Commentary on the economic , geopolitical and simply fascinating things going on. Served occasionally with a side of snark.
Tuesday, December 3, 2013
Ed Steer's Gold and Silver Report - December 3 , 2013 - Pertinent data for gold and silver , an overview of Monday precious metals raid , pertinent news focusing on the Financial Sphere and Central Bankers , Bubble Insights From The Roaring Twenties - Doug Noland missive , key points of view touching on the precious metals , key articles relating to World gold and Ed's Wrap for the day !
JPMorgan et al started off the December Christmas season with another bear raid in all four precious metal starting right at the New York open on Sunday evening EST.
In gold, half the day's losses were in by the 10 a.m. EST London p.m. gold fix. Then the HFT boyz hit the bid stack again, and the sell of continued, with the low tick coming a hair before 3 p.m. in electronic trading. After that gold traded flat into the close.
The CME recorded the high and low at $1,251.20 and $1,217.10 in the February contract.
Gold closed the Monday trading session at $1,219.30 spot, down $32.80 from Friday's close. Ted Butler mentioned that the volume was very heavy for a Monday after a U.S. long weekend, and would have been considerably less than the 151,000 [net] contracts posted, if JPMorgan et al hadn't engineered yesterday's price rout.
The silver chart looks similar, so I shall spare you the play-by-play.
The CME recorded the high and low as $20.01 and $19.115 in the March contract.
Silver closed yesterday at $19.205 spot, which was down 73.5 cents from Friday. Like gold, net volume was very high for a Monday at 53,500 contracts.
And as you already know, "da boyz" didn't spare the other two precious metal, either. Here are the charts.
The dollar index closed on Friday at 80.64 and then sold off a bit in Far East trading, bottoming out around 80.51 about 20 minutes before the 8 a.m. GMT London open. Then away the index went to the upside, peaking out at 80.93 before trading more or less sideways into the close. The index finished at 80.90, which was up 36 basis points from Friday. Here's the 3-day chart.
The CME's Daily Delivery Report for Day 3 of the December delivery month showed that 658 gold and 80 silver contracts were posted for delivery tomorrow. The only short/issuer of note in gold was Canada's Bank of Nova Scotia with 609 contracts, and it nearly goes without saying that the only long/stopper worth mentioning was JPMorgan in its in-house [proprietary] trading account, with 620 contracts.
Of the 80 silver contracts issued for delivery, 60 of them were stopped by JPMorgan in both its client and in-house trading account. The link to yesterday's Issuers and Stoppers Report is here, so you can check out all the details for yourself.
There were no reported changes in GLD yesterday, and as of 9:40 a.m. EST yesterday evening, there were no reported changes in SLV, either. But based on yesterday's price action, it's a good bet that there will be major withdrawals in both ETFs as the week progresses.
The U.S. Mint did not report any further sales for November, but they did have a small sales report for the first day of December, and that was 239,000 silver eagles.
Over at the Comex-approved depositories on Friday, they reported receiving 31,772 troy ounces of gold, and none was reported shipped out. The receipt was at the HSBC USA vault, and the link to that activity is here.
It was busier in silver, of course, as 300,938 ounces were reported received, and 501,010 ounces were shipped out. Virtually all of the in/out activity was at Brink's, Inc. The link to that action is here.
The Commitment of Traders numbers were very impressive in both gold and silver.
The headline number in silver showed that the Commercial net short position only declined by 1,036 contracts, or 5.18 million ounces. But Ted Butler said that "Under the hood, it looked even better, as the technical funds added almost 4,000 new gross short contracts and, with it, more future buying power." The Commercial net short position in silver is now down to 82.14 million ounces, almost back at its lows of July. And after yesterday's price "action," it's a good bet that we've already beaten that.
Ted also said that JPMorgan didn't lower their short position by much, if anything, during the reporting week, and their short-side corner in the Comex silver futures market still stands at around 11,500 contracts, or 57.5 million ounces. That amount represents 70% of the entire Commercial net short position.
