Friday, May 30, 2014

Gold Report May 30 , 2014 --Falling gold prices lead to highest chinese demand since February...........Alasdair Macleod examines " gold fixing "........... Ed Steer's usual collection of News , data and views touching on gold and the precious metals ...... additional itms of note after " The Wrap "


Chinese Weekly Gold Demand Highest Since Late February, 787 MT YTD

In week 21 (May 19 – 23) Chinese wholesale gold demand, measured by SGE withdrawals, was 36.4 metric tonnes, up 22.98 % from the week before. This is the highest weekly demand since week 9 (February 24 -28). 36.4 tonnes is just shy of the year to date weekly average of 37.5 tonnes. Chinese gold demand has been down in recent weeks from extremely strong in the first 9 weeks of 2014 to less strong in the last 12 weeks.

Shanghai Gold Exchange withdrawals only 2014 week 21

The insight SGE withdrawals give us has again been confirmed by the latest trade data from Hong Kong and Switzerland. Net export of both counties to China mainland in April was down from the previous month. Hong Kong net exported 65.4 tonnes to the mainland in April, down from 85.1 tonnes in March, Switzerland net exported 12 tonnes to the mainland in April, down from 26 tonnes in March. These numbers were expected as they match SGE monthly withdrawal numbers. SGE withdrawals in April were 130 tonnes, down from 147 tonnes in March.

In April the mainland was supplied by 77.4 tonnes from Hong Kong and Switzerland, 33 tonnes came from domestic mining and an additional 19.6 tonnes of supply came from scrap and/or import from other countries. Note, there can be gold en route from being imported till its sold on the SGE and not all gold supplied to the SGE will be withdrawn from the vaults, some members/individuals hold it in their SGE account.

SGE vs COMEX ™ April 2014

Silver withdrawals are unfortunately not published by the SGE, though it wouldn’t be that interesting as gold withdrawals. The Chinese silver market is not constructed as the gold market, hence silver withdrawals wouldn’t inform us about Chinese total silver demand. However, in week 21, we can see that the premium of spot silver on the SGE was still trading at more than 5 % above the international price, measured by the Ag(T+D) contract.

SGE silver premium

On the Shanghai Futures Exchange most silver contracts were trading in backwardation on May 30. This is the curve:

SHFE silver backwardation may 30, 2014


Overview Shanghai Gold Exchange data 2014 week 21

- 36.4 metric tonnes withdrawn in week 21 (19-5-2014/23-5-2014)
- w/w + 22.98 %
- 787 metric tonnes withdrawn year to date.

My research indicates that SGE withdrawals equal Chinese wholesale gold demand. For more information readthis.

Shanghai Gold Exchange withdrawals 2014 week 21

This is a screen shot from the weekly Chinese SGE trade report; the second number from the left (blue – 本周交割量) is weekly gold withdrawn from the vaults in Kg, the second number from the right (green – 累计交割量) is the total YTD.

SGE withdrawals week 21 2014

This chart shows SGE gold premiums based on data from the SGE weekly reports (it’s the difference between the SGE gold price in yuan and the international gold price in yuan).

Shanghai Gold Exchange gold premium

Below is a screen shot of the premium section of the SGE weekly report; the first column is the date, the third is the international gold price in yuan, the fourth is the SGE price in yuan, and the last is the difference.

Schermafbeelding 2014-05-30 om 14.49.06

In Gold We Trust

Gold Money.....

Gold in a fix

Last week the UK's Financial Conduct Authority fined Barclays for rigging the gold price at a gold fix for the disadvantage of a customer and the benefit of the bank's book. This news could not come at a worse time for the London Bullion Market and the London Gold Market Fixing Limited, the company directly responsible for the twice-daily fix. It may well lead to the end of the gold fix, the silver fix already being axed in August.

