Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
Venezuela’s Hyperinflation Drags On For A Near Record—36 Months - 18th Nov 19
Intellectual Property as the New Guild System - 18th Nov 19
Gold Mining Stocks Q3’ 2019 Fundamentals - 18th Nov 19
The Best Way To Play The Coming Gold Boom - 18th Nov 19
What ECB’s Tiering Means for Gold - 17th Nov 19
DOJ Asked to Examine New Systemic Risk in Gold & Silver Markets - 17th Nov 19
Dow Jones Stock Market Cycle Update and are we there yet? - 17th Nov 19
When the Crude Oil Price Collapses Below $40 What Happens? PART III - 17th Nov 19
If History Repeats, Gold is Headed to $8,000 - 17th Nov 19
All You Need To Know About Cryptocurrency - 17th Nov 19
What happens To The Global Economy If Oil Collapses Below $40 – Part II - 15th Nov 19
America’s Exceptionalism’s Non-intervention Slide to Conquest, Empire - and Socialism - 15th Nov 19
Five Gold Charts to Contemplate as We Prepare for the New Year - 15th Nov 19
Best Gaming CPU Nov 2019 - Budget, Mid and High End PC System Processors - 15th Nov 19
Lend Money Without A Credit Check — Is That Possible? - 15th Nov 19
Gold and Silver Capitulation Time - 14th Nov 19
The Case for a Silver Price Rally - 14th Nov 19
What Happens To The Global Economy If the Oil Price Collapses Below $40 - 14th Nov 19
7 days of Free FX + Crypto Forecasts -- Join in - 14th Nov 19
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19
Gold and Silver - The Two Horsemen - 11th Nov 19
Towards a Diverging BRIC Future - 11th Nov 19
Welcome to the Zombie-land Of Stock Market Investing - 11th Nov 19
Illiquidity & Gold And Silver In The End Game - 11th Nov 19
Key Things You Need to Know When Starting a Business - 11th Nov 19
Stock Market Cycles Peaking - 11th Nov 19
Avoid Emotional Investing in Cryptocurrency - 11th Nov 19
Australian Lithium Mines NOT Viable at Current Prices - 10th Nov 19
The 10 Highest Paying Jobs In Oil & Gas - 10th Nov 19
World's Major Gold Miners Target Copper Porphyries - 10th Nov 19
AMAZON NOVEMBER 2019 BARGAIN PRICES - WD My Book 8TB External Drive for £126 - 10th Nov 19
Gold & Silver to Head Dramatically Higher, Mirroring Palladium - 9th Nov 19
How Do YOU Know the Direction of a Market's Larger Trend? - 9th Nov 19
BEST Amazon SMART Scale To Aid Weight Loss for Christmas 2019 - 9th Nov 19
Why Every Investor Should Invest in Water - 8th Nov 19
Wait… Was That a Bullish Silver Reversal? - 8th Nov 19
Gold, Silver and Copper The 3 Metallic Amigos and the Macro Message - 8th Nov 19
Is China locking up Indonesian Nickel? - 8th Nov 19

Market Oracle FREE Newsletter

$4 Billion Golden Oppoerunity

Silver Sold, then Squeezed

Commodities / Gold and Silver 2015 Aug 28, 2015 - 03:30 PM GMT

By: Alasdair_Macleod

Commodities

While gold consolidated its recent gains, silver was sold down this week along with other metals and energy. The whole commodity complex suffered badly in the stock-market fall-out, before a sharp bear-squeeze across commodity markets pushed silver, copper and oil sharply higher yesterday (Thursday). Silver is now down 6.8% on the year and gold 5%. Prices were slightly firmer this morning in Asian trade, before the European opening.


Storm-force winds blew through all markets, with substantial falls in equities after last weekend. As it became clear that the falls would be contained for the moment, the US dollar rallied and US Treasury yields increased from the panic lows. This recovery in general sentiment led to weakness in precious metals generally.

The sharp fall in silver is hard to justify in anything other than purely speculative terms. While the last Commitment of Traders Report (18th August) for the US futures market showed Managed Funds short positions were slightly less extreme, they are still very high, as shown in our next chart.

We will get updated COT figures this evening, but it is reasonable to suppose that some of the long positions in this category have been closed with open interest falling about 7,000 contracts. There may have been some producer hedging as well. The net position, longs minus shorts, is our next chart.

The chart confirms speculators in the form of hedge funds were still extremely bearish as a crowd mid-month and there is little evidence this sentiment has changed this week.

Anecdotal reports are of significant shortages of physical gold and silver, despite the negative sentiment in futures markets. Demand for coins and retail bars in the US has cleaned out the dealers, particularly for silver, and in London availability of sovereigns continues to be tight. Western markets for gold in particular must be reflecting the strains imposed upon it by continuing Asian demand, which has led to progressive destocking of vaulted gold for the last three years.

The next chart shows how China’s public demand for physical gold, the largest identifiable physical market, has grown over recent years.

In the first seven months of 2015, 1,464 tonnes were taken up by the public, an annual rate of over 2,500 tonnes. If the average monthly growth seen in the first half persists, total deliveries could be somewhat more. World mine production according to the US Geological Survey in 2014 was only 2,860 tonnes, including China’s own output of 450 tonnes, putting this one market in context. Other Asian countries are also buyers, notably India which is back in the market for an estimated 1,000 tonnes this year.

These two nations alone are taking out about 150-200 tonnes more than is mined, and while there are also scrap supplies to consider, maybe about 500 tonnes globally, scarce bullion stocks in the west are still being depleted.

The public response throughout Asia to currency instability could be the most important influence on the gold price in coming months. Traditionally, when currencies come under stress the public reaction is to step up gold purchases, in which case backwardations will persist and premiums in Asian markets will rise.

I shall tweet the latest weekly demand figure for China later today when available on @MacleodFinance.

Next week

Monday. Japan: Capital Spending, Vehicle Sales, Construction Orders, Housing Starts. Eurozone: Flash HICP. US: Chicago PMI.

Tuesday. Eurozone: Manufacturing PMI, Unemployment. UK: BoE Mortgage Approvals, Net Consumer Credit, Secured Lending, M4 Money Supply. US: Flash Manufacturing PMI, Construction Spending, IBD Consumer Optimism, ISM Manufacturing, Vehicle Sales.

Wednesday. Eurozone: PPI. US: ADP Employment Survey, Non-Farm Productivity, Unit Labour Costs, Factory Orders.

Thursday. Eurozone: Composite PMI, Services PMI, ECB Deposit Rate. US: Initial Claims, Trade Balance, ISM Non-Manufacturing.

Friday. US: Non-farm Payrolls, Private Payrolls, Unemployment.

 

Alasdair Macleod

Head of research, GoldMoney

Alasdair.Macleod@GoldMoney.com

Alasdair Macleod runs FinanceAndEconomics.org, a website dedicated to sound money and demystifying finance and economics. Alasdair has a background as a stockbroker, banker and economist. He is also a contributor to GoldMoney - The best way to buy gold online.

© 2015 Copyright Alasdair Macleod - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Alasdair Macleod Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules