JPMorgan Stops 7,700 Gold Contracts So Far in February

23 February 2019 — Saturday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price crawled about three dollars higher during the first hour of trading once it began at 6:00 p.m. EST on Thursday evening in New York.  From there it crept unevenly sideways until around 9:15 a.m. in London — and by shortly after 10 a.m. GMT, the low of the day, such as it was, was set.  It edged a bit higher into the COMEX open — and began to rally sharply, only to run into ‘something’ shortly before 9 a.m. EST.  The gold price then crawled higher until 1:00 p.m. in COMEX trading — and it was quietly sold lower until 3:15 p.m. in the thinly-traded after-hours market.  It didn’t do much of anything after that.

The low and high ticks definitely aren’t worth looking up.

Gold was closed on Friday at $1,327.90 spot, up $4.90 from Thursday.  Net volume was fairly decent at just under 230,000 contracts — and there was a bit under 13,000 contracts worth of roll-over/switch volume in this precious metal.

The price pattern in silver was mostly the same as it was for gold, so I’m not going to dwell on the minutiae of its trading session.  However, it should be pointed out that the $16 spot price appears to be a line in the sand at the moment.

The low and high ticks in this precious metal aren’t worth looking up, either.

Silver was closed in New York on Friday at $15.895 spot, up 13.5 cents on the day.  Net volume was very light at a tad under 34,000 contracts, but roll-over/switch volume out of March into future months was pretty heavy once again at a bit under 34,500 contracts.

The platinum price inched unevenly higher throughout all of Far East and most of Zurich trading on their respective Fridays.  That lasted until the equity markets opened in New York yesterday morning — and that juncture, it really caught a bit.  That rally was allowed to last an hour and change — and the high tick was set at precisely 1:00 p.m. EST in COMEX trading.  It was sold a few dollars lower into the COMEX close — and didn’t do much of anything after that.  Platinum was closed at $841 spot,up 19 bucks on the day.

The palladium price traded a dollar or two higher until around 3 p.m. China Standard Time on their Friday afternoon.  It began to head higher from that point, before running into ‘something’ around 12:30 p.m. CET in Zurich trading.  It was sold lower into the afternoon gold fix in London — and then proceeded to wander quietly but unevenly higher until trading ended at 5:00 p.m. EST in New York.  Palladium finished the Friday session at $1,474 spot, up 23 dollars on the day.

The dollar index closed very late on Thursday afternoon in New York at 96.61 — and was up 5 basis points by 1:30 p.m. China Standard Time on their Friday afternoon.  It sank about 12 basis points from there until about 8:25 p.m. in London — and from that juncture it began to head unevenly higher, with the 96.78 high tick print coming at exactly 1:00 p.m. GMT in London/8:00 a.m. EST in New York.  From that point it chopped quietly lower — and the 96.43 low tick was set around 1:50 p.m. EST.  It crept a bit higher from there — and finished the Friday session at 96.51…down 10 basis points from Thursday’s close.  Nothing much to see here.

Here’s the DXY chart courtesy of BloombergClick to enlarge.

And here’s the usual 6-month U.S. dollar index chart, courtesy of the folks over at stockcharts.com — and the delta between its close…96.37…and the close on the DXY chart above, was 14 basis points on Friday.  Click to enlarge.

The gold stocks opened about unchanged, then dipped into negative territory at the afternoon gold fix in London — and then began to head higher.  Their respective highs came shortly before 12 o’clock noon in New York — and it was quietly and unevenly down hill from there.  They couldn’t quite squeeze a positive close — and the HUI finished down 0.15 percent.

The silver equities began to rally right at the outset of trading at 9:30 a.m. EST in New York on Friday morning — and their respective high ticks came around 12:10 p.m.  They chopped a bit lower until around 2:20 p.m. — and at that juncture, silver was sold down a bit more — and the shares collapsed into the close.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up a tiny 0.09 percent, so call it unchanged.  Click to enlarge if necessary.

Here’s the 1-year Silver Sentiment/Silver 7 Index chart from Nick as well.  Click to enlarge.

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 as you can see, that the gold shares outperformed the silver equities by a bit on both an absolute and relative basis, compared to the price action of their respective underlying precious metals.  Click to enlarge.

Here is the month-to-date chart — and we’re now up on the month across the board…except for silver.  And palladium appears unstoppable — and would be even higher than it is now, if it was allowed to trade freely, which it so obviously isn’t.  Click to enlarge.

The year-to-date chart still shows green across the board — and it should also be noted that the silver equities continue to outperform their golden brethren, especially when you compare them to the gains of their respective underlying precious metals.  Expect that pattern to continue when we really get a price break to the upside worthy of the name.  Click to enlarge.

With only seven weeks gone out of 2019, it’s hard to tell how the rest of the year will turn out.  As I said last week in this space — and further down again in this column, the precious metal market feels a lot different now, but that statement is hard to quantify…it just is. I’m very optimistic going forward.  The DoJ is still lurking about over at JPMorgan — and I await the resolution to that situation with great interest.  However, I expect that any decision that goes against JPMorgan, to show up in the price activity long before any word comes out of the DoJ.


The CME Daily Delivery Report showed that 779 gold and 1 silver contract were posted for delivery within the COMEX-approved depositories on Tuesday.

