Gold & Silver Rise…Their Shares Get Shorted…Again

13 August 2019 — Tuesday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


NOTEMy ISP…Shaw Cable…decided to take our town down for maintenance about twenty minutes before I normally file my column at 4:02 a.m. EDT — and that’s why it’s late today.  — Ed


The gold price opened flat once trading commenced at 6:00 p.m. in New York on Sunday evening — and didn’t do much for the next hour.  Then it rallied back above the $1,500 spot mark by a bit, but a willing short seller appeared at exactly 8:00 a.m. China Standard Time on their Monday morning — and the price was back at unchanged within two hours.  It didn’t do much from there until 2 p.m. — and then the price pressure reappeared — and that lasted until around 8:30 a.m. in London.  It rallied rather smartly from there that juncture until shortly before 1 p.m. BST — and then was sold down to its New York low by a few minutes after 9 a.m.  It rallied a few dollars into the 10 a.m. EDT afternoon gold fix in London — and then traded pretty flat until it began to tick a bit higher around 2:30 p.m. in after-hours trading.  A sharp spike higher [probably short covering] occurred ten minutes later — and that was hammered lower in pretty short order — and the ensuing rally attempt wasn’t allowed to get far.

The low and high ticks in gold were reported by the CME Group as $1,492.40 and $1,513.50 in the October contract — and $1,498.60 and $1,519.90 in December.

Gold was closed in New York on Monday at $1,510.50 spot, up $14.30 from Friday’s closed.  Net volume in October and December combined was very heavy at 352,000 contracts — and there was 10,500 contracts worth of roll-over/switch volume on top of that.

With some minor variations, the price activity in silver was the same as it was for gold…including all the major price inflection points…plus the 2:40 p.m. EDT price spike in the thinly-traded after-hours market.  And it should be noted that, except for that price spike in after-hours trading, the silver price was pretty much in lock-down mode from 11:40 a.m. EDT onwards.

The low and high ticks in silver were reported as $16.80 and $17.075 in the September contract.

Silver was closed on Monday at $17.035 spot, up 11 cents from Friday and, like gold, well of its high tick.  Net volume was on the heavier side, but not overly so at 64,000 contracts — and there was just under 22,000 contracts worth of roll-over/switch volume out of September and into future months.

Those price spikes in gold and silver in after-hours trading yesterday came at the precise moment that the Dow was saved from oblivion…2:42 p.m. EDT.  Coincidence, you ask?  Hardly, as there aren’t any in the precious metals market. Here’s the snip from BloombergClick to enlarge.

The platinum price was up one or two dollars through morning trading in the Far East on their Monday.  But that all changed shortly before 1 p.m. China Standard Time on their Monday afternoon — and the low tick of the day in this precious metal came at the same moment as it did for both gold and silver.  From there it also rallied until both gold and silver topped out…shortly before 2 p.m. in Zurich/1 p.m. in London — and 8:00 a.m. in New York.  Platinum was then sold lower the moment that the COMEX opened for business — and its New York low was set a very few minutes before the Zurich close.  Its attempts to rally back above unchanged from that juncture were all turned aside — and platinum was closed at $855 spot, down 3 dollars on the day.

The palladium price traded flat in Far East trading yesterday, but the price path sideways became far more agitated once Zurich opened — and that lasted until the 8:20 a.m. COMEX open in New York.  Its rally attempt at that point was hammered lower into the afternoon gold fix in London…but the subsequent rally got capped about twenty minutes after the Zurich close.  Then at noon EDT, quiet selling pressure reappeared — and it was sold quietly lower until around 3:30 p.m. in the very thinly-traded after-hours market.  Palladium was closed at $1,413 spot, up 14 bucks on the day — and well off its high tick.

