The COT Report Was Disappointing, But About What Ted Expected

27 May 2017 — Saturday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price didn’t do much until about 9:30 a.m. China Standard Time on their Friday morning — and then began to chop quietly higher from there.  The rally got more interesting starting about ten minutes before the London open — and that action lasted until around 12:30 p.m. BST in London.  It chopped a few dollars lower from there until around 12:20 p.m. in New York — and then rallied quietly until a minute or so before 3 p.m. in the thinly-traded after-hours market.  Then it was sold lower equally as quietly until the 5:00 p.m. close of trading.

The low and high ticks were recorded by the CME Group as $1,252.60 and $1,269.30 in the June contract.

The gold price finished the Friday session in New York at $1,266.70 spot, up $11.30 on the day.  Gross volume was around 411,000 contracts, but it netted out at around 99,500 contracts.  Needless to say, roll-over/switch volume out of June was enormous.

Here’s the 5-minute tick gold chart courtesy of Brad Robertson.  There was spotty volume in Far East trading, but that changed a few minutes before the London open as the price spiked higher — and as you can tell, volume was pretty decent for the remainder of the Friday session — and really didn’t drop off to background until after the gold price was capped and sold lower at 1 p.m. Denver time on the chart below.

The vertical gray line is 10:00 p.m. Denver time, midnight in New York — and noon China Standard Time [CST] the following day in Shanghai—and don’t forget to add two hours for EDT.  The ‘click to enlarge‘ feature is a must.

The price action in silver was very similar to gold, except there was a bit more bouncing around during the New York trading session — and its 12:20 p.m. EDT rally also got sold a bit lower starting around 3 p.m. in the thinly-traded after-hours market.

The low and high ticks in this precious metal were reported as $17.085 and $17.38 in the July contract.

Silver was closed yesterday at $17.31 spot, up 19.5 cents on the day.  Net volume was very decent at 59,500 contracts — and roll-over/switch volume out of July was moderate.

Here’s the 5-minute tick chart for silver and, like for gold, there was spotty volume in Far East trading…but it picked up substantially starting with the price move just before the London open, which is around 01:00 a.m. MDT on the chart below.

The vertical gray line is 10:00 p.m. Denver time, midnight in New York — and noon China Standard Time [CST] the following day in Shanghai—and don’t forget to add two hours for EDT.  The ‘click to enlarge‘ feature is a must here as well.

Platinum was up about 4 bucks by ten minutes before the Zurich open — and like gold and silver…away it went to the upside.  The rally was capped — and then sold lower starting around 10:20 a.m. EDT in New York.  That sell-off lasted until 12:20 p.m. EDT as well — and it inched higher from there into the COMEX close — and didn’t do a lot after that.  Platinum finished the Friday session at $959 spot, up 13 bucks from its close on Thursday.

Palladium followed the same general price pattern as platinum, at least up until the London p.m. gold fix.  It blasted higher shortly after that, only to run out of gas/get capped at the Zurich close.  It traded sideways for the rest of the day.  It closed at $789 spot, up 19 dollars.

The dollar index closed very late on Thursday afternoon in New York at 97.23 — and then chopped generally higher until 2:30 p.m. in Shanghai on their Friday afternoon, which was 30 minutes before the London open.  At that point it fell down to the 97.07 mark by shortly after 9 a.m. in London — and traded sideways until the noon silver fix.  Then a ‘rally’ began at that juncture that made it as high as the 97.55 mark by around 12:20 p.m. in New York — and began to sell off quietly from there until a few minutes before the COMEX close.  It chopped sideways for the remainder of the Friday session from there.  The dollar index finished the Friday session at 97.41 — up 18 basis points from Thursday.

You should note that the prices of gold, silver and platinum all turned higher the moment the dollar index got sold off its high tick of the day at 12:20 a.m. EDT.

And here’s the 6-month U.S. dollar index, which I present for its entertainment value only.

