Ted Butler: India Reacts to Depressed Silver Prices

14 June 2019 — Friday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price didn’t do much in morning trading in the Far East on their Thursday, but began to tick higher staring around noon China Standard Time.  It was up five bucks or so by shortly before 10 a.m. in London, but most of that gain was gone by a few minutes after 9 a.m. in New York.  It began to crawl higher from there — and the high of the day came around 2:20 p.m. in the thinly-traded after-hours market.  It was sold a tad lower into the 5:00 p.m. close from there.

Once again, the low and high ticks aren’t worth looking up.

Gold finished the Thursday session at $1,341.90 spot, up $8.80 from Wednesday’s close.  Net volume was on the lighter side, at least compared to the last few days, at a bit over 195,000 contracts — and there was a bit over 10,500 contracts worth of roll-over/switch volume in this precious metal.

Silver’s price path was virtually identical to that of gold, so I’ll spare you the play-by-play once again.  But it did close above its 50-day moving average yesterday — and touched its 200-day m.a. intraday.

The low and high prices for Thursday aren’t worth looking up, either.

Silver was closed at $14.885 spot, up 13.5 cents from Wednesday.  Net volume was nothing much out of the ordinary at a bit over 55,500 contracts — and roll-over/switch volume out of July and into future months was pretty decent at a hair over 22,500 contracts.

The platinum price crept unevenly higher in Far East trading — and also got capped and turned lower in Zurich trading, at the same time as silver and gold.  That’s not coincidental, of course.  It was sold down to its low tick, which came at the 9:30 a.m. EST open of the equity markets in New York yesterday — and proceeded to crawl a bit higher into the close from there.  Platinum was closed at unchanged on the day at $810 spot.

The palladium price traded flat until 10 a.m. CST on their Thursday morning — and dipped to its low of the day a bit over an hour after that.  From that juncture it began a long, quiet and uninterrupted climb that lasted practically until trading ended at 5:00 p.m. EDT in New York.  Palladium finished the Thursday session at $1,428 spot, up 38 bucks from its close on Wednesday.

The dollar index closed very late on Wednesday afternoon in New York at 97.000 — and opened down 4 basis points 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.  It chopped quietly and unevenly sideways until 1 p.m. in London/8 a.m. in New York.  It began to head higher from there — and the 97.08 high tick was set around 10:55 a.m. EDT.  The index sank back into the red over the next few hours, but appeared to get ‘rescued’ around 2:18 p.m…which just happened to be the high ticks in both gold and silver in after-hours/trading.  It was rallied back above the 97.00 mark by a few basis points shortly after — and it finished the Thursday session at 97.01…up 1 whole basis point from Wednesday’s close…so call it unchanged.

There certainly wasn’t much correlation between the currencies and the precious metals on Thursday, particularly during the New York trading session.

Here is the DXY chart, courtesy of BloombergClick to enlarge.

Here’s the 6-month U.S. dollar index chart, courtesy of stockcharts.com — and the delta between its close…96.51…and the close on the DXY above, was 50 basis points on Thursday.  Click to enlarge as well.

The gold shares rallied quietly and unevenly higher until around 2:20 p.m. in New York trading.  At that point, the dollar index go rescued by the usual ‘gentle hands’ — and gold [and silver] prices were tapped lower.  The gold stocks sagged a hair after that, but the HUI managed to close higher by 1.72 percent.

And Nick is still having issues with the Silver 7/Silver Sentiment Index chart, along with the 1-year Silver Sentiment/Silver 7 Index chart — and I know that more than one person is working on this problem.  Hopefully it will be back in operation today.  I said the same thing in Thursday’s column…and nothing happening.  Both Nick and I have our fingers crossed that that second ‘fix’ will work.


The CME Daily Delivery Report showed that 106 gold and zero silver contracts were posted for delivery within the COMEX-approved depositories on Monday.

In gold, there were four short/issuers in total: Advantage with 72, International F.C. Stone with 14, ADM with 11 and Marex Spectron with 9 contracts — and all from their respective client accounts.  There were seven long/stoppers in total, but the only two that mattered were Advantage and JPMorgan, as they picked up 61 and 33 contracts for their respective client accounts as well.

The link to Thursday’s Issuers and Stoppers Report is here.

