20 March 2020 — Friday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
Gold’s four rally attempts on Thursday…the first that started just before 8 a.m. in Shanghai…the second around 12:30 p.m. China Standard Time — and the third one just before 10 a.m. in New York…were all turned quietly lower, as was the tiny one just before 2 p.m. EDT in after-hours trading.
The high and low ticks were reported by the CME Group as $1,501.80 and $1,460.10 in the April contract.
Gold was closed on Thursday afternoon in New York at $1,471.40…down another $14.70 on the day. Net gold volume was slightly on the higher side at a bit over 250,000 contracts — and there was a hair under 76,000 contracts worth of roll-over/switch volume out of April and into future months.
Silver’s rally that began starting right at the 6:00 p.m. EDT open in New York on Wednesday evening, ran into ‘something’ at 8 a.m. China Standard Time on their Thursday morning. It was capped and turned lower — and that sell-off lasted until 11 a.m. CST. It began to tick higher from there until 3 p.m. CST — and then wandered around fifteen or twenty cents either side of unchanged for the remainder of the Thursday session. Its two rallies during the New York trading session were dealt with in the usual manner…the first starting at 8:30 a.m. — and the other at 1 p.m. EDT.
The high and low ticks in silver were recorded as $12.33 and $11.76 in the May contract.
Silver was closed in New York yesterday at $12.105 spot, up 16.5 cents from Wednesday. Net volume was somewhat elevated at just over 70,500 contracts — and there was 7,850 contracts worth of roll-over/switch volume in this precious metal.
Platinum’s evening rally in New York was also capped and turned lower at 8 a.m. CST on their Thursday morning and also like silver, its Far East low price came around 11 a.m. CST on their Friday morning. It rallied quietly from there until shortly before 3 p.m. CST — and then was quietly sold lower until the low tick of the day was set about 11:20 a.m. in New York. It jumped back to the $600 spot mark shortly after that…but starting at noon EDT, it was sold lower until 4 p.m. in after-hours trading — and didn’t do a thing going into the 5:00 p.m. EDT close. Platinum was closed on Thursday afternoon in New York at $588 spot, down another 35 bucks — and at a new low for this move down.
Palladium was forced to trade in a similar price pattern as silver and platinum in morning trading in the Far East. But after that, it hoed its own row. Its big rally from its 11 a.m. CST low was brutally capped and turned lower around 1:45 p.m. in Shanghai — and it chopped lower in a very wide range until shortly before 12:30 p.m. in Zurich. It took off higher from there — and was equally brutally capped minutes after 10 a.m. in New York. From that juncture it traded quietly and very unevenly lower until 4 p.m. in the thinly-traded after-hours market. It jumped back above $1,600 spot minutes later — and that’s where it ended the day…at $1,603 spot, up 92 dollars from its Wednesday close.
Based on their respective closing prices yesterday, the gold/silver ratio currently sits at 121 to 1.
The dollar index was marked-to-close very late on Wednesday afternoon in New York at 101.1600 — and opened down 37 basis points once trading commenced around 7:45 p.m. EDT on Wednesday evening, which was 7:45 a.m. China Standard Time on their Thursday morning. It ‘rallied’ until minutes before 11:30 a.m. CST — and then rolled over until around 2:35 p.m. CST. Another ‘rally’ began at that point — and the 102.93 high tick was set around 2:35 p.m. in New York. From there it chopped sideways until trading ended at 5:30 p.m. EDT.
The dollar index was marked-to-close at 102.76…up 160 basis points from Wednesday.
Of course there was almost no correlation between the precious metal prices and what was going on in the currency market.
Here’s the DXY chart for Thursday, courtesy of Bloomberg. Click to enlarge.
And here’s the 6-month U.S. dollar index chart, courtesy of the good folks over at the stockcharts.com Internet site. The delta between its close…103.61…and the close on the DXY chart above, was a whopping 85 basis points above the spot DXY close on Thursday. This is unprecedented. Click to enlarge as well.
The gold shares were sold almost 8 percent lower the moment that trading began at 9:30 a.m. in New York on Thursday morning, but strong-hand buyers were there to gobble them all up — and more — and the HUI was back in positive territory by minutes after 10 a.m. EDT. They sagged a bit until 11 a.m. — and then began to work their way higher. They really took flight starting a few minutes after 3 p.m. EDT — and that lasted until 3:30 p.m. when they were sold sharply lower for no reason that I could fathom. The HUI only closed up only 2.49 percent, but was up 15.5 percent at its high tick of the day.
