Friday, November 28th. It’s the day after Thanksgiving in the US – possibly the lightest trading session of the year. And here, buried under the turkey leftovers, we find two statements (click to read) …
That’s the CME handing out disciplinary action against Mr Igor Oystacher, one of the biggest individual fish in the deep Chicago derivatives pond. He’s been landed with a $150,000 fine and a one month trading ban. Happy Holidays Igor! Read more
Silver is off 6.4 per cent and gold is down 3.8 per cent, although the latter follows a steeper fall on Friday:
It’s come to our attention that the precious metals investing community has been rendered a little “worried” by a sudden and sizable accumulation of inventory in the iShares physical Trust, the SLV for short. (H/T Kid Dynamite)
According to ZeroHedge, 572 tonnes were added to the trust in just one day. And while that does not represent a record for the fund, it is “the biggest one day addition of physical silver to SLV in ordinary course operations”. Or so, at least, ZeroHedge says (though we haven’t double checked the numbers ourselves at this point). Read more
Warning: this is a very scary place to be. Rampant inflation, conspiracy, socialism, totalitarianism and Ayn Rand can be found at every turn.
Presenting the latest Thunder Road report from former resource analyst Paul Mylchreest: Read more
“When the storm comes, everyone gets wet.”
Remember when we facetiously told you to shelve your adviser? Probably no need to bring him back yet. Read more
The inversion of the gold forward rate curve continued to intensify on Tuesday, with seven out of eight banks that submit quotes to the London Bullion Market Association quoting short-term (one or two month) rates above 12-month rates:
To understand why Rick Perry this week picked a fight with Ben Bernanke and why media pariah Ron Paul continues to attract a cult following, it helps to know what happened on the evening of June 20, 1790 at a New York dinner party.
Thomas Jefferson, fresh from his stint as American minister to France, had the day before literally bumped into Alexander Hamilton, who looked “somb[er], haggard, and dejected beyond comparison,” according to the future President’s writings. Read more
Gold surged to a fresh record above $1,600 as fears of escalating debt crises in the US and eurozone invigorated precious metals markets, the FT reports. Bullion, seen as a haven in times of economic turmoil, rallied to a peak of $1,600.40 a troy ounce on Monday morning, marking the latest record in its decade-long bull market.The move came as risk aversion swept financial markets, with other traditional havens such as the Swiss franc and the Japanese yen trading at or close to record highs against the US dollar. Bullion dealers said that the escalation of the eurozone debt crisis, which last week touched Italy for the first time, had triggered a rush among European investors to buy physical gold. The bullion sales desk at UBS in Zurich witnessed its highest gold coin sales in a year on Friday, according to Edel Tully, precious metals strategist at the bank. The buying “came from multiple European locations, indicating that the fear trade is becoming more widespread,” she said.
Risk assets were starting the week on the back foot, with sentiment still hobbled by worries over eurozone and US sovereign debt issues, the FT reports. Global growth concerns were also overpowering any residual bullishness engendered by a generally positive start to the US second-quarter earnings season, as traders warily eyed Friday’s publication of weak consumer confidence data for the world’s biggest economy. The FTSE All-World equity index was down 0.4 per cent as European bourses saw early losses. The FTSE Eurofirst 300 was off 0.4, with banks softer as investors got the first chance to discount details of the latest European bank stress tests. “Underwhelmed” by the tests’ toughness and disinfectant properties appears to be the verdict. Gold was signalling the anxiety stalking dealing rooms. The precious metal has hit another record at $1,599 an ounce, as investors seek alternatives at a time of fiscal uncertainty. The bullion was currently up 0.3 per cent to $1,598, while silver was selling for $39.88 an ounce, an 11-week high.
What happens when you cross computer geeks with populist outrage at central banks?
Bitcoins happen. Read more
These are the silver lending rates for 2011 from the London Bullion Market Association, as derived from Libor minus the silver forward rate (Sifo):
John Kemp at Reuters has already written about how it wasn’t necessarily the froth in the market that caused the parabolic rise in silver over April:
Our colleagues on the paper-side drew attention last week to the fact that silver trading in Asian hours experienced a clear pickup into the lead up to the commodity rout.
Jack Farchy wrote, citing Edel Tully, analyst at UBS: Read more
A 2,837 per cent rise in silver turnover on the Shanghai Gold Exchange this year is a sign that Chinese speculators have driven the surge – and crash – in silver prices, the FT reports. Silver trading in Shanghai remains below the levels in London and New York, the two main global hubs, but its rapid growth means it has become increasingly significant in driving prices, bankers said. Chinese retail investors cut positions sharply when silver last week, only to return in strength during a short-lived rebound, and would be crucial to breaking the threshold of $50 a troy ounce for the metal, according to analysts.
