Gold Stopped Cold at $1,300 Spot on Friday

09 March 2019 — Saturday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price edged quietly sideways once trading began at 6:00 p.m. EST on Thursday evening in New York — and that lasted until around 9:20 a.m. China Standard Time on their Friday morning.  It began to head higher from there — and that lasted until shortly before 9:30 a.m. in London.  It crept quietly lower from that juncture until the job numbers came out at 8:30 a.m. in New York.  It jumped higher at that point, but was obviously brutally capped the moment the price broke above the $1,300 spot mark.  It was sold a bit lower into the afternoon gold fix from there — and rose quietly until minutes before 4 p.m. in the thinly-traded after-hours market.  At that point it poked its nose above the $1,300 spot mark once again — and was then sold quietly lower until trading ended at 5:00 p.m. EST in New York.

The low and high ticks were recorded by the CME Group as $1,285.60 and $1,301.30 in the April contract…an increase of a bit over 1 percent.

Gold was closed in New York on Friday at $1,297.70 spot, up $12.50 from Thursday.  Net volume was very decent at just under 240,500 contracts — and there was a bit over 48,000 contracts worth of roll-over/switch volume out of April and into future months.

It was exactly the same price path for silver, but once it started to rally on the job numbers, it only paused briefly at the afternoon gold fix — and continued higher from there.  However, it obviously ran into ‘something’ a few minutes before 11:30 in New York trading — and was sold lower until 1 p.m.  The silver price didn’t do much after that.

The low and high ticks in this precious metal were reported as $15.015 and $15.385 in the May contract.

Silver was closed at $15.31 spot, up 31 cents on the day and, like gold, would have probably closed materially higher, if allowed. It should also be noted that silver closed above its 200-day moving average by a decent amount.  Net HFT volume was reasonably heavy at just under 70,000 contracts, but not as heavy as one might expect considering the size of the price move.  There was around 4,300 contracts worth of roll-over switch volume in that precious metal.

Platinum traded pretty flat until shortly after 1 p.m. CST on their Friday afternoon — and then began to head higher.  But, like for silver and gold, it was sold lower at shortly after 11 a.m. CET in Zurich trading.  That lasted until the 11 a.m. EST Zurich close — and it crawled unevenly higher until shortly after 3 p.m. in the thinly-traded after-hours market — and was sold a few dollars lower into the 5:00 p.m. close of trading from there.  Platinum finished the day at $815 spot, up 3 bucks from Thursday’s close.

Palladium traded a bunch of dollars either side of the $1,500 spot mark through all of Far East and most of Zurich trading on Friday — and was back within a few dollars of unchanged by the COMEX open.  It ran into ‘something’ at that juncture — and by the time they were through, the low tick of the day was set at 1 p.m. in New York.  It rallied a bunch from there until shortly before 3 p.m. in after-hours trading — and didn’t do a lot after that.  Palladium was closed at $1,493 spot, down 13 dollars on the day.

The dollar index closed very late on Thursday afternoon in New York at 97.67 — and opened down 4 basis points the moment that trading commenced at 7:45 p.m. EST on Thursday evening, which was 8:45 a.m. China Standard Time on their Friday morning.  It was all unevenly down hill from there — and the 97.25 low tick was set at 8:45 a.m. in New York.  It recovered about 10 basis points from there in very short order — and then chopped nervously sideways for the remainder of the Friday session.  The dollar index finished the day at 97.31…down 36 basis points from Thursday’s close.

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

And here’s the 6-month U.S. dollar index chart from the folks over at the stockcharts.com Internet site — and the delta between its close…97.27…and the close on the DXY index above, was 4 basis points on Friday.  Click to enlarge.

The gold stocks gapped up a bit over three percent at the open, but willing sellers appeared right away — and they gave up over half their gains by around 10:25 p.m. in New York trading.  From that point, they crawled quietly higher for the remainder of the Friday session — and the HUI closed up a very respectable 3.52 percent.

It was the same price pattern for the silver equities, except the sell-off after the opening gap higher was much more pronounced.  The ensuing rally was hardly enthusiastic — and Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up only 1.81 percent.  I was more than underwhelmed.  Click to enlarge if necessary.

And here’s Nick’s 1-year Silver Sentiment/Silver 7 Index chart 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 there wasn’t much happening, at least on a net basis during this past reporting week, but the intraday prices moves during the last five business days were rather interesting.  A lot of the poor price action in the equities was because of the out-of-the-blue down day on Wednesday — and the silver equities poor performance yesterday.  Click to enlarge.

Here is the month-to-date chart — and except for palladium, everything else is in the red by a bit.  That’s because of the ongoing engineered price declines in everything that began starting before February ended — and spilled over into March, which is still only six business days old.  Click to enlarge.

The year-to-date chart still shows green across the board, except for silver and, as I mentioned in my comments on the month-to-date data…all of the gains so far this year have been taken back during this latest engineered price decline.  However, their associated equities continues to hold up.  Click to enlarge.

Once this sequence of engineered price declines is done with — and that may have ended at the close of trading on Thursday, I expect these charts to be far more rosy looking than they are now.  However — and as I said last week in this space, 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 8 gold and 10 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.

In gold, Advantage and ADM were the short/issuers, with 5 and 3 contracts out of their respective client accounts.  And the two largest long/stoppers were JPMorgan and Advantage, with 4 and 3 contracts for their respective client accounts as well.

In silver, all 10 contracts were issued by Advantage out of its client account — and they also stopped 3 contracts for their client account as well.  The only other long/stopper was JPMorgan, picking up 3 for their own in-house trading account — and 4 for their client account.

