Palladium Back Above the Gold Price Again

13 June 2019 — Thursday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price traded flat until shortly after 9 a.m. China Standard Time on their Wednesday morning — and it began to head unevenly higher from there, with the high of the day coming around 9:15 a.m. in London.  It was sold quietly lower until 9:30 a.m. in New York — and the smallish rally that developed after that, was capped and sold lower around 12:20 p.m. EDT.  That  tiny sell-off ended about forty-five minutes later — and it crept a bit higher until trading ended at 5:00 p.m.

And despite all the jumping around, the low and high ticks aren’t worth looking up.

Gold was closed in New York yesterday at $1,333.10 spot, up $6.80 from Tuesday — and a fair amount below its high tick of the day.  Net volume was not exactly light at just under 221,000 contracts — and roll-over/switch volume was a bit over 14,500 contracts.

Like on Tuesday, silver’s price path was guided in a similar manner as gold’s, except the high in London was at 9 a.m. — and the low in New York was at the afternoon gold fix.

The low and highs in this precious metal aren’t worth looking up, either.

Silver was closed on Wednesday at $14.75 spot, up 3.5 cents from Tuesday.  Net volume was a bit elevated at 57,500 contracts — and there was around 15,800 contracts worth of roll-over/switch volume out of July and into future months in this precious metal.  And it should be noted that silver traded above its 50-day moving average for a while on Wednesday, but certainly wasn’t allowed to close there.

Like for silver, platinum’s high for the day came at 10 a.m. CEST in Zurich/9 a.m. BST in London.  It was sold lower until 9:30 a.m. in New York…rallied a bit in mid-morning trading there — and then was sold lower into the 1:30 p.m. COMEX close.  It traded flat from that juncture until trading ended at 5:00 p.m. EDT.

Palladium rose and fell about five bucks between the 6:00 p.m. EDT open in New York on Tuesday evening — and the 2:15 p.m. CST afternoon gold fix in Shanghai.  It was sold lower from there going into the Zurich open — and after making it back to unchanged an hour later, it drifted sideways until the COMEX open in New York.  The subsequent rally was capped at, or just before, the afternoon gold fix in London, just as it was about to break above $1,400 spot — and it really didn’t do much of anything after that.  Palladium was closed at $1,390 spot, up 15 dollars on the day.

The dollar index closed very late on Tuesday afternoon in New York at 96.69 — and opened up a couple of 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 almost ruler flat from that point until around 1:45 p.m. CST on their Wednesday afternoon — and at that juncture began to chop quietly lower, with the 96.58 low tick coming about 9:10 a.m. in London.  It began to rally very unevenly from there — and the 97.02 high tick was set around 2:45 p.m. EDT in New York.  It sagged a small handful of basis points into the 5:30 p.m. close.  The dollar index finished the Wednesday session at 97.000…up 31 basis points from Tuesday.

It was the second day in a row where there was little or no correlation whatsoever between what was happening in the currencies — and what was going on in the precious metals.

Here’s the DXY chart, courtesy of Bloomberg once again.  Click to enlarge.

And here’s the 6-month U.S. dollar index, courtesy of the folks over at stockcharts.com — and the delta between its close…96.97…and the close on the DXY chart above, was 3 basis points on Wednesday.  Click to enlarge as well.

The gold shares gapped up a bit at the open — and then chopped quietly higher until around 11:15 a.m. in New York trading.  From that point they began to sag unevenly lower until trading ended at 4:00 p.m. EDT.  The HUI closed higher by 1.60 percent.

Nick is having some rather serious issues with the Silver 7 and 1-year Silver 7 indexes, but he assured me last night that he thinks that he has this problem fixed.  I’ll know for sure when I check the charts later this morning.


The CME Daily Delivery Report showed that 71 gold and zero silver contracts were posted for delivery within the COMEX-approved depositories on Friday.

In gold, there were four short/issuers in total — and the two largest were Advantage and International F.C. Stone, with 40 and 19 contracts out of their respective client accounts.  There were seven long/stoppers — and the biggest three were Advantage, JPMorgan and Marex Spectron with 33, 18 and 9 contracts…all for their respective client accounts as well.

