11 July 2019 — Thursday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price was sold quietly and unevenly lower once trading began at 6:00 p.m. on Tuesday evening in New York — and the Far East low tick came at the 2:15 p.m. afternoon gold fix in Shanghai. It then proceeded to crawl a bit higher until shortly after the morning gold fix in London — and then sell off until precisely 8:30 a.m. in New York when Fed chairman Powell’s comments hit the street. The gold price blasted higher on that news, but the rally was capped a minute or so before 9 a.m. EDT — and the gold price edged quietly lower until shortly after the 11:00 a.m. EDT London close. From that point, it began to work its way quietly higher, closing on its high tick of the day.
The low and highs in the precious metal were reported as $1,391.80 and $1,417.50 in the September contract.
Gold finished the Wednesday session at $1,418.40 spot, up $21.30 on the day. Not surprisingly, net volume was very beefy at a bit over 380,000 contracts — and there was a hefty 68,500 contracts worth of roll-over/switch volume out of August and into future months. And it should be carefully noted that gold is now in slight backwardation to the August contract…as the spot price closed higher than August’s high close.
Silver’s price path was the same as gold’s in virtually every respect on Wednesday, so I’ll spare you the play-by-play in this precious metal. The only significant difference was that silver was not allowed to close on its high of the day, as it was never allowed back above its 9 a.m. EDT price after its post-London close rally.
The low and high ticks in silver were recorded by the CME Group as $15.07 and $15.315 in the September contract.
Silver was closed at $15.205 spot, up 12 cents from Tuesday. Net volume was on the heavier side, but not quite as heavy as one might have expected…just over 67,000 contracts. There was a bit over 7,100 contracts worth of roll-over/switch volume on top of that.
The platinum price crept unevenly lower until around the time that Zurich opened — and from there, began to head higher until around 11:30 a.m. CEST. It traded flat from that point until the Powell news hit the tape — and it blasted skyward as well. Its price was also capped a few minutes before 9 a.m. in New York — and after getting sold a few dollars lower into the afternoon gold fix in London, began to edge steadily higher. Platinum’s price was capped for the last time around 11:45 p.m. EDT — and it was sold quietly lower into the COMEX close from there. It didn’t do much after that. Platinum was closed at $825 spot, up 15 bucks from Tuesday.
The palladium price didn’t do a thing in Far East trading until a minute or two before 2 p.m. China Standard Time on their Wednesday afternoon. It was then sold quietly lower until a few minutes after the 9 a.m. CEST Zurich open. It rallied quietly and unevenly higher from there until the Powell memorandum was published — and away it went to the upside…running into ‘resistance’ at every turn. Its high of the day came shortly after 10:30 a.m. in New York — and after getting sold lower by a bit, traded unevenly sideways until the market closed at 5:00 p.m. EDT. Palladium was closed at $1,575 spot, up 45 dollars from Tuesday.
The dollar index closed very late on Tuesday afternoon in New York at 97.49 — and opened up a couple of basis points once trading commenced at 7:45 p.m. EDT on Tuesday evening. It added five more basis points in the next fifteen minutes, but then began to very quietly crawl lower. There was a tiny bump higher at the 2:15 p.m. CST afternoon gold fix in Shanghai — and at that point the decline began anew — and with more intensity. The London low came at, or minutes after, the morning gold fix over there — and it crept higher until the Powell news became public at 8:30 a.m. in New York. It had a bit of a waterfall decline at that juncture — and most of the damage was done by 11:45 a.m. EDT — and it crawled quietly and unevenly sideways until trading ended at 5:30 p.m. The dollar index finished the Wednesday session at 97.10…down 39 basis points from Tuesday’s close.
You could certainly make the case that the precious metals followed the price action in the dollar index yesterday — and you wouldn’t hear a peep out of me.
Here’s the DXY chart, courtesy of Bloomberg as always. Click to enlarge.
And here’s the 6-month U.S. dollar index chart, courtesy of the folks over at the stockcharts.com Internet site. The delta between its close…96.70…and the close on the DXY chart above, was 40 basis points on Wednesday. Click to enlarge as well.
The gold shares gapped up a bit at the open, but were sold a bit lower almost immediately. That sell-off lasted until around 10:20 a.m. in New York trading — and from that point they began to head quietly and steadily higher — and closed on their respective high ticks of the day. The HUI finished up 2.79 percent.
