A Golden Rescue on the COMEX?

30 July 2016 — Saturday


After trading five dollars either side of unchanged in Far East and London trading, the gold price was down a buck when the GDP numbers hit the tape at 8:30 a.m. EDT on Friday morning in New York.  Gold [along with the other three precious metals] headed north with a vengeance, as the dollar index headed in the other direction even faster.  And it should be obvious from the saw-tooth price pattern that the powers-that-be were at battle stations for the rest of the day.

The low and high ticks were reported as $1,335.00 and $1,362.00 in the December contract.

Gold was closed in New York yesterday at $1,350.40 spot, up $15.80 from Thursday’s close, but without interference from JPMorgan et al, it could have easily closed up many multiples of that amount.  Net volume, including October and December, was monstrous at around 203,000 contracts.160730gold

Here’s the 5-minute tick chart courtesy of Brad Robertson — and the folks that generate this chart switched over to the December contract from the July contract at midnight EDT/22:00 Denver time [solid gray line] on the chart below — and that’s more than obvious from the change in volume levels.  Volume levels were rather quiet in Far East/London traded, but exploded ten minutes after the COMEX open, which is 6:20 a.m. MDT.  It was pretty brisk until shortly after 12:00 noon Denver time/2:00 p.m. EDT — and then volume collapsed to about background after that.

The vertical gray line is midnight in New York, noon the following day in Hong Kong and Shanghai—and don’t forget to add two hours for EDT.  The ‘click to enlarge‘ is a must here.160730 5-minute gold

And here’s the New York Spot Gold [Bid] chart so you can see the New York price action up close and personal.  It’s easy to spot where ‘da boyz’ entered the market to cool things off when necessary, especially in the first hour or so of the New York session leading into the London p.m. gold fix.160730nygold

The silver price was up a nickel or so by 1 p.m. Hong Kong/Shanghai time.  From there it was sold down, with the low tick of the day coming shortly before 9:30 a.m. in London.  It chopped more or less sideways until 8:30 a.m. into New York — and its rally ran into “all the usual suspects” — and was kept on a very tight leash after that.

The low and high ticks in the precious metal were recorded by the CME Group as $20.005 and $20.385 in the September contract.

Silver finished the Friday session at $20.285 spot, up 17 cents from Thursday’s close.  Net volume was pretty chunky at just over 56,000 contracts.160730silver

Platinum’s price was almost a carbon copy of what happened to silver.  After rallying about ten bucks in morning trading in the Far East on their Friday, it was sold down from there starting at 1 p.m. HKT as well, with the low tick coming at the COMEX open.  Except for the 9 a.m. EDT price capping that all the PMs experienced yesterday, it rallied until Zurich closed at 11 a.m. New York Time — and by 1 p.m. EDT, JPMorgan et al had peeled 10 bucks or so off the price.  But it rallied a few dollars from there into the close.  Platinum finished the day at $1,147 spot, up 16 dollars on the day and, like gold and silver would have closed up many multiples of that amount if allowed to trade freely.160730platinum

Palladium’s price path was similar in just about every respect to platinum’s — and it closed higher by 13 dollars at $709 the ounce.160730palladium

The dollar index closed very late on Thursday afternoon in New York at 96.66 — and began to head south the moment that trading began at 6:00 p.m. EDT in New York on their Friday evening.  That state of affairs continue until the GDP news — and at that juncture, the proverbial trap door opened — and the ‘not so gentle hands’ stepped in at precisely 11:00 a.m. EDT, the London close, as the index printed 95.384.  It ‘rallied’ until minutes before 1 p.m. — and then headed lower once again, with another ‘save’ around 3:15 p.m.  From there it didn’t do much, as it finished the Friday session at 95.58 — down 108 basis points.160730intraday.gif

And here’s the 6-month U.S. dollar chart complete with yesterday’s price action, as it continues to search out its intrinsic value, which is a long way down from where it is currently — and would have got much closer to it yesterday if the usual ‘gentle hands’ hadn’t appeared.160730 6-month USD

The gold stocks gapped up a percent and change at the open and turned in what I though to be a rather lacklustre performance, as the HUI only closed up 2.11 percent.160730HUI

The silver equities followed a mostly similar price path to their golden brethren — and despite the performance of the underlying metal, which certainly wasn’t great, Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed higher by 2.85 percent.  And that’s a new high close for this move up.  Click to enlarge if necessary.160730Silver 7

And here’s the long-term Silver Sentiment/Silver 7 Index so you can see how things are shaping up compared to the old high the day before the JPMorgan-sponsored drive-by shooting on May 1, 2011.160730Silver 7LT  Click to enlarge.

And here are three charts from Nick that tell all.  The first one shows the changes in gold, silver, platinum and palladium for the past week, in both percent and dollar and cents terms, as of Friday’s closes in New York — along with the changes in the HUI and Silver Sentiment/Silver 7 Index.  The Click to Enlarge feature really helps on all three charts.160730Weekly

And this chart shows the month-to-date changes as of Friday’s close.160730Month to date

And here’s the year-to-date changes as of the close of trading yesterday.160730year to date

The CME Daily Delivery Report showed that for Day 2 of the August delivery in gold, there were 1,801 gold and 1 silver contract posted for delivery within the COMEX-approved depositories on Tuesday.  Once again the list of issuers/re-issuers and stoppers is so extensive, that it’s best to look at the Issuers and Stoppers Report yourself, which is linked here.

One thing that should be pointed out, is that in the first two delivery days in August, JPMorgan has already stopped 1,290 gold contracts for its client[s] — and 316 contracts for its own account.

