The Dollar Index ‘Rallies’…Precious Metals Get Sold Lower

15 December 2018 — Saturday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price edged quietly lower starting about 10 a.m. China Standard Time on their Friday morning — and got kicked downstairs a bit more a few minutes before the London open.  It crawled higher into the morning gold fix in London — and then crawled lower until 8:30 a.m. in New York.  It was hit hard on some news or other — and the low tick of the day was set minutes after the equity markets opened in New York yesterday morning.  It rallied, under resistance, until noon EST — and then didn’t do anything for the next hour.  But at 1 p.m., it was sold lower into the COMEX close — and it chopped quietly sideways until trading ended at 5:00 p.m. EST.

Once again, the high and low ticks aren’t worth looking up.

Gold was closed on Friday at $1,238.10 spot, down $3.60 on the day.  Net volume was pretty quiet once again, but heavier than Thursday’s, at around 177,500 contracts — and there was about 6,600 contracts worth of roll-over/switch volume on top of that.

The silver price began to head lower the moment that trading began in New York at 6:00 p.m. EST on Thursday evening, with the low tick coming at the precise same time as gold…minutes after the markets opened in New York at 9:30 a.m. on Friday morning.  It headed quietly higher from that juncture…topping out at 12:15 p.m and, like gold, was sold equally quietly lower until the 1:30 p.m. EST COMEX close.  It didn’t do much after that.

The CME Group recorded the high and low ticks as $14.85 and $14.56 in the March contract.

Silver was closed in New York yesterday afternoon at $14.535 spot, down 18 cents on the day.  Net volume was heavier than on Thursday…a hair under 62,500 contracts — and there was 2,043 contracts worth of roll-over/switch volume in this precious metal.

The platinum price traded flat until 2 p.m. China Standard Time on their Friday afternoon — and it was sold lower until shortly after 9 a.m. open in Zurich.  It was almost back at the unchanged mark by around 1:40 p.m. CET, but then the real selling pressure appeared — and like gold and silver, the low tick was set at, or just before, the equity markets open in New York yesterday morning.  From that point it chopped quietly higher until the Zurich close — and then it edged quietly lower until shortly after 2 p.m. EST in the thinly-traded after-hours market.  Platinum was closed at $785 spot, down another 9 dollars.

The palladium price traded quietly sideways until 9 a.m. CET in Shanghai on their Friday morning — and began to chop quietly lower from that juncture until about 9:30 a.m. in Zurich trading.  It traded mostly sideways from there until exactly 2 p.m. CET/8 a.m. EST — and then got hammered to its low tick of the day, which came minutes before 9 a.m. in New York.  From that point, it chopped quietly higher until the 1:30 p.m. COMEX close — and didn’t do a thing after that.  Palladium finished the Friday session at $1,222 spot, down 21 bucks on the day — and 20 dollars off its low.

The dollar index closed very late on Thursday afternoon in New York at 97.06 — and opened higher by 4 basis points or so once trading commenced very early on Thursday evening EST.  It didn’t do much of anything from there until precisely 2:00 p.m. China Standard Time on their Friday afternoon — and it began to edge higher from there.  After a slight downdraft shortly before the London open, it began to ‘rally’ in earnest staring right at the 8:00 a.m. GMT London open.  That ramp job lasted for exactly an hour — and from that juncture, it stair-stepped its way higher until the 97.70 high tick was set at 8:54 a.m. in New York.  It headed quietly, but unevenly lower from there until a few minutes after 3 p.m. EST — and crept a few basis points higher into the close from there.  The dollar index finished the Friday session at 97.44…up 38 basis points from Thursday.

It was yet another day where a dollar index ‘rally’ was used as cover for JPMorgan et al to hide behind while they did the dirty.

Here’s the intraday dollar index chart from Bloomberg — and it starts right at the Thursday evening open in New York.  Click to enlarge.

And here’s the 6-month U.S. dollar index from the folks at stockcharts.com — and the delta between its close on Friday…96.91 — and the intraday chart above, was 53 basis points yesterday.  Click to enlarge.

The gold shares gapped down 3 percent at the open — and then chopped higher until around 11:15 a.m. in New York trading.  Even though the gold price was rallying at that point, the shares were sold quietly lower for the remainder of the Friday session.  The HUI close down 2.56 percent.

The silver equities blasted higher as soon as trading began at 9:30 a.m. EST in New York on Friday morning on the Wheaton Precious Metals news, but then were immediately hammered to their lows of the day minutes later.  Then, like their golden brethren, they chopped quietly higher until 11:15 a.m.  They chopped very unevenly sideways from that point until shortly after 1 p.m. — and then sold quietly lower until shortly before 3 p.m. EST.  From that juncture, they edged unevenly sideways until trading ended at 4:00 p.m.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down only 0.13 percent, which is basically unchanged.  I picked up that Wheaton Precious Metals story from an e-mail that Dave Morgan passed around early yesterday morning.  It closed up 14.17 percent yesterday. Click to enlarge if necessary.

