31 May 2019 — Friday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price began to edge quietly lower very shortly after trading began at 6:00 p.m. EDT in New York on Wednesday evening, complete with a quick spike lower in the firsts few minutes of London trading…which turned out to be the low tick of the day. It began to crawl higher from there, but the rally really grew some legs starting at 1 p.m. BST in London/8 a.m. in New York. Then the market appeared to go ‘no ask’ briefly a few minutes after the London close — and gold spiked to its high tick of the day from there. The price was capped at that juncture — and sold a bit lower for the next hour and a bit. It inched quietly higher from that point until trading ended at 5:00 p.m. EDT in New York.
The low and high ticks in this precious metal were recorded by the CME Group as $1,279.20 and $1,293.90 in the August contract…the new front month for gold.
Gold was closed in New York on Thursday at $1,288.30 spot, up $9.00 from Wednesday. Net volume was slightly elevated at 224,000 contracts — and there was a bit under 61,000 contracts worth of roll-over/switch volume out of June — and most of that ended up in the August contract.
The silver price was edged quietly lower until shortly after 10 a.m. China Standard Time on their Thursday morning — and it didn’t do much of anything until the 2:15 p.m. CST afternoon gold fix was put to bed in Shanghai on their Thursday afternoon. It crept unevenly higher by a few cents until 1 p.m. BST/8 a.m. EDT — and after that the price action was pretty much the same as it was for gold…complete with the price spike that came minutes after the London close.
The low and high ticks were reported as $14.34 and $14.555 in the July contract.
Silver was closed on Thursday afternoon in New York at $14.505 spot, up 11 cents on the day. Net volume was nothing much out of the ordinary at 53,400 contracts — and there was around 5,400 contracts worth of roll-over/switch volume in this precious metal.
The platinum price wandered around rather aimlessly in both Far East and Zurich trading on Thursday — and its low price tick, such as it was, came in morning trading in New York. It rallied back above unchanged by a few dollars by noon EDT, but was sold a bit lower into the COMEX close — and didn’t do much after that. Platinum finished the Thursday session at $794 spot, up 3 bucks from Wednesday’s close, but spent some time at a new intraday low for this engineered price decline.
Palladium was sold quietly lower until shortly after 11 a.m. CST on their Thursday morning — and from there it began to crawl unevenly higher. That state of affairs lasted until shortly after 9 a.m. in New York — and it also appeared to go ‘no ask’ going into the afternoon gold fix in London. Shortly after that the rally ended/was capped — and it drifted unsteadily lower until around 2 p.m. in the the thinly-traded after-hours market. The price didn’t do much of anything after that. Palladium was closed at $1,353 spot, up 27 dollars from Wednesday and, like silver and gold, would have obviously closed materially higher, if allowed…which it just as obviously wasn’t.
The dollar index closed very late on Wednesday afternoon in New York at 94.14 — and opened down one basis point once trading commenced at 7:45 p.m. EDT on Wednesday evening, which was 7:45 a.m. China Standard Time on their Thursday morning. From that juncture it chopped quietly and unevenly sideways until around 8:20 a.m. in New York. That was the start of a rather smallish up/down price move that ended around 11:45 a.m. EDT — and it didn’t do much of anything after that. The dollar index finished the Thursday session in New York at 98.14…unchanged on the day.
Those pundits that espouse the fact that the gold price and the dollar index have an inverse relationship, had some issues yesterday. But it’s all so simple…the price activity in the precious metals was all paper trading in the COMEX futures market…nothing else.
But if the precious metals and currencies were both trading freely…and none of them are, then there would be a definite correlation.
Here’s the DXY chart from Bloomberg as per usual. Click to enlarge.
And here’s the 6-month U.S. dollar index chart, courtesy of the folks over at the stockcharts.com Internet site. The delta between its close…98.05…and the close on the DXY chart above, was 9 basis points on Thursday. Click to enlarge as well.
The gold shares dipped a bit for the first twenty-five minutes of trading on Thursday morning — and then crawled quietly higher until around 2 p.m. EDT in New York trading. They faded a hair into the close from there — and the HUI finished higher by 1.75 percent.
