Yet Another Monster Volume Day in COMEX Gold Futures

27 June 2019 — Thursday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


‘Da boyz’ were all over the gold price the moment that trading commenced at 6:00 p.m. EDT in New York on Tuesday evening — and the low tick was set at noon in Shanghai on their Wednesday.  From there it traded unevenly sideways until the 10 a.m. EDT afternoon gold fix in London was done for the day — and from that juncture it rallied until 1 p.m. before it was quietly sold lower until trading ended at 5:00 p.m. in New York.

The high and low ticks were reported as $1,427.90 and $1,405.00 in the August contract.

Gold was closed in New York on Wednesday at $1,408.60 spot, down $14.40 from Tuesday.  Net volume was sky high once more at a bit over 404,500 contracts — and there was a bit under 18,500 contracts worth of roll-over/switch volume in this precious metal.

It was the same general price path for silver, at least up until about 9:40 a.m. in London.  After that, the price wasn’t allowed to do much.  But if you check the chart, you can see that the price pattern in silver in COMEX trading in New York was the same as gold’s from the afternoon gold fix onwards, although far more muted.

The high and low ticks were recorded by the CME Group as $15.355 and $15.16 in the July contract.

Silver was closed yesterday at $15.24 spot, down 9 cents from Tuesday.  Net volume was minuscule at just over 10,500 contracts but, for the second day in a row, roll-over/switch volume was enormous at just over 83,000 contracts, as all the large traders that weren’t standing for delivery in July, had to roll or sell their positions before the COMEX close yesterday.

Like silver and gold, the platinum price was sold quietly lower until noon in Shanghai on their Wednesday — and then it chopped sideways until the afternoon gold fix in London.  It took off rather abruptly from there, but ran into ‘something’ at the $818 spot mark shortly before noon in New York.  Then, like silver and gold, it was sold a bit lower until around 3 p.m. in the thinly-traded after-hours market — and didn’t do anything after that.  Platinum was closed at $814 spot, up 6 bucks on the day, but would have obviously closed considerably higher, if allowed.

Palladium was down nine dollars by the Zurich open on their Wednesday morning — and from that point began to chop quietly higher until about noon in New York.  From there, it crawled a bit lower until about 2:30 p.m. in after-hours trading — and at that juncture, really got kicked downstairs — and finished the day at $1,500 spot, down 10 dollars from Tuesday’s close.

The dollar index closed very late on Tuesday afternoon in New York at 94.14 — and opened up 4 basis points once trading began at 7:45 p.m. EDT, which was 7:45 a.m. China Standard Time on their Wednesday morning.  It was up 15 basis points or so by around 10:15 a.m. CST — and then proceeded to chop quietly sideways until 9:40 a.m. in New York.  Then down it went…with the 96.07 low tick coming at  11:50 a.m. EDT when the usual ‘gentle hands’ appeared.  The subsequent ‘rally’ flamed out a few minutes before 4:30 p.m. EDT — and it sank quietly and slowly until trading ended at 5:30 p.m.  The dollar index finished the Wednesday session at 96.21…up 7 basis points from Tuesday’s close.

Here’s the DXY chart for Wednesday, courtesy of BloombergClick to enlarge.

And here’s the 6-month U.S. dollar index chart, courtesy of the good folks over at the stockcharts.com Internet site.  The delta between its close…95.73…and the close on the DXY chart above, was 48 basis points on Wednesday.  Click to enlarge as well.

The gold stock got sold off by more than two percent at the 9:30 a.m. open of the equity markets in New York yesterday morning, but rallied smartly from there.  Their respective high ticks came at around 1 p.m. EDT — and after selling off to just above unchanged on the day twenty minutes later, they chopped unevenly sideways until trading ended at 4:00 p.m. EDT.  The HUI closed higher by 0.32 percent.

The silver equities traded in a very similar manner, except that after their 1 p.m. EDT highs, their sell-off took them below unchanged by a fair amount by shortly before 3 p.m. — and they couldn’t quite squeeze a positive close in the ensuing rally that followed.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down 0.22 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 showed that 119 gold and zero silver contracts were posted for delivery within the COMEX-approved depositories on Friday.

In gold, the two short/issuers were HSBC USA with 109 contracts out of its in-house/proprietary trading account — and the other 10 came out of ADM’s client account.  The three long/stoppers were the CME Group, with 97 contracts for its own account — and in second and third spots were Morgan Stanley and ADM, with 15 and 7 contracts for their respective client accounts.

