Ed Steer's Gold and Silver report - September 19 , 2013 - Data , News and Views touching on the precious metals ....

http://www.caseyresearch.com/gsd/edition/who-leaked-the-fomc-statement-to-gold-traders

¤ YESTERDAY IN GOLD & SILVER

The HFT sell off in gold in early Far East trading came to an end at 10 a.m. Hong Kong time.  From there it rallied until shortly after the London open, before selling off gently until noon in New York.

From that point it developed a positive bias that accelerated as the FOMC announcement approached.  And then a minute or two before the actual announcement was made, the gold price blasted off, reaching an interim high about fifteen minutes later.  From there it traded sideways for thirty minutes before heading higher once again.  The price topped out shortly before 4 p.m. EDT, before trading sideways into the 5:15 p.m. electronic close.  The high tick of the day was reported by Kitco as $1,368.70 spot.  And the low December tick in Hong Kong was reported by the CME Group as $1,291.50.

The gold price finished the Wednesday trading session at $1,365.30 spot, which was up $55.30 spot.  This is the biggest one-day dollar price gain for gold that I can remember.  Nick Laird sent me an e-mail just before I hit the send button on this column and said that his "End of Day" trading data shows that this was the fourth largest up-move in gold ever.  Net volume was over the moon at 247,000 contracts.

Not surprisingly, the silver chart looks almost identical to the gold chart, except that the sell offs and the rallies were more substantial on percent basis than in gold; especially the decline between 9 a.m. in London and noon in New York, and the big two hour rally after the FOMC news.

Silver's low tick came shortly before noon EDT, and not at 10 a.m. in Hong Kong like gold.  Silver also got sold down 30 cents off its 3:45 p.m. EDT time high as well, whereas gold only got sold down a couple of bucks.

According to the settlements data on the CME's website, the highs and lows for silver in the December front month were $23.250 and $21.225 respectively.  That's an intraday move of over two bucks [10 %] to the upside, another phenomenon I don't remember seeing before.

****

The dollar index closed on Tuesday afternoon at 81.15 and then rallied to its 81.22 "high" of the day shortly after 9:30 a.m. Hong Kong time on their Wednesday morning.  From there it drifted gently lower until it reached the 81.00 mark at precisely 2 p.m. in New York.  By 4:30 p.m. the index was down a hair over 90 basis points before recovering a tiny bit of that loss going into the close.  The index finished the day at 80.27 which was down 88 basis points from Tuesday.

I don't consider the rally in gold and silver to be related to what happened to the dollar index in any way, shape, or form.  You can if you wish, dear reader, but if you do, please explain the sell offs in all four precious metals in Far East trading based on a less than 7 basis point rally in the dollar index.  And as soon as you've done that, please explain why platinum and palladium prices didn't react until almost two hours after gold and silver blasted off.

***

The CME's Daily Delivery Report showed that zero gold and 47 silver contracts were posted for delivery within the Comex-approved depositories on Monday.  The two biggest short/issuers were Jefferies [once again] and ABN Amro, with 22 and 21 contracts respectively.  Canada's Bank of Nova Scotia was the long/stopper on 26 contracts, and JPMorgan Chase stopped 11 contracts in its client account.

I've noted that JPMorgan has not been active in it's in-house [proprietary] trading account since last week sometime, and everything they've been involved in recently, even though it hasn't been large amounts, has been as the long/stopper for their clients.  I don't know what it means, if anything, but I just thought I'd point it out.  The link to yesterday's Issuers and Stoppers Report is here.

There were no reported changes in GLD yesterday, and as of 10 p.m. EDT last evening, there were no reported changes in SLV, either.  I will be more than interested in what deposits are [or are not] made in both GLD and SLV as a result of yesterday's price action.  This is particularly true of SLV, as large quantities of the metal just aren't available, and it will be interesting to observe if the authorized participants [read JPMorgan Chase] short the shares in lieu of the real metal, which is what they've been forced to do in almost every big rally since shortly after the inception of SLV.

Over at Switzerland's Zürcher Kantonalbank for the week ending on Friday, September 13, they reported that their gold ETF declined by 17,483 troy ounces, and their silver ETF showed a decrease of 377,514 troy ounces.

There was no sales report from the U.S. Mint yesterday.

Once again there were no significant changes in the gold stocks at the Comex-approved depositories on Tuesday.  Like Monday, only a couple of kilo bars were moved, but this time they got shipped out from Brink's, Inc., and not in.  Here's the link to that activity, or lack thereof.

