Gold & Silver Daily
 

¤ Yesterday In Gold & Silver

The gold price wandered higher in Far East and early London trading on their Thursday, with the high tick coming about 12:30 p.m. GMT in London.  It was all down hill from there into the low, which came shortly before 4 p.m. EST in electronic trading.  After that, the price didn't do much.

The high and low ticks were recorded by the CME Group as $1,222.90 and $1,205.20 in the April contract.

Gold finished the Thursday session in New York at $1,207.20 spot, down $6.10 from Wednesday's close.  Net volume was nothing special at only 107,000 contracts.

The silver price followed the gold price very closely yesterday, so I shan't add anything to what I've already said about gold.  And it was, like in gold, just another slice---albeit tiny---off the proverbial salami.

The high and low ticks were reported as $16.77 and $16.32 in the March contract.

Silver was closed yesterday at $16.375 spot, down 12 cents on the day.  Net volume was only 24,000 contracts.

The platinum price followed a similar price path to gold and silver, except its low tick came around the London p.m. gold fix.  It rallied five bucks after that, before trading flat for the remainder of the New York session, closing at $1,169 spot---and unchanged on the day.

Palladium chopped around unchanged for almost the entire Thursday session, but the moment the London p.m. gold fix was in, it rallied ten bucks or so before getting capped.  The metal closed at $784 spot, up 9 dollars on the day.

The dollar index closed late on Wednesday afternoon in New York at 94.10---and after dipping below the 94.00 level on a couple of occasions, hit its 93.87 low about 8:30 a.m. in London trading.  At that point 'gentle hands' put in an appearance again---and its 94.44 high tick came around 2:45 p.m. EST.  After that it traded flat.  The index closed at 94.40---and up 30 basis points from Wednesday's close.  Operation "Save the Buck" was successful once again.

Like on Wednesday, the gold stocks opened in the green, but slipped into the red for the last time shortly before 11 a.m. EST---and it was a steady decline after that, with the stock closing just off their lows.  The HUI finished down 2.36 percent, giving up all of Wednesday's gains, plus a bit more.

The silver equities didn't even get a sniff of positive territory on Thursday---and were under water right off the bat---and got sold down hard from there, as Nick Laird's Intraday Silver Sentiment Index got smoked to the tune of 4.12 percent, which certainly was out of all proportion the 12 cent loss in the metal itself.

The CME Daily Delivery Report showed that 81 gold and zero silver contracts were posted for delivery within the COMEX-approved depositories on Monday.  Barclays was the short/issuer on 77 of them---and JPMorgan stopped 78 in its client account.  The link to yesterday's Issuers and Stoppers Report is here.

The CME Preliminary Report for the Thursday trading session showed that gold open interest in February dropped by 4 contracts down to 548 contracts still open, minus the 81 posted for delivery in the previous paragraph.  Silver's February open interest only dropped by 36 contracts---and there are still 20 contracts left open for delivery this month.

Much to my surprise, an authorized participant added 48,002 troy ounces of gold to GLD---and as of 9:17 p.m. EST yesterday evening, there were no reported changes in SLV.

Joshua Gibbons, the "Guru of the SLV Bar List" updated his website with the weekly data from the iShares.com Internet site as of the close of business on Wednesday---and this is what he had to report.  "Analysis of the 18 February 2015 bar list, and comparison to the previous week's list:
No bars were added, removed or had serial number changes.  As of the time that the bar list was produced, it was underallocated 8,640.5 oz.
"

"A 3,971,458.7 oz. deposit on Wednesday is not yet reflected, and should be on next week's list."

"About 2.7M oz. of bars were removed from JPM London V, and a different 2.7M oz. of bars were added to Brinks London in a 'substitution' (that I believe JPM is allowed to do per their contract, but that I believe iShares is not allowed to do)."

There was a tiny sales report from the U.S. Mint.  They sold 25,500 silver eagles---and that was it.

It was a very busy day in gold over at the COMEX-approved depositories on Tuesday, as 80,375.000 troy ounces were reported received---and 64,375 troy ounces were shipped out.  Most of the activity was at Canada's Scotiabank, including the receipt of 2,000 kilobars.  The other receipt was 500 kilobars in JPMorgan's vault.  The link to all the activity is here.

