Commentary for Thursday, April 23, 2015 ( www.golddealer.com) – Gold closed up $7.50 today on the Comex at $1194.40 in what I call ho-hum trading and is now around 3 week lows so there is not much enthusiasm in the precious metals market.
Look at the Gold Exchange Traded Funds: Total as of 4-15-15 was 52,017,908. That number this week (4-22-15) was 52,244,163 ounces so over the last week we gained 226,255 ounces of gold. The all-time record high for all gold ETF’s was 85,112,855 ounces in 2013. The record high for Gold ETF’s in 2015 is 53,901,867 and the record low for 2015 is 51,057,082.
It’s easy to see on the short term ETF physical gold holdings have moved higher – the broader picture tells a different tale. Compare the most current number (52,244,163 ounces) with the highest ETF level we have seen in 2015 (53,901,867 ounces). Our net position for 2015 is moving in the wrong direction even though we had a surge in prices early in the year.
Let’s also look at the close today ($1194.40) and compare it to gold’s moving averages – 50 DMA ($1194.00) – 100 DMA ($1212.00) – 200 DMA ($1225.00). We are under the 100 and 200 DMA’s but right at the 50 DMA so while things are not looking good technically it’s not the end of the world and we are still waiting to see how physical demand from India and China will shake out while waiting on Europe and the results of their quantitative easing program.
Here are the trading volume numbers for the last five days for the June Gold Contract, from the Chicago Mercantile Exchange: Thursday 4/16 (264,688) – Friday 4/17 (264,542) – Monday 4/20 (265,080) – Tuesday 4/21 (261,646) – Wednesday 4/22 (266,726). These numbers remain consistently high so there is plenty of action in both directions.
Gold was modestly higher today also because the dollar dipped in early trading. The Dollar Index range was 97.31 through 98.43 – as of this writing we are 97.46 so somewhat weaker probably selling off over Wall Street’s weaker earnings.
This latest bump to the upside does not look like bargain hunting to me but there could be some short covering here as some reports seem to indicate the physical gold market in India is picking up during this current festival season.
And I also think the DOW should be watched more carefully. Three or four days ago there was a selloff in the index which pushed the DOW to the 17,800 mark – since then it has recovered and is strong on either side of 18,000. That is not gold’s only trouble – the NASDAQ is hot moving above the 5000 mark – a high point which has not been seen since the year 2000. And the Japanese Nikkei is just has hot – rising to its highest level in 15 years and once again above 20,000. All of the above creates “hot” action for loose speculative money which now is not available in gold trading circles.
Silver closed up $0.03 at $15.82. I am still waiting for that rush in across the counter silver bullion business because prices have dipped. I will let you know if the bus shows up.
Platinum closed up $6.00 at $1136.00 and palladium was up $14.00 at $769.00. This might be interesting to platinum bullion players – the premium on the US American Platinum Eagle 1 oz coin is now all over the place. The usual scenario was as follows – the US Mint is not currently producing the American 1 oz Platinum Eagle – they claim because demand is soft. Other equally good platinum bullion coins, while not overly plentiful are available with some patience. Because the US market likes US Mint products the premium on the US American Platinum Eagle creeps higher to almost $200.00 over spot.
Then in one day premiums on this coin drop like a rock – down more than $100.00 – so what gives? Either a large quantity of coins have hit the market (unlikely because there were never enough platinum Eagles to go around) or there is a rumor among dealers that the US Mint is going to one again begin production.
This from David Stockman – This Is Nuts – $5.3 Trillion of Government Bonds Now Have Negative Yields – The level of complacency in world financial markets is downright astounding – even stupid. Today there are two more signs of extreme mania – a brokerage firm calculation that there are now $5.3 trillion of government bonds trading at negative yields and the cross-over of eurolibor into the nether world of negative yields, as well.
These deformations cannot be explained with reference to macroeconomic conditions—–such as weak growth or a temporary spot of minimal CPI gains. Instead, they are the destructive work of central banks and a few hundred monetary mandarins who have literally usurped control of the entire world economy.
And they have done it through a deft maneuver. That is, by disabling the pricing system in financial markets entirely and displacing market forces with central command and control in the form of pegged money market rates, manipulated yield curves, invitations to speculators to front-run massive central bank bond buying programs and both implied and explicit promises that rising risk asset prices will be favored and facilitated at all hazards.
All of this monetary mayhem is being done in the name of an astoundingly primitive Keynesian premise. Namely, that there is insufficient “aggregate demand” in the world and too little inflation in consumer goods and services as measured by the CPI and other consumption deflators; and that these insufficiencies can be magically remedied by ZIRP, massive government debt monetization and the rest of the easy money tool kit .