[Updated at 2:25 p.m. EDT on Saturday] The CME Preliminary Report for the Friday session showed that gold open interest in August fell by 5,892 contracts, leaving 8,510 still open, minus the 1,801 contracts mentioned above.  Thursday’s Daily Delivery Report showed that 5,028 gold contracts were posted for delivery on Monday, so that means that 5,892-5,028=864 gold contracts held by the short/issuers for August delivery were given a free pass by the long/stoppers that held the other side of the trade.  This means that these 864 short contracts had no physical gold backing their short positions — and the long/stoppers didn’t want to force them to deliver in August for fear of them driving the gold price to the moon if they went into the spot market [which they would be required to do] and purchased those 864×100=86,400 troy ounces of gold that it would take to cover them.  August silver o.i. increased by 1 contract to 416 still open, minus the 1 contract mentioned above.

What I’m also watching here — and I’m sure Ted is as well, is the remaining gold open interest not only for September, which has never been a traditional delivery month — but also October.  Ted said that many years ago, October used to be a regularly scheduled delivery month in gold, but that month was removed from the schedule way back when.  But, having said all that, the September delivery month shows 10,346 contracts open — and the so-called non-delivery October month has a very chunky 46,034 contracts in it currently.  December is the current front month of record, but with what’s been happening lately in gold deliveries, all eyes should be on the these two months as well.

I’m eagerly awaiting Ted’s weekly commentary, as I just know that he’ll have lots to say about all this, plus much more to add, as he’s the real authority on all this.

There was a decent addition to GLD yesterday, as an authorized participant added 124,092 troy ounces.  And as of 9:15 p.m. EDT yesterday evening, there were no reported changes in SLV.

There was a tiny sales report from the U.S. Mint yesterday, as they sold 1,500 troy ounces of gold eagles — and that was all.

For the month of July, the mint sold 38,500 troy ounces of gold eagles — 10,000 one-ounce 24K gold buffaloes — 1,370,000 silver eagles — plus 19,000 one-ounce platinum eagles.  Except for the platinum sales, it was a pretty horrid month.

There was a fair amount of ‘in’ activity in gold over at the COMEX-approved depositories on Thursday, as 144,395 troy ounces was added.  Of that amount there was 80,377.500 troy ounces/2,500 kilobars added to HSBC USA — and 64,018 troy ounces went into Canada’s Scotiabank.  A link to that activity is here.

In silver, nothing was reported received, but a very decent 956,196 troy ounces were shipped out.  Of that amount there was 606,807 troy ounces shipped out of HSBC USA, plus another 299,327 troy ounces out of CNT.  The balance came out of Scotiabank.  The link to that action is here.

Over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday, they reported receiving 879 of them, plus they shipped out 3,652.  All of the activity was at Brink’s, Inc. as per usual — and the link to that, in troy ounces, is here.

Once again I was wrong about this week’s Commitment of Traders Report in silver for positions held at the close of COMEX trading on Tuesday.  Although the Commercial net short position in gold decreased by the expected smallish amount, there was a tiny increase in silver once again.

But under the surface in the headline gold number, was an absolutely stunning change that both Ted and I were shocked to see.  But it proves Ted’s premise that one of the smaller traders in the Big 8 category most likely had its financial back against the wall — and had to get bailed out in whole or in part by one or more the Big 4 traders.  More on that shortly, as first things first.

In silver, the Commercial net short position rose once again, this time by a tiny 868 contracts, or 4.34 million troy ounces of paper silver.  The Commercial net short positions stands at a new record high of 535.6 million troy ounces of paper silver.

During the reporting week, the commercial traders reduced their long position by 2,264 contracts, plus they reduced their short position by 1,396 contracts.  The difference between those two numbers is the change for the week.  With such a small change in the commercial net short position, there wasn’t much activity in each category.  Ted said that Big 4 increased their short position by a bit more than 100 contracts — and the raptors, the commercial traders other than the Big 8, added about 800 contracts to their short position, which means that the short position of the ‘5 through 8’ traders was basically unchanged.  In the grand scheme of things, these changes are not even rounding errors.  Ted pegs JPMorgan’s short position at around 32,000 contracts, unchanged from his estimate last week.  We get a new Bank Participation Report next Friday — and that will enable Ted to calibrate their short position more precisely.

Under the hood in the Disaggregated COT Report, things were quite a bit different, as the Managed Money traders added a whopping 5,200 contracts to their already gargantuan [and record] long position, plus they increased their short position by 428 contracts, for an increase on the week of 5,200-428=4,772 contracts, which was almost six times the increase in the Commercial net short position.  Of course to make up for that, the traders in the ‘Other Reportables’ and ‘Nonreportable’/small trader categories had to go short the difference — and that’s what they did.  Ted was wondering out loud as to who those traders in the Managed Money might be that were piling in on the long side so enthusiastically.  I mentioned those ‘unblinking long’ non-technical traders as a possibility — and I just know that he’ll have more to say about this in his weekly commentary later today.

Here’s the 9-year chart for the silver COT Report — and it’s as ugly as it’s ever going to get.  I said the same thing after last week’s report as well — and the week before as well.  One of these times I’ll get it right!  Click to enlarge.160731COT - Silver

In gold, the Commercial net short position declined by a smallish 6,454 contracts.  I was hoping for a bit more, but it is what it is.  That change reduced the Commercial net short position in gold down to 30.90 million troy ounces, which is almost no change at all from last week’s report.

But that number is a paper-thin cover for the explosive changes within the Commercial category — and what I’m about say only hints at the future ramifications of these changes.