The fix is a process by which the four fixing members match their orders at an agreed price. The London bullion market is over-the-counter without the formal price records of a regulated market. The fix is therefore a needed reference price, and its status and the liquidity that follows have been central to London being the world's major bullion dealing centre.
There are two problems with the fix. The first is it potentially distorts the market by delaying pre-fix business and bringing post-fix business forward. The second is that customers have to trust the fixing banks, who are also dealing for themselves into the fix. And this is what tripped up Barclays.
Outside the fix it should be reasonably clear to clients whether a bank is operating as principal or agent. During the fix roles can become opaque, and unscrupulous dealers can find ways to game the system. Claims that the Barclays case was an isolated instance may be true, but indications that the FCA is treating this as a one-off and not investigating other banks may be ultimately damaging to the market's reputation. Then there are the separate circumstances of Deutsche Bank's resignation of its fixing seats on both gold and silver.
Last December Deutsche Bank was instructed by the German banking regulator, BaFin, to hand over documents in connection with its enquiry into gold and silver price fixing. Four weeks later the bank announced it was resigning its seats on the gold and silver fixes. While it is premature to positively link the resignations with BaFin's enquiry, the coincidence raises the possibility that banks which have settled with regulators over accusations of fixing LIBOR may have a case to answer in precious metals as well. Interestingly, there are no buyers for Deutsche's seats, suggesting legal and compliance officers at other bullion banks also have doubts about the fixing process.
To give this topic further context it should be noted that London has seen some unusual price movements in the past. The table below shows the profits generated by shorting one ounce of gold on the morning fix and buying it back at the afternoon fix every day for the eleven years 2000-2010, covering most of the largest bull market in the LBMA's history.
Sale of 1 ounce of gold at AM fix for USD and closing purchase at PM fix
This phenomenon was first drawn to public attention a few years ago by an American analyst, Adrian Douglas. In every year this short trade would have been profitable, despite a rise in the gold price from $282.05 to $1405.50 in December 2010, a rise of 400%. This extraordinary price behaviour was confined to London trading hours.
So hard statistics tell us gold has been behaving unusually in London hours for a considerable time. The LBMA is not a regulated market, but derivatives and share prices based on precious metals are, so regulators have a duty to be interested. The FCA should broaden its investigations accordingly, but whether it does or not it is hard to see how the twice-daily gold fix can survive.



The gold price did little of anything during most of the Far East trading session on their Thursday.  Then shortly after 2 p.m. Hong Kong time, an HFT-type dropped the price by about seven bucks.  The low of the day came shortly after the London open---and from there it traded flat until 10 minutes before the 8:20 a.m. EDT New York open.  The rally that began at that juncture got capped moments after London closed at 11 a.m. EDT---and just as it was about to break above its Wednesday closing price.  From its high at that point, the gold price got sold down until noon EDT---and from there it traded ruler flat into the 5:15 p.m. close of electronic trading.
The high and low ticks, such as they were, were reported by the CME Group as $1260.60---and $1,250.90 in the June contract.
Gold closed in New York yesterday at $1,255.90 spot, down another $2.70 on the day.  Volume, net of May, was very decent at 146,000 contracts as June goes off the board.
Silver had a very similar chart pattern, with the only real difference being the timing of the low price tick.  This was set about 10 minutes before the Comex open---and at that point silver and gold rallied together until minutes after the London close, when silver met the same fate as gold.  After that, it traded flat for the remainder of the Thursday session in New York.
The high and low ticks were recorded as $19.095 and $18.78 in the July contract.
The silver price finished the Thursday trading session at $19.04 spot, up 1.5 cents on the day.  I wonder if some trader somewhere got a special prize for closing the Tuesday, Wednesday and Thursday sessions within a 2 cent range?  Just asking.  Gross volume was a chunky 53,000 contracts, with 8,000 contracts of that amount trading in the September and December delivery months.
Platinum and palladium didn't do a lot, or weren't allowed to do a lot---you choose.  Here are the charts.
The effects of the strikes at the platinum and palladium producers in South Africa certainly isn't being allowed to show up in the prices of these two 'precious' metals.
The dollar index close at 80.56 late on Wednesday afternoon in New York---and from the Thursday open, it chopped and flopped a hair lower, finishing the Thursday session at 80.56---down 6 basis points.


