04 September 2019 — Wednesday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price was sold lower the moment that trading began at 6:00 p.m. EDT in New York on Monday evening — and the low tick of the day was set a few minutes after 11 a.m. China Standard Time on their Tuesday morning. It began to rally quietly and unevenly higher until the 10 a.m. EDT afternoon gold fix in London — and then jumped up a bunch more at that point, as the dollar index cratered. The rally ended/got capped around 11:15 a.m. in New York — and it was sold quietly lower until a few minutes after 3 p.m. EDT in after-hours trading. It rallied a bit more into the 5:00 p.m. EDT close of trading.
The low and high ticks were reported as $1,521.70 and $1,552.50 in the October contract — and $1,528.00 and $1,558.90 in December.
Gold finished the Tuesday session in New York at $1,546.70 spot, up $27.10 on the day. Net volume, which includes Monday’s as well, was pretty enormous at a bit under 534,000 contracts — and there was just under 22,000 contracts worth of roll-over/switch volume on top of that.
The silver price was also sold lower at the 6 p.m. open in New York on Monday evening — and it was bounced off its $18.34 spot low tick a number of times before it also began to edge quietly higher shortly after 11 a.m. CST on their Tuesday morning. It was up a handful of pennies by shortly before 10 a.m. in London, but was sold equally quietly lower until shortly before 1 p.m. BST/8 a.m. in New York. It began to head sharply higher at that juncture — and that lasted until noon EDT — and from there it wandered quietly sideways just above the $19 spot mark until the last hour of trading in the after-hours market. It jumped up another 15 cents or so going into the 5:00 p.m. close from there.
The low and high ticks in silver were recorded by the CME Group as $18.365 and $19.395 in the December contract.
Silver finished the Tuesday session in New York at $19.225 spot, up 88.5 cents on the day. It’s been many a moon since we last saw a rally of this size. Net volume, which includes Monday’s trading volume as well, was ginormous as well at a bit over 193,000 contracts — and there was around 7,750 contracts worth of roll-over/switch volume in this precious metal.
Platinum had a bit of an up/down move in morning trading in the Far East on their Tuesday — and it was back at the unchanged mark by shortly after 12 o’clock noon in Shanghai. It began to edge higher from there, but really caught a bid at 9 a.m. in New York — and that rally was capped shortly before noon EDT. Then, like silver and gold it was sold a bit lower going into the 1:30 p.m. COMEX close — and it also rallied a bit in the last hour of trading before it ended at 5:00 p.m. in New York. Platinum finished the day at $957 spot, up 28 bucks from its close on Monday.
Palladium crept very unevenly high until the 9 a.m. open in Zurich — and it was sold down until 9 a.m. in New York. Then, like platinum, it began to head higher — and like for silver, was capped and turned a bit lower a few minutes after 12 o’clock noon in New York. It chopped unevenly sideways until trading ended at 5:00 p.m. EDT. Palladium was closed at $1,523 spot, up 5 dollars from Monday.
The dollar index closed very late on Monday afternoon in New York at 98.92 — and opened up about 18 basis points once trading commenced around 7:45 p.m.. EDT on Monday evening, which was 7:45 a.m. China Standard Time on their Tuesday morning. It proceeded to ‘rally’ from that point until a few minutes before 11 a.m. CST — and from there it traded very unevenly sideways until the 10 a.m. EDT afternoon gold fix in London. Then down it went. That sell-off lasted until 2:20 p.m. EDT — and was at the 98.93 mark at that juncture. It had a bit of an up/down move over the next few hours — and according to the DXY chart below, it finished the day at 98.93…but was marked up after the close to exactly 99.0000…up 8 basis points from Monday.
If there was any correlation between what the currencies were doing — and the goings-on in gold, silver and palladium, it only came after the afternoon gold fix in London, because before that, there was little if any correlation at all.
Here’s the DXY chart from Tuesday, courtesy of Bloomberg — and the fact that it was marked up to close on such a precise number certainly was a noticeable event, as it wasn’t free-market related. Click to enlarge.
And here’s the 6-month U.S. dollar index chart, updated with Tuesday’s doji which, I suspect, includes Monday’s trading range as well. The delta between its close…98.95…and the close on the DXY chart above, was 5 basis points on Tuesday. Click to enlarge as well.