The dollar index closed very late on Friday afternoon in New York at 97.49 — and opened up 5 basis points once trading commenced at 6:30 p.m. EDT on Sunday evening, which was 6:30 a.m. China Standard Time on their Monday morning.  It crept quietly lower from there until around 2:25 p.m. CST on their Monday afternoon — and then a ‘rally’ began at that juncture that topped out at the 97.74 mark around 9:05 a.m. in London.  It was all pretty much down hill from there — and the 97.32 low tick came at 11:15 a.m. in New York.  It gained a bit of that back by 12:15 p.m. EDT — and then crept very quietly and somewhat unevenly lower until trading ended at 5:30 p.m.  The dollar index finished the Monday session at  97.38…down 11 basis points from Friday.

It should be noted that the secondary low in the dollar index in afternoon trading in New York came at the 2:42 mark…the same time as the equity markets were rescued — and when gold and silver both spiked higher.

Here’s the DXY chart, courtesy of Bloombergclick to enlarge.

And here’s the 6-month U.S. dollar index chart, thanks to the folks over at the stockcharts.com Internet site.   The delta between its close…97.32…and the close on the DXY chart above, was 6 basis points on Monday.  Click to enlarge as well.

The gold stocks gapped up a bit at the open, but obviously ran into resistance right away.  Their respective high ticks, such as they were, came at…or just before…the morning gold fix in London — and then, like last Wednesday, a major short seller[s] appeared.  Then, despite how well that gold was doing…including the price spike in after-hours trading…they were more or less driven into the dirt as the Monday trading session progressed.  The HUI was closed down 1.22 percent.

Ditto for the silver equities, so I shan’t repeat myself.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index was closed lower by 1.07 percent.  Click to enlarge if necessary.

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

There’s always a chance that the precious metal equities were being sold in order to raise funds to meet margin calls in the general equity markets yesterday, but I highly doubt it.


The CME Daily Delivery Report for Day 9 of August deliveries showed that 4 gold and 49 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday.

In gold, International F.C. Stone and Advantage issued 2 each from their respective client accounts.  JPMorgan stopped 2 contracts for its client account — and Citigroup picked up 2 for its in-house/proprietary trading account.

In silver, there were three short/issuers in total — and the only two that mattered were Advantage and ABN Amro, with 31 and 15 contracts.  Of the three long/stoppers, the two largest by far were JPMorgan and Advantage, picking up 29 and 15 contracts.  All contracts, both 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 Monday trading session showed that gold open interest in August declined by 202 contracts, leaving 2,183 still around, minus the 4 mentioned a few paragraphs ago.  Friday’s Daily Delivery Report showed that 24 gold contracts were actually posted for delivery today, so that means that 202-24=178 more gold contracts vanished from the August delivery month.  Silver o.i. in August rose again, this time by 20 contracts, leaving 210 still open, minus the 49 mentioned a few paragraphs ago.  Friday’s Daily Delivery Report showed that 81 silver contracts were actually posted for delivery today, so that means that 81+20=101 more silver contracts just got added to August.

COMEX gold contract deliveries for August continue to melt away…but in silver, they’re being aggressively added to the August delivery month.  The rush for physical silver seems to be getting more intense with each passing day and week.


After a decent sized withdrawal from GLD on Friday, there was an even larger deposit on Monday, as an authorized participant added 254,626 troy ounces.  There were no reported changes in SLV.

The folks over at Switzerland’s Zürcher Kantonalbank updated their website with the goings-on inside their gold and silver ETFs as of the close of business on Friday, August 9 — and this is what they had to report.  Their gold ETF added 18,952 troy ounces — and their silver ETF increased by 657,547 troy ounces.

Except for what went on in COMEX warehouse stocks on Friday, there wasn’t much activity in silver in the other ETFs around the world. But a net 282,938 troy ounces of gold was added to various ETFs…and that number includes the net activity from the COMEX warehouses on Friday.

There was a small sales report from the U.S. Mint.  They sold 2,000 troy ounces of gold eagles –and 92,000 silver eagles…the first silver eagle sales in August.

There was a bit of activity in gold over at the COMEX-approved depositories on the U.S. east coast on Friday.  There was 4,510.000 troy ounces/140 kilobars [U.K./U.S. kilobar weight] received at Canada’s Scotiabank.  In the ‘out’ category there was 1,800.456 troy ounces/56 kilobars [SGE kilobar weight] shipped out of Brink’s, Inc.  The link to that is here.