In gold, the largest short/issuer by far [out of the four in total] was Citigroup with another 717 contracts out of its own account — and in very distant second place was Advantage with 44 contracts out of its client account.  There were five long/stoppers — and it’s hardly worth mentioning the fact that tallest hog at the trough was JPMorgan once again, stopping 711 contracts for its client account, plus 6 for its own account.  Advantage was an ‘also ran’ in second place with 51 contracts for its client account.

So far in February, Citigroup has reissued 2,384 contracts out of the 2,474 gold contracts that they stopped earlier in the February delivery month — and JPMorgan has stopped almost all of them.  With a few more days left in the delivery month, I’ll stick my neck and say that Citigroup will have reissued the remaining 90 contracts during that period.

In silver, ADM issued — and Advantage stopped…both transactions involved their respective client accounts.

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 February fell by 152 contracts, leaving 999 still around, minus the 717 contracts mentioned a few paragraphs ago.  Thursday’s Daily Delivery Report showed that 143 gold contracts were actually posted for delivery on Monday, so that means that 152-143=9 gold contracts vanished from the February delivery month.  Silver o.i. in February declined by 2 contracts, leaving zero left.  Thursday’s Daily Delivery Report showed that 3 silver contract were actually posted for delivery on Monday, so that means that 3-2=1 more silver contract just got added to February.

So far this month, there have been 12,075 gold contracts issued and stopped…a decent chunk of which is double counting.  But of that amount, JPMorgan has stopped 4,802 contracts for its client account, plus 2,899 for its own account.  Both amounts are light years over the maximum 1,500 contracts that any entity can take delivery of during any given month.

It’s a given that Ted will have a fair amount to say about “all of the above” in his weekly review this afternoon.


There were no reported changes in either GLD or SLV on Friday.

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

Month-to-date the mint has sold 11,000 troy ounces of gold eagles — 5,500 one-ounce 24K gold buffaloes — 1,800 one-ounce platinum eagles — and 2,057,500 silver eagles.

The only activity in gold over at the COMEX-approved depositories on the U.S. east coast on Thursday, was 9,364 troy ounces that was dropped off at Delaware.  There was also a small paper transfer of 2,416 troy ounces from the Eligible category — and into Registered — and that occurred at Delaware as well.  The link to that is here.

It was quite a bit busier in silver, as 1,191,222 troy ounces were reported received — and 730,922 troy ounces were shipped out.  In the ‘in’ category, one truckload…600,912 troy ounces…was received at Canada’s Scotiabank — and the other truckload…590,310 troy ounces…found a home over at CNT.  In the ‘out’ category, there was 716,027 troy ounces that departed CNT — and the remaining 14,895 troy ounces was shipped out of Brink’s, Inc.  The link to all this is here.

There was a decent amount of activity over at the COMEX-approved gold depositories in Hong Kong on their Thursday.  They received 2,000 of them — and shipped out 3,005.  All of this activity was at Brink’s, Inc. of course — and the link to that, in troy ounces, is here.


Here’s a chart that Nick Laird passed around a few days ago.  It shows monthly U.S. gold imports and exports for a 5-year time period — and except for the odd month here and there, the U.S. is basically a net exporter of gold.

This chart is updated with November’s import/export numbers.  The import number for that month was 18.78 tonnes — and the export number is 27.01 tonnes.  Click to enlarge.

The Commitment of Traders Report, for positions held at the close of COMEX trading on Tuesday, February 5, showed the expected increases in the commercial net short positions in both silver and gold.  The number in silver was a bit more than I was expecting/hoping for — and the number in gold was less than half of what it was in the previous COT Report.

In silver, the Commercial net short position increased by a further 5,742 COMEX contracts, which works out to 18.7 million troy ounces of paper silver.

They arrived at that number by adding 2,633 long contracts, but they also added 8,375 short contracts — and it’s the difference between those two numbers that represents their change for the reporting week.

Under the hood in the Disaggregated COT Report, it was all Managed Money traders, plus more, as they added 7,660 long contracts, plus they reduced their short position by 150 contracts — and it’s the sum of those two numbers…7,810 contracts…that represents their change for the reporting week.

The difference between that number — and the Commercial net short position…7,810 minus 5,742 equals 2,068 contracts was made up as it always is, by the traders in the other two categories.  However, both went about it in a different manner, as the ‘Other Reportables’ decreased their long position by a very hefty amount — and the ‘Nonreportable’/small traders added a decent amount of long contracts.

Here’s the snip from the Disaggregated COT Report in silver, so you can see these category changes for yourself…if you’re interested, that is.  Click to enlarge.

Also in the Disaggregated COT Report — and for the second week in a row, it was the traders in the ‘Swap Dealer’ category that went the most short against the Managed Money traders.  Whereas the big banks in the ‘Producer/Merchant’ category went short by a much smaller amount…as they continue to shy away from the short side.

I didn’t have a chance to talk to Ted yesterday, as he wasn’t available, but I’ll stick my neck out and guess that JPMorgan’s short position could be as high as 23,000 COMEX contracts.

The Commercial net short position in silver, as of February 5, was reported as 78,204 contracts, or 391.0 million troy ounces of paper silver…167 days/6 months of world silver production…a preposterous amount.

The Big 4 traders are short 34.8 percent of the total COMEX open interest in silver — and the Big 8 are short 48.4 percent of total open interest.  Those numbers are just as grotesque.

Here is the 3-year COT chart for silver, updated with the February 5 numbers.  Click to enlarge.

