Gold Futures See Massive $1.5 Billion “Non Profit” Liquidation In “One Minute”

By Mark O’ByrneAugust 25, 2016No Comments

Gold futures saw a massive $1.5 billion liquidation in “one minute” yesterday which had all the hallmarks of a “non profit” liquidation – a large seller trying to manipulate gold futures lower rather than maximise profits.

Subsequently, gold dropped throughout most of trade in New York and ended near its last minute low of $1323.80 with a loss of 1.1%. Silver slipped to as low as $18.535 and ended with a loss of 1.75%. Gold futures moved sideways in Asia prior to moving slightly lower in morning trade in London.

Smart money has seen this hundreds of times over the years and will use it accumulate cheaper physical gold and silver on the dip. As ever, best not to catch a falling knife and prudent to wait for at least two days of higher closes or to dollar, pound or euro cost average into bullion at these lower levels.

It was reported that Someone Puked $1.5 Billion Of Notional Gold, And The Selling Continues by ZeroHedge:

Gold continues to be pummeled… having broken through the 50-day moving-average at $1338…

As we detailed earlier, it made perfect sense – someone just decided in keeping with their fiduciary duty, 0840ET was the perfect time to unleash $1.5 billion of gold notional into the futures markets….

Over 10,000 contracts dumped in 1 minute… “normal”

New low prices are bringing in some dip-buyers…

And Silver dropped on heavy volume too…

The Gold Anti-Trust Action Committee  or GATA were even more questioning in their headline featuring the Zero Hedge article which read Nobody sells gold like this except to drive the price down in full view.

We have seen this repeatedly over the years and the timing is frequently before “important,” “all eyes on the all powerful Fed” central bank meetings. ‘Monetary High Priest’, Janet Yellen will divine the tea leaves at Jackson Hole tomorrow and the dumb money continues to lap up the silly sound bites which distract from and ignore the wider context of a U.S., UK, Japan and of course EU that is increasingly bankrupt.

It is interesting and telling that over the years, there have been very little massive futures buying in one minute which has propelled gold futures higher. Why is this concentrated futures activity always selling and always to the downside?

The questions that arise once again are who was responsible for the sudden bout of selling and was it a bank or fund acting on its own or with official sanction of a central bank such as the Fed or indeed the BIS.

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Gold and Silver Bullion – News and Commentary

Gold Prices Edge Higher on Weaker Dollar (WSJ)

Gold futures finish higher in volatile trading (MarketWatch)

Gold attempts modest gains as traders look ahead to Yellen speech (Investing.com)

North Korea fires submarine-launched ballistic missile towards Japan (Reuters)

Earthquake Shakes Central Italy, at Least 12 Reported Killed (Bloomberg)

Inverse relationship between gold, stocks has never been this extreme (MarketWatch)

Monetary policy has nationalized Japanese stock market, CLSA analyst says (CNBC)

Tiny bead from Bulgaria may be world’s oldest gold artifact (Reuters)

India’s gold smugglers shut out refiners, banks  (Reuters)

Is the EU Volcano About to Erupt? (MishTalk)

Gold Prices (LBMA AM)

24Aug: USD 1,337.30, GBP 1,010.73 & EUR 1,185.38 per ounce
23Aug: USD 1,338.50, GBP 1,015.25 & EUR 1,181.09 per ounce
22Aug: USD 1,334.30, GBP 1,018.20 & EUR 1,181.26 per ounce
19Aug: USD 1,346.85, GBP 1,026.30 & EUR 1,189.67 per ounce
18Aug: USD 1,347.10, GBP 1,023.93 & EUR 1,190.84 per ounce
17Aug: USD 1,342.75, GBP 1,031.23 & EUR 1,191.96 per ounce
16Aug: USD 1,349.10, GBP 1,039.89 & EUR 1,197.33 per ounce

Silver Prices (LBMA)

24Aug: USD 18.84, GBP 14.23 & EUR 16.70 per ounce
23Aug: USD 18.98, GBP 14.40 & EUR 16.75 per ounce
22Aug: USD 18.91, GBP 14.45 & EUR 16.74 per ounce
19Aug: USD 19.42, GBP 14.80 & EUR 17.14 per ounce
18Aug: USD 19.78, GBP 15.04 & EUR 17.47 per ounce
17Aug: USD 19.57, GBP 15.04 & EUR 17.37 per ounce
16Aug: USD 20.04, GBP 15.43 & EUR 17.77 per ounce