The silver equities traded in an identical pattern as the gold stocks — and they also closed on their respective highs of the day. Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up 2.79 percent as well. Click to enlarge.
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 57 gold and 3 silver contracts were posted for delivery within the COMEX-approved depositories on Friday.
In gold, the three short/issuers were Advantage, ABN Amro and ADM…with 30, 20 and 7 contracts. Of the four long/stoppers in total, the only two that mattered were JPMorgan and Advantage, with 33 and 21 contracts. All contracts, both issued and stopped, involved their respective client accounts.
In silver, the sole short/issuer was Advantage out of its client account. HSBC USA picked up 2 contracts for its own account — and Morgan Stanley stopped the other.
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 rose by 27 contracts, leaving 77 still open, minus the 57 mentioned a few paragraphs ago. Tuesday’s Daily Delivery Report showed that 22 gold contracts were actually posted for delivery today, so that means that 27+22=49 more gold contracts just got added to the July delivery month. Silver o.i. in July declined by 13 contracts, leaving 541 still around, minus the 3 silver contracts mentioned a few paragraphs ago. Tuesday’s Daily Delivery Report showed that 13 silver contracts were actually posted for delivery today, so the change in open interest…and the deliveries…match for a change.
Much to my surprise, there was a very big deposit into GLD on Wednesday, as an authorized participant added 207,543 troy ounces of gold. There were no reported changes in SLV.
There was no sales report from the U.S. Mint on Wednesday.
There was no in/out movement of gold over at the COMEX-approved depositories on the U.S. east coast on Tuesday.
There wasn’t much activity in silver, as nothing was reported received — and only 201,587 troy ounces was shipped out in total. Of that amount, there was 178,203 troy ounces that departed HSBC USA — and the remaining 23,383 troy ounces was shipped out of CNT. The link to that is here.
There was no in/out activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Tuesday. That’s the third time in the last few weeks that there’s been no activity. Things have really quieted down over there this year.
The Shrewsbury Hoard (also known as the Shropshire Hoard) is a hoard of 9,315 bronze Roman coins discovered by a metal detectorist in a field near Shrewsbury, Shropshire in August 2009. The coins were found in a large pottery storage jar that was buried in about A.D. 335.
The coins were found buried in a brown pot in a plantation next to a public bridleway by Nic Davies only a month after he had started metal detecting as a hobby, and were his first find. Davies did not have permission from the landowner to metal detect on his land, and when he located the hoard he dug up the pot himself, although he subsequently took it to show Peter Reavill, the Portable Antiquities Scheme Finds Liaison Officer for Herefordshire and Shropshire. Davies later led Reavill and Shropshire County Council archaeologists to the find site, and a small excavation was carried out. The excavation revealed that the pot had probably been placed in the ground partially full (with coins dating to about A.D. 320), and that the pot had subsequently been filled up with coins dating to A.D. 333–335 before being covered with a large marker stone. The top of the pot had broken off, and about 300 scattered coins were recovered from the area around the find spot. The total weight of the pot and the coins was approximately 32 kg (71 lb).
The coins are all bronze and silver-washed bronze nummi, and date to the period between A.D. 313 and 335, corresponding to the latter part of the reign of Constantine I and the period of joint reign of his three sons, Constantine II, Constantius II and Constans. There were also a very few radiates dating to A.D. 260–293. Although the coins are not individually valuable, the large number of coins in the hoard makes it important. Click to enlarge.
I don’t have all that many stories for you today.
A ‘dovish-er’ than expected set of prepared remarks from Fed Chair Powell has sparked a bid in bonds, stocks, and gold as the dollar takes a dive ahead of his testimony late this morning.
Dow futures love the bad economic news… are up 150 points on Powell’s promises…Click to enlarge.
Powell’s remarks suggest he is comfortable with market pricing of an interest rate cut at the end of July. This was an opportunity to push back against those expectations if he wanted to, and he did just the opposite. July rate-cut odds are back at 100% (from 92.5% pre-remarks).
Since the June FOMC, gold remains the biggest winner…
This chart-filled story put in an appearance on the Zero Hedge website at 8:47 a.m. EDT on Wednesday morning — and I thank Brad Robertson for pointing it out. Another link to it is here. A companion ZH story from Brad bears the headline ““Outlook Continues to Dim” – Powell Goes Full Dove to Keep His Job“.