The CME Daily Delivery Report showed the last of the deliveries for May, as 2 silver contracts were posted for delivery by HSBC USA.  They were stopped by the CME Group once again---and then the 10 bars that comprised those two contracts were used to delivery against the 10 contracts that stood for delivery in the silver mini-futures market---the 1,000 ounce bar contract.
The First Day Notice for delivery into the June gold contract proved to a surprise, as there was just one short/issuer---and that was Canada's Bank of Nova Scotia, with only 65 contracts.  Morgan Stanley stopped 30 of them---and there were a dozen other long/stoppers that each took a couple of contracts of what was left.  In silver, there were 9 silver contracts issued---and that was it.  I certainly was expecting a bigger gold number than that.  There were platinum an palladium deliveries as well---and the Issuers and Stoppers Report is definitely worth a look---and the link is here.
There were no changes in GLD yesterday---and as of 10:01 p.m. EST yesterday evening, there were no reported changes in SLV, either.
Joshua Gibbons, the "Guru of the SLV Bar List", updated his website yesterday with the latest bar movements inside SLV for their reporting week, which was Wednesday---and this is what he had to say. "Analysis of the 28 May 2014 bar list, and comparison to the previous week's list: 1,152,824.1 troy ounces were removed (all from Brinks London). No bars were added or had a serial number change.  The bars removed were from Johnson Matthey (0.4M oz), Noranda (0.1 M oz), Handy Harman (0.1M oz), KCM (0.1M oz), and 24 others.
As of the time that the bar list was produced, it was overallocated 192.5oz.  All daily changes are reflected on the bar list. The mix of bars removed was similar to those removed on May 14."
The link to Joshua's website is here.
There was no sales report from the U.S. Mint yesterday.
And much to my amazement, there was no in/out movement in either gold or silver within the Comex-approved depositories on Wednesday.  I can't remember the last time that happened.


News and views ....

Bill King: All markets now are rigged by central banks and all prices are artificial

"Only the most obstinate academics and permabulls won't admit that the capital markets are rigged and that prices, particularly bonds, are artificial. Unless you are forced to play, most people will avoid the bond and stock markets because prices are rigged.
As bonds and stocks inflate, even traders are withdrawing from the markets because, as we keep warning, stocks could blow out to the upside in a euphoric rush or they could crater as intervention wanes and/or reality is introduced.
The stock market activity over the past two months should alarm any rational trader or investor. Several times over the past two months major stock indices suffered frightening technical damage but were quickly rescued by determined buying.
Bonds, of course, are the in the mother of bubbles, a rigged market by desperate sovereigns and central banks that are joined at the hip in the quest to keep the modern welfare state and crony capitalism afloat."
The above commentary from Bill King, plus a bit more, appeared directly below the above Bloomberg story in yesterday's edition of the King Report.  It easily falls into the absolute must read category.

Bond Surge Worldwide Drives Index Yield to One-Year Low

A worldwide bond-market surge pushed yields to the lowest levels in a year on growing evidence central banks can keep stimulating economic growth without igniting inflation.
Treasury 10-year note yields fell to the least since June. A rally yesterday drove the yield on the Bloomberg Global Developed Sovereign Bond Index to 1.28 percent, the lowest since May 2013. Australia’s 10-year yield dropped to an 11-month low, Japan’s slid to the least in 12 months, while European bond yields were close to the lowest since the formation of the region’s shared currency. The U.S. sold $29 billion of seven-year notes at the lowest yield since October.
The U.S. economy contracted 1 percent in the first quarter, the Commerce Department said. Fixed-income securities rallied yesterday in the wake of a report showing German unemployment unexpectedly rose in May.
This is another Bloomberg new item filed from New York.  This one was posted on their website at 3:51 p.m. EDT on Thursday---and it's the second offering in a row from Elliot Simon.

