we left holding 30.5% of the auction, the highest percentage since March 2018.
Overall, a dismal auction, although one which can perhaps be ignored as it took place on a day when the 10Y yield tumbled to the lowest in almost two years. Or maybe not, because once the market digested just how ugly the auction was, the 10Y promptly sold off, and in just a few minutes wiped out all of the day’s gains.
Methinks that the bond market has finally woken up to the fact that big inflation is on its way — and they’re only prepared to invest in short-term paper. All eyes on the 10-year going forward. This story put in an appearance on the Zero Hedge Internet site at 1:19 p.m. EDT on Wednesday — and it comes to us courtesy of Brad Robertson. Another link to it is here.
The Dow closed down yesterday. Last Friday marked five straight weeks of losses on the index. It hasn’t done that in eight years.
Then, yesterday, it tried to rally… and failed.
The yield curve – the difference between short- and long-term bond yields – is inverted… a classic sign of a recession.
Retail sales are headed down. Appliances, too. GDP growth. Industrial production. Hours worked. New hires. Durables. Manufacturing new orders (excluding defense). Construction spending. All down…
A recession is approaching. And our Crash Alert Flag is up on the pole… flapping… waiting… warning.
The signals are there. They are unmistakable. But we don’t know the future. All we know for sure is that almost everything that is said about the economy of the present is fraudulent, incorrect, or misleading.
This worthwhile commentary from Bill showed up on the bonnerandpartners.com Internet site early on Wednesday morning EDT — and another link to it is here.
It’s going from bad to worse for Europe, whose currency had just hit session lows after Brussels confirmed that Italy faces a massive fine over its debt, when the Euro was hit with a double whammy after Bloomberg reported that the Trump administration is escalating its battle with “European allies” over the fate of the Iran nuclear accord, and is “threatening penalties against the financial body created by Germany, the U.K. and France to shield trade with the Islamic Republic from U.S. sanctions.”
According to Bloomberg, the Treasury Department’s undersecretary for terrorism and financial intelligence, Sigal Mandelker, sent a letter on May 7 warning that Instex, the European SPV to sustain trade with Tehran, and anyone associated with it could be barred from the U.S. financial system if it goes into effect.
As a reminder, last September, in order to maintain a financial relationship with Iran that can not be vetoed by the US, Europe unveiled a “Special Purpose Vehicle” to bypass SWIFT. Back then we predicted that Washington would not be too delighted with this development seeking to undermine the dollar’s reserve status. We were right.
“I urge you to carefully consider the potential sanctions exposure of Instex,” Mandelker wrote in the letter to Instex President Per Fischer. “Engaging in activities that run afoul of U.S. sanctions can result in severe consequences, including a loss of access to the U.S. financial system.”
Germany, France and the U.K. finalized the Instex system in January, allowing companies to trade with Iran without the use of U.S. dollars or American banks, allowing them to get around wide-ranging U.S. sanctions that were imposed after the Trump administration abandoned the 2015 Iran nuclear deal last year.
Not surprisingly, a senior admin official behind the letter said the U.S. decided to issue the threat “after concluding that European officials, who had earlier downplayed the significance of Instex in conversations with the Trump administration, were far more serious about it than they had initially let on.”
When is some country, or group of European countries, going to tell the U.S. government to “go forth — and multiply!”. This not surprising news item appeared on the Zero Hedge website at 10:39 a.m. EDT on Wednesday morning — and I thank Brad Robertson for this one. Another link to it is here.
Following an unconfirmed report on Monday that Italy faces a €3.5 billion fine from the European Commission unless Europe’s largest sovereign debtor curbs its debt levels, moments ago Bloomberg confirmed that the Commission has indeed put Italy’s debt once again in its sights, sending a letter to the Italian finance minister in which it warned Italy that it has not made sufficient progress towards compliance with its debt-reduction obligations, and is at risk of disciplinary measures in accordance with E.U. law.
The Commission specifically asked Italy to provide explanations about 2018 debt by May 31, which the Commission will take into account in its final report on the matter. In response, an Italian Finance Ministry spokesman said minister Giovanni Tria “received as expected” a letter sent by the European Commission on the nation’s debt and “stands ready to reply.”
