COMEX Open Interest in Silver: One Billion Ounces

24 November 2017 — Friday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


With the only precious metal market that matters closed for their Thanksgiving holiday yesterday, the gold price didn’t do much on Thursday.  It was down about 3 bucks by shortly before 10 a.m. in London — and then got a bump upwards around the morning gold fix.  After that it traded flat for the rest of the day, before closing at 1 p.m. EST.

Gold finished the Thursday session at $1,290.60 spot, down 90 cents.  It should come as no surprised that net volume for the holiday-shortened trading session was very light at something under 99,500 contracts — and roll-over/switch volume out of December and into future months, was fairly decent.

Silver was sold down 8 cents by shortly after 9 a.m. China Standard Time on their Thursday morning — and then traded sideways until it had its little price jump centered around the morning gold fix in London as well.  It was back to unchanged by minutes after 11 a.m. GMT, but that wasn’t allowed to last.

Silver finished the Thursday session at $17.07 spot — and down 6 cents on the day.  Net volume was only 16,000 contracts, but roll-over/switch volume out of December was very heavy.

Platinum was also sold down a bit when trading began at 6:00 p.m. EST on Wednesday evening.  Its low came shortly before 11 a.m. CST — and although it rallied a few dollars off that low, it couldn’t, or wasn’t allowed to rally back above unchanged on the day.  Platinum was closed at $933 spot, down 4 dollars from Wednesday.

Palladium didn’t do much of anything from a price perspective on Thursday…at least until minutes after Zurich closed, that is.  Then the price became far more animated — and it shot above — and finally closed above, $1,000 spot…finishing the day at $1,003 spot…up 6 bucks.  A strange time to go long, or cover a short position.

The dollar index closed very late on Wednesday afternoon in New York at 93.25 — and began to edge quietly lower once trading began at 6:00 p.m. EST.  The 93.08 low tick was set minutes after 11:30 a.m. in London — and didn’t do a whole lot after that.  The index finished the Thursday session at 93.12 — and down 13 basis points on the day.  Nothing to see here.

And with the U.S. closed for the day, there’s no updated 6-month U.S. dollar index from the folks over at stockcharts.com…or any other data that would normally come from the U.S…HUI, Silver 7, Daily Delivery Report, GLD/SLV, U.S. Mint or warehouse stocks.

Here’s a photo I stole from a sputniknews.com story that I posted in my column earlier this week.  With the headlines and other frills stripped off of it, gold bars are most impressive when all stacked up like that.  Click to enlarge.

The only real reason for today’s column is to empty my in-box of stories, which have a tendency to pile up.  I don’t have all that many, but if added to Friday’s list, it would make my Saturday column a bit much to handle…for you and for me.


CRITICAL READS

Doug Casey on the New Fed Chair

A few words are in order about the likely new Chairman of the Federal Reserve, Jerome Powell.

I don’t know the man personally. Not that it would make any difference; denizens of the swamp within the Beltway usually present well, and a brief meeting rarely allows you to penetrate someone’s social veneer. But I’m pretty confident that if we dined together it would be tense and unpleasant. We’d have no common ground, after the obligatory two minutes on the weather and the state of the roads.

He’s a lawyer, has been a Fed Governor for five years, and appears to be a “steady as she goes” so-called moderate Republican. He’s a lifelong Deep State player. But let’s not waste time psychoanalyzing this bureaucrat; he’s just a cog in the machine. And the machine, at this stage, has a life of its own.

Many of my friends in the alternative press deplore Trump’s appointment of yet another conventional money printer. They were hoping for a “hawk,” who would start liquidating the Fed’s $4.5 trillion balance sheet, and raising interest rates. And they’re right. That $4.5 trillion of super money has driven stock, bond, and real estate prices to insane levels. And today’s artificially low interest rates are discouraging saving, and encouraging people to live above their means.

