Yet Another Morning Rally in Far East Trading Capped & Sold Lower

04 July 2019 — Thursday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price took off higher the moment that trading began at 6:00 p.m.  EDT on Tuesday evening in New York, but was capped and turned lower immediately.  It began to rally anew an hour later — and JPMorgan et al showed up with the coup de grâce at 9 a.m. China Standard Time on their Wednesday morning.  The price then drifted more or less quietly sideways until the noon silver fix in London — and it was sold down to its low of the day at the 10 a.m. EDT afternoon gold fix.  It jumped back to the unchanged mark shortly thereafter — and didn’t do much for the remainder of the New York trading session.

The high and low ticks were reported as $1,441.00 and $1,414.70 in the August contract.

Gold was closed on Wednesday at $1,418.20 spot, up one thin dime from Tuesday.  Much to my surprise, net volume was absolutely enormous at just under 393,000 contracts — and there was a bit over 26,500 contracts worth of roll-over/switch volume out of August and into future months.

For the most part, the price action in silver was almost the same as it was for gold.  The only notable difference was the fact that after the noon silver fix in London, its low tick of the day came shortly before 1 p.m. BST/8 a.m. EDT.  From there it rallied a bit until the equity markets opened in New York — and then didn’t do much of anything after that.

The high and low ticks in this precious metal were recorded by the CME Group as $15.41 and $15.24 in the September contract.

Silver was closed in New York yesterday at $15.275 spot, down half a cent from Tuesday.  Net volume was very decent at a bit over 62,000 contracts — and roll-over/switch volume was 4,900 contracts on top of that.

Platinum rallied about four dollars or so in sympathy with what was going on in silver and gold…and like them, was capped and turned lower at 9 a.m. CST on their Wednesday morning.  It was back at the unchanged mark by the Zurich open.  It had a four dollar up/down move from there until shortly after 8 a.m. in New York — and then a rally of some substance commenced.  That came to an end at the Zurich close — and an hour later it was sold down a bit into the 1:30 p.m. COMEX close in New York.  From there it traded flat until trading ended at 5:00 p.m. EDT.  Platinum finished the Wednesday session at $839 spot, up 9 bucks from Tuesday.

The palladium price traded very unevenly sideways in all of Far East and most of Zurich trading on their respective Wednesday’s.  Then shortly after 9:30 a.m. in New York, it began to head higher — and all of the gains that mattered were in by shortly before 1 p.m. EDT — and it traded flat into the 5:00 p.m. close from there.  Palladium finished the day at $1,555 spot, up another 11 dollars from Tuesday’s close.

The dollar index closed very late on Tuesday afternoon in New York at 96.73 — and opened unchanged once trading commenced at 7:45 p.m. EDT on Tuesday evening.  It sank a small handful of basis points until precisely 9 a.m. China Standard Time on their Wednesday morning, which was the exact moment that ‘da boyz’ stepped on the precious metals in Far East trading.  Coincidence you ask?  Not bloody likely.  From that juncture it chopped very quietly and unevenly higher until the 96.87 high tick was set at 8:15 a.m. in London.  It headed fitfully lower from there — and the 96.59 low tick was printed at 10:25 a.m. in New York.  It then jumped back a few basis points above unchanged by the 11 a.m. EDT London close — and edged unevenly sideways from that point until trading ended at 5:30 p.m. EDT.  The dollar index closed on Wednesday afternoon in New York at 96.77…up 4 whole basis points from Tuesday.

It was another day where the changes in the currencies were so small, that they were no influence on precious metal prices…with the glaring exception of the ‘gentle hands’ rally that began at 9:00 a.m. in Shanghai when the rallies in gold and silver were capped and turned lower.

Here’s the DXY chart from Bloomberg once again.  Click 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…96.33…and the close on the DXY chart above, was 44 basis points on Wednesday.  Click to enlarge as well.

There was problem with the HUI feed yesterday morning from whatever exchange provides this data — and it didn’t become active until a few minutes after 12 o’clock noon in New York.  Everything before that time is missing.  But I get the impression that after opening higher, they sold off a bit in early morning trading — and then crept back into positive territory as the gold price edged higher.  The HUI finished up 0.58 percent at 1:00 p.m. EDT when the U.S. equity markets closed for the day.

There was no such issues with the Silver Sentiment Index, as Nick gets that data from elsewhere.  They rose a bit in the first few minutes of New York trading on Wednesday morning — and then sold off to their respective lows by around 10:40 a.m. EDT.  They chopped quietly higher from there, but never got a sniff of unchanged.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down 0.88 percent at the 1 p.m. EDT close.  Click to enlarge if necessary.

