Another Very Happy Looking COT Report

27 April 2019 — Saturday


The gold price began to rally quietly and unevenly higher the moment that trading began at 6:00 p.m. EDT in New York on Thursday evening — and that lasted until shortly before 9 a.m. BST in London. It edged quietly lower by a few dollars until a minute or so after 1 p.m. BST/8 a.m. EDT — and was sold down to its low tick at 8:31 a.m. in New York trading.  It began to rally from there, but was obviously met with some ‘resistance’ — and the high of the day was set about 12:50 p.m. EDT — and it was sold quietly lower into the 1:30 p.m. COMEX close from there.  It didn’t do much of anything after that.

Gold wasn’t allowed to trade in more than about a one percent price range yesterday, so the low and high ticks aren’t worth looking up…but here they are anyway…$1,276.00 and $1,290.90 in the June contract.

Gold was closed in New York on Friday at $1,285.90 spot, up $9.20 on the day.  Net volume was very decent at just under 270,000 contracts — and there was only a bit over 10,000 contracts worth of roll-over/switch volume in that precious metal.

The silver price chopped very unevenly sideways in Far East trading on their Friday — and its London high came at the same time as gold’s.  After that, its price pattern was very similar to gold’s as well — and its rally in New York ran into ‘resistance’ too.  But it did manage to add a bit more in the thinly-traded after-hours market — and silver closed on its high tick of the day — and back above its 200-day moving average by 2 pennies in the May contract.

The low and high ticks were recorded by the CME Group as $14.845 and $15.035 in the May contract.

Silver finished the Friday session in New York at $15.10 spot, up 15 cents from Thursday’s close.  Net volume was very tiny at a hair under 23,000 contracts and, as expected, roll-over/switch volume out of May and into future months was enormous at just under 55,500 contracts.

The price action in platinum was similar to both gold and silver’s price activity in most respects, so I shall dispense with the play-by-play.  Platinum closed at $897 spot, up 12 bucks from Thursday.

After getting sold lower in evening trading in New York on Thursday evening, palladium made it back above the $1,400 spot mark during the first hour of Zurich trading on their Friday morning, but was sold down harshly shortly after 10 a.m. CEST.  It didn’t do much after that until shortly before 1 p.m. in Zurich — and then began to head higher, blasting back above $1,400 spot like a hot knife through soft butter.  Most of the gains that mattered were in by the COMEX close — and it added a few more dollars in the thinly-traded after-hours market.  Palladium finished the Friday session at $1,444 spot, up 38 dollars from Thursday’s close.

The dollar index closed very late on Thursday afternoon in New York at 98.20 and dropped 8 basis points once trading began at 7:44 p.m. EDT on Thursday evening, which was 7:44 a.m. CST on their Friday morning.  From that juncture it chopped very quietly sideways until 8:30 a.m. in New York, when the Q1 GDP number hit the tape.  From there it headed lower — and its 98.85 low tick was set at 10:38 a.m. EDT.  From there it rallied quietly until trading ended at 5:28 p.m.  The dollar index finished the day at 98.01…down 19 basis points from Thursday’s close.

Here’s the DXY chart, courtesy of Bloomberg as always.  Click to enlarge.

And here’s the 5-year U.S. dollar index chart, courtesy of the folks over at the Internet site — and delta between its close…97.73…and the close on the DXY chart above, was 28 basis points on Friday.  Click to enlarge as well.

The gold stocks gapped up almost two percent at the open — and then continued to chop unevenly higher until 3 p.m. in New York trading.  They proceeded to dip a bit into the close from there.  The HUI finished higher by 2.46 percent.

The chart for the silver equities was mostly similar, except their highs came shortly before 1 p.m. EDT — and they didn’t do much of anything after that.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up a very respectable 3.37 percent.  Click to enlarge if necessary.

And here’s Nick’s 1-year Silver Sentiment/Silver 7 Index chart updated with Friday’s doji.  Click to enlarge as well.

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 it’s far happier looking this week than the chart that graced with spot last week.  Friday’s price action, with the exception of platinum, pulled everything into the green, but not by much…although it’s better than the alternative.  Click to enlarge.

And with the exception of platinum and palladium, everything is still down month-to-date, but it wouldn’t take much of a rally in the precious metals to turn this chart green across the board once again.  Click to enlarge.

The year-to-date chart would also green across the board on even the slightest of rallies, so all is not lost.  Click to enlarge.

