Another Day of Price Management in the Precious Metals

10 March 2020 — Tuesday


Not surprisingly, the gold price blasted higher the moment that trading began at 6:00 p.m. EDT in New York on Sunday evening — and it ran into ‘da boyz’ immediately, as they prevented it from getting too far over $1,700 spot.  By around 10:20 a.m. China Standard Time on their Monday morning they had it heading lower — and the low tick was set a few minutes before 1 p.m. CST.  After that, every attempt for it to break above $1,680 spot was turned aside.

The high and low ticks in gold were reported as $1,704.30 and $1,658.00 in the April contract.

Gold finished the Monday session in New York at $1,679.60 spot, up only $6.50 on the day — and about 25 bucks off its Kitco-recorded high tick.  Net volume was extremely heavy at a bit over 437,500 contracts — and there was a bit over 76,000 contracts worth of roll-over/switch volume out of April and into future months

Silver’s rally at the open in New York on Sunday evening, ran into the Big 8 traders as well, but they had a handle on that in a bit under an hour — and starting at 8 a.m. in Shanghai on their Monday morning, it was sold down to its low of the day, which was set a minute or so after 2 p.m. CST.  After that, its price was managed in a similar fashion as gold, except the “Do Not Pass Go” sign for it was put up that $17 spot mark.

The high and low ticks were silver were recorded by the CME Group as $16.615 and $16.55 in the May contract.

Silver was closed in New York yesterday at $16.99 spot, down 33 cents from Friday.  Net volume was monstrous at at around 113,700 contracts — and there was a bit under 15,500 contracts worth of roll-over/switch volume in this precious metal.

Platinum’s tiny rally on Sunday evening in New York met about the same fate as silver, except it was sold quietly and unevenly lower until an hour or so before the market closed at 5:00 p.m. EDT on Monday afternoon.  ‘Da Boyz’ closed platinum at $863 spot, down an even 40 bucks from its close on Friday.

Palladium had a wild roll coaster ride…getting sold lower starting around 6:15 p.m. EDT in New York on Sunday evening, with the $2,250 spot low tick coming a few minutes after 10 a.m. CET in Zurich on their Monday morning.  It then stair-stepped its way higher in price until shortly after 12 o’clock noon in New York when it broke above $2,400 spot.  That was obviously a no-no — and it was sold lower into the 5:00 p.m. EDT close from there.  Palladium was closed at $2,358 spot, down 93 dollars from its Friday close, but $108 bucks off its Kitco-recorded low tick of the day.

The dollar index closed very late on Friday afternoon in New York at 95.95 – and gapped down 23 basis points once trading commenced around 6:30 p.m. EDT in New York on Sunday evening.  It chopped very unevenly lower from there — and obviously wanted to crash on three separate occasions, but the usual ‘gentle hands’ were out and about.  That decline continued until a few minutes before 2 p.m. in New York — and it crept a bit higher until trading ended at 5:30 p.m. EDT.  The dollar index was marked-to-close at 94.895…down 106 basis points from Friday.

The index was closed at that value despite the fact that the DXY chart below shows the close as 95.03.

It was more than obvious that the powers-that-be weren’t going to let precious metal prices reflect the decline in the dollar index, or anything else for that matter…as there was no correlation whatsoever, except at the spike up in the gold price at the open in New York on Sunday evening.

Here’s the DXY chart for Monday…courtesy of BloombergClick to enlarge.

And here’s the 6-month U.S. dollar index chart, courtesy of the fine folks over at the Internet site.  The delta between its close…94.87…and the close on the DXY chart above, was 2.5 basis points on Monday.  Click to enlarge as well.

Well, there’s no sugar-coating what happened to the precious metal shares yesterday, as the proverbial baby was thrown out with the bathwater once again.  A combination of “sell everything!” panic, plus margin call, mutual fund selling on redemptions — and maybe a bit of short selling thrown in for good measure, caused a bloodbath.  The HUI closed lower by a whopping 8.04 percent.

Nick had more problems with the Silver Sentiment/Silver 7 Index again yesterday — and doesn’t have that chart, nor the 1-year Silver 7 Index chart.  But I figured it out manually — and these seven silver equities got hammered by 9.88 percent on average

They were all dogs again yesterday…but the worst of the two pooches were Coeur Mining and Hecla Mining…down 14.86 and 14.77 percent respectively.  The least ugly puppy of the litter was Peñoles…down ‘only’ 5.95 percent.