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

I would suspect that the Silver 7 chart above would be a good proxy for the missing data in the HUI yesterday, as the chart patterns would be mostly similar.  Except the latter finished up on the day, not down.


The CME Daily Delivery Report showed that 21 gold and 2 silver contracts were posted for delivery within the COMEX-approved depositories on Monday.

In gold, the sole short/issuer was Advantage.  The two largest long/stoppers were Advantage with 11 contracts — and JPMorgan with 9.  All contracts, issued and stopped, involved their respective client accounts.

In silver, Advantage issued both contracts — and JPMorgan and HSBC USA picked up 1 each…the former for its client account — and the latter for its own account.

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

The CME Preliminary Report for the Wednesday trading session showed that gold open interest in July actually rose by 7 contracts, leaving 88 left, minus the 21 mentioned a few paragraphs ago.  Tuesday’s Daily Delivery Report showed that 18 gold contracts were actually posted for delivery on Friday, so that means that 18+8=26 more gold contracts were just added to the July delivery month.  Silver o.i. in July declined by 15 contracts, leaving 727 still around, minus the 2 silver contracts mentioned a few paragraphs ago.  Tuesday’s Daily Delivery Report showed that 21 gold contracts were actually posted for delivery on Friday, so that means that 21-15=6 more silver contracts just got added to July deliveries.


There were no reported changes in GLD on Wednesday, but there was another enormous deposit into SLV, as an authorized participant added 2,340,630 troy ounces.

In the last five business days, there has been 8,673,200 troy ounces of silver added to SLV.  But going back to May 30…there has been 16,875,718 troy ounces of silver added to SLV.  Ted had something to say about that in his weekly review on Saturday — and will undoubtedly have more to say on this issue in this Saturday’s review as well.

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

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

There was very little activity in silver, as only 16,945 troy ounces was received — and 15,725 troy ounces was shipped out.  All of that in/out activity was at Canada’s Scotiabank.  There was also a paper transfer of 45,807 troy ounces out of Registered — and back in to Eligible over at Brink’s, Inc.  The link to that is here.

There was a bit of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Tuesday.  They reported receiving 424 of them — and shipped out only 8.  All of this occurred at Brink’s, Inc. — and the link to that, in troy ounces, is here.


The Sedgeford Torc is a broken Iron Age gold torc found near the village of Sedgeford in Norfolk. The main part of the torc was found during harrowing of a field in 1965, and the missing terminal was found by Dr. Steve Hammond during fieldwork by the Sedgeford Historical and Archaeological Research Project in 2004. The torc is now displayed at the British Museum.

The torc dates from 200-50 B.C. and is made from twisted gold wires. Forty-eight 2mm wires were twisted in pairs to form 24 wires. Then three of these paired wires were twisted together in the opposite direction to make a rope (comprising six original wires). These eight thicker ropes were then twisted together to form the body of the torc. In total, 25 metres of gold wire was used to form the torc. The hollow gold terminals, in a ring shape, were cast using the lost wax method, and is decorated in the La Tène style with molded raised decoration of trumpet voids and circles, highlighted with pellets and cold hammering.

The torc was buried deliberately, and as such is considered a hoarded object. It may have been broken when it was buried, or broken at a later date by ploughing. It is thought to have been buried in about 75 B.C.  Click to enlarge.

For the second day in a row, I have very few stories/articles for you once again.


CRITICAL READS

U.S. Factory Orders Contract in May, Lowest Since Aug 2016

U.S. Factory Orders fell for the second month in a row (and down 3 of the last 4), down 0.7% MoM in May, following April’s 1.2% decline (revised lower).

However, more notably, factory orders year-over-year growth has contracted (by 1.2%) for the first time since August 2016…Click to enlarge.

The biggest driver of the drop was a plunge in defense spending and non-defense aircraft spending (Boeing!)

Get back to work, Mr.Powell.

This brief 2-chart article appeared on the Zero Hedge website at 10:11 a.m. EDT on Wednesday morning — and I thank Brad Robertson for this one.  Another link to it is here.  A companion piece to this from the ZH website is headlined “U.S. Composite PMI Hovers Near 3-Year Lows: Manufacturing Slowdown Spreads To Services” — and that comes courtesy of Brad as well.


Trump Says U.S. Should Join “Great Currency Manipulation Game” by Devaluing Dollar

President Trump has never been a fan of the strong dollar. And after beating around the bush for months by demanding a 50 bp rate cut and more QE from the Fed, it seems the president is now explicitly calling on the U.S. to artificially weaken the greenback by any means necessary.