The link to yesterday’s Issuers and Stoppers Report is here.

Month-to-date there have been 327 gold contract issued/reissued and stopped — and that number in silver is now up to 4,858 contracts.

The CME Preliminary Report for the Friday trading session showed that gold open interest in March declined by 7 contracts, leaving 46 still open, minus the 8 contracts mentioned a few paragraphs ago.  Thursday’s Daily Delivery Report showed that 9 gold contracts were actually posted for delivery on Monday, so this means that 9-7=2 more gold contracts were added to March.  Silver o.i. in March dropped by 125 contracts, leaving 410 still around, minus the 10 contracts mentioned a few paragraphs ago.  Thursday’s Daily Delivery Report showed that 122 gold contracts were actually posted for delivery on Monday, so that means that 125-122=3 silver contracts vanished from the March delivery month.


There were no reported changes in GLD yesterday, but an authorized participant added 1,359,740 troy ounces of silver to SLV.

Once again, there was no sales report from the U.S. Mint.

Month-to-date the mint has sold a piddling 1,500 troy ounces of gold eagles — and 500 one-ounce 24K gold buffaloes — and no silver eagles at all.

There was no in/out activity at all in gold over at the COMEX-approved depositories on the U.S. east coast on Thursday.

There was a fair amount of activity in silver, however — and all of it occurred at CNT.  They received two truckloads…1,199,653 troy ounces…and shipped out one truckload…600,911 troy ounces.  The link to this activity is here.

It was pretty busy over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday.  The reported receiving 500 of them — and shipped out a hefty 5,605.  All this activity was at Brink’s, Inc. of course — and the link to that, in troy ounces, is here.


The Treasure of El Carambolo was found in El Carambolo hill in the municipality of Camas (Province of Seville, Andalusia, Spain), 3 kilometers west of Seville, on 30 September 1958. The discovery of the treasure hoard spurred interest in the Tartessos culture, which prospered from the 9th to the 6th centuries BCE, but recent scholars have debated whether the treasure was a product of local culture or of the Phoenicians. The treasure was found by Spanish construction workers during renovations being made at a pigeon shooting society.

It consists of 21 pieces of crafted gold: a necklace with pendants, two bracelets, two ox-hide-shaped pectorals, and 16 plaques that may have made up a necklace or diadem. The jewelry had been buried inside a ceramic vessel. Alternatively, some current thinking is that the plaques were attached to textiles adorning animals led to sacrifice, while the necklace and bracelets were worn by the priest officiating. Following the discovery, archaeologist Juan de Mata Carriazo excavated the site. The treasure has been dated to the 8th century BCE, with the exception of the necklace, which is thought to be from 6th century BCE Cyprus. The hoard itself is thought to have been deliberately buried in the 6th century BCE.  Click to enlarge.


The Commitment of Traders Report for positions held at the close of COMEX trading on Tuesday, March 5, showed the expected big declines in the commercial net short positions in both silver and gold.  The silver numbers were better than Ted expected, but a bit less than he was hoping for in gold.

In silver, the Commercial net short position declined by 25,928 contracts, or 129.6 million troy ounces of paper silver.

They arrived at that number by reducing their long position by 1,878 contracts — and they covered 27,806 contracts — and it’s the difference between those two numbers that represents their change for the reporting week.

Ted said that most of the change came in the Big 4 trader category, where JPMorgan and Citigroup hang out…along with what’s left of Scotiabank’s short position in silver — and suspects that it was all JPMorgan.

Under the hood in the Disaggregated COT Report, it was all Managed Money traders, plus much more, as they sold 17,762 long contracts, plus they added 12,144 new short contracts — and it’s the sum of those two numbers…29,906 contracts…that represents their change for the reporting week.

The difference between that number — and the Commercial net short position…29,906 minus 25,928 equals 3,978 contracts.  And as is always the case, that difference was made up by the traders in the other two categories.  It was mostly the ‘Other Reportables’, as they went net long by 4,114 contracts — and the ‘Nonreportable’/small traders didn’t do much, as they decreased their long position by a tiny 136 contracts.

The head-scratcher for Ted was the fact that the big banks in the ‘Producer/Merchant’ category only decreased their short position by a net 7,788 contracts, while the traders in the ‘Swap Dealer’ category decreased their short position by a chunky net 18,148 contracts.

But since Ted thinks that because of the new Bank Participation Report, JPMorgan decreased their short position by around 16,000 contracts or so…why is the change in ‘Producer/Merchant’ category so small…only 7,788 contracts?  He now figures that the CFTC is allowing JPM to trade in both that category — and the ‘Swap Dealer’ category as well, because that’s the only way that the numbers make any sense.  He’ll have lots to say about this in his weekly review later today.

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

The Commercial net short position in silver is now down to 52,241 COMEX contracts, or 261.2 million troy ounces of paper silver.

The Big 4 traders are short 29.6 percent of the entire open interest in silver, which is down quite a bit from the COT Report from last week — and the Big 8 traders, which obviously includes the Big 4, are short 46.0 percent of the entire open interest in silver, which is down quite a bit from the 50.4 percent the Big 8 were short in the last COT Report.  However, virtually all the decline came in the Big 4 category, as the ‘5 through 8’ large traders did very little.