The CME Preliminary Report for the Thursday trading session showed that gold open interest in June rose by another 7 contracts, leaving 304 still around, minus the 106 contracts mentioned two short paragraphs ago.  Wednesday’s Daily Delivery Report showed that 71 gold contracts were actually posted for delivery today, so that means that 71+7=78 more gold contracts were added to the June delivery month.  Silver o.i. in June fell by 1 contract, leaving just 1 left, so 1 silver contract disappeared from the June delivery month.  There were no silver deliveries scheduled for today.


There were no reported changes in either GLD or SLV on Thursday.

There was a small sales report from the U.S. Mint.  They sold 1,000 troy ounces of gold eagles — and 2,000 troy ounces of one-ounce 24K gold buffaloes.

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

It was quite a bit busier in silver.  There was one truckload….605,649 troy ounces…received — and that was dropped off at JPMorgan.  In the ‘out’ category, there was 873,523 troy ounces shipped out in total.  Of that amount, there was 747,701 troy ounces that departed CNT, along with 124,890 troy ounces that was shipped out of HSBC USA. The remaining one good delivery bar…932 troy ounces…left the Delaware Depository.  The link to that is here.

There was only a tiny bit of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Wednesday.  Nothing was reported received — and only 2 kilobars were shipped out.  That occurred at Brink’s, Inc. — and I shan’t bother linking that.


Here are two charts that I lifted from Nick Laird’s website last night — and I thought they were worth posting now that India has updated its gold imports for March.  The first shows ‘Silk Road Gold Demand’ which charts the gold imports/purchases by the four major countries in this group.  You should carefully note [on the bottom chart] that the gold imports/purchases by these four countries exceeded all of the world’s gold production for March. This sort of demand has been ongoing since at least Q4/2017…if not longer.  Click to enlarge.

This next chart shows the gold purchases by these four Silk Road countries for the first three months of every year going back to 2008.  For the last seven years, the imports during Q1 of each year averages out to 805 tonnes/year.  It certainly appears that these four countries are content to suck up all the physical gold that they produce, plus buy all the gold that the West is prepared to sell them, which appears to be all the gold that the world produces.  Click to enlarge as well.

It was another quiet news day, except for what happened in the Gulf region yesterday — and I only have a small handful of stories.


CRITICAL READS

Tilling the Soil in the Garden of Catastrophe — Bill Bonner

Long-term suffers of our Diary know that we are connoisseurs of disaster.

The great vintages – a Weimar 1921, for example… or a Zimbabwe 2008… or, of course, a nice Venezuelan blend from 2018 – are always a pleasure to sip and slosh around on the tongue… as you wonder: How can smart people foul an economy so badly that people go hungry… water stops running… riots break out in the streets… and governments collapse?

And the answer is always the same: slowly… and then, all of a sudden.

The “all of a sudden” part is well reported… the object of amusement, ridicule, and finger-wagging.
But it is the “slowly” phase that is most interesting… and important. For that is where the spadework is done… the soil is tilled… and the seeds are planted and watered. It looks to most people like honest labor, trying to coax fruit out of a grudging ground.

Few notice that it is not an Eden that is being prepared… but a garden of catastrophe. That only becomes apparent later, in the “suddenly” phase, when the evil vines grow up and choke every living thing for miles around.

And yet, the process is very simple and could be spotted years in advance.

First, the government must control the currency. If it uses gold, or a gold-backed currency, the vile crop will be stunted. With price controls and central planning alone, the feds can cause a 10-year Great Depression or a 70-year Soviet-style economic failure.

But if you want a full-blown financial catastrophe, you need fake money, too.

This very worthwhile commentary from Bill, filed from Youghal in Ireland, showed up on the bonnerandpartners.com Internet site early on Thursday morning EDT — and another link to it is here.


When, Not If” – Trader Warns the Dollar is Far More in Play Than it Looks

A week ago, much of what you heard about the dollar was that it wasn’t doing anything, and traders would have much better opportunities putting their efforts into other markets. Yet, it feels like no one can stop writing about it. And the overwhelming consensus view is that the U.S. currency is going down. Not necessarily with immediate dramatic effect. But a look at the Bloomberg compilation of bank forecasts shows a steady weakening that, over time, adds up to quite a decent move.

In fact, the biggest source of contention seems to be when, not if, the move will start. Which always makes me wonder just how sure analysts really are about a call they are making with seemingly great certainty.

In any case, while waiting on a market that has been going nowhere fast, strategists and traders have been shifting their attention to other currency pairs to trade which purport to take the dollar out of the equation. But you never really can. Where — and, perhaps even more importantly, why — the dollar moves will affect how these other currencies ultimately behave. So it is important to understand the dollar forecast implicitly embedded in those perceived opportunities. Including if they actually require the currency to continue to do nothing. Because it can sit here for a very long time. But not forever.

