The World Awaits ‘The Word’ From the Fed

31 July 2019 — Wednesday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price edged lower once trading commenced at 6:00 p.m. in New York on Monday evening — and the low tick of the day was set around 9:40 a.m. in Shanghai on their Tuesday morning.  From that juncture, the price crawled unevenly higher for most of the remainder of the day…culminating in a bit of a price spike around 2 p.m. EDT in the thinly-trade after-hours in New York.  That was capped and turned lower minutes after it began — and the price didn’t do much after that going into the 5:00 p.m. close.

The low and high ticks really aren’t worth looking up, but here they are anyway…$1,422.10 and $1,433.90 in the August contract.

Gold finished the Tuesday trading session at $1,430.20 spot, up $4.10 from Monday’s close.  Net volume into October and December combined was a bit over 272,500 contracts — and there was just under 82,500 contracts worth of roll-over/switch volume on top of that.

The silver price performed in very much the same manner as the gold price, with the only real difference worth noting was that the price spike in silver in after-hours trading in New York yesterday came just before 3:30 p.m. in after-hours trading.  This was about ninety minutes after gold had a similar price spike.

The low and high ticks in silver were recorded as $16.425 and $16.545 in the September contract.

Silver was closed at $16.54 spot, up 11.5 cents on the day.  Net volume was nothing special at a bit under 54,500 contracts — and there was a hair under 3,900 contracts worth of roll-over/switch volume in that precious metal.

The platinum price was sold a bit lower until shortly after 9 a.m. in Shanghai on their Tuesday morning — and then didn’t do much of anything until shortly after 1 p.m. CST.  Then it crept up to the $880 spot price ceiling that was imposed on it in post-COMEX close trading on Monday afternoon.  It’s many attempts to break above that mark were of no avail — and its tiny rally shortly after the COMEX open on Tuesday met the same fate.  ‘Da boyz’ appeared at that point — and the low tick was set at either 1 p.m. or the 1:30 p.m. COMEX close.  It bounced a bit higher right away — and from 2 p.m. EDT onwards, it didn’t do much.  Platinum was closed at $869 spot, down 10 bucks on the day.

The palladium price was forced to follow the same general price path as platinum, except its engineered price decline after the COMEX open in New York was far more severe.  The low tick was set a few minutes before 1 p.m. EDT — and it managed to creep a bit higher into the 5:00 p.m. close from there.  Platinum was closed at $1,495 spot, down 39 dollars from Monday.

The dollar index closed very late on Monday afternoon in New York at 98.04 — and opened up 4 basis points once trading began at 7:45 p.m. EDT on Monday evening, which was 7:45 a.m. China Standard Time in the Far East.  It had a choppy up/down/up/down price pattern, virtually all of it in positive territory, during the entire Tuesday session — and finished the day where it began…at 98.05…up 1 whole  basis point from Monday’s close.

It was another day where there was little if any price correlation between the currencies — and the precious metal price activity.

Here’s the DXY chart, courtesy of Bloomberg as per usual.  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…97.81…and the close on the DXY chart above, was 24 basis points on Tuesday.  Click to enlarge as well.

The gold shares opened up a bit once trading began at 9:30 a.m. in New York on Tuesday morning.  They proceeded to chop very quietly sideways from that juncture, until a few minutes before the 1:30 p.m. COMEX close.  They rallied sharply during the price spike in gold around that time, but it ended abruptly once the price was capped — and from there the gold stocks chopped quietly lower until the 4 p.m. EDT close.  The HUI finished up 0.68 percent.

The silver equities opened in positive territory by a bit as well, but fifteen minutes after that they rolled over hard — and their respective low tick came around 10:50 p.m. EDT.  They rallied unevenly higher from that juncture…barely making it into positive territory by a few minutes after 2 p.m. in New York trading.  Once the gold price was capped at that point, the silver stocks crept quietly lower — and back into negative territory by a bit by the 4:00 p.m. close.  The silver shares didn’t react at all when silver spiked to its high tick of the day just before 3:30 p.m. EDT.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down 0.26 percent…which was certainly a disappointment considering how well the underlying precious metal performed in New York trading yesterday.  Click to enlarge.

