The Panic Into Physical Gold & Silver Continues Unabated

12 March 2020 — Thursday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price wandered unevenly higher until around 3 p.m. China Standard Time on their Wednesday morning — and then was sold a bit lower until about 9 a.m. in London.  It then rallied to its high of the day, which came at the 8:20 a.m. COMEX open in New York.  ‘Da Boyz’ took over at that point — and the low tick was set around 3:20 p.m. in after-hours trading.  It bounced a bit from there, but even that tiny gain was taken away by the 5:00 p.m. EDT close.

The high and low ticks, both of which occurred during the New York trading session, were reported by the CME Group as $1,671.80 and $1,632.40 in the April contract.

Gold was closed in New York on Wednesday afternoon at $1,634.80 spot, down $14.10 from Tuesday.  Net volume was extremely heavy at just over 396,000 contracts — and there was a hair under 18,000 contracts worth of roll-over/switch volume out of April and into future months.

Silver rallied until just before 1 p.m. CST on their Wednesday afternoon — and then was sold lower until around 9:30 a.m. in London.  It headed higher from there, but obviously ran into ‘something’ around 11 a.m. GMT.  Then, like gold, it was all down hill until the low tick was also set at 3:20 p.m. in after-hours trading in New York.

The high and lows in silver were recorded as $17.11 and $16.66 in the May contract.

Silver was closed on Wednesday afternoon in New York at $16.715 spot, down 14.5 cents from Tuesday.  Net volume, rather surprisingly, was somewhat on the lighter side at a bit under 50,500 contracts — and there was 6,900 contracts worth of roll-over/switch volume in this precious metal.

Platinum’s price path was very similar to silver’s.  The only real difference was the rally in the one hour time period between 9 and 10 a.m. in New York.  Once the afternoon gold fix was put to bed, it too was hammered lower — and was closed on its low tick of the day…$861 spot…down 2 bucks from Tuesday.

The palladium price edged quietly lower in Far East trading on their Wednesday — and was down about 18 bucks or so by shortly before 3 p.m. in Shanghai.  Then the price pressure became far more pronounced…particularly after the 10 a.m. EDT afternoon gold fix in London.  Most of the price damage was done by around 12:30 p.m. in New York — and it didn’t do much of anything after that.  Palladium was closed by ‘da boyz’ at $2,195 spot, down $123 dollars from its close on Tuesday — and well below its 50-day moving average…which was the object of the exercise.

The dollar index was closed in New York on Tuesday afternoon at 96.41 — and opened down about 9 basis points once trading commenced around 7:45 p.m. EDT on Tuesday evening, which was 7:45 a.m. China Standard Time on their Wednesday morning.  It ticked higher to almost unchanged about thirty minutes later, but its fall from grace began at that juncture.  That lasted until a few minute before 3 p.m. CST — and a ‘rally’ began at that point that faded badly over the next seven hours — and appeared to get rescued again around 9:55 a.m. in New York.  That particular ‘rally’ lasted until about 12:15 p.m. EDT — and it really didn’t do much of anything after that.

The dollar index was marked-to-close at  96.51…up 10 basis points from its close on Tuesday — and 13 basis points below its recorded close on the DXY chart below.

Here’s the DXY chart for Wednesday, courtesy of Bloomberg as always.  Click to enlarge.

And here’s the 6-month U.S. dollar index chart, courtesy of stockcharts.com.  The delta between its close…96.49…and the close on the DXY chart above, was 2 basis points on Wednesday.  Click to enlarge as well.

The gold stocks were headed lower the moment that trading began at 9:30 a.m. in New York on Wednesday morning — and that continued until JPMorgan et al. set the low tick of the day at 3:15 p.m. in after-hours trading.  They bounced a bit from there, but the HUI was crushed by 7.83 percent.

The silver equities got slammed as well.  Nick’s Intraday Silver Sentiment Index is still M.I.A…but should be up and running tomorrow morning.  I figured it out manually once again — and the Silver Sentiment/Silver 7 Index got creamed by another 9.31 percent. Ouch!

All seven of them were pretty much dogs yesterday…but the least ugly were Peñoles and Wheaton Precious Metals…down 5.50 and 5.94 percent respectively.

But the 1-year Silver Sentiment/Silver 7 Index chart is still OK — and updated with yesterday’s doji.  Click to enlarge.