President Donald Trump has grown concerned that the strengthening U.S. dollar is a threat to his economic agenda and has asked aides to cast about for ways to weaken the greenback, according to people familiar with the matter.
Trump asked about the dollar in job interviews with both Judy Shelton and Christopher Waller last week, whom he’s selected for seats on the Federal Reserve’s board, the people said. He lamented that the currency’s strength could blunt an economic boom that he expects to carry him to a second term.
The president’s top economic adviser, Larry Kudlow, and Treasury Secretary Steven Mnuchin both oppose any U.S. intervention to weaken the dollar, the people said.
The president’s questioning of Waller and Shelton follows months of Trump hectoring the Fed to cut interest rates, a move that would have the effect of weakening the dollar. But beyond regular scolding of the central bank and its chairman, Jerome Powell, Trump hasn’t taken steps to reduce the greenback’s buying power.
This Bloomberg news item was posted on their website at 1:00 a.m. Pacific Daylight time on Wednesday morning — and I found it embedded in a GATA dispatch. Another link to it is here. The original headline to this story was “Trump Concern Over Dollar Strength Spills Into Fed Selection”
Amid rampant market expectations of another and even bigger and grander round of QE by the ECB, which would also be buying corporate bonds and old bicycles, the total amount of bonds with negative yields has risen to nearly $13 trillion, according to Bank of America Merrill Lynch.
The perversion of negative interest rates imposed by central banks such as the ECB, the Bank of Japan, the Swiss National Bank and a slew of others, and the even bigger perversion of negative-yielding corporate debt apparently does a job on investors’ minds.
In a negative-yield environment, you can no longer buy bonds to hold them to maturity because you’d be guaranteed a loss. You’d have to buy them solely on the hopes of even more deeply negative yields in the near future that would allow you to slough off these critters to the next guy before they eat you up.
And this type of thinking has now completely wiped out whatever was left of investors’ capacity to act rationally. Once you start getting into central-bank mandated negative yields, rationality no longer applies because negative-yielding debt is irrational by definition: Why would you pay someone to borrow money from you? [Emphasis mine. – Ed]
This very worthwhile commentary from Wolf showed up on his Internet site on Tuesday sometime — and I thank Richard Saler for bringing it to our attention. Another link to it is here. The Zero Hedge spin on this is headlined “Redefining “High” Yield: There Are Now 14 Junk Bonds With Negative Yields” — and I thank Brad Robertson for that one.
Five Iranian ships unsuccessfully tried to seize a British oil tanker in the Persian Gulf Wednesday – U.S. officials say.
Armed vessels from Iran’s Islamic Revolutionary Guard Corps tried to capture the British Heritage tanker while it was sailing through the Strait of Hormuz on Wednesday.
Iran’s ships reportedly ordered the British vessel to divert its course and stop in Iranian waters which it was sailing nearby.
British frigate the HMS Montrose was escorting the tanker and trained its guns on the Iranians before giving them a verbal warning to back off.
A U.S. aircraft was overhead and recorded video of the incident as the Iranian ships then fled – according to CNN.
It comes after Royal Marines seized an Iranian oil tanker off the coast of Gibraltar last week, which Britain says was violating E.U. sanctions by carrying fuel to Syria.
This news story was posted on the dailymail.co.uk Internet site at 7:40 p.m. BST on their Wednesday evening, which was 2:40 p.m. in Washington — EDT plus 5 hours. I thank Brad Robertson for sending it along — and another link to it is here.
Federal Reserve Chairman Jerome Powell told Congress on Wednesday that he doesn’t think a return to the gold standard in the U.S. would be a good idea.
“You’ve assigned us the job of two direct, real economy objectives: maximum employment, stable prices. If you assigned us [to] stabilize the dollar price of gold, monetary policy could do that, but the other things would fluctuate, and we wouldn’t care,” Powell said from Capitol Hill. “We wouldn’t care if unemployment went up or down. That wouldn’t be our job anymore.”
“There have been plenty of times in fairly recent history where the price of gold has sent a signal that would be quite negative for either of those goals,” he said. “No other country uses it,” he added. The Fed is tasked and overseen by Congress to maximize employment and keep prices stable.