This 3-chart commentary by Bloomberg macro strategist Richard Breslow showed up on the Zero Hedge website at 1:15 p.m. EDT on Thursday afternoon — and I thank Brad Robertson for sending it our way.  Another link to it is here.


Suspicious doesn’t begin to describe what happened’: Iran’s Foreign Minister on tanker ‘attacks’ in Gulf of Oman

Iran’s foreign minister has labeled the reported attack on two “Japan-related” oil tankers in the Gulf of Oman as “suspicious,” occurring just as Japanese Prime Minister Abe came to Tehran for major talks.

Expressing his misgivings on Twitter, Javad Zarif noted that the incidents on the two vessels on Thursday, one of which had been reportedly struck by a torpedo, had occurred as Abe sat down for “extensive and friendly” discussions with Iran’s supreme leader, Ayatollah Seyed Ali Khamenei.

Later in the day, Japanese shipping company Kokuka Sangyo confirmed that one of its vessels had been hit in today’s attack while transporting 25,000 tons of methanol.

The statement came after Iran said it rescued 44 sailors from two tankers named as Front Altair and Kokuka Courageous. One of them was reportedly hit with a torpedo, but there is no official statement on the claim.

In May, four oil tankers were targeted off the coast of the UAE, with exact details of the incident still shrouded in secrecy. Bolton has laid the blame for the assault on Iran, yet Washington, to date, has failed to provide any evidence of complicity.

Can you smell a ‘false flag’ operation here, dear reader?  It’s so blatantly obvious, that nobody believes it, not even the U.S. media.  This news item was posted on the rt.com Internet site at 10:41 a.m. Moscow Time on their Thursday morning, which was 3:41 a.m. in Washington — EDT plus 7 hours.  I thank George Whyte for sending this story along.  Another link to it is here.  There was also an Asia Times story on this headlined “Tankers hit amid Abe’s ‘mission impossible’ to Iran” — and that comes courtesy of Tolling Jennings.  The Zero Hedge spin on this is headlined “False Flag? Iran Has Little To Gain From Oman Tanker Attacks“.


Cult Economist Jailed for Hiding Rare Coins Says They’re His Now

The 58 rare coins at the center of two federal lawsuits are exceptionally valuable.

Now a bankrupt company’s receiver wants them.

And an antique dealer wants them.

And so does Martin Armstrong, a self-taught economist with a cult following who spent years behind bars for what the U.S. said was a $700 million Ponzi scheme and for allegedly hiding assets, including what may be those very same coins.

Armstrong’s story is one of Wall Street’s more bizarre tales — and the newest chapter makes it even more absurd.

Hailed as a genius by his acolytes and a crackpot by traditional economists, Armstrong made his name in the ’80s and ’90s for calling Russia’s financial collapse and other crises, using his boom-bust “confidence cycle” theory. In 1999, prosecutors called him something else: a criminal, for swindling Japanese corporate investors.

This interesting Bloomberg article put in an appearance on their website at 3:00 a.m. PDT…Pacific Daylight Time…on Thursday morning — and it comes to us courtesy of Swedish reader Patrik Ekdahl.  Another link to it is here.


Gold Price Breakout in Multiple Currencies

The most commonly watched gold price these days is of course the gold price per troy ounce measured in the fiat currency U.S. dollars. This is so for a number of interconnected reasons such as the U.S. dollar’s international reserve status, and the fact that international gold trading takes place in U.S. dollars.

Furthermore, the gold price is established / discovered mainly in U.S. dollars, a symptom of the fact that the majority of trading of ‘gold’ volume occurs in venues such as COMEX and the London OTC gold market where the synthetic gold products that these venues quote (gold futures and unallocated gold, respectively) are traded in U.S. dollars.

Therefore, the 24-hour traded U.S. dollar gold price quote makes its way from bank, broker and exchange feeds around the world into market data feeds supplied to the world’s financial news networks, websites and bullion dealers across the world.

But for investors with a base currency / home currency that is not U.S. dollars, or whose wealth is denominated in currencies other than the U.S. dollar, the U.S. dollar gold price may not be the best price quote to keep an eye on, since these investors originally purchased their gold not with U.S. dollars but with their home fiat currencies, which could be Pounds sterling, Euros, Singapore dollars, Australian dollars, Indian rupees, Brazilian reals etc.