The silver equities followed a mostly similar, but somewhat more erratic path to their highs of the day, which came a minute or so before 2 p.m. EDT. From that point they were sold quietly lower — and gave up a large percentage of their gains by the time the market closed at 4:00 p.m. in New York. Nick Laird’s Intraday Silver Sentiment/Silver 7 Index finished up only 0.78 percent. Click to enlarge if necessary.
And here’s the 1-year Silver Sentiment/Silver 7 Index chart from Nick, updated with Thursday’s doji. Click to enlarge as well.
The CME Daily Delivery Report for Day 1 of June gold deliveries showed that only 58 gold, plus 216 silver contracts were posted for delivery within the COMEX-approved depositories on Monday.
In gold there, were four short/issuers in total — and the three largest were Advantage, ADM and Morgan Stanley, with 32, 14 and 8 contracts out of their respective client accounts. There were seven long/stoppers in total — and the largest was HSBC USA picking up 26 for its own account. JPMorgan was in second spot with 16 contracts…13 contracts for its client account — and 3 for its own account. Wells Fargo Securities, in third place, picked up 6 contracts for its client account. That’s the first time I’ve ever seen their name as an issuer or stopper.
In silver, of the five short/issuers in total, the two largest by far were ABN Amro and International F.C. Stone, with 128 and 62 contracts out of their respective client accounts. Advantage was an ‘also ran’ in third place with only 11 contracts…also out of its client account. There were only three long/stoppers…JPMorgan, Advantage and International F.C. Stone with 185, 22 and 9 contracts for their respective client accounts as well.
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 May dropped by 49 contracts to zero — and silver’s o.i. in May fell by 119 contracts to zero. Both these amounts are out for delivery today, as the May delivery month ends in both these precious metals.
Gold open interest in June cratered by a further 26,242 contracts, leaving only 3,396 left, minus the 58 contracts mentioned a few paragraphs ago. Silver o.i. in June declined by 53 contracts, leaving 253 still open, minus the 216 mentioned a few paragraphs ago.
There were no reported changes in GLD yesterday, but there was a smallish deposit in SLV, as an authorized participant added 421,501 troy ounces.
I’d like to be able to report the short interest in both GLD and SLV as of the close of trading on Wednesday, May 15…but for some reason, as Ted pointed out on the phone yesterday, the folks over at the shortsqueeze.com website are showing zeros or blank spaces in all places that there’s normally data. I’m not sure what to make of that.
There was a sales report from the U.S. Mint on Thursday. They reported selling 80,000 of the 5-ounce ‘America the Beautiful’ silver rounds…or 400,000 troy ounces worth. That was all.
There was no in/out activity in gold over at the COMEX-approved depositories on the U.S. east coast on Wednesday.
There was only a tiny bit of activity in silver. Only 6,984 troy ounces was received — and 4,033 troy ounces were shipped out. There was also paper transfers of 119,938 troy ounces from the Registered category — and back into Eligible that involved three different depositories — and I won’t bother breaking it down. But if you wish to see for yourself, the link to all this is here.
The only activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Wednesday, was 10 kilobars that were shipped out of Brink’s, Inc. Nothing was reported received — and I won’t bother linking this.
Here are three more of the charts that Nick Laird passed around the other day. The first one shows the total amount of gold that was received and shipped out of the U.K. during March. During that month they imported 78.3 tonnes — and shipped out 38.5 tonnes. Click to enlarge.
The first chart below shows the countries of origin and tonnage imported by the U.K. during March — and the second chart shows the countries [and tonnage] that received gold from the U.K. during March. Click to enlarge for both.
I’ll point out here that, for the second month in a row, tiny Azerbaijan imported gold. In February it was 8 tonnes — and in March they added 4 more tonnes.
I have an average number of stories for you today.
It seems the warnings from PIMCO’s Scott Mather that: “We have probably the riskiest credit market that we have ever had in terms of size, duration, quality and lack of liquidity,” Mather said, adding that “the current situation compares risk to mid-2000s, just before the global financial crisis,” are being reflected in pricing and flows.
