The gold price didn't do much of anything in Far East trading on their Tuesday. However, about an hour or so before the London open, a smallish rally began that ended in a melt-up at 1 p.m. GMT in London, 20 minutes before the Comex open.
The volume associated with that vertical price spike was enough to trip the CME's circuit breakers for ten seconds, and after that gold continued to rally, albeit at a somewhat slower pace. The gold price [along with the price of the other three metals] got capped at the 9:30 a.m. EST open of the New York equity markets, and then edged slightly lower as the trading day wore down.
The CME recorded the low and high price ticks as $1,237.40 and $1,267.50 in the February contract.
The gold price closed in New York at $1,262.00 spot, up $21.60 from Monday's close. The net volume of 153,000 contracts wasn't overly heavy, but it wasn't exactly light, either.
The silver price action was a carbon copy of the gold price action, so there's no need to provide any further commentary.
The CME's low and high for silver were $19.74 and $20.43 in the March contract. I was happy to see the $20 spot price ceiling finally get left in the dust, and I hope it's for good.
Silver closed at $20.43 spot, which was up 59 cents from Monday. Net volume was pretty heavy at 55,500 contracts.
The platinum price action was somewhat similar to gold and silver's, and it was obvious that there was a "Do not Pass the $741 spot price" sign out for the palladium price, at least looking at the Kitco chart. And after getting sold down hard starting at 9:30 a.m. in New York, palladium barely made it back into positive territory. Here are the charts.
The dollar index closed in New York late Monday afternoon at 80.16--and when it opened in Far East trading on their Tuesday morning, didn't do much until about half-past lunchtime in London. Then it broke through the 80.00 mark to the downside in very short order, hitting its 79.88 low at 10 a.m. EST right on the button. The index rallied weakly into the close from that point onward. The index finished at 79.98--which was down 18 basis points from it's close on Monday.
The gold stocks gapped up a bit over 3 percent at the open, and edged up to their respective highs a few minutes after 12 o'clock noon EST. From there, the stocks gave up about a percent going into the close. The HUI finished up a very respectable 4.23%.
With some minor differences, the silver equities followed their golden brethren very closely, and Nick Laird's Intraday Silver Sentiment Index closed up 4.48%.
The CME's Daily Delivery Report showed that 414 gold and 93 silver contracts were posted for delivery on Thursday within the Comex-approved depositories. The two largest short/issuers were UBS, and JPMorgan Chase out of its client account. They issued 150 and 250 contracts respectively. And, not surprisingly, it was JPMorgan Chase in its in-house [proprietary] trading account that scooped up 401 contracts as the largest long/stopper by far. This is the second time in the December delivery month that JPM was actively trading against its own clients' best interests--giving one set of investment advice to them, but knowing that it was going to do precisely the opposite as a company.
In silver, there were quite a few short/issuers, but the biggest one was HSBC USA with 37 contracts. JPMorgan and Canada's Bank of Nova Scotia stopped 63 and 18 contracts respectively.
The link to yesterday's Issuers and Stoppers Report is here and, like Tuesday report, it's also worth a look.
There were no reported changes in GLD on Tuesday, but a big chunk of silver was withdrawn from SLV by an authorized participant, as 3,081,085 troy ounces were shipped off for parts unknown. Judging by the price action over the last five or six business days, it's my guess that it had nothing to do with the price activity--and everything to do with the fact that someone needed their silver more desperately in another location.
The U.S. Mint had a sales report yesterday, as they sold 3,500 troy ounces of gold eagles and 222,000 silver eagles.
There was very little activity in gold over at the Comex-approved depositories on Monday. Nothing was reported received, and a tiny 225 troy ounces were reported shipped out. The link to that 'activity' is here.
Of course it was an entirely different story in silver, as 655,584 troy ounces were reported received, and a smallish 27,111 troy ounces were shipped out the door. All the receipts were at the CNT Depository. The link to that action is here.