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 rose by 4 contracts, leaving 296 still open, minus the 71 contracts mentioned a few paragraphs ago.  Tuesday’s Daily Delivery Report showed that 58 gold contracts were actually posted for delivery today, so that means that 58+4=62 more gold contracts were just added to the June delivery month.  Silver o.i. in June remained unchanged at 2 contracts — and there are no silver contracts out for delivery today.


There were deposits in both GLD and SLV on Wednesday.  An authorized participant added 113,240 troy ounces to GLD — and another a.p. added 1,123,815 troy ounces to SLV.

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

The only activity in gold over at the COMEX-approved depositories on the U.S. east coast on Tuesday was 734 troy ounces that was deposited at Delaware — and I won’t bother linking this.

In silver, there was one truckload received…599,818 troy ounces…that was dropped off at Canada’s Scotiabank — and one truckload…599,665 troy ounces…was shipped out of CNT.  A link to that activity is here.

There was very little happening over at the COMEX-approved gold kilobar depositories in Hong Kong on their Tuesday.  Nothing was reported received — and only 13 were shipped out…10 from Brink’s, Inc. — and 3 from Loomis International.  I won’t bother linking this, either.


Here are three charts that Nick passed around the other day that I don’t believe I’ve posted before.  They show gold imports to — and exports from the U.S.A.…updated with April’s data.  During that month they imported 12.47 tonnes — and shipped out 34.61 tonnes.  The first chart below shows the net changes for the month of April.  Click to enlarge.

This next chart shows the countries and tonnage of the gold that was received by the U.S. in April — and the second shows the countries and associated tonnage that received gold from the U.S. in April.  Click to enlarge for both.

It was a pretty quiet news day — and I don’t have all that much for you once again.


CRITICAL READS

U.S. Government Spending Soars to All-Time High as Deficit Hits Record For Month of May

Another month, another frightening jump in the U.S. budget deficit. And this time with a record surge in government spending to boot.

According to the latest Treasury data, the U.S. budget deficit in May – not a traditionally high-spending month for the U.S. government – was a whopping $208 billion, missing the $200 billion deficit expected, and well worse than the $147 billion deficit recorded last May.

And even though there may have been one-time calendar effects and time-shifts at play, the deficit was also the biggest budget deficit for the month of May on record.  Click to enlarge.

For May, receipts rose 6.9% y/y to $232.1.3BN but it was the surge in outlays that was jarring: last month, the U.S. government spent a whopping $439.8BN, a 20.9% increase from prior year’s $363.9BN in outlays. This was the most the U.S. government has ever spent in one month!

For the first 8 months of this fiscal year, gross interest payments on US Treasury debt hit $354 billion, $46 billion, or 11% more than in the same month period last year. As a reminder, according to the Treasury’s conservative budget estimates, interest on the U.S. public debt is on track to reach a record $591 billion this fiscal year, more than the entire budget deficit in FY 2014 ($483 BN) or FY 2015 ($439 BN), and equates to almost 3% of estimated GDP, the highest percentage since 2011.

And since total debt, which recently surpassed $22 trillion having, and is only set to keep rising – once the latest pesky debt ceiling issue is resolved in a few months – expect interest on the debt to keep rising, especially if inflation comes back with a bang and the Fed reverts to its tightening trajectory, and hit $1 trillion per year as soon as 2021, making it one of the biggest spending categories, and on pace to surpass total U.S. defense spending (roughly $950BN per year) in dollar terms in just two years.

This longish 7-chart Zero Hedge article was posted on their website at 3:35 p.m. on Wednesday afternoon EDT — and another link to it is here.


Regulators Alarmed by Risky Loans, But Don’t Know Who Holds Them

The steady drumbeat of warnings over the surge in risky corporate borrowing is growing louder and louder. Time and again, regulators in the U.S. and Europe have pointed to the hazards of businesses taking on too much debt.

At issue is the $1.3 trillion leveraged lending market, composed of high-yield loans from firms with some of the weakest finances. While Federal Reserve and European Central Bank officials have drawn attention to these heavily indebted companies and the deteriorating standards of loans bundled into securities called CLOs, most regulators are careful to say a repeat of 2008 is unlikely because investors, rather than the banks they oversee, hold most of the debt.

