http://www.caseyresearch.com/gsd/edition/ted-butler-market-dominance
¤ YESTERDAY IN GOLD & SILVER
There was a tiny rally in gold during morning trading in the Far East on their Friday, but starting around 2:00 p.m. in Hong Kong, the gold price began to develop its usual negative bias. That ended at the beginning of Comex trading...and the subsequent rally got cut off at the London p.m. gold fix.
Then at 10:45 a.m. EDT, the high-frequency traders showed up...and fifteen minutes later, the gold price was down another fifteen bucks. The low tick [$1,311.70 spot] came at precisely 11:00 a.m. in New York...and from there the gold price rallied quietly until 3:00 p.m. in the electronic market, when the price popped up over ten bucks in short order before trading quietly into the the close from 3:30 p.m. onwards.
The gold price finished the day at $1,333.80 spot...down 30 cents from Thursday's close. Volume, net of roll-overs was very light...around 88,000 contracts. But gross volume was monstrous.
Here's the New York Spot Gold [Bid] chart on its own...and the fifteen minutes downward price 'adjustment' between 10:45 and 11:00 a.m. EDT is more than obvious.
It was very much the same price pattern in silver, except the 10:45 to 11:00 a.m. EDT price adjustment was even more noticeable...and the subsequent rally didn't get silver back to anywhere near it's Thursday closing price.
Silver closed the Friday session at $19.99 spot...down 26 cents on the day. Gross volume was very decent...around 43,000 contracts. Net volume wasn't much below that.
Here's the New York Spot Silver [Bid] chart...complete with the fifteen minute price 'adjustment'.
Platinum and palladium did not escape yesterday's sell-off...although their respective price 'adjustments' came at slightly different times.
The dollar index closed late on Thursday afternoon in New York at 81.77...and when trading resumed in the Far East on their Friday morning, it spent the rest of the day chopping every-so-slightly lower...closing at 81.66...down 11 basis points. Nothing to see here.
It should be obvious to anyone but the willfully blind, that yesterday's price action in all four precious metals had nothing whatsoever to do with the goings-on inside the currency markets.
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The CME's Daily Delivery Report showed that 45 gold and 30 silver contracts were posted for delivery on Tuesday. In gold it was Barclays as the only short/issuer...and the Bank of Nova Scotia as the only long stopper. In silver, it was the same story as it has been all month...the short/issuer was JPMorgan out of its client account, with 24 contracts....and JPMorgan was the big long/stopper with 22 contracts out of its in-house [proprietary] trading account. The link to yesterday's Issuers and Stoppers Report is here.
For a change, nothing happened in the GLD ETF yesterday...and an authorized participant withdrew a smallish 289,388 troy ounces out of SLV.
For the fourth day in a row, there was no sales report from the U.S. Mint.
Over at the Comex-approved depositories in silver on Thursday...nothing was reported received, but 298,624 troy ounces were shipped out the door. The link to that activity is here.
In gold, they reported receiving 32,137 troy ounces...and only shipped out a tiny 230 troy ounces. The link to that activity is here.
The Commitment of Traders Report was a bit of a surprise in silver, as the Commercial net short position in that metal actually declined by 6.04 million ounces....and now sits at 60.7 million ounces in total. Based on the price action during the reporting week, an increase appeared certain. Ted Butler says that although this headline number looks great...under the hood, it wasn't quite as rosy.
In gold, the Commercial net short position increased by a healthy 1.0 million troy ounces...and the total Commercial net short position now stands at 3.47 million ounces. Once again Ted mentioned that digger deeper into the numbers showed that the deterioration was a bit worse than even this number indicates.
So far, this rally off the lows in both metals has been very orderly. I was hoping for disorderly, but up to this point, it hasn't happened.
There was a very interesting Reuters story out yesterday that really caught my eye...and here, in part, is what had to say..."Russia, Ukraine. and Azerbaijan are among eight countries that increased their gold holdings in June, data from the International Monetary Fund shows, reflecting strong interest on the part of emerging economies to own gold as part of their reserves....Data showed Russia's gold reserves climbed 0.3 tonnes to a total of 996.4 tonnes in June for its ninth consecutive monthly increase."