The 97 gold contracts stopped by the CME Group were immediately reissued as 97×10=970 ten-ounce COMEX mini gold contracts.  ADM stopped 585 of them, Advantage picked up 371 — and International F.C. Stone the remaining 14.  All were for their respective client accounts.

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 27 contracts, leaving 119 still open, minus the 119 mentioned a few paragraphs ago that will be delivered on Friday.  Tuesday’s Daily Delivery Report showed that 36 gold contracts were posted for delivery today, so that means that 36-27=9 more gold contracts were added to the June delivery month.  Silver o.i. in June shows zero, as the remaining 4 silver contracts were delivered on Monday.

July open interest in gold fell by 394 contracts, leaving 576 contracts still around.  July open interest in silver crashed by 16,930 contracts, leaving 14,897 contracts still open.  The July open interest in both gold and silver will take another big hit again today, especially silver o.i…as the remainder of the traders holding July futures contracts exit those positions by the close of COMEX trading at 1:30 p.m. EDT.


For the second day in a row there was a withdrawal from GLD, as an authorized participant took out 56,611 troy ounces.  There were no reported changes in SLV.

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

The only activity in gold over at the COMEX-approved depositories on Tuesday was 1,207 troy ounces that was shipped out of Canada’s Scotiabank.  There was also a smallish transfer of 1,783 troy ounces from the Registered category — and into Eligible over at Delaware.  I shan’t bother linking this.

And, for a change, there was no activity whatsoever in silver.  That’s a very rare occurrence.

There was also no in/out movement over at the COMEX-approved gold kilobar depositories in Hong Kong on their Tuesday.


Here’s an interesting chart that Nick Laird passed around a few days ago, that I didn’t have room for until now.  It’s entitled “Gold Cycles” — and you can read into it whatever you wish.  Click to enlarge.

I don’t have all that many stories for you again today.


CRITICAL READS

U.S. Durable Goods Orders Plunge Most in 3 Years

With manufacturing signals across the globe collapsing, expectations were for a modest drop in U.S. Durable Goods Orders in May, however, the 1.3% MoM drop was far larger than expected and not helped by a notable downward revision in April.

Worst still, on a YoY basis, durable goods orders plunged 3.3% – the most since July 2016’s post-Brexit panic.  Click to enlarge.

And a proxy for business investment – non-military capital goods orders excluding aircraft – rose 0.4% after a 1% decline in the prior month.

Under the hood there was some silver linings to cling to with Capital Goods Shipments (ex-Air) rising 0.7% MoM (well above the 0.1% expected rise).

As Bloomberg notes, the pickup in equipment orders may ease concerns that unpredictable trade policy is weighing on manufacturers and complicating business investment. Stronger demand would offer more of a tailwind to second-quarter economic growth after a downbeat April figure.

But in this brave new world, bad news is better than good to keep that 50bps bogey on the table.

This Zero Hedge story appeared on their website at 8:37 a.m. EDT on Wednesday morning — and I thank Brad Robertson for that one.  Another link to it is here.


The Federal Reserve Will Inflate the Economy Further — Bill Bonner

Instead of revisiting the peak, yesterday, the Dow took a few steps back down the mountain. What happens next is anybody’s guess.

But the picture we’ve been sketching out is a doozy. It shows that no matter what the Dow does… no matter what the headlines or the pollsters tell us… the deeper cycle is on a downward slope. It has been since 1999.

And it will probably continue until it finally reaches its rendezvous with destiny. That’s when fear reigns supreme… and hope, optimism, and faith in the future have been crushed down to historic lows.

We’ll know when that moment comes by watching our Greed/Fear gauge, which measures the relationship between stock prices and gold. People invest in stocks when they think everything is hunky dory (greed). They go for gold when they worry that things aren’t so hunky or so dory (fear).
When the Greed/Fear gauge goes below five (when you can buy all the Dow stocks for less than five ounces of gold)… the point of maximum anxiety – Peak Fear – will be at hand.

Then, you’ll be able to buy almost any stock you want for only about a quarter (we’re talking in real money terms… measured in gold) of what you would pay now.

Houses, too, should be only about half what they cost today. And bonds? Don’t be surprised to find that most of them will be worthless by then.

That’s what inflation does to bonds. It wreaks havoc.

This interesting commentary from Bill, filed from Portlaw in Ireland, put in an appearance on the bonnerandpartners.com Internet site early on Wednesday morning EDT — and another link to it is here.


