Saturday, February 4, 2012

Baltic Dry Index and Related Shipping Problems with Greece/Phony Jobs report,1.2 million jobs seekers removed from BLS

Good morning Ladies and Gentlemen:

The price of gold fell by $24.20 to $1735.80.  Silver fell by 48 cents to $33.73.
The bankers, true to form decided to carry out a raid surrounding the jobs report. I highlighted to you on Thursday that the crooks always monkey around by orchestrating a raid surrounding a  jobs report and again they did not disappoint. Do not worry, gold and silver will rise again come Monday.

There were no bank failures to report last night.  Let us head over to the comex and assess trading, amounts of physical standing, inventory changes and positions held by various players.

The total comex OI rose by 3278 contracts on Thursday, from 430,094 to 44,372.  The rise was enough fodder for the crooks to fleece.  The front delivery month of February saw its OI fall from 1783 to 1201 for a loss of 582 contracts.  We had only 241 delivery notices on Thursday so we lost another 341 contracts to cash settlements as Blythe must have paid a handsome premium to these longs.  Once they received the cash they would roll to April and hope that they can play the game again.  The next delivery month of April saw its OI rise by a little over 1,000 contracts to 239,062.  The estimated volume today happened to be very large coming in at 203,876.  The confirmed volume on Thursday was 155,683.  No doubt the increase volume was due to the massive shorts, and the influence that this had on the high frequency traders who accentuate the downward draft.

The total silver comex OI continues to trade in a narrow band and Friday saw its reading of 103,409 a gain of 1488 contracts from Thursday.  These longs are in very strong hands but the price of silver is susceptible to large swings.  The front options expiry month of February saw its OI fall from 191 to 86 for a loss of 105 contracts.  We had 146 delivery notices on Thursday so we gained 41 contracts or  205,000 additional silver oz standing.  The front delivery month of March is less than 4 weeks away and here we saw the Oi advance a tiny fraction to 46,622 from 46,000.  No rollovers yet.  The estimated volume at the silver comex was much higher Friday than of late coming in at 55,538. The confirmed volume Thursday was 62,207.  It seems the HFT traders are flocking into the silver arena.

Now let us begin with February inventory movements opening balance in Gold

  February 4.2012                               :

Withdrawals from Dealers Inventory in oz
103 (Brinks)
Withdrawals from Customer Inventory in oz
199 (HSBC,JPM)
Deposits to the Dealer Inventory in oz

Deposits to the Customer Inventory, in oz
No of oz served (contracts) today
54 (5400)
No of oz to be served (notices)
1147 (114,700)
Total monthly oz gold served (contracts) so far this month
2224 (222,400)
Total accumulative withdrawal of gold from the Dealers inventory this month
Total accumulative withdrawal of gold from the Customer inventory this month


We had no gold deposits by the dealer and no gold deposit by the customer.
The dealer had only one withdrawal:

1. Brinks  withdrawal  103 oz

We had the following customer withdrawal:

1.  Out of HSBC  98 oz
2. Out of JPMorgan; 101 oz

total withdrawal 199 oz.

we no adjustments.
The total registered gold rests today at 2.473 million oz or 76.92 tonnes.

The CME notified us that we had 54 notices filed for 5400 oz of gold  The total number of notices filed so far this month total 2224 for 222,400 oz.  To obtain what is left to be served upon, I take the OI standing for February (1201) and subtract out Friday's deliveries (54) which leaves us with 1147 notices or 114700 oz of gold.

Thus the total number of gold oz standing in this delivery month is as follows:

222400 oz (served)  +  114700 oz (to be served)  =  337,100 oz or 10.48 tonnes.

we lost 34100 oz of gold to cash settlements as the huge burden of deliveries during the past 3 months has put a toll on the comex. I strongly believe that the settlements were done via the paper route ie. GLD for gold and SLV for silver.


Now let us see inventory movements for silver and deliveries for the February month:   Feb 4.2012

Withdrawals from Dealers Inventorynil
Withdrawals fromCustomer Inventory181,735(HSBC Brinks,Delaware)
Deposits to theDealer Inventorynil
Deposits to the Customer Inventory867,826(brinks)
No of oz served (contracts)73( 365,000 oz)
No of oz to be served (notices)13 (65,000 oz)
Total monthly oz silver served (contracts)333 (1,665,000 oz)
Total accumulative withdrawal of silver from the Dealersinventory this month2,287,779
Total accumulative withdrawal of silver from the Customer inventory this month 1,641,523

Less movements today.

We had no dealer deposit of silver and no dealer withdrawal.