And here’s the 1-year Silver Sentiment/Silver 7 Index chart.  Click to enlarge as well.

And I’ll point out once again that all the precious metal shares that were sold yesterday, were purchased by someone.  It’s a good bet that they now reside in the strongest of hands.


Here are the usual charts from Nick that show what’s been happening for the week, month-to-date — 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.

Here’s the weekly chart — and both gold and silver closed down by a bit on the week.  But the silver equities outperformed their golden brethren by a bit during that time period.  Click to enlarge.

Here is the month-to-date chart — and it’s much happier looking.  Except for platinum, it’s all green, but the gold equities outperformed the gold stocks…compared to the gains in their respective underlying precious metal prices.  Click to enlarge.

Like it was last week, the year-to-date chart, except for palladium as always, continues to be a sea of red.  The gold and silver stocks are now on about on equal terms, when compared to the changes in their respective precious metal prices.  Up until the end of last week, the silver equities were outperforming their golden brethren, but that’s not what this chart shows now.  Click to enlarge.

It’s still JPMorgan’s world in the precious metals market– and they’ll do whatever they want, or until they’re told to step aside. However, this DoJ criminal investigation into JPMorgan’s trading activities in the precious metals certainly has the potential to change things in a hurry.  And as I point out in The Wrap further down, the sentencing date for this JPM traders is next Wednesday…if it doesn’t get pushed back.  It’s also the same day that the December FOMC meeting comes to an end.  That date, December 19th, could prove to be interesting in more ways than one.

So we wait some more.


The CME Daily Delivery Report showed that 12 gold and 14 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday. In gold, the only short/issuer was Advantage.  Goldman picked up 7 contracts for its own account — and JPMorgan and Advantage picked up 2 and 3 contracts for their respective client accounts.  In silver, the sole short/issuer was Advantage as well.  JPMorgan stopped 7 contracts for its client account — and Advantage and Morgan Stanley picked up 4 and 3 contracts for their respective client accounts.  The link to yesterday’s Issuers and Stoppers Report is here.

So far this month, there have been 7,273 gold contracts issued and stopped — and that number in silver is 3,913.

The CME Preliminary Report for the Friday trading session showed that gold open interest in December fell by 66 contracts, leaving 418 still left to go, minus the 12 gold contracts mentioned two paragraphs ago.  Thursday’s Daily Delivery Report showed that 53 gold contracts were actually posted for delivery on Monday, so that means that 66-53=13 gold contracts disappeared from the December delivery month.  Silver o.i. in December declined by 22 contracts, leaving 281 still open, minus the 14 contracts mentioned two paragraphs ago.  Thursday’s Daily Delivery Report showed that 27 silver contracts were actually posted for delivery on Monday, so that means that 27-22=5 more silver contracts were just added to December.


There were no reported changes in either GLD or SLV yesterday.

There was yet another small sales report from the U.S. Mint yesterday.  They sold 1,000 troy ounces of gold eagles — 500 one ounce 24K gold buffaloes — and 25,000 silver eagles.

Month-to-date the mint has sold 2,000 troy ounces of gold eagles — 1,500 one-ounce 24K gold buffaloes — and 250,000 silver eagles.

For the second day in a row, there was no in/out movement in gold over at the COMEX-approved depositories on the U.S. east coast on Thursday.  There was a tiny paper transfer of 96.450 troy ounces/3 kilobars [U.K./U.S. kilobar weight]…one COMEX contract…from the Eligible category — and into Registered over at the Manfra, Tordella & Brookes, Inc. depository.  I won’t bother linking this.

It was much busier in silver as 1,189,997 troy ounces were received — and 613,945 troy ounces were shipped out.  In the ‘in’ category, there was one truckload…600,025 troy ounces…dropped off at CNT — and the other truckload…589,972 troy ounces…was left at HSBC USA.  In the ‘out’ category, there was one truckload…594,948 troy ounces…that departed CNT — and the remaining 18,996 troy ounces was shipped out of Delaware.  There was also a paper transfer of 10,535 troy ounces from the Eligible category and into Registered over at Canada’s Scotiabank.  That is, without doubt, for delivery in December.  The link to all this activity is here.

There was very little activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday.  Nothing was reported received — and only 81 kilobars were shipped out.  Of that amount, there were 77 out of Brink’s, Inc. — and the other 4 kilobars departed Loomis International.  I won’t bother linking this amount, either.


The gold wreaths from Thrace are jewellery wreaths found in inner Thrace, which is within present day Bulgaria. The gold wreaths were found in the mounds and tombs of aristocrats at various locations in Thrace that have been dated to a period from the latter half of the fourth century and early part third century B.C.

There have been only five or six such archaeological finds of Thracian gold wreaths in Bulgaria. Of those, two are in the National Museum of History in Sofia. The earliest gold laurel wreath of Thrace in the museum, also called the “Zlatinitsa-Malomirovo Treasure,” was found at an old burial mound (tumulus) in Zlatinitsa, Elhovo Municipality, in Southeast Bulgaria.

