Ted Butler: Stranger Than Fiction

28 June 2019 — Friday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price certainly didn’t do much on Thursday.  It was sold quietly lower in Far East trading until the London open — and then it inched higher until the COMEX open, where it was tapped lower — and traded briefly below $1,400 spot for a minute or so.  From that point it edged quietly higher until trading ended at 5:00 p.m. EDT in New York.

The high and low ticks aren’t really worth looking up.

Gold finished the day at $1,409.20 spot, up 60 cents from Wednesday’s close.  Net volume was very heavy once again at just over 318,500 contracts —  and there was 18,500 contracts worth of roll-over/switch volume in this precious metal.

The silver price was forced to follow an almost identical price to gold in Far East and London trading, although there were some variations during the COMEX trading session in New York.  It was certainly obvious, at least to me, that silver was kept from closing above unchanged on the day.

The high and low ticks aren’t worth looking up for silver, either.

Silver was closed at $15.225 spot, down 1.5 cents from Wednesday.  Net volume was pretty heavy at a bit under 77,500 contracts — and there was just under 22,000 contracts worth of roll-over/switch volume out of July and into future months.

Platinum was down four bucks by shortly after 10 a.m. China Standard Time on their Thursday morning — and then didn’t do much until about 12:30 p.m. CEST in Zurich.  It ticked higher from that juncture — and was up a dollar by the COMEX open. It was sold lower from there — and the low tick was set at noon in New York.  It jumped up 5 dollars by 1 p.m. EDT — and didn’t do much of anything after that.  Platinum was closed at $812 spot, down 2 dollars on the day.

Palladium was up 8 bucks by 11 a.m. CST on their Thursday morning, but was down 3 dollars by the Zurich open.  From that point it chopped unevenly sideways a handful of dollars either side of the $1,500 spot mark until around 1 p.m. in Zurich trading.  Then away it went to the upside, with the high of the day coming at the COMEX close — and it ended up closing on its high of the day in the thinly-traded after-hours market.  Palladium finished the Thursday session at $1,532 spot, up 32 dollars from Wednesday.

The dollar index closed very late on Wednesday afternoon in New York at 96.21 — 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.  From that juncture it didn’t do much until 9:10 a.m. CST, when it began to head higher.  All the gains that mattered were in by 12:30 p.m. CST — and the index chopped quietly sideways until a few minutes before London opened — and it began to head lower from there.  The 96.14 low tick of the day was printed around 11:55 a.m. in London.  It edged unevenly higher until 9:55 a.m. in New York, but fell back to around the unchanged mark very shortly thereafter — and from that point, it chopped very quietly sideways until trading ended at 5:30 p.m. EDT.  The dollar index finished the Thursday session at  96.19…down 2 basis points from Wednesday’s close.

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

And here’s the 6-month U.S. dollar index chart, courtesy of the folks over at the stockcharts.com Internet site — and the delta between its close…95.74…and the close on the DXY chart above, was 45 basis points on Thursday.  Click to enlarge as well.

The gold stocks gapped down a bit at the open — and then hit their respective low ticks a minute or two before 11 a.m. in New York trading.  They chopped quietly higher from there, but couldn’t quite squeeze a positive close, as the day traders showed up in the last ten minutes with their sell orders.  The HUI closed down 0.32 percent.

The silver equities sold off in a similar manner at the New York open, but were down almost two percent at their lows, which also came a minute or so before 11 a.m. EDT.  They also chopped higher from there, but ran into a bout of selling around 11:30 a.m…which lasted for about forty-five minutes — and a positive close became “a bridge too far” at that point — and the day traders did the rest ten minutes before trading ended at 4:00 p.m.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down 0.66 percent.  Click to enlarge if necessary.

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

The CME Daily Delivery Report for Day 1 of July deliveries showed that 371 gold and 2,620 silver contracts were posted for delivery within the COMEX-approved depositories on Monday.