In an ideal world there would be some radical changes. The best thing for the U.S. in the (famous) long run is to go “cold turkey.” To abolish the Federal Reserve, fire its thousands of employees with their worthless PhDs. Return to 100% reserve banking with a strict separation of demand and time deposits. Depoliticize money by using gold, not Federal Reserve Notes. And default on the national debt, which is rewarding crony capitalists, and will turn future generations of Americans into serfs. And massively deregulate. And abolish the income tax, while cutting spending 90%. Etc. Etc.

The chances of that happening are exactly zero. So let’s talk, instead, about what is going to happen.

The rest of this Doug Casey rant is definitely worth reading as well.  It appeared on the caseyresearch.com Internet site yesterday — and the first person through the door with it was Brad Robertson.  Another link to this worthwhile read is here.


The Mother of All Irrational Exuberance — David Stockman

You could almost understand the irrational exuberance of 1999-2000. That’s because everything was seemingly coming up roses, meaning that cap rates arguably had rational room to rise.

But eventually the mania lost all touch with reality; it succumbed to an upwelling of madness that at length made even Alan Greenspan look like a complete fool, as we document below.

So doing, the great tech bubble and crash of 2000 marked a crucial turning point in modern financial history: It reflected the fact that the normal mechanisms of honest price discovery in the stock market had been disabled by heavy-handed central bankers and that the natural balancing and disciplining mechanisms of two-way markets had been destroyed.

Accordingly, the stock market had become a ward of the central bank and a casino-like gambling house, which could no longer self-correct. Now it would relentlessly rise on pure speculative momentum—- until it reached an asymptotic top, and would then collapse in a fiery crash on its own weight.

So with the market raging in self-fueling momentum at the 2600 mark on the S&P 500, we reflect back to the great dotcom crash for vivid reminders of what happens next. That earlier meltdown is especially pertinent because in many ways today’s stock market mania is far less justified than the one back then.

This commentary by David appeared on his Internet site on Tuesday — and it’s definitely worth reading.  It’s another contribution from Brad Robertson — and another link to it is here.


Fed Fears New Record High Credit Bubble – Danielle DiMartino Booth

Former Federal Reserve insider Danielle DiMartino Booth says the record high stock and bond prices make the Fed nervous because it’s fearful of popping this record high credit bubble. DiMartino Booth says, “The Fed’s biggest fear is they know darn well this much credit has built up in the background, and the ramifications of the unwind for what has happened since the great financial crisis is even greater than what happened in 2008 and 2009.  It’s global and pretty viral.  So, the Fed has good reason to be fearful of what’s going to happen when the baby boomer generation and the pension funds in this country take a third body blow since 2000, and that’s why they are so very, very intimidated by the financial markets and so fearful of a correction.”

Why will the Fed not allow even a small correction in the markets? DiMartino Booth says, “Look back to last year when Deutsche Bank took the markets to DEFCON 1.  Maybe you were paying attention and maybe you weren’t, but it certainly got the German government’s attention.  They said the checkbook is open, and we will do whatever we need to do because we can’t quantify what will happen when a major bank gets into a distressed situation.  I think what central banks worldwide fear is that there has been such a magnificent re-blowing of the credit bubble since 2007 and 2008 that they can’t tell you where the contagion is going to be.  So, they have this great fear of a 2% or 3% or 10 % (correction) and do not know what the daisy chain is going to look like and where the contagion is going to land.  It could be the Chinese bond market.  It could be Italian insolvent banks or it might be Deutsche Bank, or whether it might be small or midsize U.S. commercial lenders.  They can’t tell you where the systemic risk lies, and that’s where their fear is.  This credit bubble is of their making.

In short, the Fed does not know what is going to happen, and according to DiMartino Booth, nobody does. DiMartino Booth contends, “I don’t think any of us know what the implications are for a $50 trillion debt build since the great financial crisis (of 2008).  It is impossible to say.  We have never dealt with anything of this magnitude.”

This very worthwhile 23:30 minute video interview with host Greg Hunter was posted on the usawatchdog.com Internet site on Wednesday — and it comes to us courtesy of Brad Robertson as well.  Another link to it is here.