Monstrous” VaR Shock Looms as Global Bond Duration Hits All-Time High

Earlier today, Austria priced only its second 100-year bond in history at a shocking yield of just over 1.00%, prompting financial commentators to ask “what fresh madness is this.” Alas, it’s no madness, and is in fact perfectly rational behavior by investors in a world where central banks have pushed $13 trillion in debt to negative yields, forcing investors to buy anything that still yields above zero (or zero, as is the case of gold and cryptos).

Alas, this forced herding of investors into the clutches of debt at any cost will end up with catastrophic consequences – as Bloomberg cautions today, with investors scrambling to pick up any last trace of yield in response to idiotic easy-money policies, a trillion-dollar monster is forming in the bond market, “the likes of which has never been seen in decades of history.

The reason: so much debt has been sold at low yields that even a modest bump in yields near record lows “could inflict a world of pain for traders the world over.”

The technical terms for all this, of course, is “duration” – the measure of sensitivity to interest-rate changes — and specifically duration which is now at never before seen highs for sovereign debt.  Click to enlarge.

This means that even the smallest inflationary or growth impulse – like a favorable outcome from Saturday’s G-20 meeting – could send long-end yields surging, resulting in the mother of all VaR shocks, as banks take record mark-to-market losses on their portfolios.

This longish chart-filled Zero Hedge article appeared on their Internet site at 2:05 p.m. on Wednesday afternoon EDT — and another link to it is here.


Inflation Chickens Will Come Home to Roost – Peter Schiff

Money manager Peter Schiff says all the money printing and debt explosion since the Great Recession comes with a huge downside. Schiff says, “All sorts of bad policies basically took place thanks to the monetary excesses applied by the world central banks, but now we are at a point where all these inflation chickens are going to come home to roost. It will not be in stock prices or real estate prices or bond prices, but in good old fashion consumer prices. Food, energy and all the things that we need to live are going to get a lot more expensive.”

Schiff says the Fed is overlooking some big problems coming. Schiff says, “They (Fed) did not stress an environment where we have more inflation or where we have stagflation, where we not only have a rise in unemployment and a recession, but consumer prices and long term interest rates that go up at the same time. They (Fed) are not even thinking that’s possible, but that’s actually probable. The real problem is when real inflation rears its head, there is nothing the central bankers can do about it. If they try to fight the inflation by tightening up on monetary policy, it’s like slamming on the brakes. They are going to have to jack interest rates very high, and everything is going to start imploding. The whole credit bubble is going to collapse. We are going to see stock markets tumble. Bonds are going to go into default. There will be bankruptcies, layoffs, bank failures and the governments will have to start defaulting on their obligations and payments on social programs, or even interest on principal. You have a massive crisis coming if the Fed fights inflation, but you have an even worse crisis if they don’t. I am betting on this initially. As inflation gets worse and worse, the central bankers are going to say it is a good thing.”

Schiff predicts, “Inflation is going to run out of control…This is why people need to buy gold. Paper currencies are going to lose a tremendous amount of value. So, if you want to preserve your purchasing power of your savings, you better be saving real money and not all this funny money the central banks create….Once the market perceives that there is no light at the end of the tunnel, that we are never going back to normal, that interest rates are going to stay negative in real terms forever, that the Fed has no ability to raise rates, that all the new money that has been created will never be destroyed, that the Fed balance sheet will grow in perpetuity so liquidity will never be removed, then the dollar will fall through the floor. Then we are going to get all that inflation.”

This 35-minute video interview with host Greg Hunter, showed up on the usawatchdog.com Internet site on Wednesday sometime — and I thank Brad Robertson for sending it our way.  I listened to the whole thing — and Peter really gets wound up in the last half of the interview.  Another link to it is here.


A Deafening Stupidity — Andrei Martyanov

So, John Bolton concludes today that:

Jerusalem (AFP) – U.S. National Security Advisor John Bolton on Tuesday described as “deafening” Iran’s apparent silence on an offer to negotiate with Washington. “The president has held the door open to real negotiations,” Bolton told journalists in Jerusalem. “In response, Iran’s silence has been deafening,” he added. Bolton is in Jerusalem for what Israel described as unprecedented talks with his Russian and Israeli counterparts, along with meeting Prime Minister Benjamin Netanyahu. Speaking alongside the U.S. advisor, Netanyahu said there was “a wider basis for cooperation between the three of us than many believe.” Bolton’s comments come a day after the United States imposed sanctions on top officials of Israel’s arch foe Iran.