Silver analyst Ted Butler allowed me to take four full paragraphs out of his weekly commentary to his paying subscribers on Saturday, as he had a few things to say about JPMorgan's grotesque long position in the Comex futures market as brought to light by last weeks Bank Participation Report. Rather than use it as a big quote in The Wrap, I thought I'd post in here.
"The big surprise to me was in the Bank Participation Report on gold. I’ve been dithering the last few weeks trying to pinpoint JPMorgan’s long market corner in gold, varying between 70,000 to 80,000 contracts. My last guess was 80,000 contracts and, I was even expecting more privately. Unless JPMorgan has figured a way to put long gold contracts in a foreign subsidiary, the new BPR indicates the bank holds no more than 70,000 long gold contracts as of Tuesday. True, 10,000 contracts are only 12.5% off my 80,000 contract guess, but there was something else that jumped out at me.
"Since Oct 29, the commercials have purchased almost 85,000 net contracts on the $130 gold price decline, thanks largely to net selling by the technical funds of a near identical 88,000 net contracts. Yet over that same period, JPMorgan actually reduced its long market corner in gold by 5,000 contracts to 70,000 contracts. Let me state it a different way; Over a 5 week period in which the gold price was rigged $130 lower (by the commercials) and in which the commercials absolutely gorged themselves in buying 85,000 net contracts from technical funds, the largest gold long in Comex history didn’t buy a single contract and, in fact, sold 5,000 contracts. Huh?
"To my mind, JPMorgan could and should have bought 20,000 to 30,000 gold contracts on the engineered price drop. Easily. Instead, it didn’t buy any, even though it is taking 95% of December gold deliveries. When something occurs that is this outside expectations, it is natural to ask why. JPMorgan has accounted for more than 75% of the 200,000 gold contracts bought by the commercials over the past year. Why would they not buy more during the super-attractive buying circumstances over the past month? I think the correct answer to this question could be the key.
"I can’t help but believe that the reason JPMorgan didn’t join in on the commercial buying festival is because its long market corner in gold had become too well known. I can’t know if the pressure not to add to JPM’s gold market corner came from regulators, the exchange or from within the bank itself; but something prevented JPM from adding when it was most advantageous for them to add long positions. Since I discovered the gold market corner in the first place and have been shouting about it from the hilltops, it’s possible the sending of my articles to JPMorgan actually woke them up.
I have the usual number of stories for a mid-week column, and the final edit is all yours.
U.S. banks will no longer be able to make big trading bets with their own money after regulators on Tuesday finalized the Volcker rule and shut down what was a hugely profitable business for Wall Street before the credit crisis.
After struggling for more than two years to craft the complex rule, five regulatory agencies signed off on the nearly 900-page reform that included new tough sections narrowing carve-outs for legitimate trades.
In the final wording, banks could still engage in market-making and take on positions to help clients trade but their inventories should not exceed "the reasonably expected near-term demands of customers," the regulators said.
Regulators also extended the deadline by which banks have to fully comply with the new regulations by one year to July 2015, a widely expected move after they repeatedly missed deadlines for the rule. Further delays were also possible, the regulators said in the text of the rule.
So, what have we got in the end, dear reader? Beats me, but from what I've read in the above four paragraphs I've cut and paste from this Reuters story, I could drive a Greyhound bus through it. For the moment, it appears that it's "business as usual" for JPMorgan, HSBC USA and Citigroup. I thank Manitoba reader Ulrike Marx for today's first story.
Five federal agencies on Tuesday issued final rules developed jointly to implement section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Volcker Rule”).
The final rules prohibit insured depository institutions and companies affiliated with insured depository institutions (“banking entities”) from engaging in short-term proprietary trading of certain securities, derivatives, commodity futures and options on these instruments, for their own account. The final rules also impose limits on banking entities’ investments in, and other relationships with, hedge funds or private equity funds.
Like the Dodd-Frank Act, the final rules provide exemptions for certain activities, including market making, underwriting, hedging, trading in government obligations, insurance company activities, and organizing and offering hedge funds or private equity funds. The final rules also clarify that certain activities are not prohibited, including acting as agent, broker, or custodian.