“We see it in the build up in corporate leverage, the decline in credit quality, and declining underwriting standards – all this late-cycle credit behavior we began to see in 2005 and 2006.” One way of visualizing what Mather was referring to is the following chart of corporate debt to GDP which has never been higher. As for the lack of creditor protections, well, just wait until the screams of fury begin after the next wave of bankruptcies. Click to enlarge.
While stocks have slowly woken up to the realities of the ‘recovery’, credit-markets have started to flash warnings that all is not well…Click to enlarge.
And, as Bloomberg reports, traders yanked almost $429 million from State Street Corp.’s SPDR Bloomberg Barclays High Yield Bond ETF on Tuesday, the biggest withdrawal since December.
Mather’s rather ominous conclusion:
“I think that’s what you’re seeing now in markets. People are starting to come to a more realistic outlook about the forward-looking growth prospects, as well as the power of central banks to pump up asset prices.”
Considering that the S&P is about a few hundred percent higher than where it would be without central banks “pumping up prices“, the market is about to go through a lot of pain in the near future if the world’s largest bond manager is correct.
That’s a big 10-4 good buddy! This Zero Hedge article put in an appearance on their website at 10:35 a.m. EDT on Thursday morning — and I thank Brad Robertson for this one. Another link to it is here.
Markets Have Gone Nuts: Junk-Bonds Are in Party Mood, Treasuries Clamor for Doom & Rate Cuts — Wolf Richter
When the economy goes into a downturn, even a plain-vanilla recession or near-recession and not a crisis, junk bonds behave badly. This is because over-indebted companies with iffy cash flows – those are the ones that are junk rated – begin to buckle.
In a downturn, they have no wiggle room; some default on their debts and file for bankruptcy, stockholders get shafted, and bondholders take big losses. Everyone knows the drill. Fear of this happening spreads throughout the junk-bond market. Junk-bond prices fall and yields surge.
Borrowing costs for some riskier companies will shoot through the roof, which will cause them to be unable to borrow new money to pay off existing creditors, and they’ll default too. And these waves of defaults will scare the market further. Investors want to be paid ever larger premiums over Treasuries securities – which are considered free from credit risk. And the difference in yield between junk bonds and Treasuries – the yield “spread” – widens brutally.
Typically, in this scenario, Treasury yields fall, as Treasury securities become more sought-after as haven, thus driving up Treasury prices. These moves are typically backed by the expectations the Fed would cut rates, if it isn’t already cutting rates.
Junk bond yields? CCC-and-below-rated yields should have soared in this economic-slowdown scenario, they should have doubled, at a minimum, given how much of a beating investors could expect to take during the wave of defaults associated with a downturn, and how much in yield investors would demand in return for taking that beating.
But the opposite happened. The average yield of CCC-and-below-rated bonds fell from 13.7% on December 26 to 11.2% now.
This interesting, but somewhat longish 1-chart commentary from Wolf was posted on the wolfstreet.com Internet site on Thursday sometime — and I thank Richard Saler for pointing it out. Another link to it is here.
The Dow ebbed a little lower yesterday. [Wednesday – Ed]
“The Dow dropped because the market decided it couldn’t ignore trade anymore,” says Barron’s.
Even the European Central Bank (ECB) warned investors that U.S. stock prices “seem detached from their underlying fundamentals.”
They got that right.
That’s the whole point of financialization – to separate Wall Street from Main Street, which is what both the Fed and the ECB have been doing for years.
It’s why the rich have gotten so much richer, while the middle classes struggle to stay even.
And the further stock prices get away from the economy that supports them, the greater the danger that they will die in the woods, like a lost hiker.
The risk of a crash is impossible to calculate precisely or reliably. But for what it is worth, our indicators are flashing red. If this were a car, we’d pull over to the side of the road and open the hood.
This very worthwhile commentary from Bill appeared on the bonnerandpartners.com Internet site on Thursday morning EDT — and another link to it is here.