We one had deposit by the customer:

1.  Brinks:  867,826 oz

We had the following customer withdrawal:

1. Out of Brinks;  106,245
2. Out of Delaware;  70,589
3. Out of HSBC :  4901 oz

total customer withdrawal 181,735 oz
we had one adjustments whereby a customer leased silver to the dealer over at Delaware to the tune of 50,678 oz.
The total registered silver rests this weekend at 35.39 million oz
The total of all silver rests at 130.86 million oz.

The CME notified us that we had 73 notices filed for 365,000 oz.  The total number of notices filed so far this month total 333 for 1,665,000 oz.  To obtain what is left to be served upon, I take the OI standing for February (86) and subtract out Friday deliveries (73) which leaves us with 13 notices left to be served upon.

Thus the total number of silver oz standing in this non delivery month is as follows:

1,665,000 oz (served)  +  65,000 oz ( to be served)  =  1,730,000 oz.

as promised, the amounts of silver standing continue to rise.
It looks to me that Blythe is having no such luck with fiat money enticing our silver longs to roll instead of standing for physical.


Let us now proceed to our ETF's SLV and GLD and then our physical gold and silver funds:

Sprott and Central Fund of Canada.

The two ETF's that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.

Thus a default at either of the LBMA, or Comex will trigger a catastrophic event.

Feb 4.2012:

Total Gold in Trust



Value US$:71,171,802,925.37

Feb 2.2012:




Value US$:71,870,620,610.85

with such a fall in gold today one would have thought that the gold oz would have declined. No such luck.

And now for silver Feb 4 2012:

Ounces of Silver in Trust310,227,234.000
Tonnes of Silver in Trust Tonnes of Silver in Trust9,649.15

Feb 2.2012:

Ounces of Silver in Trust308,935,049.700
Tonnes of Silver in Trust Tonnes of Silver in Trust9,608.9

we  gained 1,292,000 oz of   silver late Thursday night into the SLV.  


And now for our premiums to NAV for the funds I follow:

1. Central Fund of Canada: traded to a positive 4.2 percent to NAV in usa funds and a positive 3.9% to NAV for Cdn funds. ( Feb 4 2012.).
2. Sprott silver fund (PSLV): Premium to NAV rose  to  9.61.% to NAV  Feb 4.2012 :
3. Sprott gold fund (PHYS): premium to NAV fell to   2.46% positive to NAV Feb 4. 2012). 

It is great to see that the Sprott silver fund has returned to a decent premium. today at 9.61%
Also notice that the central fund of Canada is also returning to a good premium to NAV.

The Sprott gold premium fell due to Sprott going after more gold.


Let us now head over to the COT and see position levels of the various players and see what we can glean from this report:  First the Gold COT

Gold COT Report - Futures
Large Speculators
Change from Prior Reporting Period

Small Speculators

Open Interest



non reportable positions
Change from the previous reporting period

COT Gold Report - Positions as of
Tuesday, January 31, 2012

The large speculators:

Those large speculators that have been long in gold continued to pile into the metal to the tune of a monstrous 23,999 contracts.

Those large speculators that have been short in gold did not like the lay of the land and they covered 5,137 contracts from their short side.

Our commercials:

Those commercials who are long in gold and are very close to the physical scene, pitched a huge 16,493 contracts.

Those commercials who are perennially short in gold like JPMorgan and friends, added a whopping 13,601 contracts to their short side.

The huge 16,493 pitching of longs by some commercials could also be the short commercials who have bought some contracts long which they held as a way of covering some of their shortfall.  The bankers knew a raid was forthcoming so they pitched these to go net short in a big way.

Our small specs:

Surprisingly in the small spec category, we saw a net pitching of 2,494 contracts as these guys guessed a raid was forthcoming.

The small specs that were short in gold, covered a large 3,452 contracts.

Conclusion:  the commercials went hugely net short and thus a big raid was imminent.  The big raid occurred yesterday.

 And now for our silver COT

Silver COT Report - Futures
Large Speculators

Small Speculators

Open Interest



non reportable positions
Change from the previous reporting period

COT Silver Report - Positions as of
Tuesday, January 31, 2012

Those large speculators that have been long in silver decided to tip their toe into the water and add a rather large 1414 positions to their long side.

Those large speculators that have been short in silver probably knew that physical silver was in desperate
short supply so they covered a large, 1590 contracts.

Our commercials:

Those commercials who have been long in silver and are close to the physical scene covered 1590 contracts from their long side.

Those commercials who have been short in silver and subject to class action lawsuits for manipulation of silver decided in their great wisdom to add a monstrous 2,118 additional short positions to their shorts.
There is no question that one of the primary reasons for the raid yesterday was to try and remove these new silver leaves from the tree.