I would suspect that we’re at the end of this engineered price decline in silver and gold…particularly silver.  The only big unknown is whether the powers-that-be are going to go gunning for gold’s 200-day moving average or not.  And as I also mention below, I doubt we’ll have long to wait to find out — and I also doubt that gold [and silver] prices will remain any new lows for long if they do.  Better days are ahead.

The CME Daily Delivery Report showed that 201 gold and zero silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.

In gold, the only short/issuers that mattered was HSBC USA with 199 contracts out of its own in-house/proprietary trading account.  Of the three long/stoppers in total, the only two that mattered were JPMorgan, with 118 for its client account — and the CME Group, which picked up 81 contracts for its own account.  It immediately reissued those as 81×10=810 ten-ounce COMEX mini gold contracts.  There were three long/stoppers for those — and the two largest were ADM and Advantage, stopping 583 and 225 contracts for 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 April declined by 46 contracts, leaving 201 still around, minus the 201 mentioned a few paragraphs ago.  Thursday’s Daily Delivery Report showed that 46 gold contracts were actually posted for delivery on Monday, so gold deliveries will be done for April as of Monday.  Silver o.i. in April dropped by 1 contract, leaving zero open interest remaining.  Thursday’s Daily Deliver Report showed that 1 silver contract was posted for delivery on Monday, so April deliveries are done in this precious metal as well.

Gold open interest in May fell by 350 contracts, leaving 574 still around — and silver o.i. in May cratered by 19,215 contracts, leaving 14,011 still open.  There will be further declines in May open interest in both precious metals in Monday’s Preliminary Report, but it appears that May will most likely be a big delivery month for silver regardless of that.

There was another withdrawal from GLD yesterday, as an authorized participant took out 37,765 troy ounces.  There were no reported changes in SLV.

There was no sales report from the U.S. Mint on Friday, but there was this story about U.S. silver eagles sales headlined “U.S. Mint resumes sales of American Eagle silver bullion coins” that I found on the Internet site yesterday afternoon.

Month-to-date the U.S. Mint has sold 7,500 troy ounces of gold eagles — 5,000 one-ounce 24K gold buffaloes — 3,900 one-ounce platinum eagles — and 550,000 silver eagles.  Pretty pathetic.

And there’s still no Q4/2018 annual reports from the Royal Canadian Mint.

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

The only activity in silver was 325,368 troy ounces that was withdrawn from HSBC USA — and that was it.  The link to that is here.

There was only a tiny bit of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday.  They received only 30 of them — and shipped out 5.  This activity, such as it was, occurred at Brink’s, Inc. as usual — and I won’t bother linking it.

Here are three more charts that Nick Laird passed around on Thursday.  The first shows total imports and exports of gold into the U.K…updated with February’s numbersDuring that month they imported 99.9 tonnes — and shipped out 28.3 tonnesClick to enlarge.

The first of the next two charts shows all the countries that the U.K. received gold from during February, along with the amounts — and the second chart shows the amount of gold that was received by each country that they sent gold to in FebruaryClick to enlarge for both.

The most interesting amount was the 8.0 tonnes that was shipped to tiny Azerbaijan that month.

Well, yesterday’s Commitment of Traders Report was everything that Ted hoped it would be, as the commercial net short positions declined by very decent amounts in both silver and gold.

In silver, the Commercial net short position fell by 3,680 contracts, or 18.4 million troy ounces.

They arrived at that number by reducing their long position by 3,836 contracts — and they also reduced their short position by 7,516 contracts.  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 a whole bunch more, as they reduced their long position by 323 contracts, but they also added 6,288 short contracts — and it’s the sum of those two numbers…6,611 contracts…that represents their change for the reporting week.

The difference between that number — and the Commercial net short position…6,611 minus 3,680 equals 2,931 contracts.  That difference was made up, as it always is, by the traders in the other two categories…with the bulk of that difference being made up by the ‘Nonreportable’/small trader category, as they increased their net long position by a 2,315 contracts.

The Managed Money short position, all held by the brain-dead/moving average-following variety is pretty high at 67,206 contracts.  On the other hand, the value investing Managed Money traders are long the COMEX silver market by 49,667 contracts.  It’s a very bifurcated market in this particular category.

The Commercial net short position in silver is now down to 100.0 million troy ounces — and Ted figures that JPMorgan is now long the COMEX silver market by 3,000 contracts, up a thousand contracts or so from last week’s report.

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

I suppose their could be more improvement in the Commercial net short position, but that would require new low prices — and after this week’s COT Report, we’re deep into “blood out of a stone” territory, so I’m not expecting it.  But, like Ted, I’ve learned never to say “never“.