Based on the price action during the next reporting week…ending Tuesday, February 12…I expect to see a decline in the Commercial net short position in silver.  But as to how many contracts, I’m not about to hazard a guess, but I doubt it will be a lot.


In gold, the commercial net short position increased by 12,633 contracts, or 1.26 million troy ounces of paper gold.

They arrived at that number by selling 6,334 long contracts — and the also added 6,299 short contracts — and it’s the sum of those two numbers that represents their change for the reporting week.

Under the hood in the Disaggregated COT Report, it was all Managed Money traders once again…almost to the contract, as they increased their long position by 8,550 contracts — and covered 3,928 short contracts — and it’s the sum of those two numbers…12,478 contracts…that represents their change for the reporting week.

The difference between that number — and the commercial net short position was only 12,633 minus 12,478 equals 155 contracts.  That was made up by the traders in the ‘Other Reportables” and “Nonreportable”/small traders.  However, they went about it wildly different ways…the former going hugely short — and the latter, hugely long.  Here’s the snip from the Disaggregated COT Report so you can see this for yourself.  Click to enlarge.

And also in the Disaggregated COT Report for gold, as it was in silver, it was the traders in the ‘Swap Dealer’ category that did most of the shorting against the Managed Money traders — and the big banks in the ‘Producer/Merchant’ category went [very] ‘short-lite’ in this precious metal as well.

The commercial net short position in gold is back up to 13.12 million troy ounces, which is still bullish on an historical basis, but edging in the direction of market neutral.

The Big 4 commercial traders are short 28.4 percent of the total open interest in gold in the COMEX futures market — and the Big 8 are short 41.2 percent.  These numbers aren’t as grotesque and obscene as they are in silver, but they are getting up there.

Here’s the 3-year COT chart for gold, updated with the data from the February 5 report — and the change should be noted.  Click to enlarge.

If there is an improvement in gold in the next COT Report…for positions held a the close of COMEX trading on February 12 that comes out next Tuesday…it won’t be a large amount.  At least not according to the current 6-month gold chart at the bottom of today’s column.


[NOTE I completely forgot about the new Bank Participation Report for February, which was also posted on the CFTC’s website on Friday…along with the Commitment of Traders Report for positions held at the close of COMEX trading on Tuesday, February 5…so here it is now…added at 9:35 p.m. EST on Sunday evening. – Ed]


The February Bank Participation Report [BPR] data is extracted directly from the above Commitment of Traders Report.  It shows the number of futures contracts, both long and short, that are held by all the U.S. and non-U.S. banks as of Tuesday’s cut-off in all COMEX-traded products.  For this one day a month we get to see what the world’s banks are up to in the precious metals —and they’re usually up to quite a bit.  The February Bank Participation Report covers all of January.

In gold, 5 U.S. banks were net short 75,739 COMEX contracts in the February BPR.  In January’s Bank Participation Report [BPR] these same 5 U.S. banks were net short 71,520 contracts, so there was a bit of an increase…4,219 contracts…since a month ago.  The short position of these Big 5 U.S. banks hasn’t been this high since June of 2018.

Also in gold, 30 non-U.S. banks are net short 51,374 COMEX gold contracts, which is well under two thousand contracts per bank.  In the January BPR, 28 non-U.S. banks were net short 48,209 COMEX contracts…so the month-over-month increase is up a bit as well, by 3,165 contracts.  However, I suspect that there’s at least one large non-U.S. bank in this group.  Scotiabank still holds a fairly hefty short position in gold, but their trading activity in the precious metals has come to a screeching halt.  So I suspect that another foreign bank may have picked up the slack.  Maybe France’s central bank.  But that’s wild-ass speculation on my part

As of this Bank Participation Report, 35 banks [both U.S. and foreign] are net short 26.5 percent of the entire open interest in gold in the COMEX futures market, which is up a hair from the 26.3 percent they were short in the January BPR.

Here’s Nick’s chart of the Bank Participation Report for gold going back to 2000.  Charts #4 and #5 are the key ones here.  Note the blow-out in the short positions of the non-U.S. banks [the blue bars in chart #4] when Scotiabank’s COMEX short position was outed by the CFTC in October of 2012.  Click to enlarge.

In silver, 5 U.S. banks are net short 46,281 COMEX silver contracts in February’s BPR.  I have records going back to July 2014 — and that’s the largest short position in COMEX silver that the U.S. banks have ever held — and not by a small amount, either.  According to Ted in his weekly review on Saturday, JPMorgan now holds around 26,000 contracts of that amount…up quite a bit from the 18-20,000 contracts he estimated they held in the January BPR.  I suspect that Citigroup holds a very large short position in COMEX silver now as well. In January’s BPR, the net short position of these U.S. banks was 43,606 contracts, so the short position of the U.S. banks is up 2,675 contracts from January’s BPR.

Also in silver, 22 non-U.S. banks are net short 29,126 COMEX contracts…which is up a bit from the 26,771 contracts that these same non-U.S. banks were short in the January BPR.  That’s the biggest short position that the non-U.S. banks have held in aggregate since November 2017.  I would suspect that Canada’s Scotiabank still holds a goodly chunk of the short position of the non-U.S. banks.  But it’s a possibility that a new player may have emerged on the short side, although that’s only speculation on my part as well.  But even taking that into account, I believe that a number of the remaining 20 or 21 non-U.S. banks are actually net long the COMEX futures market in silver.  But even if they aren’t, the remaining short positions divided up between these other 20 or 21 non-U.S. banks are immaterial — and have always been so.