The silver equities had a very similar trading session — and at its 3:30 p.m. New York high tick, Nick’s Silver Sentiment/Silver 7 Index was up an incredible 18.6 percent…but they also got also got smashed lower by not-for-profit selling. It closed higher by only 4.52 percent. Click to enlarge if necessary.
I computed Nick’s Silver 7 Index manually — and it closed higher by 3.99 percent.
And here’s Nick’s 1-year Silver Sentiment/Silver 7 Index chart, updated with Thursday’s doji. Click to enlarge as well.
The stars of the day were Coeur and Hecla Mining, up 11.81 and 10.56 percent respectively. The dog was Wheaton Precious Metals, down a surprising 7.52 percent.
I don’t know what to make of the goings-on during the last hour of trading in the precious metals stocks yesterday, but it was interesting.
The CME Daily Delivery Report showed that 16 gold and 21 silver contracts were posted for delivery within the COMEX-approved depositories on Monday.
In gold, the two short/issuers were Advantage and Marex Spectron, with 11 and 5 contracts out of their respective client accounts. There were five long stoppers in total — and three biggest were Scotia Capital/Scotiabank, JPMorgan and ADM, with 6, 4 and 2 contracts. Scotia Capital for its own account — and the others for their respective client accounts.
In silver, the only short/issuer worthy of the name was Scotia Capital/Scotiabank with 20 contracts out if its in-house/proprietary trading account. The two long/stoppers were Advantage and the CME group, with 3 and 18 contracts…Advantage for its client account — and the CME Group for its own account. They immediately reissued these as 18×5=90 Micron Silver Futures contracts…single one-thousand ounce bars. The three stoppers for these were Morgan Stanley, Advantage and ADM, with 56, 22 and 12 contracts — and all for their respective client accounts.
The link to yesterday’s Issuers and Stoppers Report is here.
The CME Preliminary Report for the Thursday trading session showed that gold open interest in March rose by a very hefty 142 contracts, leaving 275 still around, minus the 16 contracts mentioned a few paragraphs ago. Wednesday’s Daily Delivery Report showed that 62 gold contracts were actually posted for delivery today, so that means that 142+62=204 more gold contracts just got added to the March delivery month. Silver o.i. in March dropped by 82 contracts, leaving 204 still open, minus the 21 contracts mentioned a few paragraphs ago. Wednesday’s Daily Delivery Report showed that 86 silver contracts were actually posted for delivery today, so that means that 86-82=4 more silver contract were added to March.
Total open interest in gold in March fell by a very hefty 11,881 contracts — and surprisingly enough, silver o.i. in March also fell…by 3,735 contracts, although that’s most likely spread related…if I remember what Ted said about it.
There was another withdrawal from GLD yesterday, as an authorized participant took out 47,039 troy ounces. And after two monster deposits over the prior two days, there was a withdrawal from SLV on Thursday, as an a.p. took out 1,026,146 troy ounces.
In other gold and silver ETFs on Planet Earth on Thursday…net of any changes in COMEX stocks, or GLD & SLV…there was a net 121,054 troy ounces of gold removed — and in silver, there was a net 184,795 troy ounces withdrawn as well.
There was a very decent sales report from the U.S. Mint yesterday, as they reported selling 26,000 troy ounces of gold eagles — plus an eye-opening 25,500 one-ounce 24K gold buffaloes. They only sold 70,000 silver eagles which, I suspect, was all that they had available to sell.
And still nothing from the Royal Canadian Mint regarding Q4/2019 — or their 2019 annual report.
There was no in/out movement in gold over at the COMEX-approved depositories on the U.S. east coast on Wednesday. There was some paper activity, as 5,787.180 troy ounces/180 kilobars [SGE kilobar weight] was transferred from the Registered category and back into Eligible over at the International Depository Services of Delaware. I won’t bother linking this.
It was a lot busier in silver, as 556,207 troy ounces was received — and all of that ended up at Canada’s Scotiabank. There were three truckloads shipped out…1,816,714 troy ounces in total. Two truckloads departed CNT — and the other left the depository at Scotiabank. The link to that is here.