I would strongly suspect that those entities that were selling yesterday were mutual funds and the like that were faced with redemptions — and were forced to sell.  Also included on that short list would be some margin call selling.  This is just a continuation of what has been going on for the last couple of weeks.  I would also suspect that the buyers were the same strong hands that have been in this market since the decline in the overall stock market began.


The CME Daily Delivery Report showed that 66 gold and 105 silver contracts were posted for delivery within the COMEX-approved depositories on Friday.

In gold, the only short/issuer that mattered was Canada’s Scotia Capital/Scotiabank, with 62 contracts out of its in-house/proprietary trading account [it doesn’t have a client account].  There were four long/stoppers in total: ADM with 31…JPMorgan with 14…Morgan Stanley with 13 — and Advantage picked up the remaining 8 contracts.

In silver, the sole short/issuer was Scotia Capital/Scotiabank out of its own account.  There were nine long/stoppers in total — and the three largest were: JPMorgan with 41…ADM stopped 26 — and BofA Securities picked up 16 contracts.  All contracts stopped were for their respective 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 March rose by 8 contracts, leaving 112 still open, minus the 66 contracts mentioned a few paragraphs ago.  Tuesday’s Daily Delivery Report showed that only 3 gold contracts were actually posted for delivery today, so that means that 8+3=11 more gold contracts were added to March.  Silver o.i. in March also rose…by 72 contracts, leaving 635 still around, minus the 105 contracts mentioned a few paragraphs ago.  Yesterday’s Daily Delivery Report showed that 3 silver contracts were posted for delivery today, so that means that 72+3=75 more silver contracts just got added to the March delivery month.

Total open interest in gold fell by another 2,953 contracts in the above Preliminary Report — and in silver, total open interest declined by 3,683 contracts.  More Managed Money long selling — and more commercial short covering.  This is what sets their respective prices…nothing else.


There was a big decline in GLD yesterday, as an authorized participant took out 282,267 troy ounces.  There were no reported changes in SLV.  Although that decline may sound disappointing on its face, whoever owns it now won’t be parting with it anytime soon, as it didn’t disappear off the face of the earth.

In other gold and silver ETFs on Planet Earth on Wednesday, net of any COMEX and GLD/SLV activity, there was a net and eye-watering 455,493 troy ounces of gold added, plus a net 1,866,164 troy ounces of silver as well.  All of that silver, plus a bit more, ended up at SIVR.

Here’s a screen shot from Nick Laird’s website showing the physical gold movement in all known depositories mutual funds and ETFs on Wednesday — and to get to the above net number you have to subtract out the 8,938 troy ounce increase in COMEX warehouse stocks — and add back in the 262,328 troy ounces that was taken out of GLD/GLDM.  Click to enlarge.

There was another sales report from the U.S. Mint, the fourth one so far this month.  They sold 2,500 troy ounces of gold eagles — 1,500 one-ounce 24K gold buffaloes — and 975,000 silver eagles.


There was no in/out movement of any kind in gold over at the COMEX-approved depositories on the U.S. east coast on Tuesday.

An even bigger surprise was that there was no in/out movement in silver, either…not even any paper transfers.

The only physical activity was over at the COMEX-approved gold kilobar depositories in Hong Kong on their Tuesday.  They received 485 of them — and shipped out 207.  Except for 5 kilobars received at Loomis International, the rest of the in/out activity was at Brink’s, Inc.  The link to that is here.

Byzantine Empire, Constans II, 641-668, Solidus

Mint: Constantinople   Material: Gold   Full Weight: 4.31 grams

I have a very decent number of stories/articles/videos for you today…including a long one from Gregory Mannarino.


CRITICAL READS

Liquidity Getting Worse By the Day: Fed Injects Record $132 Billion With Overnight Repo

Mot much new to report this morning regarding the daily Fed’ repo operations that we didn’t already cover extensively yesterday in “Funding Freeze Getting Worse: Dealers Demand Record $216BN In Liquidity From Fed Repo“, except to note that while we wait for tomorrow’s upsized term repo operation, today’s overnight repo, which as a reminder was recently upsized from $100BN to $150BN…saw the highest amount of both bids and accepted securities since the central bank resumed the offerings in September as the liquidity crisis is clearly getting worse by the day.