Though Powell was quick to distance himself from the Fed nomination process, his comments on the gold standard put him at odds with the writings of Judy Shelton, a current Fed nominee and advocate for monetary policy reforms.
Shelton, who was tapped last week by President Donald Trump to join the Fed’s board, has written that a return to the gold standard affords the U.S. “an opportunity to secure continued prominence in global monetary affairs.”
This interesting story appeared on the cnbc.com Internet site at 12:24 p.m. EDT on Wednesday afternoon — and I found it on the gata.org Internet site. Another link to it is here.
Smugg[ling] gold to India and Japan has become a lucrative business for many dealers and middlemen across Asia. It is widely known that demand for physical gold by Asian populations is insatiable. From the estimated 25,000 tonnes of gold held by India’s population to the more than 20,000 tonnes of gold calculated to be held by China’s population, these two countries alone hold nearly one quarter of the world’s known above ground gold stocks.
However, beyond China and India, gold is central to almost all Asian societies and cultures. While sometimes forgotten, Japan became one of the world’s largest gold market in the 1970s and 1980s when it imported thousands of tonnes of gold to satisfy its investment boom in gold. Hong Kong’s gold market, one of Asia’s oldest, is and has been a physical gold hub for more than 100 years. Adding in South Korea, Taiwan, Singapore, and Thailand, and the Asian region then is truly the centre of the physical gold world.
But while some Asian countries’ governments, such as Singapore and Hong Kong, embrace a free-market ethos to supporting their gold markets and allowing unhindered imports and non-distorted saving and investment in gold with zero Goods and Services Tax on investment gold, other Asian economies, such as India and Japan, still throw up import barriers, taxes and penalties, distorting the free flow of gold, distorting their local gold prices, and creating what we then call gold smuggling.
The incentive for smugglers is as follows. When an economy taxes gold imports at entry, such as India, the gold import tax or gold import duty distorts the international gold price and inflates the price of gold within that country by the amount of the tax. If gold can be bought outside the country, and smuggled into the country while avoiding the import tax, it can be sold by the smuggler at the tax inclusive price and the difference earned as profit.
The same is true of the GST on gold in Japan which inflates the local gold price. If gold can be purchased outside the country at the international price, smuggled in, and sold at the local gold price, the difference can be kept by the smuggler.
This commentary by Torgny Persson showed up on the Singapore-based website bullionstar.com on Wednesday sometime — and I found it in a GATA dispatch. Another link to it is here.
Citing a confession to gold market manipulation in the United States, a member of Parliament this week urged the British government to investigate possible manipulation of the gold market in London.
The member, Jeremy Lefroy, Conservative for Stafford, prompted a discussion of manipulation during a speech Monday in the House of Commons. Lefroy questioned the economic secretary to the U.K. Treasury, John Glen, Conservative member for Salisbury, as to whether the government was able to prevent gold market manipulation.
Glen responded that the U.K.’s Financial Conduct Authority has “the right tools” and the jurisdiction to “detect and respond” to attempts at market manipulation. But he did not directly respond to Lefroy’s request for an investigation.
Lefroy’s statement, much of which is appended, showed detailed knowledge of the gold market and the recent increase in gold reserves by various nations. Lefroy not only cited the conviction for gold market manipulation of a former trader for JPMorgan Chase in the United States but also expressed concern about the trustworthiness of gold derivatives and paper gold, as well as the possibility that impoverished commodity-producing countries are being cheated by market manipulation.
He also related the complaint of a constituent who accused Deutsche Bank of manipulating the gold and silver markets. Litigation brought by his constituent in Germany and the U.K. was unsuccessful, Lefroy said, but soon afterward Deutsche Bank confessed to such manipulation in regulatory proceedings in the United States.
This GATA dispatch, with the Lefroy presentation embedded, was posted on their website at 12:49 a.m. EDT on Thursday morning — and another link to it is here.
The PHOTOS and the FUNNIES
Here are three more photos of my trip down the dirt roads in the middle of nowhere northeast of Merritt on May 12. The range cattle in the first photo — and the red barn in the second gives points of interests to both shots. The last photo is of balsamorhiza sagittata — a North American species of flowering plant in the sunflower tribe of the aster family known by the common name arrowleaf balsamroot. It is widespread across western Canada and much of the western United States. The plant’s native range extends from British Columbia and Alberta in the north, southward as far as northern Arizona and the Mojave Desert of California, and as far east as the Black Hills of South Dakota. It grows in many types of habitat from mountain forests to grassland to desert scrub. It is drought tolerant. It doesn’t grow just anywhere, but where it does, it does so in profusion. Click to enlarge.