The gold shares gapped up about a percent at the open — and began to chop quietly lower from there until the 12:20 EDT turn-down in the dollar index, accompanied by the subsequent rally in the precious metals.  That lasted until ‘da boyz’ showed up at precisely 3:00 p.m.  By the close, what little gains there were, had mostly vanished, as the HUI finished the Friday session up only 0.47 percent.

The silver equities followed the same general price pattern as the gold stocks — and they too got sold off at the end of the day, as Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up only 0.55 percent.  Click to enlarge if necessary.And here’s the 6-month Silver Sentiment/Silver 7 Index so you can see the longer term.  Click to enlarge.

Here are the three charts from Nick that show what’s been happening for the week, month — and year-to-date.  The first one shows the changes in gold, silver, platinum and palladium for the past trading week, in both percent and dollar and cents terms, as of their Friday closes in New York — along with the changes in the HUI and the Silver 7 Index. The Click to Enlarge feature really helps on all three.

And here’s the month-to-date chart…

…and the year-to-date…

Like you, dear reader, I’m totally underwhelmed by the performance of the precious metal equities since the rally began about two weeks ago.  And if you’re looking for an explanation/reason, I don’t have one…nor does anyone else.


The CME Daily Delivery Report showed that 22 gold and 42 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.  I’m not going to bother breaking down the gold contracts.  But in silver, the two short/issuers were ADM and MacQuarie Futures with 24 and 18 contracts respectively…ADM out of their client account — and MacQuarie Futures from their in-house trading account.  The two long stoppers that mattered were AMD with 17 for its client account — and the CME Group with 11 contracts…all to be split up for the 1,000 oz. mini silver contract.  The link to yesterday’s Issuers and Stoppers Report is here.

The CME Preliminary Report for the Friday trading session showed that gold open interest in May declined by 1 contract, leaving 22 left, minus the 22 gold contracts mentioned above.  Thursday’s Daily Delivery Report showed that only 1 gold contract was posted for delivery on Monday, so those numbers work out fine — and the remaining 22 gold contracts are out for delivery on Tuesday as per the above, so May gold is done.  Silver o.i. in May actually rose by 1 contract, leaving 42 remaining.  Thursday’s Daily Delivery Report showed that 21 silver contracts were actually posted for delivery on Monday, so that means that another 21+1=22 silver contracts were added to the May delivery month.  The 42 remaining silver contracts are out for delivery on Tuesday, so May silver on the COMEX is complete as well.

There were no reported changes in GLD yesterday, but an authorized participant removed 946,186 troy ounces of silver from SLV.  Presumably that would be JP Morgan converting shares into physical metal, as the price action over the last two weeks certainly doesn’t indicate that there would be net investor selling going on.  I’ll be interested in Ted’s take on this in his weekly review this afternoon.

There was no sales report from the U.S. Mint on Friday.

Month-to-date the mint has sold 14,000 troy ounces of gold eagles — 4,500 one-ounce 24K gold buffaloes — and 2,155,000 silver eagles.  That’s a big improvement from last month, but that’s not saying a lot now that JP Morgan is no longer at the trough.

It was another day of wall-to-wall zeros in gold over at the COMEX-approved gold depositories on the U.S. east coast on Thursday.

It was pretty busy in silver once again, as 559,691 troy ounces were received…all at HSBC USA…and 1,353,429 troy ounces were shipped out.  The silver received at HSBC USA was transferred out of Canada’s Scotiabank.  There was also 458,016 troy ounces shipped out of Brink’s, plus JP Morgan parted ways with 355,722 troy ounces.  The link to all this activity is here.

After Wednesday’s big movements, it was a lot quieter over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday, as only 481 kilobars were reported received — and another 3,108 were shipped out the door.  All of this activity was at Brink’s, Inc. as per usual — and the link to that activity, in troy ounces, is here.


The numbers in yesterday’s Commitment of Traders Report for positions held at the close of COMEX trading on Tuesday were, alas, pretty much as Ted said they might be.

In silver, the Commercial net short position increased by 6,650 contracts, or 33.3 million troy ounces of paper silver.  They arrived at that number by decreasing their long position by 2,417 contracts, plus they added 4,233 contracts to their short position.  They sum of those two numbers is the change for the reporting week.

