18 March 2020 — Wednesday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price was sold about ten bucks lower the moment that trading began at 6:00 p.m. EDT in New York on Monday evening, but it crept higher until 9 a.m. China Standard Time on their Tuesday morning. It was sold lower from the until around 10:30 a.m. CST — and then rallied a bit. Then, around 1:40 p.m. CST, a sell-off commenced that lasted until the noon silver fix in London/8 a.m. in New York. Then away it went to the upside. The price was obviously capped at 11:15 a.m. EDT — and it was sold lower into the COMEX close. From that point it traded unevenly sideways until the market closed at 5:00 p.m. EDT
The low and high ticks in silver were reported by the CME Group as $1,554.30 and $1,465.60 in the April contract…an intraday move of around $89.
Gold was closed in New York on Tuesday afternoon at $1,527.90 spot, up $18.40 from Monday. Net volume was very heavy at 346,5000 contracts — and there was a fairly hefty 88,750 contracts worth of roll-over/switch volume out of April and into future months.
The silver price was managed in a similar fashion as gold’s on Tuesday, complete with the blast off at the noon silver fix in London — and the subsequent price capping at 11:15 a.m. in New York. It was sold down off its high tick rather abruptly and back below unchanged on the day — and from around 11:45 a.m. EDT onwards, it didn’t do much until trading ended at 5 p.m. in New York.
The low and high ticks in silver were recorded as $12.11 and $13.23 in the May contract…and intraday move of $1.12.
Silver was closed on Tuesday afternoon in New York at $12.56 spot, down another 35.5 cents — and another new low for this move down. Net volume was pretty heavy at a hair under 95,000 contracts — and there was 17,500 contracts worth of roll-over/switch in this precious metal.
Ditto for platinum, except its low tick was set on a down/up price spike minutes before 10 a.m. in Zurich. It also began to head higher at 9 a.m. CET when both silver and gold took off — and its rally met the same fate at 11:15 a.m. in New York. From that point it was sold quietly lower until minutes before 2 p.m. EDT — and it didn’t do much of anything after that. Platinum was closed at $659 spot, down 11 dollars from its close on Monday.
The palladium chart looks very similar to the other three precious metals in all respects that mattered, so I’ll dispense with the play-by-play on it. Palladium finished the day at $1,560 spot, up 68 bucks from its Monday close.
It was a very interesting trading session on Tuesday — and I’ll have more to say about it in The Wrap.
The dollar index closed very late on Monday afternoon in New York at 98.07 — and opened up about 7 basis points once trading commenced around 7:45 p.m. EDT on Monday evening, which was 7:45 a.m. China Standard Time on their Tuesday morning. It really didn’t do much of anything from that juncture until 1:52 p.m. CST on their Tuesday afternoon. A ‘rally’ of some size began at that point — and the 99.83 high tick was set at exactly 1:00 p.m. in New York. Fromthere it drifted a bit lower into the 5:30 p.m. EDT close.
The dollar index finished the Tuesday session in New York at 99.58…up 151 basis points from its close on Monday.
Here’s the DXY chart for Tuesday, courtesy of Bloomberg. Click to enlarge.
And here’s the 6-month U.S. dollar index chart, courtesy of the fine folks over at the stockcharts.com Internet site. The delta between its close…99.80…and the close on the DXY chart above, was 3 basis points on Tuesday. Click to enlarge as well.
The gold stock chopped around unchanged until 10 a.m. EDT — and then roared higher…topping out around 11:15 a.m. when ‘da boyz’ capped the gold price and turned it lower. That sell-off lasted until around 12:45 p.m. in New York trading — and they chopped quietly higher until trading ended at 4:00 p.m. EDT. The HUI closed higher by 12.57 percent, but off its highs of the day by about 2 percentage points, which was pretty impressive all things considered.