Even though the Commercial net short position declined by 6,454 contracts during the reporting week, Ted said that the Big 4 traders actually increased their net short position by about 8,400 contracts — plus the raptors, the commercial traders other than the Big 8, also increased their short position by around 1,800 contracts.  But the biggest change was in the ‘5 through 8’ category, as they reduced their net short position by about 16,700 contracts.  My immediate reaction when I saw that number was that one of the Big 4 — most likely JPMorgan, and I’m speculating here — had to come to the rescue of one of the ‘5 through 8’ traders that was about to go bust because of margin calls.  And rather than have this trading firm cover their short position in the open market, which would have driven gold [and most likely silver] prices to the moon and the stars, and bankrupted everyone else in the process — a Good Samaritan stepped in to prevent that from happening, saving themselves, plus everyone else in the process — at least for the moment.

If this is what actually happened, then it has all the hallmarks of another Bear Stearns moment, when JPMorgan was forced to take over that firm back in early 2008 when the same thing was about to happen there.  I look forward to what Ted has to say about this with eager anticipation.

Here’s the 9-year COT chart for gold — and despite the improvement for the second week in a row, the numbers are still ugly.    But all eyes should now be on the changes inside the Big 8 category going forward.  Click to enlarge.160731COT - Gold

The changes in this week’s Commitment of Traders Report are certainly unprecedented — and hint at desperation on part of the commercial traders, especially the smaller ones that don’t have deep pockets like JPMorgan, Citigroup, or maybe Canada’s Scotiabank.  Firms like Morgan Stanley would certainly be a member of the Big 8 — and even Goldman Sachs could even be included in this group now.  These would be five members of the Big 8 — and whoever the three remaining firms that are part of the Big 8, wouldn’t have access to unlimited funding like the Big 5 I just mentioned.  Of course, with the probable rescue of one of the ‘5 through 8’ traders, all that does is elevate one of Ted’s raptors, the commercial traders other than the Big 8, into the Big 8 category by default — and as Ted correctly mentioned, you have to wonder about their financial ability to meet margins calls along with some of the other raptors that are close to Big 8 status as well.

One thing is for sure — there’s big, big trouble brewing in River City at the moment — and how this is resolved remains to be seen — and I’ll have some closing comments on all this in The Wrap.

Here’s Nick Laird’s “Days to Cover” chart updated with yesterday’s COT data for positions held at the close of COMEX trading on Tuesday.  It shows the days of world production that it would take to cover the short positions of the Big 4 and Big 8 traders in each physically traded commodity on the COMEX.  Click to enlarge.160730Days to Cover

As I say in every Saturday column—the short positions of the Big 4 and 8 traders in silver continues to redefine the meaning of the words ‘obscene’ and ‘grotesque.’  For the current reporting week, the Big 4 are short 167 days [more than five and a half months] of world silver production—and the ‘5 through 8’ traders are short an additional 71 days of world silver production—for a total of 238 days, which is a hair under 8 months of world silver production, or 547 million troy ounces of paper silver held short by the Big 8.  These numbers are virtually unchanged from last week’s COT Report.

And it should be pointed out here that in the COT Report above, the Commercial net short position in silver is 535 million troy ounces.  So the Big 8 hold a short position larger than the net position—and by just about 12 million troy ounces.  That’s how grotesque, twisted, obscene—and dangerous—this COT situation in silver has become—and gold and platinum aren’t far behind.

And as an aside, the two largest silver shorts on Planet Earth—JPMorgan and Canada’s Scotiabank—are short about 120 days of world silver production between the two of them—and that 120 days represents around 72 percent [almost three quarters] of the length of the red bar in silver in the above chart.  The other two traders in the Big 4 category are short, on average, about 23 days of world silver production apiece.

The Big 8 traders in gold are short 47.7 percent of the entire open interest in the COMEX futures market in gold, plus they’re short 46.0 percent of the entire COMEX futures market in silver—and these positions are held against thousands of other traders in these two precious metals who are long the COMEX futures market.   Ted pointed out that if you subtract out the market-neutral spread trades in both these precious metals, the Big 8 are actually short a bit more than 50 percent of the total open interest in both metals.

Here’s a chart that Nick Laird passed around yesterday evening, it shows that withdrawals from the Shanghai Gold Exchange for the week ending Friday, July 29 — and during that week, there was 50.440 tonnes withdrawn.  The Click to Enlarge feature is very useful here.160730SGE

I have a decent number of stories for you today — and a couple of them are ones that I’ve been saving for my Saturday column for length and/or content reasons.


What Escape Velocity? — 3 Straight Quarters of 1{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e} GDP

The advance estimate for second quarter GDP came in lower than expected. At just 1.211{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e}, the anticipated rebound from the dreadful winter failed to materialize in any significant way. Worse, benchmark revisions now suggest that GDP has been around 1{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e} for three straight quarters; Q4 2015 was revised down from 1.377{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e} to just 0.869{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e}; Q1 2016 was revised back 0.831{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e}.

The U.S. economy is in serious, long-term trouble. We knew that very well by the volatile nature of GDP almost from the start (the big negative in Q1 2011, for example). Because orthodox economics is entirely obsessed with the economy that “should be”, it favors smoothing out what is truly pertinent texture because it isn’t directly cyclical by implication. What the mainstream needs is not to try to turn statistics into “ideal” numbers, but to actually see them for what they represent especially when they stray into unexpected ranges. From that perspective, weak quarters were not “anomalies” to be dismissed in a fit of confirmation bias, but rather warnings that actually explain how we got here and why everything from economists, especially “overheating”, was unlikely from the start.