It was busier in silver.  The only ‘in’ activity was one truckload…600,025 troy ounces…that arrived at Scotiabank — and one smallish truckload…550,120 troy ounces…departed Brink’s, Inc.  The only other ‘out’ activity was one good delivery bar…936 troy ounces…that was shipped out of Delaware.  There was some paper action as well.  There was 212,699 troy ounces that was transferred from the Registered category — and back into Eligible over at CNT.  I would assume that Ted would think that this was silver that JPMorgan’s clients just took delivery of — and was transferred from one category to the other to save on storage fees.  The link to all this is here.

There was a bit of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Friday.  There were 200 kilobars reported received — and another 50 were shipped out.  This activity happened over at Brink’s, Inc. — and the link to that, in troy ounces, is here.


Here are the usual two charts that Nick passes around every weekend.  They show the amount of gold and silver that have been deposited in all the world’s know depositories, mutual funds and ETFs, as of the close of business on Friday, August 9th.  During the reporting week, there was 1,038,000 troy ounces of gold added…plus 10,784,000 troy ounces of silver.  Click to enlarge for both.

My back-of-the-envelope calculation based on the silver chart above shows that around 97 million troy ounces of silver have been added during the last eight week time period — and this amount of physical silver just isn’t available in the open market.

Why is that Ted is the only person talking about where all this silver is coming from that’s been going into these ETFs over the last two month?  Just asking.

I have a very decent number of stories and articles for you today.


CRITICAL READS

These Are Truly Historic and Dangerous Times” — David Rosenberg

[Authored by David Rosenberg, chief economist with Gluskin Sheff + Associates Inc. and author of the daily economic newsletter Breakfast with Dave. First published in the Globe and Mail]

We are living in dangerous times.

Mostly, everyone I speak to lives in the here and now. They seem more interested in telling people how crazy cheap the stock market is and how crazy expensive the ‎Treasury market is, rather than trying to look at the current environment in a historical perspective. We are living through a period of history that will be written about in textbooks in years and decades to come, and the undertones are none too good.

Instead of telling people there is no recession, these bulls should be discussing why the markets are busy pricing one in. What do these pundits know that the markets don’t know? We have a bond market in which a quarter of the universe trades at a negative yield. The long bond yield has gone negative in Germany. More than half of the world’s bond market is trading below the Fed funds rate. Investment grade yields, on average, are below zero in the euro area.

This is completely abnormal because it reflects an abnormal economic, financial and political backdrop. Those who point to the stock market’s performance with glee, because of its V-shaped recovery, don’t bother telling you that in the past 12 months the total return is marginal in real terms and the best performing sectors are the ones you can only typically rely on in a deflationary recession – real estate, utilities and consumer staples.

One of the problems coming out of the most recent recession is that the global debt load is infinitely larger now than it was at the peak of that prior credit-bubble cycle. The world is awash in debt. Years of monetary intervention among the world’s central banks created artificial asset-price inflation and exacerbated wealth inequalities at the same time. Fiscal policy failed to arrest the increasingly wide income disparity, a global dilemma that has become acute in the United States.

Think about what I am describing – gold soaring, bonds rallying sharply, an equity market rolling off the highs, deepening racism, and a tariff and currency war.

This sounds a lot like the 1930s to me. Back then it became a real war that cost millions of lives. This war won’t cost lives, but it will cost livelihoods.

This longish but worthwhile commentary by David was posted on the Zero Hedge website late on Sunday evening EDT — and it comes to us courtesy of Brad Robertson.  Another link to it is here.


We’re All Currency Manipulators Now — David Stockman

Call it the monetary theater of the absurd. After all, here is what a determined currency manipulator did between September 2002 and July 2008.

To wit, it pumped about $200 billion of new dollar liabilities into the world financial system, thereby expanding the Fed’s balance sheet by 26%. Clearly, global traders and U.S. trading partners didn’t welcome that flood of freshly minted fiat currency because during the same period, the traded-weighted dollar exchange rate plunged by 25%.