In gold, the commercial net short position declined by a very decent 21,034 contracts, or 2.10 million troy ounces of paper gold.

They arrived at that number by adding 8,701 long contracts — and they reduced their short position by a further 12,333 contracts.  It’s the sum of those two numbers that represents their change for the reporting week.

Under the hood, the Managed Money traders made up for almost all of the change in the commercial net short position, as they reduced their long position by 7,207 contracts — and also added 11,235 short positions.  It’s the sum of those two numbers…18,442 contracts…that represents their change for the reporting week.

The difference between that number — and the commercial net short position…21,034 minus 18,442 equals 2,592 contracts, was made up by the traders in the ‘Other Reportables’ and ‘Nonreportable’/small traders category.  Most of that difference, like in silver, came from the ‘Nonreportable’/small traders category, as they reduced their net long position by 2,156 contracts during the reporting week.

The commercial net short position in gold is now down to 5.74 million troy ounces of paper gold which, on an historical basis, is very low — and therefore very bullish.

Ted figures that JPMorgan’s long position in the COMEX futures market in gold could be as high as 20,000 contracts.

Here is the 3-year COT chart for gold and, like in silver, this week’s further improvement should be noted.  Click to enlarge.

Gold’s 200-day moving average still remains unbroken to the downside — and it remains to be seen whether or not ‘da boyz’ are going to go for it or not.  But based on the last three days of price activity, I’d say it would be a stretch to do it.  But, like in silver…never say “never”.

Without doubt, both gold and silver are back on the launch pad for a big price rally — and how high they go, as it has always been in the past, will be solely determined by what JPMorgan does or doesn’t do as the rallies progress.

So we wait some more.

In the other metals, it was very quiet in palladium this past week, as the Managed Money traders increased their net long position by a piddling 41 contracts — and the traders in the other two categories didn’t do much, either.  The Managed Money traders are net long the palladium market by 9,277 contracts.  Total open interest in palladium is 22,139 COMEX contracts, up about 400 contracts from the previous week.  It’s a very tiny market.  In platinum, the Managed Money traders added to their net long position by a tiny bit during the reporting week…increasing it by 582 contracts.  The Managed Money traders are now net long the platinum market by about 21,620 contracts.  Total open interest is 75,277 contracts.  In copper, the Managed Money traders went net short by 8,282 contracts during the reporting week — and are now net short the COMEX futures market by 7,125 contracts, which means they were net long the copper market by a bit a week ago.

Here’s Nick Laird’s “Days to Cover” chart updated with yesterday’s COT data for positions held at the close of COMEX trading this past 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 102 days of world silver production, which is down 2 days from last week’s report — and the ‘5 through 8’ large traders are short an additional 56 days of world silver production, up 1 day from last week’s report — for a total of 158 days that the Big 8 are short, which is a bit over 5 months of world silver production, or about 368.8 million troy ounces of paper silver held short by the Big 8.  [In the prior week’s COT Report, the Big 8 were short 159 days of world silver production.]

In the COT Report above, the Commercial net short position in silver was reported as 100.0 million troy ounces.  As mentioned in the previous paragraph, the short position of the Big 8 traders is 368.8 million troy ounces.  The short position of the Big 8 traders is larger than the total Commercial net short position by a chunky 368.8 minus 100.0 equals 268.8 million troy ounces.

The reason for the difference in those numbers…as it always is…Ted’s raptors, the 36-odd small commercial traders other than the Big 8, are net long that amount.

As Ted mentioned on the phone yesterday, JPMorgan is now net long the COMEX futures market in silver by about 3,000 contracts, up about a thousand contracts from the previous week’s COT Report.

The Big 4 traders now in that category are short, on average, about…102 divided by 4 equals…25.5 days of world silver production each.

The four traders in the ‘5 through 8’ category are short 56 days of world silver production in total, which is 14 days of world silver production each.

Ted’s of the opinion that there are most likely three Managed Money traders with short positions large enough in the COMEX futures market to inhabit the Big 8 category now.

The Big 8 commercial traders are short 33.7 percent of the entire open interest in silver in the COMEX futures market, which is up a hair from the 33.1 percent they were short in last week’s report.  And once whatever market-neutral spread trades are subtracted out, that percentage would be a bit under the 40 percent mark.  In gold, it’s now 34.1 percent of the total COMEX open interest that the Big 8 are short, up a bit from the 33.6 percent they were short in last week’s report — and something also approaching 40 percent once the market-neutral spread trades are subtracted out.

