A Nice Rally in the Silver Equities on Thursday

09 August 2019 — Friday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The tiny rally attempts in gold in Far East trading on their Thursday morning were all turned quietly lower, as was the tiny one going into the 2:15 p.m. China Standard Time afternoon gold fix in Shanghai.  From that point the gold price crawled quietly lower until 9 a.m. in New York — and from there, it crept higher until 1 p.m. EDT.  The rally became a bit more intense at that juncture — and that was allowed to last until around 2:50 p.m. in after-hours trading.  It was sold quietly lower until shortly after 4:30 p.m. — and didn’t do much after that going into the 5:00 p.m. EDT close.

The low and high in gold in the October contract was reported as $1,495.50 and $1,514.90 — and in the December contract, they were $1,501.60 and $1,521.30.

Gold was closed in New York on Thursday at $1,500.70 spot, down 20 cents from Wednesday.  Net volume in October and December combined was just about 403,000 contracts — and there was around 11,500 contracts worth of roll-over/switch volume in this precious metal.

The price pattern in silver was mostly similar — and once the afternoon gold fix was done in Shanghai on their Thursday afternoon, it was sold quietly lower until the 8:20 a.m. COMEX open in New York.  The low tick was set at precisely 9 a.m. EDT – and from that point, the price path in silver was identical to gold’s for the remainder of the Thursday session.

The high and low ticks in silver were reported by the CME Group as $17.225 and $16.81 in the September contract.

Silver was closed yesterday afternoon in New York at $16.89 spot, down 19 cents from Thursday — and back below $17 spot.  Net volume was enormous, as almost always seems to be the case these days, at a bit under 101,000 contracts — and there was 25,500 contracts worth of roll-over/switch volume out of September and into future months.

And just FYI, here’s the New York Spot Silver [Bid] chart from Kitco that shows the precision of the 9:00 a.m. low tick in that precious metal.  There’s nothing free market about it.

After an up/down move that lasted until the 2:15 p.m. CST afternoon gold fix in Shanghai, the platinum price was sold down hard, with the low tick of the day also coming at 9 a.m. in New York.  It rallied back nicely from there — and the high tick was set a few minutes before 3 p.m. in the thinly-traded after-hours market.  Platinum finished the Thursday session at $863 spot, up 1 whole dollar from Wednesday’s close.

Palladium’s price was all over the map on Thursday.  Its rally in New York was stopped at the morning gold fix in London…10 a.m. EDT…and once Zurich closed, it was sold unevenly lower until trading ended at 5:00 p.m. in New York.  Palladium was closed at $1,398 spot up a 1 buck from Wednesday.

The dollar index closed very late on Wednesday afternoon in New York at 97.54 — and opened up 5 basis points once trading commenced at 7:45 p.m. on Wednesday evening, which was 7:45 a.m. China Standard Time on their Thursday morning.  From that juncture, it really didn’t do much of anything until about fifteen minutes before the London open.  It began a bit of a roller coaster ride around the unchanged mark at that point — and by the time trading was done at 5:30 a.m. in New York, the dollar index was pretty much back where it started, closing at 97.62…up 8 basis points from Wednesday’s close.

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 good folks over at the stockcharts.com Internet site.  The delta between its close…97.43…and the close on the DXY chart above, was 19 basis points on Thursday.  Click to enlarge as well.

The gold stocks gapped down well over two percent at the open, but at that point strong buying appeared — and that lasted until around 3:20 p.m. in New York trading, which was about twenty minutes after the high tick in gold was set.  From there they sold off a bit into the 4:00 p.m. close.  The HUI closed up 0.88 percent.

The silver equities gapped down just under two percent at the open — and that panic sell-off was met by even stronger buying pressure than appeared in the gold shares.  The rally ended at the same time as it did for the gold stocks — and they edged a hair lower into the close.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index finished higher by 2.65 percent.  Click to enlarge if necessary.

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

It certainly wasn’t your average retail investor buying the precious metal equities on Thursday, as they were the ones selling in a panic at the 9:30 a.m. EDT open.  No, these were ‘strong hands’/deep pocket buyers — and I was certainly happy to see it.


The CME Daily Delivery Report for Day 8 of the August delivery month showed that 18 gold and 147 silver contracts were posted for delivery with the COMEX-approved depositories on Monday.