But, having said all that, the net short positions of both the U.S. and non-U.S. banks are the biggest they have ever been — and I have records going back to July 2014.

As of February’s Bank Participation Report, 27 banks [both U.S. and foreign] are net short 36.4 percent of the entire open interest in the COMEX futures market in silver—which is down a bit from the 37.8 percent that they were net short in the January BPR — with much, much more than the lion’s share of that held by JPMorgan, Citigroup, Scotiabank..and perhaps one other.

Here’s the BPR chart for silver.  Note in Chart #4 the blow-out in the non-U.S. bank short position [blue bars] in October of 2012 when Scotiabank was brought in from the cold.  Also note August 2008 when JPMorgan took over the silver short position of Bear Stearns—the red bars.  It’s very noticeable in Chart #4—and really stands out like the proverbial sore thumb it is in chart #5.  Click to enlarge.

In platinum, 5 U.S. banks are net short 9,947 COMEX contracts in the February Bank Participation Report.  In the January BPR, these same banks were net short 12,495 COMEX contracts…so there’s been a fairly hefty month-over-month decline…20.4 percent.  [At the ‘low’ back in July of 2018, these same five U.S. banks were actually net long the platinum market by 2,573 contracts.] That’s quite a change for the worse in seven months.

Also in platinum, 18 non-U.S. banks are net short 5,478 COMEX contracts, which is down from the 6,864 contracts they were net short in the January BPR…and in percentage terms, that’s a decline of 20.2 percent.  But compared to the short positions of the 5 U.S. banks, the short positions of the non-U.S. banks are mostly immaterial. [Note: Back at the July 2018 low, these same non-U.S. banks were net short only 1,192 COMEX contracts.]

And as of February’s Bank Participation Report, 23 banks [both U.S. and foreign] are net short 19.1 percent of platinum’s total open interest in the COMEX futures market, which is down from the 22.3 percent they were net short in January’s BPR.

Here’s the Bank Participation Report chart for platinum.  Click to enlarge.

In palladium, 4 U.S. banks were net short 7,278 COMEX contracts in the February BPR, which is  up a decent amount from the 6,139 contracts they held net short in the January BPR…18.6 percent.

Also in palladium, 14 non-U.S. banks are net short 1,320 COMEX contracts—which is down 41.9 percent from the 2,272 COMEX contracts that 13 non-U.S. banks were short in the January BPR.

When you divide up the short positions of these non-U.S. banks more or less equally, they’re immaterial, just like they are in platinum…especially when you compare them to the positions held by the 4 U.S. banks.

As of this Bank Participation Report, 18 banks [U.S. and foreign] are net short 29.8 percent of the entire COMEX open interest in palladium.  In January’s BPR, the world’s banks were net short 29.4 percent of total open interest, so there’s been a tiny increase in the concentrated short position of the banks in this precious metal since the prior BPR report.

Here’s the palladium BPR chart.  You should note that the U.S. banks were almost nowhere to be seen in the COMEX futures market in this metal until the middle of 2007—and they became the predominant and controlling factor by the end of Q1 of 2013.  Click to enlarge.

I don’t wish to read too much into this current Bank Participation Report, as the data in it is a month out of date…BUT the trend is not a happy on in either silver or gold.  I’m certainly not happy about the record high short position held by the world’s banks in COMEX silver and, as I said in my commentary on silver further up…I have records going back to mid-2014 on this.  The second largest short position in silver these banks have held was back in April of 2017 when they were short 75,009 COMEX contracts, compared to the 75,407 COMEX contracts they’re short in February’s BPR.

With an ultra-bearish COMEX set-up like this, there’s no reason why JPMorgan et al couldn’t hammer the silver price into the dirt if they chose to do so.  But so far they haven’t — and I don’t know why.  Maybe the DoJ snooping around the halls over at JPMorgan has something to do with it.  But whatever the reason, there has to be some sort of resolution to this obscene and grotesque state of affairs.  Either it’s the ‘same old, same old‘…or they get overrun.

I have an average number of stories for you today.


CRITICAL READS

One Giant Short Squeeze: S&P500 Short Interest Tumbles to 12-Year Low

One of the recurring market themes we have observed in recent weeks is that just because hedge funds have been painfully – if only from a P&L perspective – underexposed to the recent rally in the stock market, the “pain trade” is higher and that the higher the market rises, the more investors will be forced to buy. This thesis has been most aggressively pitched by JPM’s Marko Kolanovic who believes that as VIX drops, resulting in greater leverage among the systematic community, the more buyers will emerge, creating a positive feedback loop that sends the market higher for the next three months.

Yet while it is hardly a secret that hedge funds have been underexposed to the market, where confusion remains is why hedge funds – despite assurances by the likes of JPM that it is only a matter of time – have so far refused to jump into stocks.

In fact, as we reported earlier, U.S. equity funds saw another $4.6 billion outflow in the latest week, the 12th consecutive week of outflows according to BofA, in other words for the entire duration of the past 9 weeks rally, investors have been continuously selling stocks even as they have been aggressively bidding up every fixed income product.

But while it remains a mystery why professional investors continue to boycott the market even as the S&P is rapidly approaching both 2,800 and its Sept 2018 all time highs, we now have a good idea of what has caused the relentless lifting in the market, even without the aggressive participation of retail and institutional investors (who, in fact, have continued to sell risk assets).