Recent Market Updates

– Germans Warned To ‘Stockpile’ Cash In Case Of ‘War’
– Ireland’s Biggest Bank Charging Depositors – Negative Interest Rate Madness
– Rothchilds Buying Gold On “Greatest Experiment” With Money In “History of the World”
– Gold – “Mother of All Bull Markets Has Only Just Begun” – Grandich
– 45th Anniversary Of Nixon Ending The Gold Standard
– Gold In UK Pounds Collapses 38% Versus Gold and 56% Versus Silver Year To Date
– Will Ireland Be First Country In World To See Bail-in Regime?
– Money “Madness” Negative Interest Rates Sees Gold Buying Surge
– Gold Investment Demand Reaches Record In First Half 2016 On “Perfect Storm”
– Peak Gold – Did Gold Production Peak in 2015?
– Financial Times: “Victory For Gold Bulls Is Only Just Beginning”
– Irish Banks Most Vulnerable In Stress Tests – Banking Contagion In EU Cometh
– Gold In Sterling 2.2% Higher After Bank Of England Cuts To 0.25% and Expands QE

Mark O’Byrne

Executive Director

Published in Daily Market Update

The CRIME SCENE IN BROAD DAYLIGHT

(courtesy zero hedge/Chris Powell)

Nobody sells gold like this except to drive the price down in full view

end

Stagnant economy won’t support high stock, bond, real estate prices, Embry says

end

Global Stocks Decline Along With The Dollar, As Jackson Hole Begins

Global stocks declined broadly, led by European equities which fell for the first time this week, suffering their biggest fall in three weeks, while currency markets continued their subdued tone even as the recent 4-day rally in the USD appears to have topped out, as investors took to sidelines ahead of the Jackson Hole meeting which begins tonight. Japanese and Chinese stocks had suffered modest drops in Asia.  S&P 500 Index futures slipped 0.2%, continuing yesterday’s modest selloff.

Stubbornly low oil prices and warnings about steel demand kept the pressure on miners, while pharma stocks were also hit with traders citing social media comments from U.S. presidential candidate Hilary Clinton chastising EpiPen price hikes

A rally that’s driven global equities to their highest level in a year has petered out as the prospect of higher U.S. rates risks thwarting efforts by other central banks to stimulate growth by cutting borrowing costs. While German business confidence dropped to the lowest level in six months in August, a U.S. report on Thursday will probably show a pickup in durable goods orders.

Once again, all attention remains focused on the Jackson Hole symposium which begins tonight with a speech by the Kansas Fed’s George. “There is renewed caution ahead of Yellen’s appearance at Jackson Hole tomorrow,” said Michael Ingram, a market strategist at BGC Partners in London. “It won’t take a great deal for sentiment to turn from glass half full to glass half empty.” Michael Hewson of CMC Markets said that “there is basically just a bit of risk aversion ahead of Jackson Hole. I think expectations are way too high, though, I don’t think Yellen sets as much importance on Jackson Hole as Ben Bernanke did.”

Equity markets retreated in Europe after the August Germany IFO data fell, printing weaker than survey estimates, which called for increases; the drop was broad-based, across business climate, current assessment and expectations components.  “Business confidence in Germany has clearly worsened,” Ifo head Clemens Fuest said in a statement. “The German economy has fallen into a summer slump.”

Iron ore fell on the prospect of shrinking steel production in China and crude oil traded near a one-week low. The Bloomberg Dollar Spot Index snapped a four-day winning streak as investors await comments by Federal Reserve Chair Janet Yellen at a symposium in Jackson Hole, Wyoming, on Friday.

In Asian equities, Japan’s Nikkei ended down 0.3 percent following on from losses on Wall Street overnight. Chinese stocks fell 1 percent to extend their slide this week as investors took profit on recent red hot property shares which dropped 2 percent. Banks stumbled too ahead of earnings and a crackdown on some lending practices. “The whole (property) sector had surged more than 20% at one point this month, and falls in share prices this morning were purely a result of investors’ trading strategy as they want to lock in profits,” said Joe Qiao, a Shanghai-based analyst at Xiangcai Securities.