It was such a small increase that it didn't even show up as a rounding error in their June data when they updated their website on July 19th. Both May and June data showed their official reserves as 32.0 million ounces.
Since this is my Saturday column, I always use this occasion to empty out my in-box...and today is no exception.
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Selected news and views.....
Doug Noland: The One-Year Anniversary of "Do Whatever it Takes
As a whole, the global hedge fund community continues to struggle for performance. The volatile and policy-dominated “risk on, risk off” dynamic is tough on many trading strategies. Global risk markets – currencies, commodities, EM, bonds and equities – remain minefields, particularly for multi-asset class approaches. I believe enormous leverage has been employed by myriad strategies, certainly including global “carry trade,” corporate, MBS and municipal debt. I’ll assume there’s no egregious LTCM-like leveraging, but I still worry a lot about global derivatives markets. I believe the world of speculative finance is full of problematic “crowded trades.”
A few weeks back the markets were again indicating fragility – and the Fed once again demonstrated its market-pleasing low tolerance for market weakness. The flaw in aggressive QE is the notion that the Fed will be able to back away from market intervention without major consequences. Fed stimulus can spur debt issuance, market risk embracement and speculation. But if that debt is mispriced and predominantly non-productive, the system faces unavoidable debt problems. If speculative leverage is playing a prominent role in inflating securities and asset markets, the system face unavoidable de-leveraging problems. If the already vulnerable household sector continues to load up on mispriced stocks and bonds, there will be negative consequences.
If there are major risk misperceptions endemic in the global marketplace – including with ETFs, the hedge funds, derivatives and perceived low-risk strategies – then there is latent market fragility that is only exacerbated by central bank liquidity injections and backstop assurances. I fully expect history to look back at the past year’s Draghi Plan, Fed open-ended QE, and Bank of Japan “Hail Mary” monetary inflation as misguided market interventions that set loose historic market Bubble excess. I will posit that global systemic risk is significantly higher today than it was a year ago. And if the current trajectory of global central bank market intervention continues, systemic risk will be even more problematic one year from now.
A few weeks back the markets were again indicating fragility – and the Fed once again demonstrated its market-pleasing low tolerance for market weakness. The flaw in aggressive QE is the notion that the Fed will be able to back away from market intervention without major consequences. Fed stimulus can spur debt issuance, market risk embracement and speculation. But if that debt is mispriced and predominantly non-productive, the system faces unavoidable debt problems. If speculative leverage is playing a prominent role in inflating securities and asset markets, the system face unavoidable de-leveraging problems. If the already vulnerable household sector continues to load up on mispriced stocks and bonds, there will be negative consequences.
If there are major risk misperceptions endemic in the global marketplace – including with ETFs, the hedge funds, derivatives and perceived low-risk strategies – then there is latent market fragility that is only exacerbated by central bank liquidity injections and backstop assurances. I fully expect history to look back at the past year’s Draghi Plan, Fed open-ended QE, and Bank of Japan “Hail Mary” monetary inflation as misguided market interventions that set loose historic market Bubble excess. I will posit that global systemic risk is significantly higher today than it was a year ago. And if the current trajectory of global central bank market intervention continues, systemic risk will be even more problematic one year from now.
Doug's weekly Credit Bubble Bulletin is always worth reading...and yesterday's offering over at the prudentbear.com Internet site, is no exception. I thank reader U.D. for sending it our way.
Iceland proposal to write off debt triggers S&P outlook downgrade
Rating agency Standard & Poor’s yesterday added its voice to a chorus of warnings against a pledge by Iceland’s new government to write off as much as 20 per cent of all its citizens’ mortgage debt, announcing that it had revised downwards its outlook for the country from stable to negative.
The revision reflected a one-in-three chance that the agency could lower Iceland’s credit rating within the next two years, S&P said. The country’s triple B minus rating is considered the lowest investment grade, just one notch above junk. The proposed debt write-down could cost 10 per cent of 2013 economic output, and “possibly much more”, the agency said.