Not that it’s any consolation, but whoever bought all the precious metal equities yesterday, are the strongest of hands.

The CME Daily Delivery Report showed that 14 gold and 103 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday.

In gold, the two short/issuers were Morgan Stanley and Advantage with 11 and 3 contracts.  The three long/stoppers were ADM, JPMorgan and Advantage, with 6, 5 and 3 contracts.  All contracts, both issued and stopped, involved their respective client accounts.

In silver, there were three short/issuers in total, but the only one that mattered was International F.C. Stone with 100 contracts out of its client account.  There were 9 long/stoppers in total — and the three biggest were JPMorgan, BofA securities and Citigroup, with 54, 21 an 11 contracts.  Like in gold, all the 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 March rose by 4 contracts, leaving 101 still open, minus the 14 mentioned a few paragraphs ago.  Friday’s Daily Delivery Report showed that 19 gold contracts  were actually posted for delivery today, so that means that 19+4=23 more gold contacts just got added to March.  Silver o.i. in March declined by 110 contracts, leaving 639 still around, minus the 103 contracts mentioned a few paragraphs ago.  Friday’s Daily Delivery Report showed that 119 contracts were actually posted for delivery today, so that means that 119-110=9 more silver contracts were just added to the March delivery month.

I should note that total open interest in gold and silver fell for the second day in a row…down 15,320 contracts in gold — and 5,064 contracts in silver.  Both numbers are subject to slight revisions when the final numbers are reported on the CME’s website later this morning EDT.

There were no reported changes in either GLD or SLV on Monday.

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, March 6 — and this is what they had to report for the week just past.  Their gold ETF added 71,614 troy ounces — and 216,536 troy ounces of silver was added to their silver ETF.

In other gold and silver ETFs on Planet Earth on Monday…net of the goings-on in COMEX, ZKB, GLD & SLV…there was a net 109,079 troy ounces of gold added — and there was a net 623,971 troy ounces of silver added as well…all of which ended up at Deutsche Bank.

There was another sales report from the U.S. Mint yesterday…the third one this month!  They sold 1,500 troy ounces of gold eagles — 500 one-ounce 24K gold buffaloes — and 595,000 silver eagles.

And still nothing from the Royal Canadian Mint.

The only activity in gold over at the COMEX-approved gold depositories on the U.S. east coast on Friday was 2,411.250 troy ounces/75 kilobars [U.K./U.S. kilobar weight] that was received at Delaware.  Nothing was shipped out.  I won’t bother linking this.

There was certainly more activity in silver.  Two truckloads were received, one shipped out — and one transferred from the Eligible category and into Registered.  In the ‘in’ category, there was 587,102 troy ounces received at Canada’s Scotiabank — and the other truckload…605,417 troy ounces…was dropped off at CNT.  The 600,537 troy ounces shipped out was from Scotiabank as well.  The 600,343 troy ounces transferred was at CNT — and that’s most likely out for delivery in March.  The link to that is here.

There was only a tiny bit of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Friday.  Nothing was reported received — and only 2 were shipped out.  That activity was at Brink’s, Inc. — and I shan’t bother linking it.

Spain, Charles III., 1759-1788, 1/2 Escudo 1786

Mint: Madrid     Material: gold     Full Weight: 1.78 grams

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


New York Fed increases repo lending by 50%

The Federal Reserve Bank of New York said today it will increase the amount of very short-term loans it has been offering to money markets amid a widening market rout.

The Fed had been slowly reducing its lending in a key short-term financing market for repurchase, or repo, agreements, in which the Fed lends cash overnight or for two weeks, accepting government bonds or mortgage-backed securities as collateral.

Today’s announcement, however, reflects how growing funding strains resulting from the spreading coronavirus epidemic and increased demand for short-term lending have put any reduction in repo lending on hold for now.

Today’s adjustments were designed to ensure that the supply of bank deposits held at the Fed, called reserves, “remains ample and to mitigate the risk of money market pressures that could adversely affect policy implementation,” the New York Fed said. “They should help support smooth functioning of funding markets as market participants implement business resiliency plans in response to the coronavirus.”