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

The CME Daily Delivery Report for Day One of August deliveries, showed that 800 gold and 697 silver contracts were posted for delivery on Thursday.

In gold, there were seven short/issuers in total — and the two largest by far were JPMorgan and ABN Amro, with 303 and 254 contracts out of their respective client accounts.  In third and fourth spot were Scotiabank/Scotia Capital and ADM with 76 and 63 contracts…the former from its own account — and the latter from its client account.  There were nine long/stoppers in total, but the only three that mattered were JPMorgan, Citigroup and ABN Amro…JPMorgan picked up 316 for its client account…Citigroup stopped 260 contracts for its own account — and ABN Amro stopping 128 contracts for its client account.  Macquarie Futures was in fourth spot with 41 contracts for its own account.

In silver, of the five short/issuers in total, the two biggest by far were International F.C. Stone and ABN Amro with 291 and 290 contracts.  There were three long/stoppers, the largest being JPMorgan, with 509 contracts.  In second and third spots were ABN Amro and Advantage, with 132 and 56 contracts.  All contracts, issued and stopped, involved their respective client accounts.

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

The CME Preliminary Report for the Tuesday trading session showed that gold open interest in July was unchanged at zero — and silver o.i. in July fell by 56 contracts to zero — and those remaining contracts are out for delivery today.

Gold open interest in August dropped precipitously one again, by 31,514 contracts, leaving 8,699 contracts still open, minus the 800 contracts mentioned above, that are posted for delivery on Thursday.  Silver o.i. in August actually rose by 57 contracts, leaving 57 still around, minus the 697 contracts mentioned a few paragraphs ago.


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

There was a tiny sales report from the U.S. Mint yesterday.  They sold 500 troy ounces of gold eagles — and that was all.

There was a tiny amount of movement in gold over at the COMEX-approved depositories on the U.S. east coast on Monday.  There was 2,799 troy ounces received at HSBC USA — and 32.150 troy ounces/1 kilobar [U.K./U.S. kilobar weight] shipped out of Manfra, Tordella & Brookes, Inc.  I won’t bother linking this.

There was some activity in silver, as 601,996 troy ounces was received — and a total of 24,925 troy ounces shipped out.  There was one truckload received…600,996 troy ounces…at CNT — and the remaining 1,000 troy ounces…one good delivery bar…was dropped off at Delaware.  There were three different depositories involved in the ‘out’ activity, which I’m not going to bother itemizing.  There was also a paper transfer of 24,878 troy ounces out of the Registered Category — and back into Eligible over at Brink’s, Inc.  The link to all this is here.

There was some decent activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Monday.  They reported receiving 2,000 of them — and shipped out 228.  All this happened over at Brink’s, Inc. — and the link to that, in troy ounces, is here.


The Water Newton Treasure is a hoard of fourth-century Roman silver, discovered near the location of the Roman town of Durobrivae at Water Newton in the English county of Cambridgeshire. The hoard consisted of 27 silver items and one small gold plaque. Because of inscriptions found on some of the pieces in the collection it has been suggested that they may have been used in a local church, and they therefore comprise the earliest probable group of Christian liturgical silver yet found in the Roman Empire.

The hoard was discovered during ploughing in February 1975; several items were damaged by the plough. It was probably buried by an inhabitant of the nearby Roman fortified garrison town of Durobrivae. There are nine silver vessels, and the remainder of the items are votive tokens engraved and embossed with the labarum (the chi-rho cross), mostly of triangular shape. The larger items include jugs, bowls, dishes, a strainer, and an unengraved standing two-handled cup of the form (cantharus) later used as chalices.

The majority of the objects found are small plaques which were probably fixed to the wall of a church as votive offerings. Some have holes for nails, like the single gold plaque, and one an inscription saying that “Anicilla has fulfilled the vow which she promised“. The triangular “leaf” form of most of these was originally pagan, but the chi-rho monogram on these examples makes them the first finds to show that the practice had been adopted by Christians.  Click to enlarge.