Trouble in the Balkans: Serbian Troops on “Combat Alert” After Deadly Kosovo Police Raid on Serb Enclave
Serbian troops have reportedly been placed on “combat alert” early this week after police in the breakaway Republic of Kosovo, which has never been recognized by Serbia following its 2008 independence declaration (though backed by the U.S. and 100 nations), raided Serb-populated regions to arrest close to two dozen as part of an “an anti-smuggling mission“.
Belgrade has accused the ethnic Albanian-majority Kosovo police force of targeting Serbs in the region who still pledge allegiance to the Serbian state. The Serbian president charged Kosovo police with “bursting” into the region with armored vehicles and wounding “unarmed Serbs“.
According to Reuters:
“At least 19 people were arrested and a Russian U.N. official detained in the operation. Five police and six Serb civilians were wounded in fighting, Kosovan official said.
The incidents signaled rising tensions in four Serb-majority municipalities in northern Kosovo, parts of which remain largely outside control of Pristina and pledge allegiance to Belgrade.”
The ‘Balkans Issue’ has been simmering/festering on and off for at least a hundred years — and it obviously hasn’t gone away. I found this news item on the Zero Hedge website — and it’s also courtesy of Brad Robertson. Another link to it is here.
In perhaps the best sign thus far that a potential U.S. war with Iran has been averted (at least for the near term), given the possibility that both heightened saber-rattling and the potential for an “accidental” deadly encounter between IRGC forces and the recent build-up of American deployments could have led to a major conflict, White House National Security Adviser John Bolton himself appears to now be fast climbing down the escalation ladder.
According to Reuters on Thursday Bolton is singing a different tune compared to the war rhetoric of the past weeks since the crisis began: “The threat from Iran is not over but quick action from the United States has helped deter it.” This echoes a prior Pentagon statement essentially saying the “clear” Iran threat intelligence against U.S. forces was accurate but that the U.S. carrier and other extra force deployments to the Persian Gulf region thwarted Iran’s intentions.
“I don’t think this threat is over, but I do think you can make at least a conditional claim that the quick response and the deployment and other steps that we took did serve as a deterrent,” Bolton told reporters during a visit to London on Thursday.
When pressed over whether he was at odds with President Trump who has repeatedly stated the U.S. is not looking for regime change in Tehran, Bolton responded:
“The policy we’re pursuing is not a policy of regime change. That’s the fact and everybody should understand it that way.”
Bolton even seemed to have backed away from prior statements of defense officials which accused Iran’s leaders of having “ordered” attacks on oil tankers near the Strait of Hormuz as well as a Saudi oil pipeline in the past weeks.
This Zero Hedge news item showed up on their Internet site at 6:20 p.m. on Thursday evening EDT — and another link to it is here.
China’s Official May Composite PMI printed modestly lower than April’s at 53.3, with Services at 54.3 (in line with last month and goal-seeked expectations), while Manufacturing (expected to decline into contraction at 49.9) was considerably worse than expected, printing 49.4.
This was below the lowest analyst estimate of 49.5, and close to the lowest level in about a decade.
Under the hood of the manufacturing data, Output growth slowed, New Orders tumbled into contraction (with export orders plunging), inventories rose, employment slipped, and input & output prices contracted. The most affected were Small Enterprises.
The Services data also showed weaker new orders and employment with selling prices slumping into contraction.
The drop clearly reflects pressure on the production side of the economy from the escalating trade war (following some pre-tariff stocking-up).
None of this should be a big surprise as much of Asia’s flash PMIs were weak and after spiking on record credit injections in the early part of the year, China’s macro data has collapsed against renewed optimistic expectations…
Looks like we are “gonna need a bigger boat” of cash to keep this red ponzi afloat, which is a problem, as the signal from China’s April credit data was also negative. The unexpectedly large fallback in credit raised fresh doubts about whether the economy has found a bottom.
This rather brief 2-chart Zero Hedge article appeared on their website at 9:06 p.m. EDT on Thursday evening — and another link to it is here.