In silver there was 40,038 troy ounces received---and 364,000 ounces were shipped out the door.  The link to that action is here.

The Shanghai Gold Exchange updated their data showing the withdrawals for the week ending Friday, February 13---and it was another big week, as 59.120 tonnes were reported withdrawn.  And here's Nick's most excellent chart showing the update.  Koos Jansen has a story about this linked here, if you can't wait to scroll down to it in the Critical Reads section below.

It will be interesting to see what gold withdrawals are like from the SGE once one we get past the Chinese New Year.

I have the usual number of stories for a week-day column---and I hope you find some of interest.

 

¤ Critical Reads

Stunning Images of the "Siberian Express" FreezeNado

More than 100 million Americans are set to be impacted by the arctic blast known as the "Siberian Express" as record (low) temperatures are being broken across the eastern third of the nation. NBC News reports, Chicago is experiencing its coldest February since 1875 with roads in an "ice skating rink-like condition." From ice geysers to snow-golf and frozen falls, we can only imagine the breath-taking impact this 'polar-vortex'-esque weather will have on U.S. GDP...

The coldest outbreak of the season is pushing south into the eastern United States this week. Temperatures will be running as low as 30 to 40 degrees below normal across the Ohio Valley and Mid-Atlantic on Friday morning. Thursday night’s departure from normal temperatures is shown above in Celsius.

And the forecast for tomorrow is even lower...

This Zero Hedge article that appeared on their Internet site, was sent to me by reader M.A. at 4:55 p.m. EST yesterday afternoon.  The dateline on the article says 9:15 p.m. EST yesterday evening, so it's obviously been edited since it was originally posted.   It's definitely worth reading.  There's also this sensational photo essay posted on the dailymail.co.uk Internet site on Wednesday evening GMT headlined "Niagara Falls has frozen over as extreme winter weather continues across the East Coast"---and the photos are amazing!

Read more...

Thousands rally in Buenos Aires over prosecutor's death

Tens of thousands of people demanding justice marched Wednesday in Buenos Aires to mark a month since the suspicious death of a prosecutor who accused the Argentine president of involvement in a cover-up over a 1994 bombing.

“I am here because I want to see justice done for someone who gave his life for the truth,” said teacher Marta Canepa, 65, among those traipsing the 1.7 kilometres (just over a mile) under the banner “Homage for Prosecutor Alberto Nisman.”

Drenched in driving rain and led by prosecutors and opposition figures, the rally is the first major public show of defiance in a murky case that has ignited a political firestorm in Argentina and piled the pressure on President Cristina Kirchner, 61, in her last year in office.

Nisman was found in his Buenos Aires apartment with a bullet through his head on January 18, the day before he was to go before a congressional hearing to testify that Kirchner and her foreign minister plotted to shield Iranian officials implicated in the 1994 bombing of the AMIA Jewish-Argentine charity federation.

This news item appeared on the france24.com Internet site sometime on Wednesday---and it's the first offering of the day from Roy Stephens.

Read more...

Icelandic Bankers Sentenced to Prison

The Supreme Court of Iceland today upheld prison sentences issued by Reykjavík District Court in December 2013 on four former key executives and majority owners of Kaupþing Bank in the so-called Al-Thani case in what is the heaviest sentence ever given in Iceland for economic fraud, ruv.is reports. The four were charged with market manipulation in relation to Sheik Mohammed Bin Khalifa Al-Thani of Qatar’s acquisition of more than five percent of shares (worth ISK 25.7 billion) in Kaupþing Bank shortly before it collapsed in autumn 2008. 

The case was taken to the Supreme Court after the defendants appealed the Reykjavík District Court’s ruling.

Hreiðar Már Sigurðsson, former CEO of the bank, got the longest sentence at five and a half years, unchanged from the Reykjavík District Court’s ruling. Sigurður Einarsson, former chairman of the board, had his sentence reduced from five years to four while investor, and one of the bank’s biggest shareholders, Ólafur Ólafsson, had his sentence lengthened from 3.5 years to 4.5 years and Magnús Guðmundsson, director of Kaupþing Luxembourg, got 4.5 years instead of 3 years.

