Another Rally in Morning Trading in the Far East Snuffed Out

07 August 2019 — Wednesday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price jumped higher the moment that trading began at 6:00 p.m. EDT in New York on Monday evening, but ran into the usual set of not-for-profit sellers immediately — and the low tick of the day was set shortly after 12 o’clock noon in Shanghai on their Tuesday morning.  From that juncture it crawled quietly and unevenly higher until trading ended in New York at 5:00 p.m. EDT.

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

Gold finished the Tuesday session at $1,474.00 spot, up $10.60 on the day.  Net volume for October and December combined was way up there once again at around 377,500 contracts — and there was a bit under 13,500 contracts worth of roll-over/switch volume in this precious metal.

Silver’s rally attempts in Far East trading on Tuesday met the same fate as the identical rallies in gold, except the low tick in it was set at 11 a.m. BST in London.  From that point the silver price also crawled unevenly higher until 5:00 p.m. EDT in New York.

The high and low ticks in this precious metal really aren’t worth looking up, either.

Silver finished the Tuesday session at $16.425 spot, up 7 cents from Monday.  Net volume was fairly decent at 61,500 contracts…which may be the new normal these days — and there was 11,500 contracts worth of roll-over/switch volume out of September and into future months.

It was mostly the same for platinum in morning trading in Shanghai — and from there, it edged unevenly sideways until JPMorgan et al. appeared at the COMEX open.  It was sold down hard from that juncture until Zurich closed at 5:00 p.m. CEST/11:00 a.m. EDT in New York.  It rallied quietly from there until minutes after 4 p.m. in the thinly-traded after-hours market — and didn’t do much of anything after that.  Platinum was closed at $850 spot, down 3 bucks from Monday.

Palladium developed a slightly positive price bias right from the 6:00 p.m. New York open onwards on Monday evening, but the rally turned much more choppy starting at noon CST.  Then, like on Monday, the palladium price began to rally during the last thirty minutes going into the run-up to the COMEX open in New York.  And also like on Monday, ‘da boyz’ were laying in wait — and it was sold lower until a few minutes after 10 a.m. EDT.  It didn’t do much for the next hour, but began to creep higher from that point until 1 p.m.   From there it traded virtually ruler flat until trading ended at 5:00 p.m. EDT.  Palladium finished the day at $1,421 spot, up an even 20 bucks from Monday.

The dollar index closed very late on Monday afternoon in New York at 97.52 — and opened down a chunky 28 basis points once trading commenced at 7:45 p.m. EDT on Monday evening, which was 7:45 a.m. China Standard Time on their Tuesday morning.  About fifty minutes after the open it began to head higher — and that rally lasted until around 12:10 p.m. in Shanghai.  At that juncture it was up 16 basis points — and from there it chopped very quietly and very unevenly sideways until trading ended at 5:30 p.m. in New York on their Tuesday afternoon.  The dollar index finished the day at 97.63 — up 11 points from Monday’s close.

Here’s the daily DXY chart…courtesy of the folks over at bloomberg.comclick to enlarge.

And here’s the 6-month U.S. dollar index chart, courtesy of the fine folks over at the stockcharts.com Internet site.  The delta between its close…97.42…and the close on the DXY chart above, was 21 basis points on the Tuesday. Click to enlarge as well.

The gold stocks gapped down a bit at the open in New York on Tuesday morning, but that didn’t last long.  They began to rally a few minutes later — and their respective highs came around 10:35 a.m. EDT.  From that point they chopped quietly lower — and back into negative territory.  Another rally commenced about 2:40 p.m. — and that lasted until trading ended at 4:00 p.m. in New York.  The HUI managed to close in positive territory by a bit…up 0.49 percent on the day.  I was underwhelmed.

The price path for the silver equities was virtually identical to the one for the gold shares, except their initial sell-off was a bit deeper — and the sell-off that began around 10:45 a.m. EDT went deeper as well.  The ensuing rally that began at their afternoon lows, wasn’t strong enough to lift the shares back into positive territory, but they came close.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down only 0.34 percent.  Click to enlarge if necessary.