It is always interesting to follow the Swiss gold export patterns as an indicator of demand flows across Asia – the destination for a major proportion of the gold refined and re-exported by the world’s top provider of high purity gold. As an indicator of the high proportion of gold flowing eastwards in this manner check out the bar chart below (from Nick Laird’s www.goldchartsrus.com service) which shows the latest breakdown of destination nations for the small European country’s April gold exports. In that month fully 94% of Swiss gold exports headed for Asia and the Middle East. Click to enlarge.
We had been hearing various reports that gold demand had been picking up in India – once the world’s largest gold consumer until comfortably overtaken by China. The latest figures out of Switzerland serve to confirm this with India, with58.6 tonnes outstripping greater China, where the combination of gold shipped to Mainland China, plus that to Hong Kong (most of which will also be destined for the Chinese mainland) amounted to a marginally smaller 58.0 tonnes. The fact that India was the biggest recipient – perhaps boosted by demand ahead of the recent elections – will not have gone unnoticed by gold investors and analysts who will see it as a welcome sign that Indian gold demand is at last picking up again! However a single months’ figures could be anomalous so it will be interesting to see how gold exports from Switzerland to India do in forthcoming months.
Chinese demand may be beginning to slip a little — so gold investors will see the apparent pick up in Indian demand as an extremely welcome development in the overall global supply/demand balance. With central bank buying holding up and a seeming slowdown in the recent spate of withdrawals from gold ETFs gold fundamentals look to be marking time, but there is a broad expectation that gold prices and demand may pick up in the second half of the year. One should bear in mind, though, that this was the position at this time last year and the second half did not see the anticipated big price increase. Maybe a case of déjà vu all over again in the words of Yogi Berra.
This interesting commentary from Lawrie appeared on the Sharps Pixley website on Wednesday — and I don’t know how I missed it for Thursday’s column. Another link to it is here.
Malaysian Prime Minister Mahathir Mohamad on Thursday mooted the idea of a common trading currency for East Asia that would be pegged to gold, describing the existing currency trading in the region as manipulative.
Mahathir said the proposed common currency could be used to settle imports and exports, but would not be used for domestic transactions.
“In the Far East, if you want to come together, we should start with a common trading currency, not to be used locally but for the purpose of settling of trade,” he said at the Nikkei Future of Asia conference in Tokyo.
“The currency that we propose should be based on gold because gold is much more stable.”
He said under the current foreign exchange system, local currencies were affected by external factors and were manipulated. He did not elaborate on how they were manipulated.
This Reuters article, filed from Kuala Lumpur, was posted on their Internet site at 10:29 p.m. EDT on Wednesday night — and I thank Richard Saler for his second contribution to today’s column. Another link to it is here.
The Philippines is joining a slew of central banks that are increasing gold holdings in foreign reserves.
Sales to Bangko Sentral ng Pilipinas could reach almost 1 million fine troy ounces a year from the current 20,000 to 30,000 ounces as a new law that exempts taxes on the monetary authority’s bullion purchases from small-scale miners takes effect, according to Deputy Governor Diwa Guinigundo.
The law seeks to remedy the 99% drop in the BSP’s domestic purchases from 2010, the central bank said after the legislation was released last week. While a previous law imposing taxes on gold sales to the central bank was enacted in 2008, it was enforced only in 2011 under an administration keen to plug revenue leaks to shore up funds for state coffers.
Governments around the world have been on a gold-buying spree — with annual net purchases totaling the second-highest on record in 2018 — as heightened geopolitical and economic uncertainty drove them to diversify reserves, according to the World Gold Council. The trend continued in the first quarter, led by Russia and China, and now Serbia and the Philippines are jumping onto the bandwagon. That may aid prices, which have flat-lined this year even as trade tensions picked up between Washington and Beijing.
“The percentage of gold in the central bank reserves of a few emerging markets is quite small, so some building up is natural,” said Georgette Boele, senior foreign-exchange and precious metals strategist at ABN Amro Bank NV. “Some countries buy up their own production to support the sector, while others have a more reserve diversification motive. In the case of the Philippines, its goal is to support local miners.”
