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Ted Butler: Market Dominance

Ted Butler: Market Dominance


There was a tiny rally in gold during morning trading in the Far East on their Friday, but starting around 2:00 p.m. in Hong Kong, the gold price began to develop its usual negative bias.  That ended at the beginning of Comex trading...and the sUBSequent rally got cut off at the London p.m. gold fix.

Then at 10:45 a.m. EDT, the high-frequency traders showed up...and fifteen minutes later, the gold price was down another fifteen bucks.  The low tick [$1,311.70 spot] came at precisely 11:00 a.m. in New York...and from there the gold price rallied quietly until 3:00 p.m. in the electronic market, when the price popped up over ten bucks in short order before trading quietly into the the close from 3:30 p.m. onwards.

The gold price finished the day at $1,333.80 spot...down 30 cents from Thursday's close.  Volume, net of roll-overs was very light...around 88,000 contracts.  But gross volume was monstrous.

Here's the New York Spot Gold [Bid] chart on its own...and the fifteen minutes downward  price 'adjustment' between 10:45 and 11:00 a.m. EDT is more than obvious.

It was very much the same price pattern in silver, except the 10:45 to 11:00 a.m. EDT price adjustment was even more noticeable...and the sUBSequent rally didn't get silver back to anywhere near it's Thursday closing price.

Silver closed the Friday session at $19.99 spot...down 26 cents on the day.  Gross volume was very decent...around 43,000 contracts.  Net volume wasn't much below that.

Here's the New York Spot Silver [Bid] chart...complete with the fifteen minute price 'adjustment'.

Platinum and palladium did not escape yesterday's sell-off...although their respective price 'adjustments' came at slightly different times.

The dollar index closed late on Thursday afternoon in New York at 81.77...and when trading resumed in the Far East on their Friday morning, it spent the rest of the day chopping every-so-slightly lower...closing at 81.66...down 11 basis points.  Nothing to see here.

It should be obvious to anyone but the willfully blind, that yesterday's price action in all four precious metals had nothing whatsoever to do with the goings-on inside the currency markets.

Not surprisingly, the gold stocks spent most of the day in negative territory...but popped into winning territory on the back of the surprise gold price rally late in the electronic trading session.  The HUI finished up 1.29%.

The silver stocks weren't as fortunate...and Nick Laird's Intraday Silver Sentiment Index closed down 0.53%.

(Click on image to enlarge)

The CME's Daily Delivery Report showed that 45 gold and 30 silver contracts were posted for delivery on Tuesday.  In gold it was Barclays as the only short/issuer...and the Bank of Nova Scotia as the only long stopper.  In silver, it was the same story as it has been all month...the short/issuer was JPMorgan out of its client account, with 24 contracts....and JPMorgan was the big long/stopper with 22 contracts out of its in-house [proprietary] trading account.  The link to yesterday's Issuers and Stoppers Report is here.

For a change, nothing happened in the GLD ETF yesterday...and an authorized participant withdrew a smallish 289,388 troy ounces out of SLV.

For the fourth day in a row,  there was no sales report from the U.S. Mint.

Over at the Comex-approved depositories in silver on Thursday...nothing was reported received, but 298,624 troy ounces were shipped out the door.  The link to that activity is here.

In gold, they reported receiving 32,137 troy ounces...and only shipped out a tiny 230 troy ounces.  The link to that activity is here.

The Commitment of Traders Report was a bit of a surprise in silver, as the Commercial net short position in that metal actually declined by 6.04 million ounces....and now sits at 60.7 million ounces in total.  Based on the price action during the reporting week, an increase appeared certain.  Ted Butler says that although this headline number looks great...under the hood, it wasn't quite as rosy.

In gold, the Commercial net short position increased by a healthy 1.0 million troy ounces...and the total Commercial net short position now stands at 3.47 million ounces.  Once again Ted mentioned that digger deeper into the numbers showed that the deterioration was a bit worse than even this number indicates.

So far, this rally off the lows in both metals has been very orderly.  I was hoping for disorderly, but up to this point, it hasn't happened.