This is the second COT Report is a row where the Big 8 commercial traders held a larger percentage of total open interest short in gold, than in silver…albeit by a tiny amount once again.

In gold, the Big 4 are short 32 days of world gold production, up 1 day from what they were short in last week’s COT Report.  The ‘5 through 8’ are short another 20 days of world production, unchanged from what they were short last week…for a total of 52 days of world gold production held short by the Big 8…up 1 day from last week’s COT Report.  Based on these numbers, the Big 4 in gold hold about 62 percent of the total short position held by the Big 8…up 1 percentage point from last week’s COT Report.

The “concentrated short position within a concentrated short position” in silver, platinum and palladium held by the Big 4 commercial traders are about 65, 76 and 79 percent respectively of the short positions held by the Big 8.  Silver is down 3 percentage points from a week ago, platinum is up 1 percentage point from last week — and palladium is up 2 percentage points.

I have an average number of stories for you today — and almost all of them are ones that I’ve been saving for today’s column for length and/or content reasons.


Q1 GDP Smashes Expectations, Soars 3.2%, But the Real Story is Below the Surface

With the Atlanta Fed forecasting Q1 GDP of as little as 0.5% about 6 weeks ago, traders were shocked when moments ago the BEA reported a GDP print that at first glance many though was a misprint: at 3.2%, Q1 GDP came in 50% higher than the 2.3% expected, and was the highest Q1 GDP (which is not only the weakest quarter of the year, but also a quarter notorious for its residual seasonality) since 2015.  Click to enlarge.

That was the great news: the not-so-great news — the number was driven entirely by “one-time items” such as a surge in inventories and a far smaller trade deficit, pushing net trade sharply higher, neither of which is sustainable; meanwhile the core drivers of GDP – consumption and fixed investment – came in somewhat weak, dropping from Q4, with PCE and CapEx adding just 1.1%, or about a third, of the bottom line GDP number.

The breakdown of contribution to the bottom line GDP was as follows:

  • Personal Consumption: 0.82%
  • Fixed Investment: 0.27%
  • Change in inventories: 0.65%
  • Net Trade: 1.03%
  • Government consumption: 0.41%

And here again is why one should always read the internals: this was the weakest quarter for household spending in five years.

This news item appeared on the Zero Hedge website at 8:47 a.m. on Friday morning EDT — and another link to it is here.

The Financialization of the American Economy — Bill Bonner

We never trust any “fact” we find on the internet… unless we make it up ourselves.

And yesterday, we reported an item from Goldman Sachs researchers that was so perverse… so weird… and so staggeringly sinister, that we doubted it could be correct. We went back to the research department twice to make sure.

But it seems to be right.

Over the last 10 years, for every stock bought – in net terms – by the public, foreigners, pension funds, investment funds, or other institutional buyers (the normal buyers of stocks, in other words), the corporations themselves bought nearly 50 of them.

From Goldman Sachs:

Buybacks have been the single largest source of US equity demand each year since 2010, averaging $421 billion annually. In comparison, during this period, average annual equity demand from households, mutual funds, pension funds, and foreign investors was less than $10 billion each.”

In other words, the largest source of demand for stocks, by far, was not investors; it was corporate buybacks or acquisitions.

This very interesting, but not surprising commentary from Bill showed up on the Internet site on Friday morning EDT — and another link to it is here.

Doug Noland: Officially on “Periphery” Contagion Watch

I’ll offer a warning: Liquidity Risk Lies in Wait. When risk embracement runs its course and risk aversion begins to reappear, it won’t be long before anxious sellers outnumber buyers. When “risk off” De-Risking/Deleveraging Dynamics again attain momentum, there will be a scarcity of players ready to accommodate the unwind of speculator leverage. And when a meaningful portion of the marketplace decides to hedge market risk, there will be a paucity of traders willing to take the other side of such trades.

And there’s an additional important facet to the analysis: Come the next serious “risk off” market dislocation, a further dovish U-turn will not suffice. That trump card was played – surely earlier than central bankers had envisaged. Spoon-fed markets will demand rate cuts. And when rate cuts prove insufficient, markets will impatiently clamor for more QE. Powell’s abrupt intermeeting termination of policy “normalization” carried quite a punch. Markets were caught off guard – with huge amounts of market hedges in place. Now, with markets already anticipating a rate cut this year, one wouldn’t expect the actual Fed announcement (in the midst of market instability) to elicit a big market reaction.

