Gold & Precious Metals

U.S. Banks Precious Metals Derivative Exposure Surged In The Beginning Of 2017

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Posted by Steve St. Angelo - SRSrocco Report

on Thursday, 24 August 2017 06:18

According to the most recent report on the U.S. Financial Institutions Derivatives trading activity, the U.S. banks held a record amount of precious metals contracts in the first quarter of 2017.  Not only did the U.S. banks report a record amount of precious metals contracts, they also held a record amount in notional value of commodity and equity derivative contracts.

There just seems to be a lot of paper floating around in our highly inflated stock, bond and Forex markets.  And… there needs to be.  Without an ever increasing amount of leverage via their derivative bets and hedging, these markets would be in serious trouble.  Furthermore, the practice of using contracts to hedge bets upon on other derivative bets has put the financial market in a highly fragile state.

The Office of the Comptroller of the Currency (OCC) put out their First Quarter 2017 Quarterly Report on Bank Trading and Derivative Activities.  In that report, they published the following chart on the U.S. Banks notional value in precious metals contracts:


As we can see in the chart, the overall trend has continued higher since 2000.  What is interesting is that the notional value of precious metals contracts held by the U.S. banks is even higher in the first quarter of 2017 versus Q4 2012 when the prices of the precious metals were much higher.

In looking at previous data, there were some quarters that had a higher notional amount of precious metals contracts.  This was due to the banks adding short contracts as the price of precious metals increased.  However, Q1 2017 of $43.6 billion was up considerably versus the $28.3 billion in Q1 2016. 

For example, in Q3 2016, U.S. banks also held $43.6 billion in precious metals contracts.  Again, this was due to a lot of short contracts held by the U.S. banks when the gold price surged to a high of $1,366 in the third quarter of 2016.  As the gold price sold off over the next several months, the precious metals contracts declined in the fourth quarter of 2016:



Gold & Precious Metals

Gold Stocks: Good Times Are Near

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Posted by Stewart Thomson - Graceland Updates

on Tuesday, 22 August 2017 06:36

Aug 22, 2017

  1. After rallying almost $100 an ounce from the July lows of about $1210 (basis December futures), gold is consolidating its gains.
  2. Fundamentally, there isn’t much immediate time frame news from either the fear trade or the love trade. That’s the root cause of this sideways price action, and its healthy.
  3. To get some technical perspective on the consolidation, please  click here now. Double-click to enlarge this short term gold chart.
  4. A small head and shoulders top pattern has appeared, and it suggests more consolidation will occur before the upside action resumes. This scenario would see gold move down towards $1272, and then rally towards $1330.
  5. Please  click here now. Double-click to enlarge. On this chart, a slightly bigger head and shoulders pattern is apparent. It suggests a deeper correction to about $1250 may occur.



Gold & Precious Metals

Sentiment Speaks: What Is The True Effect North Korea Is Having On Gold?

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Posted by Avi Gilburt via Seeking Alpha

on Monday, 21 August 2017 05:51


Recent price action.

Anecdotal and other sentiment indications.

Price pattern sentiment indications and upcoming expectations.

Recent price action

As I noted in my new service on Seeking Alpha, The Market Pinball Wizard, as long as silver remains below its resistance of 17.26-17.80 and GDX remains below its resistance of 23.60-23.96, I am looking for another pullback in the complex before the real break out occurs. This past week, silver spiked and reversed slightly over the bottom of our resistance, and GDX came within 12 cents of our resistance before it turns lower on Friday.

....continue reading HERE


Gold & Precious Metals

July FOMC Minutes and Gold

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Posted by Arkadiusz Sieron

on Friday, 18 August 2017 06:22

Yesterday, the minutes of the Federal Reserve’s July meeting were released. What do they say about the Fed’s stance and what do they mean for the gold market?

How can we summarize the recent FOMC minutes? Well, the FOMC members agreed that “the labor market had continued to strengthen and that economic activity had been rising moderately so far this year”. But the most important discussion concerned three other issues.

First, several participants noted uncertainty about the future course of the fiscal policy. A few of them even suggested that “the fiscal stimulus likely would be smaller than they previously expected.” The declining odds of significant fiscal stimulus imply less need for a more hawkish Fed. Thus, this is a bad development for gold.

Second, the several FOMC members pointed out further increases in equity prices. They argued that the rising valuations, together with continued low longer-term interest rates, are equivalent to an easing of financial conditions. Hence, the Fed could be potentially more hawkish as its tightening of monetary policy has been largely offset by other factors influencing financial markets. This is good news for the yellow metal.

Last but definitely not least, the U.S. central bankers discussed the recent low readings of inflation. Although many of them saw the softness in inflation as caused by idiosyncratic factors and thus temporary, the FOMC members noted the downside risks to the inflation outlook. The key paragraph is as follows:

“Participants discussed the softness in inflation in recent months. Many participants noted that much of the recent decline in inflation had probably reflected idiosyncratic factors. Nonetheless, PCE price inflation on a 12 month basis would likely continue to be held down over the second half of the year by the effects of those factors, and the monthly readings might be depressed by possible residual seasonality in measured PCE inflation. Still, most participants indicated that they expected inflation to pick up over the next couple of years from its current low level and to stabilize around the Committee's 2 percent objective over the medium term. Many participants, however, saw some likelihood that inflation might remain below 2 percent for longer than they currently expected, and several indicated that the risks to the inflation outlook could be tilted to the downside.”

Hence, the recent minutes showed rising worries about inflation. Therefore, the U.S. dollar fell after their release (however, it rebounded today against the euro), while the shiny metal rose, as one can see in the charts below.

Chart 1: EUR/USD exchange rate over the last three days.


Chart 2: Gold prices over the last three days.



Gold & Precious Metals

Precious Metals Nearing Breakout

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Posted by Jordan Roy-Byrne - The Daily Gold

on Monday, 14 August 2017 06:48

The outlook for precious metals has changed quite a bit over the last month. In early July, Gold and gold stocks were weak and threatening severe breakdowns below key levels such as $1200 Gold and $21 GDX. Those moves reversed course and now Gold and gold stocks are threatening resistance. The prognosis has turned bullish and with the help of a correcting stock market precious metals could build on their recent rebound.

Below we plot the weekly bar chart of Gold which is testing critical resistance in the $1290-$1300 area. Gold could close the week at its highest weekly close in 2017, just weeks after breaking its 2017 uptrend. That early July breakdown proved to be a false break as Gold has been able to rally back up to resistance. Gold has broken the downtrend line since 2011 but the most important resistance is $1300. With a break above $1300, Gold could be on its way to a retest of the 2016 high at $1375.


Turning to the miners, we find that GDX has already broken its downtrend and the 200-day moving average. GDXJ faces strong resistance at $34-$35. Silver has a little ways to go before it can break its downtrend line but its relative strength in recent days is quite encouraging. 



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