Small specs:

those small specs that have been long in silver pitched a tiny 86 contracts from their long side. Most stayed
and enjoyed a run up in the silver metal price.

those small specs that have been short in silver, saw the tea leaves and covered a huge 920 contracts for them.

Conclusion: a little more bearish and thus the reason for the raid on Friday.
In all probability the raid on both silver and gold will prove futile.


Now let us now see some of the major stories which will effect the physical price of gold and silver.

Before the jobs report, Europe was greeted with a huge downfall report on the Baltic Dry Index.
Yes, there are more ships built in the years 2008 to 2011, and this surely has an effect on the shipping price that moves commodities.  However shipping is the biggest income for Greece and thus you can imagine the troubles that they are having with low volumes of commodities that each ship carries.  The banks are vulnerable to huge losses if the Greek shipping companies fail:

The following is an important read for you:

(courtesy zero hedge)

Greece, The Baltic Dry, And... Oh My

Tyler Durden's picture

Just when it seemed that nothing could possibly surprise about adverse Greek bank exposure, as these are beyond insolvent already relying on the ECB for day to day operations as is, here comes one more development, this time courtesy of the one index that has been in literal freefall in the past two months, and recently hit a 20+ year low - the Baltic Dry.
OpenEurope explains:
An interesting but niche issue has come to our attention recently in relation to the on-going troubles in Greece. The 'Baltic Dry Index' (a measure of global shipping demand/prices) has fallen for a month straight to record lows. When this index falls it suggests that there is trouble in the shipping industry, raising questions over the stability of shipping firms. As it turns out many of these firms have secured their financing from Greek and other European banks – meaning if they start defaulting on their loans these banks could take losses. This raise further questions over the bank recapitalisation plans and whether such contingencies have been thought of in the second Greek bailout (which sets aside €20bn for Greek banks).
As a recent NYT article noted:
“Basil Karatzas, the chief executive of Karatzas Marine Advisors, a ship brokerage and finance advisory firm in Manhattan, estimated that European banks hold about $500 billion in shipping loans on their books and face nearly $100 billion in losses to restructure them.”
Furthermore, not only does global demand seem to be faltering (although the index may not be the best judge of this), there is also a massive over supply of ships – due to orders put in during the boom period in 2008 which are only just being completed now (the equivalent of 22.7% of the cargo shipping fleet is due be produced this year alone). This suggest a combination of supply and demand issues which means this could become a lasting problem and will not just be tackled with a boost in growth in Asia.
Data on exposure to shipping loans is scarce, but in 2010 Greek banks had a portfolio of $16bn just on Greek owned shipping. Other European banks had about a $50bn exposure. Of this the 4 largest UK banks had $16bn and 10 German banks had $18bn.
The volatility of the index should be kept in mind but it’s an interesting fresh angle on the problems in Europe. If things keep going badly in the shipping sector, which it seems almost certain they will, some banks could face an increase in the level of non-performing loans on their books. Given that capital buffers already seem to be spread pretty thin this could cause problems. Of course this could take time to have an impact, if it does at all, but worth keeping an eye on.


The Greek team is demanding that the Public sector( e.g. ECB) take a haircut like the private sector.
Germany has refused to listen to the Greek demands.  It surely does not look like we are going to have a PSI  (Private Sector Involvement) deal:

(courtesy zero hedge)

Germany Refuses Greek Demands For Public Sector Debt Cuts As It Is "Shouldering Everything Anyway"

Tyler Durden's picture

Yesterday, Greek finmin Venizelos did his best to exude confidence when he, of all people, decided to give the ECB, and thus Germany, a virtual ultimatum demanding that public sector creditors are also impaired (supposedly only some, while excluding Greek pension companies). Kathimerini has more on this in "Never mind PSI, OSI is all the rage." And the only reason why Veni needs this critical step is because the hedge fund holdouts among the PSI creditors demand it. Alas, Germany does not deal well with ultimatums, especially from fiscal vassals. As OpenEurope notes, Die Welt reports that Greek Finance Minister Evangelos Venizelos has called for Greece’s official creditors, such as the ECB and national central banks, to take part in the restructuring of Greek debt, something German Economy Minister Philip Rösler insisted was “not currently on the agenda”. It gets better. According to Goldman, German Finance Minister Wolfgang Schäuble said that "no additional contributions from the public sector are necessary.”  German finance minister against public sector participation in Greek debt restructuring. Speaking to news channel n-tv finance minister Schäuble said that "Greece needs a reduction in private sector claims of 50% … It does not need an additional contribution from the public sector because we're shouldering everything anyway". When asked whether he thinks that the composition of the Euro area would be the same at the end of the year as today, Schäuble replied: "I hope so". So there you have it: Greece needs further concessions, which Germany will give, if and only if Greece concedes to previous German demands of abdicating fiscal independence. The only question is how badly Greece needs German help. Everything else is smoke and mirrors.

