GJ Extra: Astonishing O.I. data – looks like City Hall is in action.

John Brimelow
Thursday, December 15, 2011

The CME Final for Wednesday indicates that on volume as presaged of 306,684 lots (11.19% above estimate and the 2cnd heaviest since late October) open interest leapt 8,299 lots, 25.81 tonnes or 1.94%, to 435,998 lots. Gold of course was down 3.57% basis the stock market close. Silver’s open interest was up 4.34% while silver was down 6.07%.

From Friday’s stock market close to yesterday’s, gold has fallen $138.15 or 8.07%. Open interest has risen every day this week for a total of 12,457 lots, 38.75 tonnes or 2.94%. The widely advertised heavy spec liquidation has, in a net sense, not shown up

This increase could be attributed to the reverberation of heavy CB gold lending, meaning that strictly speaking it is not profit-motivated outright short selling. However, that does not account for the silver rise – no one suggests silver lending is significant. Furthermore the timing and ferocity of the sales do not fit with judicious fund-raising activities

This morning after gold had risen to a +$9.60 high in the Feb contract around 7-35 AM a lull in activity was ended by aggressive selling into the PM fix. This came in at $1,574, $16 lower than the morning level: estimated volume between 9AM and 10 was a heavy 45,000 lots. It takes a serious seller to move a fix like that.

Action like this is reminiscent of the mysterious heavy selling which enlivened the ’96-2001 Bear market and which continued into the early years of the current Bull phase: a statement is being made, probably Official. September was the most recent example of this. It looks like the MNI story last week of CB action was in principle correct.

Usually these interventions continue until Eastern physical demand makes them too costly. Camp-followers can then get trampled in the retreat.

Indian, and possibly Chinese dealers can anticipate a busy end to the year.

Thursday, December 15, 2011

Late GJ: Eastern FX rebound to whipsaw news shorts?

On Thursday, the slide which was triggered by heavy selling going into the PM fix eventually ended in an interim low around 10-45 AM, with Feb gold down $24.40 on the day. Gold then drifted up to settle down $9.70 at $1,577.20. Another spasm of weakness saw gold down almost to the day’s low around 2-45PM and only a weak recovery followed. By the stock market close gold was still some $11.40 below the floor close and 0.42% below Wednesday’s 4PM level.

Estimated volume to the close of the floor session was 179,483 lots, of which only 39,000 was recorded in the second half, after 11AM. Silver was notably firm, standing 0.52% higher than Wednesday’s stock market closing level at 4PM.

Gold shares displayed no buoyancy with the XAU closing shortly after and close to its low, down 1.11%. The HUI bottomed in the morning with gold, down 1.82% and managed a better but still comparatively weak close, down 1.47%. The GDX/GDXJ ratio was an unexciting (1.34%)/(2.38%).

On the other hand the bullion vehicles showed some vitality, with PHYS rising to a 4.58% premium to NAV and CEF going positive again, rising to 3% (Wednesday 4.08% and (0.7%)). After 3 days of ignoring gold’s slide, the GLD ETF reported shedding 14.82 tonnes (1.14%) from stated gold holdings, bringing them down to 1,279.97523 tonnes.

MarketVane’s Bullish Consensus for gold was unchanged at 58%, as noted previously the lowest reading since December 9th 2009 (when gold closed at $775.90). Silver’s BC rose a point to 47%. Last night’s 46% was the lowest since April 17, 2009. The HGNSI was unchanged at 0.3%.

On Friday morning local Vietnam gold stood at a premium of $97.32 to world gold of $1,581 (Thursday $109.70/$1,576.24).

Friday, December 16, 2011

Early GJ: Year-end gold menu: Bear Curry or Bear Chow Mein?

The CME Final for Friday indicates that on volume of 199,479 lots, 10.97% above estimate, open interest fell 5,144 lots, 16 tonnes or 1.18%, to 430,854 lots. Gold of course was down 0.42% at the stock market close. Continued long capitulation finally outweighed short selling, apparently, perhaps because the bears are growing cautious – possibly have actually started to cover.

Indian ex-duty premiums: AM $7.83, PM $9.94, with world gold at $1,585.58 and $1,591.35. Lavish for legal imports. The rupee surged 1.78% to close at $1= R52.7 (R53.64) aided by some technical steps taken by the Reserve Bank. The stock market lost 2.18%.

Some Indian cities posted even higher premiums than this, indicating a real shortage of metal. Apparently the public, seeing trend reversals in both $US gold and the rupee, has acted. UBS observes this morning:

“…demand from India is shaping up to be the strongest weekly off take since early October.”

Unless world gold rises substantially or the rupee slumps again. India’s gold importers are likely to be very busy.

As noted last night, local Vietnam gold today stood at a premium of $97.32 to world gold of $1,581 (Thursday: $109.70/$1,576.24).

In a development at least as bullish as India’s response today, Shanghai gold closed at a dramatic $18.97 premium to world gold of $1,591.96 on heavy volume equivalent to 17,426 NY lots (Thursday $3.87/$1,568.36/24,038 NY). Could this be a return to the crazy premiums and massive imports of late last year? In a surprising move, the Chinese authorities moved to bolster the Yuan, which jumped to a 7.52% post $US “depegging” appreciation (Thursday 7.1%). While this is not enough arithmetically to account for the premium surge, a firmer Yuan does seem to cheer Shanghai buyers. JBGJ thinks it is now probable late 2011 will be as Chinese-driven as was 2010.

On volume equivalent to a comparatively low 11,482 NY lots, TOCOM shed 2.387 tonnes of open interest (767 NY) but the public added 0.783 tonnes to its net long (1.68%) mainly by reducing its short. The active contract closed up 40 yen and world gold gained $12 during the session to go out $21.40 above the NY 4PM level.

U.S. sentiment remains very poor: Bloomberg’s trader survey has the lowest proportion of bulls since July 29th (just as the spectacular August rally was getting underway) and the story has several abjectly bearish quotes. See

http://www.bloomberg.com/news/2011-12-16/gold-market-rout-leaves-traders-least-bullish-in-four-months-commodities.html

More of a concern is a discreet hint from UBS today:

“Larger moves were also likely taking place behind the scenes, judging from the considerable market chatter about official liquidation. The picture will hopefully become clearer in the weeks and months ahead.”

AKA CB sale announcements. Since WAG participants do not have to break out leasing, this is doubtful. However the observation concurs with the suggestion here in yesterday’s GJ Extra, that the downward impetus of the last few days originated from the Official Sector.

Consulting numerous scars from ten years ago and more, JBGJ contends that this type of pressure usually ceased when Eastern physical demand became serious. Without the pressure gold will rise and the numerous trend-following camp followers who doubtless joined in will get squeezed.

JBGJ continues to anticipate considerably higher gold by year end.

This view of course will not be accepted by NY locals on a Friday afternoon after such a week. CME website volume at 8AM was a moderately heavy 46,000 lots, estimated volume at 10AM was 92,038, and indications are that subsequent volume has been light.