Ted pegs JPMorgan’s short position around the 12,000 contract mark, down from the 28,000 contracts he felt they were short in last week’s report.  But he also admitted that it was an approximation.  JPMorgan is no longer the big short in silver — and that title is most likely held by Citigroup now.  Canada’s Scotiabank is still in the Big 4 short category somewhere.  I’ll have more on this in the Bank Participation Report further down.

Here’s the 3-year COT chart for silver — and the big improvement should be noted.  Click to enlarge.

As I mentioned in Friday’s column, despite how big an improvement there would be in the Commercial net short position in this week’s COT Report, silver would remain in a bearish configuration from a COMEX futures market perspective — and it is.  Whether that matters now, remains to be seen.


In gold, the commercial net short position declined by a hefty 45,848 COMEX contracts, or 4.58 million troy ounces of paper gold.

They arrived at that number by adding 9,690 long contracts — and they also reduced their short position by 36,158 contracts.  It’s the sum of those two numbers that represents their change for the reporting week.

The short position of the Big 4 traders in gold is down to 25.4 percent of the total open interest in gold…which is a big drop from last week — and the traders in the Big ‘5 through 8’ category actually increased their short position by a bit during the reporting week.  But despite that increase, the short position of the Big 8 traders took a tumble last week, as the are now short ‘only’ 37.4 percent of the entire open interest in the COMEX futures market in gold.

Under the hood in the Disaggregated COT Report, it was all Managed Money traders, plus a bit more, as they sold 28,314 long contracts — and they increased their short position by 18,998 contracts as well.  It’s the sum of those two numbers…47,312 contracts…that represents their change for the reporting week.

The difference between that number — and the commercial net short position…47,312 minus 45,848 equals 1,464 contracts was made up almost entirely by the traders in the ‘Nonreportable’/small trader category, as the ‘Other Reportables’ barely did anything on a net basis during the reporting week.

The commercial traders in the ‘Producer/Merchant’ reduced their short position by 13,568 contracts on a net basis — and the commercial traders in the ‘Swap Dealer’ category reduced their net short position by a hefty 32,280 contracts — and the sum of those two numbers equals the commercial net short position in gold, which it mathematically must do.

Here’s the snip from the Disaggregated COT, so you can see all this activity for yourself if you wish.  Click to enlarge.

The commercial net short position in gold is down to 11.40 million troy ounces of paper gold, which I’m sure Ted would classify as pretty bullish.

Here’s the 3-year COT chart for gold — and this week’s big improvement should be noted.  Click to enlarge.

With the COMEX futures market bullish in gold, but still bearish in silver, you have to wonder where we go from here from a price perspective.  Ted always said that there would come a time when what was in the COT Reports wouldn’t matter.  This might be one of those times, but I wouldn’t bet the ranch on it at the moment.

There was very little volume in thinly-traded palladium market.  The Managed Money traders reduced their long position by a tiny 368 contracts — and the amounts traded by the commercial traders, along with the traders in the other two categories, was even less.  When I say “thinly-traded”…I mean it.  Platinum was entirely different, as the Managed Money traders got their faces ripped off by the commercials, as they covered a net 8,904 short contracts for big losses.  Now their getting hammered to the downside, losing even more money.  In copper, the Managed Money traders kept their losing streak unblemished, as they reduced their short position by 6,153 contracts, as the commercial traders rang the cash register on them in this metal as well.

Remember, as Ted keeps pointing out, it’s the commercial traders gaming the Managed Money traders that sets the world prices in most commodities…not supply demand.  The crooks at the CFTC and the CME Group knows all about this, but won’t do a thing to stop it.


Here’s Nick Laird’s “Days to Cover” chart updated with yesterday’s COT data for positions held at the close of COMEX trading last 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.

For the current reporting week, the Big 4 traders are short 120 days of world silver production—and the ‘5 through 8’ large traders are short an additional 67 days of world silver production—for a total of 187 days, which is a hair over 6 months of world silver production, or about 436.4 million troy ounces of paper silver held short by the Big 8.  [In the COT Report last week, the Big 8 were also short 224 days of world silver production.]

In the COT Report above, the Commercial net short position in silver was reported as 261.2 million troy ounces.  As mentioned in the previous paragraph, the short position of the Big 8 traders is 436.4 million troy ounces.  The short position of the Big 8 traders is larger than the total Commercial net short position by a chunky 436.4 minus 261.2 equals 175.2 million troy ounces.  The reason for the difference in those numbers…as it always is…is that Ted’s raptors, the 32-odd small commercial traders other than the Big 8, are long that amount.

As stated earlier, Ted estimates JPMorgan’s short position at around 12,000 contracts, down 16,000 contracts from last week’s report, or 60 million troy ounces of paper silver held short.  That translates into about 26 days of world silver production.  That number also represents 22 percent of the short position of the Big 8 traders — and about 39 percent of the short position held by the Big 4 traders.

The Big 4 traders are short 120 days of world silver production — and once you subtract out the 26 days that JPM is short, that leaves 94 days split up between the other three large traders…a bit over 31 days that each is short.  And as I pointed out in the COT Report, JPMorgan is no longer the Big short in silver — and these numbers prove that.

The four traders in the ‘5 through 8’ category are short 67 days of world silver production in total, which is around 16.75 days of world silver production each.  The smallest of the traders in this category holds something less than 16.75 days — and the largest, something more than that amount.  So it appears that JPMorgan is most likely the smallest of the Big 4 traders at this point.

As I state earlier, the Big 8 commercial traders are short 46.0 percent of the entire open interest in silver in the COMEX futures market.  And once whatever market-neutral spread trades are subtracted out, that percentage would be a bit over 50 percent.  In gold, it’s now 37.4 percent of the total COMEX open interest that the Big 8 are short — and something over 40 percent once the market-neutral spread trades are subtracted out.