The Fed is clearly preparing for the next episode where it will be called upon to backstop faltering markets. Our central bankers will undoubtedly point to disinflation risk and consumer prices drifting below the Fed’s 2% target. I’ll expect markets to play along. But without the shock effect of spurring a big market reversal – with attendant risk embracement and speculative leveraging – it’s likely that a 25 bps rate cut will have only ephemeral impact on marketplace liquidity. Markets will quickly demand more QE – and Chairman Powell is right back in the hot seat.

When “risk off” does make its return to the “Core,” don’t be surprised by market fireworks. “Short Vol” Blowup 2.0 – compliments of the dovish U-turn? It’s always fascinating to observe how speculative cycles work. Writing/selling put options has been free “money” since Powell’s January 4rd about face. Crowded Trade/“tinder” And if we’re now at an inflection point for global market liquidity, those gleefully “selling flood insurance during the drought” should be mindful of a decided shift in global weather patterns.

Doug’s weekly commentary is always a must read for me — and another link to this week’s edition, which appeared on his Internet site very early on Saturday morning EDT, is here.

Do We Need The State? — Doug Casey

Rousseau was perhaps the first to popularize the fiction now taught in civics classes about how government was created. It holds that men sat down together and rationally thought out the concept of government as a solution to problems that confronted them. The government of the United States was, however, the first to be formed in any way remotely like Rousseau’s ideal. Even then, it had far from universal support from the three million colonials whom it claimed to represent. The U.S. government, after all, grew out of an illegal conspiracy to overthrow and replace the existing government.

There’s no question that the result was, by an order of magnitude, the best blueprint for a government that had yet been conceived. Most of America’s Founding Fathers believed the main purpose of government was to protect its subjects from the initiation of violence from any source; government itself prominently included. That made the U.S. government almost unique in history. And it was that concept – not natural resources, the ethnic composition of American immigrants, or luck – that turned America into the paragon it became.

The origin of government itself, however, was nothing like Rousseau’s fable or the origin of the United States Constitution. The most realistic scenario for the origin of government is a roving group of bandits deciding that life would be easier if they settled down in a particular locale, and simply taxing the residents for a fixed percentage (rather like “protection money”) instead of periodically sweeping through and carrying off all they could get away with. It’s no accident that the ruling classes everywhere have martial backgrounds. Royalty are really nothing more than successful marauders who have buried the origins of their wealth in romance.

This very interesting and worthwhile commentary from Doug was posted on the Internet site on Friday — and another link to it is here.

An In-Depth Analysis of the Deep State — Alex Newman


02:40 Trump and Russia – DEBUNKED
08:40 The population slowly moving towards Socialism
18:10 Are Humans causing climate change?
26:30 Mainstream media’s great deception

I’d read commentary from Alex on many occasions over the years, but had never laid eye on the guy or heard him speak…until now.  He is brilliant, lucid — and knows his stuff.  Needless to say, I agree with virtually everything he says, especially on climate change, which is an area I have some knowledge of.  The video interview lasts for 34 minutes — and it’s my opinion that it’s worth your while — and I thank Judy Sturgis for pointing it out.  It was posted on the Internet site on Wednesday — and for obvious reasons, had to wait for my Saturday missive.  Another link to it is here.

Zelenskii beat Poroshenko: What will happen next? —  The Saker

As everybody predicted, Poroshenko completely lost the election. As I wrote in my previous column, this is both amazing (considering Poro’s immense and extensive resources and the fact that his opponent was, literally, a clown (ok, a comic if you prefer). His defeat was also so predictable as to be almost inevitable: not only is the man genuinely hated all over the Ukraine (except for the Nazi crackpots of the Lvov region), but he made fatal blunders which made him even more detestable than usual.

First, there was this masterpiece…translation “April 21st. A crucial choice!

Now one could sympathize with Poroshenko: not only did this “Putin the boogeyman” appear to work fantastically well with the main sponsors of the Ukronazi coup and with the legacy Ziomedia, but nobody dared to tell Poroshenko that most Ukrainians were not buying that nonsense at all. The suggestion that all the other candidates are Putin agents is no less ridiculous. The thin veneer of deniability Poroshenko had devised (the poster was not put up by the official Poroshenko campaign but by “volunteers”) failed, everybody immediately saw through it all, and this resulted in Poro’s first big campaign face plant.

Next came this disaster…

The video where Poroshenko threatens to kill Zelenskii was not officially Poroshenko’s campaign which made it, but everybody saw through this one too. The quasi-open threat to murder Zelenskii was received with horror in the Ukraine, and this PR-disaster was Poro’s second face plant.

