‘Da Boyz’ Are Back In Town…But For How Long?

14 August 2019 — Wednesday

YESTERDAY in GOLD, SILVER,PLATINUM and PALLADIUM


NOTE: The CME Group’s volume data has not been available since the close of COMEX trading on Tuesday, so none of that is available in today’s column…nor is the high/low price date for either gold or silver.  I’ve typed up the words — and will add that information to the website version of today’s column when it becomes available…which was around 5 a.m. EDT this morning.Ed


The gold price traded flat until 9 a.m. China Standard Time on their Tuesday morning — and over the next hour it rallied about seven dollars or so.  It then traded flat once again until shortly after 1:30 p.m. CST — and at that juncture it began to head quietly and unevenly higher until the price was capped and turned lower around 11:15 a.m. in London trading.  That sell-off continued until a very few minutes before the afternoon gold fix — and then ‘da boyz’ really hammered the price into the dirt. It recovered quickly from there…and back above $1,500 spot by a bit…until around 11:20 a.m. in New York trading — and didn’t do a whole lot of anything after that.

The low and high ticks in gold in October were recorded by the CME Group as $1,539.50 and $1,483.00 in the October contract — and $1,546.10 and $1,488.90 in December.

Gold was closed in New York yesterday at $1,500.90 spot, down $9.60 on the day.  Net volume in October and December combined was, as you can imagine, ginormous at 597,500 contracts — and there was a bit over 20,000 contracts worth of roll-over/switch volume on top of that.

The price path for silver was guided in an identical manner as gold’s, with exactly the same price inflection points as well, so I’ll spare you the play-by-play.

The high and low ticks in this precious metal were $17.49 and $16.51 in the September contract…a 98 cent intraday move…5.75 percent based on Monday’s closing price.

Silver was closed in New York on Tuesday at $16.92 spot, down 11.5 cents from Monday.  Net volume was monstrous at a bit over 147,500 contracts — and there was just under 38,000 contracts worth of roll-over/switch volume out of September and into future months.

Ditto for platinum — and it was closed at $852 spot, down 3 bucks on the day.

Palladium, as always seems to be the case, was the outlier yesterday.  It was up 14 dollars by shortly before 11 a.m. in Zurich — and its low tick was set shortly after 9:30 a.m. in New York.  From there it blasted skyward until shortly before 10:30 a.m. EDT — and from that juncture it crept very quietly and unevenly lower until trading ended at 5:00 p.m.   Platinum finished the Tuesday session at $1,437 spot, up 24 dollars from Monday’s close.

It was another blatant in-your-face engineered price decline in three of the four precious metals yesterday and, as always, the CFTC and the mining companies will say and do nothing.


The dollar index closed very late on Monday afternoon in New York at 97.38 — and it’s impossible to tell how it opened, as the DXY trace on the Bloomberg chart below didn’t start recording data until around 9:05 a.m. China Standard Time on their Tuesday morning.  It was up 10 basis points at that point.  The Far East high tick, such as it was, came at 11:20 a.m. CST — and from there the index began to creep quietly lower.  The sell-off became far more pronounced starting around 9:40 a.m. in London — and the 97.32 low tick came a very few minutes after the 8:20 a.m. COMEX open in New York.  A ‘rally’ began at that juncture that really took off a few minutes before 10 a.m. EDT — and that lasted until the afternoon gold fix in London, which came a few minutes later.  From that point it crawled quietly higher until the 97.85 high tick was printed around 4:35 p.m. — and it didn’t do a thing after that.  The dollar index was closed on Tuesday at 97.81…up 43 basis points from Monday.

Until the dollar index ‘rally’/ramp job commenced minutes after the COMEX open, there was no correlation between the precious metal prices and what was happening in the currency markets.  But the powers-that-be invented one so they could use it as an aid/cover to bash the precious metals — and it worked like a charm.

Here’s the DXY chart from Bloomberg as usual — and you should note the late start on the data trace…not the usual 7:45 p.m. EDT open.  Click to enlarge.