In gold, the Big 4 are short 42 days of world gold production — and the ‘5 through 8’ are short another 19 days of world production, for a total of 61 days of world gold production held short by the Big 8.  Based on these numbers, the Big 4 in gold hold about 69 percent of the total short position held by the Big 8.

The “concentrated short position within a concentrated short position” in silver, platinum and palladium held by the Big 4 commercial traders are about 64, 73 and 79 percent respectively of the short positions held by the Big 8.


The March Bank Participation Report [BPR] data is extracted directly from the data in yesterday’s 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 March Bank Participation Report covers all of February.

In gold, 5 U.S. banks were net short 61,228 COMEX contracts in the March BPR.  In February’s Bank Participation Report [BPR] these same 5 U.S. banks were net short 75,739 contracts, so there was a big drop of 14,511 contracts from a month ago.  If JPMorgan was short gold up to that point, I’d suspect that they’re mostly out of that position by now.

Also in gold, 29 non-U.S. banks are net short 54,200 COMEX gold contracts, which is well under two thousand contracts per bank.  In the February’s BPR, 30 non-U.S. banks were net short 51,374 COMEX contracts…so the month-over-month increase is up a bit…2,826 contracts.  However, as I always say at this point, I suspect that there’s at least one large non-U.S. bank in this group, most likely Scotiabank, that still holds a fairly hefty short position in gold, even thought they appear to be no longer active in the precious metals futures market anymore.

As of this Bank Participation Report, 34 banks [both U.S. and foreign] are net short 24.5 percent of the entire open interest in gold in the COMEX futures market, which is down a bit from the 26.5 percent they were short in the February 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 31,643 COMEX silver contracts in March’s BPR.  According to Ted, JPMorgan now holds around 12,000 contracts of that amount…down quite a bit from the 28,000 contracts he estimated they held short in the February 26 COT Report.  I suspect that Citigroup holds a very large short position in COMEX silver now as well, almost certainly larger than JPMorgan’s.  In February’s BPR, the net short position of these U.S. banks was 46,281 contracts, so the short position of the U.S. banks is down a substantial 14,638 contracts from February BPR.

Also in silver, 21 non-U.S. banks are net short 29,118 COMEX contracts…which is virtually unchanged from the 29,126 contracts that these same non-U.S. banks were short in the February 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 these non-U.S. banks.  I believe that a number of the remaining 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 21 non-U.S. banks are immaterial — and have always been so.

As of March’s Bank Participation Report, 26 banks [both U.S. and foreign] are net short 31.9 percent of the entire open interest in the COMEX futures market in silver—which is down a bit from the 36.4 percent that they were net short in the February BPR — with much, much more than the lion’s share of that held by JPMorgan, Citigroup and Scotiabank.

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 11,866 COMEX contracts in the March Bank Participation Report.  In the February BPR, these same banks were net short 9,947 COMEX contracts…so there’s been an increase of 1,919 contracts month-over-month.  [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 nine months.

Also in platinum, 17 non-U.S. banks are net short 9,392 COMEX contracts, which is up big from the 5,478 COMEX contracts they were net short in the February BPR…and in percentage terms, that’s an increase of 71 percent.  [Note: Back at the July 2018 low, these same non-U.S. banks were net short only 1,192 COMEX contracts.]

And as of March’s Bank Participation Report, 22 banks [both U.S. and foreign] are net short 27.4 percent of platinum’s total open interest in the COMEX futures market, which is up big from the 19.1 percent they were net short in February’s BPR.  That rally in platinum in February did not go unopposed by the world’s banks.

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

In palladium, ‘3 or less’ U.S. banks were net short 7,964 COMEX contracts in the March BPR, which is up from the 7,278 contracts they held net short in the February BPR.

Also in palladium, ’12 or more’ non-U.S. banks are net short 1,005 COMEX contracts—which is down from the 1,320 COMEX contracts that 14 non-U.S. banks were short in the February BPR.  That’s the lowest short position that the non-U.S. banks have held since June 2016.

When you divide up the short positions of these non-U.S. banks more or less equally, they’re completely immaterial…especially when you compare them to the positions held by the ‘3 or less’ U.S. banks.

As of this Bank Participation Report, 15 banks [U.S. and foreign] are net short 33.9 percent of the entire COMEX open interest in palladium.  In February’s BPR, the world’s banks were net short 29.8 percent of total open interest, so there’s been a small increase in the concentrated short position of the banks in this precious metal over the last month.

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’m certainly happy to see the world’s banks, but mostly the U.S. banks — and mostly JPMorgan and Citigroup, reduce their net short positions over the last month.  But it’s still grotesque that they continue to control the prices of the precious metals, as they neither produce these metals, nor consume them.  Their only purpose is price management.  That’s all there is, there ain’t no more.

I have no idea where prices will head from here.  Friday was a very positive day — and whether it continues or not, remains to be seen.

I have an average number of stories for you today.  Doug Noland is back this week — and I have a Cohen/Batchelor interview as well.


CRITICAL READS

February Payrolls Shocker: Hiring Plunges to 20K as Wage Growth Soars

Just as we warned moments ago when we cautioned that the whisper number is for a sharply lower print than the expected 180K print, moments ago the BLS confirmed that in February the U.S. labor market hit a brick wall, or perhaps a blizzard, when it added just 20K jobs in February…

… the lowest monthly gain in more than a year and far below all estimates, although revisions to the prior two month actually added another 12K jobs, with the January 304K print revised higher to 311K and Dec also revised higher from 222K to 227K.