Moreover, there can be little doubt that the severe slump in the U.S. dollar shown below was deliberate. During much of that period, the Fed conducted an aggressive campaign to slash interest rates, goose domestic growth and perk-up the inflation rate. The last objective in particular was the brain child of newly appointed Fed head Ben Bernanke, who falsely warned Greenspan & Co. about the dangers of an imminent “deflation” that never remotely happened.

Needless to say, the impolite word for a policy of suppressing domestic interest rates and goosing inflation is trashing your own currency. All things being equal, foreigners will lighten their dollar holdings and trade the dollar down when authorities promise to reduce its purchasing power and to push yields lower relative to alternatives abroad.

The truth is, the U.S. Federal Reserve is the all-time champion of currency manipulation, and has been ever since Nixon severed the dollar’s tie to gold in August 1971.

That’s because in a fiat currency world, domestic monetary policy is inherently an exercise in currency manipulation: The effects of Fed policy changes (or those of any other significant central bank) are transmitted instantly into external FX and related global financial markets – once the protective moat of a fixed exchange rate is removed.

This loooong commentary from David was posted on the goldseek.com Internet site last Friday — and I found it on the gata.org Internet site.  Another link to it is here.


Bond market close to sending biggest recession signal yet

As Wall Street economists up the odds for a recession in the coming year, the bond market is sending its own scary warning about an economic downturn.

Various parts of the yield curve have been inverted, but the traditionally watched 2-year to 10-year spread looks set to invert any day now, with the curve at its flattest level since 2007.

The 10-year yield, at its low yield of 1.64% Monday came less than 6 basis points above the 2-year yield, which was at 1.58% in afternoon trading. The spread broke below 10 basis points last week. An inverted curve simply means a shorter-term interest rate is higher than the longer-term one that it is being compared too, and that inversion has been a reliable recession signal.

It’s the whole idea that the Fed is making a mistake. There’s more fear that the Fed is going to be slow in making moves, and the economy is going to to into recession,” said Andrew Brenner, National Alliance head of international fixed income.

This news item, which really shouldn’t be ‘news’ to anyone, showed up on the cnbc.com Internet site early on Monday afternoon sometime — and I thank Swedish reader Patrik Ekdahl for his first offering in today’s column.  Another link to it is here.  And here’s Gregory Mannarino’s post-market closing rant on this very issue — and it’s linked here.  I thank Brad Robertson for that one.


U.S. Surpasses Entire 2018 Budget Deficit With Two More Months to Go in 2019

There were no surprises in the U.S. budget deficit for July, the 10th month of fiscal 2019: it came in just as consensus had expected, at $120 billion, and about 55% higher than the $76.9BN deficit reported in July 2018. This was the 2nd biggest July deficit in the past 8 years…Click to enlarge.

…  and was the result of $251BN in government receipts in July, up 11.6% from the prior year, however offset by $371.0BN in government outlays, a rate of increase double that of revenues, or +22.8% from a year earlier. The biggest sources of government revenue were individual income taxes (127BN) and social insurance/retirement ($94BN), while the biggest outlays were social security ($88BN), Medicare ($56BN), National Defense ($56BN) and Health ($50BN).

On a year-to-date basis, for the first 10 months of Fiscal 2019, receipts were up 3.4%, while outlays increased more than double by 8.0%. More notably, on a cumulative basis, the U.S. budget deficit for the 10 months of fiscal 2019 was $867 billion, surpassing the $779 billion deficit for all of fiscal 2018, with more months of deficit spending in 2019 to go.

Finally, and perhaps most concerning, is that for the first ten months of this fiscal year, interest payments on the U.S. national debt hit $497 billion, $43 billion, or 9% more than in the same four-month period last year and the most interest ever paid in the first third of the fiscal year. According to the Treasury’s forecast, interest expense on U.S. public debt is on track to reach a record $577 billion this fiscal year, more than the entire budget deficit in FY 2014 ($483 BN) or FY 2015 ($439 BN), and equates to 2.7% of estimated GDP, the highest percentage since 2011.

This Zero Hedge article appeared on their website at 4:25 p.m. on Monday afternoon EDT — and another link to it is here.