Ted said that the Big 4 traders increased their short position by around 3,700 contracts — and he attributes 3,000 of that amount to JP Morgan, which brings their short position back up to about the 18,000 contract mark.  The big ‘5 through 8’ traders actually decreased their short position by about 3,000 contracts — and that’s because, as Ted said…”it was clearly Managed Money short covering“. [As he pointed out in last week’s COT commentary, there were a couple of Managed Money traders with positions large enough to move into the ‘5 through 8’ category — and they were covering short positions as the price rose.  That was something that he mentioned in his quote in my Friday column.]  Continuing on…Ted’s raptors, the 29 smaller commercial traders other than the Big 8, sold 5,000 contracts of their long position.

The Commercial net short position is back up to 319.9 million troy ounces — and the only reason it’s that large is because of the long positions held by the unblinking non-technical funds in the Managed Money category, plus those longs in the ‘Other Reportables’ category as well.

Under the hood in the Disaggregated COT Report it was all Managed Money trading, plus a lot more, that accounted for the change, as they decreased their short position by 12,403 contracts, plus they sold 390 long contracts — and the difference between those two numbers was the change for the reporting week.  The traders in the other two categories made up the difference between the Managed Money traders and the change in the Commercial net short position, because they sold long positions by the bucketful.

Here’s the 3-year COT chart for silver.  I certainly wasn’t happy to see the Big 4/JPM go short as much as they did, but I was happy to see that except for 390 contracts sold on the long side in the Managed Money long category, the core non-technical Managed Money traders stood pat during the reporting week.  Click to enlarge.

In gold, the commercial net short position rose an eye-watering 31,432 contracts, or 3.14 million troy ounces of paper gold — and that’s certainly due to the fact that both the 50 and 200-day moving averages in gold were broken to the upside during the reporting week. They arrived at this number by reducing their long position by 1,605 contracts, plus they added a whopping 29,827 short contracts…all courtesy of the Managed Money traders.

Ted said that the Big 4 added a monstrous 19,200 contracts to their short position, which is never happy news — and the ‘5 through 8’ large traders added around 3,400 short contracts as well.  Ted’s raptors, the small commercial traders other than the Big 8, reduced their long position by about 8,800 contracts.

The commercial net short position in gold is back up to 17.43 million troy ounces of paper gold.

Under the hood in the Disaggregated COT Report it was, like in silver, all Managed Money traders, plus much, much more…as they increased their long position by 29,799 contracts, plus they covered 15,381 short contracts for a reporting week change of 45,180 contracts.  Almost all of the difference between that number — and the change in the commercial net short position, came from the traders in the ‘Other Reportables’ category.

Here’s the 3-year COT report for gold — and I’m not happy about it all.  But then again, I’m not surprised.  Click to enlarge.

Although I certainly wasn’t happy with the COT Report in silver, it could have been worse.  The set-up is still wildly bullish to the upside, but the big deterioration in gold sort of throws a wet blanket over the whole thing.  I’ll be more than interested in what Ted has to say in his weekly review this afternoon — and I’ll steal what I think I can get away with for my Tuesday column.


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 ‘5 through 8’ traders in each physically traded commodity on the COMEX.  These are the same Big 4 and ‘5 through 8’ traders discussed in the COT Report above.  Click to enlarge.

For the current reporting week, the Big 4 are short 131 days of world silver production—and the ‘5 through 8’ traders are short an additional 55 days of world silver production—for a total of 186 days, which is about six months of world silver production, or about 452.0 million troy ounces of paper silver held short by the Big 8.  [In last week’s report the Big 8 were short 182 days of world silver production.

In the COT Report above, the Commercial net short position in silver is 319.9 million troy ounces.  The short position of the Big 8 traders is larger than the total Commercial net short position by a whopping 452.0 – 319.9 = 132.1 million troy ounces.

As I also stated in the above COT Report, Ted pegs JP Morgan’s short position at around 18,000 contracts, or 90 million ounces, which is up from the 15,000 contracts they were net short in the previous week’s report.  90 million ounces works out to around 37 days of world silver production that JP Morgan is short.  That’s compared to the 186 days that the Big 8 are short in total.  JPM is short about 20 percent of the entire short position held by the Big 8 traders.