Canadian households lead the world in terms of debt: OECD

Canada leads the world in terms of household debt levels, and it’s a major risk to the country’s economy, the OECD says in a new report.

In a chapter of a report set to come out next month that has been released in advance, the Organization for Economic Co-operation and Development says that while virtually all countries saw their debt loads increase in the years leading up to the credit crisis of 2007, most have seen their indebtedness decrease over time.

But that’s not the case for Canada and some Scandinavian countries, where household debt levels, as the OECD puts it, “has continued to rise from high levels.”

Canada now leads the world in terms of household debt, when expressed as a percentage of the size of the economy.

This CBC news item was posted on their website on Thursday morning EST — and was picked up by the msn.com Internet site.  It’s yet another news item courtesy of Brad R. — and another link to it is here.


Sochi talks roundup: Russia, Iran, Turkey reach important breakthroughs on Syria

Speaking to the press after his meeting with his Iranian and Turkish counterparts in Sochi on Wednesday, President Putin said the peace talks in Astana and the establishment of de-escalation zones in Syria have made possible a fundamentally “new stage” in the Syrian settlement, and helped secure a “breakthrough” opportunity to crush the terrorists.

In the course of their meeting, presidents Vladimir Putin, Hassan Rouhani and Recep Tayyip Erdogan discussed the progress that has been made in the Syrian settlement process, and the steps necessary to ensure the complete and long-term normalization of the political and security situation in the country.

A joint statement released by the three heads of state after their talks declared that the countries’ collaborative efforts in the 11 months since the establishment of the ceasefire regime in late December 2016 have helped to secure a “breakthrough” in “bringing closer the elimination of [Daesh], the Nusra Front and all other terrorist organizations as designated by the United Nations Security Council.” The countries vowed to continue their cooperation until the terrorists are completely defeated.

Furthermore, the leaders promised to continue their coordinated efforts in reaching a political settlement “to ensure that the progress in the reduction of violence is irreversible.” This includes political support for reconciliation talks between the government and the opposition, assistance to Syrians in restoring the country’s unity, free and fair elections and a work on a constitution that would enjoy the support of the Syrian people. Crucially, the three leaders also reaffirmed their commitment to Syria’s sovereignty and territorial integrity.

This story was posted on the sputniknews.com Internet site at 10:12 p.m. Moscow time on their Wednesday evening, which was 2:12 p.m. in Washington — EST plus 8 hours — and I thank Roy Stephens for bringing it to our attention.  Another link to it is here.


The Urge to Surge: U.S. Military in Middle East Grows 33 Percent in Four Months

The U.S. military footprint in the Middle East has swelled some 33 percent in just the past four months, according to a new Pentagon report.

Since the beginning of July, the 40,517 troops and U.S. Department of Defense (DoD) civilian population prosecuting war and other security missions in the Middle East has grown to 54,180, a rise of 33 percent, according to DoD personnel and workforce report data.

The numbers do not include a sharp increase in U.S. troops — from some 11,000 to 15,000 according to military.com — deployed to hot spots in Afghanistan, where Washington has been at war for over 16 years.

The publicized troop increases in one of the most unstable parts of the world are thought to herald further escalations, as observed by the largest U.S. troop deployment to the region in five years.

Pentagon numbers detailed in the November 17 quarterly report show that every country in the region that hosts a U.S. military presence has seen a significant recent increase in DoD civilians and U.S. troops.

This news item put in an appearance on the sputniknews.com Internet site at 10:13 p.m. Moscow time on their Thursday evening, which was 2:13 p.m. in Washington — EDT plus 8 hours.  I thank Larry Galearis for finding it for us — and another link to it is here.


These Are the Five Biggest Tests Facing China’s Next Central Bank Chief

When Zhou Xiaochuan finally hands over the baton at the People’s Bank of China after a decade and a half in charge, his successor will inherit a series of headaches crowned by a debt pile racing toward 300 percent of output.