This is part of the short press release that as posted on the cftc.gov Internet site yesterday...and I thank Ted Butler for sending it along.
A certain amount of fatalism always seems to creep in whenever the government promises a new fix for something perceived to be ailing the financial system and capital markets. Back in 2002, when Congress passed the Sarbanes-Oxley Act, the big problem was the auditing profession, which had been exposed as an oxymoron by Enron Corp. and other corporate frauds. Today the hot topic is the banking industry and the matter of proprietary trading, the definition of which is evolving.
After Sarbanes-Oxley was adopted, the Securities and Exchange Commission and a new regulator, the Public Company Accounting Oversight Board, passed a bunch of rules on everything from new audit reports on companies' internal accounting controls to new restrictions on the types of non-audit services that firms could sell to audit clients. It would be hard to make the case today that audit quality has improved.
Now comes the Volcker rule from the SEC and four other federal regulatory agencies, acting in response to instructions by Congress in the Dodd-Frank Act. (That would be the 2010 law that promised to end too-big-to-fail and didn't.) The Volcker rule promises to end proprietary trading by federally insured banks, except in those instances when it doesn't. And there's some merit to having a ban: Lots of people dislike the idea of banks gambling with federally insured customer deposits, because they might blow themselves up and either cause damage to others or require a taxpayer bailout.
This short op-ed piece by Jonathan was posted on the Bloomberg website early yesterday morning EST...and it's worth reading. I thank Ulrike Marx for her second offering in today's column.
J.P. Morgan Chase & Co. has applied for a patent for a digital-payment network that would allow for anonymous payments like the virtual currency bitcoin, according to a patent application dated Nov. 28. The application was first highlighted by Let's Talk Bitcoin.
"Embodiments of the invention include a method and system for conducting financial transactions over a payment network," the application said. "The method further includes freely publishing the payment address and making it available to users of an internet portal or search engine." A J.P. Morgan media contact didn't immediately respond to an emailed request for comment.
These two paragraphs are all there is to this marketwatch.com story from early yesterday afternoon EST...and it's courtesy of reader "Andres A".
The current malaise of news, data, and spin is "meaningless," David Stockman tells Bloomberg's Tom Keene, adding that markets are exhibiting "the kind of speculative froth you get at the top of a cycle where valuation loses any anchor in the real world; from earnings or the prospects of the economy."
As he argued before, "owning stocks here is very dangerous," and despite Keene's best efforts to denigrate Stockman's "of course it's a bubble," perspective; the former inside-man exposes the hard mathematical truths of valuations, performance, and reality in this brief clip. Who is to blame - The Fed or Wall Street? "It is a question of who has taken whom hostage," Stockman concludes ominously, "it's a co-dependency...it's very dangerous."
This short Zero Hedge story from early Monday evening has the 1:43 minute Bloomberg clip embedded in it...and I thank reader "G. Roberts" for bringing it to our attention.
When the BIS’s Claudio Borrio warns about the return of “search for yield”, everyone should sit up and take notice.
The BIS’s latest quarterly review points out that yield compression is back with a vengeance, and in some respects is actually now worse than it was in the lead-up to the crisis. With interest rates at rock bottom, lenders are again throwing caution to the wind, and investing indiscriminately. There was a brief return to saner conditions last summer when the Fed suggested it might end quantitative easing, but the consequent widening of spreads was viewed as so alarming by policymakers that the threat was soon withdrawn, and now we are back to where we were.
Unconventional monetary policy is meant to work on the “hair of the dog that bit you” principle. By fighting a crisis caused by too much money with yet more money, the central bank hopes to restore the economy to a “normally” functioning machine, at which point saner voices are meant to take over and a more sustainable form of growth establishes itself.
Unfortunately, the near free money environment has gone on for much longer than anyone anticipated. What’s more, we seem quite incapable of easing ourselves off the life support.
This commentary by Jeremy Warner, who is sounding an awful lot like Doug Noland, was posted on the telegraph.co.uk Internet site early Monday evening GMT...and it's the first offering of the day from Roy Stephens. It's definitely worth reading.