In gold, the Commercial net short position declined by a chunky 23,279 contracts, or 2.33 million troy ounces. The Commercial net short position is down to 1.32 million troy ounces, a number I thought I'd never live to see. And it's a good bet that as of yesterday's Comex close, there is no Commercial short position at all, as they would now be net long the Comex futures market.
Ted pegs JPMorgan's long-side gold corner in the Comex futures at 8 million troy ounces. Ted also said that, as of the last Tuesday's cut-off, "JPMorgan controlled 24.5% of the entire net open interest in Comex gold futures after spreads are deducted."
There is one more comment about this past week's Commitment of Traders Report, and it's posted as the quote of the day in The Wrap section.
Here are the Intraday Average Gold/Silver Price Movements charts for the month of November courtesy of Nick Laird over at sharelynx.com. If you add up every minute of every trading day in November and average them all out, these are the charts you get.
As you can see, it's what happens on the Comex that matters as, on average, the engineered price declines begin at the 8:20 a.m. Comex open, and in silver, the downward price pressure ended at the 1:30 p.m. EST Comex close. And the other thing to note is the sudden downdraft in the silver price at 11 a.m. EST, the moment that London closes for the day. The same feature exists in gold, but it's not as obvious.
The only real difference in gold's chart is that its low comes at 2:45 p.m. in electronic trading.
There's nothing free market in either of these charts.
At least three U.S. regulators will meet on Dec. 10 to adopt the final version of the Volcker rule banning banks from making speculative bets with their own money, according to three people familiar with the planning.
The Federal Reserve, Office of the Comptroller of the Currency and Federal Deposit Insurance Corp. are scheduling meetings to act on the rule on that date, said the people, who requested anonymity because the schedule hasn’t been announced.
Two other agencies that need to approve the rule -- the Commodity Futures Trading Commission and the Securities and Exchange Commission -- are trying to arrange Dec. 10 votes as well, three other people familiar with that effort said. The agencies are not required to approve the rule at the same time.
The agencies’ approval would be the final stage in the process of adopting the Volcker rule, a centerpiece of the 2010 Dodd-Frank Act designed to prevent a repeat of the 2008 global credit crisis. The final version is also expected to extend the rule’s compliance dates, which was sought by Wall Street banks and trade groups.
This must readBloomberg story was posted on their website yesterday afternoon MST...and I found it embedded in a GATA release.
Goldman Sachs and JPMorgan Chase have finally overcome a regulatory rebuke that had been hanging over both banks since the Federal Reserve performed stress tests this year on large financial firms.
In March, Goldman and JPMorgan passed the tests, which are held annually and are intended to assess whether banks have the financial strength to get through sharp downturns in the economy and the markets. But in an unexpected reproach, the Fed said that it had identified significant weaknesses in the plans that JPMorgan and Goldman had submitted to show what might happen to their capital during periods of stress.
The regulator told Goldman and JPMorgan to come up with improved capital plans, and it threatened to stop the banks from paying out dividends and performing stock buybacks if the perceived flaws were not addressed.
On Monday, the two banks effectively put the matter behind them when the Fed announced that it did not object to plans that the firms had resubmitted.
This article was posted on The New York Times website very early yesterday evening EST...and is courtesy of Phil Barlett.
The most important chart that nobody at the Fed seems to pay any attention to, and certainly none of the economists who urge the Fed to accelerate its monetization of Treasury paper, is shown below: it shows the Fed's total holdings of the entire bond market expressed in 10 Year equivalents (because as a reminder to the Krugmans and Bullards of the world a 3 Year isnot the same as a 30 Year).
As we, and the TBAC, have been pounding the table over the past year, the amount of securities that the Fed can absorb without crushing the liquidity in the "deepest" bond market in the world is rapidly declining, and specifically now that the Fed has refused to taper, it is absorbing over 0.3% of all Ten Year Equivalents, also known as "High Quality Collateral", from the private sector every week. The total number as per the most recent weekly update is now a whopping 33.18%, up from 32.85% the week before.
