- Is a crash to new lows imminent, or did we see the bottom Friday afternoon as gold broke below $1250 and silver below 18.70?
- Retail demand EXPLODES– SDBullion saw largest single day sales volume EVER Friday as nearly 20,000 oz of physical silver were withdrawn from the market
- Russia, Kazakhstan, & Belarus sign Eurasian Economic Union Agreement- accelerate plans to launch “gold” Altyn currency to replace the USD in trade!
- GOFO rates & options expiration- implications for the metals
Full Coverage of the Latest PM Take-down is Below With This Week’s SD Metals & Markets!
*Due to technical difficulties, this week’s Metals & Markets update is text only.
Gold & silver were smashed in yet another cartel options expiration raid over the second half of the week, as silver was sent below $18.70, and gold under $1250. Both metals recovered much of their COMEX session losses in Friday’s afternoon access market session, with gold clawing its way back above $1250, and silver climbing back above $18.80. Gold will need to move up and off $1250, and silver regain the $19 level early next week to prevent a re-test of the New Years Eve lows- particularly in silver. Eric believes Friday’s strong access market trading is a sign that the bottom is in, and that the metals will NOT be placing a new low next week. Time will tell. Retail investment demand EXPLODED in both metals, but particularly in silver Friday, as SDBullion saw its largest single day sales volume in history, as well as the most transactions in a single day since the May 1st massacre last year that saw nearly $3 shaved off the spot price of silver.
With investment silver demand already at all-time record highs in the official mint coins- look for premiums to begin rising next week if silver remains under $19 and massive physical demand continues. The silver market hasn’t experienced a real shortage situation in nearly a year, but that could quickly change if the type of demand seen Friday continues into next week.
Don’t you just love Comex options expiration week? Sheesh. This time, the mainstream media was blaming gold and silver’s decline on the back of the release of April Hong Kong gold import data. Imports came in at a very high 65 metric tons, but that was below April 2013 imports of 76 metric tons. With that news as backdrop, the timing for a raid against weak hand Comex longs couldn’t be better and the “wash, rinse and repeat” cycle played out once again. The Hong Kong imports decline story is overblown. Monthly imports were at some of their highest levels in history earlier this year and 65 metric tons for last April is a gigantic import figure compared to the rates we saw two years ago and further back in time. Furthermore, given Chinese wholesale gold demand indications visible by looking at recent withdrawals out of the Shanghai Gold Exchange, we can safely infer that all the fuss about April is nothing but noise. When May’s figures are reported they will likely show a rebound.
Cribbing from Dave Kranzler: “In week 21 (May 19 – 23) Chinese wholesale gold demand, measured by SGE withdrawals, was 36.4 metric tonnes, up 22.98 % from the week before. This is the highest weekly demand since week 9 (February 24 -28).” Anyone making the argument that Chinese investment demand started a sustain downtrend simply doesn’t have a grasp on the big picture, nor the actual data. In fact, recall that April 2013’s Hong Kong net import figures were particularly high precisely because that month saw an unprecedented $200+ decline in the paper price of gold. We’ve been living with depressed prices for over a year now, but back in April 2013 the massive and sudden sale was a new phenomena that triggered, in turn, massive buying. We all remember the pictures of unprecedented hordes of Chinese descending on gold dealer establishments. Year-over-year comparisons need to be set against the context of the events of both periods, but apparently that’s too much to ask from the mainstream financial press.
Meanwhile, GOFO rates shifted back into the positive across all lease terms back on May 20th as gold availability via the LBMA increased. GOFO rates as indicators in the last year have not been consistent. But there’s been a tendency to see the rates shift back into a “normal” positive zone immediately preceding a smash, or just after a cartel hit. That’s what we have witnessed. Somehow, someway, the cartel was able to source and mobilize physical gold to take the pressure off the system from buyers seeking physical delivery. The swing in GOFO back into a positive rate structure combined with gold and silver performing well in the aftermarket hours this Friday, and with options expiration behind us all suggest next week probably will see an end to the downside. Gold open interest declined following Tuesday’s raid, which strongly suggests that the cartel covered some of their shorts once weak hand longs were undermined. This also suggests the cartel will take a break from aggressive bashing next week.
US equities hit fresh highs this week and complacency is now at 2006 levels. This is downright creepy. Appreciation in the equities markets is not being driven by an improving economy and corporate earnings. Rising stock prices are being driven by stock buy backs and continued asset price inflation from central bank easy money policies. Given what appears to be a massive clandestine bond purchasing program running out of Belgium, there basically has been no tapering. It’s all smoke and mirrors. With what amounts to a net increase in global financial market liquidity, is it any surprise that equities continue to benefit? Hedge fund equities short positions are on the rise, but with the size of this liquidity pump operation, asset price inflation in the equities market will continue for a while. All the while, the danger for a major stock market reversal tied to an eventual reversion to market-based rising interest rates looms on the horizon. In our white-is-black, up-is-down Orwellian financial world, even the traditional notion that interest rates should normally rise moving through a so-called economic recovery has been rationalized and tossed out the window. Bottom-line: the level of complacency now manifest not only in the stock market but in foreign exchange and interest markets as well is downright spooky. Today, Zero Hedge spotlighted a Financial Times story on this subject. The following chart speaks for itself:
Click here to read a summary of the deal between Russian, Kazakhstan and Belarus. Have a great weekend! — Eric Dubin
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