Alrighty then! Iran doesn’t want to talk. And why should she? Make no mistake, I am no fan of Ayatollah’s rule in Iran nor am I an automatic Iran’s supporter merely on the merit that Iran is in direct and stiff opposition to a bunch of Israeli stooges in Trump’s Administration. Iran has her own issues and, in general, there is nothing black and white about that nation. Current United States, however, can easily be defined in a very contrast black and white manner: there are people who serve Israel, Saudi Arabia and other Gulfies, and there are people who do not. The former, not the latter, are in power and because of that there is no point of talking to them. These are precisely people who helped to form a correct, I might add, global opinion that the United States is not agreement-capable side, so, why waste time? Especially negotiating anything with such lunatics as Bolton, Pompeo or, in the end, Trump himself.

This worthwhile commentary from Andrei was posted on his website on Tuesday sometime — and I thank Larry Galearis for bringing it to our attention.  Another link to it is here.


Gold Mine With $100 Billion Lode to Get Lifeline From Trump EPA

The Trump administration is throwing a lifeline to the massive Pebble Mine planned near Alaska’s Bristol Bay, as regulators move toward undoing Obama-era environmental restrictions that have thwarted the project.

The Environmental Protection Agency on Wednesday said it was resuming consideration of the proposed water pollution restrictions that have effectively stalled the project since they were outlined in 2014. Reconsidering the issue — after a year-and-a-half hiatus — is a necessary prelude to the EPA officially lifting the restrictions later.

The EPA’s action is a significant boost for Northern Dynasty Minerals Ltd. and Pebble LP supporters, who have called on the EPA to lift the Clean Water Act restrictions and let the proposed gold, copper and molybdenum mine move forward.

Developers have touted the mine’s potential, saying it aims to tap “the most significant undeveloped copper and gold resource in the world,” with 6.5 billion tons of known minerals and another 4.5 billion tons of assumed minerals. The bounty of gold alone is estimated to be worth more than $100 billion.

This Bloomberg story showed up on their Internet site at 9:00 a.m. PDT on Wednesday morning — and I found it on the gata.org Internet site.  Another link to it is here.


ECB gives cautious green light to League’s bill on Bank of Italy gold reserves

The European Central Bank on Tuesday gave a substantial green light to a bill by Italy’s ruling League party which seeks to spell out that gold reserves held by the Bank of Italy belong to the state, and not the bank itself.

The bill, tabled in February by the League’s economics chief Claudio Borghi, was strongly criticized by the opposition who said its aim was to allow the ruling coalition to potentially sell the gold to fix Italy’s public finance problems.

Borghi denied this, saying he wanted to clarify the legal ownership of the gold, establish a question of principle and bring Italy’s situation in line with those of other E.U. states.

In an official opinion published on the ECB’s website, the bank said E.U. treaties do not use the concept of ownership with regard to official gold reserves, but only deal with the question of their “exclusive holding and management”.

The opinion, signed by President Mario Draghi, asked the government to consult with the Bank of Italy if it planned to push ahead with the legislation, in order that the central bank’s independence be “fully respected”.

The above five paragraphs are all there is to this brief Reuters story that was filed from Rome late on Tuesday morning EDT.  I found it on the Sharps Pixley website — and another link to it is here.


The Real Reason the Deep State Hates Russia…and What it Means for Gold

For years, the Deep State in the U.S.—the permanently entrenched bureaucracy that runs the show no matter which party is in power—has labelled Russia “public enemy number one.”

To help us better understand the situation we’re turning to Doug Casey’s friend, Mark Gould.
Mark is an executive for a company in the oil industry, also working on several media projects. He also has 30 years of experience in Russian telecommunications as co-founder of CTC Media; and afterwards pioneering digital compression for TV (the core technology for video streaming) on the Soviet Satellite system, Moscow Global. Mark currently lives in Moscow.

International Man: Naturally, Americans have a lot of misconceptions about Russia. And that’s what we want to help clear up today. The importance of Russia to world affairs is simply too important to ignore or to not understand properly.

Also, this perception gap about Russia could be key to finding interesting investment opportunities—particularly in the natural resources space—that are off the radar of the mainstream financial media.

John McCain used to call Russia a gas station masquerading as a country. This is a childish and overly simplistic characterization. Others in the U.S. media and government have made similar comments. What does the mainstream image of Russia get wrong?