How? Why by inducing businesses and households to borrow more and spend more when they are otherwise not inclined to spend income they don’t have; and to rid them of a purported reluctance to spend even what they can afford because the price of toilet paper, tonic water, TVs and trips to the mall may be going down tomorrow.
Here’s the thing. Both of these alleged barriers to spending are postulates of Keynesian economic models, not conditions extant in the real world. Upwards of 85% of US households, for example, are not borrowing because they are already tapped out and trapped in “peak debt”. Even the borrowing rebound that has happened since the 2008 crisis has occurred for reasons that are irrelevant to the central bankers’ Keynesian predicate.
The only debt that has surged in traditional recovery cycle fashion is student debt and auto paper. The former has nothing to do with ZIRP or any other Fed machination. As a practical matter, the $1.3 trillion of student loans outstanding represent the largesse of the state, not the workings of the credit markets – since the entire mountain of student debt is either government funded or guaranteed and there is no credit analysis whatsoever.
In fact, 45% of student debt outstanding is in non-payment status, meaning that it functions as a cash stipend. Moreover, nearly one-third of the loans which are in payment status – that is, owed by borrowers who have run out of ways to prolong their “student” status – are delinquent. That the tens of millions of former student debt serfs can’t and won’t pay will become a huge political issue and social policy questions, but it has nothing to do with the machinations emanating from the Eccles Building.
The surge of auto loans – more than 30% of which are subprime – is consequent to Fed policy, but not in a good way. Through massive and sustained financial repression, the Fed and other central banks have produced a mindless and almost panicked stampede to “yield” among bond managers and homegamers alike.
This has generated a 40% gain in outstanding auto paper – from $700 billion at the post-recession bottom to nearly $1 trillion at present – but, again, none of it is based on credit analysis in the traditional sense. The entire boom in auto paper is being sold to yield starved investors based on temporarily low default rates and exaggerated collateral values for the new and used cars being hocked. The latter assume, however, that there will never be another recession or that when interest rates eventually normalize that there will be enough new credit extension to support prices for the massive tranches of used vehicles which will be coming off leases and loans after 2015.
That is never going to pan out. There will be another subprime loan collapse – this time in the auto market. And, in any event, the whole credit channel of monetary policy transmission is broken and done owing to peak debt. The central banks are just mechanically and blindly pushing on a string of monetary expansion that is levitating not the main street economy but only financial asset prices in the canyons of Wall Street.
Likewise, there is not a shred of evidence that consumers are hoarding cash and waiting for plummeting prices in order to spend themselves silly. The fact is, 50% of US households have no savings at all and live hand-to-mouth, paying the lowest prices they can find at the moment; and another 35% are spending what they can afford and need without regard to phony policy metrics like the PCE deflator less food and energy.
For crying out loud, the whole idea of hoarding among the 85% of households not invested in the casino is just plain implausible. In pretending they are attacking the phony scourge of “deflation” and “low-flation”, therefore, the central bankers are either engaging in a deliberate ruse or they have fallen victim to ritual incantation.
The real victim, of course, is the world’s financial system and economy. The central banks have now succeeded in generating a planet wide mania. Since the turn of the century that have expanded their collective balance sheets from $2 trillion to $22 trillion, causing the greatest falsification of financial prices in recorded history.
This has made cowards and crooks out of the political class and reckless gamblers out of the financial class. That’s the real meaning of the absurd position that banks with spare cash must pay another bank to assume their excess monetary digits or that governments should be paid for the privilege of issuing debt that they can never repay.
In short, the financial system has gone nuts owing to the destructive domination of central banks and the tiny posse of Keynesian academics and apparatchiks which run them. Self-evidently, the power intoxicated central bankers of the world have no intention of stopping – meaning that only an eventual thundering crash of the system will bring their madness to an end.”
The walk-in cash trade was slow and we had to check to see if we paid the phone bill – that’s how quiet the phones were for most of the day. There is no buzz out there and our generally higher Activity Scale is a matter of a few very large orders not a general trend relative to the average American investor.
The GoldDealer.com Unscientific Activity Scale is a “ 4” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Friday – 2) (Monday – 3) (Tuesday – 5) (Wednesday – 5). The scale (1 through 10) is a reliable way to understand our volume numbers. The Activity Scale is weighted and is not necessarily real time – meaning we could be busy and see a low number – or be slow and see a high number. This is true because of the way our computer runs what we call the “book”.
Our “activity” is better understood from a wider point of view. If the numbers are generally increasing – it would indicate things are busier – decreasing numbers over a longer period would indicate volume is moving lower.
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