In gold, of the five in total, the largest short/issuer by far was JPMorgan, with 272 contracts — and in distant second place was Advantage with 40 — and ADM in third spot with 31.  All contracts involved their respective client accounts.  There were eight long/stoppers in total.  Marex Spectron was the largest with 101 contracts for its client account — and in second place was ABN Amro with 99 contracts for its client account.  Coming in third was JPMorgan, stopping 88 contracts for its in-house/proprietary trading account.

In silver, there were seven short/issuers in total — and the largest by far was JPMorgan, with 1,400 contracts out of its so-called ‘Client Account’.  In second, third and fourth place were International F.C. Stone with 480…ABN Amro with 360 — and ADM with 134 contracts…all from their respective client accounts as well.  There were thirteen long/stoppers in total — and head-and-shoulders above the rest was HSBC USA picking up 1,341 contracts for its own account.  JPMorgan stopped 439 contracts…Morgan Stanley 429…ABN Amro 145 — and Citigroup stopped 131 contracts.  All these were for their respective client accounts.

The link to yesterday’s Issuers and Stoppers Report is here — and it’s worth a look, if you have the interest.

The CME Preliminary Report for the Thursday trading session showed that gold open interest in July fell by 151 contracts, leaving 425 still around, minus the 371 contracts mentioned a few paragraphs ago.  Silver o.i. in July cratered by another 9,628 contracts, leaving just 3,873 left, minus the 2,620 mentioned a few paragraphs ago.

All of the remaining 119 gold contracts scheduled for June delivery, will be delivered today.


For the third day in a row there was a withdrawal from GLD.  This time an authorized participant took out 66,046 troy ounces.  And, for the first time in seven days, there was a deposit into SLV, as authorized participant added a very decent 2,574,902 troy ounces.  Ted figures that this ETF is owed considerably more physical silver than that.

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

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

It was another reasonably busy day in silver, as two truckloads…1,198,140 troy ounces…were reported received — and all of that ended up at CNT.  There was 542,228 troy ounces shipped out.  Of that amount, there was 540,228 troy ounces shipped out of HSBC USA — and the remaining 2,000 troy ounces departed Delaware.  The link to that activity is here.

There was a bit of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Wednesday.  They reported receiving 700 of them, but didn’t ship out any.  All of these gold kilobars ended up at Brink’s, Inc. as per usual — and the link to that, in troy ounces, is here.


Here are three more charts that Nick Laird passed around the other day.  They show European gold imports and exports, updated with April’s data. This first chart shows that they imported 96.3 tonnes — and exported 110.9 tonnes. Click to enlarge.

These next two charts show the countries and tonnages that were received by each country in the Euro Zone — and the second shows what countries exported gold — and the tonnage associated with eachClick to enlarge for both.

I only have a tiny handful of stories for you today.


CRITICAL READS

Albert Edwards: This Was the Final Recessionary Shoe, and it Has Now Fallen

Exactly three months ago, in late March, the 3 month-10 year spread inverted for the first time since 2007…an event which sparked near-panic in the market as historically curve inversion has preceded the last 7 recessions.

However, while the inversion was certainly a memorable event, the question on everyone’s lips is how do risk assets perform once the curve flattens and/or inverts. According to back-tests from Goldman, since the mid-1980s, significant stock draw-downs (i.e. market crashes) began only when term slope started steepening after being inverted.

In other words, as we noted then, “Curve Inversion Is Bad, But It’s The Steepening After That Kills.”

Fast forward to today, when in his latest bearish missive, SocGen’s permabear Albert Edwards picks up where we left off, and in a note titled “the final recession shoe has now fallen“, he notes that while inversion of the U.S. yield curve is seen as a reliable precursor to U.S. recessions, “it has a long and variable lead time“, and instead “a far more immediate and present danger of recession occurs when after inversion, a rapid steepening occurs.”

Sound familiar?

In any case, as we first commented in early 2019, Edwards notes that this subsequent steepening “usually informs investors the cycle is over and it is time to flee for the hills.”

Well, for those who haven’t figured out the punchline yet, rapid curve steepening is now occurring, and as Edwards gleefully concludes, this “suggests recession may indeed either be imminent or else it has already arrived.”