This gold-related Bloomberg story showed up on their website at 3:00 p.m. PDT on Wednesday afternoon — and I found it in a GATA dispatch. Another link to it is here.
The PHOTOS and the FUNNIES
Continuing along B.C. Highway 8 — and the Nicola River Valley towards Spences Bridge…here’s one more scenery shot. The next two are ‘critters’…a Glaucopsyche lygdamus, the silvery blue butterfly, or a very closely-related sub-species. Then there’s this rather scruffy looking American black bear that I photographed with the 400mm telephoto as he walked along the Kettle Valley Railway right-of-way…and at a safe distance on the other side of the Nicola River. Click to enlarge.
Gold closed above its 50-day moving average yesterday — and I’m not sure what to make of it. I don’t know if this is the start of a real move upwards, or the commercial traders setting up the Managed Money traders for another price slam lower…for fun, profit and price management purposes. It’s just too soon to tell. But I was happy that net gold volume wasn’t much out of the ordinary.
The same can be said of silver, although its nowhere near any moving average that matters, so there would be pretty slim financial pickings if ‘da boyz’ attempted it in that precious metal.
As I mentioned earlier, platinum traded at a new intraday low for this engineered price move lower — and palladium traded above its 50-day moving average intraday, but was hauled lower — and then closed right on it.
In the other two of the Big 6 commodities, both copper and WTIC were closed a new lows for this move down as well…with the commercial traders ringing the cash register on the Managed Money traders in both those commodities.
Speaking of the Big 6…here are their respective 6-month charts — and you can note ‘all of the above’ for yourself. Click to enlarge.
And as I type this paragraph, the London open is a minute or so away — and I note that the gold price has been crawling quietly and unevenly higher in Far East trading on their Friday — and is currently up $5.40 an ounce. Silver hasn’t been allowed to do much, chopping very unevenly sideways — and is currently unchanged on the day. Platinum was sold lower in morning trading in the Far East — and is down 4 bucks. Palladium hasn’t done much — and is down a dollar as Zurich opens.
Net HFT gold volume is already pretty hefty…coming up on 51,500 contracts — and there’s 2,534 contracts worth of roll-over/switch volume in this precious metal at the moment. Net HFT silver volume is already at 11,700 contracts — and there’s 685 contracts worth of roll-over/switch volume on top of that.
The dollar index opened up 2 basis points once trading commenced at 7:45 p.m. EDT in New York on Thursday evening, which was 7:45 a.m. China Standard Time on their Friday morning. It slid into negative territory by a few basis points a few hours later — and has been chopping very quietly sideways since — and is down 4 basis points as of 7:45 a.m. BST in London/8:45 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. As I said in Wednesday’s column, I wasn’t about to speculate about what the report will show in gold, but I was expecting some respectable decrease in the commercial net short position in silver.
Ted’s WAG…wild-ass guess in gold…was an increase of about 15,000 contracts in Managed Money buying/commercial selling. But in silver…”perhaps 5,000 net contracts of managed money selling/commercial buying, and more than that will not break my heart.” Me neither!
And as I post today’s missive on the website at 4:02 a.m. EDT, I see that gold is up a bit more…higher by $6.40 the ounce — and silver is now up a penny as the first hour of London trading draws to a close. Platinum is down 4 dollars — and palladium is down 4 bucks as well, as the first hour of Zurich trading ends.
Gross gold volume is coming up on 74,500 contracts — and minus roll-over/switch volume, net HFT gold volume is 68,700 contracts. Net HFT silver volume is around 14,500 contracts — and there’s now 893 contracts worth of roll-over/switch volume in that precious metal. These are big volumes, especially for gold, so it certainly appears that this current rally is not going unopposed.
The dollar index has been creeping ever-so-quietly lower since shortly before 1 p.m. CST on their Friday afternoon — and is now down 12 basis points as of 8:45 a.m. in London/9:45 a.m. in Zurich.
That’s it for another day. Have a good weekend — and I’ll see you here tomorrow with the above-mentioned COT data…warts and all.