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

The CME Daily Delivery Report for Day 6 of August deliveries showed that 19 gold and 54 silver contracts were posted for delivery on Thursday.

In gold, there were five short/issuers in total.  The two biggest were Advantage and International F.C. Stone with 6 contracts each out of their respective client accounts.  There were four long/stoppers.  JPMorgan picked up 7 for its client account — and Citigroup and Macquarie Futures stopped 6 and 4 contracts for their respective in-house/proprietary trading accounts.  In fourth spot was Advantage with 2 contracts for its client account.

In silver, the three short/issuers were ADM, ABN Amro and Advantage, with 24, 21 and 9 contracts…all from their respective client accounts.  There four long/stoppers.  JPMorgan, ABN Amro and Advantage picked up 22, 13 and 10 contracts for their respective client accounts…and in fourth spot was Australia’s Macquarie Futures stopping 9 contract for its own account.

I’m surprised how slowly the delivery month is unfolding…particularly in gold.

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 August dropped by 144 contracts, leaving 2,754 still around, minus the 19 mentioned a few paragraphs ago.  Monday’s Daily Delivery Report showed that 92 gold contracts were actually posted for delivery today, so that means that 144-92=52 gold contracts vanished from the August delivery month.  Silver o.i. in August declined by 7 contracts, leaving 407 still around, minus the 54 mentioned a few paragraphs ago.  Monday’s Daily Delivery Report showed that 51 silver contracts were actually posted for delivery today, so that means that 51-7=44 more silver contracts just got added to August.


There were more deposits into both GLD and SLV on Tuesday.  An authorized participant added 56,587 troy ounces of gold to GLD — and another a.p. added a hefty 2,994,643 troy ounces to SLV.

In the other silver ETFs, there was 723,475 troy ounces added to Deutsche Bank’s XAD6 fund.

There was another tiny sales report from the U.S. Mint yesterday.  They sold 1,000 troy ounces of gold eagles — and 500 one-ounce 24K gold buffaloes.

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

The only activity in silver on Monday was the one truckload…600,251 troy ounces… that was shipped out of CNT.  The other activity was a big paper transfer from the Registered category and back into Eligible…1,284,755 troy ounces… and that occurred at CNT as well.  In my conversation with Ted yesterday, he certainly felt that this silver belonged to JPMorgan’s customers — and was being transferred from one category to the other because of the cheaper storage fee that’s charged in the Eligible category.  The link to all this is here.

There was only a little bit of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Monday.  Nothing was reported received — and only 51 kilobars were shipped out.  That activity, as usual, was at Brink’s, Inc. — and I won’t bother linking it.


Here are two charts that Nick passed around on Sunday.  They show India’s gold and silver imports, updated with June’s dataDuring that month they imported 61.74 tonnes/1.98 million troy ounce of gold — and a hefty 865.4 tonnes/27.82 million troy ounces of silver. That’s a lot of silver!  Click to enlarge for both.

I only have  tiny handful of stories/articles for you today.


CRITICAL READS

What the U.S. Government Isn’t Telling You About the Trade War With China — Bill Bonner

Stocks lost $1.4 trillion in value over the last four trading days. The press is reporting it as a “monster bloodbath.”

Bloodbath? Today, the Dow is still over 25,000. Investors still expect more rate cuts. And most still think the master deal maker, Donald J. Trump, will strike a deal with China in time to boost the stock market for the 2020 election.

But the whole ball of trade wars, Federal Reserve rate cuts, currency manipulation, inverted yield curves, and negative yields is so tangled up in deception and claptrap it is almost impossible to unravel.

Less than a week ago, the Fed cut interest rates in an “insurance” move. But insurance against what? A recession? A bear market?

Can a weatherman insure against winter?

If investors had thought about it more, they might have realized that there is no way the Fed can insure against a correction. The Fed can only delay it and make it worse.

This commentary from Bill appeared on the bonnerandpartners.com Internet site early on Tuesday morning EDT — and another link to it is here.