And here’s the 6-month U.S. dollar index chart, courtesy of stockcharts.com.  The delta between its close…97.63…and the close on the DXY chart above, was 18 basis points on Tuesday.  Click to enlarge as well.

The gold shares opened up a bit — and were then sold down hard into the afternoon gold fix in London…gold’s low tick of the day.  Then then proceeded to follow the gold price like a proverbial shadow for the remainder of the Tuesday trading session.  The HUI closed down 1.75 percent, which I didn’t think was all that bad, all things considered.

The silver equities followed the silver price like a shadow as well, but Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down a chunky 2.97 percent…which I thought was out of all proportion to the sell-off in the underlying precious metal.  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 10 of the August delivery month showed that zero gold and 73 silver contracts were posted for delivery within the COMEX-approved depositories on Thursday.

In silver, the three short/issuers were ADM, Advantage and ABN Amro, with 53, 15 and 5 contracts out of their respective client accounts.  Of the four long/stoppers in total, the three biggest were JPMorgan, Advantage and ABN Amro with 41, 22 and 9 contracts — and all for their respective client accounts as well.

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 declined by 116 contracts, leaving 2,067 still open.  Monday’s Daily Delivery Report showed that 4 gold contracts were actually posted for delivery today, so that means that 116-4=112 more gold contracts disappeared from the August delivery month.  Silver o.i. in August fell by 29 contracts, leaving 181 still around, minus the 73 mentioned a few paragraphs ago. Monday’s Daily Delivery Report showed that 49 silver contracts are actually posted for delivery today, so that means that 49-29=20 more silver contracts were added to August.


There was a decent sized withdrawal from GLD yesterday, as an authorized participant removed a very chunky 357,249 troy ounces.  But it was the opposite in SLV, as an a.p. added an eye-watering 6,062,297 troy ounces of silver.

There were no other large additions or withdrawals from any of the other ETFs in either silver or gold on Tuesday.

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

The only activity in gold over at the COMEX-approved depositories on the U.S. east coast on Monday was 64.300 troy ounces/2 kilobars [U.K/U.S. kilobar weight] that departed Manfra, Tordella & Brookes, Inc. — and I won’t bother linking this.

It was far busier in silver once again, as 900,140 troy ounces was reported received, but only 50,261 troy ounces was shipped out.  Of the ‘in’ activity, there was one truckload…600,156 troy ounces, dropped off at CNT — and the remaining 299,984 troy ounces found a home over at Brink’s, Inc.  In the ‘out’ category, there was 30,182 troy ounces that departed CNT — and the remaining 20,079 troy ounces left the Loomis International depository.  There was also a paper transfer of 40,221 troy ounces from the Registered category — and back into Eligible over at CNT.  The link to all this activity is here.

There was a bit of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Monday.  They reported receiving 271 of them — and shipped out only 16.  All of this occurred at Brink’s, Inc. as usual — and the link to that, in troy ounces is here.


The West Bagborough Hoard is a hoard of 670 Roman coins and 72 pieces of hacksilver found in October 2001 by metal detectorist James Hawkesworth near West Bagborough in Somerset, England.  No trace of buildings or other structures were found in the area.

Following a treasure inquest at Taunton, the hoard was declared treasure and valued at £40,650. Somerset County Museum Services acquired the hoard, with the aid of Somerset County Council, the Heritage Lottery Fund, and £16,400 from the Victoria and Albert Museum/Resource Purchase Grant Fund. It is now displayed at the Museum of Somerset in the grounds of Taunton Castle.

The 681 coins included two denarii from the early 2nd century and eight miliarense and 671 siliqua all dating from the period A.D. 337 – 367, but including a large number of copies some silver and others from a copper alloy covered with silver sheet. The latest coins indicate that the hoard was buried in circa A.D. 365. The majority were struck in the reigns of emperors Constantius II and Julian and derive from a range of mints including Arles and Lyons in France, Trier in Germany and Rome. There were also 64 pieces of hacksilver, weighing a total of 722gm.  Click to enlarge.

After a huge list of stories/articles in Tuesday’s column, I have very little for you today.