What is surprising is that while the Establishment Survey was a big miss, the Household Survey actually saw a big drop in the number of unemployed workers, which tumbled by 300K to 6.235MM.

Additionally, non-employment among the key worker demographic, those Americans aged 35 to 44, plunged in February to the lowest level in 12 years.

Another major surprise: while the jobless rate fell modestly to 3.8% from 4.0, the broader U-6 measure of unemployment plunged to 7.3% from 8.1%, the biggest monthly drop on record, after jumping last month.

This chart-filled Zero Hedge commentary showed up on their website at 9:40 a.m. EST on Friday morning — and I thank Brad Robertson for sending it our way.  Another link to it is here.


Fed’s QE Unwind Reaches $501 Billion, Balance Sheet Falls Below $4 Trillion. “Autopilot” Engaged — Wolf Richter

Over the next few months, the Fed is expected to announce its new plan for its balance sheet. Meanwhile, as we’re riveted to the edge of our seat, the old plan continues on autopilot, and February was one of the few months when the Treasury “roll-off,” as Chairman Jerome Powell likes to call it, hit the “caps.”

In February, the Fed shed $57 billion in assets, according to the Fed’s balance sheet for the week ended March 6, released this afternoon. This slashed the assets on its balance sheet to $3,969 billion, the lowest since December 2013. Via its “balance sheet normalization,” the Fed has now shed $501 billion. And since peak-balance-sheet at the end of 2014, the Fed has shed $547 billion:

During peak-balance-sheet at the end of 2014, total assets ($4.52 trillion) amounted to 26% of GDP. Today’s assets amount to 19.4% of GDP. In the years before QE started, the balance sheet ran around 6% of GDP.

By comparison, the ECB’s balance sheet assets now exceed 40% of GDP, and the Bank of Japan’s assets amount to 101% of GDP.

This interesting commentary from Wolf appeared on the wolfstreet.com Internet site on Thursday sometime — and I thank Richard Saler for passing it along.  Another link to it is here.


David Stockman: The Undrainable Swamp & the Inevitable Recession

Love it or hate it, the potency of the Trump Administration is on the wane, soon to be stuck in the mire of the Swamp it has deepened instead of drained, while the economy falls into one hell of a recession — so claims former Regan-era Cabinet member and Congressman David Stockman.
In his new book Peak Trump, Stockman notes how the wide divergence between Trump the campaigner and Trump the president appears to be proving to be his undoing.

Rather than fight to dismantle the institutions he railed against as a candidate — most notably the Deep State and the Federal Reserve — Trump has embraced them.

Now, when this latest asset bubble bursts (and Stockman believes the markets saw their peak back in Fall 2018), Trump will ‘own’ that. Having chosen to tie his administration’s success to the rising price of the S&P 500 since taking office, he won’t be able to foist the blame of a market crash on his predecessors.

Similarly, the Deep State — especially the military industrial complex — is experiencing a bonanza under the Trump administration. As a result, the Swamp is deeper than it has ever been.

This 56-minute audio interview was posted on the peakprosperity.com Internet site on Tuesday — and I found it on the Zero Hedge website on Wednesday.  But because of its length, I thought it best to wait for my Saturday missive.  Another link to it is here.


Doug Noland: Q4 2018 Z.1 “Flow of Funds”

The wide – and widening – divergence between booming risk markets and more than resilient safe haven sovereign bond prices narrowed just a bit this week. The Shanghai Composite was slammed 4.4% Friday (reducing y-t-d gains to 19.1%) on fears Beijing is increasingly alarmed by speculative securities markets. They should be. More dismal data (i.e. February exports down 16.6%) – along with indications that the U.S./China trade deal is not the done deal many have been presuming – pressured markets from China to the U.S. Mixed signals – i.e. paltry February job gains (20k) in the face of a stronger-than-expected ISM Non-Manufacturing index – provide little clarity regarding underlying U.S. economic momentum.

For the most part, markets have been mesmerized by a flock of dovish global central bankers – while ignoring gathering storm clouds. Yet Z.1 data are a reminder of how quickly the markets buckled back in the fourth quarter. By now, I’ll assume the vigorous short squeeze and unwind of hedges have pretty much run their course. It has me pondering the next leg down in the unfolding bear market.

At some point, it’s not going to be as easy for central bankers and Beijing to reverse faltering markets. A big surge in Broker/Dealer assets, “repo” and bank lending would prove problematic if, instead of recovering, markets continue sinking into illiquidity. Financial conditions would tighten dramatically. No junk – or investment-grade issuance. Q4 ETF outflows and derivative issues offered a hint of what’s to come. Foreign buyers have been losing interest in U.S. securities. And definitely don’t rule out a quick $10 TN drop in Household Net Worth – and attendant major economic ramifications. Silly me. Annual $2.0 Trillion federal deficits effortlessly monetized by our accommodating central bank will cure all ills – financial, economic, social, geopolitical and otherwise. Global policymakers will regret becoming so adept at stoking speculative excess.

Doug’s Credit Bubble Bulletin is always a must read for me.  His latest commentary put in an appearance on his website in the very wee hours of Saturday morning EST — and another link to it is here.