The second wreath in the museum collection was donated in 2015, after it was found at an auction in the United States. Experts are unsure of its place of origin and its age because the scientific data normally recorded during a discovery does not exist. Initially, this wreath was dated to the first century B.C., but later assessments by other archaeologists and experts on the culture date it to 1200 BC – 1300 BC. Similarities among wreaths found in Ancient Troy and the newly obtained wreath fueled a hypothesis that it might date to the time of the Trojan War or even to Troy.

Photos of this treasure are hard to come by — and I only found this one.  Click to enlarge.

The Commitment of Traders Report for positions held at the close of COMEX trading on Tuesday was a tad worse than Ted expected in silver — and better than he was expecting in gold.

In silver, the Commercial net short position increased by a hefty 12,461 contracts…against Ted’s 10,000 contract estimate.

They arrived at that number by reducing their long position by 3,503 contracts, plus they increased their short position by 8,958 contracts — and it’s the sum of those two numbers that represents their change for the reporting week.

The short positions of the Big 4 — and Big ‘5 through 8’ large traders remains irrelevant for reasons I’ve repeated so many time over the last many months, that I’m not going to repeat them here again this week.

Under the hood in the Disaggregated COT Report, it was all the Managed Money traders again this week, plus a bit more, as they increased their long position by 3,341 contracts — and reduced their short position by 9,782 contracts.  It’s the sum of those two numbers…13,123 contracts…that represents their change for the reporting week.

The difference between that number — and the Commercial net short position…13,123 minus 12,461 equals 662 contract, was made up as it always is, by the traders in the other two categories.  But each of them went about it in different ways, as the ‘Other Reportables’ decreased their net long position — and the ‘Nonreportable’/small traders increased their net long position.  Here’s the usual snip from the Disaggregated COT Report showing those changes.  Click to enlarge.

The Commercial net short position is now up to 27,879 COMEX contracts, or 139.4 million troy ounces of paper silver.  Ted figures that JPMorgan has gone short to the tune of 5,000 contracts, or maybe a bit more over the last two reporting weeks, with more than the lion’s share of that being put on during this reporting period.  Ted also speculated that it was highly likely that JPM has covered that entire short position since the Tuesday cut-off.  Of course that won’t be known for sure until next Friday.

Here is the 3-year COT Report for silver — and this week’s further deterioration should be noted.  Click to enlarge.

The Managed Money traders are still net short the COMEX futures market in silver, but now much closer to being market neutral.  But that was as of Tuesday’s cut-off — and things certainly have improved since then.  It will improve even more if JPMorgan et al can blast silver back below its 50-day moving average again, which is what they appeared to be attempting yesterday.


In gold, the commercial net short position increased by 19,119 contracts, or 1.91 million troy ounces of paper silver.  Ted guessed around 25,000 or so, but was hoping for less, so he got his wish.

They arrived at that number by reducing their long position by 782 contracts — and they increased their short position by 18,337 contracts.  It’s the sum of those two numbers that represents their change for the reporting week.

Like for silver, the short positions of the Big 8 traders in gold remains irrelevant for reasons I’ve repeated so many time over the last many months…most of them are now Managed Money traders — and not the commercial variety.

Under the hood in the Disaggregated COT Report, the Managed Money traders only made up for a hair more than half of the change in the commercial net short position.  Much to Ted’s surprise, they sold 9,472 long contracts, plus they reduced their short position by 19,193 contracts — and it’s the difference between those two numbers…9,721 contracts… that represents their change for the reporting week.

The difference between that number — and the commercial net short position…19,119 minus 9,721 equals 9,398 contracts…was made up by the traders in the ‘Other Reportables’ and ‘Nonreportable’/small trader categories, as both increased their net long positions during the reporting week…the former by a little [1,777 contracts] — and the latter by a lot [7,621 contracts].  Those two numbers add up to 9,398 contracts, which they mathematically have to do.  I commented to Ted that there may have been some sort of reporting error in the Disaggregated Report, as they didn’t seem right in aggregate.  If there was, it will all be sorted out in next week’s report.

Here’s the snip from the Disaggregated COT Report for gold, so you can see these changes for yourself.  Click to enlarge.

The commercial net short position in gold is now up to 77,368 COMEX contracts, or 7.74 million troy ounces of paper gold.  Ted said that JPMorgan also added to their short position in gold during the reporting week…10,000 contracts or so…but like in silver, they’ve probably covered that since the Tuesday cut-off.

Here’s the 3-year COT chart for gold and, like in silver, the further deterioration should be noted.  And from an historical perspective, it’s not overly material.  Click to enlarge.

On an historical basis, the commercial net short position in gold is still very bullish, but certainly not wildly bullish as it was several weeks back.  Of course, like in silver, the commercial net short position has certainly declined since the Tuesday cut-off.  But, unlike silver, the 50-day moving average in gold is still a decent dollar amount below Friday’s intraday low and close.