The approximate short position in silver held by Scotiabank works out to around 53 days of world silver production.  So Scotiabank is the number one silver short in the COMEX futures market — and has been for many weeks in a row.

The two largest silver shorts on Planet Earth—JP Morgan and Canada’s Scotiabank—are short about 90 days of world silver production between the two of them—and that 90 days represents about 69 percent of the length of the red bar in silver in the above chart…a bit over two thirds of it.  The other two traders in the Big 4 category are short, on average, a little over 20 days of world silver production apiece — and those numbers hardly ever change by much — and they’re unchanged from last week’s report.  The four traders in the ‘5 through 8’ category are short, on average, a bit under 14 days of world silver production each, about unchanged from the last week’s report as well.

The short positions of Scotiabank and JP Morgan combined, represents about 48 percent of the short position held by all the Big 8 traders.  How’s that for a concentrated short position within a concentrated short position?

The Big 8 are short 44.4 percent of the entire open interest in silver in the COMEX futures market — and that number would be a bit over 50 percent once the market-neutral spread trades are subtracted out.  In gold, it’s 39.3 percent of the total COMEX open interest that the Big 8 are short.

In gold, the Big 4 are now short 47 days of world gold production, which is up from the 41 days that they were short last week — and the ‘5 through 8’ are short another 18 days of world production, which is up from the 16 days they were short from the prior week, for a total of 65 days of world gold production held short by the Big 8.  Based on these numbers, the Big 4 in gold hold about 72 percent of the total short position held by the Big 8.

The “concentrated short positions within a concentrated short position” in silver, platinum and palladium held by the Big 4 are about 70, 65 and 65 percent respectively of the short positions held by the Big 8.  Silver is up about 2 percentage points from the last reporting week — and platinum and palladium are basically unchanged.

As I said in my closing comments in Friday’s column, I’m on the road this weekend — and I’m only posting a couple of stories, as I have other things to do.  Once again, there’s no John Batchelor/Stephen F. Cohen interview.  But Doug Noland is back.

I’m also having enormous formatting and spacing issues with today’s column and I just hope the links work.


CRITICAL READS

Moody’s Downgrades China — Doug Noland

Marie Diron, Moody’s associate managing director, Sovereign Risk Group, commenting Wednesday on Moody’s Chinese downgrade (Bloomberg Television): “It is likely to be a very medium-term and gradual erosion of credit metrics and we are looking at the policies that the government is implementing. The authorities have recognized the risks that come with high leverage and have a very broad agenda of structural reforms and we take that into account to the point that we think leverage will increase more slowly than it has in the past. But still these measures will not be enough to really reverse the increase in leverage.”

I’ve always felt the rating agencies got somewhat of a bum rap after the mortgage finance Bubble collapse. Sure, their ratings methodologies were flawed. In hindsight, Trillions of so-called “AAA” MBS were anything but pristine Credits. And, again looking back, it does appear a case of incompetence – if not worse. Yet reality at the time was one of home prices that had been inflating for years with a corresponding long spell of low delinquencies and minimal loan losses, along with GDP and incomes seemingly on a steady upward trajectory. The GSEs had come to dominate mortgage finance, while the Fed had market yields well under control. Washington surely wouldn’t allow a housing crisis, which ensured that markets were absolutely enamored with anything mortgage related. So the mortgage market enjoyed bountiful liquidity conditions, and it was just difficult for anyone – including the ratings firms – to see what might upset the apple cart.

The ratings agencies were basically oblivious to the key issue of deepening structural maladjustment throughout the mortgage finance Bubble period. They were inattentive to what a major de-leveraging episode could unleash. But so were the Federal Reserve, Wall Street and the world. Analysis and models did not incorporate latent (financial and economic) fragilities that had compounded from years of rapid credit growth and asset inflation. These days there’s a similar inability to comprehend the myriad global risks associated with the runaway Chinese Bubble.