Specifically, dealers submitted $132.375BN of bids at 1.10% vs a maximum of $150b, which was not only up from Tuesday’s total bids of $124BN, but also the highest in overnight repo history!  Click to enlarge.

The growing funding panic also meant that general collateral has continued to rise, and after dropping to 1.10%, in line with last week’s Fed emergency rate cut, overnight GC has pushed higher, and last traded at 1.23%/1.18% as dealers are once again scrambling for liquidity anywhere they can.

As this latest data merely confirms that the liquidity crisis is getting worse, we have nothing new to add to our conclusion from yesterday so we will just repost it here:

As we pointed out last week, this continuing liquidity crunch is not only bizarre, but increasingly concerning, as it means that not only did the rate cut not unlock additional funding, it actually made the problem worse, and now banks and dealers are telegraphing that they need not only more repo buffer but likely an expansion of QE… which will come soon enough, once the Fed funds hits 0% in a few days and is forced to restart bond buying to prevent the next crash.

Will that be enough to stabilize the market? We don’t know, but in light of the imminent corona-recession, on Tuesday Credit Suisse’s Zoltan Pozsar repo guru published a lengthy piece whose conclusion – at least on the liquidity front – is that the Fed should “combine rate cuts with open liquidity lines that include a pledge to use the swap lines, an uncapped repo facility and QE if necessary.”

This never-ending money printing article was posted on the Zero Hedge website at 9:50 a.m. EDT on Wednesday morning — and comes to us courtesy of Richard Saler.  Another link to it is hereZero Hedge had a follow-on story to this at 2:46 p.m. EDT — and it’s headlined “Fed Boosts Size of Repo Bailout Facility For 2nd Time in a Week Following Liquidity Collapse


Fallen Angel” Day Arrives: $140 Billion in Energy Debt at Risk of Imminent Downgrade to Junk

Back in November of 2017, this website was the first to suggest that a flood of “fallen angels“, or the lowest, BBB-rated investment grade bonds that are downgraded to junk, will be the event that triggers the next corporate debt crisis. In “Hunting Angels: What The World’s Most Bearish Hedge Fund Will Short Next“, we quoted from the IMF’s Oct 2017 “Global Financial Stability Report”  which issued an ominous warning:

… BBB bonds now make up nearly 50% of the index of investment grade bonds, an all time high. BBB bonds are only one notch above high yield, and are at the greatest risk of becoming fallen angels, that is bonds that were investment grade when issued, but subsequently get downgraded to below investment grade, or what is known these days as high yield. It then points out that investors have never been more at risk of capital loss if yields were to rise. In addition, it notes volatility targeting investors will mechanically increase leverage as volatility drops, with variable annuities investors having little flexibility to deviate from target volatility.

Following this article, the topic of a tsunami in “fallen angel” credits took on greater urgency, because with over $3 trillion in bonds on the cusp of downgrade, as we discussed in “The $6.4 Trillion Question: How Many BBB Bonds Are About To Be Downgraded“, countless asset managers warned that this was the biggest threat to the credit pillar of both the U.S. economy and stock market (recall the bulk of BBB rated issuance was used to fund the trillions in buybacks that levitated the stock market over the past few years).  Click to enlarge.

However, despite a few close scares, and the downgrades of some massive IG names to junk such as Ford and more recently, Macy’s, there never emerged a clear catalyst that would trigger a wholesale downgrade of IG names to junk, especially since the Fed ending its monetary tightening in late 2018 and unleashed another rate cut cycle coupled with QE4 in 2019 sent IG and HY yields and spreads to record lows, even though as Morgan Stanley pointed out no less than 55% of BBB-rated investment grade bonds, would have a junk rating based on leverage alone.

…as of this moment, over $140 billion of debt issued by independent oil and gas producers, oilfield services providers and integrated energy companies has triple-B credit ratings from Moody’s or S&P and is now at risk of falling to junk status.

In other words, between just the oil producers and the midstream companies, some $360BN is at risk of near-term downgrade to junk. Assuming that’s all there is, it would increase the size of the $1.2 trillion junk bond market by nearly 30%, resulting in an unprecedented selloff in an asset class that has become an anchor to yield-starved speculators who will be forced to liquidate most if not all of their credit exposure, which would then also drag down the rest of the IG space, resulting in a catastrophic crash in the credit market.