This worthwhile commentary was posted on the Zero Hedge website at 12:45 p.m. on Thursday afternoon EDT — and I thank Brad Robertson for this one.  Another link to it is here.  A parallel ZH story is headlined “Goldman Warns Risk of Market Crash is Highest Since the Financial Crisis, Nearing 60%” — and that’s from Brad as well. Then this ZH piece from last night…”Paul Singer Warns a 40% Market Crash is Coming


Inflation Has Distorted The U.S. Markets — Bill Bonner

Yesterday [Wednesday] once again, the Dow rose in the morning on news that a deal with China was 90% done – and fell later, as investors realized that they couldn’t believe anything that came out of Washington.

Meanwhile, the president of the United States of America says he’d rather have a European – an Italian, no less – as head of the Federal Reserve.

Powell? Draghi? In America as in Europe, Italian as in English, the phenomenon is the same. We say “inflation,” you say “inflazione.” What’s the difference?

But this is not your grandfather’s inflazione. This is inflation of asset prices, not consumer prices. And Mario Draghi is as good at it as Jay Powell is.

Every day seems to bring some new absurdity, each one more dizzying than the one before. We’re almost laughed out.

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


Doug Noland: History Rhymes

But extending the “Terminal Phase” has ensured a historic parabolic surge in systemic risk. Consumer (chiefly mortgage) borrowings have increased 17.2% over the past year (40% in two years!). Thousands of uneconomic businesses continue to pile on debt. Unprecedented over- and mal-investment runs unabated. Millions more apartments are constructed. The bloated Chinese banking system continues to inflate with loans of rapidly deteriorating quality.

Global risk markets have been conditioned for faith both in Beijing’s endless capacity to sustain the boom and global central bankers’ determination to sustain system liquidity and economic expansion. So long as Chinese Credit keeps flowing at double-digit rates, inflating perceived wealth ensures Chinese spending and finance continue to buoy vulnerable emerging market booms and the global economy more generally. Global risk markets remain more than content.

At this stage, however, global bonds have adopted an altogether different focus: China’s financial and economic structures are untenable. Sustaining rapid Credit growth is increasingly fraught with peril. With market players now questioning Beijing’s implicit guarantee for smaller and mid-sized banks and financial institutions, financial conditions are in the process of tightening at the financial system’s “periphery.” And tightened Credit conditions have begun to reverberate in the real economy.

And what about the possible impact of a positive G20 and momentum toward a U.S./China trade deal? Stocks, no surprise, are readily excitable. For global safe haven bonds, however, it’s of little consequence. How can this be? Because even a trade deal would at this point have minimal impact on what has become deep and rapidly worsening structural impairment. Trade deal or not, Chinese exports to the U.S. will decline, right along with capital investment. Even with a deal, the Chinese financial system faces the consequences of years of rapid expansion as economic prospects deteriorate. Sure, 6% growth as far as the eye can see. That implies a further surge in consumer debt and even more dangerous mortgage finance and apartment Bubbles. Unparalleled overcapacity and maladjustment.

I would closely follow unfolding developments in Chinese Credit – funding issues for small and mid-sized banks; ructions in the money markets; trust issues with repo collateral, inter-banking lending, and counterparties; vulnerabilities in local government financing vehicles (LGFV); heightened concerns for speculative leverage; and the overarching issue of the implicit Beijing guarantee of essentially the entire Chinese financial system. The overarching issue is one of prospective losses of monumental dimensions. These losses will have to be shared in the marketplace. As much as global markets bank on Beijing bankrolling China’s entire financial apparatus, the Chinese government will not welcome the prospect of bankrupting itself.

This week’s edition of Doug Noland’s weekly commentary is certainly a must read — an it appeared on his website very early on Saturday morning EDT — and another link to it is here.


Doug Casey on False Flags and Pretexts For the Next War

I’d go so far as to say that most wars are started with false flags in one way or another, where the real bad guy is disguised.