And while the European Commissioner for Economic and Financial Affairs, Moscovici, noted yesterday that he is not in favor of sanctioning Italy, the market is having flashbacks to the controversial Italian deficit negotiations of 2018 which sent Italian bond yields soaring, and the result was an immediate drop in the Euro to session lows…
The European warning comes at a time when Italy’s resurgent de facto leader, and Deputy Prime Minister, Matteo Salvini, fresh off a rousing electoral victory, said he’ll now devote all his energy to changing the European Union’s “old and obsolete rules” and hammered the bloc over the prospect of penalties against Italy. He went so far as to demand for the ECB to fund Italian deficit spending.
It also comes at a time when the future of Italy’s coalition government is at stake, with tensions between 5-Star and Salvini’s League threatening to collapse the current regime, leading to elections that could see Salvini take unilateral control.
This Zero Hedge news item was posted on their website at 9:52 a.m. on Wednesday morning EDT — and it comes courtesy of Brad Robertson as well. Another link to it is here.
In the wee small hours of the morning, last week in Kazakhstan, my wife and I encountered every hotel guest’s worst nightmare.
Asleep in our night clothes we both woke to the sound of someone trying to enter our room. First, a gentle then ever-more forceful turning of the handle. Then, the unmistakable noise of a shoulder repeatedly thumping against our door – the strength of which we had no way of knowing.
With estimable alacrity Mrs. Galloway was out of bed like a shot and hurling anything and everything with wheels in front of the door. The barricade built, she was then on the phone to the front desk calling for help, not the easiest thing to communicate in the middle of the night in Almaty as you can imagine.
Being ‘the man of the house’ I could really only offer brute force, with my two hands applying countervailing pressure on the door (which was beginning to literally bend) and my brute Scottish accent demanding the interloper cease and desist (or Scottish street words to that effect). Of course I looked through the spy hole in the door and could see enough to be sure that this was no nightmare, this was a clear and present human danger.
For a very fleeting moment I mentally checked as to whether or not it was April 1/April Fool’s Day as I read this story/article. It was not. As to who the interloper was…I was shocked. You couldn’t make this stuff up in if you tried. I barely glanced at the 1 hour and 39 minute video debate that’s embedded. This amazing article was posted on the rt.com Internet site at 11:38 a.m. Moscow time on their Wednesday morning, which was 4:38 a.m. in Washington — EDT plus 7 hours. I thank George Whyte for sending it our way — and another link to it is here.
With China’s bond market continues to be hammered in the aftermath of the government’s surprise seizure of Baoshang Bank, the PBOC – whose open market operations had been in dormancy for much of 2019 – finally panicked and on Wednesday injected a whopping net 250 billion yuan ($36 billion) into the financial system via open-market operations, as it fills what traders have dubbed a growing funding gap following the Baoshang failure. Click to enlarge.
The consequences of this liquidity flood were instant: China’s overnight repurchase rate, a measure of inter-bank liquidity, tumbled the most in three weeks, while the benchmark 7-day repo rate also declined.
“The operations so far this week send a strong signal that the PBOC is ready to ensure ample liquidity for the market, amid fragile sentiment in the credit and bond market,” said Westpac strategist Frances Cheung. The central bank also set the daily yuan fixing at a stronger-than-expected level to prevent even a hint of speculation that China will be have no choice but to devalue the yuan as part of the “reliquification” of the market. Click to enlarge.
The PBOC’s massive liquidity injection, which was the largest since January when the S&P was still close to a bear market and started the tremendous Chinese stock market rally, also helped the Shanghai Composite be one of the few markets that closed in the green overnight.
However, while the near-term reaction was favorable to Chinese risk, the paradox is that this only became a viable option as a result of a far greater problem: China’s inter-bank funding market is starting to freeze.
This long and chart-filled news story put in an appearance on the Zero Hedge website at 3:11 p.m. on Wednesday afternoon EDT — and another link to it is here.
I didn’t find any precious metal-related news items that I thought worth posting today.
