Early GJ: Huge Turkish gold imports: Good or Bad?

John Brimelow
Friday, August 5th 2012

Thursday’s CME Final reported that on volume of 172,751 lots, 11.53% above estimate, open interest slipped 1,901 lots, 5.91 tonnes or 0.48%, to 394,777 lots. This is the lowest open interest since September 1st 2009.

Gold was down 1.03% at the floor close and 0.71% at the stock market close. Clearly on balance Thursday saw exiting from the gold futures market, but the gyrations were so wild as to make the short covering/long liquidation issue difficult to determine.

Indian ex-duty premiums: AM $1.63, PM $1.21, with world gold at $1,589.35 and $1,595.94. More or less adequate for legal imports. The rupee firmed to close at $1= R55.75 (R55.84); the stock market lost 0.15%.

Local Vietnam gold today stood at a premium of $69.64 to world gold of $1,590.80 (Thursday $58.13/$1,612.31).

On quite heavy volume equivalent to 9,659 NY lots Shanghai gold closed at a premium of $2.63 to world gold of $1,592.88 (Thursday $4.33/$1,604.48/6,503 NY). The yuan was backed off to a 7.11% post $US “depegging” appreciation (Thursday 7.2%). “Delivery Volume” jumped to 11.078 tonnes, the first time in double digits in over a week. It appears the Chinese public like sub $1,600 gold.

On low volume equivalent to only 4,638 NY lots TOCOM saw open interest rise 1.906 tonnes (613 NY lots) as the public added 1.299 tonnes (2.51%) to their net long by boosting their long almost 2 tonnes. The active contract closed down 38 yen but world gold gained $1.90 during the session to go out $2.30 above the NY stock market closing level.

The Istanbul Gold Exchange finally published Turkey’s gold imports for July. At 34.994 tonnes these were 46.2% higher than June’s and 234.7% higher than July 2011. In fact this is the 3rd highest in the 17 years the IGE has been publishing data, being exceeded only in August 2008 and July 2007 when gold was in the $800s and $600s respectively. So far in 2012, Turkey has imported 94.1 tonnes, almost all of it in the last 3 months.

Presumably much of this is going into Iran. The Iranian public must be very alarmed indeed. Maybe the rest of us should be, too.

Today gold has recovered from the heavy selling bout which took it down $13 to a low of down $2.20 in the Dec contract at the Employment data came out. However the recovery is entirely a function of the weak $US: Euro gold has not recovered at all. Estimated volume at 12 Noon was an unexciting 113,515 lots.

Of course, if this means the Asian currencies firm up, physical demand will respond.

Late GJ: Again, huge HK/China gold shipment in June

Sunday, August 5th, 2012

On Friday, gold absorbed a substantial bout of selling following the Employment data – estimated volume was 88,238 lots at 10AM - and regained the upward path which had started as Europe opened in the morning. From an intraday glow down $2.20 after 8-30 AM, Dec gold recovered to settle up $18.60 (1.17%) at $1,609.30; by 4PM gold had drifted down $4.90 to stand 0.89% above Thursday’s stock market close. Silver was up 2.39%.

Estimated volume for the day was only 123,548 lots: the CME Preliminary suggests actual volume was 143,035 contracts. MKS attributes the parrying of the early NY down thrust to fund buying; JBGJ is more inclined to see a buyer on the PM fix which at $1,602 was some $18 higher than the immediately preceding low. Gold briefly lost momentum after the fix and volume in the latter part of the day was slow. A notable feature of the day was that gold was for once greatly helped by the weakness of the $US: not entirely, though, as Euro gold finished at the low of the day – there was some outright selling pressure.

Gold shares peaked distinctly after gold with the HUI and XAU up 2.54% and 2.65% around 2-30PM. Very aggressive selling appeared in the final half hour of trade, partly offset by a very late rally: the HUI and XAU both closed up 1.76%, which remained a considerable accentuation of bullion. The GDX/GDXJ ratio came in at 1.95%/2.37% and the S&P/TSX Venture Composite ended up 1.13%.

The highly professional website The Golden Truth has posted Friday Chart Porn: Value Play Of The Decade complete with a remarkable 28 year chart of the XAU/gold ratio, now at an all time low:

“Either the market is pricing in the expectation of gold and silver selling off to the level where they started this bull market or the universe of mining stocks represents the value play of the decade.”

PHYS slipped to a 3.69% premium to NAV but CEF rose to 4.6% (Thursday 3.75% and 3.0%). The GLD ETF reported adding 3.0169 tonnes to stated gold holdings, taking then up to 1,254.94167 tonnes, the second consecutive increase.

MarketVane’s Bullish Consensus jumped 3 points to 58% while silver’s added 2 points to 47%. The HGNSI was unchanged at 4%.

Dan Norcini has posted a thoughtful piece Gold and Silver Continue Marking Time. This contrasts and charts the long slide in CME gold open interest matched with poor price action compared to the reverse situation in Soybeans.

“Keep this in mind whenever you read comments that the current malaise in the gold and silver markets is being orchestrated by the bullion banks so that they can position themselves on the long side of the market for the next wave higher. That is pure nonsense. The gold and silver markets are currently moving lower because the hot money crowd has currently lost interest in them and is putting its money to work in other markets for the time being as they chase profits…”

Norcini notes that he writes

“As a firm believer in the view that the feds have a vested interest in keeping the gold price under wraps…”

and concludes going into some detail about how in general he believes this has been done.

JBGJ broadly agrees with this assessment of the current situation. However in the last 5 day period to hand (7/26th-8/2cnd) open interest dropped 6.67% while gold declined 0.55%. This raises suspicions of accommodation being offered to exiting Specs, a event frequently seen in the Bad Old Days.

On a brighter note, after last week bringing news of fresh Korean CB purchases and heavy Turkish gold imports, the present week has opened with news of huge Hong Kong net gold exports to China: according to Reuters data to be 40.75 tonnes (Exports 67.747 tonnes, Imports 26.997 tonnes). While down some 10% from May this is still an immense amount compared to little more than a year ago, and is in fact not easy to fit into conventional interpretations of gold flows.

This evening gold so far is trading very quietly.