‘Da Boyz’ at Battle Stations Once Again

06 June 2019 — Thursday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price basically flat-lined in morning trading in the Far East, but began to show some signs of life starting around 1 p.m. China Standard Time on their Wednesday afternoon.  It began to edge unevenly higher from there, before taking flight at the COMEX open.  JPMorgan et al showed up less than fifteen minutes later with all guns blazing — and engineered the price lower until around 11:40 a.m. EDT.  It crept a bit higher from there into the 5:00 p.m. close.

The low and high ticks were reported by the CME Group as $1,329.30 and $1,348.90 in the August contract.

Gold was closed at $1,329.80 spot, up $4.70 on the day.  Net volume was over the moon once again at a hair over 401,000 contracts — and roll-over/switch volume amounted to a bit over 14,000 contracts.

It was essentially the same for silver, except the ‘rally’ that began at 1 p.m. CST certainly wasn’t allowed to develop into anything — and it was barely above unchanged by the COMEX open.  At that point, it took off to the upside, but was capped and driven lower almost as soon as it broke above the $15 spot mark, which came a bit after 9:15 a.m. in New York.  That price spike blew silver through both its 200 and 50-day moving averages in the process.  The engineered price decline in silver also ended around 11:40 a.m. EDT — and it recovered a penny or two, but was not allowed to close in positive territory.

The low and high ticks in silver were recorded as $14.755 and $15.04 in the July contract.

Silver was closed on Wednesday at $14.785 spot, down 1.5 cents from Tuesday.  Net volume was past the orbit of Saturn at a bit over 120,500 contracts — and there was around 12,200 contracts worth of roll-over/switch volume out of July and into future months.

Platinum traded flat until about 1:45 p.m. China Standard Time on their Wednesday afternoon — and it began to head higher from there — and was up 12 bucks or so by the COMEX open…and back above its 200-day moving average.  Like for silver and gold, ‘da boyz’ appeared ten minutes or so later — and hammered the price to its $800 spot low tick, which appeared to come a few minutes before the COMEX close.  It didn’t do much of anything after that.  Platinum was closed at $802 spot, down 17 dollars from Tuesday.

The palladium price chopped very unevenly sideways until about ten minutes before the Zurich close — and it was at that time that JPMorgan et al appeared, with the low of the day coming a few minutes after 12 a.m. in New York.  It struggled unevenly higher from there, but was closed at $1,315 spot, down 13 bucks on the day.

The dollar index closed very late on Tuesday afternoon in New York at 97.07 — and opened up 5 basis points once trading commenced at 7:45 p.m. EDT on Tuesday evening.  It began to sag from that juncture – and every time it did, those ‘gentle hands’ appeared — and lifted it back above the 97.00 mark…albeit very briefly each time.  I counted eight interventions over the next twelve hours.  But the roof finally caved in at 8:12 a.m. in New York — and those ‘gentle hands’ appeared with renewed vigour at the 96.75 low tick at 8:38 a.m. EDT — and ramped it higher for almost the entire remainder of the New York trading session.  The dollar index was closed at 97.32…up 25 basis points on the day — and back above its 50-day moving average by a bit.

You shouldn’t need me to tell you that the ramp job in the dollar index came at the precise moment that the prices of gold, silver and platinum were capped — and then hammered to their lows of the day.  This was most certainly a coordinated effort involving the entire PPT.  Palladium was added to the list as an afterthought several hours and change later.

Here’s the DXY chart, courtesy of Bloomberg — and the signs of intervention are everywhere you care to look.  Click to enlarge.

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…97.25…and the close on the DXY chart above, was 7 basis points on Wednesday.  Click to enlarge as well.

The gold stocks gapped up over two percent at the open, but were then sold lower until ‘da boyz’ were through with their engineered price decline in gold, which came around 11:40 a.m. in New York trading.  They crawled quietly and unevenly higher from there — and actually made it back into positive territory by a bit by the close.  The HUI finished up 0.18 percent.