Then the poor man “lost it.” I won’t list all the stupid and ridiculous things the man said and did, but I will say that his performance at the much-anticipated debate in the stadium was a disaster too.

The writing had been on the wall for a while now, and this is why the two candidates were summoned to speak to their masters (face to face in Germany and France, by phone with Mr. MAGA) and they were told a few things.

This commentary on the Ukrainian election from the Saker came out on Wednesday, but I thought I’d wait to post in my Saturday missive.  It was posted on Internet site on Wednesday — and I thank Larry Galearis for sending it along.  Another link to it is here.

U.S. Hoped Putin Would be a ‘Sober Yeltsin’ — Stephen Cohen

After the fall of the Soviet Union, a dysfunctional and pro-American Russian President Yeltsin presided over the chaos of the 1990’s; when Putin came to power, the West was very disappointed at the independent and nationalist character of the Putin led state — and the demonization began.  Stephen Cohen joins Paul Jay on Reality Asserts Itself.

This 31-minute video interview is a frank and open discussion between Cohen and Jay — and it’s most unfortunate that reasoned analysis such as this isn’t taking place in the North American main stream media every day.  This Real New Network video interview was posted on the Internet site on Tuesday — and it’s another offering that I thought should wait for Saturday’s column.  It’s the second contribution in a row from Larry Galearis — and another link to this worthwhile interview is here.

The Decline of India — Jayant Bhandari

As I write these words, the 2019 general election for the next federal government of India is underway. This comes five years after a significant break from the past occurred in Indian politics. Now, for the first time since independence, the ruling party and the Prime Minister have no connection with the British colonial past.

Narendra Modi, the Prime Minister, was born in 1950, three years after the British left.

It is perhaps no coincidence then that this cycle’s electioneering is by far of the lowest quality I have ever seen. Terrorists, criminals, mass-murderers, fanatics, conmen, and gang-rapists populate the field. Moreover, at least one-third of the current legislators have criminal proceedings against them, and this in a country where most crimes never get reported. Every face I see reminds me of Gollum (of The Lord of the Rings).

The voter is obsessed with his ideological preferences and processes everything through partisan lenses. If a rapist is from a feminist’s preferred party, she will refuse to see any fault in him. Not that India has had much to do with concepts like morality and reason. In earlier times, there was a certain kind of tolerance of different ideas. That tolerance is long gone.

Everywhere I look it is as if scavengers are feasting on carcasses.

When I lived in Edmonton, I had knew enough people from India that I had some idea of what was going on back in their homeland — and this is the first real analysis of that country from someone who was born and raised there.  If you have the interest, this commentary by Jayant is definitely worth reading.  It was posted on the Internet site on Thursday — and was another article that I thought best to leave for today’s missive.  Another link to it is here.

The Quiet Panic” – Kyle Bass on Hong Kong’s Looming Financial & Political Crisis

In his first investor letter in three years, Kyle Bass, Wall Street’s most visible China bear, explains the rationale behind his latest massive macro bet: A carefully-constructed position that will produce carry for his investors while also producing a massively asymmetrical outcome should the looming crisis Bass describes come to pass, in either China or Hong Kong. The letter was previewed earlier in The Wall Street Journal. Bass also appeared on CNBC earlier today to answer some questions about his views on China and Hong Kong, alongside former White House Chief Strategist Steve Bannon.

Via Kyle Bass, managing partner of Hayman Capital Management


For the better part of the last 36 years, since Hong Kong pegged its currency to the USD and ceded monetary policy to the Fed, Hong Kong has been a financial and political oasis for investment into mainland China and Southeast Asia. Today, newly emergent economic and political risks threaten Hong Kong’s decades of stability. These risks are so large that they merit immediate attention on both fronts. In this letter, we will discuss the origins of Hong Kong’s impending crisis, a brief history of Hong Kong, the economics of currency boards/pegs, the agreement that governs the United States economic and political relationship with Hong Kong, and how Xi Jinping’s China is forcing the Hong Kong Government to violate the agreement that requires Hong Kong to maintain its autonomy or lose most-favored-nation trading status and be treated as China itself is treated.

The Economics of Hong Kong Have Changed Dramatically Since the Global Financial Crisis

Hong Kong was once vitally important to China’s economic position. At its apex in 1993, Hong Kong’s economy represented more than 25% of China’s GDP and was the most active port in the world.