Wow!  This brief, but very interesting article showed up on the icelandreview.com Internet site late last week---and I thank Phil Barlett for sharing it with us.

Read more...

Snowden Docs: NSA, GCHQ Hacked Largest SIM Maker to Monitor Your Cellphone

American and British intelligence hacked into the computer network of one of the world’s biggest manufacturers of SIM cards, stealing encryption keys used to protect the privacy of cellphone communications worldwide.

That information is revealed in a 2010 document from British intelligence agency Government Communications Headquarters. The top-secret report is the latest to be leaked by National Security Agency whistleblower Edward Snowden.

The document was made public on journalist Glenn Greenwald’s website, the Intercept. Greenwald has been publishing such documents since Snowden first leaked them in June 2013.

A joint unit of operatives from the NSA and the GCHQ committed the breach, the Intercept reported. The hack gave the agencies the ability to secretly monitor a large portion of the world’s cellular communications, including both voice and data.

This story was posted on the sputniknews.com Internet site at 12:45 a.m. Moscow time on their Friday morning, which was 4:45 p.m. in Washington on Thursday afternoon.  It's the second offering of the day from Roy Stephens.

Read more...

Germany rejects Greek bailout extension request

Germany rejected Greece's 6-month bailout extension request, according to German Finance Ministry spokesman. The two sides have until Friday to agree on a deal, otherwise, Greece runs out of money.

German Finance Ministry spokesman Martin Jaeger told Bloomberg News in an emailed statement that the terms proposed by Greece do not meet the earlier agreed conditions of providing financial aid.

However, the European Commission sees the request as a good omen showing the Greek government’s willingness to reach a compromise on stabilizing the economic situation in the eurozone.

This news item put in an appearance on the Russia Today website at 12:11 a.m. Moscow time on their Thursday morning---and I thank reader "h c" for finding it for us.  A similar story headlined "Greece caves in, Germany plays hardball" appeared on the euobserver.com Internet site at 3:48 p.m. Europe time Thursday afternoon---and it's courtesy of Roy Stephens.

Read more...

Greece Drops Key Bailout Demands, but Germany Still Objects

Greece heads to another round of negotiations Friday after dropping key demands for a bailout settlement, but still faced stiff opposition from lead lender Germany, which criticized Athens' latest proposals as a "Trojan horse" designed to dodge its commitments.

Eurozone finance ministers agreed to hold their third meeting on the Greek debt crisis in just over a week after Athens formally requested a six-month extension of loan agreements with rescue creditors that expire this month.

Going back on recent election campaign pledges, Prime Minister Alexis Tsipras' new left-wing government said it would honor debt obligations and agree to continued supervision from bailout lenders and the European Central Bank.

Late Thursday, Tsipras held telephone conversations with French President Francois Hollande and German Chancellor Angela Merkel after Germany sharply criticized the Greek offer during preparatory talks in Brussels.

This AP story, filed from Athens, was picked up by the abcnews.go.com Internet site at 5:34 p.m. EST on Thursday afternoon---and I thank West Virginia reader Elliot Simon for bringing it to our attention.

Read more...

Central Bankers' Worst Nightmares Are Unfolding in Greece

The situation in Greece boil down to the single most important issue for the financial system, namely collateral.

Modern financial theory dictates that sovereign bonds are the most “risk free” assets in the financial system (equity, municipal bond, corporate bonds, and the like are all below sovereign bonds in terms of risk profile). The reason for this is because it is far more likely for a company to go belly up than a country.

Because of this, the entire Western financial system has sovereign bonds (US Treasuries, German Bunds, Japanese sovereign bonds, etc.) as the senior most asset pledged as collateral for hundreds of trillions of Dollars worth of trades.

Indeed, the global derivatives market is roughly $700 trillion in size. That’s over TEN TIMES the world’s GDP. And sovereign bonds… including even bonds from bankrupt countries such as Greece… are one of, if not the primary collateral underlying all of these trades.