The silver equities followed the gold shares up until silver’s price was also capped and turned lower at 11:15 a.m. in New York. From that juncture they were sold lower until shortly before the COMEX close. They then rallied until 2:30 p.m. EDT — and sold off a bit until trading ended at 4:00 p.m. Nick Laird’s Silver Sentiment/Silver 7 Index closed up an impressive 7.08 percent, but about 11 percentage points off its earlier highs of the day, which was also impressive considering that ‘da boyz’ closed silver at a new low for this move down on Tuesday. Click to enlarge if necessary.
[However, I computed the Silver 7 Index manually — and its gain came out to 10.99 percent, so I’ll be speaking to Nick about that.]
And here’s Nick’s 1-year Silver Sentiment/Silver 7 Index chart, updated with Tuesday’s doji. Click to enlarge as well.
By far the biggest star of the day was Coeur Mining, closing higher by a whopping 34.60 percent. But not all that far behind was Hecla Mining, closing up 24.71 percent. The only dog of the day was Peñoles, closing down an eye-watering 22.95 percent.
Without doubt, it was the strongest of hands that were buyers on Tuesday — and they were buying regardless of how high they were driving share prices in the process.
The CME Daily Delivery Report showed that 3 gold and 60 silver contracts were posted for delivery within the COMEX-approved depositories on Thursday.
In gold, the sole short/issuer was Marex Spectron. Morgan Stanley picked up 2 for its client account — and Scotia Capital the other one for its own account.
In silver, there were three short/issuers. Scotia Capital/Scotiabank was by far the largest with 51 contracts from its in-house/proprietary trading account. JPMorgan issued 6 and Advantage the other 3 from their respective client accounts. There were nine long/stoppers in total — and the biggest two were JPMorgan and Morgan Stanley with 19 and 16 contracts for their respective client accounts.
The link to yesterday’s Issuers and Stoppers Report is here.
The CME Preliminary Report for the Tuesday trading session showed that gold open interest in March rose yet again, this time by 20 contracts, leaving 84 still open, minus the 3 mentioned a couple of paragraphs ago. Monday’s Daily Delivery Report showed that 60 gold contracts were actually posted for delivery today, so that means that 60-20=40 more gold contracts just got added to the March delivery month. Silver o.i. in March declined by 56 contracts, leaving 319 still around, minus the 60 contracts mentioned a few paragraphs ago. Monday’s Daily Delivery Report showed that 24 silver contracts were actually posted for delivery today, so that means that 56-24=32 silver contracts disappeared from March.
Not surprisingly, considering the price action yesterday, there was a smallish increase in the total open interest in gold on Tuesday…4,540 contracts…but also considering the price action, total silver open interest fell by another 1,898 contracts.
There were no reported changes in GLD on Tuesday, but that definitely wasn’t the case for SLV, as an authorized participant added an astonishing 12,034,358 troy ounces. I suspect JPMorgan, as they’re the only entity that has that kind of physical supply — and one has to wonder whether or not that was deposited to cover an existing short position. I would hope that Ted might have something to say about this in his mid-week commentary this afternoon. If not, then certainly on Saturday.
In other gold and silver ETFs on Planet Earth on Tuesday…net of any COMEX or GLD & SLV movement…there was a net 180,490 troy ounces of gold withdrawn. There was a net 1,869,314 troy ounces of silver withdrawn as well, with all of it coming out of SIVR.
There was yet another sales report from the U.S. Mint. They sold 11,000 troy ounces of gold eagles — 6,000 one-ounce 24K gold buffaloes — and another 450,000 silver eagles.
Retail forms of physical precious metals are now in short supply everywhere. Various and sundry dealers in North America, the U.K. and in the Far East have reported out-of-stock and very low inventories in lots of small bars and coins…particularly silver. Here’s a notification from the goldcore.com Internet site yesterday that Richard Saler sent us — and it’s typical of what I’ve been seeing and hearing over the last few days.