Those Who Seek to Rule — Jeff Thomas

The reader may be familiar with the Russian parable of the frog and the scorpion.

A flood occurs and a scorpion finds himself on a small, dry patch of land, but will soon drown when the water rises. He sees a frog and says to him, “Please save me, I cannot swim. If I could get on your back and you swim to the higher ground, I’ll be saved.” The frog says, “But you are a scorpion – you might sting me and I would die.” The scorpion says, “That would be very foolish of me, for if I were to sting you, we would both drown.”

The frog nods his head and lets the scorpion climb onto his back. He swims toward the higher ground, but before they reach it, the scorpion stings him. As the frog feels the sting paralyzing him, he says, “What have you done, you trecherous fool? Now we will both drown.” The scorpion says, “I could not help it. It is my nature.”

It’s an insightful parable. People follow their nature. We should not be fooled into thinking that they will do otherwise.

We’d like to think that all people have a sense of compassion and fair play, but this isn’t so. Roughly ten percent of all people, in any population, are estimated to have traits associated with narcissism. Roughly four percent are estimated to be sociopathic and one percent are estimated to be psychopathic.

Unfortunately, those people who possess these pathologies have a far greater drive to achieve power than those who do not. So, the longer a government exists, the more riddled with pathological types it becomes.

This commentary from Jeff, which is definitely worth reading, put in an appearance on the internationalman.com Internet site on Monday morning sometime — and another link to it is here.


Fears of Argentina Default Loom Large as Traders Dump Everything

Suddenly, fears of a full-blown financial crisis in Argentina have once again come rushing to the fore.

In the wake of President Mauricio Macri’s stunning rout in primary elections over the weekend, investors dumped its stocks, bonds and currency en masse in a selloff that left much of Wall Street wondering whether the crisis-prone country was headed for yet another default.

The upset, widely seen as a preview of October’s presidential vote, threw the doors open to the very real possibility a more protectionist government will take power come December and unravel the hard-won gains that Macri made to regain the trust of the international markets. It deepened worries his populist opponent, Alberto Fernandez, and running mate, former president Cristina Fernandez de Kirchner, will try to renegotiate its debts as well as its agreements with the International Monetary Fund. The country has billions in foreign-currency debt due over the coming year.

The market is starting to price in default,” said Edwin Gutierrez, the London-based head of emerging-market sovereign debt at Aberdeen Asset Management. “The market is unwilling to give Fernandez the benefit of the doubt.”

Credit-default swaps now show that traders are pricing in a 75% chance that Argentina will suspend debt payments in next five years. On Friday, the likelihood was just 49%. Its dollar-denominated government bonds lost roughly 25% on average, pushing down prices to as low as 55 cents on the dollar. Yields on shorter-maturity notes soared past 35%.

The peso tumbled as much as 33% to a record-low 60 per dollar and the Merval stock index lost the most ever in intraday trading.

This Bloomberg news item was posted on their Internet site at 8:07 p.m. PDT on Sunday evening — and was updated about eighteen hours later.  I thank Patrik Ekdahl for this story.  Another link to it is here.  The longish chart-filled Zero Hedge spin on this is headlined “Macri Massacre Cuts Stocks in Half Today as Argentina Slides Into the Abyss“.


Risk of Nuclear Conflict in Asia Grows — Eric Margolis

Two of the world’s most important powers, India and Pakistan, are locked into an extremely dangerous confrontation over the bitterly disputed Himalayan mountain state of Kashmir.  Both are nuclear armed.

Kashmir has been a flashpoint since Imperial Britain divided India in 1947.  India and Pakistan have fought numerous wars and conflicts over majority Muslim Kashmir.  China controls a big chunk of northern Kashmir known as Aksai Chin.

In 1949, the U.N. mandated a referendum to determine if Kashmiris wanted to join Pakistan or India.  Not surprisingly, India refused to hold the vote.  But there are some Kashmiris who want an independent state, though a majority seek to join Pakistan.