The New York Fed said it would increase to $150 billion from $100 billion the amount of repo lending it conducts on an overnight basis through Thursday, when the Fed is set to update its monthly funding schedule. On two days last week, the Fed saw demand for those overnight repo operations exceed the $100 billion limit, though rates didn’t rise significantly. …

The rest of this Wall Street Journal article is hidden behind their subscription wall — and the above portion was posted in the clear in a GATA dispatch on Monday morning EDT.  Another link to the story is here.  The Zero Hedge spin on this is headlined “N.Y. Fed Massively Ramps Up Repo Facility Liquidity Bailout” — and I thank Brad Robertson for sending it our way.

Think it’s bad now? Wait a month, says hedge-fund manager Kyle Bass

That’s Bass talking on CNBC early Monday about how long this weakness will last. He said that until the results from the first round of widespread testing for the coronavirus infection are tallied in the U.S., he’ll remain in holding pattern.

According to the latest numbers, there are now 111,284 cases of COVID-19 and 3,892 deaths. In the U.S., 22 people have died, with 564 confirmed cases as of Monday morning.

At this point, Bass says he’s not buying or selling, instead he’ll just be watching “one of the most interesting financial collapses that we’ve seen in the past 15 to 20 years.”

However, he’ll be ready to pounce when the timing’s right.

This 9:47 minute video interview with host Joe Kernan, is embedded in this story from the Internet site.  It was posted there at 2:46 p.m. EDT on Monday afternoon — and the first reader through the door with it was Jim Gullo.  Another link to it is here.

Fed Rates at 0% Now Seen Within Months Amid Global Bond Frenzy

The entire U.S. yield curve fell below 1% for the first time in history as rising expectations that the Federal Reserve will cut policy rates to zero in the coming months drove investors to reach for longer-dated securities.

Traders are pricing in about 80 basis points of cuts in March, and 100 basis points by July, which would drag borrowing costs down to zero. Those bets fueled a rally in U.S. Treasuries, with the rate on 30-year bonds diving as much as 59 basis points. Benchmark U.K. bond yields tumbled below zero for the first time, Germany’s two-year bonds and rates in Australia and New Zealand fell to new lows.

The latest frenzy in markets, spurred by concerns over an oil price war between Russia and Saudi Arabia, prompted the New York Fed to say it will boost the size of this week’s overnight and term repo operations to ensure reserves are ample and reduce the risk of pressures in money markets.  Click to enlarge.

The more I think about it, the more it makes sense to me that the U.S. cash rate will fall below zero some time very, very soon,” said Chris Rands, portfolio manager at Nikko Asset Management Ltd. in Sydney. “I wouldn’t be surprised if the U.S. tries negative rates, especially with the tailspin in oil now adding to the virus fears.”

Goldman Sachs Group Inc. economists said Monday that they now expect the Fed to slash interest rates back to the record low of 2015 as the U.S. economy stagnates because of the coronavirus. The Fed will cut its benchmark rate by 50 basis points when policy makers gather on March 17-18 and again at their April 28-29 meeting, Jan Hatzius, Goldman Sachs’s chief economist, said in a report to clients on Monday.

This Bloomberg news item showed up on their Internet site at 5:09 p.m. EDT on Sunday afternoon — and was updated about sixteen hours later.  It’s another article that I found on the Internet site — and another link to it is hereGregory Mannarino‘s post market close rant for Monday is linked here — and I thank Brad Robertson for this.

There is no Liquidity” – Market Paralyzed as FRA/OIS Explodes

Over the weekend, we discussed the latest analysis by JPMorgan’s Nick Panigirtzoglou according to which in addition to the literal lock up in equity markets (where S&P futures were halted limit down for hours overnight), credit and funding markets were starting to show signs of extreme stress, not only as a result of the sudden plunge in energy credits but due to a violent return of what appears to be systemic issues within the inter-bank funding market.

As the JPM quant summarized, “we see initial signs of emerging credit and funding stress. If these shifts in credit and funding markets are sustained over the coming weeks and months, especially in the issuance space, credit channels might start amplifying the economic fallout from the COVID-19 crisis.

To prove his point that the credit bubble was cracking, Panigirtzoglou highlighted the recent spike in the dollar fx basis, the latest burst of repo activity by the Fed, the spike in the SOFR rate and the SOFR-IOER spread, and last but perhaps most notably, the sudden blow out in the notorious FRA/OIS spread.