You've already read all the text of the Zero Hedge piece from early yesterday afternoon EST, but it's the chart that makes the story worth the trip...and I thank Manitoba reader Ulrike Marx for her first offering in today's column.
“To understand the Great Depression is the Holy Grail of macroeconomics. Not only did the Depression give birth to macroeconomics as a distinct field of study, but also—to an extent that is not always fully appreciated—the experience of the 1930s continues to influence macroeconomists' beliefs, policy recommendations, and research agendas. And, practicalities aside, finding an explanation for the worldwide economic collapse of the 1930s remains a fascinating intellectual challenge.” Ben. S Bernanke, Essays on the Great Depression, 2000
No longer is the understanding of the Great Depression the “Holy Grail” of economics.” It’s been supplanted by understanding today’s extraordinary ongoing global Credit and speculative Bubble cycles.
Dr. Bernanke and others focus primarily on what they believe were policy errors during the Thirties, with surprisingly little attention paid to “Roaring Twenties” policies and excesses. If only the Fed had understood the need to open up the monetary floodgates, they claim. Fed money printing could have been used to recapitalize the banking system, rectify insufficient demand and reflate consumer and asset prices. The Great Depression could have and should have been avoided.
Doug must have posted this on the prudentbear.com Internet site very late on Friday, as I checked for it twice earlier that evening so I could include it in my Saturday missive, but it wasn't there. But here it is now...and it's a must read.
Despite the beginning of the wedding season in November, gold imports have remained low. This has resulted in a fall in gold jewellery sales, which have gone down by 25% in comparison with last year. The economic slowdown and barriers imposed on gold imports by the Centre since June 2013 have led to lower imports for the last 3 months.
According to the latest figures, October saw the fifth lowest gold imports for a month in Gujarat in the last five years. Only 203kg was imported in November and 127kg in September. Imports in November this year are less than one percent of imports in the same period last year. In November 2012, 18.998 metric tonnes (MT) of gold was imported in the state.
"These are pre-placed orders, from much before the restrictions came into effect. Imports will continue to remain low in the coming months as bullion traders are being cautious," said Monal Thakkar, president, Amrapali Industries.
Silver imports recorded a 4-month high in 2013. This year, silver imports in November are at 163.849 metric tonnes compared to 0.137 MT of silver imports in November last.
This news item, filed from Ahmedabad, was posted on The Times of India website during their lunch hour today IST...and it's courtesy of Ulrike Marx.
Back in October gold researcher Koos Jansen and Jan Skoyles of The Real Asset Co. in London called attention to commentary by Zhang Jie, deputy editor of the Chinese publication Global Finance and a consultant to the China Gold Association, which cited the Federal Reserve's manipulation of the gold market to protect the U.S. dollar's standing as the world reserve currency.
Jansen has obtained a much better English translation of this Chinese commentary, and it includes this observation about gold leasing by Western central banks: "Through continuous gold leasing the gold in the market can be circulated and produce derivatives, creating more and more paper gold. This is very significant for the United States. Gold leasing is a major tool for the Federal Reserve and other central banks in the West to secretly control and regulate the gold market, creating gold credit derivatives and global credit conflict."
The new translation, headlined "Gold Leasing Is a Tool for the Global Credit Game," is posted at Jansen's Internet site.
There's a lot more in this GATA release than what is mentioned in the above three paragraphs, as Chris Powell has a fair amount to say...and a few other links as well. This is certainly worth your time.
Maintaining grossly disproportionate positions in the gold futures market, JPMorgan Chase is manipulating the market and governments may be part of the manipulation, Casey Research's chief economist, Bud Conrad, tells Dan Ameduri of Future Money Trends in an interview done a few days ago at the Metals and Minerals Investment Conference in San Francisco and posted today.
Conrad adds that a country that is accumulating gold -- presumably China -- might want to smash the futures price down to facilitate its acquisition of real metal, as by liquidation of shares in the gold exchange-traded fund GLD, a speculation recently offered by Eric Sprott of Sprott Asset Management in Toronto and William Kaye of Pacific Group in Hong Kong.
