“Gold will be explosive, unlike anything we’ve seen” — Frank Giustra

05 September 2019 — Thursday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price was sold quietly and unevenly lower starting at the 8 a.m. open in Shanghai on their Wednesday morning — and the low tick of the day was set shortly after 11:30 a.m. in London.  It then headed higher until at, of just shortly after, the afternoon gold fix — and then traded sideways until shortly after 1 p.m. in New York.  It jumped up a few more dollars at that point until a few minutes before 2 p.m. EDT — and crept quietly lower into the 5:00 p.m. close from there.

The low and high ticks were reported by the CME Group as $1,536.50 and $1,559.80 in the October contract — and $1,542.60 and $1,566.20 in December.

Gold finished the Wednesday session at $1,552.00 spot, up $5.30 from Tuesday’s close.  Net volume was enormous at around 390,000 contracts — and there was a bit under 24,000 contracts worth of roll-over/switch volume in this precious metal.

Silver was up about 32 cents by around 8:20 a.m. in Far East trading on their Wednesday — and all of that was gone, plus a few pennies more, by 9 a.m. in London.  It then had about a ten cent up/down move between that time — and around 12:40 a.m. BST and, like gold at that time, began to head higher quietly and unevenly higher.  That lasted until the price was quietly capped and turned lower around 4:30 p.m. in after-hours trading in New York — and it didn’t do a thing after that.

The low and high ticks in silver were reported as $19.28 and $19.75 in the December contract.

Silver was closed at $19.57 spot, up 34.5 cents from Wednesday.  Net volume was past Saturn at around 152,500 contracts — and there was about 5,100 contracts worth of roll-over/switch volume in this precious metal.

The platinum price crept very quietly and unevenly sideways with a slight positive bias until 10 a.m. in Zurich.  A rather spirited rally commenced at that point, which was capped and sold lower starting about fifteen minutes before the Zurich close…10:45 a.m. in New York.  That sell-off lasted until a few minutes before the COMEX close — and it edged a bit higher in the thinly-traded after-hours market.  Platinum finished the day at $984 spot, up 27 bucks from Tuesday.  The Managed Money traders have gone from short the COMEX futures market in platinum, to massively long, in just two short weeks…a fact that will be born out in tomorrow’s COT Report.

The palladium price was higher by seven dollars by shortly before 8 a.m. CST on their Wednesday morning.  But that gain was all gone, plus a few dollars more by a few minutes before 2 p.m. CEST/8 a.m. EDT.  It stair-stepped its way higher in price from there, before finally getting capped and turned lower at the afternoon gold fix in London.  From that point onwards, the price did next to nothing.  Palladium finished the day at $1,539 spot, up 14 dollars from Tuesday’s close.

The dollar index closed very late on Tuesday afternoon in New York at 96.0000 — and opened down about 3 basis points once trading commenced around 7:45 p.m. EDT on Wednesday evening, which was 7:45 a.m. China Standard Time on their Wednesday morning.  From that juncture it chopped very quietly sideways until a very few minutes after 2 p.m. CST on their Wednesday afternoon.  It then began its descent to its 98.39 low tick of the day, which came at 3 p.m. in New York — and it didn’t do much of anything after that.

The dollar index finished the Wednesday session at 98.45 down 55 basis points from Tuesday’s close.

With the dollar index down a fairly large amount yesterday, one would have thought that silver and gold prices would have responded in more dynamic fashion to the upside…but that didn’t happen.  I don’t know why, but I’m not overly concerned about it, as other forces besides the currencies are now driving precious metal prices.

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

And here’s the 6-month U.S. dollar index chart, courtesy of the folks over at the stockcharts.com Internet site.  The delta between its close…98.39…and the close on the DXY chart above, was 6 basis points on Wednesday.  Click to enlarge as well.

The gold shares opened unchanged — and then chopped quietly sideways until around 11:20 a.m. in New York trading.  They began to head unevenly higher from there — and  closed on their respective highs of the day, as the HUI closed up by 1.93 percent.