India claims that most of northern Pakistan is actually part of Kashmir, which it claims in full.  India rules the largest part of Kashmir, formerly a princely state. Pakistan holds a smaller portion, known as Azad Kashmir.  In my book on Kashmir, ‘War at the Top of the World,’ I called it ‘the globe’s most dangerous conflict.’  It remains so today.

I’ve been under fire twice on the Indo-Pak border in Kashmir, known as the ‘Line of Control,’ and once at 15,000 feet atop the Siachen Glacier on China’s border.  India has over 500,000 soldiers and paramilitary police garrisoning its portion of Kashmir, whose 12 million people bitterly oppose often corrupt and brutal Indian rule – except for local minority Hindus and Sikhs who support it.  A bloody, bitter uprising has flared on against Indian rule since 1989 in which some 42,000 people, mostly civilians, have died.

About 250,000 Pakistani troops are dug in on the other side of the ceasefire line.

This very worthwhile commentary from Eric appeared on the lewrockwell.com Internet site on Saturday sometime — and the first reader through the door with it was Rick Martell.  Another link to it is here.


Hong Kong on the Edge: Chinese Troops Gather in Shenzen; 100s of Flights Cancelled Over Protester “Terrorism

Protesters flooded Hong Kong’s airport, one of the busiest in the world, on Monday, forcing authorities to cancel more than 100 flights as demonstrators expressed their anger over the violent police response to protests the night before.

Amid the unrest, Cathay Pacific, Hong Kong’s flagship carrier, has reportedly fired two employees and suspended a pilot for participating in the protests. The airline said over the weekend that it would ‘comply with a directive from China’s aviation authority’. According to the FT, Cathay’s move was “the starkest sign yet of Beijing’s growing readiness to make high-profile businesses choose between the protesters and the government. The company’s shares were off more than 4% in recent trade.”

More broadly speaking, European equities sold off as the developments in Hong Kong created a risk off mood on a morning that was mostly devoid of data.

Per The New York Times, the protesters gathered throughout the day, first filling up the arrival halls, before expanding upstairs to the departure halls. Monday’s protest is a continuation of a three-day peaceful sit-in at the airport which began on Friday.

But even more ominously, over the border in Shenzen, the Chinese city that lies directly across from Hong Kong, Chinese People’s Liberation Army forces were building up ahead of what appears to be a “apparent large-scale exercise,” according to the Global Times. “Numerous” armored personnel carriers, trucks and other vehicles of the paramilitary police were seen heading towards Shenzhen over the weekend. That means the long-awaited military intervention from the mainland could be just around the corner – something that the Hong Kong people have condemned.

This ever-developing story showed up on the Zero Hedge website at 6:00 a.m. EDT on Monday morning — and I thank Brad Robertson for sharing it with us.  Another link to it is here.


HSBC Greater China chief Wong leaves for external role

HSBC Holdings’ Greater China Chief Executive Helen Wong is leaving, a bank spokeswoman said on Friday, the second senior departure this week after the ousting of group CEO John Flint.

Wong has decided to leave to pursue an external opportunity, the spokeswoman said, adding that her role will be dropped and the Greater China region, which includes Hong Kong and Taiwan, would be run by the respective country heads.

Greater China is HSBC’s biggest profit driver, but the banking sector outlook in the region has been clouded by the tit-for-tat tariff war between China and the United States, as well as unrest in Hong Kong.

Flint and Wong’s exit also follows weeks of adverse Chinese media coverage over HSBC’s role in the arrest of Huawei finance chief Meng Wanzhou.

Wong, who joined HSBC in 1992 and rose to become its China CEO before being given the newly created role of Greater China chief in 2015, did not immediately respond to a request for comment sent to her official e-mail.

The HSBC spokeswoman said Wong’s resignation was submitted at the end of July and there was no connection between her decision and Flint’s departure.

This Reuters news item, filed from Hong Kong, put in an appearance on their website last Friday morning EDT — and I found it in the Monday edition of the King Report.  Another link to it is hereKyle Bass had this to say about it in a Tweet: “@Jkylebass: Wow – trouble brewing at HSBC. Remember, HSBC H.K. is ring-fenced and is bankruptcy remote. U.K. regulators aren’t going to bail out this leveraged [time bomb]. Depositors in H.K. better PAY ATTENTION. Better convert deposits to USD and wire them to an institution with a real backstop.”