In gold, the two short/issuers were International F.C. Stone and ADM, with 16 and 2 contracts out of their respective client accounts.  There were four long/stoppers in total — and the two biggest were JPMorgan and Citigroup…the former stopping 7 contracts for its client account — and the latter picking up 6 contracts for its own account.

In silver, the three short/issuers were ABN Amro, Advantage — and ADM, with 76, 57 and 14 contracts…all out of their respective client accounts.  The three largest of the four long/stoppers were JPMorgan, ABN Amro and Advantage, with 61, 44 and 34 contracts for their respective client accounts as well.

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

The CME Preliminary Report for the Thursday trading session showed that gold open interest in August declined by 122 contracts, leaving 2,418 still around, minus the 18 mentioned a few short paragraphs ago.  Wednesday’s Daily Delivery Report showed that 6 gold contracts were actually posted for delivery today, so that means that 122-6=116 more gold contracts vanished from the August delivery month.  Silver o.i. in August fell by 180 contracts, leaving 256 still open, minus the 147 mentioned a few paragraphs ago.  Wednesday’s Daily Delivery Report showed that 326 silver contracts were actually posted for delivery today, so that means that 326-180=146 more silver contracts just got added to August.

August gold deliveries continue to creep along at glacial speed — and deliveries in silver for this month keep rising at an eye-opening rate.  Very unusual.

There was a withdrawal of some size from GLD yesterday, as an authorized participant took out 179,189 troy ounces — and whether or not that was a normal withdrawal, or an exchange of GLD shares for physical metal is hard to tell.  However, it does seem rather counterintuitive…all things considered.  There was a deposit into SLV, as a.p. added 1,403,703 troy ounces.  It’s a very good bet that both of these ETFs are owned decent amounts of physical metal, especially after the price activity on Wednesday.

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

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

But that wasn’t the case in silver, as 1,205,236 troy ounce was reported received — and 342,010 troy ounces were shipped out.  And except for 9,563 troy ounces that was shipped out of the International Depository Services of Delaware…all of the rest of the in/out activity took place over at CNT.  There was also a paper transfer of 1,200,451 troy ounces from the Eligible category — and into Registered.  That occurred at CNT as well — and is most likely destined for delivery in August, as that amount only represents about 240 COMEX contracts.  The link to all this activity is here.

There wasn’t much activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Wednesday.  They didn’t receive any — and shipped out 50 of them.  This activity was at Brink’s, Inc. of course — and I won’t bother linking it.


Here are two charts that I dug up on Nick’s website.  Now that India has reported its gold imports for June, here is the updated ‘Silk Road Gold Demand’ chart…showing the four largest importers of gold.  There are quite a few other countries on the ‘Silk Road’, but their overall demand is somewhat immaterial.  Since 1995 these countries have imported 40,000+ tonnes of gold.  And as you can see from the small insert chart at the bottom, these four countries have taken up virtually all of the newly-mined gold in the world each and every year for about the last six years.  Click to enlarge.

And here’s a chart that shows the Silk Road Gold Demand for Month 6/June of these same four countries — and it’s pretty impressive.  Click to enlarge as well.

And it should be most carefully noted that if China’s true gold reserves were suddenly made public, both these above charts would look radically different, as it’s widely acknowledged that they’re holding far more reserves than they’re letting on.

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


CRITICAL READS

Gold Tells Us the Stock Market’s True Condition — Bill Bonner

The feds can fool some of the people some of the time, and they can fool stock market investors almost all the time. But they can’t fool gold.

Gold is real money. Yes, it gets overexcited once in a while… and it tends to exaggerate. But over time, it faithfully records what things are worth. And right now, it’s telling us that the stock market is worth less than half of what it was worth 20 years ago.

We will pause to let you absorb that info-grenade.

If we’re right about this, it tells us what we’ve long suspected… that from an economic perspective, the whole 21st century has been a bust.

America’s most precious capital – its leading industrial companies – has lost half its capital value. Whizzbang technology has gained these companies nothing.

Wall Street has been unable to add a single penny. The feds, the manipulators with PhDs at the Federal Reserve, and the genius elite have totally failed to produce a richer society. Instead, they’ve produced a poorer one.

Could it be? Could that be right? What are we missing?

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


Bonds, Gold Bid As Italian Political Crisis Re-Emerges: Salvini Demands Fresh Elections

Italy’s ruling party leader Matteo Salvini has just written in a note:

We are going to Parliament immediately to acknowledge that there is no longer a majority, as is evident from the vote on the Tav, and we quickly return the word to the voters.”