The gold stocks gapped up a bit at the open — and then proceeded to their respective high ticks, which came around 11:20 a.m. in New York trading, which was the point where the gold price rally ended/got capped. They were sold quietly lower until a few minutes after 3 p.m. EDT — and bounced a bit higher into the 4:00 p.m. close from there. The HUI only finished higher by 1.36 percent.
The silver equities followed an almost identical path as the gold shares, except they closed a bit higher, as Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up only 2.88 percent. Click to enlarge if necessary.
And here’s Nick’s 1-year Silver Sentiment/Silver 7 Index chart, updated with Monday’s doji. Click to enlarge.
I suspect that yesterday’s sell-off in the general equity markets may have had something to do with the rather underwhelming performance of the precious metal equities yesterday…as certainly the silver stocks should have done better.
But as I’ve pointed out before, both Compañía de Minas Buenaventura and Peñoles, two of Nick Laird’s Silver Sentiment/Silver 7 Index continue to vastly underperform. And as reader Gordon Foreman pointed out in an e-mail yesterday…”Another miner in the Silver 7 that is dragging it down is Hecla. It’s over 40% below its 12-month highs, and below where it was trading in early May, when silver was still below $15.” So, dear reader, when you have 43% of that index flat or down year-to-date, it makes the Silver 7 Index performance appear terrible relative to the gold shares.
[But, having just said that, Hecla was not a laggard yesterday, as it closed up 6.48 percent, so there’s hope for it yet. – Ed]
My own portfolio of silver mining equities does not have, nor has it ever had, any of those three companies in it. On a combined basis, my list of silver equities closed up 5.16 percent on Tuesday. I’ve included that list in The Wrap section of today’s column once again.
The CME Daily Delivery Report for Day 3 of September deliveries showed that 75 gold and 651 silver contracts were posted for deliver within the COMEX-approved depositories on Thursday.
In gold, the two short/issuers were Marex Spectron and Advantage, with 38 and 37 contracts out of their respective client accounts. Of the six long/stoppers in total, the two largest were Macquarie Futures and JPMorgan, with 24 and 22 contacts — and all for their respective in-house/proprietary trading accounts. In third spot was Advantage, with 15 contracts for its client account.
In silver, of the seven short/issuers in total, the three biggest were International F.C. Stone, ABN Amro and ADM, with 300, 141 and 96 contracts from their respective client accounts. There were eight long/stoppers — and tallest hog at the trough was JPMorgan once again, picking up 263 contracts…144 for clients, plus 119 for its own account. In second place was Macquarie Futures, stopping 137 for its in-house/proprietary trading account — and in third spot was ABN Amro, with 70 contracts for its client account.
The link to yesterday’s Issuers and Stoppers Report is here.
The CME Preliminary Report for the Tuesday trading session, which also includes the data from Monday as well, showed that gold open interest in September declined by 169 contracts, leaving 117 still around, minus the 75 mentioned a few paragraphs ago. Friday’s Daily Delivery Report showed that 242 gold contracts were actually posted for delivery today, so that means that 242-117=125 more gold contracts just got added to the September delivery month. Silver o.i. in September dropped by 451 contracts, leaving 1,768 still open, minus the 651 mentioned a few paragraphs ago. Friday’s Daily Delivery Report showed that 619 silver contracts were actually posted for delivery today, so that means that 619-451=168 more silver contracts were added to September.
There was another big deposit into GLD on Tuesday, as an authorized participant added 377,134 troy ounces. There were no reported changes in SLV.
Ted figured that as of the close of trading last Friday, SLV was owed about 10 million troy ounces of silver. So it’s pretty much a given that this ETF is owed much more than that after Tuesday’s price action, as Ted said that volume in that ETF was very heavy yesterday. And if they can’t get the physical silver, the authorized participants have to short the SLV shares in lieu of that.
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 trading on Friday, August 30 — and this is what they had to report. Their gold ETF added 38,854 troy ounces — and their silver ETF increased their holdings by 318,453 troy ounces.
The U.S. Mint had a sales report for the first day of business in September. They sold 2,000 troy ounces of gold eagles — 500 one-ounce 24K gold buffaloes — and 11,000 silver eagles.