All of this, of course, assumes that the rest of the $3 trillion in Investment Grade names are not downgraded. However with the coronavirus pandemic now assuring not only a bear market, but a recession, guaranteeing that the bulk of the IG names are hit by at least a one notch downgrade, the only question is whether all those names, which MS calculated at roughly $1.6 trillion, that already have junk bond fundamentals, will be downgraded. Alas, even if it is a modest portion, it would still be enough to create a cascade that shuts down the U.S. credit market first, and then spills over to every capital market in the world.

Not a single surprise here, dear reader.  This longish and chart-filled commentary was posted on the Zero Hedge website at 12:00 p.m. EST on Wednesday — and another link to it is here.  It’s worth reading.  And in a directly related ZH story from 10:44 a.m. EDT yesterday morning, is this headline that reads “Boeing to Drawdown Full $13.8 Billion Revolver, Hinting at Bank Lending Freeze“.  Wolf Richter had commentary on Boeing as well headlined “Boeing Crashes: $43 Billion in Share Buybacks Turn into Existential Threat” — and I thank Dennis Miller for that one.


Stocks Extend Losses After WHO Declares Pandemic

U.S. equity markets are re-tumbling after bouncing off Tuesday’s close following WHO’s statement that Covid-19 is now a pandemic…Click to enlarge.

We’re gonna need more rate cuts…

The above chart and two brief paragraphs are all there is to this tiny Zero Hedge article that put in an appearance on their website at 12:43 p.m. EST on Wednesday.  Another link to it is hereGregory Mannarino‘s post market close rant for Wednesday is linked here.


The Fed Can’t Let Bond Yields Fall to Zero — Danielle DiMartino Booth

Ultra-low rates on benchmark government debt would have negative consequences for the global financial system.

The Federal Reserve has a lot to worry about these days. And while it’s not often mentioned, at the top of the list should be preventing rates on longer term U.S. Treasuries, the world’s risk-free benchmark securities, from falling to zero.

Treasuries play a critical role in providing ample liquidity to the global financial system because they are a manifestation of the dollar’s reserve currency status. As such, they are the most important store of value and a critical hedging instrument for global market participants. The Treasury market is also the primary vehicle through which the Fed transmits monetary policy.

But if yields on benchmark 10-year Treasury notes go to zero — a no longer ludicrous suggestion after Russia walked out of the OPEC+ meeting without a deal — then all of those key roles get upended. Especially hard hit will be banks, insurers and pension systems worldwide.

The business model of banks is predicated on borrowing at low short-term rates and lending the proceeds at higher long-term rates. But if the gap between short- and long-term rates evaporates, lending would come to a standstill, especially if this were to happen with nominal yields falling to zero. As for pensions and insurers, they need returns of 6% to 7%, which they are definitely not getting from their holdings of stocks or credit-related securities these days. The need for potential bailouts of pensions would become a very real prospect for federal authorities.

This opinion piece appeared on the Bloomberg Internet site at 9:00 a.m. PDT on Tuesday morning — and I found it on the gata.org Internet site last night.  Another link to it is here.


Argentina Offers Insight Into America’s Political, Economic Future — Bill Bonner

Argentina is a great place for us to explore the future. That is, all the bad ideas… bad policies… and bad politics that are now developing in the U.S. have been rehearsed for many years – 8 decades, to be more precise – south of the Rio de la Plata.

Runaway spending programs? Check!

Huge government deficits? Check!

Uncontrolled money-printing? Check! Price fixing? Uh huh. Tariffs and subsidies to protect crony industries? Yep. Phony statistics, fake news, demagoguery, pandering? If they haven’t tried it in Argentina, it’s not worth trying.

Crackpots, scalawags, grifters, and opportunists running the government?

Hey… Argentina has them, too. Lots of them.

This interesting and worthwhile commentary from Bill was posted on the bonnerandpartners.com Internet site on Wednesday sometime — and another link to it is here.


Putin backs amendment allowing him to stay in power beyond 2024

Russian President Vladimir Putin on Tuesday backed a proposed constitutional amendment that would allow him to seek re-election after his current term ends in 2024, ending uncertainty about his future.