The silver equities were up a bit over 4 percent by a minute or so before 10 a.m. EDT, but then were also sold back into negative territory by a few minutes before noon in New York trading.  They didn’t do much of anything after that.  And despite a weak rally attempt in the last fifty minutes of trading, couldn’t quite managed a positive close.  Nick Laird’s Intraday Silver Sentiment/Silver7 Index finished down 0.48 percent.  Click to enlarge if necessary.

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

The CME Daily Delivery Report for Day 5 of June deliveries in gold, showed that 28 gold and 46 silver contracts were posted for delivery within the COMEX-approved depositories on Friday.

In gold, of the four short/issuers in total, the largest by far was International F.C. Stone, as they issued 22 contracts — and in very distant second place was Advantage with 4 contracts.  All amounts were from their respective client accounts.  There were five long/stoppers — and the biggest was HSBC USA with 16 contracts for its in-house/proprietary trading account.  JPMorgan stopped 3 for its client account.

In silver, the sole short/issuers was ADM — and of the four long/stoppers, the only one that mattered was JPMorgan, stopping 41 for its client account.

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 June declined by 29 contracts, leaving 1,337 still around, minus the 28 contracts that were mentioned a few short paragraphs ago.  Tuesday’s Daily Delivery Report showed that 52 gold contracts were actually posted for delivery today, so that means that 52-29=23 gold contracts just got added to the June delivery month.  Silver o.i. in June rose by the 46 contracts that showed up in the Daily Delivery Report just above, leaving 50 still open.  There were zero silver contracts posted for delivery today.


There was a rather counterintuitive withdrawal from GLD yesterday, as an authorized participant took out 66,062 troy ounces of gold.  That’s absurd on the face of it — and I’ll get into it in the next paragraph.  Over at SLV, there was a fairly healthy deposit, as an a.p. added 2,524,831 troy ounces of silver.

With the gold price roaring higher, accompanied by heavy buying in GLD, physical gold should be pouring into that ETF.  True, there was a big deposit on Monday, but nothing on Tuesday — and then this sizeable withdrawal yesterday.  I would suspect — and I’ll leave it to Ted to be the final judge on this matter — that there was a very sizeable addition to GLD yesterday, but it was masked by an even larger withdrawal, as someone [think JPMorgan] converted a whole pile of GLD shares — and redeemed them for physical metal.  This is wild-ass speculation on my part, but that’s the best explanation I can come up with under the current circumstances.

The other possible explanation is that Wednesday’s withdrawal/conversion of shares was all there was — and that some authorized participants in gold are shorting GLD shares in lieu of depositing physical metal.  This is something that Ted and I discussed briefly on Tuesday.

There was no sales report from the U.S. Mint.

There was no in/out movement in gold over at the COMEX-approved depositories on the U.S. east coast on Tuesday.

There was some activity in silver, but not a whole lot. There was 237,207 troy ounces received — and 220,901 troy ounces shipped out.  All of the ‘in’ activity was at Brink’s, Inc.  In the ‘out’ category, there was 121,130 troy ounces shipped out of Loomis International — and the remaining 99,770 troy ounces departed CNT.  There was also a paper transfer of 45,887 troy ounces from the Registered category — and back into Eligible over at Brink’s, Inc.  The link to all this is here.

There wasn’t much happening over at the COMEX-approved gold kilobar depositories in Hong Kong on their Tuesday.  Nothing was reported received — and only 4 kilobars were shipped out of Brink’s, Inc.  I won’t bother linking this, either.


Here are two more charts that Nick sent around last Friday, both of which had to wait until I had space — and today’s the day.  They show the current gold and silver holdings of all know depositories, mutual funds and ETFs, as of the close of business on Friday, May 31.  For that business week, there was 37,000 troy ounces of gold, plus 161,000 troy ounces of silver added on a net basis during that week.  Click to enlarge for both charts.