Europe’s Stoxx 600 slid 0.8% in early trading. Glencore Plc and Anglo American Plc led a gauge of miners to the worst performance on the equity gauge as iron ore retreated. Total SA dragged energy producers lower as oil held near its lowest close in a week. Jimmy Choo Plc jumped 5.3 percent after the maker of luxury shoes posted higher first-half revenue and earnings and said it remains optimistic on this year’s prospects. CRH Plc rose 2.6 percent after the Irish construction company posted higher-than-expected first-half sales and profit.

S&P 500 Index futures slipped 0.2%, after a late selloff in drugmakers helped drag U.S. equities down 0.5 percent on Wednesday. HP Inc. dropped 6.7 percent in early New York trading after the seller of personal computers and printers forecast fiscal fourth-quarter profit that may fall short of analysts’ estimates.

West Texas Intermediate crude rose 0.3% to $46.89 a barrel on the back of the dollar’s modest decline. It dropped 2.8% in the last session as data showed U.S. inventories unexpectedly rose last week.

2Y Treasuries were little changed with their yield at a two-month high of 0.76%. The securities are the cheapest they’ve been relative to 30-year notes since the start of 2008 following a run of hawkish comments from Fed officials including Vice Chairman Stanley Fischer and the heads of the New York and San Francisco branches. The rate on 10-year Treasuries fell one basis point to 1.55%. Fed fund futures indicate a 54 percent chance of a U.S. interest-rate hike this year, up from 36 percent at the start of August. The yen was little changed at 100.37 per dollar and South Korea’s won gained 0.6 percent.

* * *

Market Snapshot

• S&P 500 futures down less than 0.2% to 2171
• Stoxx 600 down 0.6% to 343
• FTSE 100 down 0.2% to 6819
• DAX down 0.6% to 10556
• German 10Yr yield up less than 1bp to -0.08%
• Italian 10Yr yield up 2bps to 1.14%
• Spanish 10Yr yield up less than 1bp to 0.94%
• S&P GSCI Index up 0.2% to 362.3
• MSCI Asia Pacific up 0.1% to 139
• Nikkei 225 down 0.2% to 16556
• Hang Seng up less than 0.1% to 22827
• Shanghai Composite down 0.6% to 3068
• S&P/ASX 200 down 0.4% to 5542
• U.S. 10-yr yield down less than 1bp to 1.55%
• Dollar Index down 0.19% to 94.61
• WTI Crude futures up 0.6% to $47.04
• Brent Futures up 0.5% to $49.29
• Gold spot up less than 0.1% to $1,325
• Silver spot up 0.5% to $18.64

Global Headline News

• Apple’s Cook Reaped $373m in Stock in Five Years as CEO: He met his performance goal of beating two-thirds of S&P 500. About half of Cook’s original grant has vested so far
• Nordea Plans More Synthetic Swaps After Doing $9.5b Deal: Scandinavia’s biggest bank says it’s planning to do more deals to remove risk from its balance sheet through synthetic swaps after completing the region’s first such transaction.
• Shanghai Said to Plan More Curbs to Cool Home, Land Prices: City to hold meetings to discuss stepped-up cooling measures
• Mobius Says Helicopter Money Will Be Japan’s Next Big Experiment: Templeton investment guru sees BOJ acting after more yen gains
• High-Speed Trader IMC Under China Stock-Index Futures Probe: Dutch firm is in discussions with regulator, says spokesman
• European Health Stocks Fall on Negative U.S. Drug Price Comments: SXDP falls as much as 2.3%, the most since June 24, with all but two members declining.
• As Welspun Awaits Wal-Mart Review, Investors Brace for Worst: Target cuts ties to supplier over cotton sheet product claims
• Alipay Owner Said to Plan Hong Kong IPO in 1H 2017: Ant Financial’s Shanghai listing said to face hurdles