There was some activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Wednesday. They reported receiving 160 of them — and shipped out 88. All of this occurred at Brink’s, Inc. — and the link to that, in troy ounces, is here.
Mint: Phoenicia, city Tyros Material: Silver Full Weight: 13.22 grams Value: €215.00/US$229
I have an average number of stories/articles for you today.
Overnight saw the addition of yet another four-letter-acronym bailout fund from The Fed but signals from the market suggest that they are once again losing control of the dollar-shortage-driven liquidity crisis as the FRA-OIS spread has started to rise sharply once again…
So, what does The Fed decide to do?
Simple – increase its daily QE buying of bonds by 66%, buying a record $75 billion of U.S. Treasury bonds each of today and tomorrow. Click to enlarge.
Just for some context, that is more than one month of ‘old QE’ in one day!!
This rather brief 2-chart Zero Hedge article showed up on their website at 9:01 a.m. EDT on Thursday morning — and is the first offering of the day from Brad Robertson — and another link to it is here. Gregory Mannarino‘s post mark close rant for Thursday is linked here — and that comes courtesy of Brad as well. I must admit that I don’t agree with everything he has to say.
As we reported yesterday, one of the recommendations proposed by repo “god” Zoltan Pozsar to restore dollar liquidity and eliminate funding and market stress, was for the Fed to effectively become banker to the entire world in the form of unlimited, 24/7 swap lines with every central bank, not just the current G7, to wit:
“The Fed needs to broaden access to the swap lines to other jurisdictions as dollar funding needs are large in Scandinavia, Southeast Asia, Australia and South America, not just in the G-7.”
Well, after an overnight session that saw currencies flash crash across Asia, notably the Aussie…Click to enlarge.
… demonstrating just how urgently instant dollar access is needed at a time of the biggest dollar margin call in history, the Fed relented, and on Thursday morning the Federal Reserve announced the establishment of temporary U.S. dollar liquidity arrangements (swap lines) with:
- the Reserve Bank of Australia
- the Banco Central do Brasil
- the Danmarks Nationalbank (Denmark)
- the Bank of Korea
- the Banco de Mexico
- the Norges Bank (Norway)
- the Reserve Bank of New Zealand
- the Monetary Authority of Singapore
- and the Sveriges Riksbank (Sweden).
Finally, the Fed announced that these U.S. dollar liquidity arrangements will be in place for at least six months.
If this turns out to be insufficient, the Fed may have to follow up on Pozsar’s other, far more draconian recommendations, including backstopping virtually every asset.
This article appeared on the Zero Hedge website at 9:14 a.m. on Thursday morning EDT — and I thank Brad Robertson for this one as well. Another link to it is here. Then there’s this very related Reuters story headlined “Dollar rampage spurs FX interventions, speculation of big G7 move” that I found on the gata.org Internet site.
A day after the Big 3 shutdown factories amid the virus lock-down, Ford is out with a kitchen sink 8K as it braces to ride out the worsening economic situation in the U.S. (and worldwide):
- $15.4 billion of additional cash on balance sheet, drawing from two credit lines
- Dividend suspension to preserve cash and provide additional flexibility in the current environment
- Withdrawal of company guidance for 2020 financial performance
Why this is all a problem? Because CDS markets are now pricing a 45% chance of the automaker defaulting…Click to enlarge.
How long before they demand a government bailout too?
This story showed up on the Zero Hedge website at 9:15 a.m. EST on Thursday morning — and I thank Brad Robertson for sharing it with us. Another link to it is here.
“Hell is coming“: Billionaire Bill Ackman sent the stock market spiraling during a 28-minute interview
The billionaire hedge-fund manager Bill Ackman predicted on Wednesday that millions of Americans would die, industries would collapse, and the U.S. economy would tumble into a deep recession unless there’s a 30-day nationwide shutdown to slow the spread of the coronavirus.
The Pershing Square Capital chief’s dire warnings in an emotional half-hour CNBC interview pushed a vulnerable stock market to intraday lows.
The Dow Jones industrial average — already down more than 1,000 points when Ackman came on air — quickly hit a circuit breaker that halted trading for 15 minutes after S&P 500 losses reached 7%. The Dow reopened more than 2,000 points down, according to Forbes.