The next governor will be tasked with not just reining in that leverage without tripping up economic growth, but keeping an eye on accelerating inflation too, all as the institution’s role in a complex regulatory structure evolves. As if that wasn’t enough, they’ll also be tasked with maintaining a stable currency as it opens up to market forces and boosting communication to keep global investors in the loop.

The PBOC is in more of bind than ever with its monetary policy,” said Zhao Yang, chief China economist at Nomura Holdings Inc. in Hong Kong. “While it was fine to just look at inflation and economic growth targets in the past, the central bank now has to strike a balance among more targets, some of them conflicting.

China’s appointment of a new PBOC governor may be imminent, after Zhou last month signaled his retirement. Zhou is already helping set the agenda for his successor, having warned in October about the risk of a collapse in asset prices after the popping of a credit bubble. Here are five of the most pressing tasks that will be on the new chief’s docket from day one…

This Bloomberg story, courtesy of Brad Robertson, is one I plucked from a Zero Hedge article yesterday evening.  It was posted on their Internet site at 1:00 p.m. Denver time on Wednesday afternoon — and updated about eleven hours later.  Another link to it is here.


China Deleveraging Hits Corporate Bonds As Cascade Effect Begins

Following the market lock down during October’s Party Congress, many commentators were disturbed by the continued rise in Chinese government bond yields as we returned to “business as usual”, with the 10-year rising to 4%. At the beginning of this month, we discussed the sell-off and noted a useful insight from The Wall Street Journal

An important anomaly to note about the bond rout: as government bonds sold off, yields on less-liquid, unsecured Chinese corporate bonds barely moved.

    That is atypical in an environment of rising rates – usually, bond investors shed their less-liquid holdings and hold on to assets that are more easily tradeable, like government debt.

The question was…why had corporate bond yields barely moved? The answer, according to the WSJ, was that China’s deleveraging policy led to redemptions in the shadow banking sector, e.g. in the notorious $4 trillion Wealth Management Products (WMP) sector. Faced with redemptions, shadow banks had to sell something…quickly…and highly liquid government bonds were the “easiest option”. Furthermore…and this is potentially significant…the WSJ noted…

Meanwhile, the non-banks have held on to their higher-yielding corporate bonds, which at least have the benefit of helping them to maintain high returns.

Not any more.

We agreed with the WSJ’s explanation at the time, but noted that the government bond sell-off was actually a sign of the unravelling of the WMP Ponzi scheme. The Chinese authorities are wise to the Ponzi which is why they announced the overhaul of shadow banking and WMPs last Friday. However, the new regulations don’t kick in until mid-2019, a sign to us that when they looked “under the bonnet”, they didn’t like what they saw.

We doubt that China can achieve an orderly restructuring of its shadow banking sector, never mind its much larger credit bubble. A sign that we have taken another step towards China’s “Minsky moment” is that the bond sell-off has spread to the corporate bond market. The chart shows how spreads versus sovereign bonds have blown out during the last few weeks.

This long, but very worthwhile news item was posted on the Zero Hedge website at 7:15 p.m. on Thursday evening EST — and another link to it is here.


The Party Is Over for Australia’s $5.6 Trillion Housing Frenzy

The party is finally winding down for Australia’s housing market. How severe the hangover is will determine the economy’s fate for years to come.

After five years of surging prices, the market value of the nation’s homes has ballooned to A$7.3 trillion ($5.6 trillion) — or more than four times gross domestic product. Not even the U.S. and U.K. markets achieved such heights at their peaks a decade ago before prices spiraled lower and dragged their economies with them.

Australia’s obsession with property is firmly entrenched in the nation’s economy and psyche, fueled by record-low interest rates, generous tax breaks, banks hooked on mortgage lending, and prime-time TV shows where home renovators are lauded like sporting heroes. For many, homes morphed into cash machines to finance loans for boats, cars and investment properties. The upshot: Australian households are now twice as indebted as China’s.

This longish, but very interesting Bloomberg news story showed up on their Internet site at 6:00 a.m. MST on Thursday morning — and I thank Swedish reader Patrik Ekdahl for pointing it out.  Another link to it is here.