U.S. treats Luxembourg like a vassal state…or how U.S. imperial hubris has gone bonkers — The Saker

The U.S. Embassy in Luxembourg, responding to news of the Russian Prime Minister’s planned visit issued the following statement:

Luxembourg and its government find themselves at a unique time and in a unique place for advancing the right of all countries and peoples to “stay what [they] are”. It is a unique time as Russian Prime Minister Medvedev comes to Luxembourg just after the fifth anniversary of the illegal annexation of Crimea by Russia. Luxembourg is a unique place because Luxembourg was twice in the position of Crimea – occupied by a larger foreign power insisting it give up its identity to become part of a larger empire. Now, the world will watch to see if Luxembourg officials accept a different future for the people of Crimea than it insisted for itself, or will instead look the other way. To challenge illegal aggression, Luxembourg is at the perfect moment, in the perfect place, to forcefully call on Russia to reverse course and leave Crimea. After all, who in Europe or even around the world has greater standing to raise this issue?

Comment: clearly there is no such thing as “U.S. diplomacy” out there.  All that’s left are a sad gang of illiterate ignoramuses who don’t even realize how utterly offensive and yet also comical they look in the eyes of civilized people.  The local reaction was predictable:

The Luxembourgish government does not need tutoring from another state or embassy about how foreign policy should be defined. This is unacceptable!

Wow…hubris is being kind.  This tiny but worthwhile commentary from The Saker put in an appearance on his website on Thursday sometime — and I thank Larry Galearis for pointing it out.  Another link to it is here.


U.S. may demand ‘allies’ pay 150% for privilege of hosting [its] troops

Frustrated by its allies’ lagging military spending, the Trump administration is reportedly drawing up demands that countries where U.S. troops are stationed pay the full cost – and then some – for the ‘privilege’.

The White House is drawing up demands that Germany, Japan, South Korea and eventually every other country ‘hosting’ U.S. troops on its soil pay “cost plus 50” – 150 percent – for their upkeep, including the soldiers’ salaries, Bloomberg reports, citing “a dozen” sources in the Trump administration.

The Pentagon was asked to gather data on the cost of keeping U.S. troops abroad and countries’ contributions toward these expenses, several officials – again, anonymously – told AP on Friday. Countries whose policies “align closely” with the U.S. would get an unspecified discount, according to these sources.

President Donald Trump is pushing the proposal personally, according to Bloomberg, going so far as to demand “cost plus 50” in a note to National Security Advisor John Bolton, when the U.S. was negotiating the status of 28,500 or so troops in South Korea. The two countries eventually agreed on Seoul paying $924 million in 2019, up from $830 million the year before.

By way of comparison, Germany currently pays 28 percent of the cost of U.S. troops being based on its soil – about $1 billion-a-year – according to Rand Corporation researcher David Ochmanek. At a recent congressional hearing, the top U.S. general in Europe asked for even more troops, citing a “threat” from Russia. This was in addition to U.S. demands for European NATO members to buy more U.S.-made weaponry.

This news story was posted on the rt.com Internet site at 12:24 a.m. Moscow time on their Saturday morning, which was 4:24 p.m. in Washington — EDT plus 8 hours — and this comes courtesy of George Whyte.  Another link to it is here.  The Bloomberg story on this is headlined “Trump Seeks Huge Premium From Allies Hosting U.S. Troops” — and I thank Larry Galearis for that one.


Tales of the New Cold War: 100 years of the U.S. meddling in Russian affairs — John Batchelor interviews Stephen F. Cohen

Part 1:  Although not specifically about the Russiagate story, the two pundits discuss the other side of the accusations of “Russian meddling in U.S. elections” as balanced by a look at U.S. meddling in Russian affairs. Batchelor comments that the United States has been meddling with Russia for as long as three centuries. The professor, as an historian, agrees with this and adds that the social media effort used in the U.S. is what is new. Historically, however, this meddling in Russian affairs has been going on for a century – and visa versa. For example, he continues, the Russians were involved on the union side during the civil war (as other foreign states were somewhat participants or observers on both sides of this war. L.) The British favoured the Confederacy and the Czar sent naval units to ward off British ships in American waters. Then there were the three cold wars since the Russian Revolution – and he adds that these “wars” lasted a total of 85 years in duration. And in addition to espionage, these cold wars also involved meddling in the internal affairs of all the players.

Batchelor then describes how the West interfered in the Bolshevik Revolution on the side of the “Whites” against the “Reds” by actually sending troops into Russia. Cohen adds that the U.S. contingent of troops numbered 8,000 — and the U.S. position was clearly about fighting the Bolsheviks (Reds) considered a menace to all governments. Although the U.S. casualties were very modest, it was the only time that America was actually at war with Russia. This history led to the Communist International as an institution in Russia and beyond. The result was the spread of  Communist political parties in foreign states. By the time Stalin became leader of the Soviet Union, these parties were more or less controlled by Moscow – and that included the American Communist Party – and that meant Russia was probably meddling in U.S. politics. And Batchelor adds that the very act of the Western powers militarily supporting the Czarist regime was seen as significant hostility from then on by Communist governments.

Part 2:  In this segment Batchelor begins with describing how the anti-Bolshevik stance in the West became orthodoxy until Roosevelt recognized the Soviet Union in 1934, and how this alienation was very damaging to that country. He postulated that this contributed to the brutality of the Stalin regime. Cohen agrees and cites his own written biography about Nikolai Bukharin, who was General Secretary of the Executive Committee of the Communist International, and advocate of both moderation in the treatment of Russian peasants and better relations with the West. Stalin eventually executed him. Cohen then speculated that the first detente with the Soviets was initiated by the German aggression under Hitler. The relationship with Europe and the US then moderated and the American Communist Party relatively prospered. Batchelor then points out that the American invention of “the bomb” created “polar opposites” in the relations of the two countries, and the second cold war came into being. This affected the “information” flows that were censored in a variety of ways in each country, but surprisingly cultural forms, like music were more freely accepted although this too was a form of meddling. More serious meddling came from “Radio Free Europe” and the Russian equivalent going the other way. The Western radio propaganda worked because of the popular music quotient embedded in the programming. The modern version of this technology, the two pundits agree, has become Facebook.