Commenting on the sudden liquidity air pockets, Bloomberg Chief Global Derivatives Strategist Tanvir Sandhu wrote that “liquidity holes and the unleashing of suppressed volatility has seen convexity options outperform given the acceleration in volatility gains as tail risks reprice. For example, VIX calls funded by SPX puts would work for those looking for long convexity exposure. Now, extracting vol premium should come into play while managing the further deterioration of risk.”

Yet while traders are looking at indications the financial collapse of 2008 may repeat, there is one novel wrinkle: the unprecedented proliferation of ETFs and passive investing. For Nomura’s Hodges, the problem is exacerbated by the proliferation of exchange-traded funds, something we discussed in “Market Crash Reveals The “Liquidity Problem” of Passive Investing“.  The problem with passive investing is that while it propels market dutifully higher, when stocks crash, ETFs reverse, and a painful selling liquidation commences, one which takes a long time to stop, or as Bloomberg puts it, “when the market goes into free-fall, they are required to sell the underlying asset, prompting a frantic search for anyone who will buy it.”

In the end, Aberdeen Investment money manager Luke Hickmore put it best: “People are asking for bids — and then dealing when they see them. You can definitely sell for sure, you just might not like the price.

He’s right, for now. A few more days of liquidation panic, and there won’t be a price at all: the market will simply be halted indefinitely, and nobody will know when (and if) they reopen, something we first discussed almost 6 years ago in “How The Market Is Like CYNK (Which Was Just Halted)”

This long, chart-filled and rather heavy-reading commentary put in an appearance on the Zero Hedge website at 3:38 p.m. EDT on Monday afternoon — and it comes to us courtesy of Brad Robertson.  Another link to it is here.

A Shift in the Global Financial Order Is Upon Us — John Authers, Senior Editor…Bloomberg

The collapse in bond yields, exacerbated by the crash in oil prices, marks an end to the era of trust in central banks

looking too closely at the drama following the OPEC breakdown might miss the point. This looks like a truly historic juncture, of the kind that comes along only every few decades, as the international financial order shifts.

After the war, the developed world was governed by the Bretton Woods accords, which tied all currencies to the dollar, which was in turn pegged to gold. It was a looser form of a gold standard, and survived until 1971. That was when Richard Nixon ended the gold peg, realizing that it had become too great a burden for the U.S., and stood in the way of the expansionary fiscal policy he was hoping to adopt ahead of his re-election campaign.

The result was a huge shock to the world order. With the gold peg gone, the financial system adopted a new anchor, which was oil. In a book published 10 years ago, I tried describing the system that replaced Bretton Woods as an Oil Standard. Effectively, producers tried to defend themselves against the declining buying power of the dollar by hiking prices, so as to keep the price of oil in gold terms effectively constant. The oil/gold ratio measures how much gold you would need to pay to buy a certain amount of oil. As the chart shows, it ended the 1970s almost exactly where it had started, despite the massive increase in dollar terms.  Click to enlarge.

The chart uses Bloomberg’s historic oil prices, which appear monthly, and pre-dates the latest market drama. Once updated, it will show the oil/gold ratio reached an all-time low, having already halved this year:  Click to enlarge.

The Oil Standard era ended in the early 1980s. Markets — and everyone else — had lost faith in the ability of central banks to control inflation. Paul Volcker arrived at the Fed, raised rates more than anyone thought he would dare, provoked a recession, and convinced everyone that central banks could control inflation after all. In conjunction with the Reagan/Thatcher approach to economic management, and then the collapse of the Soviet Union and the resurgence of China, that ushered in a quarter-century of triumphalism for a new model anchored by broadly trusted central banks.

That foundered in the financial crisis of 2007-09.  Now we have reached a new juncture, where the fear is that central banks cannot control deflation. For the post-crisis decade, the U.S. has managed to stay distinct, thanks in part to the privilege of the world’s reserve currency, and in part to the superior success of its corporate sector. It has done this even as Japan and Western Europe have sunk into negative interest rates, while the emerging markets have stagnated. The twin shocks of the epidemic and the oil price now appear to have wounded confidence that the U.S. can stand alone.