Yet that’s created a new, and potentially more dangerous, kind of risk. Precisely because roughly 85% of leveraged loans are held by non-banks, regulators are largely in the dark when it comes to pinpointing where the risks lie and how they’ll ripple through the financial system when the economy turns. More and more, critics are questioning whether regulators like the Fed have a handle on the problem or the right tools to contain the fallout. A big worry is highly leveraged businesses employing thousands could face severe financial stress and, in some cases, insolvency, deepening the next downturn.

I always remind myself that even the smartest policy maker with the most far-reaching perspective, data and tools was basically blind-sided by the breadth and depth of the housing crisis,” said Mark Spindel, chief investment officer at Potomac River Capital. “Leveraged loans and corporate debt are not housing, but maybe it’s more pervasive than we think. We can’t take any of the CLO, leveraged loan, or private debt growth for granted.”

Signs of excessive risk-taking have emerged in any number of markets. But leveraged lending has raised eyebrows partly because of how lightly it’s regulated. Fueled in large part by demand from collateralized loan obligations that offer interest rates that approach 9% on some riskier portions of the debt, the market for leveraged loans has more than doubled since 2012.

One of the ironies of the boom is that much of the risk-taking decried by central banks and regulators is largely of their own making.

This worthwhile Bloomberg story appeared on their website at 3:00 a.m. PDT on Tuesday — and was updated about four hours later.  I found it in yesterday’s edition of the King Report — and another link to it is here.


Euro Slides After Trump Threatens Sanctions To Stop NordStream 2 (Again!)

President Trump (and alternatively Congress) has been threatening sanctions against the Nordstream 2 pipeline for years, so color us surprised when the euro started to sell off on a flashing-red headline from Bloomberg that Trump is considering sanctions… again!

We’re protecting Germany from Russia and Russia is getting billions and billions of dollars in money from Germany” for its gas, Trump complained to reporters at the White House during a meeting with Polish President Andrzej Duda.

He didn’t say whom the U.S. might sanction to block the pipeline.

However, the algos seem unaware of that fact and are sending the euro lower…

Why does it matter? Simple, as Tom Luongo recently noted, the Nordstream 2 pipeline represents the last stand of U.S. influence over the internal affairs of Europe.

Once finished it will stand as a testament to the fundamental split between the European Union and the United States.

Europe will see this as its first successful defense of its newly-declared independence. And the U.S. will have to come to terms with no longer having control overseas.

This Zero Hedge story showed up on their Internet site at 12:51 p.m. on Wednesday afternoon EDT — and another link to it is here.


China asks India to team up to ward off U.S. ‘bullying’ trade practices

Chinese authorities have invited the Indian government to join efforts to effectively offset the potential impact of “protectionist“ and “unilateral“ trade practices implemented by the US across the world over recent months.

According to Chinese Vice Foreign Minister Zhang Hanhui, “trade frictions between China and the US and the specter of trade frictions between the U.S. and India” may become a crucial subject for talks between the two states, bullied by Washington.

Trade protectionism and unilateralism are very much on the rise. How to respond to the bullying practices of the United States … its practices of trade protectionism is an important question,” Zhang said.

The comment comes ahead of the Shanghai Cooperation Organization (SCO) summit, which is to kick off in the Kyrgyz capital of Bishkek later this week. Chinese President Xi Jinping is expected to meet with his Indian counterpart Prime Minister Narendra Modi on the sidelines of the event.

The top official stressed that the heads of state would reach deeper understanding on the issue of “upholding justice and opposing trade protectionism” in global trade. Moreover, Zhang expressed hopes that the neighboring nations would agree on bilateral trade.

This story appeared on the rt.com Internet site at 2:29 p.m. Moscow time on their Tuesday afternoon, which was 7:49 a.m. in Washington — EDT plus 7 hours.  I thank Larry Galearis for sending it our way — and another link to it is here.


China Auto Sales Just Posted Their Worst Month Ever

China’s automobile market has continued to catalyze the global auto recession, posting its worst sales month in history for May according to the China Association of Automobile Manufacturers (CAAM). The data showed a decline of 16.4% for May, following a decline of 14.6% in April and 5.2% in March. It was the sharpest decline ever for China’s auto industry.

Xu Haidong, CAAM’s assistant secretary general ignored the fact that his country was in the midst of a trade war and instead told Reuters: “One key reason for the drop was provinces implementing ‘China VI’ vehicle emission standards earlier than the central government’s 2020 deadline, stoking uncertainty among manufacturers.”

Or the same reason Europe has been using to explain away its own automotive depression recession.