Cohen then describes himself as a victim of being accused of meddling by the Soviets in 1982. His “crime” was talking to dissidents and he was denied a visa entry by the regime. This exists today, of course, as even the U.S. president can be accused of meddling for the Russians, an abuse as extreme as it is dishonest. And the most appalling modern example of Western meddling is of course the U.S. support of the Yeltsin leadership of the 1990s that resulted in more grief for Russia.

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The discussion leaves this listener with the impression that “meddling” has a more extreme meaning coming from Washington activities than from Russian ones. As such there is not a balance in grievances, and this also applies to Washington’s relationships with virtually every country on the planet where there has been meddling, or meddling is threatened as a matter of policy relations with unaligned nations. Russians died of starvation due to Washington interference in the Yeltsin years, and yet there was not nearly the degree of animosity as this deserved towards the West by Russians. The hypocrisy is obvious in the Russiagate event. Nor is this discussion comprehensive, as sanctions involving commodities, especially energy and FOREX interventions against Russia, should also be mentioned. There is also the broad interference of Washington against military sales by Russia to unaligned countries and even a NATO member. The U.S. is complicit in attempting to direct what can or cannot be sold to foreign states by Russia. One can often use the word meddling or interference and draconian in the same sentence with this topic. And it is getting worse by the day. [And a perfect example of that is the that brief article by The Saker posted about Luxembourg two stories back. – Ed]

This 2-part audio interview, with both sections being twenty minutes in length, was posted on the audioboom.com Internet site on Tuesday — and I thought it best to wait for today’s column, when you might have more time to listen to it.  I thank Larry Galearis for his excellent executive summary — and personal comments as well.  The link to Part 1 is in the headline — and here.  The link to Part 2 is here.


Global Warming a “Hoax and Scam” Pushed By Greedy Government Scientists: Greenpeace Co-Founder

The co-founder and former president of Greenpeace, Patrick Moore, says that climate change is a “complete hoax and scam,” which has been “taking over science with superstition and a kind of toxic combination of religion and political ideology.”

Moore, who recently made headlines for calling Rep. Alexandria Ocasio-Cortez a “pompous little twit” and “garden-variety hypocrite” on climate change, sat down with SiriusXM’s Breitbart News Tonight with hosts Rebecca Mansour and Joel Pollak…

The Greenpeace co-founder’s message echoes that of John Coleman, the late Weather Channel founder who called global warming “the greatest scam in history.”

Moore told Breitbart how fear and guilt are driving the climate change argument, reports Breitbart News.

Fear has been used all through history to gain control of people’s minds and wallets and all else, and the climate catastrophe is strictly a fear campaign — well, fear and guilt — you’re afraid you’re killing your children because you’re driving them in your SUV and emitting carbon dioxide into the atmosphere and you feel guilty for doing that. There’s no stronger motivation than those two.”

Precisely, dear reader!!! No surprises here — and it’s even more so coming from a source like him.  But I’ve known this for what it was when it first became ‘news’ way back when. This Zero Hedge story, complete with a 26-minute audio interview with Patrick Moore, appeared on their Internet site  at 3:05 p.m. on Friday afternoon EST — and is certainly worth your while if you have the interest.  Another link to it is here.


China’s gold demand looks to be slowing this year so far — Lawrie Williams

Shanghai Gold Exchange (SGE) figures for February’s gold withdrawals are now in and using our assumption (contentious in some analyses) that SGE gold withdrawals equate closely to overall Chinese gold demand it looks as though the nation’s voracious appetite for gold may be slowing.  The total of withdrawals for the first two months of the year comes to 318.31 tonnes as against 342.0 tonnes in 2018 and 332.65 tonnes in 2017.  Indeed the February 2019 gold withdrawal figure is the first monthly sub 100-tonne total for over 3 years.

Although the fall in the withdrawal figure as total Chinese gold demand would seem to be confirmed by other available data – notably a fall in deliveries of re-refined gold from Switzerland both to Mainland China and to Hong Kong so far this year, perhaps not too much should be read into the decline at this stage of the year.  The Chinese (Lunar) New Year, which encompasses a week-long Golden Week holiday commenced on February 5th this year so the whole holiday period – over which time government bodies like the SGE were closed – occurred in February thus reducing total gold withdrawal figures that month.  In 2018 the New Year holiday commenced later in the month, but still meant the SGE would have been closed for a full week during February, while in 2017 the New Year holiday commenced on January 28th meaning there will have been a couple of more trading days in February then.

So although we say that perhaps not too much sway on overall Chinese demand should be placed on cumulative figures for the first two months of the year because of the week-long February holiday period, the data taken in conjunction with that from other sources does, at this stage, suggest that Chinese demand is indeed turning down along with the slippage in the nation’s GDP growth.  Even so China remains the principal driver of global demand for gold bullion, although the gap that has built up between it and India may be slipping.

This commentary from Lawrie appeared on the Sharps Pixley website on Thursday GMT sometime — and another link to it is here.