In a tweet, Trump blasted China and Europe for playing a ‘big currency manipulation game‘ and recommended that the U.S. “MATCH” or risk being “the dummies who sit back and politely watch as other countries continue to play their games.”

Trump’s warning also comes less than two weeks after Bank of America warned that direct intervention to weaken the dollar would be possible by a few avenues, some directly involving Trump (jawboning), some involving the Treasury and the Fed (direct intervention by the NY Fed’s New York markets desk).

Whatever the administration decides, it’s becoming increasingly clear that the dollar is unsustainably overvalued compared with its long-term real effective exchange rate value. BofA’s analyst calculated that the dollar is 13% above its long-term average.

According to tradition, the dollar and its value have long been the exclusive purview of the Treasury Department. But Trump has never been one to unquestioningly adhere to precedent. And back in May, the Treasury Department declined to name any country to its list of currency manipulators, though it added some to a ‘watch list’.

Although the Fed and most central banks insist that they don’t explicitly target the exchange rate, most observers know this isn’t exactly true.

Nobody knows what the true free market value of anything is these days, including the currencies.  And, for the moment, those ‘gentle hands’ I speak of often, are there to prevent the U.S. dollar from falling too far or too fast.  This Zero Hedge article was posted on their website at 10:46 a.m. on Wednesday morning EDT — and I thank Brad Robertson for that one as well.  Another link to it is here.


Why Negative Interest Rates Don’t Stimulate the Economy — Bill Bonner

Inflation is what happens when new money is added to the system. And in today’s phony-baloney system, new money is created when people borrow. But sometimes, debtors resist – especially when they’re already drowning in it.

Here is Madame Lagarde explaining how to force their heads underwater; pay them to borrow more:

If we had not had those negative rates, we would be in a much worse place today, with inflation probably lower than where it is, with growth probably lower than where we have it. […] It was a good thing to actually implement those negative rates under the current circumstances.”

Lagarde is also on record as saying that negative interest rates “improve confidence and financial conditions in the euro area, which will further aid the recovery.”

Yes, it is a wacky world.

This rather brief but worthwhile commentary from Bill was posted on the bonnerandpartners.com Internet site early on Wednesday morning EDT — and another link to it is here.


June gold imports rise 12.6% YoY amid global price rally

India’s gold imports rose 12.6 per cent in June from a year earlier to $2.69 billion amid a jump in global prices to six-year highs, a government source said on Tuesday.

However, imports were 44 per cent lower in June from May’s $4.78 billion, the source said, who was not allowed to speak to the media.

In India, local prices jumped to a record high in June, moderating demand from retail consumers.

The drop in gold imports by India, the world’s second-biggest consumer of the precious metal, could weigh on global prices that are struggling to hold recent gains.

Of course as you already know, supply/demand fundamentals in both silver and gold mean nothing when their respective prices are controlled in the COMEX futures market by JPMorgan et al.  The above four paragraphs are all there is to this tiny article that appeared on the Economic Times of India‘s website at 2:56 p.m. IST on their Tuesday afternoon — and I found it on the Sharps Pixley website.  Another link to the hard copy is here.  By the way, these are “unofficial” import numbers, as the June numbers from the “official” sources, won’t be out until late August or early September.


Silver should be good to go — Lawrie Williams

The recent surge in the gold price has largely left silver behind, which is somewhat counter to the junior precious metal’s usual performance when its more costly sibling is on a sharp rising pattern.  As a result the gold:silver ratio – GSR — (effectively the number of ounces of silver needed to correspond price-wise to one ounce of gold) has been languishing badly and, as I write, is at around its highest level in some 25 years (a high level is bad for silver investors) at over 93. Indeed the silver price actually fell a little during amidst the stronger gold prices seen this morning, but we suspect it may play catch-up over the U.S.’s extra long holiday weekend.  Since last reaching such an elevated level, in the interim the GSR fell back to as low as 38 in 2011 when silver reached nearly $50 an ounce and gold was near $1,900.

Now just imagine what a gold:silver ratio of 38 would mean for the price of silver at today’s gold price of around $1,430 an ounce.  This level would put the silver price at no less than a little over $37.50 an ounce – way more than double the current silver price of just over $15.