Conrad's interview with Ameduri is 11 minutes long and it was posted at Future Money Trends Internet site last Friday. I thank Chris Powell for wordsmithing 'all of the above'...and this interview is a must watch.
German financial regulator BaFin has started an official investigation of suspected manipulation of benchmark gold and silver prices set by a number of international banks.
The information regarding the investigation was reported by the Wall Street Journal Deutschland. WSJ journalists got an official confirmation from a BaFin spokesman: "Apart from Libor and Euribor, BaFin is also looking into other benchmark setting procedures at individual banks such as for gold and silver prices."
During the last year, the biggest global banks have been found guilty of rigging benchmark lending rates and manipulating the world's interest rates derivatives market, which involves trading in contracts that have a total notional value of tens of trillions of dollars.
This is another story I found embedded in a GATA release yesterday. This one was posted on the voiceofrussia.com Internet site last Friday. The actual headline reads "Germany's Regulators Investigate Manipulation in the Gold Market".
Economist and former banker Alasdair Macleod writes that Middle Eastern oil exporters are likely to turn away from the U.S. dollar and toward Europe and Asia as the United States reduces its purchases of oil from abroad.
Whether those oil exporters put more of their foreign exchange surpluses into gold, Macleod writes, may have as much impact on the gold and currency markets as what China does. His commentary is headlined "Arab Gold" and it's posted at hisfinanceandeconomics.org Internet site. This is another item I found in a GATA release yesterday.
Four Gulf Cooperation Council countries will announce the introduction of a common currency by the end of December, a Bahraini daily reported on Sunday.
The common currency to be announced by Bahrain, Kuwait, Qatar, and Saudi Arabia will be pegged to the dollar, a source told the Akhbar Al Khaleej newspaper.
"The decision to peg the Gulf currency to the dollar is political and is not related to the economy," the source said.
"From an economic point of view, it would have been better to peg the new currency to a basket of currencies because the volume of trade of the Gulf states with the countries of the European Union is much larger than that of their commerce with the United States. Gulf exports of oil to the European Union are estimated to constitute about 70 per cent of European imports," the source said.
This story was posted on the gulfnews.com Internet site on Sunday...and is another article I found over at the gata.orgwebsite on Sunday.
Peter Munk built Barrick Gold Corp. into the world’s largest gold producer by expanding into Africa and South America. Now former Goldman Sachs Group Inc. President John Thornton is betting on China to help revive the beleaguered company’s fortunes.
Thornton, 59, currently co-chairman, already helps to oversee long-term corporate strategy. As part of that remit, he’s trying to establish partnerships with Chinese companies that may include investment in Barrick and future mining projects, said the people, who asked not to be identified discussing a private matter. China Investment Corp., the country’s largest sovereign wealth fund, is among potential partners Barrick has met with, the people said.
The leadership change at Barrick comes at the end of a difficult year for the company. It has lost 45 percent of its market value in 2013 while debt levels have soared after a slump in gold prices, rising operating expenses and a cost blowout at an $8.5 billion mining project in the Andes.
With a Goldman Sachs guy running Barrick, it's a sure thing that whatever he does won't be in the best interests of its shareholder, or the precious metals they dig out of the ground. This Bloomberg news item was posted on their Internet site yesterday afternoon Denver time.
Noting that the price of gold is starting to fall below the cost of production, Zero Hedge observed last night: "Not even Bernanke, Yellen, or all the paper gold exchange-traded funds in the world will be able to do much to suppress gold prices from reaching their fair value when gold production hits a standstill and when demand, especially by China, is still in the hundreds of tons each year."
The Zero Hedge commentary speculates about the gradual shutdown, company by company, of the gold mining industry as production costs cannot be recovered.
