http://www.caseyresearch.com/gsd/edition/goldman-sees-risk-of-gold-below-1000...hsbc-disagrees
The last time that the claims per ounce were nearly this high was in the late 1990's. At that time the central banks had to intervene to keep one or more bullion banks from faltering. It occurred during a period of coordinated bullion selling from the central banks into the market under the Washington Agreement, culminating in the notorious gold dumping known as Brown's Bottom. At least the Germans still have a receipt. That selling failed to hold the line, and shortly thereafter gold began its great bull market run.
One difference this time is that the fellows who examine the more detailed reports tell us that the big boy of the bullion banks, JP Morgan, is said to have already liquidated their large short position and gone net long gold. Perhaps they are well advised.
If this is true they would benefit greatly from another bull run. And since gold has been reaffirmed as a Tier 1 asset along with cash and government securities, it is literally 'as good as gold' for the Banks' balance sheet, n'est-ce pas? How fortunate for America's favorite financier.
Deliverable 'dealer' gold, known as registered gold at the COMEX, has plunged a remarkable 78% during the vicious price smashing of gold in 2013.
This decline in gold available for delivery has not been matched by a similar decline in contracts bidding for that gold, known as the open interest.
Therefore the number of contracts for each ounce of deliverable gold has now reached a new all time high of about 57.8 claims per ounce, a level that has not ever been seen since Nixon closed the gold window.
There was another big buildup in the claims per ounce that occurred just before gold began its big bull market run in 2000. Some contend that this drain in dealer gold was the result of a last ditch effort to the hold the price of gold lower before the market broke and the price began its remarkable run.
But given that the banks became net buyers of gold around 2008, as shown in the third chart below, it does not seem likely that the Bank of England or the western central banks will sell bullion into the market to save the overleveraged speculators again.
Recently the Federal Reserve was unable to comply with a request from the Deutsche Bundesbank to return the German national gold which had been held in custody in New York. The vault seems to be a bit on the thin side in general. I am sure all the gold is there, it is just that we live in an age in which multiples of rehypothecation for our financial assets held in trust are de rigeur. All the finest financiers are doing it without fear or regret, even when it occasionally decimates their customer accounts or shakes the global economy to its foundations.
Also included below is a peek at the registered inventories of all the COMEX warehouses. Some of the declines are impressive. What a remarkable coincidence.
There has rarely been a dull moment since they knocked down Glass-Steagall. It will be interesting to see what happens next. This has been so much fun that it hard to know whether to crack open a bottle of champagne, or to make a run for the border.
We'll probably have to wait until after Goldman brings out the Twitter IPO. Priorities.
Have a pleasant weekend. See you Sunday evening.
¤ YESTERDAY IN GOLD & SILVER
As I mentioned in The Wrap yesterday, the smallish rally in gold in early Far East trading ran into a not-for-profit seller about thirty minutes before the London open, and it was more by good luck than by good management that I manged to file Friday's column at the precise low of the day, which came at 10:15 a.m. BST, which was 5:15 a.m. EDT. With the benefit of 20/20 hindsight, this might have been an early a.m. London gold fix.
After that, the gold price recovered into the Comex open, but once the London p.m. gold fix was in, gold got sold down again, hitting its New York low of $1,306.60 at 2 p.m. EDT in electronic trading. The subsequent rally ended on its high of the day at the 5:15 p.m. close, which is a chart pattern I don't ever recall seeing on a Friday.
Gold finished the day at $1,327.90 spot, up $6.90 from Thursday's close. Net volume was around 175,000 contracts.
It was virtually the same chart pattern in silver, with the only difference being the timing of the New York low price tick. That came just minutes before the 1:30 p.m. EDT Comex close. Then, like gold, it was up, up and way into the 5:15 p.m. electronic close.
Silver finished the Friday session on its high tick as well, at $22.265 spot, up 53 cents on the day. Net volume was way up there at around 51,000 contracts.
The price patterns for platinum and palladium were very similar to gold and silver. Their respective low ticks were at 10:15 a.m. in London, with their subsequent rallies also lasting until around 9 a.m. in New York, where they got capped until Zurich closed for the day. The rallies after that lasted right into the New York electronic close as well. Here are the charts.
The dollar index closed in New York on Thursday afternoon at 81.52. It's high at around 1:30 p.m. Hong Kong time was 81.73. After that it traded in a broad 40 basis point range, closing on Friday at 81.50, basically unchanged from it started the day. The dollar index also closed unchanged on Thursday as well.
****
The CME's Daily Delivery Report showed that 6 gold and 17 silver contracts were posted for delivery within the Comex-approved depositories on Tuesday. The link to the Issuers and Stoppers Report is here.