The International Monetary Fund has poured cold water over claims that the eurozone is safely recovering, calling on the European Central Bank to take pre-emptive action to alleviate the credit crunch for small business and head off the risk of deflation.
Christine Lagarde, the IMF's managing director, said it is "premature to declare victory", warning that EU governments may have to ditch austerity policies and switch to fiscal stimulus to kick-start growth and avert lasting damage to the underlying economy.
"Looking past the headlines, there are clearly signs that not all is well," she told a forum in Brussels, highlighting the risk of a "vicious cycle" in which depressed demand and stagnant investment feed on each other.
The warning came as fresh data showed Greece's recovery may be stalling again, with mounting risks of a relapse into recession over the winter. The Greek statistics office said industrial output had fallen 5.2pc in October, a sharp deterioration from minus 1.3pc in September.
Here's a commentary from Ambrose Evans-Pritchard that was posted on The Telegraph's website yesterday afternoon GMT. It's another contribution from Roy Stephens, for which I thank him, and it's definitely worth reading as well.
Authorities around the world are taking action against large banks for questionable practices including collusion and rate manipulation, but the power of these financial institutions continues to grow. Germany's Deutsche Bank in particular finds itself under fire.
Government agencies around the globe are taking an aggressive approach toward the financial industry. In London regulators are investigating banks that allegedly manipulated the price of gold. In Brussels the European Commission has slapped financial institutions with billions in penalties for rigging key interest rates.
A handful of financial companies dominate the trading of currencies, natural resources and interest-rate products. Although millions of investors and companies participate in these deals, buy and sell, hedge their bets and speculate, these transactions are handled by an exclusive club of global institutions like Deutsche Bank, J.P. Morgan or Goldman Sachs. These are also the financial giants that determine the reference rates that serve as a benchmark for deals worth trillions.
The main profiteers of these deals write important rules of the game themselves -- and the events of recent weeks have shown that they often abuse their power in the process.
This 2-page must read essay was posted on the German website spiegel.de during the lunch hour in Europe yesterday...and it's another offering from Roy Stephens.
Anti-government protesters in Ukraine calling for the government to step down are working from a playbook, following to the letter a manual for regime change through popular revolutions, said RT political analyst and columnist, Nebojsa Malic.
RT: Is there any chance of a compromise between the government and the opposition at this point?
Nebojsa Malic: The opposition has said that it doesn’t want any compromise, that it is not interested in anything short of a regime change. But the thing we have to keep in mind is that this is being played straight out of a playbook. This is following a script and the opposition’s activities are generally geared to create as much unrest and show as possible. But there is very little substance behind both their demands and their posturing.
We have evidence today that repeated reports of an incoming crackdown failed to materialize, not because there was supposed to be any sort of crackdown, but because that’s how they keep the people wound up.
This news item was posted on the Russia Today website early yesterday afternoon Moscow time...and once again I thank Roy Stephens for sending it our way. It's required reading for all students of the New Great Game.
Russia will create forces in the Arctic in 2014 to ensure military security and protect the country’s national interests in the region, which President Vladimir Putin has named among the government’s top priorities.
Russia is returning to the Arctic and “intensifying the development of this promising region” so it needs to “have all the levers for the protection of its security and national interests,” Putin said on Tuesday at an expanded meeting of the Defense Ministry Board.
He ordered the ministry to complete the formation of new military units and infrastructure in the Arctic next year.
This is another Roy Stephens contribution from the Russia Today website. This story was posted on their Internet site yesterday afternoon Moscow time.
It's been a source of endless fascination to follow the game of geopolitical Go being played since China declared an air defense identification zone (ADIZ) in the East China Sea.
The spin in the United States is relentless; this was no less than "saber-rattling", a "bellicose" posture and a unilateral "provocation". The meeting last week between Chinese President Xi Jinping and US Vice-President Joe Biden in Beijing may have done nothing to dispel it.
This is what the White House says Xi and Biden talked about; Beijing did not release a transcript. In the hysteria front, this op-ed in the Financial Times - reflecting a warped consensus in the City of London - even managed to crank it up to pre-World War II levels.