The people who run nation states are never of the highest moral character. In fact, when it comes to political leaders, the scum rise to the top. These people are necessarily Machiavellian and capable of anything; they have to be in order to claw their way to the top of the political snake pit. Even if a person is basically decent when he gets into politics, he’ll inevitably be corrupted by his environment—and the fact he’s expected to exert power and use force to preserve the interests of the State. You can expect mainly duplicity and sanctimony from them.

International Man: There have been many instances of false flag events that have changed the course of history—by leading to wars, military interventions, and political upheavals. What do you think are some of the most notable historical examples, like the Gulf of Tonkin for instance?

Doug Casey: That’s an excellent one. The Gulf of Tonkin was entirely fabricated by the Johnson administration, which was looking for an excuse to invade Vietnam.

This worthwhile commentary from Doug was posted on the internationalman.com Internet site on Thursday sometime — and another link to it is here.


Perth Mint Gold Bullion Sales in May Drop to 25-Month Low

Sales of Australian bullion products slowed in May, for a second month in a row, figures from The Perth Mint of Australia show.

The Mint’s silver sales registered at a three-month low while its gold sales logged in at the lowest level in 25 months.

Perth Mint sales of gold coins and gold bars reached 10,790 ounces last month, registering declines of 46% from April and 27.1% from May of last year. The monthly tally was the weakest since April 2017 when the Mint sold 10,490 ounces.

Year-to-date gold sales at 114,251 ounces are 7.5% lower than 123,491 ounces sold in the first five months of 2018.

May sales of the Mint’s silver coins and silver bars at 681,582 ounces dropped 24.8% from April but grew 22.3% from May 2018.

For the year so far, silver sales at 3,935,784 ounces register 2.9% lower than the 4,052,011 ounces sold during the same period last year.

This precious metal-related news item showed up on the coinnews.net website on Thursday sometime — and I plucked it from the Sharps Pixley website.  Another link to it is here.


Ted Butler: Stranger Than Fiction

Yesterday, the Department of Justice and the Commodity Futures Trading Commission announced yet another settlement, both criminal and civil, for “spoofing” and market manipulation in COMEX precious metals, this time against Merrill Lynch, a unit of Bank of America. The infractions occurred hundreds of times starting at least in 2008 and continuing through 2014. While Merrill Lynch and Bank America settled criminal charges via a deferred prosecution agreement and a $25 million fine, separate criminal charges are pending against a number of former individual traders.

Considering that a straight criminal charge and/or conviction could easily have resulted in, effectively, putting Merrill Lynch out of business (many cities, states and government entities are forbidden from doing business with convicted felons), Merrill and BAC got off easy. For the umpteenth time, price manipulation is the most serious market crime possible and Merrill just dodged a bullet that could have been fatal.

Not so lucky, of course, were the many victims of Merrill Lynch’s criminal activities who are unlikely to collect a penny for the long-running gold and silver price manipulation. Apparently, this is what comes of high-level corporate crime in the U.S. – a wrist slap of a fine, a dubious trophy on some prosecutor’s mantle and an avoidance of the real issues.

What makes this all stranger than fiction is that the settlement covers nearly the exact time period that the CFTC (with DOJ involvement according to the late Bart Chilton) was involved in a formal five year investigation into a COMEX silver investigation which ended in 2013 with no findings of wrongdoing. Neither the CFTC nor the Justice Department could find anything wrong with silver (or gold) back then, but now each can recite chapter and verse about all the wrongdoing that took place at that time. What are the odds that the CFTC could have been inundated with more allegations of a silver manipulation than any other complaint in its history and for it to conclude repeatedly those allegations had no substance, only to come back years later saying plenty was wrong? Thanks for nothing.

This commentary from Ted put in an appearance on the silverseek.com Internet site at 8:53 a.m. MDT on Thursday morning — and it’s definitely worth reading.  Another link to it is here.