There were big withdrawals from both GLD and SLV yesterday, most likely a direct response from the hammering that the two precious metals took on Thursday. An authorized participant withdrew 193,116 troy ounces from GLD, and an AP withdrew 2,210,826 troy ounces of silver out of SLV.
The U.S. Mint had a tiny sales report. They sold 32,000 silver eagles, and that was it.
There wasn't much activity in gold over at the Comex-approved depositories on Thursday. They didn't report receiving any, and only shipped out 6,318 troy ounces of the stuff. The link to that activity is here.
It was a bit busier in silver, as nothing was reported received, and 636,040 troy ounces were shipped out the door. The link to that action is here.
I was certainly happy with the Commitment of Traders Report that came out yesterday, as there was real decent improvement in the Commercial net short position in silver, and the Commercial net short position in gold decreased by as well.
In silver, the Commercial net short position declined by 19.3 million ounces and currently sits at 117.5 million ounces. According to Ted Butler, the Big 4 traders improved their position by 13.0 million ounces out of the total 19.3 million ounces. Ted pegs JPMorgan's short position around 75 million ounces, which is a hair under 16% of the entire Comex futures market in silver on a net basis basis.
In gold, the Commercial net short position improved by a bit over 12,200 contracts, or 1.22 million ounces, and is now down to 8.02 million ounces. Of that improvement, Ted said that JPMorgan appears to have added 2,000 contracts to their long-side corner, which now sits at just under 19% of the entire Comex futures market in gold on a net basis.
The amazing thing about yesterday's report was the fact that of all the selling done by the technical funds and small traders in both gold and silver, only 1,041 silver contracts of the total amount [5.2 million ounces] was added by the way of fresh shorting by the technical funds, and none in gold at all. As silver analyst Ted Butler said in his quote in Friday's column:
If the commercials succeed in causing technical traders and other momentum type traders to sell, then the commercials will likely continue to rig prices lower so that they (the commercials) can continue to buy. In retrospect, this was why we fell so steeply in the first half, namely, the technical funds not only sold and liquidated long positions, they established record or near record new short positions as well on the dramatic decline in price. Throw in the massive liquidation in GLD and that’s why we dropped so much in gold (and silver). Since the technical funds kept selling, the commercials kept lowering the price and kept buying. This is how JPMorgan came to hold a long market corner in COMEX gold futures.
The reason I’m narrowing it down to a question of new short selling by technical funds is because data from the Commitments of Traders Report indicates that there has been virtually no build up of technical fund or other speculative new long positions on the rally in gold and silver prices to over $1,400 in gold and $24 in silver. There can be no selling of new long positions that don’t exist. Of course, there could be some selling from old long positions, but logic would hold not massive amounts.
As for the price action since the Tuesday cut off, it's impossible to tell how much of the price decline in both gold and silver was caused by long liquidation versus new short selling by the technical funds and small traders. The one thing that we do know with absolute certainty is that the Commercial traders continued doing what they did during the last reporting week; gobbling up every long that was being sold, and also taking the long side of every short sale that was being transacted. Unfortunately, none of this will be known to us until next Friday's Commitment of Traders Report.
As I've said a few times in the past, it always seems like I'm waiting for the next COT Report.
****
Selected non redundant news and views....
Doug Noland: Blinder, Summers and Monetary Policy
And with the Fed prepared to ever gingerly pull back on QE, there is new-found focus on the efficacy of “forward guidance.” The Fed is determined to avoid the 1994 scenario whereby a 25 bps rate boost incited a problematic spike in yields all along the yield curve. The thinking today is that assurances of a low Fed funds rate target for the foreseeable future will work to anchor longer-term market yields. There has even been Federal Reserve research concluding that Fed QE purchases haven’t had a major impact on market yields.
Well, I would counter that QE has had enormous market impact. U.S. stocks have returned about 30% since the Fed began ballooning its balance sheet this past November. Junk bond issuance is poised for a record year, with likely the strongest expansion of business borrowings since 2007. Housing prices have jumped double-digits, with overheated conditions returning across many markets. Globally, a strong inflationary bias has propelled asset prices generally.
Returning back to “forward guidance,” I expect the market to take little comfort from the promise of ongoing near-zero short-term rates. Generally, faith in a persistently low “fed funds” target would place a ceiling on long-term market yields. And, indeed, this dynamic has been in play for years now, in the process fostering major financial leveraging and other speculative excess. And especially after the past year’s broad-based risk market excesses, what really worries the markets these days is a bout of problematic “risk off” de-risking/de-leveraging. The markets are comfortable with and fully leveraged for a Fed that won’t be hiking rates anytime soon. Major questions remain, however, as to the availability of a sufficient marketplace liquidity backstop in the event of market turmoil.
Iceland dissolves E.U. accession team
The Icelandic government has dissolved its E.U. accession team after deciding to give up on talks to join the Union.