Putin gave his support to the amendment put forward by lawmaker Valentina Tereshkova, who as a Soviet cosmonaut in 1963 became the first woman to fly to space. She proposed either scrapping Russian’s two-term limit for presidents or resetting the clock so Putin’s four terms wouldn’t count.
Lawmakers in the Kremlin-controlled State Duma quickly endorsed Tereshkova’s proposal, along with a sweeping set of constitutional changes proposed by Putin.

In a speech to lawmakers Tuesday, Putin spoke against scrapping presidential term limits altogether but backed the idea that if the constitution is revised, the two-term limit only would apply from 2024 on. The president’s current six-year term expires in 2024.

Putin, 67, has been in power for more than 20 years, becoming Russia’s longest-serving leader since Soviet dictator Josef Stalin. After serving two presidential terms in 2000-2008, he shifted to the Russian prime minister’s office while protege Dmitry Medvedev served as a placeholder president.

Putin reclaimed the presidency in 2012 and won another term in 2018.

This news item showed up on the france24.com Internet site at 4:06 p.m. Central European Time [CET] on Tuesday afternoon, which was 11:06 a.m. in Washington — EDT plus 5 hours.  I thank Roy Stephens for sending it our way — and another link to it is here.


How black swans are shaping planet panic — Pepe Escobar

Is the planet under the spell of a pair of black swans – a Wall Street meltdown, caused by an alleged oil war between Russia and the House of Saud, plus the uncontrolled spread of Covid-19 – leading to an all-out “cross-asset pandemonium” as billed by Nomura?

Or, as German analyst Peter Spengler suggests, whatever the averted climax in the Strait of Hormuz has not brought about so far “might now come through market forces”?

Let’s start with what really happened after five hours of relatively polite discussions last Friday in Vienna. What turned into a de facto OPEC+ meltdown was quite the game-changing plot twist.

OPEC+ includes Russia, Kazakhstan and Azerbaijan. Essentially, after enduring years of OPEC price-fixing – the result of relentless U.S. pressure over Saudi Arabia – while patiently rebuilding its foreign exchange reserves, Moscow saw the perfect window of opportunity to strike, targeting the U.S. shale industry.

Shares of some of these U.S. producers plunged as much as 50% on “Black Monday.” They simply cannot survive with a barrel of oil in the $30s – and that’s where this is going. After all these companies are drowning in debt.

A $30 barrel of oil has to be seen as a precious gift/stimulus package for a global economy in turmoil – especially from the point of view of oil importers and consumers. This is what Russia made possible.

This commentary/opinion piece from Pepe appeared on thesaker.is Internet site on Wednesday sometime — and I thank Larry Galearis for pointing it out.  Another link to it is here.


Brien Lundin: Only market manipulation by government explains gold’s fall on Tuesday

… Gold’s decline today doesn’t seem to fit any reasonable interpretation.

If investors are flocking into equities in anticipation of significant Fed easing and government stimulus programs, they should also be piling into gold alongside stocks. If the rising stock market today is stealing the thunder, and money, from gold, then why did gold maintain its losses when the stock market dipped into the red mid-session?

And yes, the U.S. dollar rebounded today after yesterday’s shellacking, but the greenback and gold have been trading with a very close, positive correlation in recent weeks. So a stronger dollar doesn’t seem like a valid reason for gold’s steep selloff today.

Maybe it’s just a normal correction after the yellow metal hit an intraday high above $1,700 yesterday. Perhaps.

Of course, another explanation would be covert manipulation in the paper gold markets to keep the gold price — and investor worries — corralled.

As long-time readers know, I’m not a big advocate of the idea that government forces are manipulating the gold price on a daily basis. But I think it’s obvious, especially if one considers the history of previous gold-price manipulations, that someone, somewhere steps into the market at key moments.

And this is undoubtedly a key moment.

Finally — and after all these years, some of these so-called analysts are having to admit the obvious, instead of using goofy and bulls hit explanations for all the goings-on in the precious metal world these last few decades.  Better late than never, one supposes.  But their credibility in this area is now beyond repair as far as I’m concerned.  This commentary from Brien was posted, in part, on the gata.org Internet site on Wednesday — a the link to all of it is here.  Then there was this GATA dispatch, also from yesterday, headlined “The Aden Forecast: Gold manipulation is real“.


Mobius Sees Trend for Gold Going Up on Rates, Money Supply

Mark Mobius, co-founder at Mobius Capital Partners, says he wouldn’t be selling gold at this stage as he explains why it will continue to trend higher. He speaks on “Bloomberg Daybreak: Americas.”