Lost amidst the hub-bub about austerity measures and Debt to GDP ratios for Greece is the real issue that concerns the EU banks and the EU regulators: what happens to the trades that EU banks have made using Greek sovereign bonds as collateral?

This commentary by Phoenix Capital Research appeared on the Zero Hedge website yesterday morning at 10:25 a.m. EST---and it's courtesy of reader M.A.  It's worth your time.

Read more...

Finance ministers in emergency meeting over Greece

Euro zone finance ministers including Michael Noonan travel to Brussels on Friday for an emergency meeting amid mounting uncertainty about the status of Greece’s application for a loan extension.

With Greece’s bailout due to expire at the end of next week, Athens submitted a formal request for a six-month loan extension on Thursday, but this was rejected by Berlin within hours. A German finance ministry spokesman said it was “not a substantial proposal for a solution”.

Greece faces an uphill battle to secure support for its extension request when all 19 euro zone finance ministers, the eurogroup, meet on Friday.

Slovakia became the latest country to voice concerns about concessions to Greece, with prime minister Robert Fico saying he was “calm” about the prospect of a Greek exit from the euro.

This news item was posted on the irishtimes.com Internet site at 1:00 a.m. GMT on their Friday morning---and I thank Roy Stephens for sending it.

Read more...

Ukraine fighting rages despite efforts to revive truce

Renewed fighting has occured in eastern Ukraine despite European efforts to revive a fresh ceasefire, a day after pro-Russian separatists who spurned the truce forced thousands of government troops to withdraw from the strategic town of Debaltseve.

Artillery was still raining down near Debaltseve, a strategic railway hub, on Thursday, and the Ukrainian military said its troops had come under fire elsewhere from rebels.

Western nations have refused to give up on a peace deal negotiated last week even though rebels disavowed it to seize Debaltseve.

Thousands of besieged Ukrainian troops pulled out of the town on Wednesday in one of the worst defeats for the Kiev government of a 10-month war that has killed more than 5,000 people.

I'm not sure whether this is "old news" or not, so we'll see how things shake out over there in the next few days.  The article appeared on the aljazeera.com Internet site at 3:18 a.m. GMT this morning---and once again I thank Roy Stephens for sharing it with us.

Read more...

Debaltsevo fallout in Banderastan: An E.U. Coalition of the Willing?

When I first heard of Poroshenko's latest idea about sending peacekeepers to the Ukraine, I had figured that he was talking about UN peacekeepers, the only ones with any possible legality for such an operation.  Turns out I had "underestimated" Poroshenko.  His idea is even crazier: he wants *E.U.* "peacekeepers"!

Am I the only one who is detecting a distinctly American "handwriting" behind this latest idea?  Look again: the idea is this - first go to the UN and when the Russians and Chinese veto it, then turn to the E.U. and use E.U. states to make a "coalition of the willing".  Why?  Let me spell out the rationale here:

The prime goal of the USA was to get Russia to militarily intervene in the Donbass to trigger a continental war.  Now that this has clearly failed, they want the Europeans to enter the Donbass with exactly the same goal.  Once the EU peacekeepers are deployed, all it would take is a bloody false flag (an artillery strike, or a bomb) killing enough E.U. peacekeepers to raise the immediate need to protect them.  Except that the E.U. does not have any "E.U. armed forces" so can you guess who would be sent it?  Exactly - NATO.

Will the Europeans fall for that?  I doubt it.  Even the Eurocretins seemed to have lost their taste for crazy U.S. Neocon schemes.  Besides, Russia is not Serbia and there is no way the E.U. will bypass the UNSC for a military operation, not without triggering a huge political crisis inside Europe.  To me this latest plans smacks of something McCain and Saakashvili could have cooked up and not something coming out of this White House.  God knows I have no sympathy for the Obama Administration or for the Eurocretins in Brussels, but this latest stunt is dumb even by their standards.

This commentary appeared on the vineyardsaker.blogspot.ca Internet site yesterday sometime---and my thanks go out to Roy S. once again.  It's definitely worth reading.

Read more...