I have an average number of stories and articles for you today.


CRITICAL READS

U.S. Services Growth Weakest Since Feb 2016, Flashes “Worrying Signs For Economy

Following the collapse in both PMI and ISM surveys for U.S. Manufacturing, Services surveys for May were expected to slide (tracking the rest of the world’s give-up of the Services sector outperformance overnight) but as is so typical, the surveys are entirely opposite of one another!!

  • U.S. Services PMI survey dropped to 50.9 – the weakest since February 2016
  • U.S. Services ISM survey jumped to 56.9 – highest since February 2019

Spot The Odd One Out!!  Click to Enlarge.

Even more ridiculous is that PMI reports that business expectations are at their lowest level since June 2016, but ISM’s Service employment index rose to 58.1 vs. 53.7 – the largest monthly increase in employment index in two years.

ISM respondents appear in a world of their own seeing a pickup in new orders, employment, and business activity in May (that no one else anywhere saw)…

Commenting on the PMI data, Chris Williamson, Chief Business Economist at IHS Markit notes that “The survey data indicate a deterioration of annualised GDP growth to just 1.2% in May, down from 1.9% in April, putting the second quarter on course for a 1.5% rise.

This chart-filled article was posted on the Zero Hedge website at 10:04 a.m. EDT on Wednesday morning — and it comes to us courtesy of Brad Robertson.  Another link to it is here.  A related ZH story is headlined “ADP Employment Growth Crashes to 9 Year Lows” — and that’s from Brad as well.


The Disconnect Between the Economy and Stocks is at Record Highs

The bear case for U.S. stocks is getting more compelling by the day, according to Bloomberg macro strategist Mark Cudmore.

Via Bloomberg…”There’s been a remarkable deterioration in the macro environment since my column last week, yet U.S. equities have gained in value. This divergence is unsustainable but it’s a reminder that bear markets take many months to play out.”  Click to enlarge.

Amid an intensifying tit-for-tat on trade, it should be increasingly clear to even the most optimistic of analysts that any deal between the U.S. and China will be very difficult to achieve and is by no means imminent.

Economists are starting to reduce their growth projections but there’s a great amount of global economic damage still to be factored in. Equity strategists mostly remain in denial but, at some point, they will speak to their eco colleagues and slash earnings forecasts, making overvalued U.S. stocks appear even more expensive.

Never mind the U.S. seems determined to also pick a fight with its second-largest trading partner (after China) with the threat of imminent tariffs on Mexico. They will be exceptionally damaging to U.S. companies if implemented, but harm has already been done either way, just by floating the idea after a trade agreement was negotiated and agreed. Policy uncertainty will linger, prompting business owners to hold back capital expenditure and encourage supply chains to bypass the U.S..

And then there’s the marginal negative of removing tariff exemptions on India, the world’s fifth-largest economy.

All this, and yet the S&P 500 has fallen less than 5% since I first turned bearish on April 30, via this column. And back then, an imminent U.S.-China trade deal was still the base case!

That size and scope is to make the point how much downside is still ahead of us — not that it will occur immediately nor in a straight line. Bear markets are always difficult to trade and bear market rallies can be savage.

This 3-chart commentary put in an appearance on the Zero Hedge website at 9:50 a.m. on Wednesday morning EDT — and it’s from Brad as well.  Another link to it is here.


What Comes From Disrespecting Mr. Market — Bill Bonner

A big day on Wall Street yesterday.  [Tuesday – Ed]

The Dow was up more than 500 points after Federal Reserve chairman Jerome Powell told investors they have nothing to fear. FXNews is on the case:

Here are the highlights from this morning’s “Conference On Monetary Strategy, Tools, And Communications Practices” in Chicago:

We [FED] are closely monitoring the implications of recent developments [tariffs] on the U.S. economic outlook

We [FED] will act as appropriate to sustain the expansion

FED policy remains data dependent

Persistently low inflation could lead to downward drift in expectations

Yes, the great wizards at Fed headquarters will heal every wound, soothe every heart, and make sure there is no pot without a chicken in it.