"We have dissolved our task force and negotiation teams, and there won't be any other summits," foreign minister Gunnar Bragi Sveinsson told the Icelandic parliament, the Althing, on Thursday (12 September).
"The government is in agreement on this subject. The process has been suspended. But nothing has been closed down, and we will improve our communication and strengthen our ties with the EU without actually joining," he added.
Personally, I'm delighted by this decision. This short article, filed from Berlin, appeared on the euobserver.com Internet site yesterday morning...and my thanks go out to Roy Stephens for finding it.
Germany's Bismarck temptation and secret pacts with Russia
Germany's euro break-up party – Alternative für Deutschland (AfD) – has unveiled its foreign policy. It is pure Bismarck.
"Germany and Europe have no interest in a further weakening of Russia," said Alexander Gauland, AfD's foreign affairs chief. "Germany's relations with Russia should be managed with meticulous care."
What they say is no longer an academic question. The party is rising fast in the polls and may break through the 5pc barrier to take seats in the Bundestag, scrambling a close election.
AfD openly evokes the "Rückversicherungsvertrag", the secret "Reinsurance Treaty" between the Kaiser's Germany and Tsarist Russia in 1887.
This Ambrose Evans-Pritchard blog from yesterday is amust read for all serious students of the New Great Game. I thank Roy Stephens once again for sending it our way.
Italy floated plans to leave euro in 2011, says ECB insider
So, we now know: Silvio Berlusconi seriously floated plans to pull Italy out of the euro in October/November 2011, precipitating his immediate removal from office and decapitation by EMU policy gendarmes.
Ex-ECB insider Lorenzo Bini-Smaghi has quietly dropped a few bombshells in his new book Morire di Austerita (Dying of Austerity), worth a read if you know Italian.
Mr Bini-Smaghi – until recently on the ECB's six-man executive council, and for many years Italy's man in Frankfurt – states that Silvio Berlusconi was toppled as Italian premier in November 2011 as soon as he began to rattle the EMU cage in earnest.
Specifically, he discussed (threatened?) Italian withdrawal from the euro in private meetings with other EMU governments, presumably with Chancellor Angela Merkel and France's Nicolas Sarkozy, since he does not negotiate with underlings.
We have long suspected this. Now it is confirmed.
This is another blog from Ambrose Evans-Pritchard, this one from Thursday...and it's another item that you should put on your must read list for this weekend. I thank Roy Stephens again for finding this for us.
Two King World News Blogs
The first interview is with Andrew Maguire...and it's headlined "Morgan Whistle Blowers Confess Bank Manipulates Gold and Silver". The second and final commentary is withEgon von Greyerz. It's entitled "Historic JP Morgan Whistle Blower Interview Moves Markets".
[Although I post all of Eric King's interviews, I wish to go on the record as saying that I don't necessarily agree with everything that's said by some of his guests. - Ed]
[Although I post all of Eric King's interviews, I wish to go on the record as saying that I don't necessarily agree with everything that's said by some of his guests. - Ed]
Goldman Sees Risk of Gold Below $1,000 on U.S. Economy
Gold is poised to extend declines as the U.S. Federal Reserve withdraws stimulus and economic data improve, according to Goldman Sachs Group Inc., which says that there’s a risk that bullion may drop below $1,000 an ounce. Futures retreated in New York.
While debt-ceiling discussions in the U.S. and the Syrian crisis may support bullion in the near term, gold will resume its decline into next year, Jeffrey Currie, head of commodities research, said in an interview on Bloomberg Television today. The bank’s target for 2014 is $1,050, and the commodity may overshoot to the downside, Currie said in Singapore. Gold futures haven’t traded below $1,000 since October 2009.
“While we agree with the mid-cycle price somewhere around $1,200, we believe that at least near term it can overshoot to the downside, which is why we have $1,050” as a target, Currie said. “It clearly could trade below $1,000.”
If you're prepared to believe this, dear reader, than I really do have a bridge to sell you. This news item, if you wish to dignify it with that name, was filed from Singapore and posted on theBloomberg website yesterday morning MDT. Ken Hurt was the first reader to slide this story into my in-box shortly after I filed Friday's column.
HSBC lifts 2013 gold price forecast on higher physical demand
HSBC Global Research raised its 2013 gold price forecast and said physical demand is becoming a major driver for the yellow metal.
The bank lifted its gold price outlook for this year to $1,446 per ounce from $1,396, and kept its 2014 forecast unchanged at $1,435 an ounce. Spot gold was trading at $1,330.66 at 17:36 GMT on Thursday.
"Physical demand for jewelry, coins, and bars from China, especially, are supportive and becoming a key driver," HSBC said in a note on Thursday.
The bank said investment demand for gold will remain weak as gold's use as a safe haven ebbs.