PHOTOS and the FUNNIES

After leaving the Othello Tunnels, we took the back road into Hope, B.C. — and ran into the lovely jewel of Kawkawa Lake, a 5-minute drive from the town itself.  Just driving the main highways in the area, you’d never know this place existed.  I didn’t until then.  I took these two shots looking across the lake.  The first winter snow had just dusted Ogilvie Peak in the background of the second shot.  This is an area that we’ll explore in far more detail once spring arrives. The Trans-Canada Highway, B.C. Highways 3&7, plus the Highway 5/Coquihalla Highway — and main-line CNR and CPR all pass through, or around this town.  The Coquihalla River empties into the Fraser River in the town as well. Click to enlarge.

For fun…here’s a snip from the Google Earth website from four miles/7 kilometres up.  All the places mentioned above are contained in this image.  If you’re an arm-chair adventurer, you can go to their website and ‘drive’ the streets and highways of the entire area for yourself…plus more.  Click to enlarge.


The WRAP

I have two pop ‘blasts from the past’ for you today.  The first one, from 1979, is rather on the sedate side, but it was huge hit back in its day here in Canada — and the bordering states in the U.S. that could pick up Canadian radio stations.  The band was called ‘Deliverance‘ — and they were 1-hit wonders, but what a hit is was…at least in these parts — and it even charted on the Billboard Hot 100 in the U.S.  The link to that is here.

But if you’re looking for something that really rocks — and is more kick-ass/upbeat, here’s another Canadian rock classic.  I’ve posted this before several times, but I’m in the mood for it right now, so you’re getting it again today — and the link to that is here.  And if you’re into bass covers, here’s all-Canadian Constantine Isslamow doing the honours in the longer/full version of this tune — and the link is here.

Beethoven’s Symphony #5 is a work that I’ve only posted once before as a classical ‘blast from the past’ — and the reason for that is personal, as I’m just tired of it.  But it dawned on me this evening that others may not be, so I shouldn’t let my personal opinion get in the way of one of the most popular classical compositions of all time.

Here’s the West-Eastern Divan Orchestra under the baton of the world renown Daniel Barenboim.  This iteration was performed at the Royal Albert Hall on 23 July 2012 as part of The Proms that year.  The link is here.


The big rally in gold on the job numbers looked like it ran into ‘da boyz’ almost right away in New York yesterday morning, even before it attempted to blast above $1,300 spot — and the price was successfully capped minutes after 9 a.m. EST.  Silver fared better, but even it wasn’t allowed to run away to the upside.

I’m still wondering who was selling the precious metal equities so aggressively, not only yesterday, but on several other occasions this week.  The gold stocks did OK on Friday, despite that initial sell-off, but the silver shares weren’t as fortunate.

And as for where we go from here price-wise…I’m just not sure, as the commercial traders still have precious metal prices in their iron grip…with or without the help of JPMorgan.

Here are the 6-month charts for all four precious metals, plus copper and WTIC — and it should be noted that silver closed well above its 200-day moving average.  Whether that means anything in these managed markets, remains to be seen.  Click to enlarge.

With the ECB back in official Q.E. mode once again — and Japan’s central bank chomping at the bit to announce their next stock-buyback extravaganza, it’s only fitting to know that Fed chairman Jerome Powell will be appear on the CBS show ‘60 Minutes‘ on Sunday.

From quiet and secretive fifty years ago, they’ve now gone full 3-ring circus on us…complete with their versions of clowns and carnival barkers.  And with the world financial and economic system teetering on the brink…let the show begin!

That would be funny, if it wasn’t so tragic.  Most us are old enough to remember the gold standard — and when politics, banking and economic affairs were run by more serious minds.  It’s more than alarming to see how all this…and much more…has degenerated to farce within our lifetimes.

And as Doug Noland pointed out in his Credit Bubble Bulletin in the Critical Reads section…

For the most part, markets have been mesmerized by a flock of dovish global central bankers – while ignoring gathering storm clouds. Yet Z.1 data are a reminder of how quickly the markets buckled back in the fourth quarter. By now, I’ll assume the vigorous short squeeze and unwind of hedges have pretty much run their course. It has me pondering the next leg down in the unfolding bear market.

At some point, it’s not going to be as easy for central bankers and Beijing to reverse faltering markets. A big surge in Broker/Dealer assets, “repo” and bank lending would prove problematic if, instead of recovering, markets continue sinking into illiquidity. Financial conditions would tighten dramatically. No junk – or investment-grade issuance. Q4 ETF outflows and derivative issues offered a hint of what’s to come. Foreign buyers have been losing interest in U.S. securities. And definitely don’t rule out a quick $10 TN drop in Household Net Worth – and attendant major economic ramifications.”

As I said when this bear market began last spring…the implosion of the biggest financial and economic bubble in world history will take decades to unwind — and most of us, including this writer, will not be around to see the moment that biggest bear market the world will ever know, breaths its last.

Hard assets, especially the precious metals, will be the only safe harbour at some point — and both Ted and I have pointed out over the last few months, this rally from last year’s low feels different for some reason.  Some of which has to do with the dos à dos between JPMorgan and the DoJ that’s been going on since last October…or longer.  I also have one eye on Basel III…because as of the end of this month, gold suddenly becomes a Tier 1 capital asset…like cash or Treasury Bills.  Before that, it was relegated to a speculative holding category.  That will soon be no more.

But what happens from that point going forward remains to be seen.

And because of “all of the above”…I’m still ‘all in’.

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

Ed