The silver equities also opened about unchanged, but soared to their highs of the day by around 11:25 a.m. EDT.  But two hours later they were almost back at unchanged.  Another sharp rally began shortly after 1 p.m. — and the silver stocks revisited their previous high shortly before 2 p.m. EDT.  They gave a bit of those gains back before the markets closed at 4:00 p.m.  Nick Laird’s Intraday Silver Sentiment/Silver 7 index closed up only 1.52 percent.  Click to enlarge if necessary.

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

I was surprised at the share price action in the silver equities yesterday.  Even though the Silver 7 Index was up 1.52 percent on Wednesday — and should have been up more, my portfolio of silver equities barely finished above unchanged.  But on Tuesday, they wildly outperformed Nick’s Index.  I don’t have an answer for you as to why that is.  I’m just making an observation.


The CME Daily Delivery Report for Day 4 of the September delivery month showed that 17 gold and 378 silver contracts were posted for delivery within the COMEX-approved depositories on Friday.

In gold, the two short/issuers were Advantage and S.G. Americas, with 15 and 2 contracts out of their respective client accounts.  There four long/stoppers…JPMorgan and Macquarie Futures with 7 and 4 contracts for their in-house/proprietary trading accounts — and Advantage and ADM with 4 and 2 contracts for their respective client accounts.

In silver, there were six short/issuers in total — and the three largest were ABN Amro, JPMorgan and Advantage, with 193, 60 and 52 contracts out of their respective client accounts.  The largest long/stopper as always was JPMorgan, picking up 119 contracts…65 for its client account, plus another 54 for its own account.  In second, third and fourth place were ABN Amro, Macquarie Futures — and Advantage…stopping 82, 68 and 45 contracts…Macquarie for its own account — and the other two for their client accounts.

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

The CME Preliminary Report for the Wednesday trading session showed that gold open interest in September fell by 61 contracts, leaving only 56 still open, minus the 17 mentioned in the previous paragraph.  Tuesday’s Daily Delivery Report showed that 75 gold contracts were actually posted for delivery today, so that means that 75-61=14 more gold contracts were added to the September delivery month.  Silver o.i. in September dropped by 385 contracts, leaving 1,382 still around, minus the 378 mentioned a few paragraphs ago.  Tuesday’s Daily Delivery Report showed that 651 silver contracts were actually posted for delivery today, so that means that another 651-385=266 silver contracts were added to September.

So far, after four days worth of deliveries in September, there have been 1,613 gold contracts issued/reissued and stopped, which is a huge number for a unscheduled delivery month — and that number in silver is already an eye-watering 6,510 contracts…32.55 million troy ounces of the stuff.


There was another decent sized deposit into GLD yesterday, as an authorized participant added 188,566 troy ounces.  But the big surprise was in SLV, as an a.p…assume JPMorgan…took out 707,584 troy ounces in what was most likely a conversion of shares for physical metal.

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

The only activity in gold over at the COMEX-approved depositories on the U.S. east coast on Tuesday was 8,037.750 troy ounces/250 kilobars [SGE kilobar weight] that was shipped out of Brink’s, Inc.  Nothing was reported received.  The link to this is here.

As I’ve pointed out before, any and all kilobars shipped out of Brink’s, Inc. are now being reported as the SGE kilobar weight, rather than the U.K./U.S. kilobar weight…32.151 troy ounces vs. 32.150 troy ounces.  And as I’ve also mentioned before, I expect the rest of the world’s gold depositories to follow suit at some point.

In silver, the only ‘in’ activity was 7,710 troy ounces that was received at CNT.  The ‘out’ activity amounted to 644,673 troy ounces, with the lion’s share of that…one truckload…599,976 troy ounces…shipped out of Canada’s Scotiabank.  The rest was shipped out of the International Depository Services of Delaware and CNT…43,729 and 967 troy ounces respectively.  There was also some paper transfers from the Eligible category and into Registered…1,371,293 troy ounces at CNT — and 318,501 troy ounces from the Delaware.  Without doubt, this is all slated for delivery in September.  The link to all this is here.