In the other metals, the Managed Money traders decreased their long position in palladium by 1,037 contracts during this reporting week. Total open interest in palladium is only 25,736 contracts, so it’s a very tiny and illiquid market…one seventh the open interest of silver — and sixteen times smaller than the total open interest in gold.  In platinum, the Managed Money traders went further on the short side by 4,911 net contracts during this last reporting week.  In copper, the Managed Money were net short the COMEX futures market by a tiny bit in last week’s report — and increased it a tiny bit more…1,889 contracts…this reporting week.


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. Click to enlarge.

Like the COT Report itself, the chart above is basically irrelevant at this point as well — and for the same reason. Except for Scotiabank — and and maybe one U.S. bank…most likely Citigroup…the positions of the Big 4 and Big 8 traders in silver are back to being made up of the brain-dead/moving average-following Managed Money traders now.

For the current reporting week, the Big 4 traders are short 119 days of world silver production, up 12 days from what they were short in last week’s report — and the ‘5 through 8’ large traders are short an additional 47 days of world silver production, which is down 1 day from last week’s report—for a total of 166 days held short, which is five and a half months of world silver production, or about 387.4 million troy ounces of paper silver held short by the Big 8. [In last week’s COT Report the Big 8 were short 155 days of world silver production.]

Just as a point of interest, the Big 4 traders in silver are short a hair under 30 days of world silver production each — and the Big ‘5 through 8’ are short a hair under 12 days of world silver production each.  Quite a dichotomy.  The traders in the Big 4 category…all Managed Money traders except Scotiabank…keep piling in on the short side.

The Big 8 commercial traders are short 44.4 percent of the entire open interest in silver in the COMEX futures market, which is up a very decent amount from the 40.1 percent that they were short in last week’s COT Report. And once whatever market-neutral spread trades are subtracted out, that percentage would be around 50 percent. In gold, it’s 40.6 percent of the total COMEX open interest that the Big 8 are short, up a bit from the 37.5 percent they were short in last week’s report — and pushing 45 percent [or a bit more] once the market-neutral spread trades are subtracted out.

In gold, the Big 4 are short 42 days of world gold production, which is up 3 days from what they were short last week — and the ‘5 through 8’ are short another 15 days of world production, which is up 2 days from what they were short the prior week, for a total of 57 days of world gold production held short by the Big 8 — which is up 5 days from what they were short in last week’s report. Based on these numbers, the Big 4 in gold hold about 74 percent of the total short position held by the Big 8…which is down 1 percentage point from last week’s COT Report.

And, once again, don’t forget that like in silver…most of the traders in the Big 4 and Big 8 categories in gold are still Managed Money traders — and not the commercial variety.

The “concentrated short position within a concentrated short position” in silver, platinum and palladium held by the Big 4 commercial traders are about 72, 70 and 79 percent respectively of the short positions held by the Big 8.  Silver is up 3 percentage points from the previous week’s COT Report, platinum is up about 1 percentage point from a week ago. And palladium is up around 2 percentage points from last week’s COT Report.

I don’t have all that many stories for you today.


CRITICAL READS

U.S. Leveraged Loan Funds Lose Cash at Fastest Pace Ever

U.S. leveraged loan funds saw $2.53 billion of net outflows in the week ended Dec. 12, the biggest decline on record, as jittery markets rattle demand for riskier assets.

Investors pulled $1.82 billion from mutual funds that buy the debt, according to Lipper, while exchange-traded funds lost $705 million. It was the fourth straight week of outflows. Fund flows often trail secondary prices, which have slumped to the lowest levels since October 2016, according to the S&P/LSTA Leveraged Loan Price Index.

Just a few months ago, leveraged loans were among the hottest of markets. But fears of slowing global growth, trade-war tensions and slumping energy prices have left investors willing to take few risks heading into year-end. That has disrupted issuance of the debt, with several offerings shelved.

Since Oct. 1, loans have lost about 2 percent, including a 1 percent drop this month, while both high-yield and investment grade bonds rose slightly. Fund outflows and waning demand from collateralized loan obligations, the biggest loan buyers, are adding pressure.

This brief 1-chart Bloomberg news item was posted on their Internet site at 2:58 p.m. EST on Thursday afternoon — and was updated about twenty-six hours later.  I found it on Doug Noland’s website — and another link to it is here.


Doug Noland: The Perils of Inflationism

Going on a decade now, I’ve been chronicling the “global government finance Bubble.” It has not been ten years of systemic smooth sailing. History’s greatest Bubble stumbled in 2011 on fears of the Fed’s “exit strategy.” The Fed quickly backed off – and then proceeded to double its balance sheet again by 2014. Europe tottered badly in 2011 and 2012, inciting “whatever it takes” and a reckless ECB balance sheet gambit. Fed, ECB and global central bank liquidity stoked a historic boom throughout the emerging markets. China’s epic Bubble, pushed into overdrive with aggressive global crisis-period stimulus, inflated uncontrollably. All of it almost came crashing down in late-‘15/early-’16. But the Chinese adopted more stimulus, the ECB and BOJ boosted QE, and the Fed postponed “normalization.”