This very worthwhile interview was posted on the internationalman.com Internet site on Wednesday sometime — and another link to it is here.


The PHOTOS and the FUNNIES

About five minutes after I took those killdeer photos that appeared in yesterday’s column, we came across this male ruffed grouse strutting his stuff for a female that was semi-hidden in the grass/brush just out of frame.  I still had the 400mm lens on the camera — and he was so close that I barely had to crop either one of these shots.  My vehicle makes a wonderful blind, as I wouldn’t have got anywhere near it, if I’d been on foot.  Click to enlarge.


The WRAP

Yesterday’s price action certainly took some steam out of the current rally in gold — and in silver as well…such as it was.  It remains to be seen where prices are headed from here.  Certainly up as the year progresses, but in the short term now, it’s hard to say.  However, the bearish flags are flying for gold now.

The next FOMC meeting is a bit over a month away — and the consensus on Wall Street is that the Fed will cut interest rates by 50 basis points at that meeting.  The continuing decline in economic activity in the U.S…plus interest rates abroad…certainly indicates that this is what the Fed will do.  But I suspect that they’ll keep the markets guessing right up until the big announcement on Wednesday, July 31.  So, in the interim, what happens in the precious metals world until then, is a big unknown — and I’m certainly not about to speculate.

Here are the 6-month charts for the four precious metals, plus copper and WTIC.  Despite yesterday’s price decline, gold continue to remain in hugely overbought territory — and silver is not even close yet.  Palladium is overbought as well, as the Managed Money traders are stuffed to the gills on the long side…just as they are in gold.  Copper traded above its 50-day moving average intraday yesterday, as the Managed Money traders are still short more than 1.2 billion pounds of the stuff — and are beginning to cover — and that’s why the price is rising.  The big spike up in WTIC on Wednesday had more to do with Managed Money short covering than anything that happened in the supply/demand arena…which is something that Ted points out continually in his weekly reviews.  Click to enlarge.

And as I type this paragraph, the London/Zurich opens are less than a minute away — and I see that the gold price has been chopping quietly lower almost since trading began at 6:00 p.m. EDT in New York on Wednesday evening. But the sell-off grew more pronounced once that 2:15 p.m. CST afternoon gold fix was done in Shanghai — and gold is currently down $7.10 an ounce. It was the same for silver — and it’s down 9 cents. Ditto for platinum — and it’s lower by 4 bucks. Palladium was up 8 dollars by shortly before 11 a.m. China Standard Time on their Thursday morning, but that gain has vanished, plus more — and palladium is now down 3 bucks as Zurich opens.

Net HFT gold volume is something over 80,500 contracts — and there’s only 1,847 contracts worth of roll-over/switch volume on top of that. The volume numbers in silver, both net and gross were totally unbelievable, so I didn’t use them.

The dollar index opened down 4 basis points once trading commenced 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 has been crawling unevenly higher since — and is off its current 1:20 p.m. CST high tick by a hair — and up 15 as of 7:45 a.m. BST in London/8:45 a.m. CEST in Zurich.


The remainder of the futures contract holders in July silver that aren’t standing for delivery next month, have to roll or sell those positions by the close of COMEX trading today.  Then, around 10 p.m. EST this evening, the First Day Notice figures for delivery in July silver will be posted on the CME’s website.  I know that Ted will be looking to see how much JPMorgan is involved in that delivery month, as will I.  But whatever the numbers are, I’ll have them for you in my Friday missive.


And as I post today’s column on the website at 4:07 a.m. EDT, I note that the gold price touched the $1,400 spot mark at the London open — and has bounced a bit — and is now down $6.30 the ounce. Silver also hit its current low at the London open — and it’s down 5 cents at the moment. Platinum hasn’t done much since the Zurich open — and it’s down 3 bucks. But palladium has struggled higher by a bit — and is up 2 dollars as the first hour of Zurich trading ends.

Gross gold volume is way up there once again at just over 103,000 contracts — and minus what little roll-over/switch volume there is, net HFT gold volume is just over 99,000 contracts. Net HFT silver volume [which is now back to something believable] is coming up on 16,000 contracts, most of which is in the new front month for silver which is September — and roll-over/switch volume out of July and into future months is a bit over 5,000 contracts.

The dollar index began to head lower a very few minutes before the London/Zurich opens — and it’s only up 3 basis points currently.

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

Ed