There was very decent activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Tuesday.  They received 1,830 of them — and shipped out 366.  All of this occurred at Brink’s, Inc. as per usual — and the link to that, in troy ounces, is here.


Here are two more charts that Nick Laird passed around on Tuesday that I just didn’t have the space for in Wednesday’s column…so here they are now.  They show gold and silver imports into India, updated with July‘s data…not August’s.  They’re always a month behind everyone else.

During that month they imported 37.75 metric tonnes of gold — and an eye-watering 1,040 tonnes of silver…33.46 million troy ounces.  Click to enlarge.  There was a rather breathless story about this on the srsroccoreport.com Internet site headlined “India Silver Imports Tripled In July As Prices Rise” — and I thank Brad Robertson for that one.

I have an average number of stories/articles/interviews again for you today.


CRITICAL READS

“Big Short” Investor Michael Burry Explains How Index Funds Will Trigger the Next Crash

After years of radio silence, Dr. Michael Burry – the small-time stock picker who rose to fame for his bets against subprime mortgage bonds featured in the book (and later film) “The Big Short” – is once again doing the media rounds, talking about his latest equity plays and sharing his thoughts about the next big market blowups.

And in an interview with Bloomberg, Burry doesn’t disappoint. At one point, he shares his skepticism about passive investing, and the flood of money that has poured into index funds since the financial crisis. Burry sees similarities between these funds and the CDOs that nearly brought down the financial system in the run-up to the crisis.

Burry, who made a fortune betting against the CDOs, argued that these passive flows are distorting prices for stocks and bonds in much the same way that CDOs did for subprime mortgages. Eventually, the flows will reverse at some point, and when they do, “it will be ugly.”

Like most bubbles, the longer it goes on, the worse the crash will be,” Burry, who oversees about $340 million AUM at Scion Asset Management in Cupertino, said.

This very interesting item was posted on the Zero Hedge website at 2:25 p.m. EDT on Wednesday afternoon — and another link to it is here.


Negative Interest Rates Threaten the Financial System — Jim Bianco

Former Federal Reserve Chairman Alan Greenspan recently said he wouldn’t be surprised if yields on U.S. bonds turned negative and if they do, it wouldn’t be “that big a of a deal.” That seems to be a sentiment widely held in central banking circles these days, but it’s wrong. Negative interest rates represent a threat to the financial system.

To understand why, let’s start with the existing fractional reserve banking system, which is more than a century old. For every dollar that goes into a bank, some set amount (usually about 10%) must go into a reserve account to be overseen by the central bank. The rest is either lent out or used to buy securities.

In other words, the fractional reserve banking system is leveraged to interest rates. This works when rates are positive. Loans are made and securities bought because they will generate income for the bank. In a negative rate environment, the bank must pay to hold loans and securities. In other words, banks would be punished for providing credit, which is the lifeblood of an economy. As German bankers recently explained to the European Central Bank:

We already have a devastating interest rate situation today, the end of which is unforeseeable,” Peter Schneider, who represents public-sector savings banks in the southern German state of Baden-Wuerttemberg, said on Wednesday. “If the ECB aggravates this course, that would hit not only the entire financial sector hard, but especially savers.”

And to make matters worse, the German government is considering outlawing negative deposit rates. In a negative rate world, forcing rates on short-dated debt to zero would keep the yield curve permanently inverted. The fractional reserve banking system cannot operate properly in this environment.

This worthwhile opinion piece was posted on the Bloomberg website at 2:00 a.m. PDT on Tuesday morning — and I found it in a Zero Hedge article that Brad Robertson sent our way.  Another link to it is hereGregory Mannarino‘s post-market close wrap-up from Wednesday is linked here — and I thank Roy Stephens for that.


Jay Taylor interviews David Stockman

This 23-minute audio interview with host Jay Taylor begins at the 36:15 minute mark — and I must admit that I haven’t had the time to listen to it yet, so you’re on your own with this one.  But David is never lost for words.