It was a very quiet news day on Tuesday, as the world awaits the news from the Eccles Building at 2:00 p.m. EDT today.


CRITICAL READS

Pending Home Sales Jump In June, Break 17-Month Losing Streak

After mixed home sales data (new higher and existing lower), pending home sales were expected to increase by 0.5% MoM but beat handily, rising 2.8% MoM.

As Bloomberg notes, contract signings to purchase previously owned U.S. homes rose in June by the most in three months, indicating demand may pick up with the help of lower mortgage rates and steady job growth.

Job growth is doing well, the stock market is near an all-time high and home values are consistently increasing,” NAR Chief Economist Lawrence Yun said in a statement.

When you combine that with the incredibly low mortgage rates, it is not surprising to now see two straight months of increases.”

Pending home sales broke a 17 month losing streak, rising 1.6% YoY – the most since Feb 2017…Click to enlarge.

Contract signings increased 5.4% from the prior month in the West, the most in three months; rose for a fourth month in the Midwest; and advanced in the South and Northeast.

Pending home sales are often looked to as a leading indicator of existing-home purchases and a measure of the health of the housing market in the coming months.

This positive news item showed up on the Zero Hedge website at 10:20 a.m. EDT on Tuesday morning — and I thank Brad Robertson for sharing it with us.  Another link to it is here.


Consumer Confidence Surges In July, Nears Highest Since 2000

The headline Conference Board Consumer Confidence data exploded higher, jumping from an upwardly revised 124.3 to 135.7 – just short of its highest since the year 2000.

  • Present situation confidence rose to 170.9 vs 164.3 last month
  • Consumer confidence expectations rose to 112.2 vs 97.6 last month [Click to enlarge]

Those claiming business conditions are “good” increased from 37.5 percent to 40.1 percent, however, those saying business conditions are “bad” also increased slightly, from 10.6 percent to 11.2 percent. Consumers’ appraisal of the job market was also more favorable. Those saying jobs are “plentiful” increased from 44.0 percent to 46.2 percent, while those claiming jobs are “hard to get” declined from 15.8 percent to 12.8 percent.

Consumers were more optimistic about the short-term outlook in July. The percentage of consumers expecting business conditions will be better six months from now increased from 19.1 percent to 24.0 percent, while those expecting business conditions will worsen declined from 12.6 percent to 8.7 percent.

Along with a 2.1 percent increase in Q2 GDP — and an increase in retail sales, you have to wonder what the Fed will do today.  I suspect they will cut anyway, as it’s only E-Z credit that makes all this so-called ‘positive’ news possible.  The reality under the surface is far different, as the crushing debt burden at normal interest rates would wipe out half the world.  It’s still “print, or die”.  This news item put in an appearance on the Zero Hedge website at 10:10 a.m. on Tuesday morning EDT — and it’s the second offering in a row from Brad Robertson.  Another link to it is here.


The Fed Might Not Cut Rates More Than Once — Bill Dudley

The U.S. Federal Reserve is poised to make a monumental move: At its policy-making meeting this week, it will cut interest rates for the first time in more than 10 years. Many see this as just the first step in a new stimulus policy aimed at supporting a fragile economy.

I’m not so sure. I think there’s a good chance the Fed won’t be cutting further anytime soon.

Some think this week’s cut in the federal funds rate could be as large as half a percentage point. I don’t agree. There’s no consensus for such an aggressive move on the policy-making Federal Open Market Committee, and the most recent data show the economy gaining momentum. Also, it might compromise the Fed’s independence, creating the impression that the central bank was caving to President Donald Trump’s insistent calls for deeper cuts.

Even a quarter-point cut — which is what I expect — entails significant risks. What if, in hindsight, it proves to have been a mistake?

Right now, the Fed is focused on the risk that the economy will slow and inflation will keep falling short of its 2% target. If this erodes people’s expectations of future inflation, it will undermine the central bank’s ability to provide stimulus. With inflation already low, it’s hard to justify any action — including standing pat this week — that could precipitate such an outcome. The public and the president would inevitably blame the Fed.