Drugs and prostitution to be included in U.K. national accounts

George Osborne famously declared "we are all in this together" when it comes to Britain's prosperity. The Office for National Statistics has now taken him at his word, adding up the contribution made by prostitutes and drug dealers.
For the first time official statisticians are measuring the value to the UK economy of sex work and drug dealing – and they have discovered these unsavoury hidden-economy trades make roughly the same contribution as farming – and only slightly less than book and newspaper publishers added together.
Illegal drugs and prostitution boosted the economy by £9.7bn – equal to 0.7% of gross domestic product – in 2009, according to the ONS's first official estimate.
A breakdown of the data shows sex work generated £5.3bn for the economy that year, with another £4.4bn lift from a combination of cannabis, heroin, powder cocaine, crack cocaine, ecstasy and amphetamines.
If it's good enough for the Italians, it should be good enough for the Brits as well.  This story showed up on theguardian.comInternet site Thursday evening BST---and it's the first contribution of the day from South African reader B.V.

Major metals exchanges vie for London Silver Fix 2.0

Major metal exchanges emerged as contenders in developing an alternative to the London silver price benchmark, or "fix", after the century-old system for setting the globally recognised price is disbanded in August.
The Chicago Mercantile Exchange (CME) and the London Metal Exchange (LME) both said on Thursday they were working with the London Bullion Market Association (LBMA) and the precious metals industry to find an electronic-based solution.
"We are working closely with the precious metals industry and the LBMA to reduce market disruption by helping to find a robust transaction-based way to set the daily spot price, so the markets can continue to work efficiently and seamlessly," Harriet Hunnable, CME managing director of metals products, said in a statement.
This is all bulls hit, of course.  No fix is needed.  There are no fixes in any other commodities other than the precious metals.  The fix is just another tool that is used to manage precious metal prices.  This Reuters story ended up on the mineweb.comInternet site yesterday---and I thank Ulrike Marx for sending it our way.

Lawrence Williams: China and India consuming more gold than the world mines

In opening last week’s precious metals forum in London, Bloomberg Industries Global Head of Metals and Mining, Ken Hoffman, kicked off with some of the latest stats which showed that China and India between them are consuming more gold than the world is actually mining. The Bloomberg figures suggested that China was consuming gold at a rate of 5.15 million ounces a month and India - even at a reduced rate through import restrictions - 2.85 million ounces a month, making a total of 8 million ounces a month. And these figures may even understate the case given the Bloomberg figures for China are based on gold imports through Hong Kong and China’s own production, whereas gold is also imported through other points of entry.
Meanwhile Bloomberg calculates global new mined gold output at some 7.44 million ounces a month making for a deficit of 0.56 million ounces a month.
Now the above figures would have been prepared before the latest April figures for China’s gold imports from Hong Kong showing a fall both month on month and year on year – although following exceptionally strong January and February figures.
This commentary by Lawrie was posted on the mineweb.comInternet site early this morning BST---and it certainly falls into the must read category.  I thank Ulrike Marx for her final contribution to today's column.