The Internet Age Distorted the Meaning of Wealth — Bill Bonner

Last week, we explained that we knew next to nothing about economics when we began writing this Diary 20 years ago. We discovered the economic world along with our long-suffering Dear Readers, dot by dot, error by error, claptrap by claptrap.

Now, we know a little more than next to nothing. But what we know most of all… and are absolutely confident about… is that next to nothing is about as good as it gets.

Neither we nor anybody else will ever know, in detail, how an economy actually functions.

An economy is a natural thing, evolved, not designed.

It responds to billions of inputs… past, present, and future… far too numerous, ambiguous, and subtle for any person, group, or computer algorithm to master… aggregating the desires, fantasies, and desperate midnight terrors of billions of people, each with his own “information.”

Any attempt by a few people to impose their own vision on it only distorts it, subverts it, and corrupts it.

That’s why central planning – either the hard version of the Bolsheviks… or the light version of Republicans and Democrats… or the bizarro version of Donald Trump – always retards growth and reduces satisfaction.

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


British MPs defeat Boris Johnson on Brexit, election looms

A cross-party alliance defeated Boris Johnson in parliament on Tuesday in a bid to prevent him taking Britain out of the E.U. without a divorce agreement – prompting the prime minister to announce that he would immediately push for a snap election.

Lawmakers voted by 328 to 301 for a motion put forward by opposition parties and rebel lawmakers in Johnson’s party – who had been warned they would be kicked out of the Conservative Party if they defied the government.

More than three years after the United Kingdom voted in a referendum to leave the European Union, the defeat leaves the course of Brexit unresolved, with possible outcomes still ranging from a turbulent ‘no-deal’ exit to abandoning the whole endeavour.

Tuesday’s victory is the first hurdle for lawmakers who, having succeeded in taking control of parliamentary business, will on Wednesday seek to pass a law forcing Johnson to ask the EU to delay Brexit until Jan. 31 unless he has a deal approved by parliament beforehand on the terms and manner of the exit.

This story was posted on the france24.com Internet site at 11:35 p.m. CEST on Tuesday night — and was updated about ten hours later.  I thank Roy Stephens for sending it — and another link to it is here.  There was a Russia Today item on this headlined “‘Chaos unseen since WWII’: U.K. parliament subverts democracy, leaves pre-Brexit Britain ungoverned” — and that comes to us courtesy of Roy as well.  The Zero Hedge spin on all this is headlined “Cable Climbs as Parliament Rejects Johnson’s Election Request” — and the link to that is here.


Iran will give Europe two months to save nuclear deal — Rouhani

Europe has two months to negotiate sanctions relief for Tehran, otherwise the country will initiate ‘phase three’ in its rollback of commitments under the 2015 nuclear deal, Iranian President Hassan Rouhani has said.

Europe has another two-month deadline for negotiations, agreement, and a return to its commitments,” Rouhani warned at a cabinet meeting on Wednesday.

Tehran has been calling on the E.U. to provide relief from the sweeping sanctions that were imposed by Washington after the U.S. unilaterally left the 2015 deal, known as the JCPOA. Iranian officials have warned that they will gradually reduce their commitments under the agreement if this does not happen.

In early July, Iran activated the ‘first phase’ of this strategy by increasing its stockpile of enriched uranium beyond the 300kg limit imposed by the JCPOA. The ‘second phase’ – enriching uranium beyond 3.67 percent – was effected shortly afterwards.

Rouhani didn’t specify what the next step would be, but he hinted that it would play an important part in transforming the nation’s nuclear program.

This news story put in an appearance on the rt.com Internet site at 7:17 a.m. Moscow time on their Wednesday morning, which was 12:17 a.m. in Washington — EDT plus 7 hours.  I thank Larry Galearis for sending it our way — and another link to it is here.