Russia P.M. Medvedev orders commencement of gas deliveries to embattled Donbass

Russia’s prime minister has ordered the Energy Ministry and state-owned corporation Gazprom to prepare for natural gas deliveries to the self-proclaimed Donetsk and Lugansk Republics after the Kiev regime stopped selling fuel to the regions.

There is a problem related to natural gas deliveries, caused by the decision of Ukrainian authorities that has not yet been canceled. The situation is that natural gas is not delivered to a number of settlements,” Dmitry Medvedev told ministers at a cabinet meeting on Thursday.

I would like the Energy Ministry and Gazprom to prepare their suggestions on rendering aid to these regions in the form of natural gas supplies. Of course this will be needed only if Kiev does not take urgent measures to resume gas supplies under the usual scheme."

In any case, people must not freeze there. Prepare the necessary suggestions and report on what is done,” Medvedev said.

This Russia Today story was posted on their website at 1:34 p.m. Moscow time on their Thursday afternoon, which was 5:34 a.m. EST.  It's also courtesy of Roy Stephens.

Read more...

Russia Launches Own 'SWIFT' Service, Links Up 91 Credit Institutions

Almost 91 domestic credit institutions have been incorporated into the new Russian financial system, the analogous of SWIFT, an international banking network.

The new service, will allow Russian banks to communicate seamlessly through the Central Bank of Russia. It should be noted that Russia's Central Bank initiated the development of the country's own messaging system in response to repeated threats voiced by Moscow's Western partners to disconnect Russia from SWIFT.

Joining the global interbank system in 1989, Russia has become one of the most active users of SWIFT globally, sending hundreds of thousands of messages per day. In general, SWIFT provides a secure communication network for more than ten thousands of financial institutions around the world, approving transactions of trillions of US dollars.

This article appeared on the sputniknews.com Internet site a week ago---and it appeared on the Zero Hedge website yesterday, which is where reader M.A. found it.  I thank him for sending it our way.

Read more...

Turkey eyes deal with China on missile defense despite NATO concern

Turkey's defense minister said on Thursday the country does not plan to integrate a new missile defense system with NATO infrastructure and officials said a $3.4 billion deal with China was still under consideration.

NATO member Turkey chose China Precision Machinery Import and Export Corp as a preferred bidder in 2013, prompting U.S. and Western concern about security and the compatibility of the weaponry with NATO systems.

Defense Minister Ismet Yilmaz, in a written response to a parliamentary question, indicated Ankara planned to go ahead with the Chinese system, saying the evaluation of bids had been completed and no new offers received.

I'm sure that the U.S. is underwhelmed by this turn of events.  This Reuters article, filed from Ankara, put in an appearance on their Internet site at 3:25 p.m. EST yesterday---and it's another contribution from reader "h c", for which I thank him.

Read more...

Indian stocks not compelling; crude can jump 15-20%: Marc Faber

The first full-fledged Budget is most likely to announce a slew of reforms, but the key is in implementation and India's bureaucratic red tape serve is an impediment, says Marc Faber, who is the editor and publisher of 'The Gloom, Boom and Doom' report. He said, "I am sure that Narendra Modi would proceed at a much faster pace and implement further reforms if he could."

Faber has been overweight on banks but right now Indian equities do not appear compelling due to steep valuations, he told CNBC-TV18 in an interview. He reminds foreign investment flows has a big role to play in equity market's performance, and right now global investment scenario appears shaky on the back of Chinese slowdown.

Talking about crude, which has seen bit of a pull back in the last few sessions, Faber said there are strong signs that bad days are over for the commodity and prices may rebound 15-20 percent from current levels.

This 9:14 minute video interview [including transcript] with "Dr. Marc" appeared on the moneycontrol.com Internet site at 6:02 p.m. IST on their Wednesday evening---and my thanks go out to Ken Hurt for digging it up for us.  It's rare to see Marc on TV in India---and this interview is worth your while if you have the time.  His comments on the crisis in Greece are right on the money.

Read more...

A "frightening" trend emerging in gold: analyst Doug Pollitt

This must watch 5:11 minute video interview with Doug appeared on the bnn.ca website at 8:10 a.m. EST on Thursday morning---and my thanks go out to Howard Brown for digging it up for us.