We gave the manufacturers too little time to prepare,” he continued, also noting that May’s drop in demand was attributable to a “decline in purchasing power in the low-to-middle income groups as well as expectations of government stimulus to encourage purchases.”

Passenger vehicles were crushed lower for the 12th straight month, according to the Passenger Car Association (“PCA”). May retail passenger vehicle sales were down 12.5% on the year to 1.61 million units. May’s data follows a drop of 16.6% in April and 12% in March. Passenger vehicle sales include sedan, MPV, SUV and minivan sales. SUV sales were down 9.6% to 669,395 units.  Click to enlarge.

Turning toward individual brands, Changan’s auto sales fell 35% to 113,497 units in May and Great Wall Motor said that their sales had fallen 11.8% to 62,559, according to Bloomberg. Cui Dongshu, secretary general of PCA, told reporters in Beijing: “It is a pretty difficult time for the auto industry.

This news item put in an appearance on the Zero Hedge website at 1:25 p.m. EDT on Wednesday — and another link to it is here.


Gold Is Paul Tudor Jones’s Favorite Trade for Next 12-24 Months

Paul Tudor Jones, founder at Tudor Investment Corporation, explains why he views gold as the best trade over the next year to two years. He speaks with Bloomberg‘s Vonnie Quinn on “Bloomberg Markets“.

This 2:07 minute video clip was posted on the Bloomberg Internet site at 8:50 a.m. Pacific Daylight time on Wednesday morning.  I thank Richard Saler for pointing it out.


If Gold Was Just a Barbarous Relic… — Jim Rickards

There’s nothing new about the Russian accumulation of gold bullion in their reserve position. It began in a material way in 2009 when Russia had about 600 metric tonnes of gold.

Today, Russia has 2,183 metric tonnes, a stunning 264% increase in less than 10 years. Russia is the sixth-largest gold power in the world after the U.S., Germany, IMF, Italy and France.

Russia’s gold hoard is over 25% of the U.S. hoard, but Russia’s economy is only 8% the size of the U.S. economy. This gives Russia a gold-to-GDP ratio over three times that of the U.S.

While these developments are well-known, the question of why Russia is accumulating so much gold has never been answered.

One reason is as a dollar hedge. Russia is the second-largest energy producer in the world. Most of that energy is sold for dollars. Russia can hedge potential dollar inflation by buying gold.

This very worthwhile commentary from Jim showed up on the dailyreckoning.com Internet site on the weekend — and I don’t know how I missed it until now.  Another link to it is here.


Could JPMorgan Chase Be Hit with a Fourth Felony Count for Rigging Precious Metals Markets?

The CFTC’s fruitless 5-year investigation is all the more embarrassing because Edmonds was not some lone, rogue trader inside an otherwise pristine Wall Street bank. JPMorgan’s reputation is so soiled for rigging everything from electric markets to foreign exchange to wearing a self-imposed blindfold while Bernie Madoff carried out his decades-long Ponzi scheme that two trail attorneys have written a book comparing the bank to the Gambino crime family. (The reality is that it would take a 7,000-hour study just to chronicle this bank’s serial crimes. See our partial rap sheet here.)

Far from being a lone, rogue trader, Edmonds has now implicated other traders and supervisors within JPMorgan Chase. His plea agreement indicates the following:

…the defendant and his fellow traders routinely placed bids and offers-in other words, orders-for precious metals futures contracts with the intent to cancel those bids and offers before execution (the ‘Spoof Orders’). This trading strategy was intended to, and did, transmit materially false and misleading liquidity and price information and otherwise deceive other market participants about the existence of supply and demand for the futures contracts at issue, and thus induce those other market participants to trade against orders that the defendant and his co-conspirators placed and did want to execute on the opposite side of the market from the Spoof Orders at prices, quantities, and times that the other market participants otherwise would not have traded. The Spoof Orders thus were designed to, and did, artificially move the price of precious metals futures contracts in a direction that was favorable to the defendant and his co-conspirators at the Bank, to the detriment of other market participants, including other market participants in Connecticut. The defendant placed the Spoof Orders in order to make money and avoid losses for himself, his co-conspirators, and the Bank. The defendant learned this deceptive trading strategy from more senior traders at the Bank, and he personally deployed this strategy hundreds of times with the knowledge and consent of his immediate supervisors.”