They also added another 2,000 ounce of gold eagle sales to August sales, bringing that month’s total of gold eagles sold up to the 8,000 troy ounce mark.
The only activity in gold over at the COMEX-approved depositories last Friday was that Canada’s Scotiabank…whose COMEX vault is located in Toronto, I believe…added 42,947 troy ounces. The link to that is here.
There was some activity in silver. Nothing was reported received — and 682,158 troy ounces was shipped out. Most of the ‘out’ activity was one very large truckload…656,417 troy ounces…that departed Scotiabank. The rest came out of CNT and Delaware…24,693 and 1,048 troy ounces respectively. There was also 100,121 troy ounces that was transferred from the Eligible category — and into Registered over Delaware as well. Without doubt, that’s scheduled for delivery in September. The link to all this is here.
It was a very decent day over at the COMEX-approved kilobar depositories in Hong Kong on their Friday. They reported receiving 500 of them — and shipped out 2,639. All of this activity was at Brink’s, Inc. — and the link to that, in troy ounces, is here.
Here are the usual two charts that Nick Laird sends around every weekend. They show the amounts of gold and silver in all know depositories, mutual funds and ETFs, as of the close of business on Friday, August 30. For the week, there was 958,000 troy ounces of gold added — and in silver, that number was 3,999,000 troy ounces. Click to enlarge for both.
I have an average number of stories for you today.
With Flash PMI in contraction and ISM sliding fast, expectations were for a very modest rise in both measures of manufacturing in August as ‘hard’ U.S. macro data picked up relative to expectations.
The headline Markit Manufacturing PMI inched back into expansion with a final 50.3 print for August (after a 49.9 flash print), however, that is still the lowest since September 2009, with new export orders plunging at the fastest pace in 10 years.
The headline ISM Manufacturing plunged into contraction, printing 49.1 (well below the 51.3 expectations) to the lowest since Jan 2016 as employment and new orders (seven year low) collapsed. Click to enlarge.
As Bloomberg notes, the latest downturn underscores how slowing global growth and an escalating U.S. trade war with China are taking an even bigger toll on domestic producers. Although manufacturing only makes up about 11% of the economy, there are concerns that entrenched weakness – and any layoffs that may result – could filter through to the rest of the economy and endanger the record-long expansion.
As Rabobank comments, what is clear from both surveys is that the U.S. manufacturing sector has come to a standstill, most likely because of the global economic slowdown and the uncertainty about international trade policy.
The vicious circle this sets up does not bode well for any rational investor.
This Zero Hedge article showed up on their Internet site at 10:05 a.m. EDT on Tuesday morning — and I thank Jim Gullo for pointing it out. Another link to it is here. Gregory Mannarino‘s Tuesday post-market rant is linked here.
The Romans were a win-lose, hard-fighting group. But once conquered, people were free to do win-win deals under the protection of the empire.
Under the Roman Empire, there was a great expansion of trade, technology, and wealth. Evidence can be found as far from Rome as Gloucestershire in Britain. A third-century Roman villa there shows all the trappings of civilized life of the time. These included running water, central heating, and floor mosaics… as well as wine and olives from the Mediterranean, silver from the mines of Spain, and carpets from the East.
This was made possible by the Romans’ vast road network and the traders who traveled it. Rome’s protection of property rights removed some uncertainty. It also helped make sure contracts were enforced and violence was limited. If anyone were to be robbed or killed, it would be the feds who did it!
Another great expansion took place under the British Empire in the late 19th century. Economist John Maynard Keynes wrote about what a remarkable thing it was…
The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole Earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his doorstep; he could at the same moment and by the same means adventure his wealth in the natural resources and new enterprises of any quarter of the world, and share, without exertion or even trouble, in their prospective fruits and advantages.
A third great period of “globalization” occurred under the watchful eye of the post-Cold War Pax Americana. From the fall of the Berlin Wall in 1989 to 2007, trade boomed. The world had never seen such an increase in wealth.
This worthwhile commentary from Bill…an excerpt from Bill’s new book…was posted on the bonnerandpartners.com Internet site early on Tuesday morning EDT — and another link to it is here.