Greece Draws The Line As Unity Government Leaders Refuse To Cede To Further Troika Austerity Demands

Tyler Durden's picture

It appears that Greece will not even have to wait until the dreaded March 20 funding D-Day. As was earlier reported, Greek PM Lucas Papademos may resign if he is unable to persuade his coalition unity government to agree to further Troika demands for additional austerity. It now appears that there will be no agreement, and thus the primary demand from the Troika for further cash disbursement will not be met. The FT reports: "All three party leaders in Greece’s teetering national unity government have opposed new austerity measures demanded by international lenders, forcing eurozone finance ministers to postpone approval of a new €130bn bail-out and moving the country closer to a full-blown default. Representatives of the so-called “troika” – the European Commission, European Central Bank and International Monetary Fund – have demanded further cuts in government jobs and severe reductions in Greek salaries, including an immediate 25 per cent cut in the €750 minimum monthly wage, before agreeing the new rescue. But representatives of all three coalition partners, including centre-left Pasok of former prime minister George Papandreou and the centre-right New Democracy of likely successor Antonis Samaras, said they were unwilling to back the government layoffs." Now we have been here before, and as a reminder the last time Greece threatened to pull out of Europe with the G-Pap referendum threat back in the fall, G-Pap was promptly replaced with the Trilateral Commission member and former ECB Vice President, Lucas Papademos. The problem is that for him to obtain power, he needed to form a coalition government. Well, that now appears to be in tatters, as not one party is willing to break to the Greeks that the minimum wage of €750 will be cut even further. The question is who will blink first this time, as it is quite likely that neither the Troika nor Greece want an out of control default. Unless, of course, this was Germany's plan B to the imposition of a Greek commissar all along...
In addition, a Greek government official said the EU and IMF negotiators rejected a counter-proposal that would have frozen Greek wages for three years and cut social security contributions by 10 per cent.

Without approval of the new bail-out within a matter of days, Athens is at risk of defaulting on a €14.5bn bond that comes due on March 20. Many eurozone officials fear such a default could reignite panic in European bond markets, pushing Italy and Spain back into danger.

The standoff in Athens has angered officials in eurozone creditor countries, particularly in those that have retained their triple A credit ratings and will be leant on most heavily to provide new Greek aid.

Finance ministers from the four remaining triple As – Germany, the Netherlands, Finland and Luxembourg – met in Berlin on Friday where they agreed that Athens must move quickly or they would withhold assistance.

“We want no further delays,” Jan Kees de Jager, the Dutch finance minister, said after the meeting.

Eurozone finance ministers had hoped to meet on Monday in Brussels to sign off on the new bail-out, but officials cancelled the gathering on Friday. Jean-Claude Juncker, the Luxembourg prime minister who serves as chairman of the group, issued a statement saying only that the meeting “may be scheduled later in the week”.
Kathimerini with the pre-story:
Papademos is expected to meet PASOK’s George Papandreou, New Democracy’s Antonis Samaras and Giorgos Karatzaferis of the Popular Orthodox Rally (LAOS) on Saturday. The three politicians will have to agree on measures that will satisfy Greece’s lenders and pave the way for a new bailout.

However, a number of sticking points remain. One of the main issues on which the party leaders are finding it difficult to agree is the private sector wage reductions that are being demanded by the troika of the European Commission, European Central Bank and International Monetary Fund.

Sources told Kathimerini that the troika is demanding that the minimum wage of 751 euros per month (gross) be reduced and that labor costs in the private sector drop by 25 percent in a bid to help Greece regain competitiveness.

Labor unions and employers wrote to Papademos on Friday to inform him that they cannot agree on a wage cut.

Papademos needs the agreement of the political leaders so the prospect of Greece receiving a new bailout can be discussed at the meeting of eurozone finance ministers on Monday.

Greece will have to set out the measures it plans to take over the next two years to reform its economy and create a primary budget surplus as well as the framework for the debt restructuring agreement with its bondholders.

Skai TV and radio reported on Friday that should the leaders fail to agree a deal, Papademos will tender his resignation on Monday.
And so on. To say that by now the market may well surge, however briefly, out of pure delight that Greece has finally defaulted, may not be a stretch. Of course, the "however briefly" period will shortly thereafter end, leaving Europe with few things to look forward to aside from complete disintegration of the union and its currency. But at least US banks will be fully insulated to that "contingency" which is increasingly looking like a "certainty.

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