The PHOTOS and the FUNNIES
After our brief junket to Hope, B.C. on Saturday April 20…we were headed west to Lillooet, B.C. on Sunday…our second trip to this town — and it won’t be our last. To get there, one has to drive through both Spences Bridge and Lytton. Most ‘point A to point B’ trips in the mountains aren’t straight lines, as big piles of rock get in the way. We took our time getting there, as I was taking photos of everything and anything along the way. These are scenery shots along B.C. Highway 8 — in the valley from Merritt to Spences Bridge along the Nicola River. The second of those photos shows a railway bridge on the now long-defunct Kettle Valley Railway. Click to enlarge.
With the June delivery month coming up hard, Wednesday was a big roll-over/switch day in gold — and nothing much should be read into the price action…although it should be pointed once again that gold did touch its 50-day moving average very briefly at 9 a.m. in London yesterday morning.
The big traders in gold that had to roll or sell their June gold contracts, were out by the COMEX close yesterday — and the remaining traders that aren’t standing for delivery in June, have to do the same by the close of COMEX trading today.
I noted on the chart below that silver’s 50-day moving average is about to break below its 200-day moving average — and that will happen today, as both averages closed at the $14.92 spot mark on Wednesday.
In the other metals, both platinum and copper were closed at new lows for this move down — and WTIC set a new intraday low, before recovering most of that loss by the COMEX close.
Here are the 6-month charts for all of the Big 6 commodities — and the above events from yesterday should be noted. Click to enlarge.
And as I type this paragraph, the London open is just minutes away — and I see that the gold price crept a bit lower in Far East trading on their Thursday, but popped a bit at the 2:15 p.m. afternoon gold fix in Shanghai. It’s down $1.30 the ounce currently. The price path for silver was almost identical — and it’s now up a penny at the moment. Platinum hit its current low a few minutes after 11 a.m. CST — and has been crawling higher since — and is back at unchanged. Palladium was up 4 bucks shortly after trading commenced at 6:00 p.m. EDT in New York on Wednesday evening, but began to sink an hour later — and was down about 12 buck by shortly after 11 a.m. CST on their Thursday. It has crept a bit higher since — and is only down 6 dollars as Zurich opens.
Net HFT gold volume is nothing special at 32,000 contracts — and almost all of that is in the new front month for gold, which is August. There’s only around 4,800 contracts worth of roll-over/switch volume in that precious metal. Net HFT silver volume is pretty quiet at a bit over 7,300 contracts — and there’s 1,263 contracts worth of roll-over/switch volume on top of that.
The dollar index opened down a couple of basis points once trading began at 7:45 p.m. EDT in New York on Wednesday evening, which was 8:45 a.m. China Standard Time on their Thursday morning. It hasn’t done much of anything since — and is sitting at unchanged as of 7:45 a.m. BST in London/8:45 a.m. CEST in Zurich.
As I’ve mentioned several times already, the only fly remaining in the ointment is gold’s 200-day moving average. Will ‘da boyz’ go for it or not? Ted had this to say about it in his mid-week commentary for his paying subscribers yesterday…”I’m still concerned about gold’s 200 day moving average looming as a final wash out target by the commercials to induce managed money selling.”
So we wait some more.
And as I post today’s column on the website at 4:02 a.m. EDT, I note that gold and silver got hit a bit a the London open. Gold is now down $3.60 the ounce — and off its current low tick by a hair. Silver is down 3 cents. Platinum is now down a dollar — and palladium got sold down at the Zurich open — and is now down 12 bucks.
Gross gold volume is around 62,000 contracts — and minus roll-over/switch volume, net HFT volume in August is 45,000 contracts. Net HFT silver volume has certainly picked up — and is about 10,700 contracts. There’s 1,388 contracts worth of roll-over/switch volume in this precious metal.
The dollar index began to inch higher starting a few minutes before the London/Zurich opens — and after a up/down move in the first hour of trading, the index is up 2 basis points as of 8:45 a.m. in London/9:45 a.m. in Zurich.
That’s it for yet another day — and I’ll see you here tomorrow.