I believe the world over the past two years experienced a momentous speculative blow-off – in stocks, bonds, corporate Credit, real estate, M&A, art, collectibles, and so on. I would further argue that speculative melt-ups are quite problematic for contemporary finance. Surging asset prices spur rapid increases in speculative Credit, new self-reinforcing liquidity/purchasing power unleashed upon markets, financial systems and economies around the globe. The problem is it doesn’t work in reverse. The greater the price spikes, the more vulnerable markets become to destabilizing reversals. De-risking/deleveraging dynamics then see a contraction of speculative Credit, leading to problematic self-reinforcing destructions of marketplace liquidity.

As inflationism has been throughout history, QE was always going to be a most slippery slope. The notion of inflating risk asset markets with central bank liquidity has to be the most dangerous policy prescription in the sordid history of central banking. And, importantly, the longer central bankers held to this policy course the deeper were market structural distortions. Rather than attempting to rectify crucial flaws in contemporary finance, central bankers chose inflationism and market backstops as stabilization expedients. This was a monumental mistake.

As I state every week, Doug’s weekly commentary always falls into the must read category for me — and another link to it is here.


Inching towards war with Russia — Stephen F. Cohen

It seems every week there’s a new pundit or politician inching us closer to war with Russia; author and professor Stephen F. Cohen joins us to make sense of it all.

This video rt.com video interview appeared on the their website at 7:45 a.m. Moscow time on their Friday morning, which was 11:45 a.m. in Washington Thursday night…EDT plus 8 hours.  The interview starts at the 13:05 minute mark, but Stephen isn’t allowed to get a word in edgewise until about the 15:00 minute mark, so you may wish to start at that time, if you want to watch it that is.  I thank Larry Galearis for sending it our way — and another link to it is here.


The real reason Western media and CIA turned against Saudi MBS

Forces are aligning against Saudi Arabia’s Crown Prince, lead by elements within the CIA and strong players in the mainstream media. But what is really behind this deterioration in relationship, and what are its implications?

Following the brutal murder of Washington Post columnist Jamal Khashoggi, western media and various entities, including the CIA, appear to have turned their back on Saudi Crown Prince Mohammad Bin Salman (MBS). In response to the scandal, The Guardian released a video which its celebutante, Owen Jones, captioned“Saudi Arabia is one of the biggest threats on Earth. Time to stop propping up its repulsive regime.”

The Guardian was not alone in its condemnation. “It’s high time to end Saudi impunity,” wrote Hana Al-Khamri in Al-Jazeera. “It’s time for Saudi Arabia to tell the truth on Jamal Khashoggi,” The Washington Post’s Editorial Board argued. Politico called it “the tragedy of Jamal Khashoggi.”

Even shadowy think-tanks like the Council on Foreign Relations (CFR) and the Atlantic Council released articles criticising Saudi Arabia in the wake of Khashoggi’s death.

This longish commentary/opinion piece showed up on the rt.com Internet site at 1:49 p.m. Moscow time on their Friday afternoon, which was 5:49 a.m. in Washington — EDT plus 8 hours — and I thanks George Whyte for sharing it with us.  Another link to it is here.


1MDB dragnet closes in on Najib, Goldman Sachs

Legal wheels are turning fast in Malaysia and U.S. to jail the ex-premier and hold the American investment bank responsible for money laundering and fraud worth billions of dollars.

Prosecutors in Malaysia filed yet another round of new graft charges against disgraced former prime minister Najib Razak this week after investigators questioned him and Arul Kanda Kandasamy, a former chief executive at 1Malaysia Development Berhad (1MDB), over allegations of tampering with a 2016 government audit of the graft-linked state fund.

Malaysian officials say Najib ordered amendments to the audit report that removed a mention of fugitive Malaysian financier Low Taek Jho’s presence at a 1MDB board meeting, a figure both Malaysian and U.S. authorities regard as a central player in the alleged theft of an estimated US$4.5 billion from 1MDB between 2009 and 2014.

By amending the audit report before it was finalized, Najib had “secured protection from disciplinary, civil or criminal action related to 1MDB,” according to the charge-sheet read in court on December 12. He pled not guilty to an abuse of power charge, while Arul pled not guilty to abetting and engaging in a criminal conspiracy with the former premier.

Najib, 66, who was ousted in May after a coalition led by Prime Minister Mahathir Mohamad clinched a shock election victory, faces charges of graft, abuse of power and criminal breach of trust related to 1MDB. He has consistently denied wrongdoing and could spend the rest of his life behind bars if found guilty in a trial due to begin next year.

Jim Rickards labelled JPMorgan “the biggest criminal organization the world has ever known“…but it’s a certainty that Goldman Sachs is not too far behind.  This story, filed from Singapore, showed up on the Asia Times website at 3:20 p.m. HKT on their Friday afternoon, which was 2:20 a.m. in New York…EST plus 13 hours.  I thank Tolling Jennings for sharing it with us — and another link to it is here.