But, as Ted Butler has pointed out for a couple of years now, the real frantic action has been in silver, and Tuesday's warehouse activities were no exception.  They reported receiving 1,355,985 troy ounces of the stuff, but only shipped out one good delivery bar that weighted 1,056 troy ounces.  The link to that activity ishere.

****

Ambrose Evans-Pritchard: Fed recoils from 1937 tightening error as jobs evaporate

The American economy has shed 347,000 jobs over the past two months, roughly comparable with the rate of loss seen during the Great Recession. It is remarkable that the US Federal Reserve should even have been thinking of phasing out life-support in such circumstances.

The Fed's tough talk has already led to a 140 basis point rise in US 10-year Treasury yields, the benchmark price money for US mortgages and for the world (ex-China). It might as well have raised rates six times.

The shock decision on Wednesday night to put off tapering bond purchases is a recognition of what should have been obvious. Rising mortgage costs and the "tightening of financial conditions" could slow growth, it said. Indeed.

This longish commentary from Ambrose was posted on thetelegraph.co.uk Internet site late yesterday evening BST...about two hours after the Fed announcement.  I found it buried in a GATA release.

Five Years of Hard Work By the Federal Reserve

The only comment that comes with the must view chart are the words..."It's Working...".  And when you click on the link you'll see what I mean.  West Virginia reader Elliot Simon sent me this Zero Hedge 'story' very late last night.

Wells Fargo Cutting 1,800 More Jobs in Mortgage Business

Wells Fargo, the biggest U.S. mortgage lender, is cutting about 1,800 jobs in its home-loan production business as an increase in mortgage rates curtails borrower refinancing demand.

The cuts are in addition to 3,000 earlier this quarter, Tom Goyda, a spokesman for the San Francisco-based bank, said today in an interview. That included 2,300 announced Aug. 21 and smaller reductions prior to that, Goyda said.

Wells Fargo is eliminating jobs as rising rates slow mortgage refinancings and new home purchases fail to make up for the decline. The bank may originate about $80 billion in home loans in the third quarter, a 29 percent drop from the three months that ended June 30, Chief Financial Officer Timothy Sloan said Sept. 9.

This very brief news item appeared on the Bloomberg website late yesterday afternoon MDT...and my thanks go out to U.A.E. reader Laurent-Patrick Gally.

White House Warns Agencies to Prepare for Possible Government Shutdown

The Obama administration is telling federal agencies to prepare for a possible government shutdown.

The Office of Management and Budget sent a letter to agency heads this week ordering them to make contingency plans if Congress does not reach a deal to fund the government after Sept. 30.

The letter from OMB director Sylvia Burwell says there is still enough time for Congress to prevent a lapse in funding, but "prudent management" requires that the government get ready for a shutdown.

OMB has sent similar warnings to agencies during previous budget battles. 

That's about all there is to this very tiny AP story that was picked up by the moneynews.com Internet site late yesterday morning...and I thank Elliot Simon for bringing it to our attention.

CFTC Seeks Admission Of Market Manipulation From JPM; Jamie Balks

The Commodity Futures Trading Commission, pursuing a probe into last year's "London whale" trades even as other agencies near a settlement with J.P. Morgan Chase, is focusing on a giant trading position that enforcement officials believe distorted prices and misled investors, according to people familiar with the matter. ...

The CFTC is likely to use new powers granted by the Dodd-Frank law that allow it to charge firms for recklessly manipulating markets, say people familiar with the agency's thinking. Previously, the agency had to prove that traders intended to manipulate prices in order to win a case.

One of the sticking points in the CFTC discussions is over whether the bank or its traders manipulated the trades, according to a person familiar with the talks. J.P. Morgan is balking at any CFTC settlement that would require it to admit to manipulation, this person said.

The above three paragraphs came from The Wall Street Journalstory on this issue, but the rest of the story was posted on theZero Hedge website yesterday.  The first person through the door with this was reader M.A.  It's definitely worth reading.

SWIFT Suspension? EU Parliament Furious about NSA Bank Spying

The recent revelations regarding the degree to which the US intelligence agency NSA monitors bank data in the European Union has infuriated many in Europe. "Now that we know what we have long been suspecting, we have to protest loudly and clearly," Jan Philipp Albrecht, a legal expert for the Green Party in the European Parliament, told SPIEGEL ONLINE. He is demanding a suspension of the SWIFT agreement, which governs the transfer of some bank data from the EU to anti-terror authorities in the United States.