This commentary from Bill, filed from Dublin, appeared on the bonnerandpartners.com Internet site on Tuesday morning EDT — and another link to it is here.


Air Cargo Demand Continues to Plunge as World Trade Sinks

The International Air Transport Association (IATA) published a new report for global air freight markets showing that demand (measured in freight tonne kilometers (FTKs)), plunged 4.7% in April on a YoY basis. The trend turned negative in January as YoY demand declined thanks to a synchronized global downturn and deepening trade war.

Air freight operators are expecting a further deterioration in global growth in 2H19. Trade tensions between Washington and Beijing dramatically flared up last month, and industry experts warned global trade volume is in free fall.

If we see further deterioration and tariff increases, there will be further damage to world trade,” IATA director general Alexandre de Juniac said on a conference call. “It will be a difficult year for world cargo.”

This 2-chart Zero Hedge news item showed up on their Internet site at 4:15 a.m. on Wednesday morning EDT — and I thank Brad Robertson for this one as well.  Another link to it is here.


Doug Casey on What Happens After the Next War

International Man: The U.S. government is actively at war in about half a dozen countries. It’s eyeing new conflicts all the time.

On the topic of getting involved in another war… President Trump was reported to have said this about his National Security Advisor John Bolton: “If it was up to John, we’d be in four wars now.”
What do you make of all this?

Doug Casey: Where to start?

Well, first of all, things are out of control. The U.S. Government has become so big, so dysfunctional, and with its fingers in so many pies that anything can happen, unpredictably.

Secondly, it’s extremely dangerous. Prodding lots of hornet’s nests guarantees you’ll be stung—perhaps enough to put you in the hospital. Third, it’s extraordinarily expensive. And the U.S. Government is already bankrupt.

As you pointed out, the U.S. is actively at war in right now in who knows how many countries— including at least a half a dozen in Africa that nobody can find on a map. There are combat troops in probably 100 countries around the world. There are probably 800 bases around the world. These things are all just trip wires waiting for an accident or an incident to draw the country into a real war. So far—at least since the misadventure in Vietnam—the U.S. has just engaged in trouble-making exercises and sport wars. But the big thing on the horizon right now is Iran. This is hunting big game.

This very worthwhile commentary by Doug showed up on the internationalman.com Internet site on Wednesday sometime — and another link to it is here.


China, Russia Urged to Continue Efforts to De-fang U.S. dollar Sanctions Weapon

China and Russia should avoid using U.S. dollars in financial translations to minimise Washington’s ability to bully other countries into following its rules with the threat of sanctions, according to a top adviser to Russian President Vladimir Putin.

The two nations have been keen to cut their dependence on the U.S. dollar for some time, and continue to talk about establishing a new system for direct yuan-rouble settlements despite multiple delays.

The U.S. is the most powerful economy in the world. If we want to avoid dollar hegemony, the first thing we need to do is to avoid using dollars, because the foundation of the U.S. economy is based on the dollar reserves owned by other countries and this has given it the ability and confidence to press other countries to play by its rules,” said economist Sergey Glazyev.

U.S. influence would eventually be weakened if we do so.”

This worthwhile news item appeared on the South China Morning Post website at 7:30 p.m. HKT on their Wednesday afternoon, which was 7:30 a.m. EDT in Washington…EDT plus 12 hours.  I found it embedded in a GATA dispatch — and another link to it is here.  The rt.com spin on this is headlined “Dollar dump? Russia & China agree to bilateral trade in national currencies during Putin-Xi meeting” — and I thank George Whyte for passing that one our way.