Mark doesn’t waste or mince word during this 1:26 minute video clip that was posted on the bloomberg.com Internet site at 7:10 a.m. EDT on Wednesday morning.  I found this tiny gold-related news item on Sharps Pixley.


As Stocks Gyrate, Investors Scoop Up Tons and Tons of Gold

It doesn’t seem to matter anymore whether global stocks are rising or falling — investors just keep snapping up more gold.

Holdings in gold-backed exchange-traded funds surged by 55 tons in the previous three days, or 1.8 million ounces, accounting for almost a third of year-to-date inflows, according to a preliminary tally by Bloomberg. As a haven asset, demand for the metal tends to move in the opposite direction from stock markets. Yet this week’s ETF buying continued Tuesday even as equities bounced following Monday’s rout.

Gold continues to provide a safety net as financial markets tumble,” Stephen Innes, chief Asia market strategist at AxiCorp Ltd., said in a note. “It just feels flat-out comfortable owning gold in this environment.”

Seeking Shelter

Inflows into gold-backed exchange traded funds this year are already more than half of 2019’s total

Given the uncertain nature concerning the severity of the coronavirus, low global interest rates, central banks expected to provide even more liquidity and a high level of negative yielding debt globally, there is plenty of price support for precious metals,” Rob Haworth, senior investment strategist at U.S. Bank Wealth Management in Seattle, said in an e-mailed note.

The above paragraphs are the positive parts of this Bloomberg story.  Other voices in the article are less than favourable.  It put in an appearance on their website at 9:01 p.m. PDT on Tuesday evening — and was updated about fifteen hours later.  I thank Swedish reader Patrik Ekdahl for sharing it with us — and another link to it is here.


The PHOTOS and the FUNNIES

The first photo below was taken from north end of the highway bridge that crosses the Fraser River on the east side of Prince George on the afternoon of September 1. — and looking west down the river.  There’s no sign of the city anywhere.  But in the second photo, taken from south end of the bridge — and much higher in elevation, the tops of some of the building in the downtown core are visible. The CN Rail line at the bottom of the shot heads south through Williams Lake, Lillooet — and then, eventually, Vancouver.  The last photo, just outside the city limits, was taken looking east down the Yellowhead Highway [Highway 16] in the direction of the next town, McBride…at least two hours of driving away — and the only town between Prince George and Jasper…375 kilometers distant.  It’s just under 5 hours non-stop…but a long day’s drive if you’re taking your time to stop and smell the roses [of which there are plenty] along the way.  Click to enlarge.


The WRAP

So what accounts for silver being dirt cheap relative to gold? Exactly the same thing that accounts for the absolute price levels of each metal, namely, futures positioning on the COMEX. Yes, I’m well-aware of the major issues of the day, including a developing worldwide pandemic, economic uncertainty, wildly fluctuating stock markets and declines in interest rates never before experienced. It would be impossible not to be aware of such things. But more than ever, the near sole driver of gold and silver prices is futures contract positioning on the COMEX. And more specifically, the positioning that is directly tied to the fate of the seven big shorts in COMEX gold and silver futures and the unusual role of JPMorgan.

Case in point – last week’s near epic decline in silver prices is more than fully explained in last Friday’s COT report (which coincided with the decline), as more than 32,700 net silver contracts were dumped by the managed money traders, in response to JPMorgan’s and the other commercials’ rigging lower of the price. That’s the equivalent of more than 163 million oz of silver being dumped on the market – nearly two and a half months of world mine production, the most intentionally induced selling in history. How could silver prices not collapse under the onslaught of such deliberately induced selling?” — Silver analyst Ted Butler: 07 March 2020


In the face of another big down day in the general equity markets, it was obvious in gold from the COMEX open…if not sooner in the case of the other precious metals…that they were not going to allow them to rise and became a safe haven yet again.

It’s true that they weren’t closed lower by much, but all would have closed higher by large amounts if ‘da boyz’ hadn’t been active in the futures market all day long on Wednesday.