Smack In Middle of a Trade War, Boeing Opens Its First 737 Plant in China

This headline seems suitable for “The Onion“, Boeing to Open Its First 737 Plant in China Under Shadow of a Trade War.

The Chicago-based planemaker will inaugurate its completion and delivery center in Zhoushan, 90 miles southeast of Shanghai, on Saturday, after more than a year of construction. The facility marks a rare industrial foray outside of the U.S. for Boeing and a joint venture with state-owned planemaker Commercial Aircraft Corp. of China Ltd.

About one of every four jets that Boeing builds is bound for China, while the country’s airlines are the biggest buyers of the 737, the manufacturer’s largest source of profit. China is expected to need about 7,700 commercial planes over the next two decades to connect an increasingly mobile middle class. That represents a $1 trillion market opportunity for Boeing, Airbus SE and homegrown rivals like Comac.

Boeing, the largest U.S. exporter, has urged both governments to resolve their trade differences and protect aerospace, which generates about an $80 billion annual trade surplus for the U.S.

On October 19, Bloomberg asked Is This Chinese Love-In With Boeing About to End?

A Chinese airline that’s been an exclusive operator of Boeing Co. jets for more than 30 years is in talks with Airbus SE on a potential plane purchase, amid growing trade tensions between Beijing and the U.S., according to people familiar with the matter.

Should it come off, an Airbus purchase would be a blow to Boeing, which secured Xiamen last year as a launch customer for the latest variant of its best-selling 737 Max plane, a direct competitor to the longest range A320. It also highlights the risks of U.S. President Donald Trump’s high-stakes effort to curtail China’s rise as a global economic rival.

So here we are. Trump cheers the demise of Harley Davidson for opening a plant in Europe but is strangely silent on a multi-billion dollar Boeing move to China.

This Zero Hedge article was posted on their website at 7:49 a.m. on Friday morning EST — and it comes to us courtesy of Brad Robertson.  Another link to it is here.


New Cold War With China Possible — Jim Rickards

On Saturday, Dec. 1, at the end of the G-20 meeting in Buenos Aires, President Trump and his team of trade and finance advisers had dinner with President Xi Jinping of China and his team.

The purpose was to discuss the ongoing trade war between China and the U.S. Trump’s team had presented the Chinese team with 142 specific trade demands.

The two sides went over the demands one by one during the course of their two-hour dinner. When they were done, both sides announced a 90-day “truce” in the trade wars. China agreed to negotiate in good faith on the demands and the U.S. agreed to delay the imposition of tariffs scheduled to go into effect Jan. 1, 2019, until March 1, 2019, to give the negotiations time to proceed.

This was not a final deal, but it did allow markets to breathe a sigh of relief. The initial response of the stock market was a rally.

But just hours after the Trump-Xi announcements, Canada arrested Meng Wanzhou, the CFO of Huawei, in Vancouver, British Columbia. The arrest was at the request of the United States, which had issued an arrest warrant for Meng last August on numerous charges including money laundering, espionage and selling telecommunications equipment to Iran in violation of U.S. sanctions.

This commentary by Jim put in an appearance on the dailyreckoning.com Internet site yesterday — and it comes to us courtesy of Richard Connolly.  Another link to it is here.


Japan Is Now Giving Away Free Houses

There are over 8 million abandoned homes in Japanese suburbs, according to The Japan Times.

What is driving the government to give away these homes? Well, there is a massive housing glut.

In part, it has to do with Japan’s aging population – responsible for the high number of abandoned houses across the country. Japan has a major demographic problem, which means there are too few first time home buyers.

According to the World Bank Group, the country’s population declined by -0.2% in 2017 alone, while China and the U.S. barely grew .60% and .70% respectively. Back in 2010, Japan had 1.3 million more people than today.

The Japan Times said an increasing number of abandoned properties are being listed on online databases known as “akiya banks”—“akiya” translating to “vacant house” — with tens of thousands of homes being offered at a massive discount. Prices on one particular database range from 30 million yen ($266,800), while many other properties are listed under “gratis transfer” for the sum of literally zero yen.

In Tokyo, where 70% of the people live in apartments, about 10% of homes are dormant, a ratio higher than in cities like New York, London, and Paris — and that figure is expected to surge in 2020, as deaths outpace births in a mature society where more than 25% of the population is 65 or order.

Nomura Research Institute forecasts the number of abandoned homes could grow to 21.7 million by 2033, or about 33% of all homes in Japan.  Meanwhile, the population peaked a decade ago, forecasted to plunge 30% by 2065, creating an even more profound crisis in the decades to come.

The demographics of Japan are worse than awful — and this sort of story is certainly confirmation of that.  I found it on the Zero Hedge website.  It showed up there at 8:45 p.m. EST on Friday evening — and I thank Brad Robertson for finding it for us.  Another link to this very interesting article is here.