It certainly looks as though the world has at last arrived at a point that it appeared to have reached a decade ago. Some new financial order, to replace Bretton Woods and the system that Volcker built to replace it, is now needed. A decade of monetary expansion has delayed the issue. It is hard to see how it can be delayed much further. It would be wise to brace for disruption to match what was experienced at the end of the 1970s and the beginning of the 1980s.  [Emphasis mine. – Ed]

Is this a warning that the new financial system is about to be sprung on us, dear reader…complete with a shiny new price for both silver and gold?  It has that odor to me.  But I’ve thought that before and nothing’s ever come of it, so we’ll see.  The columnist, John Authers, is a senior editor for markets at Bloomberg — and before that he was with the Financial Times of London, so he certainly has the pedigree. This long, chart-filled commentary/opinion piece is definitely worth reading — and it was posted on their Internet site at 10:28 p.m. PDT on Sunday night — and I extracted it from a Zero Hedge article from late Monday afternoon.  Another link to it is here.

Coronavirus Reveals Compromised Financial System — Bill Bonner

[F]rom Europe came two more bits of news. The first was a tragedy: Our “home” town in Ireland, Youghal, cancelled its St. Patrick’s Day parade. The second struck a more light-hearted note:

(Bloomberg) – “A top political party leader in Italy and a French lawmaker caught the coronavirus as the outbreak continued its global advance.

A 55-year-old Iranian lawmaker died from the illness, the first fatality among 23 infected members of parliament.”

Typically, politicians spare themselves from the mischief they do. But the C virus is no respecter of the elite. And it doesn’t give a hoot about rate cuts.

Already, two members of Congress are self-quarantining. Will Congress close its doors? Will the next presidential election be called off?

Will the president himself catch the virus? What a drama!

Imagine, the commander in chief lying in the hospital, as the whole world holds its breath… one half praying that he pulls through… the other half rooting for the bug!

This commentary from Bill was posted on the Internet site on Monday sometime — and another link to it is here.

Putin Dumps MBS to Start a War on America’s Shale Oil Industry

At 10:16 a.m. on a wet and dreary Friday morning, Russia’s energy minister walked into OPEC’s headquarters in central Vienna knowing his boss was ready to turn the global oil market upside down.Alexander Novak told his Saudi Arabian counterpart Prince Abdulaziz bin Salman that Russia was unwilling to cut oil production further. The Kremlin had decided that propping up prices as the coronavirus ravaged energy demand would be a gift to the U.S. shale industry. The frackers had added millions of barrels of oil to the global market while Russian companies kept wells idle. Now it was time to squeeze the Americans.After five hours of polite but fruitless negotiation, in which Russia clearly laid out its strategy, the talks broke down. Oil prices fell more than 10%. It wasn’t just traders who were caught out: Ministers were so shocked, they didn’t know what to say, according to a person in the room. The gathering suddenly had the atmosphere of a wake, said another.

For over three years, President Vladimir Putin had kept Russia inside the OPEC+ coalition, allying with Saudi Arabia and the other members of the Organization of Petroleum Exporting Countries to curb oil production and support prices. On top of helping Russia’s treasury – energy exports are the largest source of state revenue – the alliance brought foreign policy gains, creating a bond with Saudi Arabia’s new leader, Crown Prince Mohammed bin Salman.

But the OPEC+ deal also aided America’s shale industry and Russia was increasingly angry with the Trump administration’s willingness to employ energy as a political and economic tool. It was especially irked by the U.S.’s use of sanctions to prevent the completion of a pipeline linking Siberia’s gas fields with Germany, known as Nord Stream 2. The White House has also targeted the Venezuelan business of Russia’s state-oil producer Rosneft.”The Kremlin has decided to sacrifice OPEC+ to stop U.S. shale producers and punish the U.S. for messing with Nord Stream 2,” said Alexander Dynkin, president of the Institute of World Economy and International Relations in Moscow, a state-run think tank. “Of course, to upset Saudi Arabia could be a risky thing, but this is Russia’s strategy at the moment – flexible geometry of interests.”

The First No

The OPEC+ deal had never been popular with many in the Russian oil industry, who resented having to hold back investments in new and potentially profitable projects. In particular, Igor Sechin, the powerful boss of Rosneft and a long-time Putin ally, lobbied against the curbs, according to people familiar with the matter, who asked not to be identified discussing private conversations.The Kremlin was also disappointed the alliance with Riyadh hadn’t yielded major Saudi investments in Russia.For several months, Novak and his team had been telling Saudi officials they liked being in the OPEC+ alliance but were reluctant to deepen production cuts, according to people familiar with the relationship. At the last OPEC meeting in December, Russia negotiated a position that allowed it to keep production fairly steady while Saudi Arabia shouldered big reductions.When the coronavirus started devastating Chinese economic activity in early February – cutting oil demand in Saudi Arabia’s biggest customer by 20% — Prince Abdulaziz tried to convince Novak that they should call an early OPEC+ meeting in response to cutback supply. Novak said no.