Here are the 6-month charts for the four precious metals, plus copper and WTIC once again.  I will point out one more time that all the price activity that occurred in gold, silver and platinum after the COMEX close, which was considerable, does not appear on the Wednesday dojis on these charts.  Gold is still miles above any moving average that matters — and palladium has now been engineered and closed below its 50-day moving average for the last two days straight.  Silver and platinum are both well below their respective 200-day moving averages — and the same goes for copper and WTIC…both of which were down on the day as well.  Click to enlarge.

I had a short e-mail exchange with Jim Rickards on Tuesday.  Here it is in its entirety — and posted with his permission…

Hi Jim…What do you read into this, if anything?  A Shift in the Global Financial Order Is Upon Us — John Authers, Senior Editor…Bloomberg…especially these three paragraphs below…

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]

Hi Ed…

I’ve heard the same complaint privately from Ben Bernanke and John Lipsky (former acting Managing Director of the IMF).

The elites agree the system is unstable (or “incoherent” as Bernanke told me), but they don’t have a good replacement.

The biggest problem is that when you try to benchmark the dollar (up? down? sideways?) there is no benchmark. They’re trying to measure something with no measuring stick. If the dollar is up against the euro and down against the yen at the same time, did it go up or down? That’s the problem.

There is a way to benchmark the dollar and all other currencies so that they can be measured against the benchmark and against each other. It’s called gold (by weight).

And, there’s a way to beat deflation and get inflation overnight. FDR did it in 1933 (intentionally) and Nixon did it in 1971 (by accident). It’s called gold. If the Fed bought gold at $5,000 per ounce and made a two-way market, gold would be $5,000 per ounce. The point is not to enrich gold holders, but to get widespread inflation. The world of $5,000 gold is also the world of $150 oil and $75 silver. Every other price goes up at the same time.

So, gold can solve the benchmark problem and the inflation problem. But, that won’t be tried until things get much worse. Authers anticipates a “new” system, but he doesn’t know what it is or how to get there. The answer to both questions is gold.” — Jim

So the last card that the Fed and the Wall Street banks have left in the deck is the gold/precious metals one.  JPMorgan is certainly in a position to play it — and benefit handsomely from it as well. But will they or not is the question — and how bad will things have to get before they’re forced to?  However, they and their cronies haven’t been squirreling away gold and silver for all these years for no reason.

That moment may be in our future, but until that moment arrives, we’re going to be on care and maintenance.  During that period they’re going to be swallowing up all the physical precious metals they can, plus their associated equities — and covering every possible short position that they can in the COMEX futures market…which is what they’re in the process of doing now.


And as I post today’s missive on the website at 4:02 a.m. EDT, the London/Zurich opens are less than a minute away — and I see that gold, silver and platinum were all up respectable amounts by minutes after 9 a.m. China Standard Time on their Thursday morning. But the moment that the dollar index tanked, ‘da boyz’ were there to hammer their respective prices lower, so that the precious metals didn’t become an even better safe haven than they were already turning into.

But both gold and silver have rallied smartly off their lows. Gold is only up $5.90 now — and silver is only down a penny, but well off its late-morning low in Shanghai. Platinum, which had been up as well until around 9 a.m. CST, is now down 3 bucks. ‘Da boyz’ went to work on palladium shortly after they’d dealt with the other three precious metals — and its current $2,078 low tick was set around 11:45 a.m. China Standard Time on their Thursday morning. It’s off that low by a bunch, but still down 82 dollars as Zurich opens.

Gross gold volume is pretty heavy already at a bit over 114,000 contracts — and minus current roll-over/switch volume out of April and into future months, net HFT gold volume is a bit over 82,000 contracts. But silver volume is enormous for this time of day…a bit under 31,500 contracts — and there’s only about 1,500 contracts worth of roll-over/switch volume in this precious metal.

The dollar index opened up 15 basis points as 96.66 the moment that trading commenced 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 — and began to tick lower from there. It hit a very big air pocket starting a few minutes after 9 a.m. CST — and that lasted until 9:40 a.m. CST. It began to edge unevenly higher from that point until around 12:45 p.m. CST — and has been edging lower at an ever-increasing rate since. And as of 7:45 a.m. GMT in London/8:45 a.m. CET in Zurich, the dollar index is down 29 basis points…but still some distance off its current 96.08 low tick.

That’s it for yet another day — and I must admit that with the Dow and WTIC futures down a whole bunch as I post my column this morning, I know that the inevitable stock market crash is in our future.

See you tomorrow.

Ed