Whose Private-Sector Debt Will Implode Next: U.S., Canada, China, Eurozone, Japan? — Wolf Richter

The Financial Crisis in the U.S. was a consequence of too much debt and too much risk, among numerous other factors, and the whole house of cards came down. Now, after eight years of experimental monetary policies and huge amounts of deficit spending by governments around the globe, public debt has ballooned. Gross national debt in the U.S. just hit $20.5 trillion, or 105% of GDP. But that can’t hold a candle to Japan’s national debt, now at 250% of GDP.

And private-sector debt, which includes household and business debts — how has it fared in the era of easy money?

In the U.S., total debt to the private non-financial sector has ballooned to $28.5 trillion. That’s up 14% from the $25 trillion at the crazy peak of the Financial Crisis and up 63% from 2004.

In relationship to the economy, private sector debt soared from 147% of GDP in 2004 to 170% of GDP in the first quarter of 2008. Then it all fell apart. Some of this debt blew up and was written off. For a little while consumers and businesses deleveraged just a tiny little bit, before starting to add to their debts once again.

This worthwhile commentary by Wolf put in an appearance on the wolfstreet.com Internet site on Wednesday sometime — and I thank Judy Sturgis for pointing it out.  Another link to it is here.


Russia’s Plaurum sees PGMs more reliable than bitcoin — Lawrie Williams

There has been almost a mania over bitcoin and its crypto-currency copies recently as the price of the original has accelerated up to $8,000 which the writer sees as a bubble situation just waiting to burst.  It is a currency built almost entirely on sentiment and if sentiment changes we could see it return to from whence it came.  It, in the writer’s view, has no material substance behind it.  What comes from zero could just as easily return there – it is something of a legal Ponzi scheme only having value as long as investors carry on pouring money into it.

Thus it is good to read analysis from others who, to an extent at least, take a similar view.  Rick Rule has recently made the point that in his view bitcoin is a distraction.  It may appeal to the speculator, but he chooses gold for the long term.  And now analysts as Russia’s Plaurum Group have put out a statement that they see precious metals as more reliable and stable than bitcoin.

In terms of PGM demand though, Plaurum sees continuing strength in the automobile markets, at least in the short to medium term, and the supply shortages which have been benefiting palladium and rhodium prices in particular are likely to persist and drive prices even higher.  Meanwhile a change in sentiment for the very volatile bitcoin could bring it crashing down.  It’s not so much that bitcoin couldn’t see further gains.  It may do so, but is far more vulnerable to a substantial fall than the PGMs where a real shortfall exists.

This commentary by Lawrie appeared on the Sharps Pixley website yesterday — and another link to it is here.


The PHOTOS and the FUNNIES

Today’s ‘critter’ is the pheasant-tailed jacana, which is a bird I ran across when I was researching the Indian roller that graced my Thursday column.  They are identifiable by their wide feet and claws which enable them to walk on floating vegetation in shallow lakes, their preferred habitat. The females are more colourful than the males — and are polyandrous.  It breeds in India, southeast Asia, and Indonesia. It is sedentary in much of its range.  Here are four shots…three of the female — and one of the male.  ‘Click to enlarge’.


The WRAP

Cautious, careful people, always casting about to preserve their reputation and social standing, never can bring about a reform. Those who are really in earnest, must be willing to be anything or nothing in the world’s estimation — and publicly and privately, in season and out, avow their sympathy with despised and persecuted ideas and their advocates — and bear the consequences.Susan B. Anthony [1820-1906]


With the markets in the U.S. closed yesterday, there’s certainly not much to talk about regarding the precious metals price activity on Thursday.

But I was re-reading Ted Butler’s mid-week commentary to his paying subscribers just before I started on today’s missive — and it jogged my memory about something — and to make my point, I’m going to steal two more paragraphs from Ted, because he’s just so good at getting right to the heart of the matter…


“Total open interest data indicate that there is a one billion ounce open commitment in COMEX silver short and long positions, more than annual world production or consumption. No other commodity has a larger real world equivalent total open interest as high as silver.”