Read more...

Barrick Gold Corp suffers monster US$2.8 billion write-down, plans asset sales, layoffs and major debt reduction

Barrick Gold Corp. is putting its Porgera and Cowal operations up for sale and setting a major debt reduction target for 2015 as the company starts to implement a long-discussed strategy to become leaner and less centralized.

The Toronto-based miner also reported a monster fourth quarter loss on Wednesday evening of US$2.85 billion. Barrick took a widely-expected US$930-million write-down on the Lumwana mine (which is poised to close), and an unexpected US$778-million impairment on Cerro Casale, a project that would be tough to justify at current metal prices. There were also write-downs on other assets.

Back in the summer, chairman John Thornton talked about a plan to take Barrick “back to the future” with a leaner model that would empower managers at the mine level. The company provided more details of that plan on Wednesday, noting that it will cut head office jobs by nearly half.

Barrick also said it will continue to repair its balance sheet in the short term, with a plan to reduce net debt by “at least” US$3 billion in 2015. The gold miner acknowledged that it got away from its roots by taking on too much debt in recent years.

It couldn't happen to a finer bunch of crooks.  This Financial Post article showed up on the msn.com Internet site on Wednesday---and I thank Brad Robertson for finding it for us.

Read more...

March date set for gold fix switch

The deadline for the gold fix to enter the digital age is nearing.

The London Bullion Market Association said today that the gold benchmark will be set via an electronic platform managed by ICE Benchmark Administration beginning on March 20.

The new LBMA Gold Price will be set twice daily -- at 10:30 GMT and 15:00 GMT -- in dollars, euros, and sterling. It will replace the current private telephone conference between a group of four banks, the remnants of a cozy system that has existed since 1919.

But nothing will change, as JPMorgan et al will continue to control precious metal prices through their gaming of the COMEX futures market.  And as I said in this space yesterday, until that changes, nothing changes.  This gold-related news item showed up on the wsj.com website at 12:50 p.m. EST yesterday---and I found it embedded in a GATA release.

Read more...

Gold Bars In France Worth $500,000 Robbed From Pensioner By Fake Cops

A curious and sad story broke last night about a pensioner in Paris who had US$500,000 worth of gold bars stolen from his home by con-artists posing as police officers.

The criminals arrived at his home claiming to investigate a gold robbery according to Agence France Presse. The pensioner was asked if he had gold bullion and he told them that he did and allowed them into his home to inspect it.

While one of the robbers distracted the 69-year old with paper work the other stole his gold - 13 bars, each weighing 1 kilogram or 32.15 ounces each with a total value of US$500,000.

The story lacks details but if it proves to be true then it is a cautionary tale for owners of gold who take possession.

This AFP story, which is definitely worth reading, found a home on the goldcore.com Internet site yesterday---and the first reader through the door with it was Norman Willis.

Read more...

Chinese Lunar Year Gold Buying Frenzy Started

Every year around January first, the Chinese ramp up gold buying at the retail level to an unprecedented pace. The Chinese calendar (Lunar Year) is slightly different than the Western (Gregorian) calendar. The Chinese New Year will be celebrated on February 19, 2015, this time to begin the year of the goat. For the occasion the Chinese buy each other gifts, quite often in the form of gold.

We can see elevated gold purchases on wholesale level (SGE withdrawals) of late, rapidly being sold to end consumers in the shops at the moment. China Gate News Channel reported on January 3rd a “stampede phenomenon” in a shopping mall in Beijing, were gold was sold at a rate of 400,000 yuan per minute.

400,000 yuan per minute means it’s likely more than 0.6 metric tonnes of gold is sold per day in just one shopping mall in Beijing. How many of these shopping malls are there across China? I wish I knew.

This commentary by Koos Jansen appeared on the bullionstar.com Internet site way back on January 9---and I don't know how I missed it.  It certainly falls into the absolute must read category.

Read more...