…it is pointless for government to go ahead amid continuous quarrels.”

Salvini went on to say that he has told PM Conte that “it is necessary to formalize the crisis in parliament” following a failed vote on a new railroad link with France, and demanded “fresh elections.”

De Maio confirmed, via Ansa, that Five Star is ready for a vote.

Italian equity markets are sliding (MSCI ETF as local markets closed).

As The Telegraph notes, “The League has by far the most to gain from fresh elections – its public support has more than doubled since last year from 17% to around 38%. After riding a wave of optimism during the general election last year, Five Star is now polling just 17% – half what it won at the election.  If the League were to ally with other Right-wing parties such as Brothers of Italy and Silvio Berlusconi’s Forza Italia, the bloc would win more than 50% of the vote, polls suggest.”

As we detailed earlier, Italy is about to have an express date with political chaos again.

Overnight, Italian bond yields spiked following the latest media reports that Deputy PM, and Italy’s defacto leader, Matteo Salvini had issued a Monday ultimatum to shake up the cabinet and threatened that if his partners in the Five Star Movement don’t yield to his demands he’ll dissolve the government.

While hardly new, threats from Italy’s de facto leader to his Five Star government alliance “partners” have been escalating in severity in recent days, urging that either they stop trying to delay his agenda or he’s ready to pull the plug on the government and try to force early elections. Salvini, the League party leader, has called for deep tax cuts and investments, even if they fall afoul of European Union rules.

Italian bonds took another leg lower after reports that PM Conte was set to meet with President Mattarella, ahead of the coming government collapse and subsequent elections that will assure that Salvini is Italy’s undisputed leader, one who no longer need a coalition partner to govern.

This news item put in an appearance on the Zero Hedge website at 2:20 p.m. on Thursday afternoon EDT — and I thank Richard Saler for sending it our way.  Another link to it is here.


Smugglers make hay as Indian govt hikes import duty on gold

With the Indian government jacking up import duty on gold, smuggling of the yellow metal from Persian Gulf countries, Singapore and Malaysia is in full swing.

Ever since customs duty on the precious metal was raised from 10 per cent to 12.5 per cent on July 5 in a desperate attempt to narrow the fiscal deficit, not a day passes without the arrest of gold-runners by eagle-eyed officials at one airport or the other in the country.

While techno-savvy customs sleuths at Kochi (Kerala) on August 6 busted a gang of six who had sneaked in 25 kg of gold bars from Dubai in the past few days, Sri Lankan officials collared six Chennai-bound Indian tourists carrying contraband gold worth Rs 17 million, at an international airport on August 4.

On August 3, even as gold prices zoomed to almost Rs 37,000 per 10 gram, seven gold biscuits worth Rs 2.9 million were recovered from a passenger, who had arrived at New Delhi from Dammam (Saudi Arabia), and his accomplice, an employee of Air India SATS, a joint venture between Air India Limited and Singapore-based SATS Limited.

What’s more, whip-smart contrabandists have hit upon novel tricks to bamboozle even alert law-keepers for pushing gold into India. If three women who had travelled from Colombo with gold paste concealed in plastic sheaths in their rectum were hauled up at Bengaluru airport, 2 kg of gold in paste form hidden in a waist band and floppy slippers was confiscated from a frequent flyer who had landed at Kochi from Dubai.

Indeed, among other ingenious modus operandi, smugglers have of late been hiding gold in toys, radios, bag handles, brass pipes, induction cookers, damaged chairs, emergency lights, vacuum cleaners, and hidden cavities of cars to throw dust in the eyes of the airport officials.

No wonder, members of the all-India Jewellery Trade Council (GJF) recently met federal finance minister Nirmala Sitharaman in New Delhi and told her that the import duty hike would only encourage gold smuggling, and pointed out that 300 tonnes of gold was being brought into India through unofficial channels, leading to huge revenue losses.

This long, interesting — and photo-filled gold-related news item appeared on the connectedtoindia.com Internet site on Wednesday sometime.  I found it on the Sharps Pixley website — and another link to it is here.