There was a very interesting Reuters story out yesterday that really caught my eye...and here, in part, is what had to say..."Russia, Ukraine. and Azerbaijan are among eight countries that increased their gold holdings in June, data from the International Monetary Fund shows, reflecting strong interest on the part of emerging economies to own gold as part of their reserves....Data showed Russia's gold reserves climbed 0.3 tonnes to a total of 996.4 tonnes in June for its ninth consecutive monthly increase."

It was such a small increase that it didn't even show up as a rounding error in their June data when they updated their website on July 19th.  Both May and June data showed their official reserves as 32.0 million ounces.

Since this is my Saturday column, I always use this occasion to empty out my in-box...and today is no exception.



Obama, Republicans gear up for bruising U.S. budget fight

Another dramatic showdown between Republicans and the White House over federal spending looks inevitable this fall, with scary talk of government shutdowns and default on government debt.

While Capitol Hill analysts are not predicting catastrophe, they have several reasons to worry that the conflict just weeks away could be even worse than usual.

The timing is particularly bad, they say, because the political climate in Washington is unusually frayed by a host of tangential issues not present in previous battles.

This Reuters story, filed from Washington, was posted on their website in the wee hours of yesterday morning EDT...and today's first story is courtesy of West Virginia reader Elliot Simon.


U.S. blows out $16.7 trillion debt limit

The US Treasury has already exceeded the federal legal borrowing limit of $16.7 trillion in May. That signals the main structural problems remain unresolved putting at risk the fragile recovery.

The country’s  outstanding public debt is already $38.82 million above the statuary debt ceiling and now at $16,738,220,000,000.00, according to Treasury data.

Christopher Weafer from the Economist Macro Advisory Consultancy says the numbers show “that the debt issue along with the deficit is two very structural problems in the US that remain unresolved and without any clear mechanism on how they are going to be resolved”.

In the short term it doesn’t cause any immediate crisis and that’s why I guess the news is not widely covered, ” Weafer told RT.

This piece showed up on the Russia Today website late yesterday morning...and it's the first contribution of the day from Roy Stephens.


Despite Declining Deficit, Foreigners Aren’t Bailing Us Out, So the Fed Will Keep QE Going

Foreigners recycling their trade surpluses have been an important source of purchases for US government debt. As you can see from the chart of long-term securities purchases by foreigners, that buying collapsed during the crisis. And, interestingly, it has recently fallen sharply again.

Offsetting the reduction in purchases of US debt by foreigners, the Fed has stepped in with multiple quantitative easings (QE), buying government securities itself in order to add liquidity and drive interest rates down. The shift into an accommodative policy is easy to see in the big picture of the holdings of Treasuries at the Fed.

The loss of foreign enthusiasm for US government debt would normally be a red flag for our economy. This time around, the slack is being papered over by the Fed, which is creating money out of thin air in order to buy what is, in essence, most of the new debt being issued by the federal government. By filling the gap left by exiting foreigners, the Fed has been able to sustain low interest rates—for the time being.

This most excellent commentary by Casey Research's own Bud Conrad, was posted on their Internet site yesterday.  The short article contains some excellent charts...and I consider it a must read.


Doug Noland: The One-Year Anniversary of "Do Whatever it Takes

As a whole, the global hedge fund community continues to struggle for performance. The volatile and policy-dominated “risk on, risk off” dynamic is tough on many trading strategies. Global risk markets – currencies, commodities, EM, bonds and equities – remain minefields, particularly for multi-asset class approaches. I believe enormous leverage has been employed by myriad strategies, certainly including global “carry trade,” corporate, MBS and municipal debt. I’ll assume there’s no egregious LTCM-like leveraging, but I still worry a lot about global derivatives markets. I believe the world of speculative finance is full of problematic “crowded trades.”