Beijing Warns U.S. Farmers May Lose Chinese Market For Good

Han Jun, the Chinese vice-minister of agriculture and rural affairs, says American farmers risk losing the entire Chinese market in the deepening trade war, reported South China Morning PostClick to enlarge.

The U.S. began collecting 25% tariffs on $200 billion of Chinese goods arriving at all ports on Saturday morning in an intensification of the trade war. Earlier that morning, China also began collecting 25% tariff on $60 billion of American goods.

Jun said the retaliatory tariffs covered all American agricultural products, a warning that American farmers could lose significant market share in 2H19 and beyond.

If the U.S. doesn’t lift all additional tariffs [levied on Chinese products], bilateral agricultural product trade between China and the U.S., including soybean trade, will never go back to normal,” Jun told Xinhua news agency. “If the U.S. loses China’s market, it will be very difficult for the U.S. to regain it.”

Jun spoke about the developing farm crisis in the Midwestern U.S. but played down the impact of the trade war on the Chinese economy.

The agriculture official said President Trump’s farm bailout(s) wouldn’t be enough to cover the losses if American farmers were entirely shutout of the Chinese market. China can withstand the trade war, he added, indicating the government will incentivize domestic farmers to plant more of the crop and could also resort to other countries, like Argentina and Brazil.

This news story put in an appearance on the Zero Hedge website at 9:25 p.m. EDT on Wednesday evening — and another link to it is here.


GLD turnaround very positive for gold — Lawrie Williams

Gold showed signs of weakness through most of April and May and no less than 35 tonnes of gold were liquidated out of GLD, the world’s largest gold ETF, between April 1st and the Memorial Day holiday on May 27th. But as so often seems to be the case, the U.S. holiday seemed to trigger a turning point and, since then, GLD has added 22 tonnes of gold to its holdings. And the GLD increase has coincided with a very sharp uptick in the gold price which is currently approaching $1,350 spot as I write – a big increase from a low point of around $1,275 only a week ago.

This is no coincidence as both the GLD deposits and the rising gold price signify a major change in sentiment about the prospects for gold from some of the big money funds. Ray Dalio’s Bridgewater, reputed to be the world’s biggest hedge fund with around $150 billion under management, has been leading the clarion call for gold. Dalio is said to be a gold believer and is reported as recently having his fund increase its gold exposure in the light of what he sees as an escalating trade war between the U.S. and China which he regards as potentially moving out of control. In a recent blog post he noted “History shows that countries in conflict have seen that such conflicts can easily slip beyond their control and become terrible wars that all parties, including the leaders who got their countries into them, deeply regretted, so the parties in the negotiations should be careful that that doesn’t happen. Right now we are seeing brinksmanship negotiations, so it is a risky time.”

Lawrie appears to have the sequence of events backwards, as it’s the purchase of GLD shares that causes this ETF to buy physical gold and add it to the fund.  The fund doesn’t just buy gold out of the blue for no reason, the purchase of GLD shares comes first — and the physical metal deposit follows.  This commentary was posted on the Sharps Pixley website [which has been off-line for a couple of days] on June 5 — and another link to it is here.


The PHOTOS and the FUNNIES

The town of Lillooet is sprawled along a large area of the west bank of the Fraser River between two very impressive mountain ranges — and where the Seton River/Lake drains into the Fraser.  The gorge/mountain pass along the 5 kilometer long river is one of the most impressive and photogenic sights that I have ever been in — and the three photos below barely hint at the majesty of the place.  And it was incongruous to see deciduous and coniferous trees, plus lush grass, growing side by side with desert sage brush.  All three photos were taken within a hundred meters of each other…the first one looking due east — and the last two looking west over the lake. It’s less than a fifteen minute drive from this spot to downtown Lillooet.  Click to enlarge.


The WRAP

Yesterday’s price activity in just about everything that mattered, should leave know doubt in anyone’s mind that the President’s Working Group on Financial Markets…a.k.a. the Plunge Protection Team…were everywhere yesterday, but particularly in the currency and precious metal markets.