Tuesday’s high volume sell-off in gold and silver looks to be, once again, an exclusive COMEX production, namely, a deliberate price rigging lower by the commercials for the intent of generating technical fund selling (for the purpose of permitting commercial buying). There’s little question that the technical funds were the big sellers in COMEX gold and silver---and that the commercials were the big buyers, as there has never been a large price decline in which the technical funds haven’t sold, or in which the commercials haven’t bought. The only question is how much technical fund selling and commercial buying occurred.
I would guess that there was a reduction in the total net commercial short position of at least 20,000 contracts in gold---and as much as 4000 contracts in COMEX silver futures as a result of Tuesday’s action. However, since Tuesday was the cut-off for the COT report, there is some question as to whether the CFTC will report the data in Friday’s release in a timely manner. But more important than what the report may reveal on a timely basis, is what actually occurred. - Silver analyst Ted Butler: 28 May 2014
I have no further comments to make on yesterday's price action other than the ones I made at the top of this column.  It was the last day for all traders to roll out of the June contract, or stand for delivery---and that pretty much consumed the whole trading session.  But I did note the fact that silver was taken below the $19 spot price mark with some authority---and there certainly wasn't anything free market about that.  It's just unfortunate that Thursday's trading data won't be in today's Commitment of Traders Report, although JPMorgan et al couldn't have got much with silver being all sold out to the downside already.
Here are the 6-month charts for both gold and silver.  Gold is well and truly into oversold territory---and silver is as well although, as I said yesterday, the RSI trace doesn't indicate that.
As I type this paragraph, London has been open just about 10 minutes.  Gold rallied about five bucks in the early going in Far East trading, but that didn't last---and the price is up a few dollars as of 8 a.m. BST in London.  Silver was under a bit of selling pressure right up until the London open---and at the moment its unchanged from its Thursday close in New York.  Platinum is up 9 bucks---and palladium is flat.  Net volume in gold is pretty light---and virtually all of it is now in the new front month, which is August.  Silver's volume is nothing special.  The dollar index is down a handful of basis points.
Today we get the new Commitment of Traders Report for positions held at the close of Comex trading on Tuesday.  As Ted Butler pointed out in the quote posted above, the big question that awaits an answer is whether or not all the trading data from Tuesday's engineered price declines in both gold and silver on options expiry day, will be in this report or not.  If it is, it will be a blockbuster---but if it isn't, there won't be much to see.
And as I prepare to send today's column into cyberspace, I note that the HFT boyz showed up at 9 a.m. BST and took back what little gains any of the precious metals had up until that point---and all are now back below their Thursday closing prices in New York.  Volumes in both gold and silver are nothing special---and the dollar index hasn't changed much since the London open two hours ago.
Today is Friday---and the last trading day of May.  As I said in yesterday's missive, I had no idea of the price action during the last two trading days of the month---and I still don't.  I can't see any justification for JPMorgan et al to pound the crap out of them again today, but you just never know.
As I mentioned earlier in The Wrap further up, I'm off to Vancouver for the Cambridge Investment Conference later today---and both my Saturday and Tuesday columns---which I write while I'm "on the road"---are going to be as short as I can make them, as I have other things on my plate while I'm there.
I hope you have a good weekend---or enjoy what's left of it, if you live west of the International Date Line---and I'll see here tomorrow.


Eurasian Economic Union Agreement Signed

As I have reported on April 24, the members of the Eurasian Economic Space, Russia, Belarus and Kazakhstan, back then were accelerating the forming of the Eurasian Economic Union. A union that can be compared to the European Union. Today President of Russia Vladimir Putin, President of Kazakhstan Nursultan Nazarbayev and President of Belarus Alexander Lukashenko signed the Agreement on the Eurasian Economic Union in Astana, the capital of Kazakhstan, where the Supreme Eurasian Economic Council met.

Signing of Agreement Eurasian Economic Union, Russia, Belarus, Kazakhstan
Signing of Agreement Eurasian Economic Union, Russia, Belarus, Kazakhstan

The agreement is based on norms of the contractual legal framework of the Eurasian Customs Union and Common Economic Space (those were prior stages of Eurasian cooperation), which were optimized, improved and brought into compliance with the rules of the World Trade Organisation, according to The three nations will allow the free movement of goods, services, capital and labour and work on further coordinated policy in with regard to energy, industry, agriculture and transport. From Putin’s speech today (III):

Our meeting today is a truly milestone event. Russia, Belarus and Kazakhstan are signing the Agreement on the Eurasian Economic Council. This document will take our countries to a completely new integration level, fully retaining their national sovereignty, but providing for closer and better-coordinated economic cooperation.

Today, we are creating together a powerful and attractive economic development centre, a major regional market uniting over 170 million people. Our Union has immense natural resources, including energy resources. It accounts for 20 percent of the global natural gas reserves and 15 percent of oil reserves. At the same time, the three states have a developed industrial base, vast labour resources, and a powerful intellectual and cultural potential.

Our geographic location makes it possible to create transportation and logistics routes of not only regional, but also global significance and attract large-scale trade from Europe and Asia. All this is the basis for the competitiveness of our union, for its dynamic development in this rapidly changing and complicated world.

I would like to stress that the Eurasian Economic Union will operate based on universal, transparent and clear principles. This includes the norms and principles of the WTO.

For the future, we have set ourselves the goal of creating a common financial market. The absence of barriers in the flow of capital will make it possible to diversify risks and improve the quality, accessibility and reliability of financial services.