This longish and somewhat convoluted chart-filled commentary by Jeffrey Snider appeared on David Stockman’s website yesterday sometime — and if your eyes start to glaze over, you know what to do.  I thank Roy Stephens for pointing it out.  Another link to this article is here.

Sputtering Car Sales Pose a Risk to U.S. Retail Momentum

The recent calm in global markets owes a lot to the U.S. consumer, with payroll gains and rising retail sales helping to buoy the world’s largest economy in June.

Yet there’s one big weak spot: slowing car sales, and it’s not clear which market segment will pick up this slack.

Two charts on U.S. consumption from CreditSights Inc. show just how damaging trouble in the auto industry can be. As you can see from the chart below, spending on vehicles is the largest category of U.S. retail sales, representing 20 percent of overall spending, after groceries at 13 percent.

Crucially, demand for cars has propped up the overall retail sales figure by a particularly wide margin from mid-2014 to March 2016, offsetting weakness in gas stations (as a result of the fall in fuel prices), electronics sellers and department stores. That owes something to the aggressive bid by carmakers to offer discounts and leases to boost sales.

This Bloomberg story showed up on their website at 4:06 a.m. Denver time on Wednesday — and it’s something I found in yesterday’s edition of the King Report.  Another link to this news item is here.

Home Ownership Rate in the U.S. Drops to Lowest Since 1965

The U.S. home ownership rate fell to the lowest in more than 50 years as rising prices put buying out of reach for many renters.

The share of Americans who own their homes was 62.9 percent in the second quarter, the lowest since 1965, according to a Census Bureau report Thursday. It was the second straight quarterly decrease, down from 63.5 percent in the previous three months.

The drop extends a years-long decline from the last housing boom, in part because of tight credit and a shift toward renting in the aftermath of the crash. First-time buyers have been struggling to find affordable properties as low mortgage rates and an improving job market spur competition for a tight supply of listings. Home prices rose 5.2 percent in May from a year earlier, according to the S&P CoreLogic Case-Shiller index of values in 20 cities released this week.

One of the biggest hurdles now is affordability,” Mark Vitner, a senior economist at Wells Fargo Securities LLC in Charlotte, North Carolina, said before the Census Bureau report was released. “Home prices are rising so much faster than incomes, so it’s hard for buyers to save for a down payment.”

The home ownership rate reached a peak of 69.2 percent in June 2004.

This rather brief Bloomberg story put in an appearance on their website at 8:25 a.m. MDT on Thursday morning — and it’s the second news item in a row that I found in yesterday’s edition of the King Report.  Another link to this news item is here.

Donald Trump’s Candidacy: The Good and the Bad of It — David Stockman

In the next sections we shall document at length why the U.S. is a nation on the brink of financial ruin. Our purpose at this point, however, is to dispel any illusion that Donald Trump—–the man and his platform—-offers any semblance of a remedy.

In the great scheme of history, the Donald’s great purpose may be to simply disrupt and paralyze the status quo. And that much he may accomplish whether he is elected or not.

Their entire regime of casino capitalism, beltway racketeering and imperial hegemony is being unmasked. The unwashed masses are catching on to the “rigged” essence of the system, and have already become alienated enough to rally to outlaw politicians—– like Bernie and Trump—–peddling ersatz socialism and red neck populism, respectively.

To be sure, the metaphor of Shock and Awe and the idea of “regime change” have been given a bad name by Bush the Younger and his bloody henchmen. Yet there is no better way to describe Donald Trump’s rise and role than with exactly those terms.

This commentary is most likely part of David’s new book that’s coming out shortly.  This excerpt appeared on his Internet site yesterday — and it comes courtesy of Roy Stephens as well.  Another link to it is here.

The USA Debt Time-bomb Tocking, Ticking, Tock, Tick… — F. William Engdahl

Most of the world has an image of the United States as the one country of the advanced industrial world that took consequent action in the wake of the March 2007-September 2008 financial crisis. The result, we are carefully led to believe—via the politically ever-correct mainstream media like The New York Times or the CNBC financial network or Bloomberg—is that American banks and corporations today are back on their feet, healthy, robust. We are led to believe that eight years of Obama Administration economic genius have produced near-all-time low unemployment as the U.S. leads the way among the G-7 to healthy growth. Only one thing wrong with this picture—it’s a complete, fabricated lie, fabricated by Washington with the collusion of the Wall Street banks and the Federal Reserve. The reality is pretty scary for those living in ignorance. The cracks now emerging in an unprecedented level of U.S. corporate debt are flashing red alert on a new economic crisis, a very, very ugly one.

Nobel economics laureate Paul Krugman once made the stupid argument that “debt doesn’t matter.” Dick Cheney back during the 2002 Washington budget debates over the wisdom of making new tax cuts amid huge costs to finance the new Washington War on Terror, made the equally stupid comment, “Reagan proved that deficits don’t matter.” In the real world, where debts of private households, of governments like Greece or Portugal or Detroit City, or private corporations like Chesapeake Energy or General Motors, effect jobs, technology, entire communities or nations, debt certainly does matter.

Even more dangerous than the enormous rise in US National Debt since 2000, to levels today of over $19 trillion or 108{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e} of GDP, is the alarming rise since 2007 in U.S. debt of corporations, excluding banks. As of the second quarter of 2015 high-grade companies tracked by JPMorgan Chase paid $119 billion in interest expenses over the year, the most in debt service costs since 2000. Disturbing is that that was despite record low debt borrowing costs of 3{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e}. US corporations took advantage of the Fed’s unprecedented near-zero interest rates to borrow up to the hilt. It made sense were the economy really improving. Now with a significant recession looming in the USA, the debt is suddenly a problem.  This is the true reason the Fed is unable to raise interest rates beyond the purely symbolic 0.25{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e} last December. The US corporate debt pyramid would topple. Yet the zero interest rates are wreaking havoc for those investors or insurance companies invested in bonds for “security.”