Silver is more volatile in part because it is a much smaller market than gold and its futures market far more easily controlled by the big money.  Silver market specialist/analyst Ted Butler notes that the big bullion banks, led by JP Morgan Chase, hugely dominate the silver futures market and have built up huge silver metal positions in their own right.  When they see that the time is right to cash in on these positions, silver could really fly again!  Its probably a when, not if, situation and when it happens the GSR could come down hugely.  But the timing of such a move is totally unknown.  One suspects that if the gold price takes off further towards the $1,500 level, as a number of analysts are now predicting, then the bullion banks may start to lose their controlling suppressing  influence on the silver price and it could well move very strongly to the upside.  This year, next year, sometime?  Get the timing right and one could make a killing in silver!

This interesting commentary by Lawrie put in an appearance on the Sharps Pixley website on Wednesday sometime — and another link to it is here.


The PHOTOS and the FUNNIES

After shooting that mule deer sequence that appeared in yesterday’s column, we decided to do a quick tour of the three or four streets and avenues that make up the semi-ghost town of Coalmont.  In the process of doing that, we came across this Stellar’s Jay, which I had to chase down over a couple of blocks to finally get a shot of it located it in a suitable backdrop…as a power line and a pressure-treated fence post, weren’t the natural habitat photo that I had in mind.  Click to enlarge.


The WRAP

Wednesday’s price action was the third time in about the last ten days that large rallied occurred in morning trading in the Far East, or late evening trading in New York — and every time that happened, ‘da boyz’ showed up as short sellers of both first and last resort.  And there’s no way of knowing what the current price of silver and gold would be if they hadn’t.

Despite these rallies, JPMorgan et al appear, at least on the surface, to still have an iron grip on precious metal prices.  But as I’ve mentioned twice already this week…both gold and silver appear to be in play — and there’s no way to speculate on how this is all going to play out over the days and weeks ahead.  All we can do is sit on the sidelines — and watch the show.

Here are the 6-month charts for the Big 6 commodities — and the dojis for both gold and silver aren’t even close to reflecting what Wednesday’s closing prices were.  Both show decent gains, but that didn’t happen, at least not in their respective spot months.

Other than that, there’s no much to see in these charts.  Click to enlarge for all.

And as I type this paragraph, the London open is less than a minute away — and I note that the gold price traded quietly sideways until around 1:40 p.m. China Standard Time on their Wednesday afternoon. At that juncture, the selling pressure began — and as London opens, they have gold lower by $4.50 the ounce. The price path in silver was the same, along with the same 1:40 p.m. CST sell-off — and it’s down 6 cents currently. Ditto for platinum — and it’s down a dollar. The palladium price has been under patchy price pressure ever since trading began at 6:00 p.m. EDT in New York on Wednesday evening — and although off its current low by a decent amount already, it’s still down 8 bucks as Zurich opens.

Net HFT gold volume is already up to 49,500 contracts — and there’s 2,600 contracts worth of roll-over/switch volume out of August and into future months. Net HFT silver volume is around 6,100 contracts — and there’s only 295 contracts worth of roll-over/switch volume in that precious metal.

The dollar index opened down 5 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 edging very unevenly higher since — and is just back at unchanged as of 7:45 a.m. BST in London/8:45 a.m. CEST in Zurich.


Tomorrow we get the latest jobs report — and what it shows will be another indication as to whether the Fed will be dropping interests rates at their FOMC meeting at the end of the month.  Of course, I’m also expecting some ‘reaction’ in the precious metals.  But by how much — and in which direction, remains to be seen.

And as I’ve already pointed out several times this week, there won’t be a Commitment of Traders or Bank Participation Report on Friday.  Both will be posted on the CFTC’s website around 3:30 p.m. EDT on Monday afternoon.


And as I post today’s column on the website at 4:03 a.m. EDT, I see that the gold price has been turned lower in the last half of the first hour of London trading — and is down $8.60 an ounce. Ditto for silver — and it’s now down 9 cents. Platinum is now down 3 bucks — and palladium is down 11 dollars as the first hour of Zurich trading ends.

Gross gold volume is about 65,000 contracts — and minus what little roll-over/switch volume there is, net HFT gold volume is around 54,500 contracts. Net HFT silver volume is 7,000 contracts — and there’s still only 297 contracts worth of roll-over/switch volume on top of that.

The dollar index hasn’t done much of anything in the last hour — and is still sitting at unchanged as of 8:45 a.m. in London/9:45 a.m. in Zurich.

That’s it for yet another day — and if you’re a U.S. citizen, I certainly hope that you enjoy your extended Independence Day long weekend.

And unless the ‘seas boil — and the sky falls’ in overseas trading today…I won’t have a column tomorrow.

See you on Saturday.

Ed