U.S. Announces $15M Reward To Disrupt Iran’s IRGC’s “Sprawling Petroleum Shipping Network

At a moment the Iran-flagged tanker Adrian Darya has “gone dark” – turning off its transponder signal as it waits off the Syrian coast in what is believed the precursor to an imminent offloading of its 2.1 million barrels of Iranian crude, the U.S. Treasury has rolled out new sanctions covering 40 Iran-linked companies, individuals and vessels in what is the most far-reaching attempt to disrupt Iran’s oil trade on the high seas yet.

A senior administration official announced Wednesday the U.S. is targeting a “sprawling petroleum shipping network” spearheaded by former Islamic Revolutionary Guard Corps (IRGC) commanders and their proxies such as Hezbollah.

The official charged that Iran’s oil continued in “funding” global terrorism. The senior official further called on the international community to “reject oil from Iran” and further took the unprecedented step of offering a substantial reward to anyone that helps to “disrupt an [Iranian] government operation“.

Specifically, the U.S. is now offering for the first time ever a reward up to $15 million to help disrupt petroleum operations of the IRGC and its Quds force, citing “hundreds of millions of dollars” in oil moved “over the past year through this network“.

The State Department is offering the massive sum through its Rewards for Justice program, which includes giving information which uncovers the sources of IRGC funding.

From one outrage to another.  This news item put in an appearance on the Zero Hedge Internet site at 2:25 p.m. on Wednesday afternoon EDT — and another link to it is here.


Hong Kong leader fully withdraws contentious extradition bill

After it led to months of often violent protests, Hong Kong’s contentious extradition bill was finally withdrawn Wednesday by leader Carrie Lam.

Officially withdrawing the legislation, which proposed allowing China to extradite fugitives from the territory for trial, meets one of the five demands made by the protesters. The others include setting up a government inquiry into police conduct, granting amnesty to those arrested in the protests, refraining from characterizing the protests as riots and resuming political reforms.

Lam announced plans to investigate the causes of the social unrest and suggest solutions, but stopped short of the full-fledged inquiry demanded by protesters.

Lam’s capitulation follows one of the most violent weekends of protests all summer, when numerous protesters were arrested for tossing gas bombs at police headquarters and government buildings. The demonstration was considered illegal because the government had rejected a permit to assemble.

Hong Kong lawmaker Michael Tien, who had been a proponent of the extradition bill, said the withdrawal was the right thing to do but it may not satisfy the opponents.

The focus since the beginning of July has completely shifted now to the confrontation between police and rioters, and how the public perceives it,” Tien said. “The public is totally polarized, but it is no longer about the extradition bill.”

This news item was posted on the upi.com Internet site at 7:23 a.m. EDT on Wednesday morning — and I thank Roy Stephens for bringing it to my attention — and now to yours.  Another link to it is here.


LME’s gold, silver contracts in doubt as Société Générale pulls out

The London Metal Exchange’s gold and silver futures are being thrown into doubt, with the imminent resignation of Societe Generale as a market maker threatening to deepen a decline in trading activity, three sources said.

SocGen, one of five lenders that partnered with the LME to launch the contracts in 2017, is expected to resign shortly as a market maker, taking the number of banks committed to offering tradeable prices to two — Goldman Sachs and Morgan Stanley, the sources said.

That has triggered a discussion over the contracts’ future.

There’s still commitment,” said one of the sources. But if volumes remain low, they added, “we’ll have to sit down and decide what is the next stage — exit, restructuring, or something else.”

Another rat leaving a sinking ship, perhaps?  This Reuters article, filed from London, showed up on their Internet site at 10:23 a.m. EDT on Wednesday morning — and the first reader through the door with it was Jim Gullo.  Another link to it is here.


I wouldn’t be surprised to see $3,000 gold: David Rosenberg

This 6:38 minute National Post video interview appeared on the youtube.com Internet site back on August 28 — and I thank Swedish reader Patrik Ekdahl for sending it along.


Gold will be explosive, unlike anything we’ve seen says Canada’s billionaire Frank Giustra

We’re currently in the last phase of a gold bull rally that began back in 2001 — and this phase will see the most upside action, this according to Frank Giustra, chairman of Leagold.