There was only a tiny bit of activity in gold over at the COMEX-approved depositories on the U.S. east coast on Monday. Nothing was reported received — and only 1,607.500 troy ounces/5 kilobars [U.K./U.S. kilobar weight] was shipped out — and that departed Loomis International. There was also a paper transfer of 964.530 troy ounces/5 kilobars [SGE kilobar weight] from the Registered category and back into Eligible over at HSBC USA. I won’t bother linking these amounts.
It was busier in silver. Nothing was reported received, but 1,403,679 troy ounces was shipped out. There were two truckloads…1,221,826 troy ounces…that departed Brink’s, Inc. There was also 127,607 troy ounces that was shipped out of CNT — and the remaining 54,245 troy ounces left HSBC USA. The link to all this is here.
There was a bit of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Monday. Although nothing was reported received, there were 587 kilobars shipped out…500 from Loomis International — and the other 87 from Brink’s, Inc. The link to that is here.
France, Charles X — 1824-1830, 5 Francs 1829
Mint: Paris Material: Silver Full Weight: 25 grams
I don’t have all that many stories/articles for you today.
In light of the frozen funding markets, which are now demanding the Commercial Paper bailout facility we discussed on Sunday, which the Fed failed to deliver and which CNBC‘s Steve Liesman said may be coming any moment as without we will see a relentless barrage of companies drawing down on their revolvers as they are locked out of other sources of funding, moments ago the Fed continued to inject liquidity, by conducing two repos amounting to just under $189BN.
The first one was an oversubscribed 14-Day repo, which saw $46.6BN in submissions, with the max available $45BN allotted.
This was followed half an hour later by the $500BN overnight repo which merely rolls over the prior day’s expiring overnight, and which saw some $142.65BN in usage.
With no other repos scheduled for today, and the next $500BN 84-day facility not due until Friday, banks may soon find themselves in another funding panic, and the Fed may respond as it did yesterday, with an ad hoc $500BN facility later in the day if funding conditions refuse to ease, which considering the biggest one-day jump in LIBOR since the crisis screaming systemic funding stress and now counterparty risk…is very unlikely.
This Zero Hedge article from 8:59 a.m. on Tuesday morning EDT comes to us courtesy of Brad Robertson — and another link to it is here. Then there was this follow-up ZH news item a few hours later…”Fed Again Announces Extra $500BN Repo to Stabilize Funding Markets” — and that’s from Brad as well.
The Fed may have hoped that when it announced up to $5 trillion in monthly repo capacity last week, it would ease the funding crisis that has dragged the dollar to three year highs. Click to enlarge.
Alas, as Zoltan Pozsar explained earlier (when he demanded a Fed backstop of virtually anyone, anywhere), so far it is failing as just confirmed by the latest ad hoc repo operation that was announced earlier today, supposedly to reverse the spike in overnight GC funding, yet which saw the lowest submissions of any of the Fed’s expanded repo operations yet: with up to $500 billion in total capacity, the repo operation saw only $10.1 billion in submissions, or just over 2%!
So if domestic repo lines are not the panacea that is needed to thaw the dollar market, what is? For the answer we point readers to the rather draconian conclusion offered by Zoltan Pozsar earlier today, which was the following:
“backstop not only the banks at the core of the financial system, but also markets and non-banks. The market backstops should include the CD and CP market where we need a buyer of last resort as the structural buyers of paper are losing cash fast; the backstop of the FX swap market should include daily operations at more points along the FX curve.”
In other words, we have crossed a Rubicon where absent a backstop and bailout of pretty much any USD-denominated financial asset anywhere will lead to an acceleration of the already acute dollar short squeeze which JPM calculated to be as large as $12 trillion.
No surprises here — and good luck to them, as the Fed is in full panic mode now…making stuff up as they go along. This Zero Hedge news item put in an appearance on their website at 2:06 p.m. EDT on Tuesday — and it comes to us courtesy of Brad Robertson. Another link to it is here. Gregory Mannarino‘s post market close rant for Tuesday is linked here.
Over the weekend, the Port of Los Angeles has published its latest data about monthly container statistics. Surprising exactly nobody, it was very ugly.