The whole drama is far from being just about a few islets and rocks that China calls Diaoyu and Japan Senkaku, or the crucial access to the precious waters that surround them, harboring untold riches in oil and natural gas; it concerns no less than the future of China as a sea power rivaling the US.
This essay by Pepe that was posted on the Asia Times website yesterday. It's certainly worth reading for all students of the New Great Game...and I thank Roy Stephens for finding it for us. It's his last contribution to today's column.
1. James Turk: "Metals War Rages and Today's Rally in Gold and Silver". 2. Dr. Marc Faber: "The Asset Class Hated Even More Than Gold and Silver". 3. William Kaye: "Absolutely Stunning Developments in the War on Gold". 4. The audio interview is with Dr. Marc Faber.
[Please direct any questions or comments about what is said in these interviews by either Eric King or his guests, to them, and not to me. Thank you. - Ed]
Gold and silver are extending yesterday's gains as US markets awake this morning. The crack higher at around 8:07ET caused the futures market to be halted after 3,000 Gold Futures contracts traded in one second at 08:07:45 on December 10, 2013 sending the price up $10 and tripping circuit breakers for 10 seconds.
This sort of thing is happening far too often: see also the drops on April 12, 2013, September 12, 2013, October 11, 2013, November 20, 2013 and November 25, 2013 which also resulted in trading halts.
That's about all there is to this Zero Hedge piece from early yesterday morning...but the charts and graphs are worth looking at. I thank Ulrike Marx for sharing it with us.
Gold production by U.S. mines dropped 5% in September, compared to 20,400 kg (655,875 troy ounces) of output reported in August 2013.
U.S. gold mine production was down slightly in September with 19,300 kilograms (620,509 troy ounces) of production compared to 19,600 kg (630,154 oz) for September of 2012, says the U.S. Geological Survey.
The state of Nevada led U.S. gold output in September with 14,500 kg (466,185 oz) of production, followed by Alaska at 2,680 kg (86,164 oz) and other states at 2,170 kg (69,797 oz).
This short news item was posted on the mineweb.com Internet site earlier this morning...and I found it there just before I hit the send button on today's column.
In my column last Friday, I posted a very excellent article by Alex Stanczyk with the above headline...and it's linked here.
Since then, the audio interview from which the above story was transcribed, is now available. It was posted on the physicalgoldfund.com Internet site yesterday...and it runs for just under 19 minutes.
I thank reader Harold Jacobsen for bringing it to our attention.
Pitting monetary philosopher Jean-Baptiste Say against the economist John Maynard Keynes, GoldMoney research director Alasdair Macleod predicts that Say will be vindicated, insofar as economics and economies will continue, if inconveniently, when those in charge of money manage to destroy it.
This short essay by Alasdair was posted on the goldmoney.com Internet site on Monday...and is worth reading. I found it embedded in a GATA release yesterday.
The Finance Ministry in a written reply addressed to the lower house of the Indian Parliament has clarified that the government has never banned gold coin sales by banks in the country.
Towards end-November, the All India Gems and Jewellery Trade Federation allowed its members to sell gold coins of smaller denominations. The relaxation of the self-imposed ban saw coins of 2 gram, 3 gram and 5 gram flocking at jewellery outlets.
In was in the midst of renewed coin sales by jewellers that the Deputy Minister of Finance Namo Narain Meena clarified the government’s standpoint on the matter. According to him, the government has not officially put any ban on gold coin sales by jewellers or banks.
This story, filed from Mumbai, was posted on the scrapmonster.com Internet site early yesterday morning IST. A bit is lost in the translation, but it's worth skimming nonetheless. My thanks go out to Ulrike Marx for bringing this article to our attention.
Despite pleas from government to lower gold purchases in a bid to bring down the current account deficit, India's politicians appear to have been soaking up significant quantities of the precious metal.
Though gold appears to have lost its glimmer across global markets, the frenzy at which Indian politicians have been buying gold over the past few years has been laid bare with elections around the corner in India.