Doug’s weekly Credit Bubble Bulletin appeared on his Internet site about 2 a.m. EDT this morning — and another link to it is here.


JFK at 100 — Paul Craig Roberts

This Memorial Day, Monday, May 29, 2017, is the 100th birthday of John Fitzgerald Kennedy, the 35th President of the United States.

JFK was assassinated on November 22, 1963, as he approached the end of his third year in office. Researchers who spent years studying the evidence have concluded that President Kennedy was assassinated by a conspiracy between the CIA, Joint Chiefs of Staff, and Secret Service. (See, for example, JFK and the Unspeakable by James W. Douglass)

Kennedy entered office as a cold warrior, but he learned from his interaction with the CIA and Joint Chiefs that the military/security complex had an agenda that was self-interested and a danger to humanity. He began working to defuse tensions with the Soviet Union. His rejections of plans to invade Cuba, of the Northwoods project, of a pre-emptive nuclear attack on the Soviet Union, and his intention to withdraw from Vietnam after his re-election, together with some of his speeches signaling a new approach to foreign policy in the nuclear age, convinced the military/security complex that he was a threat to their interests. Cold War conservatives regarded him as naïve about the Soviet Threat and a liability to US national security. These were the reasons for his assassination. These views were set in stone when Kennedy announced on June 10, 1963, negotiations with the Soviets toward a nuclear test ban treaty and a halt to US atmospheric nuclear tests.

The Oswald cover up story never made any sense and was contradicted by all evidence including tourist films of the assassination. President Johnson had ro cover up the assassination, not because he was part of it or because he willfully wanted to deceive the American people, but because to give Americans the true story would have shaken their confidence in their government at a critical time in US-Soviet relations. To make the cover up succeed, Johnson needed the credibility of the Chief Justice of the US Supreme Court, Earl Warren, to chair the commission that covered up the assassination. Warren understood the devastating impact the true story would have on the public and their confidence in the military and national security leadership and on America’s allies.

This absolute must read commentary appeared on Paul’s website on Wednesday — and I thought I’d save it for Saturday, as the 100th anniversary is on Monday.  I thank ‘David in California’ for bringing it to our attention — and another link to it is here.


Trump directly scolds NATO allies, says they owe ‘massive’ sums

 

U.S. President Donald Trump on Thursday intensified his accusations that NATO allies were not spending enough on defense and warned of more attacks like this week’s Manchester bombing unless the alliance did more to stop militants.

In unexpectedly abrupt remarks as NATO leaders stood alongside him, Trump said certain member countries owed “massive amounts of money” to the United States and NATO — even though allied contributions are voluntary, with multiple budgets.His scripted comments contrasted with NATO’s choreographed efforts to play up the West’s unity by inviting Trump to unveil a memorial to the Sept. 11, 2001, attacks on the United States at the new NATO headquarters building in Brussels.One senior diplomat said Trump, who left the leaders’ dinner before it ended to fly to Italy for Friday’s Group of Seven summit, said the remarks did not go down well at all.This was not the right place or time,” the diplomat said of the very public harangue. “We are left with nothing else but trying to put a brave face on it.“This Reuters story, filed from Brussels, showed up on their Internet site at 3:15 a.m. EDT — and I thank Brad Robertson for sharing it with us.  Another link to it is here.


Trump Slams “Very Bad” Germans For Selling Millions Of Cars In US: “We Will Stop This

A day after Trump stunned his fellow NATO leaders, shoving one of them out of the way for a photo-op and demanding that they “must do more” to offset defense costs which are mostly borne by the U.S., Trump lobbed another bomb at the European center-right consensus by renewing his attacks on the German auto industry during a closed door meeting with two high-ranking European Union officials, according to a report in German magazine Der Spiegel, that was picked up by Bloomberg and CNBC.

Citing unidentified attendees, Spiegel quoted Trump as saying that “the Germans are bad, very bad” and adding “look at the millions of cars that they sell in the U.S. Terrible. We’re going to stop that.” The comments were said to have been made during a closed-door meeting with the E.U.