The promise of debt relief was the main campaign pledge of the Progressive party and the Independence party, who went on to form a coalition after the election. They focused on inflation-linked loans, payments on which soared following the country’s deep financial crisis owing to a 36 per cent depreciation of the currency.
This story appeared on the irishtimes.com Internet site in the wee hours of this morning BST...and I thank Roy Stephens for his second offering in today's column.
Three King World News Blogs
1. Eric Sprott [#1]: "Physical Gold Shortage Now Reaching Extremes". 2.Egon von Greyerz: "Gold Shortage Creating Massive Problems For Bullion Bank". 3. Eric Sprott [#2]: "We Are Seeing Unprecedented Events in Gold and Silver".
Morgan considers exiting commodities business, but will stick with gold
JPMorgan Chase revealed on Friday that it was considering a sale of its physical commodities business, signalling the potential exit of one of Wall Street's biggest traders of cargoes of oil, coal and industrial metals.
The announcement capped a week of intensifying scrutiny of banks' role in the raw materials supply chain. The Federal Reserve said on July 19 it was reviewing a landmark decision to permit banks to own physical commodities, not only paper derivatives. On Tuesday witnesses at a Senate hearing raised questions about metal warehouses, power plants and tanker vessels owned by banks.
JPMorgan's physical commodities business includes trading in energy markets such as oil, gas, coal and emissions, and base metals. Its longstanding precious metals vaulting and commodity derivatives businesses are not part of the strategic review.
All of the early stories on this topic yesterday did not include the fact that the precious metals were not part of this restructuring...much to everyone's disappointment...including mine. But this story from the Financial Times of London pointed it out...and it's posted in the clear in this GATA release. It'sworth reading.
Ted Butler: Market Dominance
In the weekly review on July 20th, I referenced several news stories about JPMorgan. A few hours after publishing that report, another big news story made the scene – a comprehensive front page story in Sunday’s New York Times concerning the big banks and base metal warehouse shenanigans. In a nutshell, the story alleged that giant financial firms, like Goldman Sachs and JPMorgan, had amassed vast holding of metals warehouses and then engaged in schemes involving artificial metal movements for personal profit (at the expense of the consumer and user communities)
This story was followed by news of senate committee hearings yesterday and CFTC interest in the warehousing issue and more commentary about the Federal Reserve having doubts about whether the big banks should be allowed to deal in physical commodities. This issue is potentially as important as it gets. And it certainly begs the question I have asked repeatedly - why in the world should big banks be dealing in physical or derivatives on commodities in the first place?
Over the past few years, much has been written and discussed about the Volcker Rule that would outlaw proprietary trading by commercial banks. The main purpose of the proposed rule was to end the risks to the financial system caused by reckless speculation by banks backed by insured deposits that were deemed too big to fail. The idea of the Volcker Rule is to get the big banks out of proprietary trading and eliminate any need for taxpayer bailouts for big bets gone wrong. While the big banks have held the Volcker Rule at bay and prevented its enactment to date, it occurred to me that there is an even more compelling reason why these banks, and especially JPMorgan, should not be allowed to trade commodities for their own accounts. Potential risk is one thing; clear and present damage is another.
This absolute must read essay by silver analyst Ted Butler was posted on the goldseek.com Internet site yesterday.
Reg Howe: Chinese GPS -- payback in full with benefits
Gold price-fixing litigator Reginald H. Howe writes this week that the world financial system can be set right only by China, whose U.S. dollar reserves, trading position, and interest in gold give it the power to discipline all governments and currencies. Howe proposes that China peg the world reserve currency, the dollar, to gold by giving gold a floor price in dollars. Howe's commentary is titled "Chinese GPS: Payback in Full with Benefits" and it's posted at his Internet site.
This lengthy essay by Reg was posted over at the goldensextant.com Internet site on Thursday...and is definitely worth reading...and it certainly doesn't fall into the "Gold 101" category. I found this posted in a GATA release yesterday.
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