“Sanctions are not diplomacy. They’re a precursor to war and an embarrassment to a country that pays lip service to free trade.” — Ron Paul
The far more ‘dovish’ than expected prepared remarks by Fed Chairman Jay Powell hit the Internet at 8:30 a.m. EDT on Wednesday morning — and that set the HFT algorithms on fire. It was equally obvious that ‘da boyz’/’gentle hands’ were there to cap the precious metal rallies as best they could — and prevent the dollar index from collapsing.
In the precious metals, there were no moving averages of importance that were broken to the upside in either gold or silver yesterday. But platinum broke above — and then closed above its 50-day moving average — and also touched its 200-day moving average at its high tick yesterday. JPMorgan’s prior 3-day attempt to run the Managed Money traders out of their long positions in palladium failed spectacularly on Wednesday, as it closed at another new all-time high.
Copper rallied a bunch — and was closed right on its 50-day moving average and, without a doubt, this price move was caused by Managed Money short covering in the COMEX futures market. And ditto for WTIC, as it blasted through — and then close well above, it’s 200-day moving average on Wednesday.
And as I type this paragraph, the London open is less than a minute away — and I see that the gold price began to rally a bit as soon as trading began at 6:00 p.m. EDT on Wednesday evening in New York. That lasted until 10:20 a.m. in Shanghai on their Thursday morning — and it began to edge lower from there. At the moment, gold is only up $2.10 the ounce. The price path for silver was identical — and from being up 9 cents, its only up 4 cents as London opens, but off its current low. Platinum and palladium were both higher by 10:20 a.m. CST…but were both turned lower at the same moment as silver and gold. Platinum is up a dollar — and palladium by 2 as Zurich opens.
Net HFT gold volume is very heavy at around 84,000 contracts — and there’s 2,833 contracts worth of roll-over/switch volume out of August and into future months. Net HFT silver volume is up there as well at about 10,500 contracts — and there’s only 160 contracts worth of roll-over/switch volume in that precious metal.
The dollar index opened down down 4 basis points was trading commenced at 7:45 p.m. EDT in New York on Wednesday evening, which was 7:45 a.m. CST in the Far East. It continued to fall until 11:20 a.m. CST — and it has been crawling quietly higher since. It’s down 18 basis points as of 7:45 a.m. BST in London/8:45 a.m. CEST in Zurich.
It should be noted that the price capping operation in the precious metals began a full hour before the dollar index hit its current low tick of the day.
As it was stated in the lead Zero Hedge story in the Critical Reads section, the chance of a rate cut at the next FOMC meeting just went back to 100 percent. But whether or not it will be 25 or 50 basis points, won’t be known until then.
But the world’s central banks have now turned the equity and bond markets into raving junkies…craving for their next interest rate cut ‘fix’. And whatever interest rate cut that does materialize will have little to no effect on business or the average consumer in the U.S., as they are already overflowing with the highest debt levels in history. The day of reckoning, when it does finally manifest itself, will be ugly.
The precious metals are responding accordingly. And as I pointed out in a recent commentary, the headwinds that JPMorgan et al are running into are becoming more ferocious all the time. At some point they will be overwhelmed — and the race into precious metals and their associated equities, will be on in earnest.
And as I post today’s column on the website at 4:03 a.m. EDT, I note that the gold price has edged a bit higher in the first hour of London trading — and is currently up $3.40 an ounce. Silver is up 5 cents. Platinum is up 3 dollars now — and palladium’s spike up at the Zurich open was hammered back below the unchanged mark almost right away, but it’s back in the plus column by 3 dollars as well, as the first hour of Zurich trading ends.
Gross gold volume is about 103,500 contracts — and minus what little roll-over/switch volume there is, net HFT gold volume is a bit over 96,500 contracts. Net HFT silver volume is around 12,100 contracts — and there’s still only 179 contracts worth of roll-over/switch volume on top of that.
The dollar index hasn’t done much of anything over the last hour — and as of 8:45 a.m. in London/9:45 a.m. in Zurich, it’s down 18 basis points.
That’s all I have for today — and I’ll see you here again tomorrow.