In a stunning turn of events, PM Boris Johnson has lost the Tory’s majority in the House of Commons after Bracknell MP Dr. Philip Lee, an anti-Brexit conservative, decided to defect to the Liberal Democrats, according to Bloomberg.
In an act of high drama, Lee said he would quit over the way Boris Johnson was pursuing a “damaging Brexit” that could “put lives at risk.” After months of rumors that he was planning on joining another political party, Lee on Tuesday walked across the floor of the Commons during debate and sat with the Lib Dems as Johnson addressed MPs.
Lee follows in the footsteps of former Toy MP Sarah Wollaston, and former Labour MP Chuka Umunna in joining the LibDems, who now have 15 MPs.
The LibDem leader Jo Swinson said she was delighted with Lee joining at such a critical moment for British politics, per The Guardian.
This very interesting news item appeared on the Zero Hedge website at 10:54 a.m. on Tuesday morning EDT — and I thank Brad Robertson for sharing it with us. Another link to it is here.
Sweden’s central bank is anticipated to ditch its plan to exit negative interest rates this year in response to mounting evidence of a slowdown in the global and domestic economy.
In an announcement on Thursday, the Riksbank will hold its benchmark rate at minus 0.25%, according to all economists surveyed by Bloomberg. Governor Stefan Ingves and his colleagues will likely lower the rate path, dropping plans to tighten toward the turn of the year.
The retreat is coming fast and would prolong almost half a decade of negative rates. A trade war between the world’s biggest economies risks tipping export-dependent Sweden into a recession. The Federal Reserve, the European Central Bank and other policy makers around world are once again unleashing stimulus, raising bets that the Riksbank will next year be forced to undo a rate increase it delivered in late 2018.
“A rate hike is very far off,” said Torbjorn Isaksson, an economist at Nordea. “What we are struggling with is whether they are going to cut rates or not. It’s not our official forecast, but there’s a large probability for it and it’s increasing by the day.”
This news item was posted on the bloomberg.com Internet site at 4:00 p.m. PDT on Monday afternoon — and it comes to us courtesy of Swedish reader Patrik Ekdahl. Another link to it is here.
Chinese builders – already struggling with a stagnant housing market and several rounds of tightening credit control measures – now have to deal with a falling yuan amid increasing offshore debt.
The yuan weakened by 3.84 per cent in August, the biggest monthly loss since January 1994. It also broke through the key level of 7 yuan per U.S. dollar, after U.S. President Donald Trump announced that he would slap import tariffs of 15 per cent on an additional tranche of goods that will ultimately cover a further US$300 billion of Chinese goods exported to the U.S. later this year.
According to ratings agency Moody’s Investors Service, foreign currency debt now accounts for a quarter of Chinese developers’ total debt, up from 20 per cent at the end of June 2018. Besides, builders are also finding it difficult to the tap the offshore debt market because of the additional curbs.
“The developers generate nearly all of their revenue in renminbi, and many do not hedge their foreign-currency debt against exchange rate movements. As a result, renminbi depreciation causes their foreign-currency debt and related interest expenses to rise in renminbi terms, and subsequently weakens their leverage and interest coverage,” Moody’s said.
The deteriorating conditions have taken a toll on Chinese builders.
As of July, the number of developers filing for bankruptcy had risen to 274, a jump of 50 per cent from a year ago, according to the website of the People’s Court Daily, a state-owned publication.
This news item put in an appearance on the South China Morning Post website at 9:00 a.m. CST on their Monday morning, which was 9:00 p.m. on Sunday evening in New York — EDT plus 12 hours. I found it in the Tuesday edition of the King Report — and another link to it is here.
Bank of Japan Governor Haruhiko Kuroda, who made his mark pursuing aggressive monetary stimulus policies, is under fresh pressure by financial markets to return to the fight.
Government bond yields are falling through the floor of the central bank’s target range, the yen is hovering at the limit of companies’ comfort zones and inflation is weakening again.
Add the fact that other central banks are stepping up to support their economies and Kuroda has no shortage of reasons to do likewise. Among the options are lowering the negative short-term interest rate, increasing asset purchases or widening the trading range around its long-term yield target.