Of course there's no telling when enough of the world outside of a few central banks will wise up to paper gold and when the central banks that have been leasing and swapping their metal surreptitiously for price suppression will run out of metal they're prepared to lose, just as the central banks operating the London Gold Pool reached that threshold in March 1968. The next moment of transition might be many years away, or it could come tomorrow. (Most likely it will be a Sunday night U.S. Eastern time, which is when such things are usually sprung on the world by its unelected rulers.)
What may be most remarkable about the present is the silence of the gold mining industry and its supposed representative, the World Gold Council -- silence that, as the Zero Hedgecommentary suggests, soon may be dead silence. [That applies in spades to the members of The Silver Institute as well. - Ed]
This is another excellent commentary by Chris...and the link to the Zero Hedge piece is embedded. It's a must read for sure.
¤ THE WRAP
I’d peg JPMorgan at 80,000 contracts net long, based upon big net buying in the producer/merchant category of the disaggregated report, which flipped to net long for the first time in my memory. At 80,000 contracts net long, JPMorgan controlled 24.5% of the entire net open interest in Comex gold futures after spreads are deducted from open interest.
Even more shocking is that JPMorgan holds 51.5% of all long gold commercial contracts on the Comex, the largest precious metals exchange in the world. It is not possible that these market shares do not constitute price manipulation. And as extreme as JPMorgan’s gold market corner is, I still get the sense that the bank is holding back a bit in buying more because its market share is so unprecedented. I’d like to see anyone try to defend it in legitimate free market terms. - Silver analyst Ted Butler: 02 December 2013
There's not too much that I can add to what I said at the top of this column regarding yesterday's price activity, as I'm sure you have the routine down pat by now. Here are the six-month charts for both gold and silver showing yesterday's hammering by JPMorgan et al.
None of the four precious metals have taken out their lows of late July from a price perspective, but the shares are certainly at new lows. And as Chris Powell so eloquently put it, the miners would rather go out of business, taking our companies that we own with them, rather than putting up a fight on our behalf. I never thought that we would be betrayed in such a fashion.
How did it come to this?
Can we go lower in price from here? I suppose. It all depends on how much more shorting the technical funds and small traders are prepared to do as "da boyz" engineer prices lower. But as Ted Butler pointed out to his paying subscribers yesterday, there is a limit, it's just that its both unknown and unknowable. But we have to be very close.
However, after yesterday's pounding, it's a good bet that we're either at, or below the numbers posted in the June lows. If we get through today's activity without too much up-side price movement, then we'll have a look at an even more wildly bullish Commitment of Traders Report on Friday, as the cut-off is today at the 1:30 p.m. Comex close.
Not only do we get a COT Report on Friday, we also get the latest Bank Participation Report which strips out the Comex futures positions held by the banks, and for that one day a month JPMorgan stands naked before the world for all but the willfully blind.
The other thing coming down the pipe at 8:30 a.m. EST this Friday is the latest jobs report. Using past history as prologue, it will come as no surprise to anyone if "da boyz" take full advantage of that situation.
And, as always, the question becomes: What do JPMorgan et al do on the next rally, whenever that moment arrives. Of course, with the precious metal prices literally miles below their respective 200-day moving averages, except for palladium, the technical funds and small traders on the short side will not be under much pressure to cover, but there could always be a surprise or two in store.
Very little happened from a price perspective in Far East trading on their Tuesday, and the same can be said now that London has been open for about 35 minutes. Volume is on the lighter side in both metals, and the dollar index is down a hair.
And as I hit the send button on today's efforts at 5:05 a.m. EST, both gold and silver are up a bit from yesterday's New York close. Volumes are still on the lighter side, and the dollar index, which came within an eyelash of the 81.00 mark shortly before 1 p.m. Hong Kong time on their Tuesday, has rolled over a bit, and is now down 14 basis points.
After yesterday's down-side surprise, nothing will shock me too much when I power up my computer later this morning. And as the two Intraday Average Gold/Silver Price Movements charts posted further up make abundantly clear, it's what happens from the Comex open going forward that matters the most, with yesterday's price action being an obvious exception to that rule.