John Hathaway: Things Look Very Bullish For Gold Mining Stocks

Mining stocks have performed miserably over the past seven years, missing out completely on the central bank-created liquidity-fest that has raised nearly every other equity sector to record highs.

But the long winter of abuse is over, claims highly-respected mining analyst John Hathaway, co-manager of the Toqueville Gold Fund. To John’s veteran eye, the conditions in this beleaguered industry have improved substantially. Mining supply is tightening while demand is rising, and the surviving companies have achieved positive cash flows at today’s depressed prices.

“The industry hasn’t been able to issue equity to any substantial degree for five or six years. And, so they’ve gone more and more to streaming royalties, that sort of thing. But the industry is capital constrained and they always seem to be able to get capital, but what we see is a shrinking industry, shrinking gold production on a global basis and a wave of mergers and acquisitions. We’ve seen quite a few recently, the combination of Barrick and Randgold would be the first. We recently saw Pan American Silver take over Tahoe, and that wasn’t as big a deal, but certainly it was significant. And then there have a been a lot of little private deals you don’t hear about.

“The industry is running out of reserves. The reserve to production ratio is the lowest it has been in 30 years. We’ve seen peak gold. And we expect that the supply of newly-mined gold will continue to decline for several more years. If you were to say to me, “Gold is going to trade tomorrow at $2,000,” I wouldn’t change that forecast, because it takes so many years to build a gold mine. It’s a lot different than shale oil, where you get small increments from a lot of different producers. Not to mention host countries — even Mexico recently, which used to be thought of as a good mining province, good mining country — are becoming tougher and tougher on the capital they want to enter their countries and build mines. So, the hurdle rate, the investment return is going higher and higher.

This 46-minute audio interview with John was something I discovered on the Sharps Pixley website just a few minutes ago — and I haven’t had the time to either listen to it, or read the full transcript.  But it’s an excellent bet that John never mentions the precious metals price management scheme that’s been in existence for what seems like forever now, nor did he mention JPMorgan’s roll in it.  It’s also a good bet that Chris Martenson, the host of this interview, never brought it up, either. The interview was conducted back on November 29 — and it was posted on the goldseek.com Internet site yesterday.  Another link to it is here.


JP Morgan faces potential class action lawsuit after guilty pleas by a former metals trader

Traders from across the U.S. are banding together to accuse J. P. Morgan Chase of manipulating precious metals markets for years.

At least six lawsuits, all making similar allegations against the nation’s largest bank, have been filed in New York federal court in the past month, since federal prosecutors in Connecticut unveiled a plea agreement with a former J. P. Morgan Chase metals trader.

The cases could potentially include thousands of people who traded in the precious metals market. The White Plains, N.Y., law firm Lowey Dannenberg is asking the court to combine the cases and name it as the lead.

The law firm’s commodities group is led by Vincent Briganti, the attorney who filed the first lawsuit on behalf of Dominick Cognata, a New York resident who alleges he suffered losses due to J. P. Morgan’s trading conduct in the silver and gold futures and options markets.

A combined case, seeking class action status, would include anyone who purchased or sold futures contracts or an option on NYMEX platinum or palladium or COMEX silver or gold between at least Jan. 1, 2009, and Dec. 31, 2015. The lawyers believe that “at least hundreds, if not thousands” of traders would be eligible to join the case.

This news story was posted on the cnbc.com Internet site at 4:59 p.m. EST on Thursday afternoon — and I thank George Whyte for bringing it to my attention — and now to yours.  It’s certainly worth reading — and another link to it is here.


The PHOTOS and the FUNNIES

Today’s photos are two more from the Siena International Photo Awards — and the first one, in the ‘Remarkable Award’ category, was taken by U.S. photographer Amos Nachoum — and is entitled, appropriately, ‘Love on the Rocks”.  Click to enlarge.

The second award-winning photo was taken by Italian photographer Marco Mercuri — and its title is part Swahili — and part Italian…”Malaika, una cacciatrice indomabile“.  You’re on your own with that one.  But it’s one heck of a picture.  Click to enlarge.


The WRAP

Today’s pop ‘blast from the past’ was by a Dutch rock band that was formed in The Hague in 1967.  This tune was their biggest hit back in 1969…forty-nine years ago…wow!  Where in hell has all that time gone?  It was the number one hit in nine different countries the year it was released.  The link is here.

Last week’s classical ‘blast from the past’ was Mozart’s oboe concerto in C major…linked here — and as I pointed out at the time, in 1778 he re-worked it as a concerto for flute in D major.  Anyone who knows their music theory, knows that there are substantial differences between those two keys — and the oboe vs. the flute.  This week’s offering is Mozart’s flute concerto in D major, K.314.  Here is the Seoul-based Gnagman Symphony Orchestra — and the flutist is Yeojin Han.  Chiyong Jeong conducts — and the link is here.  It’s lovely — and the encore is breathtaking: Rachmaninov’s Rhapsody on a Theme of Paganini for solo flute.  Enjoy.