“The BOJ has probably already made up its mind that it has to ramp up its easing,” said Masaaki Kanno, chief economist at Sony Financial Holdings and a former BOJ official. “The BOJ can’t take the risk of watching the yen strengthen without doing anything when the Fed and ECB are going to act.”
Economists including Takeshi Yamaguchi at Morgan Stanley see a lowering of the short-term negative rate among the most likely moves by the BOJ, should it take action.
This story was posted on the Bloomberg website at 1:00 p.m. PDT on Monday afternoon — and I thank Swedish reader Patrik Ekdahl for sending it along. Another link to it is here.
On Friday I did an audio interview with host Jim Goddard over at HoweStreet.com. It starts at the 38:55 minute mark of their ‘This Week in Money‘ podcast — and it runs for about 16 minutes.
Among the main grouping of precious metals, platinum had been by far the poorest performer with its supply/demand fundamentals looking somewhat inferior to its platinum group metal (pgm) sister metal, palladium which has consequently surged past it in price. For most of the past few decades platinum was the highest priced of the major precious metals, but in the past few years both gold and palladium have advanced and platinum fallen back, hit hard by a major supply surplus and a fall-off in demand for diesel-driven automobiles where platinum had been the primary exhaust emissions control catalytic metal and had provided its major market – and still does. Meanwhile palladium has almost entirely replaced platinum as the exhaust cleaning catalytic metal for the far bigger petrol (gasoline)-driven small vehicle market.
The substitution of palladium for platinum as an exhaust emissions control catalyst had initially been largely due to the previous price differential between the two metals with platinum, up until relatively recently, having been priced far higher than palladium. Now the reverse is true and there has been speculation that emission control manufacturers for petrol-driven vehicles might revert to platinum-based catalysts, but we have seen little sign of that to date. Continuing research has seen palladium, mostly in conjunction with small amounts of another even rarer pgm, rhodium (which has also seen a huge price spurt) is proving to be a very powerful exhaust emissions control catalyst, so platinum would have to play catch-up again if it is going to retake its dominant position in this market. No doubt research is under way to see if an even more efficient platinum-based catalytic converter for petrol engines can be developed, but it is early days yet and the market remains to be convinced anyway that palladium will maintain its substantial price premium over any possible alternative – but the big hike in rhodium prices (now closing on $5,000 an ounce and around double its price of a year ago) could give another stimulus to platinum as a more cost efficient catalytic converter replacement catalyst for petrol engines too.
The platinum price has however caught fire over the past week or so – perhaps belatedly – although still remains at a price level substantially below that of gold and palladium. As I write, the closing prices for these three precious metals at the end of the most recent week’s trading in U.S. dollars were gold – $1,520, the much more volatile palladium – $1,517 (having spurted $70 at one time on Friday and moved back almost level with gold) and platinum – $931. So the latter has a good way to go before it could match or exceed the price of the other two, but with a 9% rise in the past week has certainly rewarded its most recent investors, if not its long term ones! A similar rise this week would put it back at over $1,000.
Well, dear reader, the platinum price is rising because the Managed Money traders are in the middle of one of ‘da boyz’ patented ‘wash, rinse, spin…repeat’ cycles. It’s a short-covering rally — and that was evident in last week’s COT Report . This Friday’s COT Report will show them massively long the platinum futures market — with them being much poorer — and ‘da boyz’ much richer. This commentary by Lawrie put in an appearance on the Sharps Pixley website on Sunday sometime — and another link to it is here.
The PHOTOS and the FUNNIES
Here are three photos from our trip into the boondocks east of Barriere, B.C. on June 16. It’s less than an hour’s drive north of Kamloops. The first shot is looking generally north across the local geography and what appears to be a ginseng farm in the foreground. The second shot is more scenery along the way, looking generally south — and the last photo is of Forest Lake…typical of the many thousands of small lakes that dot the inter-mountain country of British Columbia. Click to enlarge.
“Tyranny is defined as that which is legal for the government, but illegal for the citizenry.” — Thomas Jefferson
Although I was certainly happy to see the rallies yesterday, I certainly wasn’t happy to see the big increases in open interest in both gold and silver in the CME’s Preliminary Report for Thursday, which wasn’t posted on their website until around 3:15 a.m. EDT this morning.