This Reuters piece, filed from Bangalore, was posted on their website just before lunch on Friday IST.
***
¤ THE WRAP
But can this manipulation ever be obvious enough for the mainstream financial news media, gold and silver mining companies themselves, and the World Gold Council to notice it and say something about it? Those are the parties that could stop it. - GATA's Chris Powell commenting on Lawrence Williams' article from Friday headlined "Gold Knocked Down Again, and Again".
****
I was somewhat surprised that JPMorgan Chase et al didn't press their advantage during the Comex trading session in New York yesterday, as they had it all set up to do exactly that after the pounding gold and silver took in advance of, and during, the early London trading session. The sell-off appeared to hit a down-side crescendo just before, or at, the London a.m. gold fix at 10:30 a.m. BST.
Comments made by Eric Sprott in his latest interview over at King World News yesterday may be very apropos at this point. Eric raised the possibility that gold had been knocked down in preparation for the Federal Reserve's cancellation of its plans to "taper" its bond buying, so that the resulting increase in gold will come from a lower base.
That wouldn't surprise me in the slightest, as we've all noticed the fact that the gold price is smacked in advance of any negative news that is about to be released, with the monthly jobs report coming to mind as a "for instance".
Of course we won't know until they draw back the curtain after the FOMC meeting this coming week. Whatever the news, it will be interesting to see how gold "reacts" to it, or is allowed to "react". Time will tell.
Here are the 6-month gold and silver charts updated with yesterday's price action. As you can see, the gold price punctured its 50-day moving average, but only briefly; and the silver price just touched its 50-day moving average.
(Click on image to enlarge)
(Click on image to enlarge)
But does all this really mean anything in the grand scheme of things? I'm sure that by this time next week, there will be some clarity, but at the moment, everything is just one big question mark.
But until we hear the FOMC news, I suggest one blue pill a day might be necessary. But after the "news" the red pill may be just what the doctor ordered.
That's it for the day, and the week.
Enjoy what's left of your weekend, and I'll see you here on Tuesday.
13 SEPTEMBER 2013
COMEX Deliverable Gold Bullion Has Plunged By 78% in 2013 - Claims Per Ounce Highest On Record
"We looked into the abyss if the gold price rose further. A further rise would have taken down one or several trading houses, which might have taken down all the rest in their wake. Therefore at any price, at any cost, the central banks had to quell the gold price, manage it."The first chart below shows that rather nicely. Nick Laird, the maestro of charts from Sharelynx.com, was kind enough to go back and pull all the available data. It helps to complete the picture don't you think?
Sir Eddie George, Bank of England, reportedly in private conversation, September 1999
One difference this time is that the fellows who examine the more detailed reports tell us that the big boy of the bullion banks, JP Morgan, is said to have already liquidated their large short position and gone net long gold. Perhaps they are well advised.
If this is true they would benefit greatly from another bull run. And since gold has been reaffirmed as a Tier 1 asset along with cash and government securities, it is literally 'as good as gold' for the Banks' balance sheet, n'est-ce pas? How fortunate for America's favorite financier.
Deliverable 'dealer' gold, known as registered gold at the COMEX, has plunged a remarkable 78% during the vicious price smashing of gold in 2013.
This decline in gold available for delivery has not been matched by a similar decline in contracts bidding for that gold, known as the open interest.
Therefore the number of contracts for each ounce of deliverable gold has now reached a new all time high of about 57.8 claims per ounce, a level that has not ever been seen since Nixon closed the gold window.
There was another big buildup in the claims per ounce that occurred just before gold began its big bull market run in 2000. Some contend that this drain in dealer gold was the result of a last ditch effort to the hold the price of gold lower before the market broke and the price began its remarkable run.
But given that the banks became net buyers of gold around 2008, as shown in the third chart below, it does not seem likely that the Bank of England or the western central banks will sell bullion into the market to save the overleveraged speculators again.
Recently the Federal Reserve was unable to comply with a request from the Deutsche Bundesbank to return the German national gold which had been held in custody in New York. The vault seems to be a bit on the thin side in general. I am sure all the gold is there, it is just that we live in an age in which multiples of rehypothecation for our financial assets held in trust are de rigeur. All the finest financiers are doing it without fear or regret, even when it occasionally decimates their customer accounts or shakes the global economy to its foundations.
Also included below is a peek at the registered inventories of all the COMEX warehouses. Some of the declines are impressive. What a remarkable coincidence.
There has rarely been a dull moment since they knocked down Glass-Steagall. It will be interesting to see what happens next. This has been so much fun that it hard to know whether to crack open a bottle of champagne, or to make a run for the border.
We'll probably have to wait until after Goldman brings out the Twitter IPO. Priorities.
Have a pleasant weekend. See you Sunday evening.
No comments:
Post a Comment