SGE Withdrawals 59 Tonnes in Week 6---YTD 374 Tonnes: Chinese Gold Soap Opera Extended Another Season

The latest numbers from the Shanghai Gold Exchange (SGE) shows that a little over 59 tonnes have been withdrawn from the vaults in week 6 of 2015, down 0.35 % week over week. SGE withdrawals, which are often used as a proxy for Chinese wholesale gold demand, account for an amazing 374 tonnes year to date, up 17 % y/y.

Corrected by the volume traded on the Shanghai International Gold Exchange (SGEI), withdrawals in week 6 were at least 51 tonnes. Year to date withdrawals corrected by SGEI volume were at least 333 tonnes.

I can’t prove it at this stage, but I think domestic withdrawals are more likely to be 374 tonnes year to date than 333 tonnes. The Chinese import huge amounts of gold which obviously is not going through the SGEI. In addition, it seems unlikely every trade on the SGEI is withdrawn from the vaults in the Shanghai Free Trade Zone to be exported. The SGEI is not yet the place to buy gold.

This must read commentary by Koos Jansen showed up on the bullionstar.com Internet site yesterday---and it's a story I found on the gata.org Internet site.  As I mentioned further up in today's column, it will be interesting to see what withdrawals are like from the SGE once the Chinese New Year fades in the rear view mirror.

Read more...

Lawrence Williams: Copper and gold -- parallels in massive supply deficit scenarios

I have just written an article for Mineweb covering a prediction that global copper supply is heading for a very large deficit – perhaps as much as 1.5 million tonnes by 2018.  (See: Copper heading for 1.5 million tonne deficit by 2018).  I have also penned an article on what I see as a looming gold supply deficit (indeed it may actually be with us already) on these pages (See: 2015 global gold supply deficit could be substantial).

There are some interesting parallels between the two articles with one particular factor standing out – notably Chinese demand.  In terms of copper the current weak copper price is largely because there has been something of a hiatus in Chinese copper purchases in line with something of a downturn in the Chinese economic growth.  Note this is not a recession in the economy, but a downturn in the levels of growth seen in the recent past.  The Chinese economy still seems to be growing, but at a slower rate.  The analyst bandwagon has seized on the slowdown as showing that the supercycle, primarily generated by Chinese demand for industrial metals of all kinds, has thus ended.  The copper article stems from analysis by senior Bernstein analyst, Paul Gait, that in fact the Chinese generated supercycle is only around one-third into its course and the Asian dragon still has a huge amount of  ground to make up on  all other industrialised nations in terms of per capita metal consumption.

With exploration curtailed, and nowadays huge lead times in taking a major new mine from discovery to production (figures of 30 years are being quoted) the world is facing a major copper shortage in the years ahead.

Gold is running into a very similar situation on the supply side.  We may well have seen peak gold last year as low gold prices are already leading to new project cancellations and curtailments, closures of uneconomic operations and a big downturn in exploration expenditures.  Coupled with older mines running out of ore and declining grades at other older operations it is beginning to look like this is the year global new mined gold production may be about to start to fall.

Alas, the copper price is another one that the Big 8 traders are in full control of.  But the situation is reversed in this metal vs. the precious metals, as the Commercial traders are massively long the COMEX futures market in copper.  This commentary by Lawrie makes it three must reads in a row---and I found this on his website  late yesterday evening Denver time.

Read more...

 

¤ The Funnies

Besides the Painted Desert and the Petrified Forest, the other reason I stopped in Winslow, Arizona was to see one of the natural wonders of the world that I'd read about, and seen photos of since I was a kid---and that was the famous meteor crater, or Barringer crater, just west of town.  When I got there, I found out that it was a major tourist attraction, but very tastefully done.  Here are three photos which---individually and collectively---don't do it justice.  The last photo shows the crater rim along with the surrounding countryside, so you can get the "lay of the land" so to speak.  Don't forget about the "click to enlarge" feature.

Here's what Niagara Falls looked like yesterday as the deep freeze in eastern North American grinds on.

The agreement with Sumitomo on the Fourth of July project is a great compliment to our recent agreement with Newmont Mining on the Wood Hills South project. We also have the Arabia, Golden Shears and some generative efforts being funded through our joint venture business model. We have enough capital in the bank to last two more years and no debt. The share structure remains at 33.5 million fully diluted. We are very well positioned to have a major win with an incredible share structure.