Ackman revealed during the interview that he was buying shares in Hilton, Starbucks, and Restaurant Brands International, which owns Burger King. The disconnect between his grave predictions and his stock purchases sparked accusations that he was trying to scare investors into selling so he could buy at a discount or profit from short bets. Market commentators also accused him of fearmongering and argued that a month-long break wasn’t feasible.
The backlash led Ackman to clarify his position in a tweet: “I am confident the president will do the right thing in temporarily shutting down the country and closing the borders.”
“If that happens, we can win the war against the virus and the markets and the economy will soar,” he added.
This story showed up on the businessinsider.com Internet site at 1:42 p.m. on Thursday afternoon EDT — and it’s the first contribution of the day from Swedish reader Patrik Ekdahl. Another link to it is here.
After Bill Ackman scared the living sh*t out of every anxious Boomer who tuned in for his “Hell Is Coming” interview, CNBC decided to invite a market skeptic with a decidedly more low-key demeanor to calmly explain the dynamics of the current panic, as well as the biggest risks on the horizon.
Following Thursday’s central bank panic parade, it’s safe to say that the monetary policymakers have “kitchen-sinked” this crisis. He then offered an example of a panic from 200 years ago (when financial panics were even more common than they are today) that, as far as we can tell, is one of the earlier examples of central bank interventions.
“Well, we are at kitchen sink level, which reminds me of something that happened 200 years ago, a famous raging panic in England in 1825,” Jim Grant said.
In subsequent testimony, Grant said, the director of the Bank of England testified that “seeing the dreadful condition of the public, we did all we could, and we were not over-nice.”
Building on Mohamed El-Erian’s comments from earlier, Grant explained that there are two ‘panics’ unfolding in the U.S. right now: A “hypochondriac panic” and a ‘financial panic.’
After people saw one person go to the store and stock up on hoarding supplies, everybody followed suit. Now, at the microscopic level, what investors are trying to do is “look for opportunities amid chaos“.
But Grant was abruptly cut off by Kernen, who prompted the ‘Grant’s Interest Rate Observer‘ editor to deliver one final though.
“There are things for sale that you’d want to own,” Grant said.
Well, dear reader, I’m sure he was about to say that four-letter word…’gold‘ — and Joe didn’t want it mentioned on his show. This Zero Hedge story, with the 4:03 minute video interview with Jim embedded, put in an appearance on their Internet site at 5:35 p.m. EDT on Thursday afternoon — and another link to it is here. I thank Roy Stephens for sending it — and the video clip is definitely worth watching.
Something strange happened when the Fed, and all other central banks went all in, and fired one bazooka after another in the past few days.
For the first time since the financial crisis, perhaps ever, the masters of the monetary universe unleashed a liquidity tsunami and risk assets barely responded.
Perhaps this is just the start: in a note from Barclays strategist Jeffrey Meli, he writes that while the Federal Reserve has been providing abundant liquidity and other measures to unclog balance sheets, more can be done. According to Meli, there’s additional measures that could be taken on the regulatory front to improve the distribution of liquidity, of which the important would be loosening capital requirements through the leverage ratio and a reduction in risk-weighted assets for households and business loans.
“The Fed took a step in this direction with the MMLF,” by explicitly eliminating money market risk and capital/balance sheet burdens on the banking system, Meli wrote adding that “this lens is important when assessing the potential efficacy of new programs, to the extent that they represent risk transfer as well as liquidity relief we believe they will be more effective.”
But beneath the rational justifications and explanations of what the Fed can or can not do, there is a more overarching issue: perhaps the Fed simply can’t fix a crisis such as this one, in which the entire world is grinding to a halt, and where trillions in cash flows that would have been there, simply won’t due to the unprecedented discontinuity in business.
That’s the ominous point raised by Deutsche Bank’s George Saravelos who writes that unlike the 2007-08 banking crisis, today the stress is driven by rising corporate default risk. As the global economy freezes, banks are hoarding dollars anticipating greater liquidity needs from companies and worried about corporate defaults. This, in turn, is preventing interest rate cuts in the U.S. from being passed on to the FX market, resulting in hair-raising moves such as Wednesday multiple Asian FX flash crashes. Indeed, despite the Fed slashing rates, the FX-implied interest rate differential has widened in favor of the dollar last week.