This commentary by Engdahl was posted on the journal-neo.org Internet site on Thursday sometime — and it’s definitely worth reading.  I thank Judy Sturgis for sharing it with us — and another link to this article is here.

Doug Casey on “Brexit”

On June 23, the U.K. had a referendum in which 52{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e} of voters opted to leave the European Union. I applaud Britain for leaving the corrupt, costly, and dysfunctional E.U. It may be the best thing that’s happened to Europe since the end of World War 2. And, I think, it signals the start of some major new trends.

In principle, the idea of the European Union sounded good. All the signatory countries joined a customs union so goods and people could flow freely.

The idea was to both increase general prosperity and decrease the chances of another war. It sounds very libertarian—in principle. But in practice it turned out very differently. And may wind up doing the opposite of its intended purpose.

Europeans could have had all the benefits of free trade simply by eliminating all import duties and quotas—a very simple and costless solution. Having duties and quotas amount to putting your own country under embargo. They increase the costs and decrease the availability of foreign goods and services; that lowers a country’s competitiveness while decreasing its standard of living. It sounds insane.

This longish commentary by Doug showed up on the internationalman.com Internet site yesterday — and it’s certainly worth reading as well.  Another link to this article is here.

Deutsche Bank Said to Revive Trading of Credit Options in Europe

Deutsche Bank AG is dipping back into an area of the credit derivatives market in Europe that it all-but pulled out of in 2014.

Germany’s largest lender has resumed trading options on credit-default swap indexes for the first time in more than 18 months, according to two people familiar with the matter, who asked not to be identified because they’re not authorized to speak about it.

Deutsche Bank stopped buying and selling most credit-default swaps on individual companies in late 2014, when it cut as many as 10 credit traders in London, including index and options traders. Chief Executive Officer John Cryan signaled on Wednesday he may have to deepen cost cuts after second-quarter profit was almost wiped out by a slump in trading and restructuring costs.

Charlie Olivier, a spokesman for Deutsche Bank in London, declined to comment on the bank’s trading activity in credit index options.

This story put in an appearance on the Bloomberg Internet site at 4:05 a.m. Denver time on Friday morning — and I thank West Virginia reader Elliot Simon for pointing it out.  Another link to this news item is here.

New Cold War McCarthyism…Weaponizing Putin: John Batchelor Interviews Stephen F. Cohen

It has been a kind of good news/bad news kind of week in the NCW (New Cold War). The Russians are back in the Olympics – the good news- and the bad news is the Washington War Party, in this case the military and intelligence wings, have stated their position that cooperating with Russia in Syria will not work. Also of note were accusations from media and spokespeople from the DNC about Russian hacking of DNC emails that were turned over to WikiLeaks. (Although the NY Times stated the claims were unproven speculations, and that Wikileaks’ Mr. Assange also denied Russian complicity.) Cohen, however, reminded of the days of McCarthyism in the’50s, waxes and wanes from angry to melancholy over the implications of “neo-McCarthyism” that is now being used in a smear campaign against Trump by the Clinton forces. It is interesting that these people think Americans are that naïve and conditioned enough to believe such nonsense, that their own credibility may not be questioned.  And perhaps there is also a little desperation present in the Clinton camp too.

Cohen believes that the new McCarthyism may be defeated by the mini-détente and the very cooperation of forces, Russian and American, in Syria. But Cohen states, “Someone may have walked out of this deal”. Batchelor on the other hand, worries that McCarthyism “stains the fabric of society”. But as Cohen points out, Ash Carter (DOD) came out in opposition to a Russian American coalition in Syria.  Inexplicably, when Obama needs to stand firm with détente and cooperation with Russia in Syria and crush the opposition at home, he remains mute. Another glaring point (that was not made in this discussion) is that, unlike the 1950s McCarthyism, the new McCarthyism is a focused hostility on a presidential candidate. Another point that can be made is that in Obama’s presidency we see open public defiance within the government to a president’s policies by people allegedly serving that regime.

Finally the great changes in Turkey are discussed. The position of Erdogan is that the Americans were involved in the attempted coup. According to Cohen this is the political perception being pursued. Also apparently it is Erdogan’s position that he was warned by Russian intelligence that he would be assassinated and owes his life to Putin. Whether true or not, this is Erdogan’s position and it has profound implications for Turkish relations towards Washington, Putin and NATO. And one could speculate that this new “win” for Putin – a possible alliance between Russia and Turkey may be in the works – may have also effected a renewed effort by the Washington neocons to thwart a cooperative effort in Syria.

This 40-minute audio clip was posted on the audioboom.com Internet site on Tuesday.  I thank Ken Hurt for the link, but the big THANK YOU as always is reserved for Larry Galearis for the above executive summary, which is certainly worth reading if you don’t have the time/interest in listening to the whole interview.  Another link to all this is here.

U.S. Lifts Kremlin Capital Blockade – SOVCOM FLOT Floats $750 Million Bond, U.S. Banks Submerge Timchenko Takeover Risk

A Russian state bond for $750 million is such an obvious target, European bankers are asking why didn’t U.S. government war fighters against Russia shoot down last month’s Sovcomflot issue. This followed by just four weeks the campaign by the U.S. Treasury to stop U.S. investment banks and the international security clearance companies, Euroclear and Clearstream, from trading the bond issued in May by Russian state bank, VTB.