And so, for those investors, the gold price movement over various time horizons such as year-to-date, 1 year, 3 year, 5 year etc, is best measured in those investors’ home currencies, or the currencies in which these investors and savers in gold generate their income and denominate their wealth.

This longish chart-filled commentary by Ronan Manly showed up on the bullionstar.com Internet site on Friday morning in Singapore — and I found it in a GATA dispatch yesterday evening.  Another link to it is here.


Top Primary Silver Miners Average Yield Falls to Record Low

The top primary silver miners in the world saw their production yield fall to the lowest level ever in 2018.  Since 2005, the average yield from the top silver miners has fallen nearly in half.  And along with rising oil prices, has pushed up the total cost to produce silver by an additional $10 an ounce.  So, for those who still believe in the fantasy that it cost $5 an ounce to produce silver, that data shows otherwise.

It has been a few years since I updated the data for the top primary silver miners, but I was quite surprised by how much the average yield declined in the past year.  While part of the reason for the decrease was due to the shutting down of the Tahoe Resources (taken over by Pan American Silver) Escobal Silver Mine in Guatemala, several other large primary mining companies also suffered reductions in their average yield.

So, according to the data from the top primary silver mining companies, the average yield fell to 6.8 oz/t last year, down from 7.5 oz/t in 2017…Click to enlarge.

The reason for the increase in average yield in 2015 was due to the ramping up of the new high-grade Escobal Silver Mine.  In 2015, the Escobal Mine produced silver at an average yield of 13.5 oz/t.  Regardless, the top primary silver miners experienced a substantial decline in average yield last year.

The top primary silver mines and companies included in the chart above:

  1. Cannington Silver Mine
  2. Fresnillo PLC
  3. Pan American Silver
  4. Polymetal International
  5. Hochschild
  6. Escobal Mine (no data for 2018)
  7. Buenaventura
  8. Hecla

While there are more primary silver mining companies, these eight have the highest production amount and yields.  Silver production from these eight primary silver mines and companies totaled 155.5 million oz. in 2018.  However, one of the eight listed above has seen its production and average ore grade fall considerably over the past decade.

This very interesting commentary was posted on the srsroccoreport.com Internet site sometime on Thursday.  I thank Brad Robertson for pointing it out — and another link to it is here.


Ted Butler: India Reacts to Depressed Silver Prices

Several recent articles have highlighted a surge of silver imports to India, prompting me to take a closer look. India has always been a big buyer of silver and gold, befitting the traditions and culture of the country with the world’s second largest population. The population of India, more than 1.3 billion citizens, is now only about 50 million less than that of China. Combined, both countries make up 35% of the total world population (7.7 billion) and have always been large buyers and holders of gold and silver. Together, India and China absorb close to 50% of total world gold and silver mine production.

One big difference between India and China is that the gold and silver buying in India is largely a grassroots phenomenon, emanating from the general population due to deep-rooted customs and traditions; where the buying from China is predominantly from official sources (similar to the gold buying by Russia). To me, this makes the gold and silver buying from India more “free market” and price-sensitive in nature because the more participants in any market, the freer the market is by definition. The many tens and even hundreds of millions of gold and silver buyers from India make the markets there the freest of all.

India has always played a vital role in gold and silver. I remember how my longtime friend and silver mentor, Izzy Friedman, more than 40 years ago, as he was deciding whether to make a major investment in silver in the mid-1970’s, actually flew to India to see for himself if the stories of great silver hoards about to flood the market should prices move higher (from $4 or $5) were true. Izzy saw plenty of silver, but none so closely held in large concentrated quantities to pose a market threat. I believe that’s still the case today.

I’ll certainly be looking forward to India’s silver imports for both April and May when they finally get around to officially reporting them over the next few months.  This very worthwhile commentary from Ted put in an appearance on the silverseek.com Internet site on Thursday morning MDT — and another link to it is here.


The PHOTOS and the FUNNIES

Here are the last three photos from our rather whirlwind 1-day trip from Merritt to Lillooet — and then back to Merritt via Kamloops on April 21.  The sun was just about to disappear behind the mountains to the west — and as we were driving east along the Trans-Canada Highway towards Kamloops, I spotted this CNR train winding its way slowly along the Thompson River valley.  That, along with the contours of the mountains lit up by the setting sun in a rather unique way, was something I though worth photographing.  The old highway, the one that preceded the Trans-Canada, is still visible in the left foreground of the first picture.  The non-reduced 24MB full-sized photos look awesome on a 65-inch flat-screen TV. Click to enlarge.