Since China’s ascension into the World Trade Organization (WTO) in 2001, China has spent heavily on its own port infrastructure and therefore is much less economically reliant on Hong Kong today. As the chart below shows, Hong Kong was once a large exporter of goods (primarily settled in US dollars) with a significantly positive trade and current account surpluses. Hong Kong was widely known as China’s southern port. As China built out its own port infrastructure, Hong Kong was forced to re-invent its economy into a service exporting economy. Hong Kong transitioned from a major global exporter to a net importer of goods while simultaneously becoming a services exporter primarily to mainland China. In economic terms, this transformation has taken place rather suddenly over the past decade.

This loooong chart-filled commentary by Kyle showed up on the Zero Hedge website at 9:15 p.m. EDT on Thursday evening — and for length reasons, it certainly qualified to be in today’s missive.  I thank Brad Robertson for sharing it with us — and another link to it is here.

China gold output slipping…Australia and Russia catching up? — Lawrie Williams

According to the China Gold Association, the nation’s gold output in Q1 fell another 5.5% to just short of 93 tonnes.  If that percentage decline is continued over the full year, Chinese gold output this year would fall to around 380 tonnes and it would only take another two to three years of declines at this kind of magnitude for the world’s current No. 1 gold producer to be overhauled by Australia, and/or perhaps Russia, both of which are going through stages of annual gold output growth.

Last year, for example, Australian gold production was estimated by consultancy Metals Focus at 315 tonnes, up around 7.6% on the previous year, although local consultancy, Surbiton Associates, which specialises in Australian gold, puts it even a fraction higher at 317 tonnes.  Russian output, according to Metals Focus, was up around 6% year on year at 297 tonnes, although that country’s Finance Ministry reports it as 17 tonnes higher at 314 tonnes.  Both of these nations, if output grows at a similar rate to last year, and if China’s gold output continues to fall at 5-6% annually (it fell 5.9% last year according to Metals Focus), would edge out China as the world’s No.1 gold producer by 2021 or 2022.

This rather brief commentary from Lawrie put in an appearance on the Sharps Pixley website on Friday sometime — and another link to it is here.

Perth Mint Gold and Silver Bullion Sales Surge in March

Australian gold and silver bullion sales advanced sharply in March from February but they declined in the first quarter 2019 compared to the same period in 2018, according to figures from The Perth Mint of Australia.

The Mint’s gold sales in March was the highest in four months after logging an eight-month low in February and demand for its silver coins and bars climbed to a five-month high after sliding to a six-month low.

March sales of the Mint’s gold coins and gold bars reached 32,757 ounces, posting gains of 67.8% from February and 9.6% from March 2018.

First quarter gold sales at 83,470 ounces dropped 10.8% from the 93,530 ounces sold in the first three months of 2018.

Perth Mint sales of silver coins and silver bars reached 935,819 ounces last month, jumping 60.2% from February but dipping 4.1% from a year ago March.

The Mint’s first quarter silver sales at 2,348,983 ounces fell 22.6% from the 3,036,236 ounces sold during the same period in 2018.

This news item was posted on the Internet site on Friday sometime — and I found it on the Sharps Pixley website.  Another link to it is here.

Brien Lundin: Flash crashes keep showing gold market manipulation, CFTC’s indifference

Sometimes the gold market seems like a mixed martial arts fight. The metal is down on the canvas, seemingly helpless, yet it keeps getting pummeled unnecessarily.

That’s what we’ve seen since mid-February, as any attempt to climb well into the $1,300s was repeatedly cut short, with the price being driven back below $1,300 not once but three times — often for no other apparent reason save market manipulation.

But the ongoing price decline has been punctuated by repeated sharp selloffs. And each of these has been characterized by unceremonious dumping of thousands of Comex contracts at the open, in an obvious disregard for any profit motive.

In short, somebody somewhere is using the power of their purse, in concert with the indifference of the U.S. Commodity Futures Trading Commission, to violations of its trading rules, to manipulate the gold price lower.

As you are probably well aware, I’m skeptical that government actors can or would manipulate gold or silver on a daily basis. But there’s no denying that the structure of the paper gold and silver markets (as well as some other assets) are such that well-financed traders can move them for their own purposes at will.

This very worthwhile gold market commentary from Brien would normally be posted behind the subscription wall on his website at, but he has kindly allowed it to be posted in the clear in its entirety on the Internet site — and another link to it is here.