There may have been some short covering driving yesterday’s rallies to some extent, it was equally obvious that, some or all of the ‘da boyz’ were going short hand over fist at the same time.
In my telephone conversation with Ted yesterday, his back-of-the-envelope calculation showed that the Big 8 traders…minus JPMorgan…had added around $875 million to their collective short positions on yesterday’s big rallies in silver and gold. Ted said that these margin calls have to be settled with the CME Group at least once a day — and he is wondering when it will become too much for one or more of them…especially the smallest four of the Big 8.
Yesterday’s margins calls took these seven traders to about the $6 billion mark that they hold in collective unrealized loses.
And as Ted has been pointing out for several weeks now, regardless of how this scenario plays out in the future…another ‘wash, rinse, spin’ cycle…or the Big 7 get overrun, JPMorgan still comes out of either of them smelling like that proverbial rose because of its huge physical holdings in both silver and gold.
Here are the 6-month charts for the Big 6 commodities — and I will remind you that Tuesday’s price dojis on each chart are the sum of what happened on both Monday and Tuesday combined. And those rallies after the COMEX close aren’t included. Besides the performances of the precious metal, both copper and WTIC set new intraday and closing lows for the Monday and Tuesday trading sessions combined. Click to enlarge.
And as I type this paragraph, the London open is less than a minute away — and I see that the gold price hit its current high tick right at the 8 a.m. open in Shanghai on their Wednesday morning — and it has been stair-stepped lower in price ever since — and as London opens, gold is down $9.60 the ounce. Silver was up 31.5 cents in the spot market at its 8:20 a.m. China Standard Time high tick, but has had almost all of that taken away — and is up 8 cents at the moment. Platinum hit its current high of the day around 2 p.m. CST — and was up 12 bucks at that juncture, but has given half of that back — and is only up 7 dollars. The palladium price has been chopping very unevenly sideways in Far East trading on their Wednesday — and is up 2 bucks as Zurich opens.
Net HFT gold volume is very heavy at around 90,500 contracts — and there’s only about 1,650 contracts worth of roll-over/switch volume in this precious metal. Net HFT silver volume is already very hefty as well at around 37,500 contracts — and there’s 1,200 contracts worth of roll-over/switch volume on top of that.
The dollar index opened down about 4 basis points once trading commenced around 7:45 p.m. in New York on Tuesday evening, which was 7:45 a.m. China Standard Time on their Wednesday morning. It then proceeded to chop quietly sideways until minutes after 2 p.m. CST — and then ticked downward — and is lower by 14 basis points as of 7:45 a.m. in London/8:45 a.m. in Zurich.
Yesterday, at the close of COMEX trading, was the cut-off for this week’s Commitment of Traders and companion Bank Participation Reports. For this one day a month we get to see what the banks have been up to in the precious metals futures market — and during August, they’ve been up to quite a bit.
Since the precious metals, plus their associated equities have been on such a tear over the last while, I thought I’d toss in the list of companies that I own shares in…which hasn’t changed one bit since I last posted it about six weeks ago. The ‘click to enlarge’ feature does not help with this chart.
And as I post today’s efforts on the website at 4:02 a.m. EDT, I note that the gold price is a bit lower — and down $11.70 the ounce as the first hour of London trading ends. Silver is now down 9 cents on the day…after being up over 30 cents in morning trading in Shanghai. Platinum is up only 4 dollars — and palladium is now down a dollar as the first hour of Zurich trading draws to a close.
Gross gold volume is now up to around 110,000 contracts — and minus what little roll-over/switch volume there is, net HFT gold volume is a bit over 106,000 contracts. Net HFT silver volume is a bit over 42,000 contracts — and there’s still only 1,290 contracts worth of roll-over/switch volume in this precious metal.
The dollar index has ticked a hair lower during the last hour — and as of 8:45 a.m. in London/9:45 a.m in Zurich, the index is down 15 basis points.
That’s all I have for today, which is more than enough — and because of the dramatic price reversals in morning trading in Shanghai in both gold and silver…particularly silver, I’m looking forward to the COMEX trading session in New York with more than the usual amount of interest…and some trepidation.
See you here tomorrow.