Sovcomflot, Russia’s state-owned shipping company and one of the world largest oil tanker groups,  successfully placed  $750 million in 7-year bonds at 5.735{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e} on June 23. VTB and Sberbank were the Russian underwriters,  JP Morgan and Citigroup were the American bank underwriters. Sovcomflot’s prospectus confirms its bond has been cleared to trade with all three global clearance agencies — Depository Trust Company (DTC) of New York, Euroclear of Brussels, and Clearstream of Luxemburg.  Says a London bond trader:  “The DTC is dominated by Citi, Morgan Stanley and J P Morgan. Euroclear  is owned by J P Morgan. These Americans can hardly be sanctions busters unless the U.S. Treasury has all of sudden decided to go soft on the Russian oil and gas business, and on Russians who have been on the sanctions lists for two years. Is the war petering out, like the Obama Administration?”

Sovcomflot is a 100{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e} state-owned shareholding company. A decade of schemes to privatize its shares on stock exchanges in New York, London, Frankfurt and Moscow have so far come to nothing.

Its board is appointed by the state, and is chaired by a state official. Its chief executive, Sergei Frank (below, left), is a former federal Transport Minister and protégé of Mikhail Fradkov, a former prime minister and currently head of Russia’s Foreign Intelligence /Service (SVR).  An English appointee on the Sovcomflot board, David Moorhouse (right),  is not listed as an independent. He used to run the shipping classification and inspection company, Lloyds Register. In the past he and the Register serviced Sovcomflot’s fleet safety and insurance requirements. Moorhouse also helped Frank respond to critical reporting of Sovcomflot’s affairs in the London maritime press.

I was intrigued by this article — and even more so when I read about the Depository Trust Company [DTC] in the second paragraph — and one of Ted Butler’s least favourite financial organizations in the world.  It got my ‘spidey senses’ tingling, but I can’t put my finger on exactly why.  I was amazed that anyone would write a story in this much detail and depth about a Russian bond issue.  I don’t know what to make of it, but I just get the sense that this is a big deal in a way that I can’t determine yet.  It was posted on the russia-insider.com Internet site a week ago yesterday — and I thank ‘aurora’ for passing it around.  His covering comment in the e-mail was “Very interesting article. Wonder what’s up?”  Exactly my thoughts, dear reader.  Another link to this very interesting commentary is here.

Moscow and Tehran ink energy deals, discuss free trade zone

A five-year strategic cooperation plan was agreed on Friday between Moscow and Tehran during the visit by co-chair of the Russia-Iran Joint Economic Commission Mahmoud Vaezi’s to the Russian capital.

The sides signed a contract for the construction of a power station in Iran’s Hormozgan province. The power plant’s four generators will have a 1,400 megawatt capacity. Moscow has already approved a €2.2 billion loan for infrastructure projects in the Iran, including the construction of the power station.

During the meeting with Russian Energy Minister Aleksandr Novak, Vaezi said Tehran plans new energy contracts with Russia in the near future. According to him, in two or three months Iran will reach its pre-sanctions oil output level of four million barrels a day. Vaezi added that the country has already regained 80 percent of the market share it held before the US and EU imposed sanctions on its oil industry in 2012.

Novak told the minister that almost all Russian oil and gas companies have shown an interest in energy exploration and production projects in Iran.

This news item appeared on the Russia Today website at 2:44 p.m. Moscow time on their Friday afternoon, which was 6:44 a.m. in Washington — EDT plus 8 hours.  Not surprisingly, it’s another contribution from Roy Stephens — and another link to this story is here.

BOJ does bare minimum for Abenomics reboot

The Bank of Japan is doing the bare minimum to help reboot Abenomics. The central bank added just 2.7 trillion yen ($26 billion) of equity funds to its annual asset-buying binge at its July meeting. That is about the least it could do without totally disappointing markets or Prime Minster Shinzo Abe, who is digging deep to revamp his attempted revival of Japan’s economy. The BOJ, running low on options, probably wants to keep some powder dry.

Back in 2013, the government and central bank worked in tandem to launch Abenomics with a coordinated assault of spending, reform, and epic bond-buying. Now, though, BOJ Governor Haruhiko Kuroda is holding back, even as Abe touts a 28-trillion-yen stimulus package.

The latest change will see the BOJ almost double its purchases of equity exchange-traded funds from the current rate of 3.3 trillion yen a year, and extend dollar funding for banks operating overseas. The ETF blitz might lift the stock market and thus consumer confidence, but is unlikely to encourage much extra risk-taking by companies that are already awash with cash. There is also a hint policy could be eased again in future, with staff ordered to undertake a “comprehensive assessment” of the economy, prices and BOJ policy.

This opinion piece by Reuters columnist Quentin Webb showed up on their Internet site yesterday sometime — and it’s worth your while if you have the interest.  Another link to it is here — and my thanks to Richard Saler for pointing it out.

Doug Noland: Bubble Battles

Levitated securities markets and maladjusted economic structures around the world would be sustained by nothing less than perpetual ultra-loose finance, the type that only governments and central banks were capable of providing. Private Credit would be insufficient in scope and too unstable. Securities markets without government support would be too volatile and susceptible to crashes. Perhaps they were unaware that there could be no retreat, but governments did take full control. And the more unstable the financial and economic underpinnings, the more egregious the government interventions required to impose transitory stability. Markets reacted positively to this extraordinary imposition, ensuring overbearing Bubbles with only deeper addiction to loose finance. Desperate policymakers accommodated with regrettable pronouncements of “whatever it takes.”