All of this goes right to what we said over the weekend when we discussed about the $12 trillion global dollar margin call.
So how can the dollar shortage be fixed: after all the Fed has already thrown the “kitchen sink” at the problem and the dollar keeps rising?
With markets seemingly broken beyond repair, with every day that normalization fails to arrive meaning one day more that the global economy loses to the shutdown chaos of the Global Covid Crisis, and every single central bank intervention so far failing to restore confidence, one way or another we will get there. And the fastest way we will get there is for stocks to crash “more” because there is nothing more “stimulating” for politicians to finally do their job than watching an angry army of pitchfork-armed (or pick any other weapon) people get bigger with every percent the stock market loses.
The only question is how much “more.”
This commentary by Tyler Durden was posted on the Zero Hedge website at 6:14 p.m. on Thursday evening EDT — and another link to it is here.
This morning I reached out to my old friend and colleague Peter Schiff to talk about some uncomfortable truths that very few people are discussing right now.
I wrote to you about this yesterday: banks are in trouble. You can’t expect to shut down practically an entire world economy that is in debt to the tune of $250 TRILLION and not expect massive loan defaults.
The last financial crisis in 2008 was caused by a spike in loan defaults. We’re about to see another spike of loan defaults due to all the layoffs and business closures… only this time the problem is much, much bigger than it was in 2008.
And Peter and I discuss some potential scenarios.
Be forewarned, they’re not pleasant.
This 1 hour 33 minute video conversation was posted on the sovereignman.com Internet site on Thursday sometime — and I thank Dave Stirling for sending it along. Another link to it is here. The 4 and a half hour Q&A session that Peter refers to right at the beginning of this conversation, is linked here…if you’re interested.
The Federal Reserve is comatose after having exhausted its snake oil. Key rates are already at zero, more than 2% below the rate of consumer price inflation. But wait, here come two former Fed heads with more quackery…
The Financial Times published an appeal from Ben Bernanke and Janet Yellen:
“The Fed could ask Congress for the authority to buy limited amounts of investment-grade corporate debt… The Fed’s intervention could help restart that part of the corporate debt market, which is under significant stress.”
No mention was made of why it is under stress. That would have involved a confession.
Bernanke and Yellen pushed down rates so low that the “smart” thing for corporations to do was not to save their money… but to borrow heavily, counting on a bailout in the next crisis.
Well, the crisis is here… and so is the bailout.
The mob, the chiselers, the connivers, insiders, delusional economists, and grifter cronies turn to the central government. “Touch us. Heal us. Give us more of that magic elixir – your fake money!”
The money is already on its way. Republicans and Democrats can never agree to cut spending but they increase it in a trice.
Bill’s daily commentary appeared on the bonnerandpartners.com Internet site on Thursday sometime — and another link to it is here.
The Bank of England cut interest rates to a record-low 0.1% and added £200 billion ($230 billion) to its asset-purchase program in its latest emergency action to mitigate the economic impact of the coronavirus pandemic.
The decision, just days into the tenure of new Governor Andrew Bailey, saw the central bank lower rates by 15 basis points and boost its quantitative easing target to £645 billion. That increase will mainly be made up of extra gilt purchases, but will also include corporate buying, and will be completed as soon as operationally possible.
In a conference call with reporters following the decision, Bailey said it was right to act now, rather than waiting for data to show the impact of the virus. He said the BoE’s actions reflected the unprecedented nature of the crisis, the pace of which was increasing very rapidly. The central bank still has more in the tank, he said.
Bailey said that market moves had bordered on the disorderly in recent days and market pricing had been exacerbated by rumors of a London lock-down. Still, the BoE isn’t in favor of closing markets, he said.
This Bloomberg news item was posted on their website at 7:46 a.m. PDT…Pacific Daylight Time…on Thursday morning — and was updated two hours later. I thank Swedish reader Patrik Ekdahl for pointing it out — and another link to it is here.
The coronavirus outbreak caused the steepest drop in German manufacturers’ expectations in the 70-year history of surveys, data showed on Thursday, as the three main economic institutes predicted anything from mild recession to a generational crash.