The WRAP

It was a day of quiet gains on reasonably quiet volume for both gold and silver yesterday.  Most of the positive price action came in New York — and only ended when the dollar index got saved around 2:20 p.m. EDT — and they got tapped a bit lower at the same time.  Platinum was the only precious metal under some price pressure, but it managed to close at unchanged, despite that.  Palladium, which it almost always is, was in a world of its own yesterday — and there were no signs of ‘da boyz’ in that precious metal.

Here are the 6-month charts for the Big 6 commodities — and silver’s continuing dos-à-dos/do-si-do with its two big moving averages should be noted.  Click to enlarge.

And as I type this paragraph, the London and Zurich markets are about to open — and I see that the gold price wandered unevenly higher until around 11 a.m. China Standard Time on their Friday morning — and then didn’t do much of anything until a few minutes before 2 p.m. CST on their Friday afternoon. It began to rally a bit more forcefully at that point — and then appeared to go ‘no ask’ either at, or just after, the 2:15 p.m. afternoon gold fix in Shanghai. It’s heading higher with some authority now — and is up $13.10 the ounce at the moment. The price action in silver was quieter — and far more erratic and, like gold, began to show real signs of life shortly before 2 p.m. CST. It was capped the moment it hit the $15 spot price — and is up 12 cents. Platinum was up a few dollars in morning trading in the Far East — and then down a few dollars in the afternoon. Along with silver and gold it has rallied a bit since ‘the fix’ — and is currently up 3 bucks. Palladium hasn’t been doing a thing in Far East trading, but it ticked higher as well in the last thirty minutes — and is also up 3 dollars as Zurich opens.

Net HFT gold volume is roaring higher — and is around 69,000 contracts — and that’s a guesstimate — and there’s about 1,600 contracts worth of roll-over/switch volume on top of that. Net HFT silver volume is a tiny bit under 18,000 contracts already — and there are 666 contracts worth of roll-over/switch volume out of July and into future months.

The dollar index opened unchanged once trading commenced in New York at 7:45 p.m. EDT on Thursday evening, which was 7:45 a.m. CST on their Friday morning. It crept a bit higher until 2 p.m. CST — and has dropped a few basis points since. And as of 7:45 a.m. BST in London/8:45 a.m. CEST in Zurich, the index is up 2 whole basis points.


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 promised, here is the Reader’s Digest version of what silver analyst Ted Butler feels might be in it…”I still think it’s likely that we’ll see additional managed money buying/commercial selling in silver in Friday’s COT report, but not as much as existed had the report been cutoff [last] Friday. I’m hoping for 5,000 contracts (and not much more than 10,000 contracts) of managed money buying and commercial selling in Friday’s silver report…[and] Even with the expected deterioration in silver, the market structure there would still have to be considered extremely bullish by historical standards.”  And in gold…”As for gold, since the selloff on Monday didn’t come close to penetrating any key moving averages to the downside and trading volume was on the light side, whatever deterioration that occurred through Friday likely remained intact. For numbers on gold for Friday’s report, I’d guess managed money buying and commercials selling of 20,000 to 30,000 net contracts…solidly in the neutral zone.”


And as I post today’s column on the website at 4:02 a.m. EDT, I note that gold was capped minutes after the London open — and is up $13.30 currently. Silver is now above $15 spot but, like gold, is obviously running into some resistance. It’s up 13 cents. And as the first hour of Zurich trading ends, platinum is up 2 dollars — and palladium by 5.

Gross gold volume is now way up there at around 104,000 contracts — and minus roll-over/switch volume, net HFT gold volume is about 95,500 contracts. Net HFT silver volume is also sky high at about 25,000 contracts…best estimate — and there’s 2,700 contracts worth of roll-over/switch volume in this precious metal. It’s certainly obvious that these rather impressive looking rallies, particularly in gold, are not going unopposed…as usual.

The dollar index dipped below the 97.00 mark around 8:10 a.m. in London trading — and it been chopping quietly sideways since — and as of 8:45 a.m. in London/9:45 a.m. in Zurich, the index is now down 5 basis points.

It certainly could be an interesting trading session in New York today…especially with the next FOMC meeting starting on Tuesday.

Enjoy your weekend — and I’ll see you here tomorrow.

Ed