Bubbles always require rapid and increasing Credit expansion. The global government finance Bubble is no different. The world is generally at near zero rates, negative sovereign yields, large deficit spending and about $2.0 TN of annual global QE. Effects have dissipated, ensuring what was originally “shock and awe” overwhelming force is near the brink of not being enough. Crude has sunk back to near $40. Growth has slowed again in Europe, the U.S. and throughout Asia. With the French economy flat-lining, Eurozone Q2 GDP (0.3{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e}) was half of Q1’s. Considering that some sectors and locations are in powerful Bubbles, 1.5{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e} (annualized) Q2 GDP growth speaks poorly for the overall U.S. economy. Ten-year Treasury yields dropped 10 bps this week to 1.45{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e}, clearly betting against Federal Reserve tightening.

Global markets beckon for more loosening. Markets demand that the Bank of Japan turns crazy reckless, even as evidence mounts that now routine reckless hasn’t worked. The markets need Chinese policymakers to ensure $3.0 TN of annual Credit growth, even though it’s apparent to communist leadership that such a course is fraught with major risks. The markets stipulate that the Draghi ECB must continue printing at a Trillion annualized pace, in the face of unprecedented market distortions, internal policy discord and great financial, economic, social and geopolitical risks.

Doug’s Credit Bubble Bulletin appeared on his website around 2 a.m. EDT this morning — and is always a must read for me.  Another link to it is here.

Silver: Once and Future Money — Jim Rickards

Before the Renaissance, world money existed as precious metal coins or bullion. Caesars and kings hoarded gold and silver, dispensed it to their troops, fought over it, and stole it from each other. Land has been another form of wealth since antiquity. Still, land is not money because, unlike gold and silver, it cannot easily be exchanged, and has no uniform grade.

In the fourteenth century, Florentine bankers (called that because they worked on a bench or banco in the piazzas of Florence and other city states), accepted deposits of gold and silver in exchange for notes which were a promise to return the gold and silver on demand. The notes were a more convenient form of exchange than physical metal. They could be transported long distances and redeemed for gold and silver at branches of a Florentine family bank in London or Paris.

Bank notes were not unsecured liabilities, rather warehouse receipts on precious metals.

Renaissance bankers realized they could put the precious metals in their custody to other uses, including loans to princes. This left more notes issued than physical metal in custody. Bankers relied on the fact that the notes would not all be redeemed at once, and they could recoup the gold and silver from princes and other parties in time to meet redemptions. Thus was born “fractional reserve banking” in which physical metal held is a fraction of paper promises made.

This commentary by Jim was posted on the dailyreckoning.com Internet site yesterday — and I thank Jim Gullo for digging it up for us.  Another link to it is here.

Demolishing 3 Common Arguments Against Gold

What are some of the main arguments against gold? The first one you may have heard many times. ‘Experts’ say there’s not enough gold to support a global financial system. Gold can’t support the entire world’s paper money, its assets and liabilities, its expanded balance sheets of all the banks and the financial institutions in the world.

They say there’s not enough gold to support that money supply, that the money supply is too large. That argument is complete nonsense. It’s true that there’s a limited quantity of gold. But more importantly, there’s always enough gold to support the financial system. But it’s also important to set its price correctly.

It is true that, at today’s price of about US$1,315 an ounce, if you had to scale down the money supply to equal the physical gold times 1,315, that would be a great reduction of the money supply. That would indeed lead to deflation. But to avoid that, all we have to do is increase the gold price. In other words, take the amount of existing gold, place it at, say, US$10,000 dollars an ounce, and there’s plenty of gold to support the money supply.

In other words, a certain amount of gold can always support any amount of money supply if its price is set properly. There can be a debate about the proper gold price, but there’s no real debate that we have enough gold to support the monetary system.

This is another worthwhile commentary from Jim.  It showed up on the sharecafe.com.au Internet site on their Thursday sometime — and it’s another article I found on the Sharps Pixley website.  Another link to this article is here.

Execs flee GLD – The revolving door at the SPDR Gold Trust Sponsor

A remarkable but little noticed development has occurred behind the scenes of the SPDR Gold Trust (GLD) over the last 3 years. This development concerns the very high level of executive staff turnover at World Gold Trust Services, the New York based ‘Sponsor’ of the mammoth gold GLD gold-backed Exchange Traded Fund that is listed on the NYSE.

For within the space of less than 3 years, World Gold Trust Services has gone through 4 Chief Executive Officers (CEOs) and 3 Chief Financial Officers (CFOs). By any standard this is a huge amount of senior executives moving through the roles, and would normally ring alarm bells in the corporate governance departments of major institutional investors. Perhaps it has caused concern among institutional investors of the SPDR Gold Trust (GLD), but if it has, it has gone unreported.

New York based World Gold Trust Services (WGTS) LLC is a fully owned subsidiary of the London-based World Gold Council. WGTS is a Delaware registered limited liability company (for-profit) established in 2003 by the World Gold Council and run out of offices at 685 Third Avenue, in midtown Manhattan, New York. The World Gold Council (WGC) itself is a non-profit association registered in Geneva under Swiss Civil Code Article 60. So the structure of the relationship is a non-profit organization, the World Gold Council, owning 100{f02ffe5e8b39fd7974c2720d01ccf381ddc9ebb4164215842085b3c57e4f642e} of a for-profit company, World Gold Trust Services.

This very interesting story by Ronan Manly put in an appearance on the Singapore-based bullionstar.com Internet site yesterday — and is certainly worth reading.  Another link to this commentary is here.  I found it on the Sharps Pixley website.