As Saxobank’s Christopher Dembik writes, the drop in container volumes at Port of Los Angeles was -22.87% in February, which is the worst monthly performance since February 2009. As the Saxo analyst notes, traffic at America’s largest port in terms of volume and value “is of strong significance for the U.S. economy” as it is a leading indicator for overall commerce and trade. The data presents a clear confirmation that supply chains disruptions due to the COVID-19 outbreak are becoming more visible and, based on preliminary data, are likely to get worse. Click to enlarge.
Looking ahead, statistics for the month of March, which should be released around April 15, should confirm the Port of Los Angeles is going through a terrible time this month.
Adding to that severe disruptions on the consumer side that are likely to get stronger, especially regarding discretionary consumption which represents nearly 40% of GDP, and you get a perfect storm for a recession.
The only pending question at this stage is the size of the drop.
It will be huge, dear reader, as shipping from all parts of South-East Asia, particularly China, imploded in February — and those ships that were on the water at that time will have arrived by now, with very few following them across the Pacific. This Zero Hedge article was posted on their Internet site at 2:35 p.m. on Tuesday afternoon EDT — and another link to it is here.
Earlier today, when discussing the launch of the “Lehman crisis playbook” in response to the Global Covid Crisis, we listed the alphabet soup of measures the Fed may launch which are a replica of the measures adopted in the aftermath of the Lehman collapse. These included the AMFL, the MMIFF, the TAF and last but not least, the PDCF, or Primary Dealer Credit Facility, which as Rabobank said “would provide overnight funding to primary dealers, similar to the way the discount window provides a backup source of funding for depository institutions.”
Just three hours later, at 6pm ET, the Fed, as expected, announced the establishment of a Primary Dealer Credit Facility (PDCF) “to support the credit needs of households and businesses.” What the Fed really meant is that it is now launching a way for dealers to monetize the stocks they own, as the facility will be collateralized, among others, by “equity securities.”
As the Fed announced, the PDCF “will offer overnight and term funding with maturities up to 90 days and will be available on March 20, 2020” and will be in place for at least six months and may be extended as conditions warrant.”
But here is the punchline:
“Credit extended to primary dealers under this facility may be collateralized by a broad range of investment grade debt securities, including commercial paper and municipal bonds, and a broad range of equity securities.”
This means that as of this moment, equities – which are worth zero in a worst case scenario – are eligible collateral for Fed liquidity.
For those who many not remember, the PDCF was one of the biggest bailout abortions of the financial crisis, one which we discussed extensively in describing how dealers abused the Fed as they pledged totally worthless stocks for which they got “par” value.
This longish Zero Hedge story appeared on their website at 6:34 p.m. EDT on Tuesday evening — and another link to it is here.
The Moment When Monetary ‘Shock and Awe’ Finally Fails Has Arrived: What Do We Do Next? — Ambrose Evans-Pritchard
Central banks have exhausted almost all their usable ammunition under existing rules yet still failed to calm markets or to unfreeze critical parts of the global financial system.
This moment what we all feared. The danger now is that global recession — it is no longer “if,” as we are weeks into it already — will morph into something more intractable: a deflationary depression with a wave of defaults that breaks the capitalist system as we know it.
So what can be done? Let me take an instant stab. Either the rules are changed fast or we risk uncontrolled global liquidation. The Federal Reserve must be unshackled to act as a buyer-of-last-resort for the corporate debt markets, for great swaths of the credit system, and for Wall Street equity indexes.
The European Central Bank must acquire powers to act as a genuine lender-of-last resort for eurozone sovereign states. It must do exactly what Christine Lagarde refused to do when she blurted out last week that “the ECB is not here to close bond spreads” — an expression lifted word for word from the German board member, Isabel Schnabel, which tells us who is in charge of that institution in the post Draghi era.
This must be backed by a fiscal blitz even greater than in 2008-09, with pledges to “socialize” the drastic losses faced by industry and private firms. What was done for banks last time despite misconduct must now be done for others.