Stage-by-stage harmonisation of the currency policy will serve to enhance the stability of the financial systems of the Union member states and will make the national money markets more predictable and better protected from exchange rate fluctuations, and will enhance our sovereignty as well.

Of course, we touched upon the issue of expanding membership in the Eurasian Union, as Mr Nazarbayev already mentioned, and we have considered the draft agreement with Armenia. This document should be approved and signed shortly. Armenia would like to have this done in June. Overall, we all agreed. We expect that shortly after the Union is set up, Armenia will become its full-fledged member.

We also discussed the prospects for other partners joining the Union, primarily Kyrgyzstan. We have just had a detailed discussion with the President of Kyrgyzstan. I believe chances are high, though there is still a lot of work to be done to draft the relevant documents. We are ready to help, and Kyrgyzstan has every chance of joining the Union soon.


We agreed to step up our negotiations, as I already said, with Vietnam on creating a free trade zone, to strengthen cooperation with the People’s Republic of China, specifically in the exchange of customs information on goods and services, and to form expert groups that would work out preferential trade regimes with Israel and India.

I am convinced that through joint efforts we will be able to create favourable conditions for the development of our economies in order to maintain stability, security and prosperity in Eurasia.

Eurasian Economic Union

it’s only matter of time before more countries will join the EEU. On the joint currency Altyn that is supposed to be introduced in the EEU, according to Russian media in April, nothing was said.

Putin and Nazarbayev additionally signed of a number of documents on the supply of oil, the use of subsoil resources at the Kharasan-1, Akdala and South Inkai fields, and cooperation in alternative energy and rare-earth metals mining.

Putin and Nazarbayev
Putin and Nazarbayev

The EEU is another clear example of increasing cooperation on the Asian continent and the formation of power blocks, underlining the descent of the US as the world superpower. A few examples of  developments in previous months:

- Russia closed an energy deal with China worth $400 billion, amongst 40 other business contracts
- China, Russia, Iran and 21 other countries bolstered cooperation to promote peace, security and stability
- China heavily invested in infrastructure in West Asia and Africa
- China and Russia held a massive naval drill in the East China Sea
- China openly called for de-Americanization of the world

In Gold We Trust

Constant intervention hints at likelihood of U.S. economic collapse, Sperandeo says

9p ET Thursday, May 29, 2014
Dear Friend of GATA and Gold:
Constant intervention in U.S. markets by the Federal Reserve indicates that the country's economy is in serious danger of collapse, Victor "Trader Vic" Sperandeo tells King World News tonight. Sperandeo, president and CEO of Alpha Financial Technologies in Southlake, Texas, says, "Every time there is negative news, the Fed comes in, via the banks, and manipulates the stock market higher to keep the appearance of strength.... The U.S. economy must be in grave danger of collapsing. This is why the Fed does not dare allow the stock market to sell off."
Sperandeo's interview is excerpted at the KWN blog here:
Meanwhile mining entrepreneur Keith Barron tells KWN that economic desperation is worsening in Europe and that gold exports are declining because much gold already has been sold to keep its owners afloat:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

TF Metals Report: Another review of GOFO and the gold price

11:30a ET Thursday, May 28, 2014
Dear Friend of GATA and Gold:
The TF Metals Report's Turd Ferguson today elaborates on his research about gold forward offered interest rates, confirming that negative rates signifying tightness of metal supply have become normal after 24 years of being exceedingly rare. Ferguson concludes:
"I remain convinced that the 'new normal' of negative GOFO is, in fact, symptomatic of extreme physical tightness and empty vaults in London. Knowing this and the clear correlation of GOFO with price, you should adjust your trading strategies accordingly. For those of us who are stacking only, persistently negative GOFO is just another clue that the end of the fractional-reserve bullion banking system is near. Whether or not that 'end' comes in 2014 or 2015 matters little. It is coming, regardless, and we should continue to look at these manipulated and suppressed prices as one last gift from the soulless central bankers who have plundered our national treasure and set our posterity on a course of permanent debt enslavement."
Ferguson's commentary is headlined "Another Review of GOFO and Gold Price" and it's posted at the TF Metals Report's Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.