Left to its own devices the free market was about to pass judgement on everything paper, particularly the U.S. dollar, which would have certainly crashed and burned, if allowed…which it just as obviously wasn’t.  The precious metals showed every indication that they were about to mark down the value of all paper currencies by a very large percentage, but those attempts were also halted in their tracks.

‘Da Boyz’ did “whatever it took“…to paraphrase ECB chairman Mario Draghi.  But it’s obvious that the rot in the financial system — and all things paper, is now so deep and so vast on a world-wide basis, that “whatever it takes” won’t be enough some day.  However, what exact day that will be, I don’t know…but it marches ever closer, as these are desperate acts by equally desperate men.

As I pointed out earlier, silver broke above both its 50 and 200-day moving averages on an intraday basis on Wednesday, before being hauled lower — and closed down on the day.  It was the same for platinum’s 200-day moving average…back above it for a decent gain, but closed below it for an even bigger loss.  Copper was also closed at a new low move for this engineered price decline — and ditto for WTIC.

The Managed Money traders got slaughtered yesterday — and JPMorgan et al made out like the bandits they are.  Too bad Wednesday’s price/volume action won’t be in tomorrow’s COT Report — and I’m sure that fact was dutifully noted by the powers-that-be as they went about their market management procedures yesterday.

Here are the 6-month charts for all four precious metals, plus copper and WTIC — and the above-mentioned changes should be duly noted.  Click to enlarge for all.

And as I type this paragraph, the London open is less than a minute away — and I note that the gold price ticked a bit higher as soon as trading commenced in New York at 6:00 p.m. EDT on Wednesday evening, but that wasn’t allowed to last long. The current low tick, such as it was, came a few minutes after 9 a.m. China Standard Time on their Thursday morning. It has been edging unevenly higher since — and is currently up $1.80 an ounce. The price path for silver was mostly similar — and it’s up 4 cents. Platinum crept higher until shortly after 8 a.m. CST — and it has been trading quietly sideways ever since — and is up 4 dollars at the moment. The palladium has been trading unevenly sideways a few dollars either side of unchanged — and it’s up 2 bucks as Zurich opens.

Net HFT volume is a bit over 49,500 contracts — and there’s only 367 contracts worth of roll-over/switch volume on top of that. Net HFT silver volume is coming up on 11,500 contracts — and there’s 873 contracts worth of roll-over/switch volume in this precious metal.

The dollar index opened down 3 basis points once trading began at 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 made it up above the unchanged mark, but began to turn lower starting around 9:15 a.m. CST, with its current low tick, such as it is, coming at 2:04 p.m. CST, which was at, or about ten minutes before, the afternoon gold fix in Shanghai. It’s down 3 basis points currently.


Tomorrow we get the latest and greatest Commitment of Traders Report…sans Wednesday’s data…and also the companion Bank Participation Report.  I am not looking forward to seeing what’s in either one.


And as I post today’s column on the website at 4:02 a.m. EDT, I see that the gold price has crept a bit higher during the first hour of London trading — and is up $4.30 the ounce at the moment. Silver is now up 9 cents. Platinum is up 2 dollars — and palladium is up 5 as the first hour of Zurich trading ends.

Gross gold volume is getting up there at around 66,000 contracts — and minus what little roll-over/switch volume there is, net HFT gold volume is about 64,500 contracts. Net HFT silver volume is coming up on 14,800 contracts — and there’s 967 contracts worth of roll-over/switch volume in this precious metal.

The dollar index had a bit of an up/down move during the last hour — and as of 8:45 a.m. GMT in London — 9:45 a.m. CEST in Zurich, it’s down 6 basis points from Wednesday’s close.

One has to wonder what ‘da boyz’ have in store for us during the COMEX trading session today, but it appears that the final battle between paper and physical has now switched into high gear.

See you here tomorrow.

Ed