Looking at regional markets, Asian stocks traded in a choppy fashion with participants cautious ahead of the Jackson Hole symposium and following the weak lead from Wall St. in which commodities were pressured and gold shed USD 13/oz. The downbeat tone saw Nikkei 225 (-0.3%) and ASX 200 (-0.4%) open lower, with weakness in energy adding to the glum after WTI fell below USD 47/bbl in the wake of an unexpected build in DoE Inventories, however markets then recovered from their lows amid widespread indecisiveness. Chinese markets were also subdued with the Shanghai Comp (-0.6%) underperforming after dismal earnings from large industry names including PetroChina, CNOOC and Citic Securities, while the Hang Seng (0.0%) was resilient and recovered from early losses to return flat. 10yr JGBs were marginally higher amid the cautiousness seen across stocks, while at today’s enhanced liquidity auction for 10yr, 20yr and 30yr attracted a greater number of bids vs. the prior month.
Japanese PPI (Jul) Y/Y 0.40% vs. Exp. 0.10% (Prey. 0.20%); highest reading in 10 months. PBoC injected CNY 140bIn in 7-day reverse repos and CNY 80bIn in 14-day reverse repos; which is the 2nd consecutive day the PBoC utilised 14-day reverse repos after a 6-month halt. PBoC set CNY mid-point at 6.6602 (Prey. 6.6420).

Top Asian News

• Shanghai Said to Plan More Curbs to Cool Home, Land Prices: City to hold meetings to discuss stepped-up cooling measures
• Mobius Says Helicopter Money Will Be Japan’s Next Big Experiment: Templeton investment guru sees BOJ acting after more yen gains
• High-Speed Trader IMC Under China Stock-Index Futures Probe: Dutch firm is in discussions with regulator, says spokesman
• Alipay Owner Said to Plan Hong Kong IPO in 1H 2017: Ant Financial’s Shanghai listing said to face hurdles
• Galaxy’s Profit Beats Estimates as New Resorts Woo Tourists: Quarterly profit up 22% on Galaxy Macau expansion, Broadway
• Monsanto Withdraws GMO Cotton Seed Application in India: Application pulled because of “regulatory uncertainties”

In Europe, equities are trading in the red as traders and analysts await the outcome from the Jackson Hole Symposium. Adding to the negative sentiment, German IFO data added to the subdued start to the session with equities trading lower (Euro Stoxx -1%) and the DAX (-1.3%) is the major laggard as the as stronger EUR weighs on the exporting names in the index. The worst performing sector this morning is healthcare, after Hilary Clinton stated that the price of Mylan’s Epipen was too high and needed to be reviewed. In terms of fixed income markets, there has been not too much supply of Europe, while Bunds have failed to benefit from the downside in equities and continue to trade within a tight range.

Top European News

• Nordea Plans More Synthetic Swaps After Doing $9.5b Deal: Scandinavia’s biggest bank says it’s planning to do more deals to remove risk from its balance sheet through synthetic swaps after completing the region’s first such transaction.
• European Health Stocks Fall on Negative U.S. Drug Price Comments: SXDP falls as much as 2.3%, the most since June 24, with all but two members declining.
• BMW, Daimler Downgraded; Peak Auto Demand in Sight, Redburn Says: Market has been anticipating peak auto demand for 18 months, growing evidence this peak is now visible, Redburn analysts write in note. BMW stock down 1.9%, Daimler down 1.8% at 10:04am in Frankfurt, vs Stoxx 600 down 1%

In FX, The Bloomberg Dollar Spot Index declined 0.1 percent, after climbing 0.8 percent over the last four trading sessions. “The market’s just trying to get through the whole event risk” of Yellen’s speech, said Andy Ji, a Singapore-based currency strategist at Commonwealth Bank of Australia. “But after that, what’s driving the market is back to the search for yield and it’s good for emerging markets in general.” Emerging markets rebounded, with South Africa’s rand leading gain, advancing 0.7 percent. South Korea’s won strengthened 0.6 percent and Turkey’s lira rose 0.5 percent. Currencies tumbled on Wednesday as political and security concerns resurfaced in South Korea, South Africa and Turkey. A JPMorgan Chase & Co. gauge that measures the volatility of developing-nation currencies was the highest since July 6. The flare-ups eroded returns on carry trades, borrowing where interest rates are relatively low and investing the proceeds where they are higher. Turmoil in South Africa’s leadership sent the rand tumbling, cutting the return on this quarter’s best carry trade in half from 10 percent.