Traffic Declines Across U.S. Railroads Signals Broad Industrial Slowdown

New data from the Association of American Railroads (AAR) reported U.S. Class I rail traffic for the week ended July 27, of 534,498 carloads and inter-modal containers, down 4.4% compared with the same week last year, reported Railway Age.

The slowdown in rail traffic is the result of a broad-based industrial downturn that is hitting American manufacturers, originating from Asia and Europe as a global synchronized structural decline. Trade disputes between the U.S. and China have accelerated the downturn on almost every continent, sending world trade volumes lower.

Total carloads for the week were 261,706 carloads, declined 3.5% YoY, while U.S. weekly inter-modal container volume was 272,792 for the week, slipped 5.3% YoY.  Click to enlarge.

About 70% of carload commodity groups posted negative YoY change versus the same week in 2018. Only nonmetallic minerals, petroleum and petroleum products, and “other” posted gains for the same week in 2018.

For the first 30 weeks of 2019, railroads reported the cumulative volume of 7,549,879 carloads, down 3.2% from last year. Inter-modal containers for the first 30 weeks posted 7,963,475 units, down 3.6% from last year. All rail traffic combined for the first 30 weeks this year was 15,513,354 carloads and inter-modal container units, a drop of 3.4% compared to last year.

One of the main reasons behind the sudden rail decline in the US could be the broad-based industrial slowdown that started shifting U.S. manufacturing PMIs lower in late 2018.

Rail freight is alternative data that gives us a more transparent measurement of what’s happening in the real economy, without government numbers that could be significantly altered for a political agenda

The decline in rail freight is an ominous sign that the economy is headed for a cycle of vulnerability that could trigger a shock so great that a recession would shortly follow.

This news item showed up on the Zero Hedge website at 2:50 p.m. EDT on Tuesday afternoon — and I thank Brad Robertson for this one.  Another link to it is here.


Negative Yield Debt Hits Record $15 Trillion, Up $1 Trillion in 2 Business Days

Negative debt implies a negative time preference. In the real world, that cannot happen.

In easy to understand terms, negative time preference means someone would rather have 90 cents ten years from now than a dollar today.

Such a construct is only possible with massive central bank intervention.

This article is a series of Tweets about the insanity in the bond market.  It was posted on Mish Shedlock’s website on Tuesday sometime — and I thank Richard Saler for sending it our way.  Another link to it is here.  A parallel Bloomberg story on this issue is headlined “UBS’s Rich Clients to Feel Negative Rates as Fees Extended” — and I found that in a GATA dispatch yesterday.  And Gregory Mannarino’s 11:30 minute rant from Tuesday is linked here…thanks to Roy Stephens.


Robbers steal millions in gold coins from Mexican mint

Mexico’s security ministry announced on Tuesday that an armed group of robbers broke into the nation’s mint, stealing the equivalent of 50 million Mexican pesos (€2.23 million, $2.5 million) in gold coins.

The announcement came after sources from the Department of Finance and Public Credit confirmed the crime to news agency EFE.

According to a Mexico City police report, two people, one with a firearm, broke into the mint after throwing a security guard to the ground and taking his gun.

One of the robbers then went to an open vault and filled a backpack with 1,567 gold coins. The robbers then carried the gold centennials directly from the scene.

Officials from Mexico City’s Secretariat for Citizen Security are currently in the testimonial process of the case.

Officials from the government coin manufacturer are suspected of assisting the robbers.

This gold-related news item showed up on the dw.com Internet site on Tuesday sometime — and I found it on the gata.org Internet site in the wee hours of Wednesday morning EDT.  Another link to it is here.


The PHOTOS and the FUNNIES

These four photos are the last from our trip to Chase via the back road on the north side of the South Thompson River on May 25.  The first is a just a landscape shot with wild lupins and yarrow flowering in the foreground.  The next two are shots of a horse chestnut in flower in someone’s yard on the main drag in Chase — and the last is a pastoral sort of picture looking southwest down the South Thompson River  three kilometers or so out of Chase as the day ends.  Click to enlarge.