Also, the Fed faces the question of how best to maintain its recession-fighting firepower at a time when interest rates are already much lower than they typically are at this stage in the economic cycle. Officials believe that earlier and more aggressive action is needed to ensure that the U.S. doesn’t end up like Japan, with interest rates stuck at zero. As Chair Jerome Powell put it, an ounce of prevention is worth a pound of cure.

This worthwhile opinion piece by former Fed governor Bill Dudley was posted on the bloomberg.com Internet site at 2:00 a.m. PDT on Tuesday morning — and I pulled it from another Zero Hedge article that Brad sent our way.  Another link to it is here.  Then there’s this article from the cnbc.com Internet site headlined “Larry Summers Blasts Trump on the Dollar: ‘No Nation Can Devalue Its Way to Prosperity’” — and I found that on the gata.org Internet site.


World Gold Council responds to the ECB’s announcement that the Central Bank Gold Agreement won’t be renewed

Following [the] announcement by the European Central Bank (ECB) that the Central Bank Gold Agreement (CBGA) won’t be renewed for a fifth time, Natalie Dempster, Managing Director, Central Banks & Public Policy, responded with the following comment:

There has been a sea change in central banks’ attitudes toward gold since the financial crisis, and today’s announcement from the ECB is yet another sign of that. Last year, central banks bought more gold than at any time under the existing international monetary system. That buying has continued to accelerate this year, fuelled by heightened geopolitical and economic risks associated with other reserve assets and negative real and nominal interest rates. Compound that with fears of debt monetisation arising from record high budget deficit levels and currency wars and gold looks like a very attractive reserve asset. It’s the only reserve asset that has no political risk and you can’t print more of. Europe itself is now a net buyer of gold, so a sales agreement is no longer needed.”

This is a major endorsement of gold’s role in global monetary reserves.“

The above three paragraphs are all there is to this brief statement from the WGC that appeared on their website last Friday.  I found it on the Sharps Pixley Internet site — and another link to the hard copy is here.


Mexico’s ‘Liberty’ Silver Ounce: its Origin and its Future — Hugo Salinas Price

Don Jose Lopez Portillo became President of Mexico in 1976.

In 1981, President of Mexico Lopez Portillo ordered the creation of a silver-ounce coin, the “Liberty Ounce”, whose weight was to be 31.1 grams, the weight of a Troy ounce. This coin was to bear no engraved monetary value.

President Lopez Portillo’s intention was to provide Mexicans with a solid, traditional monetary instrument that would enjoy an official monetary quote, to be determined daily by Mexico’s Central Bank.

Unfortunately, after a few months of its existence as money – during which the Ounce enjoyed legal monetary quotes – the monetary quote for the “Liberty Ounce” had to be abandoned. This became necessary, because the Central Bank issued daily quotes of the monetary value of the Ounce, based on the international prices of silver, and thus the monetary values of the Ounce went up or down on a daily basis; the result was that there arose lawsuits amongst investors, regarding the monetary value of related contracts involving the “Liberty Ounce”.

However, since its creation and up to the present, the Central Bank of Mexico has continued to mint the Liberty Ounce, whose value fluctuates every day; Mexicans have accumulated Liberty Ounces as savings through the years, and they can be calculated to amount to about 25 million ounces. These ounces remain in the possession of Mexicans, as savings which afford some protection against the depreciation of the Mexican peso, caused by the daily increase in the amount of Mexican monetary bills and digits.

This interesting commentary from Hugo was posted on the plata.com.mx Internet site on Tuesday sometime — and I found it in a GATA dispatch.  Another link to it is here.


The PHOTOS and the FUNNIES

We’re still on what’s left of Paul Lake Road on May 25…but the pavement has long since disappeared — and we’re now on a forestry services road…mostly dirt.  The first shot is from the top of the plateau…looking sort of southeast across the South Thompson River valley, which flows from east to west/left to right in this photo.  The second picture is of wild larkspur which grows in profusion at these altitudes in late spring.  So do the dandelions!   The last photo is of a pair of mountain bluebirds at one of the many thousands of bluebird boxes that dot the landscape in these parts.  They’re skittish little things.  Click to enlarge.