As is the practice, candidates standing for election as well as those belonging to political parties have to submit affidavits declaring all their assets - and gold has tumbled out of many closets.
This interesting read, filed from Mumbai as well, was posted on the mineweb.com Internet site yesterday...and I thank Ulrike Marx for her final contribution to today's column.
L: That's interesting. But I'm not sure gold bugs would find this to be bad news. The thing they're afraid to hear is that the market has peaked already—that the $1,900 nominal price peak in 2011 was the top, and that it's downhill for the next two decades. To hear you say that there is a basis in more than one type of analysis for arguing that we're still in the middle of the bull cycle—and that it should go upwards over the next 10 years—that's actually quite welcome.
Petrov: Yes, it's great news. But we're still not going to get to the Mania Phase for at least another two, but more likely four to six years from now.
Now, we should clarify what we mean by the Mania Phase. Last time, it was the 1979 to early 1980 period. It's the last phase of the cycle when the price goes parabolic. Past cycles show that the Mania Phase is typically 10% or 15% of the total cycle. So it's important to pick the proper dates for defining a gold bull market. I prefer to date the previous one from 1966 as the beginning of the market, to January of 1980 as the top of the cycle. That means that the previous bull market lasted 14 years, and it's fair to say that the Mania Phase lasted about 18 months, or just under 15% of the cycle.
So I expect the Mania Phase for the current bull cycle to last about two to three years, and it's many years yet until we reach it.
This longish interview features Professor Krassimir Petrov...and Casey Research's Louis James...and was posted on the CR website very early yesterday morning EST. Needless to say, I agree with very little that the good professor has to say, as the precious metal prices are 100 percent controlled by JPMorgan et al in the Comex futures market...and it's entirely up to them as to how high and how fast precious metal prices are allowed to rise; and when it will all begin. I'll let you be judge and jury on this one.
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It wasn't too hard to spot the moment that JPMorgan et al showed up in the precious metal market yesterday in New York, as they all got capped and began to slide lower at exactly 9:30 a.m. EST. It's hard to believe that they could be this blatant, but they are, and obviously don't care, as there are no adults [CFTC] in charge anymore, and this new Volcker Rule doesn't kick in for another 18 months or so, if then.
As I mentioned in yesterday's column, Tuesday was the cut-off for this Friday's Commitment of Traders Report, and I must admit that after yesterday's price action, I'm not optimistic about what it's going to show.
I would suspect, because of their long-side gold corner in the Comex futures market, that JPMorgan et al has been selling long positions at a profit over the last couple of days in order to cap the price.
In silver, it's obviously different, as JPMorgan still has a [much-diminished, but still market-controlling] short-side corner in the Comex silver market. And as Ted Butler keeps pointing out, correctly I might add, it's whether or not JPMorgan piles back in on the short side that will determine the fate of the current rally in that precious metal. However, there's no doubt in my mind that the raptors [the small commercial traders other than the 'Big 8'] will be selling part of their grotesque long position and taking profits as this rally unfolds and the technical funds look to cover their record short position. But in the end, the how far, fast and high the silver price rises, rests solely with JPMorgan's conduct going forward.
I guess I should just wait until I actually see the COT Report on Friday before I trash it, but I was just thinking out loud in the last few paragraphs.
By the way, in case you missed it, I posted a 4-paragraph quote from Ted Butler just above the Critical Reads section in today's column. If you didn't read it, I urge you to do so.
There was very little price activity in either gold or silver during the Far East trading day on their Wednesday, and this price pattern is continuing now that London has been open for an hour. All four precious metals are a bit lower than they were at the New York close yesterday, but volume levels are pretty light, so I wouldn't think it wise to read too much into them. The dollar index is trading in a very tight range either side of the 80.00 mark.
And as I send today's missive off to Stowe, Vermont at 5:15 a.m. EST, I note that all four precious metals have ticked up in price, volumes are still relatively light, and the dollar index isn't doing much either.
That's all I have for today, which wasn't a lot.
I hope your Wednesday goes/went well for you, depending where on Planet Earth you live, and I'll see you here tomorrow.