The answer, which we doubt will come as a surprise to many, is that in addition to buybacks which as noted earlier today are tracking some +91% higher compared to the same period in 2018 according to BofA client data suggesting another record year for stock repurchases, is stock buybacks.

For the evidence we once again go to Goldman which notes that mirroring the decline in gross exposures, the share of S&P 500 market cap held short is now at the lowest level since 2007, and as shown in the chart below, after peaking at 2.5% in 2015, just ahead of the Jan 2017 Shanghai Accord, short interest as a share of S&P 500 market cap has continued to slide lower and now equals just 1.7%.

This longish chart-filled article was posted on the Zero Hedge website at 3:56 p.m. EST on Friday afternoon — and it’s the first offering of the day from Brad Robertson.  Another link to it is here.


Reagan’s Top Economist Warns Investors Should Flee Stock Market

David Stockman, who served as the late U.S. President Ronald Reagan’s top economic adviser, says a day of reckoning has arrived for the stock market. Stockman believes a recession is imminent and that a “bad situation” waits on Wall Street’s horizon.

He warns investors to exit the stock and bond markets in a recent interview with Neil Cavuto on Fox Business with a stark metaphor:

We need to wake up and smell the roses here.”

Stockman says the U.S. economy is in the tenth year of the longest business expansion in history. An increasing budget deficit comes at the “very wrong time,” coupled with the U.S. Federal Reserve reducing its balance sheet. The Fed is doing this by allowing bonds to expire without replacing them. These factors are “catching up” with the U.S. economy, he argues.

Stockman describes the Fed’s actions of “monetizing” debt by buying bonds as delivering what appears to be a “free fiscal lunch.” Now, he says, the US will have to live with the consequences.
US debt hit $22 trillion for the first time in recent weeks, but, Stockman says the problem is even worse than it appears.

This 8:00 minute video clip was posted on the ccn.com website a 5:02 p.m. EST on Friday afternoon — and I thank George Whyte for pointing it out.  Another link to it is here.


Dudley on Debt and MMT — Doug Noland

December’s market instability and resulting Fed capitulation to the marketplace continue to reverberate. At this point, markets basically assume the Fed is well into the process of terminating policy normalization. Only a couple of months since completing its almost $3.0 TN stimulus program, the markets now expect the ECB to move forward with some type of additional stimulus measures (likely akin to its long-term refinancing operations/LTRO). There’s even talk that the Bank of Japan could, once again, ramp up its interminable “money printing” operations (BOJ balance sheet $5.0 TN… and counting). Manic global markets have briskly moved way beyond a simple Fed “pause.”

It’s now been almost a decade since I began warning of the incipient “global government finance Bubble.” In true epic Bubble form, after a decade of unprecedented expansion of government and central bank Credit, there’s a deeply embedded market perception that basically no amount of supply will impact the price of so-called “risk free” debt. And it’s precisely this perilous delusion that ensures an eventual crisis of confidence.

Today’s crackpot theories hold that central banks can continue to suppress interest rates and stimulate financial markets so long as consumer price inflation remains muted. It’s the old “money” as a “medium of exchange” focus that has led to scores of fantastic booms followed certainly by devastating collapses. The infamous monetary theorist John Law and his experiment in paper money were celebrated in France – that is until the spectacular 1720 collapse of his scheme and the attendant Mississippi Bubble. It literally took generations for trust in banking to return. Contemporary central banking is both the architect and enabler of crackpot theories. The celebration, today seemingly everlasting, will prove tragically transitory.

The dilemma today – as it’s been with great inflationary episodes throughout history – is that inflation becomes deeply ingrained and halting it too painful. Policymakers refuse to accept mistakes and change directions. Instead, there is denial and the irresistibility of rationalization and justification. Throughout the devastating Weimar hyperinflation, Germany’s central bank refused to accept that they were the party of primary responsibility – but instead rationalized they were being forced to respond to outside forces. Today’s great global inflation is characterized by contrasting dynamics, but some of the devastating consequences of failing to recognize the essence of the problem are all too similar. Markets. Social. Political. Economic. Geopolitical.

Doug’s always worth reading weekly commentary appeared on this website in the very wee hours of Saturday morning — and another link to it is here.


U.S. Cities Face “Moment of Reckoning” As China Halts Trash Imports

In the Trump era, the American garbage business is changing in ways that Tony Soprano never could have anticipated. And it’s creating serious problems for American cities, who might soon find themselves with nowhere to turn to export their trash and recyclables (most of which have almost no value above rubbish due to contamination, and are typically disposed of in the same fashion).

And while an unrelenting river of garbage with nowhere to go might be a mafioso’s dream, small towns like Chester City, PA., a small town in Delaware County that is best known as Philly’s waste pit, is demanding that something be done since China’s sleeper ban on recycling imports – which arose from Beijing’s desire “not to be the world’s landfill” – has led to a host of new deadly contaminants polluting the impoverished town’s air as its incinerators now burn more of the plastics that China will no longer accept.

What they do still accept: cardboard and metal, now has an extremely low contamination threshold of just 0.5% – a level far too low for current U.S. recycling technology to handle. Where China used to take 40% of the US’s paper plastics and other trash, that trade has now ground to a halt.

It is “virtually impossible to meet the stringent contamination standards established in China”, according to a spokeswoman for the Philly city government. Because of this, the city’s garbage problem has become a “major impact on the city’s budget”, at around $78 a ton. Now, half of the city’s recycling is going to the Covanta plant.