Barrick puts its Australia Super Pit stake on the market

Barrick Gold has put its half of Kalgoorlie’s iconic Super Pit gold mine on the market, finally confirming it intends to complete its exit from Australia.

The sale of its half of Kalgoorlie Consolidated Gold Mines has been mooted since Barrick began selling its Australian gold mines two years ago, and the global gold major handed over operational control of the Super Pit to partner Newmont Mining just over a year ago.

But Barrick finally confirmed it is looking to quit is stake early this morning in its June quarter production report, saying it intends to “initiate a process to explore the sale” of its half-share in the storied mine.

Barrick said the Super Pit was expected to produce about 700,000 to 730,000 ounces of gold this year, at average all-in sustaining costs of $US670 to $US700/oz.

This gold-related news item appeared on The Western Australian website on Thursday afternoon local time ‘down under’.  It was picked up by the au.news.yahoo.com Internet site — and I found it embedded in a GATA release.  Another link to this story is here.


There wasn’t much going on down at the pond on Thursday, at least initially — and the two grebe shots in yesterday’s column were all I had to show for 30 minutes of sitting quietly.  Then a baby muskrat showed up — and that event kept me entertained for the next hour or so.  Here are the first three photos…and the last one is from a rather unconventional angle, but I thought it worth sharing nonetheless.  It was so close that depth of field was a real issue. The red reflection on the water is from a building in the distant background.  I’ll have more photos of this critter on Tuesday.160730 2016 07 28 4

160730 2016 07 28 5160730 2016 07 28 6


Today’s pop ‘blast from the past’ dates from 1973 — which is an astonishing 43 years ago. And if you don’t know the piece, then you don’t get out much.  It was never issued as a single — and appeared only an L.P.  Here’s Don Henley doing the honours — and the link is here.

Today’s classical ‘blast from past’ dates from 1878.  It’s Tchaikovsky’s Violin Concerto in D major, Op. 35 which he composed in less than a month when he was staying in Clarens, Switzerland and, rightfully so, it’s also considered one of the most technically difficult works for the violin.

Here’s the gifted Dutch violinist Janine Jansen doing the honours, with Paavo Järvi conducting the Frankfurt Radio Symphony Orchestra back on 19 April 2013.  The link to you the youtube.com video is here.

It was obvious that the powers-that-be were all over the precious metal prices during the COMEX trading session on Friday, because if they’d been allowed to trade freely, the moon and the stars would have been the limit as far as closing prices were concerned.  Then the resulting margin calls to the Big 8 traders alone would have certainly buried more of them and, as I said in my discussion on the COT Report, it appears that one of the smaller trader has already been bailed out.

Since this is my Saturday column, here are the 6-month charts for the Big 6+1 commodities as of the close of trading yesterday.160730 6-month gold

160730 6-month silver160730 6-month platinum160730 6-month palladium160730 6-month copper160730 6-month NG160730 6-month WTIC

Ted mentioned on the phone yesterday that the current paper loses for the Big 8 now total at least $3 billion dollars as of the close of trading on Friday — and those loses do not include the realized gains that they made earlier this year.  He says it’s likely more than that, but wasn’t able to compute it more precisely during the time we spent on the phone yesterday, which was considerable.  These are huge loses, but there’s now no question that for some of the small traders in the Big 8 category, plus most likely for some of the raptors [the commercial traders other than the Big 8] the writing is on the wall.

I’d guess that a resolution to all this is very near — and there are only three end-game scenarios that I can think of at this time of morning — and they are all ugly — and are as follows: 1] with the approval of the CFTC and SEC, both organizations that most certainly have to know what’s going on at the moment, we’ll get another JPMorgan-led drive-by shooting like we had starting on May 1, 2011 in silver.  This time it would be in gold as well, plus platinum most likely.  But as to how successful that might be in the current financial and monetary environment remains to be seen.  2] Another one or more small Commercial traders rush to cover — and we have a melt-up in precious metal prices, plus a melt-down in the U.S. banking system as the margin calls bankrupt ever larger players up the precious metal food chain as the price management scheme unwinds around the world, or 3]  The CFTC is forced to close the COMEX in order save JPMorgan et al.  That would save all the short players, but suddenly the precious metals would be selling on the spot market, with no futures and options attached to them.  I can’t even begin to comprehend what would happen to the financial market on a world-wide basis if that came to pass.

Ted was of the opinion that the possibility existed that these unprecedented gold deliveries we’ve been watching unfold over the last two or three months could be part and parcel of what’s happening now.  I couldn’t agree more.

The other thing we talked about — and I alluded to in my discussion on the COT Report earlier, was the fact that with such huge volume and open interest, there could be all kinds of things going on under the hood in the COMEX futures market that can’t be seen in the COT Report, or at least that are not that obvious.  But in the ‘obvious’ category — and as a ‘for instance’ the huge increase in the long position in silver in the Managed Money category this week.  Who was that — and what was it all about?

There are many more questions than answers, but JPMorgan et al have now painted themselves into such a small corner that there doesn’t appear to be any more wiggle room left — and the first sign of big trouble was the apparent rescue of one of the Big 8 traders in the COMEX futures market in gold.

A cornered beast is a dangerous animal — and those caught in the price management scheme as it breaths its last, will do just about anything, legal or otherwise, to save themselves and the system that nurtures them.  So this bears watching carefully in the days and weeks ahead, if in fact we actually have that much time left.

‘Push’ really has become ‘shove’ at this juncture — and I must admit that I’m on ‘Red Alert’ from this point onward.

How did it come to this?

That’s all I have for the day — and the week — and I’ll see you here on Tuesday.


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