On Monday, SPIEGEL reported that the NSA monitors a significant share of international money transfers, including bank and credit card transactions. The information comes from documents in the possession of whistle blower Edward Snowden that SPIEGEL has been able to see. "Follow the Money" is the name of the NSA branch that handles the surveillance. Information obtained by "Follow the Money" then flows into a financial database known as Tracfin. In 2011, Tracfin had 180 million data sets -- 84 percent of which are comprised of credit card data.

But data from the SWIFT network, headquartered in Brussels, also ends up on Tracfin. SWIFT, which handles international transfers among thousands of banks, is identified by the NSA as a "target" according to the Snowden documents. They also show that the NSA monitors SWIFT on several different levels, with the NSA department for "tailored access operations" also being involved. Among other methods, the documents note that the NSA has the ability to read "SWIFT printer traffic from numerous banks."

This short article, which is definitely worth reading, was posted on the German website spiegel.de very late on Wednesday morning Europe time...and I thank Roy Stephens for sending it.

Who Leaked the FOMC Statement to Gold Traders?

Beginning three minutes before the release of the FOMC Statement, gold spot and futures prices began to rise notably.

Bonds did not. Stocks did not. FX did not. Around 4,300 contracts changed hands in the December Futures - massively more than average volume - before the statement came out and drove prices further up. In those three minutes Gold prices jumped $11...so the question is: lucky guess...or which big bullion bank got the nod?

The two charts in this Zero Hedge piece from yesterday afternoon are a must to view...and I thank Casey Research's own John Grandits for bringing it to our attention.  Washington state reader S.A. sent me the same story...along with the comment that he was watching his trading screens in real time as this event unfolded.

Canadian Billionaire Predicts the End of the Dollar as the Reserve Currency; Warns "It's Likely to Get Ugly"

Beginning with how Kissinger and Nixon enabled the USD as the world's de facto reserve currency through oil, Canadian Billionaire Ned Goodman [President and CEO of Dundee Corporation] explains in the brief but far-reaching clip how it is both inevitable (and rapidly approaching) that the rest of the world will turn its back on the dollar. With China and Russia (among many others that we have detailed in the past) agreeing on non-USD swap terms for energy, the cracks are starting to show and as Goodman details, "in the 1930s, everyone wanted USD (backed by silver)," but today, backed by nothing, "everyone wants to get rid of them."

Buying hard assets is crucial (he has never been more bullish of gold) as we head into a period of stagflation or even high inflation; and as Goodman previously commented "the world is totally upside down right now - it's completely crazy," in fact, he adds, "I'm keen on anything that's going to live with higher inflationary numbers, because I can't see the world getting out of the problems that it's in."

Mr. Goodman has it exactly right...and this absolute must read/watch commentary/video clip was posted on the Zero Hedge website very late Wednesday evening.  Bill Busser was the first reader through the door with this in the wee hours of yesterday morning, for which I thank him.

Cazenove's Robin Griffiths: Central banks lost their gold trying to suppress it

Today we cordially welcome another member to the ranks of tin-foil hat wearers -- Robin Griffiths of Cazenove Capital Management in London, who, writing at King World News, acknowledges the Western central bank gold price suppression scheme.

Griffiths writes of the gold market: "Central banks have been trying to disrupt the bull move but they have simply ended up with nothing in their vaults. They have lent out or sold so much of the precious metal that it would take seven years of production to rebuild their reserves to the levels they were at two years ago."

This GATA release was posted on their Internet site yesterday.

The Fed's Reflexive Catch 22 In One Sentence

Submitted by Tyler Durden on 09/19/2013 08:28 -0400

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A month ago, we explained that the key issue complicating the Fed's taper in particular, and exit policy in general, is that the Fed is now caught in a "reflexive" corner, where the mere hint of tightening (because Bernanke just admitted tapering is just that) pushes markets so far and so fast, that the Fed has no choice but to delay or outright cancel said tightening, in the process losing further institutional credibility. And so on, until eventually the inflationary spiral takes hold, at which point it will be too late to respond proactively, and then the Fed pulls a 2008 and complains bitterly how"nobody could have seen the asset bubble coming" and so on. For anyone still confused by this Catch 22, here it is summarized by Deutsche Bank's Jim Reid:

Another theme arising from their decision to hold fire was their worry that financial conditions had tightened over the past few weeks. If this is the case then the path of tapering is going to be tough because every time the market thinks they are going to taper, yields will likely rise and conditions will tighten. However the Fed's guidance is becoming confused enough now that you couldn't rule out another change of emphasis, especially as the composition of the Fed will change notably over the next few months. So markets are underpinned by liquidity for now but it’s a fluid situation and it strikes me that the Fed do not have a clear direction at the moment which makes them difficult to second guess.