Central banks change their policy on gold but not their madness — Chris Powell

Over a weekend in April six years ago, without any corresponding news, the gold price was smashed out of the blue for nearly $200. For months before the smash analysts often said that China had put a floor under the gold price, buying whatever it could to hedge its U.S. dollar exposure without pushing gold’s price up too much.

That analysis made sense, since, with its estimated $3 trillion in foreign-exchange reserves, mostly in U.S. dollar instruments, China was in a position to control any market on the planet.

But over that weekend in April six years ago the supposed Chinese floor under gold disappeared. Regardless of how much gold China had been buying, no collapse of that size could have happened in any major international market without China’s cooperation or consent.

The gold smash was clearly a coordinated intervention by central banks. So soon there was speculation that the central banks had decided that the gold price was getting away from them too fast, particularly for China’s dollar-hedging purposes.

Now, over the last week, gold and silver prices have been spiking dramatically and unprecedentedly, and central bank intervention against gold seems to be diminishing. This is suggested by the gold-trading footnotes in the monthly reports of the Bank for International Settlements, as well as by the lapsing of the European Central Bank’s gold sales agreement with its members. The decline in intervention may result in part from the exhaustion of central bank gold available for intervention, just as the collapse of the London Gold Pool in 1968 was caused by exhaustion of the gold reserves of the participating Western central banks.

So who is buying the gold?

Central banks not so closely allied with the United States have announced substantial purchases in the last couple of years, and over the last eight months even most-secretive China has resumed announcing purchases, if small ones that may represent only a fraction of that nation’s purchases. Of course China still has a huge foreign-exchange reserve in dollars with which it can dominate any market, at least for a significant time.

So either central banks now are divided on policy toward gold or they no longer want or are able to suppress the price with sales, leases, swaps, and futures market intervention. Indeed, with even President Trump clamoring for a cheaper U.S. dollar, the gold policy of the U.S. government itself may have changed, though the government long has refused to say what its gold policy is.

This worthwhile commentary from Chris was posted on the gata.org Internet site on Wednesday — and another link to it is here.


Government Action Will Push Gold Higher — Egon von Greyerz

As I discussed in last week’s article, central banks are now panicking. They know that the world economy and the financial system is standing on a foundation of quicksand. The effects of quicksand is that the harder you try to get out, the deeper you sink. And this will be the next phase for the world economy. Central banks only have two pills at their disposal. One is called money printing and the other is interest rate manipulation.

Since Nixon closed the gold window in 1971, central banks have overdosed these two medicines with ever increasing frequency. The consequences for the world have been disastrous but virtually no one has noticed. For example, the average house in the UK cost £4,700 in 1971. Today the price is £230,000 even though you would only get a shed for that money in South East England. Still, the average price has gone up almost 50x or 4,800%. Let’s say that instead of buying a house, the person put £4,500 in the bank earning 4% per annum for 48 years between 1971 and 2019. Today he would have £30,000 in total, including the interest. So his money in the bank went up 6x whilst the house went up 50x. Obviously, he can’t now afford to buy a house with his savings having lost most of their purchasing power.

This is how savers have been crushed by governments irresponsible destruction of the value of money. Credit expansion and money printing have totally demolished the value of money and also the incentive to save. Today it is even worse for savers since it is no longer possible to earn an annual interest return of 4%. In most European countries, you earn nothing or negative interest. Currently savers thus have to pay a penalty to the government for being thrifty. This is totally outrageous and will soon lead to the destruction of the financial system. As anyone who understands the basics of economics knows, real investment returns come from savings. To achieve real growth and a stable currency, total investments must equal savings.

Most people don’t understand that the value of their money in the pocket is deteriorating all the time. They live under the illusion that prices are going up which is totally erroneous. It is not prices that are going up but the value of money which is declining rapidly. The example of the house above going up 50x in 48 years is a good illustration. In real terms, the house has not gone up in value at all. It is the value of the money that has collapsed in all countries since Nixon closed the gold window.

This interesting and worthwhile commentary from Egon was posted on the goldswitzerland.com Internet site on Thursday sometime — and I thank Phil Manuel for pointing it out.  Another link to it is here.


The PHOTOS and the FUNNIES

Here are three more photos from our stop at the Kettle Valley Railway Othello Tunnels just outside of Hope, B.C. — and as I pointed out in my Thursday column, no photos can do this place justice…at least on the device your looking at them on now.  But on a 65″ flat-screen TV at 22 mega-pixels per photo — and sitting 2 meters/6 feet from the screen, they look far different.  Click to enlarge.