Chinese 2019 gold demand still slipping but don’t panic — Lawrie Williams

Perhaps the U.S.-instigated trade war is beginning to bite with the Chinese consumer.  As readers of sharpspixley.com will be aware, we measure Chinese gold demand China is still the world’s largest gold consumer) by the reported gold withdrawal figures from the Shanghai Gold Exchange (SGE).  This is a consistent measure reported monthly by the SGE, so does provide comparative figures direct from source rather than estimates of consumption from the major precious metals consultancies, which seem to hugely underestimate known gold flows (published gold import figures from major sources) into the Middle Kingdom plus the nation’s own production.  The latest monthly figures for the past three years…suggest that Chinese gold demand this year will be substantially less than in the past couple of years – but perhaps more importantly the projected annual total will be the lowest for five years, as we reported just over a month ago on the release of the June withdrawal figures by the SGE.

On the basis of the year to date figures, full year Chinese gold demand, as measured by SGE withdrawals, may struggle to reach 1,800 tonnes as compared with over 2,000 tonnes in 2017 and 2018 – and in particular with the record annual figure in 2015 where full year withdrawals  totalled around 2,600 tonnes.  We speculated a month ago that the assessed drop in Chinese gold demand, coupled with an apparent continuing downturn in the annual Chinese growth percentage might be expected to be a positive factor in the ongoing trade discussions between the U.S. and China but it seems there has been little progress here – indeed trade tensions appear to have escalated with President Trump apparently imposing tariffs on another $3 billion worth of Chinese imports, while the Chinese have apparently allowed the yuan’s currency parity with the dollar to slip further to over 7 – an apparent U.S. ‘line in the sand’.  While the tariff impositions may well be beginning to hurt the Chinese economy, it is also adversely impacting that of the U.S. with higher prices for U.S. manufactured goods which rely on imported Chinese components becoming more expensive.  The 5.5% fall in the dollar/yuan parity since April will also be mitigating the effects of the Trump-imposed tariffs.

Despite the apparent disadvantage to China represented by the big trade imbalance in China’s favour, which theoretically should give the U.S. a ‘trade war’ advantage, President Trump is a businessman who believes that financial advantage is the be-all and end-all in monetary trade disputes.  But China is basically a Communist-led nation where economic advantage may well take second place to a long-term global growth plan.  It is also an Asian nation where ‘saving face’ may take priority over a purely monetary agenda.  Trade disputes thus are not necessarily subject to like with like agendas and President Trump may well have substantially over-estimated the likelihood of China capitulating to his demands, whatever the economic consequences.

This interesting and worthwhile commentary from Lawrie put in an appearance on the sharpspixley.com Internet site on Saturday BST sometime — and another link to it is here.


The PHOTOS and the FUNNIES

The first photo is of a columbine of some kind growing out of the granite rock face just outside the Othello Tunnel complex — and I spotted it as we were leaving.  We then took the old road into Hope, stopping by Kawkawa Lake, which is a five minute drive from the town center.  The second shot is looking south across the lake…as is the third photo.  If you can see it, the beach that appears in the second photo is partially obscured by a twig/branch on the left-hand side of the third shot.  Click to enlarge.


The WRAP

For the second time in less than a week there were unknown parties in the New York market selling the precious metal equities short all day long.  What began as a promising start to the day was completely extinguished — and then some, by the time that trading ended at 4:00 p.m. EDT.

I’m not sure whether these were acts of desperation by desperate men…or they know for sure that they’ll be able to buy them back far more cheaply at some later date.  I suppose they would know this if they were the same parties that were going to be responsible for the prices of both silver and gold to get engineered lower.  But how successful they might be in that attempt, remains to be seen.

And as I also said earlier, it could have been traders selling their winners to cover margin calls in other stocks…but I’m not convinced of that.

That’s speculation on my part, but the only possible answers I can come up with at the moment — and we’ll only know that in the fullness of time.