While we were skulking around the Sun Rivers golf course in northeast Kamloops, B.C. on March 16, I could hear lots of birds talking to each other, but hidden in the sagebrush and grass.  I though they might have been California quail, as they are a very common in the Okanagan valley, about 60 miles/100 kilometers away on the east side of the Thompson Plateau.  But when we finally saw one, we were amazed to discover that they were chukar partridges….a Eurasian upland game bird in the pheasant family!  How they found their way over here is a mystery, but were obviously introduced.  The place was lousy with them.  They are very handsome indeed — and this is the male of the species.  Like pheasants, they’d rather run than fly — and using the car as a blind, it was like shooting fish in a barrel.  Click to enlarge.


Today’s pop ‘blast from the past’ is one I’ve posted several times before — and when reader Steve Wagner sent me an e-mail on Tuesday mentioning it as a possible choice, I said “what the heck…why not”.  They were an American rock band that became popular in the 1970s.  This tune was the second-most-played track on U.S. classic rock radio in 1995 and No. 1 in 1997 — and it’s still a classic today.  The link is here.

Today’s classical ‘blast from the past’ is one I’d never heard of before — and I have to thank Roy Stephens for this one as well, because it arrived hard on the heels of the the Dimash” video from last week.

If you ever wanted to know what a child prodigy looks and sounds like, I have one for you today…playing the most unlikely of instruments…a balalaika.  Here’s 7-year old Anastasia Tyurina performing an old Russian folk tune entitled “Valenki“.

This performance was recorded in Moscow on 13 September 2018 at the Tchaikovsky Concert Hall along with the Osipov Russian Folk Orchestra.  Vladimir Adropov conducts.  It only last for 4:13 minutes, but it’s charming — and so is she!  The link is here.

And in case you’ve heard the word ‘balalaika’ before, the Beatles immortalized it in this Beatles tune linked here.

I was certainly happy to see all four precious metals close higher on Friday.  Gold was closed well below its 50-day moving average, but silver closed above its 200-day moving average by a few pennies.  However, it was on very light net volume — and Ted was happy to see that.  So was I.

The decent gains in the HUI and Silver 7 Index allowed both indexes to close in the green for the week, although the HUI only by a whisker.  And even though the precious metal equities are still down on the month — and year-to-date as well, that can change in one heck of a hurry.

Friday’s COT Report certainly indicates that we’re pretty much down to the downside — and the set-ups in both gold and silver are very bullish once again.

Next Tuesday and Wednesday is the FOMC meeting — and it will be interesting to see what comes out of that — and how the precious metals will be allowed to react to it.

Here are the 6-month charts for the Big 6 commodities — and the changes in all should be noted.  Click to enlarge.

The U.S. equity and bond markets are becoming even bigger 3-ring circuses with each passing week.  They have morphed into a giant video momentum game, where the 30-somethings crowd run the show — and there are no adult supervisors in sight.

The Q1 numbers came out yesterday morning at 8:30 a.m. EST — and although great on the surface, there was, as Jim Rickards said in commentary yesterday afternoon…”probably less here than meets the eye.”

And despite the first quarter’s 3.2% outlier, I expect lower GDP in the quarters ahead, returning to the same punk levels we’ve seen for nine years.”

The equity markets opened down, the dollar index sank — and gold and silver rallied, so that should tell you how well the markets took the news.

Most of the world’s equity markets rise and fall on the back of what happens in New York each day. But across the board…China, Japan, South Korea, Europe…everywhere you care to look, economic activity is slowly sinking into the morass.

And despite the happy-boy face on the Q1 U.S. GDP numbers, the numbers under the hood…the internals…were far more somber, as the Zero Hedge story in today’s Critical Reads section is quick to point out.  Where it counts, the U.S. economy is already on the slippery slope like everyone else.  The glaring fact is that the U.S. cannot continue to be an island of prosperity in an ocean of contracting global economic activity.  That fact is glaringly obvious — and at some point the kiddies on Wall Street will come to that realization.  Then look out below.

I can’t remember where I read it, but I’ve seen it mentioned a couple of times on the Internet in the last day or so, that if Mueller couldn’t get Trump, the deep state may use an engineered economic downturn to thwart his chances of him getting re-elected in 2020.  That would certainly cause China to implode, which would be a bonus, at least from their perspective.

That’s a pretty big risk to take…popping the biggest stock market/economic bubble the world has ever know to dump Trump et al, but I would put nothing past the sociopathic/psychopathic minds that populate the deep state.

Either by accident, or design, these halcyon days will end — and as I’ve said on many occasions before, I will likely be a very old man indeed before the ensuing bear market breaths its last.  And one has to wonder what kind of world will emerge as that event unfolds.

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