The grim outlook and the rapid spread of the virus are pushing Chancellor Angela Merkel’s government to use an exception to the debt brake enshrined in its constitution, an official with knowledge of the plan told Reuters.
“The German economy is speeding into recession,” said Clemens Fuest, president of the Ifo institute, which published preliminary results of its monthly survey for March.
A fall in Ifo’s overall business climate index to 87.7 from 96.0 in February, the biggest drop since 1991, brought the index to its lowest level since the 2009 recession, Fuest said.
This Reuters article, filed from Berlin showed up on their Internet site at 2:28 a.m. EDT on Thursday morning — and was updated about five hours later. I found it in the Friday morning edition of the King Report — and another link to it is here.
I didn’t see any precious metal-related news item that I thought worth posting.
The PHOTOS and the FUNNIES
I must admit that I found McBride a disappointment. It was cute and very well kept, but the dot on the map indicated that it was a much bigger place than it actually was…something under 700 persons. The CN train station is the biggest feature of the town — and was actually built by the Grand Trunk Pacific Railway in 1919. CN Rail inherited it when they took over the line. There wasn’t much else to see, so we stopped and had a glass of wine at the only place in town that was open on the Labour Day long weekend — and the rain had caught up to us by the time we left. The last photo was taken a few kilometers east of the town looking south towards the Cariboo Mountains — and down the Fraser River and its flood plain…now vastly diminished in size as we approached it source at the Great Divide…a few miles north of Lake Louise in Alberta. Click to enlarge.
It was basically a nothing day in the precious metals…except for platinum, which was closed at another new low for this engineered price decline. Copper got blasted below 2 dollars a pound intraday on Thursday, but managed to close up a hair on the day. I’d say that we’ve seen the low in this Big 6 commodity as well. WTIC closed up about 25 percent yesterday, but that’s not saying much, as its price would have to almost triple from here to get back to where it was at the beginning of the year. Click to enlarge.
Today, around 3:30 p.m. EDT, we get the latest Commitment of Traders Report for positions held at the close of COMEX trading on Tuesday — and I’m more than looking forward to seeing what’s in it.
Here’s what silver analyst Ted Butler had to say about it in his mid-week commentary for his paying subscribers on Wednesday…”What we do know is that there was substantial commercial buying in the reporting week that ended yesterday, along with equally substantial managed money and other speculative selling. Certainly, I’ll be keenly interested in the breakdowns in commercial buying, as concerns the big 7 and JPMorgan and also of the raptors, the smaller commercials. There are lots of variables, including the possibility that some of the raptors which entered silver on the long side early, may have been blown out on the continued sharp decline. Rather than speculate on what the report will indicate, I’d prefer to review the actual data.”
And as I post today’s missive on the website at 4:03 a.m. EDT, the London/Zurich opens are less than a minute away — and I note that both gold and silver were sold sharply lower once trading began at 6:00 p.m. EDT on Thursday evening in New York. But both recovered quickly — and have been been in serious rally mode ever since. Gold is currently higher by $40.60 — and silver is up 86 cents as London opens. Platinum began to rally immediately at the New York open yesterday evening — and it’s up 46 bucks currently. Palladium was sold sharply lower at the New York open on Thursday evening — and it ticked higher from there until a few minutes before 2 p.m. China Standard Time on their Friday afternoon. Then it really took flight — and is up 50 dollars as Zurich opens.
Gross gold volume is moderate, at a bit over 68,000 contracts — and minus current roll-over/switch volume out of April and into future months, net HFT silver volume is around 51,000 contracts. Net HFT silver volume is very reasonable, all things considered, at around 23,500 contracts — and there’s 1,669 contracts worth of roll-over/switch volume in this precious metal.
The dollar index opened higher by 17 basis points at 102.93 once trading commenced around 7:45 p.m. EDT on Thursday evening in New York, which was 7:45 a.m. China Standard Time on their Friday morning. It ticked a bit higher [up to 102.9920] over the next thirty minutes — and then began to head very sharply and somewhat unevenly lower. As of 7:45 a.m. GMT in London/8:45 a.m. CET in Zurich, the dollar index is down 156 basis points.
That’s it for another day. Enjoy your weekend as much as possible under the current circumstances — and I’ll see you here tomorrow.