But as silver analyst Ted Butler mentioned in his weekly review on Saturday…”The commercials have never, ever been overrun to the upside. Therefore, if gold prices get forced substantially lower in the future, no one should be surprised.  All that said, there is nothing that guarantees that the commercials can’t possibly get overrun. Just because something has always worked does it mean it always will work.”

However, I’m expecting that any price decline at this juncture will be short lived, although potentially violent…an opinion that I stated in my Saturday missive as well.

But make no mistake about it…correction or not, precious metal prices in the medium and long term have a lot further to run to the upside — and the powers-that-be will be powerless to stop it.  The flight into gold and silver has already commenced — and as I’ve continually pointed out…the economic, financial and monetary situation continues to become more dire with each passing day.

Here are the 6-month charts for the four precious metals, plus copper and WTIC — and there’s really not that much to look at.  Click to enlarge.

And as I type this paragraph, the London open is less than a minute away — and I note that after doing virtually nothing for the first hour of trading after it began at 6:00 p.m. EDT in New York on Monday evening, gold and silver have been rising in stair step fashion in Far East trading on their Tuesday. Gold is up $11.90 — and silver is up 34 cents as London opens. Whether this represents new buying, or short covering is hard to tell, but I suspect the former. But why they’re doing it in such an illiquid market is a mystery to me, unless they’re Far East-based traders. Platinum also rallied between 9 and and 10 a.m. CST in Far East trading, but it was sold lower by 11 a.m. over there — and the didn’t do much until around 1:40 p.m. in Shanghai. It has ticked a bit higher since — and is up 6 bucks the ounce at the moment. Palladium has been chopping very unevenly higher in Far East trading — and is off its high tick by a handful of dollars — and is up only 5 bucks as Zurich opens.

Net HFT gold volume is already over 89,500 contracts — and there’s only 1,623 contracts worth or roll-over/switch volume in this precious metal. Net HFT silver volume is already up to about 26,000 contracts — and there’s 2,870 contracts worth of roll-over/switch volume out of September and into future months.

For whatever reason, the Bloomberg DXY chart didn’t start recording data until around 9 p.m. EDT on Monday evening, which was already 9 a.m. China Standard Time on their Tuesday morning. Its current 97.64 high tick was set around 11:20 a.m. CST — and it has been edging quietly and unevenly lower since — and as of 7:45 a.m. BST in London/8:45 a.m. CEST in Zurich, the dollar index is up 17 basis points.


Today, at the close of COMEX trading, is the cut-off for this Friday’s Commitment of Traders Report.  And barring any major surprises to the downside, there will certainly be increases in the commercial net short positions in both silver and gold…particularly silver.

Here’s a chart that I plucked from commentary by Chris Martenson over at the peakprosperity.com Internet site on the weekend.  It shows the price of gold plotted against the growth of negative-yielding debt in the world. Click to enlarge.

They look pretty correlated to me.


And as I FINALLY post today’s missive on the website at 7:00 a.m. EDT, I see that the gold price has continued higher in London trading — and its current high tick was set around 11:15 a.m. BST.  Silver also hit its current high at 11:15 a.m. in London — and is up 39 cents.  Platinum made it up to the $864 spot mark, but hasn’t been allowed to get any higher for the moment — and it’s up 8 bucks.  Palladium  traded very unevenly higher in both Far East and early Zurich trading — and from up 15 dollars shortly before 11 a.m. CEST, it’s now up only 3 dollars.

I won’t bother with the volume figures at this hour.

From its 11:20 a.m. Shanghai high, the dollar index chopped quietly lower until around 9:40 a.m. in London — and began to head sharply lower from there.  It appeared to get saved at 11:30 a.m. in London…just as it dipped into negative territory.  It’s above that by a hair now — and up 1 basis point as of 11:45 a.m. BST.

It could certainly prove to be an interesting trading session in the precious metals in New York when the COMEX opens at 8:20 a.m. EDT.

That’s it for another day, which is more than enough — and I’ll see you here tomorrow.

Sorry about being late today, but there was nothing I could do about it.

Ed