Making matters worse is that U.S. waste handlers believe that China is on track to close its doors to all recycled materials by 2020, an impossibly short deadline to build new incinerators or find somewhere else to dump America’s garbage (other than the ocean).

This very interesting, but not entirely surprising news item appeared on the Zero Hedge website at 3:40 p.m. EST yesterday afternoon.  I thank Brad Robertson for that one as well — and another link to it is here.


On to Caracas and Tehran! — Patrick Buchanan

In the Venezuelan crisis, said President Donald Trump in Florida, “All options are on the table.” And if Venezuela’s generals persist in their refusal to break with Nicolas Maduro, they could “lose everything.”

Another example of Yankee bluster and bluff?

Or is Trump prepared to use military force to bring down Maduro and install Juan Guaido, the president of the national assembly who has declared himself president of Venezuela?

We will get an indication this weekend, as a convoy of food and humanitarian aid tries to force its way into Venezuela from Colombia.

Yet, even given the brutality of the regime and the suffering of the people — 1 in 10 have fled — it is hard to see Trump sending the Marines to fight the Venezuelan army in Venezuela.
Where would Trump get the authority for such a war?

Still, the lead role that Trump has assumed in the crisis raises a question. Does the reflexive interventionism — America is “the indispensable nation!” — that propelled us into the forever war of the Middle East, retain its hold on the American mind?

This worthwhile commentary by Pat put in an appearance on his Internet site on Friday sometime — and I thank Phil Manuel for sending it our way.  Another link to it is here.


Cold War is good for business: U.S. contractors rejoice at the new Red Scare

U.S. politicians and media peddling scary stories about Russia and China may have a more pedestrian motive than defending ‘American values and way of life‘ – a return to the halcyon days of the Cold War and the Pentagon gravy train.

If there’s one thing mainstream Democrats and Republicans agree upon, it’s that Russia and China are the new global threat, ready to pounce at the first sign of a week spot in American defenses to topple the benevolent U.S. dominance of the globe.

If there’s another – never on the record, of course – it’s that war is good for business. Not actual war, what the Pentagon calls ‘kinetic military action‘, as that would be destructive. The ideal conditions for the political class in Washington is the bygone Cold War, when it could funnel billions of dollars in taxpayer money to defense contractors, with these corporations repaying the largesse with hefty contributions to politicians.

With a military budget of $717 billion in 2019 – which is about four times that of China and 15 times that of Russia – Washington war hawks are still lamenting how the “underfunded” U.S. military could lose the next war against either. There’s only one way to avoid that – spend more.

This right-on-the money commentary put in an appearance on the rt.com Internet site at 5:17 p.m. Moscow time on their Friday afternoon, which was 9:17 a.m. in Washington — EST plus 8 hours.  I thank George Whyte for pointing it out — and another link to it is here.


E.U. Targets Caterpillar, Samsonite & Xerox For Auto-Tariff Retaliation

As bureaucrats in Brussels wait for the other shoe to drop following the completion of the Commerce Department’s report on whether auto imports represented a “national security threat” (spoiler: they do), they are once again making it clear to the White House that, if it follows through with 25% tariffs on imported cars and car parts, the E.U. will swiftly retaliate with tariffs of its own.

And according to Bloomberg, the E.U.’s trade officials are targeting Xerox, Caterpillar and Samsonite for retaliation should the U.S. move ahead with auto tariffs.

Unsurprisingly, shares of Caterpillar and Xerox tumbled on the news.

This tiny 2-chart Zero Hedge item showed up on their website at 8:54 a.m. EST on Friday morning — and it’s also courtesy of Brad Robertson.  Another link to it is here.


Trump says he’ll maintain some troops in Syria, media says 400 ‘peacekeepers’ to stay

The U.S. plans to keep a total of 400 troops in Syria, half in the Kurd-held northern part of the country and half at the southeastern border, at Al-Tanf base, a media report says citing an administration official.

Earlier, Washington said it was planning to downsize its military presence in the north of Syria to 200 ‘peacekeepers’, but would not detail plans about the Al-Tanf base, which is located in a strategic part of Syria, where it borders Jordan and Iraq.

The 400 American troops will be part of a total force of 800-1,500 Western soldiers in Syria, with the rest provided by U.S.’ European allies, Reuters reports.

Washington claims it’s military deployment, which is not mandated by the U.N. Security Council and is also opposed by the Syrian government, was necessary to fight the terrorist group Islamic State (IS, formerly ISIL).

The Al-Tanf base is a constant subject of complaints by Russia, which accused the U.S. military of turning a blind eye on militant groups using the territory under their control to regroup and launch attacks against Syrian government troops.

Moscow also said the Rukban refugee camp, which is located near Al-Tanf, serves as a recruiting ground for jihadists.

This news item showed up on the rt.com Internet site at 6:19 p.m. Moscow time on their Friday afternoon, which was 10:19 a.m. EST in Washington.  It was updated about two and a half hours later.  I thank George Whyte for his third and final contribution to today’s column — and another link to it is here.  The Zero Hedge spin on this is headlined “Trump To Keep 400 Troops In Syria After European Allies Balked At “Multi-National Force”” — and I thank Brad Robertson for that one.