In commodities, West Texas Intermediate crude rose 0.3 percent to $46.89 a barrel. It
dropped 2.8 percent in the last session as data showed U.S. inventories
unexpectedly rose last week. Iron ore dropped 2.8 percent in Singapore after Li Xinchuang, a vice chairman at the China Iron & Steel Association, said falling steel production in China should weigh on prices for the raw material. The price is still up by about 40 percent for the year.  Gold was little changed at $1.324.17 an ounce, after sliding 2.1 percent over the last four days.

Bulletin Headline Summary from RanSquawk and Bloomberg

• The Jackson Hole Symposium remains firmly in focus, with European equities experiencing downside this morning with a softer than expected German IFO survey
• FX markets remain in a tight range as August trade continues and European newsflow remains light
• Looking ahead, German IFO, US weekly job report, Services PMI, Durable Goods and the Jackson Hole Symposium begins
• Treasuries show upside bias in overnight trading amid global equity weakness, while crude oil still trades below $47/bbl; Treasury concludes this week’s auctions with sale of $28b 7Y notes, WI 1.400%.
• German business sentiment unexpectedly declined the most in more than four years in August in a sign that companies took some time to weigh the consequences of Britain’s decision to quit the EU
• China’s central bank watchers have something new to puzzle over. The PBOC sold 50 billion yuan ($7.5 billion) of 14-day reverse-repurchase agreements on Wednesday, its first offering of anything with a tenor other than seven days since February
• The world’s biggest bond traders are getting fed up with Fedspeak as weeks of conflicting economic reports have whipsawed investors seeking to handicap the path of interest rates
• Not everyone’s a fan, but Thomas Jordan has little choice when it comes to negative interest rates. Since his principal headache is the exchange rate, they’re the best available tool — along with currency interventions — for the SNB
• Recent flare-ups in political risk in emerging markets weakened their currencies and helped send returns on carry trades tumbling from the highest in a year
• Scandinavia’s biggest bank says it’s planning to do more deals to remove risk from its balance sheet through synthetic swaps after completing the region’s first such transaction
• U.S. companies feeling pain in short-term debt markets are seeking relief by borrowing longer term, pushing already- high levels of corporate bond issuance toward fresh records

US Event Calendar

• 8:30am: Durable Goods Orders, July P, est. 3.4% (prior -3.9%)
• 8:30am: Initial Jobless Claims, Aug. 20, est. 265k (prior 262k)
• 9:45am: Markit US Services PMI, Aug. P, est. 51.8 (prior 51.4)
• 9:45am: Bloomberg Consumer Comfort, Aug. 21 (prior 43.6)
• 10am: Freddie Mac mortgage rates
• 10:30am: EIA natural-gas storage change
• 11am: Kansas City Fed Manufacturing Activity, Aug., est. -2 (prior -6)
• 6:30pm: Fed’s George speaks at Jackson Hole conference

* * *

DB’s Jim Reid concludes the overnight wrap

Markets continue to behave like they’ve eaten too much cake and need to lie in the corner and do nothing in order to recover. Inactivity rules. However a late day US sell-off after a notable fall in oil and also the wider commodity complex, along with the prospects of Yellen’s speech tomorrow are at least giving us something to discuss.

Indeed the S&P 500 closed -0.52% yesterday which is actually the fourth biggest move up or down this month. Still, it marked the 33rd consecutive session that the index has failed to break +/- 1%. The excitement came in Oil again though where WTI tumbled -2.77% and back below $47/bbl. A surprise pick up in US crude inventories took the blame although it was actually a broadly weaker day all round in commodity markets. Gold and Silver slumped -1.00% and -1.41% respectively while it was a similar story for base metals with Aluminium (-1.38%), Copper (-1.66%) and Nickel (-2.63%) all sharply lower. It was hard to gauge what was driving that weakness although the USD did rebound after a couple of stagnant sessions which perhaps weighed on metals.

All in all though it was largely a day for single news stories rather than any broader macro themes. Healthcare names across the pond where under pressure following a tumble for Mylan shares (-5.45%). That came after Presidential candidate Hilary Clinton commented on the rising drug prices debate in Washington, referring specifically to the furor over EpiPen price increases. The Nasdaq BioTech index slumped -3.37% as a result while the broader Nasdaq composite index was -0.81%. Another interesting stat is that the Nasdaq index has now gone 41 consecutive sessions without declining for two consecutive days. That is the longest such streak since 1978.