There must be tax holidays, sweeping state guarantees for firms, credit forbearance, a temporary suspension of mortgage payments (pushing out the maturity), and moral hazard be damned — all under the umbrella of financial repression.
The rest of this AE-P article is hidden behind their subscription wall over at the telegraph.co.uk Internet site. It was posted on their website on Tuesday sometime — and I found “all of the above” posted in the clear in a GATA dispatch. Another link to that dispatch is here. Then there’s this Reuters article from 12:42 p.m. EDT on Tuesday headlined “New York Fed pledges to offer $1 trillion a day in overnight repo loans“. That’s from the gata.org Internet site as well.
JPMorgan is being probed for market manipulation of Treasury securities
Authorities are investigating whether traders at JPMorgan Chase & Co. manipulated the market for Treasury securities and futures contracts, according to regulatory disclosures and people familiar with the matter.
The investigation shows that federal prosecutors and regulators continue to expand a campaign against an illicit practice known as spoofing, which has mainly focused on wily trading in derivatives. A move to scrutinize whether similar practices have affected the $17 trillion market for Treasury securities would open a new and potentially more complicated front in the war on spoofing.
The bank disclosed in a Feb. 25 regulatory filing that it is dealing with “related requests concerning similar trading-practices issues in markets for other financial instruments, such as U.S. Treasurys.”
According to people familiar with the matter, the investigation also is probing the bank’s trading in futures. It couldn’t be learned which time period authorities are focusing their investigation on. …
What crime are they not guilty of, one wonders. This story showed up on The Wall Street Journal‘s website on Tuesday morning sometime — and only the above four paragraphs are posted in the clear on the gata.org Internet site. The rest are behind the WSJ pay pall. Another link to it is here.
The PHOTOS and the FUNNIES
We’re still in Purden Lake Provincial Park. It’s a fairly long and skinny, so we drove further down — and I took the next two photos from the exact same spot on the shoreline..the first one looking southwest and into the light source — and the second one with my back to the light source — and as you can see, it makes a world of difference when something is back-lit. On the way back to the parking lot, I spotted this male dark-eyed junco — and managed to get off a few shots with the 400mm. Here are two of them. Click to enlarge.
I have no idea what sparked the rallies in the precious metals starting at exactly noon in London/1 p.m. in Zurich/8 a.m. in New York on Tuesday. Whatever it was, it had nothing to do with the currencies. But away they went anyway. They would have obviously closed at record high prices if their rallies had been allowed to continue, but it’s equally obvious that “the word” went out — and they were all capped and turned lower at 11:15 a.m. in COMEX trading in New York.
Except for gold, none came remotely close to penetrating any moving average that mattered during their respective rallies yesterday, so little if any damage was done to the wildly bullish set-ups that now exist in all of them.
As I mentioned in yesterday’s column, they will only be allowed to blast higher in an unrestricted fashion when JPMorgan et al. give the word — and it was obviously not yesterday. But Tuesday’s trading gave you some glimpse of what the start of the real rallies will look like when that day arrives.
The other rather surprising event was at the open of the equity markets in New York. With gold and silver in melt-up mode at the time, the precious metal equities didn’t do much of anything until 10 a.m. EDT…which may or may not have coincided with the afternoon gold fix in London. Why there was that thirty minute delay, one wonders?
But once the serious buying got started, it turned into panic in short order, as everything offered for sale was snapped up regardless of its price — and except for SSR Mining and Wheaton Precious Metals, four of the other five members of Nick’s Silver Sentiment/Silver 7 Index closed up by double digits on Tuesday. That price activity was also a precursor to what the real big move is going to look like.
Here are the 5-year charts for the Big 6 commodities that I said I would post in today’s column. Because gold is in such a strong bull market — and demand for physical is so high, the Big 7/8 traders weren’t able to keep its price below its 200-day moving average for long, as it closed above it on Tuesday. But in silver and platinum, their prices were savaged. And because of the chronic supply fundamentals in palladium, they could only knock its price back to where it was last June. I also note that rhodium close at $8,500 the ounce yesterday, down an eye-watering amount from its $13,800 spot high about ten days ago.