The Saudi king and Putin spoke by phone ­­– it didn’t help.As the virus spread and analysts forecast the worst year for oil demand since the global financial crisis, the Saudi camp was hopeful Moscow could be won round at the next scheduled OPEC meeting in early March. The Russians didn’t rule out deepening cuts, but kept making the point that shale producers should be made to share the pain.Putin, who has been the final arbiter of Russia’s OPEC+ policy since the alliance started in 2016, met oil Russian producers and key ministers last Sunday. Russia’s approach was that shale producers should share the pain caused by the drop in demand, cutting U.S. oil production, according to someone who attended.

This worthwhile Bloomberg article from 1:28 p.m. EST on Saturday afternoon was picked up by the Internet site — and I thank Phil Manuel for sending it along.  Another link to it is here.

Russia Just Told the World, “No.” — Tom Luongo

[I]nto this mess OPEC tried to save itself by asking for a historic production cut.

OPEC needs this cut to remain relevant. The cartel is dying. It’s been dying for years, kept on life support by Russia’s willingness to trade favors to achieve other geostrategic goals.

I’ve said before that OPEC production cuts are not bullish for oil just like rate cuts are not inflationary during crisis periods.

But finally Russia said No. And they didn’t equivocate. They told everyone they are prepared for lower oil prices.

The panic was palpable in the reporting on the meeting.

“At the end of the day, it was the general, painful decision of the joint conference to adjourn the meeting,” he told reporters.

Earlier, Oanda analyst Edward Moya had suggested that a failure to reach an agreement could spell the end of OPEC+.

“No-deal OPEC+ means the three-year experiment is over. OPEC+ is dead. The Saudis are all-in on stabling oil prices and they may need to do something extraordinary,” he said.

There comes a point where negotiating with your adversaries ends, where someone finally says, “Enough.” Russia has been attacked mercilessly by the West for the crime of being Russia.

This long, but very worthwhile commentary from Tom put in an appearance on his Internet site of Friday — and it’s definitely worth reading.  I thank Roy Stephens for pointing it out — and another link to it is here.

Lebanon to Default on Dollar-Denominated Debt

Lebanon said on Saturday it would default on its Eurobond debt for the first time and seek out restructuring agreements amid a spiralling financial crisis that has affected foreign currency reserves.

The country, hit by a severe liquidity crunch and months of anti-government protests, was due to repay a $1.2bn (£920m) Eurobond on 9 March, while another $700m matures in April and a further $600m in June.

But the prime minister, Hassan Diab, said that foreign currency reserves have fallen to “a worrying and dangerous level which pushes the Lebanese government to suspend payment of the 9 March Eurobond maturity because of a need for these funds.”

The Lebanese state will seek to restructure its debts, in a manner consistent with the national interest, by entering into fair negotiations … with all creditors,” he said in a live address.

Prime Minister Hassan Diab, who took the helm earlier this year, said. How could we pay creditors while hospitals are subject to medical-supplies shortages?

This story was posted on Internet site at 6:16 p.m. GMT on Saturday evening — and I found it embedded in a GATA dispatch.  Another link to it is here.

Saudi Arabia Starts All-Out Oil War: MbS Destroys OPEC By Flooding Market, Slashing Oil Prices

With the commodity world still smarting from the Nov 2014 Saudi decision to (temporarily) break apart OPEC, and flood the market with oil in (failed) hopes of crushing U.S. shale producers (who survived thanks to generous banks extending loan terms and even more generous buyers of junk bonds), which nonetheless resulted in a painful manufacturing recession as the price of Brent cratered as low as the mid-$20’s in late 2015/early 2016, on Saturday, Saudi Arabia launched its second scorched earth, or rather scorched oil campaign in 6 years. And this time there will be blood.

Following Friday’s shocking collapse of OPEC+, when Russia and Riyadh were unable to reach an agreement during the OPEC+ summit in Vienna which was seeking up to 1.5 million b/d in further oil production cuts, on Saturday Saudi Arabia kick started what Bloomberg called an all-out oil war, slashing official pricing for its crude and making the deepest cuts in at least 20 years on its main grades, in an effort to push as many barrels into the market as possible.