CRITICAL READS

The Fed Should Let the Market Set Rates — Bill Bonner

Yesterday, stocks traded down. Investors are getting spooked by high bond prices (low yields).

Central bankers must think they are repairing a lawn mower. So rather than do the right thing – and let Mr. Market set prices and interest rates – they get out the screwdrivers and wrenches and go to work on it themselves.

Faced with the next crisis, the grease monkeys at central banks are going to do what everyone expects them to do. They’ll turn the screws on savers, harder than ever. They’ll buy bonds and force interest rates down – all to keep the (fake) money pumping into the bubble markets.

The gamblers are front-running the Fed, bidding trillions of dollars’ worth of bonds into negative-yield territory, confident that the Fed will push prices even higher.

But stock investors have eyes too.

They see the bond market flashing a warning: yikes, an “inverted yield curve” – with lower yields for long-term bonds than for short-term ones.

They know it signals recession. So they sell stocks – triggering the very sell-off the Fed was trying to avoid.

The level of claptrap is breathtaking.

This very worthwhile commentary from Bill put in an appearance on the bonnerandpartners.com Internet site early on Tuesday morning EDT — and another link to it is here.


Terrible” 52-Week Auction Confirms Plunge in Market Liquidity

When it comes to investing in safe assets such as U.S. Treasuries, the decision process is relatively simple: one buys coupon securities (with a maturity over 1 year), on specific expectations of inflation (or deflation) and receiving current income in the form of a cash coupon (assuming there is one). When it comes to T-Bills the decision is simpler: it’s all about liquidity preference – does one keep cash equivalents in the form of U.S. Dollars, whether paper or electronic, or does one purchase Bills, with a maturity from 4- to 52-weeks. If investors are mostly happy to exchange money for Bills, it is generally said that liquidity in the financial system is ample; if however investors are unwilling to part with their “cash” in order to fund the U.S. Treasury (as a reminder, in a time of chronic budget deficits, Uncle Sam has to issue debt to fund its operations), then there is a liquidity shortage.

We bring this up because last week we warned that as the Treasury scrambles to rebuild its cash balance to roughly $350BN from the latest $133BN in Treasury cash, a process that will require the aggressive gross and net issuance of T-Bills, liquidity in the system was set to collapse.  Click to enlarge.

In fact, according to Bank of America the liquidity shortage over the next two months – a period in which as shown in the chart above the Treasury would aggressively be issuing bills – would be so acute, that the Fed may be forced to launch QE, a conclusion which JPMorgan echoed just days later.

Today, we got the first proof that Bank of America may be right when we observed just how tight liquidity already is in today’s sale of $28 billion in 52 week bills by the Treasury, an auction which went so poorly it was widely panned by analysts, with Stone & McCarthy going so far to describe it as terrible.

The auction was so ugly, in fact, that it prompted Jefferies to notes that “if you are looking for a pretty auction, look someplace else” while SMRA chimed in that “the combination of extreme recent market volatility and the record auction size made for a terrible auction.”

While it remains unclear if the Fed will have to step in and launch QE in the next few months to offset the plunge in market liquidity, a few more “terrible” auctions like today’s 52-Week sale and Powell may have no choice.

No surprises here, as this issue has been sneaking up on the markets for a while now.  This Zero Hedge article was posted on their Internet site at 6:06 p.m. on Tuesday evening EDT — and another link to it is here.


Greenspan sees no barriers to negative yields on Treasuries

Former Federal Reserve Chairman Alan Greenspan says he wouldn’t be surprised if U.S. bond yields turn negative. And if they do, it’s not that big of a deal.

There is international arbitrage going on in the bond market that is helping drive long-term Treasury yields lower,” Greenspan, who led the central bank from 1987 to 2006, said in a phone interview. “There is no barrier for U.S. Treasury yields going below zero. Zero has no meaning, beside being a certain level.

Negative yields are confounding traditional fixed-income investors. Lenders traditionally were compensated for parting with their money, while borrowers paid to use that cash for some purpose. That’s no longer the case in many markets outside the U.S., with more investors coming to grips with the changing dynamics of global markets over the last few years.