I had so many reader send me this in the last day or so, that I’ve lost track of who sent it to me first.  I passed on it the first time I saw it on Tuesday, but did a 180 on it after reading it when Mike Watt sent it my way yesterday afternoon.  None of this should be a surprise, including the fact that…”two trial attorneys have written a book comparing the bank to the Gambino crime family.”  I guess that would be close to the truth considering that Jim Rickards on more than one occasion in the public domain has called JPMorgan “the biggest criminal enterprise the world has ever known.”  Opinions of a similar kind have graced Ted Butler’s commentary for the last number of years as well.  This worthwhile article put in an appearance on the wallstreetonparade.com Internet site on Monday sometime — and another link to it is here.


The PHOTOS and the FUNNIES

Today’s three photos were all taken on B.C. Highway 99 within a 10-minute drive of where I took the pictures that graced yesterday’s column — and all three from the side of the highway as we continued north as the light began to fade.  The first is another peek down the Fraser River Canyon.  The second looking south down the part of the highway we’d just travelled over the last ten minutes or so — and the third, a couple of miles north of that, looking north.  No photo, or group of photos, does this terrain justice.  Click to enlarge.


The WRAP

There wasn’t much price activity yesterday — and any rally in both gold and silver that looked like they were going to amount to anything, were quietly turned lower in Far East, London and New York trading.  That was true in platinum and palladium as well.  It was all subtle…but not subtle enough if you know how to read a chart.

Here are the 6-month charts for all of the Big 6 commodities.  There’s nothing much to see in gold or platinum…but silver traded above its 50-day moving average on an intraday basis — and palladium continues to march quietly higher, above all its moving averages…and back above the gold price by a considerable amount as well.  Copper didn’t do much, but WTIC set a new low close for this move down, as the Managed Money traders continue to plow onto the short side of that commodity.  I’m sure they were helped along by the commercial traders on the surge in crude inventory news yesterday.  Click to enlarge for all.

And as I type this paragraph, the London open is a minute or so away — and I see that the gold price has been wandering quietly higher since around 8 a.m. China Standard Time on their Thursday morning — and is currently up $4.00 an ounce. Silver wandered sideways until about noon CST — and it has crept higher from there — and is up 4 cents at the moment. Platinum and palladium didn’t do much in morning trading in the Far East, but have edged quietly higher since. Platinum is up 3 bucks — and palladium by 5 as Zurich opens.

Net HFT gold volume is just about 49,000 contracts already — and there’s only 762 contracts worth or roll-over/switch volume in that precious metal. Net HFT silver volume isn’t exactly light, either at around 13,200 contracts — and there’s 973 contracts worth of roll-over/switch volume out of July and into future months.

The dollar index opened down four basis points once trading commenced at 7:45 p.m. EDT in New York on Wednesday evening, which was 8:45 a.m. in Shanghai on their Thursday morning. It has been drifting very unevenly lower since — and as of 7:45 a.m. BST in London/8:45 a.m. CEST in Zurich, the dollar index is down 8 basis points.


Tomorrow we get the latest Commitment of Traders Report — and as I stated in Wednesday’s missive, it certainly appears likely that we’ll get increases in the commercial net short positions in both.

Ted expressed his opinion about this in his mid-week commentary to his paying subscribers yesterday — and I’ll have the Reader’s Digest version of his comments for you in my Friday column.


And as I post today’s efforts on the website at 4:02 a.m. EDT, I note that gold hasn’t done much — and is up $3.60 an ounce — and silver by 5 cents. Platinum is still up 4 dollars, but palladium is now up 7. It was up 11 bucks a bit earlier in Zurich trading.

Gross gold volume is getting up there at around 64,500 contracts — and minus what roll-over/switch volume there is, net HFT gold volume is about 62,000 contracts. Net HFT silver volume is a bit over 17,000 contracts — and there’s 1,117 contracts worth of roll-over/switch volume in that precious metal.

The dollar index hit its current low tick…such as it is…about ten minutes after the 2:15 p.m. afternoon gold fix in Shanghai. It has crept a few basis points higher since — and is down 9 basis points as of 8:45 a.m. in London/9:45 a.m. in Zurich…but is basically unchanged in the last hour of trading.

That’s it for yet another day — and I’ll see you here on Friday.

Ed