Copper got hammered 8 cents lower — and to a new low not only for this move down, but going back to around May of 2016 as well. Ditto for WTIC. Click to enlarge.
And while I was downloading the charts from the stockcharts.com Internet site early yesterday afternoon, I thought I’d take a gander at the banking index chart…the BKX. Here’s its 5-year chart — and that’s all you need to see to know that the banking system is in a world of hurt. It’s only a matter of time before its weakest link fails, or gets bailed out…starting most likely with Deutsche Bank. Click to enlarge.
The central banks of the world are facing a deflationary implosion that even I’m have trouble wrapping my head around. Fractional Reserve banking doesn’t work in a deflationary environment — and that’s why the BKX chart above is showing the banks in such dire straits. They need inflation in the worst way — and will have to resort to the most desperate measures, including playing the gold card to get it — and that’s why I think they will at some point.
But when — and will a banking holiday and closed equity markets come with it? If so, for how long?
All questions with no answers at the moment, but the event horizon for this deflationary back hole is only a week or so, if not days away — and all this panic money printing in the trillions will only delay the inevitable. Something is terribly, terribly wrong in the banking system right now, most likely in Europe according to Bill King — and you can see it in the obvious panic at the Federal Reserve.
And as I post today’s column on the website at 4:02 a.m. EDT, I note that the gold price rallied rather smartly once trading began at 6:00 p.m. EDT on Tuesday evening in New York. That wasn’t allowed to last long — and from that juncture it was sold quietly and somewhat unevenly lower. Gold is currently down $29.30 the ounce. The silver price crept almost imperceptibly higher until around noon in Shanghai, but about ninety minutes later it too was headed lower — and that lasted until 2 p.m. CST. It drifted unevenly sideways from there, but then got hammered lower starting around 3:45 p.m. CST — and it’s now down 18 cents as London opens. Ditto for platinum — and it’s down 10 bucks. Palladium hit its current high of the day around 9:30 a.m. China Standard Time on their Wednesday morning — and it has been under varying degrees of selling pressure since as well — and is down 45 dollars as Zurich opens.
Gross gold volume is pretty decent already…coming up on 90,000 contracts — and minus current roll-over/switch volume out of April and into future months, net HFT gold volume is a bit over 76,000 contracts. Net HFT silver volume is fairly healthy as well at a bit over 20,500 contracts — and there’s 1,813 contracts worth of roll-over/switch volume in this precious metal.
The dollar index opened down 17 basis points once trading commenced around 7:45 p.m. EDT on Tuesday evening in New York, which was 7:45 a.m. China Standard Time on their Wednesday morning. It jumped back to the unchanged mark at 9:05 a.m. CST — and then began to head sharply lower, with the current 99.15 low tick coming at 1:40 p.m. CST. It was obviously headed for oblivion at that point, so it was most likely saved by the usual “gentle hands”. The ensuing ‘rally’ has taken it sharply higher since — and as of 7:45 a.m. GMT in London/8:45 a.m. CET in Zurich, it’s now up 6 basis points.
I believe there was supposed to be an FOMC meeting yesterday and today…with “the word” from Jay Powell coming at 2:00 p.m. EDT this afternoon. But one of my readers, whose name escapes me now, said that they had their meeting over the weekend before the announced their $1 trillion dollar “bazooka” on Sunday afternoon before the markets opened in the Far East on their Monday morning…so we’ll see what transpires when that time arrives.
Yesterday, at the close of COMEX trading was the cut-off for this Friday’s Commitment of Traders Report — and what a report it will be! I will certainly be printing off a copy for posterity. Ted will certainly have something to say about it in his mid-week commentary for his paying subscribers later today — and I’ll ‘borrow’ the salient points for my Friday missive.
That’s all I have for today, which is more than enough — and I’ll see you here again tomorrow.