Barrick Gold Has Studied Offer for Newmont Mining

Barrick Gold Corp., the world’s second-largest gold producer, has considered a bid for Newmont Mining Corp. in what could be the biggest-ever industry merger and propel the Canadian miner to the No.1 spot globally.

Shares of Newmont rose 3 percent to settle at $36.48 in New York, valuing the company at more than $19 billion. Barrick slipped 2.4 percent in Toronto, while Goldcorp Inc., which Newmont agreed to acquire in January, fell 4 percent.

Barrick has reviewed the opportunity to merge with Newmont in an “all-share nil premium transaction,” but no decision has been taken, the company said in a statement Friday. One possibility that Barrick has studied would involve teaming up with a partner such as Newcrest Mining Ltd. in a bid for Newmont, people familiar with the matter said earlier.

Newmont is aware of the statement but won’t speculate “on Barrick’s interest or motivation,” spokesman Omar Jabara said in an e-mail.

This Bloomberg story put in an appearance on their Internet site at 7:14 p.m. PST on their Thursday evening — and it was updated about eighteen hours later.  I found it embedded in a GATA dispatch yesterday morning — and another link to it is here.  There was an interesting Reuters commentary/opinion piece on this possible take-over that was posted on their website at 3:45 a.m. EST on Friday morning.  It’s headlined “Barrick gamble is one part logic, two parts folly” — and it comes to us courtesy of Richard Saler.


Indians are deferring gold purchases as prices touch never-seen levels

The biggest Indian wedding season isn’t as glittery this year. For gold prices are off the charts, fuelled by gathering clouds of economic turmoil across the world.

On Feb. 20, standard gold (22 karat) prices stood at a historic high of Rs33,725 per 10 grams in India. Pure gold (24 karat) prices, too, had rallied to their highest-ever level of Rs33,850 per 10 grams, earlier this week. Despite a marginal dip on Feb. 21, this north-bound movement of prices is expected to continue due to several reasons.

Gold prices in India are particularly sensitive to global factors as the country meets most of its demand through imports. Typically, as bullion becomes expensive, retail buyers defer their purchases, a trend already playing out.

In the past two weeks since prices have been steadily increasing, we have seen sales go down as people are postponing (purchases) or just not buying,” said Bachhraj Bamalwa, a Kolkata-based jeweller and a bullion dealer. “And this is usually the wedding season in India when people buy more; but despite that, sales have been dull.”

What’s worse is that Indians foot an even higher price for gold compared to the global market due to the double whammy of import-dependence and a weak Indian rupee.

This gold-related news item was posted on the qz.com Internet site on Thursday sometime — and I found it on the Sharp Pixley website.  Another link to it is here.


India Gold Jewellery exports climb to $867 million in January

India’s Gold jewellery exports totaled $866.99 million in Jan ’19. This compares with the exports of $655.05 million in Jan ’18, thereby translating to a year-on-year increase of 32.35%, according to Gem & Jewellery Export Promotion Council (GJEPC) data.

The combined exports during the first ten months of the fiscal, from Apr ’18 to Jan ’19, totaled $9,845.66 million, considerably higher by over 27% year-on-year. India had exported only $7,746.72 million worth of Gold jewellery during corresponding ten-month period during the previous fiscal.

The exports of Costume and Fashion jewellery by the country recorded marginal growth in Jan ’19. The exports, at $5.57 million, were 3.15% higher than Jan ’18. The exports during the ten months from Apr ’18 to Jan ’19 too were up by almost 8% from $51.68 million in Apr ’17-Jan ’18 to $55.75 million.

Meantime, the silver jewellery exports continued to exhibit declining trend in January 2019. The monthly exports plunged heavily by nearly 29% from $146.73 million in Jan ‘18 to $104.38 million in Jan ’19. The exports during Apr ‘18-Jan ’19 declined sharply by almost 79% over the previous year.

The above four paragraphs are all there is to this brief news item that was posted on the scrapregister.com Internet site.  It was filed from Mumbai on Friday, although there’s no dateline.  This is the second gold-related article that I found on the Sharps Pixley website.  Another link to it is here.


Australia’s Gold … Safely in the Hands of the Bank of England

Those looking to break into the Reserve Bank of Australia’s Sydney headquarters looking for a stash of gold are going to be disappointed.

The bank explained to a parliamentary committee on Friday that its store of gold — all 80 tonnes of it — is 17,000 kilometres away in the Bank of England.

About 6,400 bars of the precious metal, which according to RBA governor Philip Lowe is worth about $4 billion, are sitting with 400,000 other bars in special vaults in the world’s gold-trading capital.

Later this year, a special audit will be conducted to ensure all these bars are there and that they weigh the 80 tonnes the Reserve Bank has on its ledger.

Bank deputy governor Guy Debelle said London had been the globe’s gold centre for “a few centuries“, saying it made sense for the RBA to keep its holding in Britain.

Outside of Fort Knox, literally and a few other places, most of the world’s gold holdings are in London because that’s where the bulk of the transactions are,” he said.

Every year, the RBA’s range of assets are audited for financial purposes.

Australia started the practice of physically auditing its London gold holdings, which it currently does every 6 years.

This news item appeared on The Sydney Morning Herald‘s Internet site on Friday ‘down under’ — and I found it on the gata.org Internet site.   Another link to it is here.