President Jean-Claude Juncker and the European Council President Donald Tusk, who reportedly both stood up for Germany, according to CNBC.

Trump administration officials immediately went into damage-control mode, even as Juncker said the reports of the comment in question had been exaggerated. National Economic Council Director and former Goldman Sachs President Gary Cohn clarified that the US has concerns with the US-German trade balance, not with Germany itself.

“He said they’re very bad on trade, but he doesn’t have a problem with Germany. He said his dad is from Germany. He said, ‘I don’t have a problem Germany, I have a problem with German trade’,” according to Bloomberg.

This Zero Hedge article showed up on their website at 4:00 p.m. EDT on Friday afternoon — and it’s the second offering of the day from Brad Robertson. Another link to it is here.


NYU professor interviewed about detecting gold and silver market manipulation

Market manipulation scourge Rosa Abrantes-Metz, anti-trust specialist for Global Economics Group in New York and economics professor at New York University, was interviewed by Small Cap Power’s Rachel Lee at the recent Mines and Money conference in New York, where they discussed the professor’s methods of detecting gold and silver market manipulation. The interview is a bit short of six minutes.

Well, dear reader, I haven’t watched this video, but I can tell you right now that the easiest way to find it is in the COT Report numbers — and in the ‘Days to Cover’ chart further up in today’s column.  I found this interview embedded in a GATA dispatch yesterday.


 The PHOTOS and the FUNNIES

 

The first shot is of a red-necked grebe‘s nest, complete with the usual complement of four eggs…with the female watching me nervously just out of frame. I was lucky to get this shot, as if I’d waited another week, there would have been too much foliage in the way.  The second shot is of the male taking his turn on the nest.  This shot was taken the following day when it wasn’t that sunny — and he was pretty much back-lit, so I had to do some fancy work to dig the image out.  The last shot is of the same nest and bird, except it’s from about 200 meters away from across the pond.  I used that 400mm lens, plus a 1.3x teleconverter for this photo, but still had to crop it rather hard.  The click to enlarge feature helps a lot with all three shots.


The WRAP

Today’s pop ‘blast from the past’ dates from 1963…the same year that J.F.K. was assassinated by the ‘Deep State’.  It’s a classic for sure, from happier times…and the link is here.

Today’s classical ‘blast from past’ is somewhat older.  Tchaikovsky composed this work in 1880 to commemorate Russia’s defence of its motherland against Napoleon’s invading Grande Armée in 1812.  Without doubt, it’s one of his most popular works — and always draws a full house whenever it’s performed — and many thousands more when it’s performed outside with real cannons.  I’ve heard it like that on several occasions — and its simply an indescribable experience…and one of those things where no recording can do it justice.  But here’s the Berlin Philharmonic doing it as best as it can be done.  The link is here.


I admit that I’m not sure what to make of yesterday’s price action, as it certainly wasn’t what I was expecting to see going into a major delivery month for gold. Without doubt, there was further increases in the Commercial net short positions in all four precious metals — and we won’t know for sure how much damage has been done until next Friday’s COT Report — and there are still two more trading days to go in the reporting week.  Gold is well above both 50 and 200 day moving averages now — and silver is within spitting distance of its 50-day moving average.

It certainly appears from yesterday’s COT Report that ‘da boyz’ are still there as short buyer and long sellers of last resort — and I look forward to what Ted has to say about the current situation later today.

Here are the 6-month charts for all four precious metals, plus copper, once again and, once again, the high ticks for silver and don’t show up on their dojis, as they occurred long after the COMEX close.  The ‘click to enlarge’ feature helps a bit with the first four charts.

And as I mentioned further up, I’m not at all happy with the performance of the underlying precious metal stocks — and I have no idea whatsoever why they’re not doing better.  You would think that they should be doing great, but that certainly hasn’t been the case.

I’m in Vancouver for the precious metal conference on Sunday and Monday — and I have to get Nick Laird to do some chart work for me for my presentation on Sunday, so I have to get at it before has too many beers after updating all his charts on his Saturday evening ‘down under’.

See you here on Tuesday.

Ed