Escalating trade tensions between the U.S. and China, worsening global growth, political tensions in Europe and more central banks embarking on policy easing has resulted in more than $15 trillion of negative-yielding bonds worldwide. Add in U.S. stock-market volatility that is prompting investors to scoop up Treasuries and the result is yields on benchmark U.S. securities racing toward record lows.  Click to enlarge.

This Bloomberg news item was posted on their website at 8:34 a.m. Pacific Daylight Time on Tuesday morning — and I plucked it from a GATA dispatch on Tuesday evening.  Another link to it is here.


Singapore second-quarter GDP falls 3.3%, cuts 2019 growth forecast

Singapore slashed its full-year economic growth forecast on Tuesday, as global conditions were seen worsening and final second-quarter data showed the economy shrank 3.3% on the quarter.
The government cut its forecast range for the city-state’s gross domestic product to zero to 1% from its previous estimate for 1.5% to 2.5%.

The second quarter’s 3.3% contraction was slightly smaller than the 3.4% decline seen in the government’s advance estimate on a seasonally adjusted and annualized quarter-on-quarter basis, but firmed bets a recession may be around the corner.

Economists in a Reuters poll had expected the final reading to show a 2.9% fall.

Looking ahead, GDP growth in many of Singapore’s key final demand markets in the second half of 2019 is expected to slow from, or remain similar to, that recorded in the first half,” the Ministry of Trade and Industry said in a statement on Tuesday.

This economic news item appeared on the cnbc.com internet site on Monday at 8:28 p.m. EDT — and was updated about thirty minutes after that.  I thank Swedish reader Patrik Ekdahl for pointing it out — and another link to it is here.


China July Industrial Output Growth Weakens to 17-Year Low

China posted the weakest industrial output growth since 2002 and slumping retail sales in July, as a cyclical slowdown and trade tensions add to the case to roll out more stimulus.

Industrial output rose 4.8% from a year earlier, retail sales expanded 7.6%, and fixed-asset investment slowed to 5.7% in the first seven months. While some seasonal effects likely compressed the data, all results were lower than forecast by economists in a Bloomberg survey.

The output data coupled with weak credit demand in the month signal that the world’s second-largest economy is still struggling to stabilize. A partial delay of President Donald Trump’s next tranche of tariffs is cheering markets, but adds little in the way of certainty for export companies already reeling from the year-long standoff.

The economy is facing strong headwinds and decelerating,’’ said Gene Ma, chief China economist at the Institute of International Finance in Washington. “More targeted monetary and credit easing are needed. We expect some sort of interest rate cut in the fall.’’

This Bloomberg news story appeared on their Internet site at 7:02 p.m. PDT on Tuesday evening — and was updated about four and a half hours later.  I thank Patrik Ekdahl for sliding it into my in-box in the week hours of Wednesday morning EDT — and another link to it is here.


Why China’s a Paper Tiger — Jim Rickards

Markets are still digesting last week’s Chinese devaluation that sent the Dow crashing over 700 points last Monday.

And as everyone knows by now, the Trump administration labelled China a currency manipulator.

The ironic part of it is that China has been manipulating its currency to strengthen it against the dollar.

Here’s the dynamic you need to understand…

The Chinese yuan is softly pegged to the dollar. To maintain the soft peg, the People’s Bank of China (PBoC) sells dollars and buys yuan.

That props up the yuan. It’s basic supply and demand economics.

One of the primary reasons China tries to strengthen the yuan is to prevent capital flight out of the country. If the yuan depreciates too rapidly, massive amounts of Chinese money would look to flee abroad where it can get much higher returns.

After all, would you want to hold a rapidly deteriorating asset that constantly loses value? Or if you were a Chinese investor, would you try to convert your money into a currency that holds its value?

That’s the question Chinese investors have been facing.

This worthwhile commentary from Jim showed up on the dailyreckoning.com Internet site on Tuesday, but is datelined Monday.  Another link to it is here.  Jim had a parallel/companion piece to this, also from the dailyreckoning.com website — and it’s headlined “China: Paper Tiger” — and it’s worth a look as well.


I didn’t see any precious metal-related news item that I thought worth posting.