Renaissance Gold has proven through the joint venture business model what exploration success with a tight share structure can do. Renaissance is the spinout of AuEx Ventures that sold in 2010 and made just shy of 100x their first private placement. It takes technical strength and fiscal conservatism to generate meaningful share holder returns in the high risk exploration business. Please visit our website for more information.

 

¤ The Wrap

If I’m reasonably close on my guesstimates, we’re probably past the halfway mark in undoing the commercial build up in total shorts since late December in gold and may be coming close to that in silver. But considering that gold rallied about $125 from late December to the recent highs and has now given up $100 of the rally (at the lows on Wednesday), this has been a particularly successful commercial rig job so far. In silver, at the lows earlier today, close to $2 of the $2.80 rally was wiped out. Certainly, all the commercial contracts bought back recently were bought at lower prices than previously sold – that’s the essence of the rig job.

If I had to speculate, I would guess that the big commercials will look to engineer prices lower in order to buy more gold and silver short contracts back, but the exact timing and precise short-term price direction is always unknowable. If it wasn’t the most important influence on current prices, I would be reluctant to speak of the COT at all because it might cause a long term silver investor to abandon positions. Even though the COT market structure isn’t bullishly configured, that doesn’t rule out the possibility of sharp rallies, particularly after the recent sharp declines. But barring something out of the blue and non-COT related, it’s hard to bet on the crooked commercials not prevailing as they usually do. - Silver analyst Ted Butler: 18 February 2015

Another day---and another tiny slice off the gold and silver salamis.  Both metals were up until about thirty minutes after the noon London silver fix---and that was all she wrote, as "da boyz" in New York squashed the budding rallies in both metals.

Here are the 6-month charts for both gold and silver updated with yesterday's price/volume data.  The salami slices are more than obvious here.

But as I said yesterday, we could get some sort of counter-trend rally out of this, but I'm firmly of the belief that JPMorgan et al will want to cover as many of their current short positions as they can, so there's still more pain to the downside yet to come.

As I write this paragraph, the London open is about an hour away.  Gold and silver have crawled  a bit higher in Far East trading, but platinum and palladium aren't doing a thing.   Net gold volume is actually under 6,000 contracts.  A lower number I've never seen at this time of day.  Silver's net volume is only 2,100 contracts.  It's not even this quiet between Christmas and New Years!  The dollar index isn't doing much either---and is currently up 4 basis points.

Today we get the latest Commitment of Traders  Report for positions held at the close of COMEX trading on Tuesday---and as Ted and I have both mentioned, we're expecting big things from it.  But whatever the numbers are, I'll have all the details for you in tomorrow's column.

And as I hit the 'send' button on today's effort at 4:50 a.m. EST, I see that all four precious metals began to head lower the moment I wrote the previous paragraph an hour before the London open---and all are down below their Thursday afternoon closes in New York.   Platinum is down the most, followed by gold.  Net gold volume has blossomed to almost 14,000 contracts, more than double what it was almost three hours ago, but still very light volume.  Silver's net volume is now a hair over 4,000 contracts.  The dollar index is now up 24 basis points.  For the moment, things are unfolding as I expected they might---and it only remains to be seen if this price trend continues for the remainder of the day.

Before heading off to bed, I'd like to point out one last time that this is the final day to join Casey's Club, as this will probably be our only opening for the rest of 2015.

All of our markets have taken a beating of late, but that’s not the time to back away.  On the contrary, it means many incredible companies are extremely undervalued and selling for a fraction of their worth. This is a great time to buy into the right junior resource stocks at bargain prices---and we’re opening Casey’s Club with a special report that outlines our top 11 undervalued companies to get started with. Membership in Casey’s Club gives members access to all the sectors we cover and they’ll get updates on these 11 companies, as well as others, as the markets do begin to recover and prices go up.

It costs absolutely nothing to check this out, dear reader, which you can do so by clicking here.

Enjoy your weekend, or what's left of it---and I'll see you here tomorrow.

Ed Steer