And since the economy is made worse by the Fed's constant intervention in this positive feedback loop, what is obvious is that the Fed will never step away, until such time as it has soaked up so many securities and so much liquidity from the markets, that even the final policy vehicles, the bond and stock markets, grind to a halt. The good thing is that it is now abundantly clear that no news, no headlines, no wars, frankly nothing beside the Fed's balance sheet matters.

Eurozone Recovery Fades - Will The U.S. Follow?

Submitted by Tyler Durden on 09/19/2013 - 08:18

It has been a "Summer of Recovery" for the U.S. economy with GDP growth rising from 1.1% in the first quarter to 2.5% in the second and manufacturing surveys showed sharp jumps in new orders and outlooks.  The same occurred in the Eurozone with Markit's PMI reports showing sharp bounces higher and hopes that the recession that has plagued the region was finally coming to an end.  The question of sustainability remains. The recent uptick in the Eurozone has now ended which most likely suggests that the recent pop in domestic production is likely ephemeral.  The next couple of months of data should be telling in the regard and also suggests why employment reports have been much weaker than anticipated. With hopes once again running high that the economy is set to regain"escape velocity" in the coming year there is plenty of margin for disappointment.

***

¤ THE WRAP

Comparisons between the London Whale derivatives trade and JPMorgan’s activities in COMEX gold and silver are revealing. The Whale trade is over; COMEX gold and silver manipulation is still a crime in progress. Which is more deserving of priority attention from the CFTC? Additionally, the CFTC only learned about the Whale trade after it blew up, and that’s when JPMorgan’s potential manipulation came into focus. With silver and gold, the agency reports the proof weekly in its reports on market concentration. - Silver analyst Ted Butler: 18 September 2013

With the big volume associated with yesterday's jump in gold and silver prices, the sobering question that must always be asked is this:  Who was going long gold and silver in the Comex futures market?  And even more important; which traders were going short against them, as there didn't appear to be much short covering going on.  Since yesterday's action conveniently occurred on a Wednesday, the day after the cut-off for tomorrow's Commitment of Traders Report, we won't have a clue until next Friday's report, which comes out on September 27. I'd give a days wages to know who did what in the gold and silver markets yesterday.

I took a quick peek at the CME's preliminary volume and open interest numbers for yesterday, and they were rather surprising.  It showed that gold's total open interest only rose just under 3,700 contracts, and silver's open interest rose just under 3,000 contracts.  Ted Butler mentioned on the phone yesterday that there appeared to have been much more going on under the hood than met the eye in New York trading yesterday, and he could be right, as these volume numbers suggest that.  We'll see. 

I thought I'd toss in the 6-month gold and silver charts.  As you can tell, gold has blasted through its 50-day moving average again, and silver barely got below its, before it took off as well.

I have to agree with Ted Butler that the lows we saw at 10 a.m. in Hong Kong on Wednesday morning were probably the last gasp of the bullion banks before we more materially higher from here.  But never forget that JPMorgan Chase is still in charge, as they still hold a long-side corner in the Comex futures market in gold to go along with their decreased, but still short-side corners in silver, platinum and palladium, so they are still very much in the driver's seat going forward.

I note that, once again, there was absolutely no follow-though in Far East trading on their Thursday.  The volumes in both gold and silver, up to the London open, were nothing out of the ordinary and were mostly of the high-frequency trading variety.  London has been open about twenty minutes as I write this paragraph, and all four precious metals have popped a bit.  The dollar index is flat.  It will be interesting to see how trading goes for the rest of the session in Europe.

And as I hit the send button on today's column at 5:06 a.m. EDT, the tiny rallies I spoke of in the previous paragraph have been snuffed out, and all four precious metal prices are back near their Wednesday closes in New York.  Volumes are getting up there; around 42,000 contracts in gold and 10,000 in silver, and it's still mostly high-frequency trading.  The dollar index is now down about 17 basis points.

Based on the lack of follow-through in both Far East and early London trading, one has to wonder what JPMorgan et al have in store for us during the Comex session in New York today.

See you tomorrow.

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