The PHOTOS and the FUNNIES

Here are two more photos from the short 65 kilometer trip between Merritt and Spence’s Bridge in British Columbia.  The first is another photo of those bighorn sheep, the second is a railway bridge over the Nicola River from the long-defunct Kettle Valley Railway.  But the third photo is of the Thompson River where it empties into the Fraser River at Lytton…which is a thirty minute drive south of Spence’s Bridge.  Click to enlarge.


The WRAP

The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.” — Ernest Hemingway


I have two versions of today’s pop ‘blast from the past’.  Both are from the same group…Journey.  The first is by their original lead singer, Steve Perry — and that’s linked here.  The second version of the same tune is performed by Journey’s new lead singer from the Philippines, singing in his first concert since joining the band…Arnel Pineda — and the link to that is here.

Arnel’s ‘rags to riches’ ascent from living in abject poverty on the streets of Manila, to international super-stardom, is the stuff of legend.  It was captured in a stunning documentary of this ever-so-humble man that’s entitled “Don’t Stop Believin’:  Everyman’s Journey” — and although long, it is definitely worth your while if you have the time and/or the interest.

Today’s classical ‘blast from the past’ is a work by Czech composer Antonín Dvořák that I’ve only featured once before — and I’m going to make amends for that today.  Symphony No. 9 in E minor, “From the New World”, Op. 95, B. 178 was composed in 1893 while he was the director of the National Conservatory of Music of America from 1892 to 1895. It is by far his most popular symphony, and one of the most popular of all symphonies.

At the premiere in Carnegie Hall, the end of every movement was met with thunderous applause and Dvořák felt obliged to stand up and bow. This was one of the greatest public triumphs of Dvořák’s career.

When I first heard the performance that I chose today, I thought the Adagio and Largo were way too slow for my taste.  But after listening to them several times, I became a convert.  This recording with the Munich Philharmonic Orchestra, with the world-renowned Sergiu Celibidache conducting, is from 1991. He is regarded as one of the greatest conductors of the 20th century.  The audio is superb — and the performance is as good as you’ll ever hear anywhere.  The link is here.


I’m not sure what, if anything should be read into Friday’s price action in the precious metals.  I had a real sense that the short sellers of last resort were certainly lurking about, but their touch was pretty light, although obvious in silver, as it’s being carefully corralled under the $16 spot price mark.  But it’s hard to read too much into even that, considering that net volume in silver was basically fumes and vapours.

The other thing that I found rather surprising was that the short sellers didn’t continue the engineered price decline that they started on Thursday.  I was expecting the worst when I checked the charts after rolling out of bed yesterday morning, but that didn’t happen.  Maybe that’s why things feel different this time.  However, the jury is still out on that, especially in silver.

There were no new lows set in any of the precious metals yesterday — and both gold and silver remain above their respective 200 and 50-day moving averages.  Platinum blasted through and closed above its 200-day moving average for the first time since early January 2018 — and palladium continues on its controlled price rise…despite the alarming supply/demand fundamentals and sky-high lease rates.

Here are the 6-month charts in all four precious metals, plus copper and WTIC — and the above points I touched upon in the previous paragraph should be noted.  Click to enlarge for all.

Ever since the Fed caved into the demands of the equity markets in January, it has been a pretty wild short-covering ride in all of them.  But even with the ‘Fed Put’ firmly in place, it’s obvious that the PPT have had to show up in the equity markets on many occasions since then to prevent them from melting down — and that applies to the U.S. dollar index as well.

And in order to continue this illusion of wealth by keeping stock markets elevated, it has now become obvious that at some point, the Federal Reserve will be back with another round of Q.E.  In both Japan and China, none of their leadership or central banks are hiding the fact that they are intervening massively in their own equity markets and banking systems…printing whatever money it takes to keep their respective paper games afloat.  Even the ECB has indicated that they may be back in the market buying up bonds once again.  So it’s a certainty that at some point the Fed will be forced to go down that path as well.  It’s only a matter of when.

Here’s the 5-year chart for gold — and ever since its low back in very late December of 2015, it has never been allowed to rise much above the $1,360 price mark — and has been hauled lower by JPMorgan et al ever time it has reached that mark since.  That may or may not prove to be a line in the sand this time as well.  Click to enlarge.

And here’s the 5-year chart for silver — and ever since its July 1 high back in 2016, it has been under relentless price pressure, thanks to the guiding hand of JPMorgan et al.  Things may turn out differently since it became public knowledge that the Department of Justice convicted that ex-JPMorgan trader of spoofing in gold and silver in the COMEX futures market.  We’ll have to see how things turn out this time, despite the current bearish market structure in silver at the moment.  Click to enlarge.

But the world’s financial system and equity markets are far different beasts now then back at the lows for gold and silver in late December of 2015.  They have now gone totally off the rails — and there’s nobody left that’s under any illusion that there are free markets anymore.

It’s my opinion that the precious metal market has now awakened to that fact — and that’s why it feels “different this time”.  Despite how powerful ‘da boyz’ appear to be in silver and gold…they could get overwhelmed in the COMEX futures market at any point, especially if JPMorgan does not show up as the short seller of last resort as these rallies continue to gain strength.

Ted is of the opinion that JPMorgan is being very cautious about going short any more than they have to, now that the DoJ is on their case.  But it still remains to be seen what action, if any, they’ll take against the firm considering the fact that they most likely have all the evidence they need to haul away all their precious metal traders in steel bracelets and orange jump suits.

The best we can do now is what we’ve always done, just wait some more — and hopefully not much more…hoping that justice will prevail.

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

Ed