“Crude oil futures, for instance, have 10 times the number of total open paper contracts than COMEX silver, making silver’s total open interest appear unremarkable, or even small. But when you convert the open interest in each to real world equivalents, the comparison gets turned on its head. By real-world equivalents, COMEX silver open interest is 100 times larger than exists in crude oil in terms of open interest…relative to annual world production. The real world equivalent long and short position in COMEX silver is so much larger than that of any other futures-traded commodity that it necessarily exerts a force on price more profound than in any other commodity.”Silver analyst Ted Butler: 22 November 2017


You get a real sense of these numbers in the weekly “Days to Cover” chart that I post every week in conjunction with the Commitment of Traders Report.  I don’t call it “The most important chart in my Saturday column” for no reason, dear reader.

Although it doesn’t show open interest numbers for any of the physically traded commodities on the COMEX, the difference between what the Big 4 and Big 8 traders are short in crude oil vs. silver is eye-watering…4 and 6 days respectively for world production for crude oil — and 145 and 208 days for silver.  Click to enlarge.

The above chart is for last week’s COT Report, but it really doesn’t matter, as the chart barely changes, with crude oil always and forever on the far left — and silver [plus the other three precious metals] always and forever on the far right of this chart.  This circumstance has existed virtually without a break for at least a couple of generations.

Riddle me this.  What would the price of crude oil and silver be, if the respective short positions of the Big 4 and Big 8 traders in these two commodities were reversed?  Here’s another question.  How long would the CFTC — and the powers-that-be/deep state — allow that particular scenario to exist if it were to happen?


And as I type this paragraph, the London open is less than ten minutes away — and I see that the gold price has been wandering around a dollar or so either side of unchanged during Far East trading on their Friday — and at the moment it’s down 40 cents the ounce.  Silver spent almost the entire Far East session in positive territory by a few pennies — and it’s currently up 2 cents.  Platinum jumped up 6 bucks in early morning trading in Shanghai, but has been sold off a bunch since then — and is only up 2 dollars.  Palladium traded unchanged until shortly before 3 p.m. China Standard Time, but has been sold lower as well — and is down 3 bucks as Zurich opens.

HFT gold volume, net of Thursday’s volume, is pretty light at just over 36,000 contracts — and roll-over/switch volume out of December is very decent.  HFT silver volume, net of Thursday’s volume, is only about 5,200 contracts, which is very light, but roll-over/switch volume is very heavy in that precious metal.

The dollar index has been chopping very quietly, but unsteadily higher ever since trading began at 6:00 p.m. EST on Thursday evening in New York — and it’s up 13 basis points as London opens.

As I mentioned in yesterday’s column, all the large traders that aren’t standing for delivery in December, have to roll or sell their futures contracts on or before the close of COMEX trading on Tuesday — and the rest have to do the same by the close of COMEX trading on Wednesday, so gross volumes are going to be very heavy on a daily basis between now and then.

But with today being Black Friday in the U.S., it’s a given that the markets will most likely close early — and if they don’t, trading volumes will certainly fall off substantially in the afternoon as what few traders there are at the office, will most certainly head home early.

And as I post today’s column on the website at 4:02 a.m. EST, I note that precious metal prices have done practically nothing during the first hour of London/Zurich trading. Gold is down 10 cents at the moment. Silver isn’t doing much — and is still up 2 cents. Platinum is still up 2 bucks — and palladium is down the same amount as it was an hour ago…3 dollars.

Gross gold volume, which includes Thursday’s volume as well, is about 221,000 contracts — and with everything netted out, including Thursday’s volume…net HFT gold volume is around 45,000 contracts. Net HFT silver volume is 6,600 contracts.

The dollar index hit its current 93.25 high about forty minutes before the London open — and has been heading lower since — and is now back at unchanged.

That’s all I have for today — and I’ll see you here tomorrow.

Have a good weekend…long, or otherwise.

Ed