The WRAP

Except for the fact that the rallies in silver and gold in morning trading in the Far East weren’t allowed to go anywhere, it was a fairly quiet trading session in both metals on Tuesday — and both were allowed to close in positive territory.  It should also be noted that the palladium price didn’t get pushed back below $1,400 spot.

Here are the 6-month charts for the four precious metals, plus copper and WTIC.  Gold is now a bit further into overbought territory, but silver has a ways to go.  Copper appears to be in a bottoming pattern, as Friday’s COT Report will certainly show that the Managed Money traders now hold a new record short position in that metal.  WTIC was closed at a new low for this move down, but is not even close to being in oversold territory.  Click to enlarge.

And as I type this paragraph, the London open is less than a minute away — and I note that the gold price edged unevenly higher until 9 a.m. China Standard Time on their Wednesday morning — and then jumped a bit higher until a few minutes before 10 a.m. CST. It was sold quietly lower from that point until a few minutes before 2 p.m. over there — and has been heading rather sharply higher since. But once it broke above $1,490 spot, it was smacked down a bit — and as London opens, gold is up $11.60 the ounce. It was the same price path for silver — and it’s rally at 9 a.m. CST, like the one in gold, had most of the hallmarks of a short-covering rally. That also ended a few minutes before 10 a.m. CST — and after that it followed the gold price to the tick — and is up 25 cents currently. Platinum had an up/down move that took it back below unchanged by 2 p.m. CST, it has ticked a bit higher since — and is up a dollar at the moment. Palladium’s high tick also came a few minute before 10 a.m. CST — and was then sold very unevenly lower until 2 p.m. CST as well and, like platinum, is off that low by a bit, but still down 5 dollars as Zurich opens.

Net HFT gold volume in October and December combined is already enormous at around 134,500 contracts — and there’s only a tiny 1,340 contracts worth of roll-over/switch volume on top of that. Silver’s net volume is sky high as well at a bit over 32,500 contracts — and there’s also 3,958 contracts worth of roll-over/switch volume out of September and into future months.

The dollar index opened down 7 basis points once trading commenced at 7:45 p.m. EDT in New York on Tuesday evening, which was 7:45 a.m. China Standard Time on their Wednesday morning. It chopped quietly lower from that juncture — and its current 97.43 low tick was set around 9:50 a.m. in Shanghai, which was the end of the rallies in all four precious metals. It has been edging unevenly higher since — and is now down only 3 basis points as of 7:45 a.m. BST in London/8:45 a.m. CEST in Zurich.


Yesterday, at the close of COMEX trading, was the cut-off for this Friday’s Commitment of Traders Report — and companion Bank Participation Report, so none of this morning’s price action in the Far East will be in it.

Just eye-balling the last five dojis in gold and silver on the above charts, I’m expecting that there might be some decrease in the Commercial net short position in silver, but a rather sizeable increase in gold.  But Ted is the real authority on this — and will have his thoughts on this in his mid-week column today.  I’ll ‘borrow’ a few sentences for my Friday missive.


And as I post today’s column on the website at 4:02 a.m. EDT, I see that the gold price continues to struggle higher, but is off its current high tick — and as the first hour of London trading draws to a close, gold is up $11.20 an ounce. Ditto for silver — and it’s up 26 cents. Platinum is now up 4 bucks — and palladium is down only 1 dollar as the first hour of Zurich trading ends.

Gross gold volume in October and December combined is gargantuan for this time of day at around 159,500 contracts — and minus what little roll-over/switch volume there is, net HFT gold volume is a bit over 156,500 contracts. Net HFT silver volume continues to climb steadily as well — and is sitting at around 36,300 contracts — and there’s 4,253 contracts worth of roll-over/switch volume out of September and into future months.

The dollar index barely made it above the unchanged mark by the 8:00 a.m. London open — and has faded a bit since — and is now down 4 basis points as of 8:45 a.m. BST/9:45 a.m. CEST.

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

Ed