The WRAP

For the second day in a row there’s been more positive price action in gold and silver than I had been expecting, especially since it occurred during the last two heavy roll-over day from July and into the August delivery month.

The other item worth noting is the amount of positive price action that has showed up after the COMEX close on both days…particularly on Monday.  I’m not sure what should be read into that, because it’s so unusual.  I’m reading it as a positive, at least for the moment.

Here are the 6-month charts for the four precious metals, plus copper and WTIC.  The gold doji price for Tuesday represents the settle price for gold in the December contract yesterday — and that’s why the doji shows such a big jump.  It went from August to December delivery — and the contango was that much.  Only silver, gold and WTIC finished higher yesterday…with WTIC now back above both its 50 and 200-day moving averages.  The other two precious metals, plus copper, were all closed down on the day.  Click to enlarge.

And as I type this paragraph, the London open is less than a minute away — and I see that the gold price traded flat until 9 a.m. in Shanghai on their Wednesday morning. It was sold down a few dollars from that point until 10 a.m. CST — and then didn’t do much of anything until a few minutes after 12 o’clock noon over there. It has crawled quietly higher since — and is currently up $1.50 an ounce. Silver trading flat until around 8:15 a.m. CST — and then was sold down to its current low tick, which came a very few minutes before 11 a.m. in Shanghai. It hasn’t done much of anything since — and is currently down 7 cents the ounce. Platinum traded sideways until about 7:45 a.m. CST on their Wednesday morning — and then jumped up a bunch over the next thirty minutes. It has been crawling quietly higher since — and is currently up 6 bucks. It was the same price pattern for palladium as it was for platinum, except it’s up 13 dollars as Zurich opens.

Net HFT gold volume in October and December combined is pretty quiet at a bit over 37,000 contracts — and there’s only 825 contracts worth of roll-over/switch volume in this precious metal. Net HFT silver volume is just over 9,800 contracts — and there’s only 790 contracts worth of roll-over/switch volume on top of that.

The dollar index opened down about 2 basis points once trading commenced at 7:45 p.m. in New York on Tuesday evening, which was 7:45 a.m. China Standard Time on their Wednesday morning. Its current high tick, such as it is, came around 9:15 a.m. CST — and it has been heading quietly lower since. And as of 7:45 a.m. BST in London/8:45 a.m. CEST in Zurich, the index is down 3 basis points.


We’ll find out later today what the men behind the curtain at the Eccles Building have decided — and it’s a given that just about every indice that matters will ‘react’ in some way.  That includes the precious metals of course.  I’d suspect that we’re all hoping for up, but by how much remains to be seen — and will JPMorgan et al show up and spoil the party?  We’ll find out soon enough.

Yesterday, at the close of COMEX trading, was the cut-off for this Friday’s Commitment of Traders Report.  Looking at the last five dojis on the 6-month charts above, I’m not prepared to stick my neck out, especially considering that the trading week contained a roll-over sequence out of one month — and into another.  So nothing will surprise me when I get my first look at 3:30 p.m. EDT on that date.


And as I post today’s column on the website at 4:02 a.m. EDT, I note that the gold price was tapped lower once trading began in London — and as the the first hour of trading ends, gold is currently back at unchanged on the day. Silver was sold lower starting at 2 p.m. CST in Shanghai — and that sell-off continued through the London open — and it’s down 11 cents. And as the first hour of London/Zurich trading ends, palladium is up only 4 dollars — and palladium by 14.

Gross gold volume in October and December combined is a bit over 48,000 contracts — and minus roll-over/switch volume, net HFT gold volume is a bit over 46,000 contracts. Net HFT silver volume is up to 12,600 contracts — and there’s still only 869 contracts worth of roll-over/switch volume in that precious metal.

The dollar index hit its current low tick at 2:20 p.m. CST, which was probably the same time as the afternoon gold fix in Shanghai. It has rallied a tiny handful of basis points since then — and as of 8:45 a.m. in London/9:45 a.m. in Zurich, the index is up 3 basis points.

That’s it for today, as we all await ‘The Word’ from the Fed.

See you here tomorrow.

Ed