Confirming the obvious, Iman Nasseri, managing director for the Middle East at oil consultant FGE said “Saudi Arabia is now really going into a full price war.”

The draconian cuts in monthly pricing by state prouder Saudi Aramco are the first and clearest indication of how the Saudis will respond to the break up of the alliance between OPEC and Russia, which as we noted earlier, dumped MbS on Friday in a stunning reversal within OPEC+. Talks in Vienna ended in dramatic failure on Friday as Saudi Arabia’s gamble to get Russia to agree to a prolonged and deeper cut failed to pay off.

And the second indication that the OPEC oil cartel is now effectively dead, came a few hours later when Bloomberg again reported that in addition to huge price cuts, Saudi Arabia was set to flood the market with a glut of oil to steal market share and capitalize on its just announced massive price cuts as the kingdom plans to increase oil output next month, going well above 10 million barrels a day.

[O]nce Brent craters on Monday to the mid-$30s or lower, the accompanying implosion in 10Y yields could make the record plunge in yields seen on Friday a dress rehearsal for what could be the biggest VaR [value at risk – Ed] shock of all time. And since QE will only send yields even lower, perhaps it’s time for the Fed to add oil futures to stocks among the expanded securities it plans on purchasing as part of QE-5 to avert the next deflationary crisis which may have just started.

This eye-opening 5-chart Zero Hedge article showed up on their website at 12:33 p.m. EST on Sunday afternoon — and it’s the second offering in a row from Roy Stephens.  Another link to it is here.

Gold backtracks from $1,700 top on profit-taking

Gold retreated from the $1,700 level touched briefly earlier on Monday, as investors sold the bullion to cover margin calls amid plummeting equities and energy markets, overshadowing the metal’s safe-haven demand.

Gold had been up as much as 1.7% in a volatile session, having touched its highest since December 2012 at $1,702.56 earlier. However, the price rally has led to profit taking in the metal, analysts said.

It’s a little bit surprising with gold not having done better – we did hit $1,700 mark in early trading but it has come down and it seems to be a sale across all assets,” said Mitsubishi analyst Jonathan Butler.

The (decline) maybe partly because of margin calls being made in other commodities or asset classes, which means liquidation in gold.”

The only reason I’m posting this Reuters article from Sunday night is to show you that the main-stream analysts in the precious metals just don’t know what they’re talking about — and don’t have any clue as to what’s really happening in the precious metals behind the scenes.  This commentary is pure 100 percent bulls hit.  You can’t believe everything you read on the Internet — and this piece of trash is certainly living, breathing proof of that.  Another link to it is here.


It would have been real handy if I had done some reading about Prince George before I left Merritt.  I knew zero about the place — and ended up reading about it on the Internet while we were in our hotel room.  The next morning we learned a bit more when I talked to the receptionist…what could we see in a just a few hours.  The city is basically buried in forest — and no matter where you are, there’s really no good overlooks of the place.  So we just ended up driving around using the street map that the receptionist had provided.  The first two shots…the first looking west — and the second looking mostly east, is of the Nechako River a kilometer or so before it flows into the Fraser River a bit further down stream in the second photo.  The last two photos were taken only steps from each other as well.  Both from a city park  overlooking the flood plain of the Nechako River — and the river itself is barely visible as a thin blue line in the centre right of the first shot.  The last photo is of the river where it enters the Fraser behind the trees in the centre of the picture — and the Fraser itself is in the distance at the right-center of the photo.  Click to enlarge.


The ECB meets on Wednesday and Thursday.  P.S. – Remember that we asserted a few months ago: “Debt doesn’t matter – until it matters.”  Debt now matters!” — Bill King…09 March 2020

Despite all the garbage that the main stream media and the usual so-called ‘expert’ gold analysts are saying…Monday’s price action was strictly a GLOBEX/COMEX paper affair as ‘da boyz’/PPT were there to make sure that the only escape route was the T-bill market.  It worked wonderfully well…at least it did yesterday.

Looking at the 6-month dollar index chart further up, I note that since the index topped out around the 99.80 mark on Friday, February 21 — and its close yesterday, it has shed around 500 basis points.  There’s virtually no sign of it in precious metal prices…particularly in gold.  That’s how well that ‘da boyz’ have been able to control this market via paper trading on the COMEX.