The PHOTOS and the FUNNIES

Continuing on our back-road trip from Merritt to Princeton on May 5, we came across this valley, complete with a creek — and the right-of-way for the long-defunct Kettle Valley Railway.  You can see it running across the center of the first photo.  The timber bridge over the road in the gap, was taken down years ago, but people still drive that route anyway — and it’s only for the bravest of souls.  The second photo is from the rail-bed itself…looking north.  And while on top, I came across this one tiny violet…smaller than a dime, sticking out amongst the pebbles.  A quick addition of an extension tube made short work of this macro shot.  Depth-of-field…in millimeters — and fractions thereof…is at a premium at these close quarters.  Click to enlarge.


The WRAP

It was really a ‘nothing’ day from a precious metal price standpoint…with the obvious and glaring exception of palladium.  Everything else appeared to on ‘care and maintenance’…so there’s not much to see, or to say.

Here are the 6-month charts for all four precious metals, plus copper and WTIC.  Click to enlarge.

And as I type this paragraph, the London open is less than a minute away — and I see that the the gold price began to head sharply higher staring about an hour after trading began at 6:00 p.m. EDT in New York on Thursday evening.  The price was capped and driven lower by ‘da boyz’ starting shortly before 10 a.m. China Standard Time on their Friday morning.  It was kicked downstairs some more going into the London open — and gold is now up only $2.10 the ounce.  Silver was up about 9 cents by minutes before 10 a.m. CST, but once JPMorgan et al were through with it, it’s now down a penny on the day.  It was about the same for platinum and palladium in the early going, but neither was hit as hard in afternoon trading in the Far East — and the former is up 3 bucks currently — and the latter by 11 as Zurich opens.

Net HFT gold volume is way up there at a bit over 100,000 contracts — and there’s 3,214 contracts worth of roll-over/switch volume on top of that.  Net HFT silver volume is around 14,000 contracts — and roll-over/switch volume is only 445 contracts.  Most of this net volume is in the new front month for silver, which is September.

The dollar index opened unchanged once trading commenced at 7:45 p.m. EDT in New York on Thursday evening, which was 7:45 a.m. CST on their Friday morning.  It dipped to its current low tick…such as it was…at 8:30 a.m. CST — and then crept quietly higher until 1:40 p.m. in Shanghai.  At that juncture it was sold sharply lower at that point, which was the same moment that gold and silver prices were hit in the Far East.  And as of 7:45 a.m. BST in London, the index is down 4 basis points.


Today, around 3:30 p.m. EDT we get the latest and greatest Commitment of Traders Report, for positions held at the close of COMEX trading on Tuesday — and I’m already bracing myself.

In his mid-week commentary on Wednesday, silver analyst Ted Butler had this to say about it: “As far as what to expect in Friday’s COT report, I’m going to stick with my previous guesses of 50,000 net contracts in gold — and 15,000 net contracts in silver for managed money buying and commercial selling, although higher numbers in gold wouldn’t surprise me. My main concern is what JPMorgan may have done.”

I had a subscriber ask for a copy of the companies that I hold shares in yesterday, so I passed it along.  Then it suddenly occurred to me that I hadn’t posted it in this column for a while, so here it is again.


And as I post today’s column on the website at 4:02 a.m. EDT, I note that the gold price has crept a bit higher during the first hour of London trading — and is up $3.30 an ounce. Silver is now up a penny. Platinum is up 2 dollars, but ‘da boyz’ smoked palladium…from up 11 dollars at the Zurich open…it’s now down 12 bucks as the first hour of Zurich trading ends.

Gross gold volume is around 127,500 contracts — and minus what little roll-over/switch volume there is, net HFT gold volume is a bit over 119,000 contracts. Net HFT silver volume is about 16,300 contracts — and there’s only 684 contracts worth of roll-over/switch volume on top of that.

The dollar index continues to head lower — and as of 8:45 a.m. in London/9:45 a.m. in Zurich, the index is now down 12 basis points.

That’s it for today — and I hope you have a good weekend.  For all my Canadian subscribers, I hope you have a safe and happy ‘Canada Day’ long weekend.

I’ll see you here tomorrow.

Ed