A few weeks back the markets were again indicating fragility – and the Fed once again demonstrated its market-pleasing low tolerance for market weakness. The flaw in aggressive QE is the notion that the Fed will be able to back away from market intervention without major consequences. Fed stimulus can spur debt issuance, market risk embracement and speculation. But if that debt is mispriced and predominantly non-productive, the system faces unavoidable debt problems. If speculative leverage is playing a prominent role in inflating securities and asset markets, the system face unavoidable de-leveraging problems. If the already vulnerable household sector continues to load up on mispriced stocks and bonds, there will be negative consequences.

If there are major risk misperceptions endemic in the global marketplace – including with ETFs, the hedge funds, derivatives and perceived low-risk strategies – then there is latent market fragility that is only exacerbated by central bank liquidity injections and backstop assurances. I fully expect history to look back at the past year’s Draghi Plan, Fed open-ended QE, and Bank of Japan “Hail Mary” monetary inflation as misguided market interventions that set loose historic market Bubble excess. I will posit that global systemic risk is significantly higher today than it was a year ago. And if the current trajectory of global central bank market intervention continues, systemic risk will be even more problematic one year from now.

Doug's weekly Credit Bubble Bulletin is always worth reading...and yesterday's offering over at the Internet site, is no exception.  I thank reader U.D. for sending it our way.


Feds tell Web firms to turn over user account passwords

The U.S. government has demanded that major Internet companies divulge users' stored passwords, according to two industry sources familiar with these orders, which represent an escalation in surveillance techniques that has not previously been disclosed.

If the government is able to determine a person's password, which is typically stored in encrypted form, the credential could be used to log in to an account to peruse confidential correspondence or even impersonate the user. Obtaining it also would aid in deciphering encrypted devices in situations where passwords are reused.

"I've certainly seen them ask for passwords," said one Internet industry source who spoke on condition of anonymity. "We push back."

A second person who has worked at a large Silicon Valley company confirmed that it received legal requests from the federal government for stored passwords. Companies "really heavily scrutinize" these requests, the person said. "There's a lot of 'over my dead body.'"

This very disturbing story was posted on the Internet site late on Thursday morning...and I thank U.K. reader Tariq Khan for bringing it to our attention.


Pentagon to deploy huge blimps over Washington, D.C. for 360-degree surveillance

A pair of high-tech Army blimps is coming to the greater Washington, DC area, and soon they will be able to provide the military with surveillance powers that spans hundreds of millions of acres from North Carolina to Niagara Falls, Canada.

The airships are part of Raytheon’s Joint Land Attack Cruise Missile Defense Elevated Netted Sensor System, or JLENS, and when all is said and done they’ll offer the United States military what the defense contractor calls “an affordable elevated, persistent over-the-horizon sensor system” that relies on “a powerful integrated radar system to detect, track and target a variety of threats.”

Once above the nation’s capital, JLENS will allow the Army to see for 320 miles in any direction from 10,000 feet above the earth. The system can be set up to operate on its own for an entire month without requiring refueling, and offers the Pentagon surveillance capabilities that dwarf other options at a penny of the cost.

This essay, with lots of great photos, was posted on the Russia Today website early on Thursday evening...and I thank reader M.A. for sending it along.


Justin Raimondo: Is America a Free Country?

Jimmy Carter is making waves: “America does not have a functioning democracy at this point in time,” he told a meeting of the American Bridge, held in Atlanta, when asked about Edward Snowden’s exposure of Washington’s secret global surveillance system. Looks like the only outlet that covered the meeting was Der Spiegel, but word is spreading and it won’t be long before the Usual Suspects start ranting about what a flake Carter is, and that he should shut up already and go lock himself in his presidential library. But think about it: for a former President to say this is unprecedented in modern times.

The NSA spying scandal, he went on to tell his audience, is subverting democracy around the world: he warned that one consequence of the Snowden revelations will be increasing suspicion of American online platforms, such as Facebook and Google, both of which he characterized as major factors energizing pro-democracy movements abroad.

Carter’s previous statements about the Snowden affair were mildly supportive: he told CNN he thought “the secrecy that has been surrounding this invasion of privacy has been excessive,” and that Snowden’s bringing the secret surveillance of Americans “to the public notice has probably been, in the long term, beneficial.” Yet this new statement goes way beyond that: it is a sweeping condemnation of the current regime. That a former US President would say such a thing has got to be the scariest public pronouncement I’ve heard since the Watergate era. What’s even scarier: Carter is right.