The PHOTOS and the FUNNIES

Still in Hope, B.C. on May 27…we revisited one of our favourite spots…Thacker Regional Park — and I took these three photos…plus a bunch more.  My daughter spotted this green frog on a least water-lily pad — and it was a classic photo that I always wanted to take of any frog.  The second shot is of the flower of that type of water lily…complete with hoverfly — and last photo is of wild irises.  They’re a spring flower everywhere around water in B.C.  It’s a highly aggressive grower — and is now considered a noxious weed and banned in some states of the U.S.  Click to enlarge.


The WRAP

Well, the commercial traders, with or without the help of JPMorgan, were at it again yesterday, with the fig leaf of a dollar index ‘rally’ as cover.  Ted wasn’t sure whether this engineered price decline in both silver and gold…plus platinum, involved them or not.  But he was sure that they were covering short positions like mad while it was going on.

Gold didn’t break any moving averages of importance at its low tick on Tuesday, but silver did touch — and then bounce off its 20-day moving average.  The 50 and 200-day moving averages in both are still miles away — and it’s not clear at the moment whether ‘da boyz’ are going to go for a full clean out of the Managed Money longs this time around.  Let’s hope not.

Here are the 6-month charts for the four precious metals, plus copper and WTIC — and the wild intraday price moves in the gold, silver and platinum should be noted.  Palladium is continuing to hoe its own row.  Copper closed up a few cents, but WTIC blasted above — and closed above both its 50 and 200-day moving averages yesterday.  Click to enlarge for all.

And as I type this paragraph, the London open is less than a minute away — and I see that the gold price traded mostly around unchanged in the Far East on their Wednesday. But once the 2:15 p.m. afternoon gold fix was done for the day in Shanghai, the gold price was tapped lower — and it’s currently down $4.00 an ounce. It was mostly the same in silver — and it was also tapped a bit lower after the fix in Shanghai. It’s back at unchanged at the moment. Platinum traded flat until 9 a.m. China Standard Time on their Tuesday morning and, like silver and gold at that time, was sold lower as well. But unlike the other two precious metals, it hasn’t managed to recover from that — and it’s down 6 bucks. Ditto for palladium — and it’s down 9 dollars as Zurich opens.

Because the folks over at the CME’s website are still having issues with their silver and gold volume quotes, there is no volume data as of this time.

The dollar index opened down 2 basis points once trading commenced at 7:45 p.m. EDT on Tuesday evening in New York — and its current 97.73 low tick…such as it is…came at 9 a.m. CST on their Wednesday morning. It began to edge unevenly higher starting around 10:45 p.m. China Standard Time — and was back in the plus couple by a few basis points at one point. But it’s now back below unchanged — and down 4 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 after Tuesday’s price action one would think that there will be some substantial decreases in the commercial net short positions in both silver and gold.

But as Ted also pointed out on the phone yesterday, because no major moving averages were broken to the downside during Tuesday’s engineered price declines, it’s difficult to say just how much Managed Money long selling was going on.  Some, most certainly…but how much is something that he will likely address in his mid-week commentary to his paying subscribers this afternoon.

Just looking at the Preliminary Report from yesterday evening suggests that there wasn’t that much, as there weren’t big changes in total open interest in either precious metal.  However, I’ve learned from hard experience that these numbers can’t be entirely trusted, as ‘da boyz’ can cover their tracks pretty good when it suits them.


And as I post today’s efforts on the website at 4:02 a.m. EDT, I note that the gold price has crept a tiny bit higher during the first hour of trading in London — and it’s only down $2.30 the ounce. But silver is now up 8 cents. Platinum is still down 6 bucks — and palladium is down 8 dollars as the first hour of Zurich trading ends.

The CME Group is still having “technical difficulties” with their gold and silver volume data — and as of ten minutes before posting today’s column on the website, this data is still not available.

The dollar index hasn’t done a thing during the last hour — and is still down 4 basis points as of 8:45 a.m. in London/9:45 a.m. in Zurich.

That’s all I have for today — and I’ll see you here tomorrow.

Ed