The  WRAP

The gold price was sold back below $1,500 spot shortly after the 2:15 p.m. afternoon gold fix in Shanghai.  But at 9 a.m. in New York it headed higher and managed to close back above that price mark.  It was the same for silver at the $17 spot mark, but ‘someone’ was there to make sure, it didn’t close back above it by the 5:00 p.m. close yesterday.

Here are the 6-month charts for the Big 6 commodities.  Gold is still hugely overbought, but silver managed to dip below that after Thursday’s price activity.  And as you can see, platinum and palladium didn’t do much.  Copper has been crawling off its Monday low tick ever day since then — and WTIC closed up a bit.  Click to enlarge.

And as I type this paragraph, the London open is less than a minute away — and I note that gold’s rally attempt at the 6:00 p.m. open in New York on Thursday evening, was met by ‘da boyz’ right away — and from there it chopped sideways until shortly before the 2:15 p.m. CST afternoon gold fix in Shanghai.  It was sold down about four bucks and change at that juncture, but is off its current low — and is only up $2.00 an ounce at the moment.  Silver crept unevenly higher until shortly before noon CST — and then didn’t do much until shortly before 2 p.m. over there.  It jumped up a bit at that point — and was up 18 cents, but JPMorgan et al. worked their magic — and sold it back to unchanged.  It has rallied a bit since — and is up 4 cents currently.  Platinum was up a buck by around 1:30 p.m. CST — and it go the same treatment as both silver and gold — and is now down 3 dollars.  Palladium was up 11 dollars by shortly before 1 p.m. in Shanghai, but it was sold lower as well — and is only up 4 bucks as Zurich opens.

Net HFT gold volume in October and December combined is a bit under 75,000 contracts — and there’s only 1,025 contracts worth of roll-over/switch volume on top of that.  Net HFT silver volume is a bit under 22,500 contracts — and there’s 2,335 contracts worth of roll-over/switch volume out of September and into future months.

The dollar index opened down 5 basis points once trading commenced at 7:45 p.m. in New York on Thursday evening, which was 7:45 a.m. China Standard Time on their Friday morning.  It’s current low tick, such as it is, came about 1:50 p.m. CST — and it has moved a bit higher since — and is down 2 basis points as of 7:45 a.m. BST in London/8:45 a.m. CEST in Zurich.  I guess that 7 basis point ‘rally’ off its current low tick was all the excuse ‘da boyz’ needed to turn the precious metals sharply lower.


Today we get the latest Commitment of Traders Report — and companion Bank Participation Report for positions held at the close of COMEX trading on Tuesday.  I’m on record as stating that we’ll see a decent increase in the commercial net short position in gold, but wasn’t about to take a stab at what the silver number would look like.

Silver analyst Ted Butler had this to say in his mid-week column to his paying subscribers on Wednesday…”At least through yesterday’s close and the cutoff for the reporting week, I don’t detect any move by the big shorts to stop adding shorts or to begin buying back existing shorts. Accordingly, I would expect significant new commercial shorting in gold in Friday’s new COT report given the $40+ gain over the reporting week and the sharp increase in total open interest of 37,000 contracts. It’s possible that there was some commercial short covering in [Wednesday’s] trading, but it’s way too soon to know for sure. Silver, on the other hand, didn’t do anything price-wise during the reporting week — and total open interest remained unchanged, so I wouldn’t expect much overall positioning change in Friday’s report.”


And as I post today’s column on the website at 4:02 a.m. EDT, I see that the gold price has faded a bit more during the first hour of London trading — and is currently up only 80 cents the ounce . The silver price has recovered a bit — and is now up 9 cents. Platinum is up 2 bucks — and palladium is still up 4 dollars as the first hour of Zurich trading draws to a close.

Gross gold volume in October and December combined is a bit over 91,500 contracts — and minus what little roll-over/switch volume there is, net HFT gold volume is a bit over 88,500 contracts. Net HFT silver volume is now up to a hair over 26,000 contracts — and there’s 2,454 contracts worth of roll-over/switch volume out of September and into future months.

The dollar index hasn’t done much during the first hour of London trading — and is down 3 basis points as of 8:45 a.m. in London/9:45 a.m. in Zurich.

That’s it for today.  Have a good weekend — and I’ll see you here tomorrow with my longest report of the month.

Ed