In contrast to markets across the pond, it was actually a broadly stronger session in Europe with the Stoxx 600 closing +0.39% as financials once again led the charge (Stoxx 600 Banks +2.00%). The Bank index is quietly back to within just 7% of its pre-Brexit level having at one stage been down as much as -23%. The one caveat to the stronger performance in Europe yesterday was the UK where the FTSE 100 fell -0.48% after Glencore fell -3.06% following its latest earnings report.

Staying with the U.K., yesterday our economics team put out a fascinating report yesterday boldly predicting a UK Industrial Revolution 2.0. The premise for the report is that Brexit is a structural shock. Monetary policy is unsuitable to deal with this and Theresa May’s government is already laying the organisational groundwork for a more suitable response – an industrial strategy. Governments here and abroad have tried this before. What’s different this time? There is a better opportunity for the UK today. There is a confluence of events that should increase the success of an industrial strategy. First, a clear,  comprehensive and most importantly committed plan should help counterbalance Brexit-related uncertainties. Second, sterling has depreciated and will fall further. Production costs are already low in the UK. A good industrial policy can cement these benefits. Third, public sector funding costs are low and QE has re-started. We should probably view the Chancellor’s “reset” of UK fiscal policy through the lens of the industrial strategy.

In our opinion the UK does have a unique opportunity to reset policy that is not necessarily as easy for other countries. Brexit provides the perfect excuse to change course. It could all still go wrong but there is an opportunity. Back to yesterday, the other interesting news story came in emerging markets and specifically in South Africa where Finance Minister Pravin Gordhan reportedly refused to heed to police over allegations regarding his actions when he ran the national tax agency. After falling 3% on Tuesday after Gordhan had been issued with a warning statement, the South African Rand was down another 1% yesterday and is at the lowest level since July 28th.

Elsewhere Treasury markets were a touch weaker but continue to trade in a super tight range. Apologies to our readers for the absence of the chart in the PDF as promised yesterday. We’ve added it today and as a reminder it shows the monthly 10y Treasury range which is currently at its lowest for a decade. We’ll see if Yellen changes this tomorrow.

Looking at markets this morning that weaker tone on Wall Street last night is generally weighing on the Asia session, while Oil is also holding that decline from yesterday. The Nikkei (-0.25%), Shanghai Comp (-0.86%), ASX (-0.08%) and Kospi (-0.23%) are all in the red, while the Hang Seng is little changed. FX markets are generally lacking any obvious direction while sovereign bond markets are flat.

With regards to the data flow yesterday, in the US existing home sales were weaker than expected in July (-3.2% mom vs. -1.1% expected) resulting in a drop in the annualized rate to 5.39m from 5.57m. It was actually the first monthly drop in sales since February with the blame seemingly being put on a lack of inventory. The other data out in the US yesterday was the FHFA house price index for June which rose +0.2% mom.

In Europe the sole release came in Germany where we got confirmation that Q2 GDP grew +0.4% qoq and +1.8% yoy. Our Europe economists noted however that the details were weaker than the solid headline suggests. Net exports compensated for a small decline of final domestic demand, but only due to tumbling imports. Investment growth was weaker than expected. They believe that payback to strong Q2 net exports will weigh on Q3 GDP, while domestic demand should pick up again. Still, they have toned down their outlook for the next couple of quarters taking account of muted external demand weighing on sentiment, weaker than expected wage dynamics lifting real income gains and a slower than expected refugee influx.

In terms of the day ahead, the early data this morning will come from France where the August confidence indicators are due out. Shortly following that Germany will release its August IFO survey where a modest improvement in the headline business climate reading is expected which would be consistent with what the PMI’s largely showed. Later this morning the UK will then release the CBI Distributive Trades Survey which will present another post-Brexit indicator. This afternoon in the US the main data of note is the flash durable and capital goods orders report for July. Market expectations are for a +3.4% mom increase in headline durable goods orders thanks to firmer aircraft orders, while core capex orders are expected to rise a more modest +0.2% mom. Elsewhere, the latest weekly initial jobless claims reading is due along with the remaining US flash PMI’s (services and composite) and finally the Kansas City Fed’s manufacturing survey.

ASIA MARKETS