This excellent...and right on the money commentary...was posted on the Internet site on July 19th...and I've been saving it for today's column.  I thank Danish reader Jan Gindrup for finding it for us.  It's certainly a must read for all students of theNew Great Game...and certainly all Americans.


Iceland proposal to write off debt triggers S&P outlook downgrade

Rating agency Standard & Poor’s yesterday added its voice to a chorus of warnings against a pledge by Iceland’s new government to write off as much as 20 per cent of all its citizens’ mortgage debt, announcing that it had revised downwards its outlook for the country from stable to negative.

The revision reflected a one-in-three chance that the agency could lower Iceland’s credit rating within the next two years, S&P said. The country’s triple B minus rating is considered the lowest investment grade, just one notch above junk. The proposed debt write-down could cost 10 per cent of 2013 economic output, and “possibly much more”, the agency said.

The promise of debt relief was the main campaign pledge of the Progressive party and the Independence party, who went on to form a coalition after the election. They focused on inflation-linked loans, payments on which soared following the country’s deep financial crisis owing to a 36 per cent depreciation of the currency.

This story appeared on the Internet site in the wee hours of this morning BST...and I thank Roy Stephens for his second offering in today's column.


Banks shiver as UBS swallows $885 million U.S. fine

UBS will pay $885 million in a settlement with a U.S. regulator over allegations the Swiss bank misrepresented mortgage-backed bonds during the housing bubble, paving the way for billions more to be paid by other banks.

European and U.S. lenders such as Credit Suisse and Deutsche Bank have set aside money to cover the cost of any losses arising from the dispute with the Federal Housing Finance Agency but estimates vary widely.

The FHFA said late on Thursday UBS will pay $415 million and $470 million respectively to government-sponsored housing enterprises Fannie Mae and Freddie Mac to resolve claims related to securities sold to the companies between 2004 and 2007.

UBS is just one of 18 banks the FHFA pursued in 2011 for allegedly misrepresenting the quality of the collateral backing securities during the run-up to the financial crisis.

File this under the cost of doing business, as it's little more than a licensing fee.  This Reuters story, co-filed from London and Frankfurt, was posted on their website early yesterday morning EDT.  My thanks to Elliot Simon for sharing it with us.


Russia and Iran: A postmodern dance

If, as expected, Russian President Vladimir Putin undertakes the trip to Tehran in August, it will be rich in symbolism - even if he were to give up the travel plan to take a boat across the Caspian Sea to reach the Iranian shore. The congruence of interests of the two regional powers, which are neighbors, has never been in doubt.

But then, this year is also, by a curious coincidence, the 70th anniversary of the Tehran Conference of 1943, which was a poignant event in Russo-Iranian relations in their rich tapestry of history dotted with blood and betrayal.

The history of Russian-Iranian relations is stunning. Putin has been the only Russian leader to visit Tehran since the Bolshevik revolution in 1917. Yet, both countries are ancient players on the geopolitical arena.

Putin's return to Tehran nearly seven years after his hugely successful first visit in 2007 leaps out of a morality play. Russian foreign policy has come full circle. Putin hopes to clean up the Aegean stables, by literally removing the debris that accumulated during the years when he was not in the Kremlin.

This Roy Stephens offering, his last in today's column, was posted on the Asia Times website early Friday morning Hong Kong time...and it's an absolute must read for all students of the the New Great Game.


Why Buffet Bailed on India

India has long been viewed as a value investor’s dream: rapid growth, 1.2 billion people pining for a taste of globalization, and underdeveloped industries ripe for turnarounds. So it surprised few when the genre’s guru, Warren Buffett, placed a bet on the world’s ninth-biggest economy.

What did come as a surprise, though, was last week’s decision by the billionaire’s Berkshire Hathaway Inc. to give up on India’s insurance market after just two years. Adding to the drama, the withdrawal came the same week India unveiled plans to open the economy as never before to foreign-direct investment.

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