Gold, silver and platinum would have closed at heaven only knows what price if the Big 8 hadn’t stepped into the market on Sunday evening in New York.  There’s not much to see in gold on the 6-month chart, but silver was hammered back below its 200-day moving average by a substantial amount on an intraday basis on Monday.  Looking at the silver doji for yesterday, it appears that almost all the long trades that were put on last week, pretty much got taken out yesterday — and its low tick, the gold/silver ratio blew out to a tad over a 100 to 1.  Platinum was hammered lower as well, although it never closed above its 200-day moving average last week.  They were able to blast palladium back below its 50-day moving average on an intraday basis yesterday, which I didn’t think possible — and how much damage that did won’t be known until Friday’s COT Report.

And as massively short as the Managed Money traders already were in copper as of Friday’s close, the powers-that-be got them to go even further on the short side…as they took its intraday low price back to where it was in the dying days of 2016!  And in WTIC, the intraday low in that was at a price not seen since August 2016.

I looked at all this carnage — and wondered briefly if there some ulterior motive for this…as it all seemed more than coincidental.  But maybe I’m just imagining things.

Here are the 6-month charts for the four precious metals, plus copper and WTIC — and I’ll point out once more that all the price activity that occurred after the COMEX close, is not reflected on any of the Monday dojis on these charts.  Click to enlarge.

I thought I’d toss in the 6-month chart for the banking index…the BKX…as it’s been pounded into the dirt…which is where it belongs anyway.  It was down a massive 14 percent yesterday — and about 34 percent off its high back on Thursday, February 20th.  It’s obviously pricing in that big and imminent rate cut that the Fed will unleash between now and next Wednesday.  Click to enlarge.

Today, at the 1:30 p.m. EDT close of COMEX trading, is the cut-off for this Friday’s Commitment of Traders Report.  I may or may not have something to say about what might be in it once I look at the Tuesday doji when I’m writing tomorrow’s commentary.

With the U.K. and Europe still on standard time until March 29…three weeks from this past Sunday…I won’t be staying up the extra hour — and will file all columns between now and then based on what has happened right up to, but not including, the London/Zurich opens.  Once they convert to BST [British Summer Time] and CEST [Central European Summer Time] on that date, I will resume the regular schedule of reporting on the first hour of trading in both markets, because I’m just not interested in staying up that extra hour to do it.

And as I post today’s column on the website at 4:02 a.m. EDT, the London/Zurich opens are a minute away — and I note that the gold price has been stair-stepped quietly lower in price in Far East trading, with the current low tick coming at 2 p.m. China Standard Time on their Tuesday afternoon. It has been edging higher since — and is down $17.70 the ounce at the moment. Surprisingly enough, silver has been rallying every since it hit its current low tick around 9 a.m. CST — and it’s now up 9 cents as London opens. Platinum traded quietly higher until just before 9:30 a.m. in Shanghai, but around 10 a.m. it was sold a bit lower before turning sideways — and is up 8 bucks the ounce. Palladium rallied up to the $2,400 spot mark about thirty minutes after trading began in New York on Monday evening. It has been chopping quietly sideways and mostly above that mark since — and is up 42 dollars as Zurich opens.

Gross gold volume is way up there at around 106,000 contracts — and minus current roll-over/switch volume out of April and into future months, net HFT gold volume is about 93,000 contracts. Net HFT silver volume is fairly hefty as well at a bit over 22,500 contracts — and there’s 2,400 contracts worth of roll-over/switch volume in this precious metal.

The dollar index opened up 45 basis points once trading commenced around 7:45 p.m. EDT in New York on Monday evening, which was 7:45 a.m. China Standard Time on their Tuesday morning. It chopped quietly higher from there until a minute or so before 2 p.m. CST — and has faded a bit since then. As of 7:45 a.m. GMT in London/8:45 a.m. CET in Zurich, the dollar index is up 80 basis points.

That’s all I have for today.  I see that President Trump will have something to say on Tuesday at some point.”  That’s according to this Zero Hedge story headlined “Oil, Stocks Rip Higher After Trump Promises “Very Dramatic” Actions to Support the Economy” from 8:05 p.m. EDT yesterday evening.

I have this fantasy in my mind as to what he might announce, or what I would like him to announce, but I’m sure it’s wishful thinking.

See you on Wednesday.