This 20-minute video interview appeared on the kitco.com Internet site on Tuesday sometime — and Roy Stephens was the first person through the door with this one.  I’ve watched the first nine minutes of it — and it’s definitely worth your time.


The PHOTOS and the FUNNIES

Continuing on our trip down Agate Bay Road east of Barriere, B.C….I saw this small herd of horses under a tree by an old abandoned house — and though it would make a good photo.  The second is of a hay field in the valley that the road goes through.  The third is the local variety of the Columbian ground squirrel — and the last shot is the piece of pasture that the critter and family members called home.  Click to enlarge.


The WRAP

Despite the sell-offs in both gold and silver in Far East and early morning trading in London, they both managed to recover and close higher on the day, but I doubt that this will the last attempt by the bullion banks to run the Managed Money traders off their massive long positions.   As Ted says, they either engineer a price decline so they can cover some or all of their massive short positions…or they get over run.

Platinum had another huge upside day on Wednesday — and that is strictly a short covering rally which, as I pointed out in yesterday’s missive, will be fully evident in tomorrow’s Commitment of Traders Report.

Here are the 6-month charts for all four precious metals, plus copper and WTIC — and the changes in all should be noted.  I will point out that both copper and WTIC managed to rally yesterday, but it’s way too soon to call this the start of anything.  The Managed Money traders hold massive short positions in both these critical commodities as well.  That’s why their respective prices are as low as they are.  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 traded down a dollar or so going into the 8 a.m. open in Shanghai on their Thursday morning. But, like on their Wednesday morning, was kicked down to its current low by shortly after 10 a.m. CST. It recovered a bit after that — and has been trading mostly sideways since, but has ticked up a bit in the last few minutes — and is down $4.40 as London opens. It was mostly the same for silver, without the tick up like gold had — and it’s down 13 cents currently. Platinum has been wandering around a few dollars either side of unchanged during Far East trading on their Thursday — and is down a dollar. Ditto for palladium — and it’s down a dollar as well as Zurich opens.

Net HFT gold volume is already immense at about 92,000 contracts — and there’s around 2,600 contracts worth of roll-over/switch volume on top of that. Net HFT silver volume is getting up there was well at just under 29,000 contracts — and there’s 847 contracts worth of roll-over/switch volume in this precious metal.

The dollar index opened down about 5 basis points once trading commenced at around 7:45 p.m. EDT in New York on Wednesday evening, which was 7:45 a.m. China Standard Time on their Thursday morning. It set its current low tick moments later — and has been chopping very quietly and unevenly higher since. As of 7:45 a.m. BST in London/8:45 a.m. CEST in Zurich, the index is up 7 basis points.


Looking ahead at what might be in tomorrow’s Commitment of Traders Report, I’m not going to stick my neck out in gold, but I would suspect that there will be further deterioration in the commercial net short position in silver.

Ted had something to say about this in his mid-week commentary for his paying subscribers in his mid-week commentary yesterday — and I’ll borrow a few sentences for my Friday column.


And as I post today’s missive on the website at 4:02 a.m. EDT…I note that the tiny gold rally going into the London open was turned sharply lower shortly after that — and it’s currently down $11.00 an ounce. Ditto for silver — and it’s down 27 cents as the first hour of London trading ends. Platinum is now down 5 bucks — and palladium is back at unchanged as the first hour of Zurich trading draws to a close.

Gross gold volume is now up to 115,000 contracts — and minus what little roll-over/switch volume there is, net HFT gold volume is around 109,000 contracts. Net HFT silver volume is just under 34,000 contracts — and there’s 940 contracts worth of roll-over/switch volume on top of that.

The dollar index topped out around 2:45 p.m. CST/7:45 a.m. BST — and has been sold lower since –and is now down 10 basis point as of 8:45 a.m. in London/9:45 a.m. in Zurich.

That’s all I have for today — and on Friday we get the latest jobs report, so I expect some ‘reaction’ from both gold and silver at that time.

See you here tomorrow.

Ed