Chinese speculators have emerged as a key driver of silver’s robust rally and subsequent crash with trading in the metal in Shanghai soaring nearly 30-fold since the start of the year, reports the FT. The commodity, nicknamed “the devil’s metal” for its wild price swings, surged 175% from August to a peak of almost $50 a troy ounce two weeks ago. Since then, it has plummeted 35%, hitting a low of $32.33 on Thursday. At the same time, silver turnover spiked on the Shanghai Gold Exchange, China’s precious metals trading hub, rising 2,837% from Jan 1 to a peak of 70m ounces on April 26, according to exchange data. The number of contracts outstanding doubled over the same period. FTAlphaville examines growing debate over the impact of margin moves on the price falls.
Silver prices rose by over 60 per cent between the start of the year and April 25.
They’ve now fallen by over 30 per cent — unwinding some 80 per cent of the upward move in the space of two weeks, according to Société Générale figures. Such violent swings have lead to margin call hikes on the precious metal (along with other commodities) at the Chicago Mercantile Exchange, and have also unleashed a wave of debate about just how much margin moves may have attributed to price falls. Read more
A relapse for commodities as the dollar rallied knocked early optimism that the global economy is robust enough to shrug off the policy implications of burgeoning inflation, reports the FT. US gasoline futures traded down sharply enough – the RBOB contract was now down 7.1 per cent, to $3.13 a gallon – that the New York Mercantile Exchange triggered its trading halts on oil products at one point. WTI crude futures were down 4.7 per cent at $99.01. The stronger dollar, which was up 1 per cent on a trade-weight basis, was having a particularly hard impact on the rally in precious metals. Silver, arguably the market’s favourite vehicle for punting, and therefore a good gauge of risk appetite, was down 8.3 per cent at $35.24 an ounce. Gold has also fallen 0.9 per cent to $1,502 an ounce. Bond investors also continue to bet against a rapid recovery, with benchmark US Tresaury yields falling back to near their lowest level of the year. Ten-year note yields were down 6 basis points to 3.15 per cent. The FTSE All-World index was down 0.8 per cent and benchmark. Wall Street’s S&P 500, which according to overnight futures prices was due to open above its cyclical closing high of 1,360, was sporting a loss of 1.1 per cent at 1,340, its worst one-day drop in over three weeks.
So here’s the story. Read more
Here’s an interesting point from Cullen Roche at Pragmatic Capitalism on Monday.
Margin debt — the amount that speculators borrow to buy stocks (or other assets for that matter) — is rising quickly. Read more
Still pondering possible reasons behind the recent commodities rout?
Deutsche Bank says it’s all because of the coming QEnding, or the end of the Federal Reserve’s second bout of quantitative easing, scheduled to take place in June. And it makes some sense. Read more
Just what everyone has been waiting for!
The latest thoughts from Goldman Sachs’ energy gurus on the most recent commodity mega-slide. Read more
The quick answer is… nobody knows.
Although JBC Energy has come up with a helpful summary of points that they feel could be behind the Thursday rout. Read more
It was inevitable that Thursday’s commodites rout would claim some victims … just as Friday’s further slide in commodities prices will inevitably cause more casualties.
Emerging-markets funds managed by Goldman Sachs Group Inc. and Franklin Resources Inc. were among the U.S.-registered mutual funds affected the most in this week’s commodities selloff. The $831 million Goldman Sachs BRIC Fund and the $825 million Templeton BRIC Fund, which focus on Brazil, China, India and Russia, both fell 5.7 percent in the week ended yesterday. Read more
Silver prices plunged for the fifth consecutive day on Friday as the grey precious metal suffered its biggest correction since the billionaire Hunt brothers cornered the market in 1980, the FT reports. The reversal of fortunes for silver – which until this week’s 25 per cent drop had been up 56 per cent since January – has led a wider sell-off in commodities markets, which were heading towards one of their worst one-day falls on record. Brent crude dropped as much as $12.17 to a low of $109.02 a barrel, the FT says. The drop was the largest in percentage terms since the financial crisis and the largest ever in absolute terms. FT Alphaville has a round-up of some extraordinary commodities sell-off numbers. Goldman’s Bric fund is among the most hurt in the “panic selling,” according to Bloomberg. The WSJ cites an analyst saying “hedge funds got scared and everyone’s running for the door”.
A bloody day across the commodities complex.
Some commodity market curios on Thursday May 5, 2011:
Number 1 - Standard deviations. Read more