With the equity markets heading lower world-wide yesterday, it’s obvious that JPMorgan et al did not want the precious metals to be a safe haven just yet.  Not only did they close them at loses for the day, they also needed a ramp job in the dollar index as a helping hand.

Neither silver nor gold are far above their respective 50-day moving averages once again — and it remains to be seen if ‘da boyz’ will ring the cash register on these dumb-as-dirt Managed Money traders yet one more time.

The gold price was stopped and turned lower well before it got within spitting distance of its 200-day moving average, so it appears that JPMorgan still has the precious metals in ‘care and maintenance’ mode until ‘whatever’ happens.

Here are the 6-month charts for all of the Big 6 commodities — and their dojis for Friday should be noted.  Click to enlarge for all.

And yesterday was also another down day for the U.S. banking stocks, as they closed virtually on their lows of the day.  I had mentioned in this space yesterday that the KBW Banking Index [BKX] was down ten percent from its high on August 27 — and reader Milo Schield kindly pointed out that my math was more than faulty, as the decline was actually double that amount — and as of Friday’s close, the percentage drop from that date is 21 percent.  Something is definitely rotten here — and in the European banking system as well.  Here’s the 6-month BKX chart one more time, updated with Friday’s doji.  Click to enlarge.

And it’s not just the banking stocks, dear reader…it’s everything in the West…plus Japan and China…along with a host of emerging market countries as well.  As I also pointed out last week, the only country with a solid balance sheet and debt level, is that most reviled nation…Russia.  Who would have thought that would be the case, but it is.  Their central bank updates their gold reserves next week — and it will be interesting to see if they add another million ounces to their reserves in November as well, because that’s what they’ve been averaging for the last four consecutive months.

Today I’m going to revisit those three classic paragraphs from British economist Peter Warburton.  Back in April of 2001 he penned an essay headlined “The Debasement of World Currency: It is deflation, but not as we know it.”  These paragraphs ring true even more today, than they did back then, as the world’s economic, financial and monetary systems teeter on the brink.  Under the sub-heading…Central banks are engaged in a desperate battle on two fronts…he had this to say…

What we see at present is a battle between the central banks and the collapse of the financial system fought on two fronts. On one front, the central banks preside over the creation of additional liquidity for the financial system in order to hold back the tide of debt defaults that would otherwise occur. On the other, they incite investment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, soft commodities or anything else that might be deemed an indicator of inherent value. Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the US dollar, but of all fiat currencies. Equally, their actions seek to deny the investor the opportunity to hedge against the fragility of the financial system by switching into a freely traded market for non-financial assets.

It is important to recognize that the central banks have found the battle on the second front much easier to fight than the first. Last November, I estimated the size of the gross stock of global debt instruments at $90 trillion for mid-2000. How much capital would it take to control the combined gold, oil and commodity markets? Probably, no more than $200bn, using derivatives. Moreover, it is not necessary for the central banks to fight the battle themselves, although central bank gold sales and gold leasing have certainly contributed to the cause. Most of the world’s large investment banks have over-traded their capital [bases] so flagrantly that if the central banks were to lose the fight on the first front, then their stock would be worthless. Because their fate is intertwined with that of the central banks, investment banks are willing participants in the battle against rising gold, oil and commodity prices.

Central banks, and particularly the U.S. Federal Reserve, are deploying their heavy artillery in the battle against a systemic collapse. This has been their primary concern for at least seven years. Their immediate objectives are to prevent the private sector bond market from closing its doors to new or refinancing borrowers and to forestall a technical break in the Dow Jones Industrials. Keeping the bond markets open is absolutely vital at a time when corporate profitability is on the ropes. Keeping the equity index on an even keel is essential to protect the wealth of the household sector and to maintain the expectation of future gains. For as long as these objectives can be achieved, the value of the U.S. dollar can also be stabilized in relation to other currencies, despite the extraordinary imbalances in external trade.”

Now all the world’s central banks, plus their various and assorted Plunge Protection Teams, are at battle stations 24/7 to prevent this very thing from occurring.  It’s a fight that they are destined to lose sooner rather than later — and as I pointed out earlier this week, the denouement will come from out in left field somewhere…or by design.  But until the first event occurs, or the second is allowed to occur, they’re going to fight this thing to the bitter end.  Read Doug Noland’s commentary if you want it spelled out chapter and verse.

Of course the longer they delay the inevitable, the harder the fall from grace will be.

Next week brings the final FOMC meeting of the year…starting on Tuesday — and ending the following day [December 19] with the 2 p.m. EST pronouncement from the Eccles Building — and all eyes will be on it, as it could prove contentious.  Also on that date, if it’s not delayed at the last minute, is the sentencing date for that JPMorgan trader that pleaded guilty to spoofing the precious metal market.

So make up a cheese platter, open a bottle of wine or two — and fasten your seat belts.

And as I said in last Saturday’s column in closing….”you couldn’t make this stuff up.”

I’m done for the day — and the week — and I’ll see you here on Tuesday.

Ed