Ted Butler: The CFTC’s Summer Camp Letter

01 June 2019 — Saturday


The gold price began to edge quietly and unevenly higher starting around 7:30 a.m. China Standard Time on their Friday morning — and that continued more or less without interruption until about fifteen minutes after the 1:30 p.m. COMEX close in New York yesterday.  It didn’t do much after that.

The low and high ticks were reported by the CME Group as $1,292.50 and $1,311.90 in the August contract…the new front month for gold.

The gold price finished the Friday session in New York at $1,304.90 spot, up $16.60 from Thursday’s close — and comfortably above its 50-day moving average.  Not surprisingly, net volume was absolutely monstrous at a bit over 326,000 contracts — and there was a bit over 17,000 contracts worth of roll-over/switch volume in this precious metal.

The silver price chopped quietly sideways in all of Far East and most of London trading on their Friday — and all rally attempts, no matter how small, were turned aside.  Once the noon BST silver fix was in, it began to creep quietly higher — and really began to sail once the afternoon gold fix was put to bed.  Its spike high around 10:45 a.m. in New York was dealt with immediately — and from about 11:35 a.m. EDT onwards, it didn’t do much of anything.

The low and high ticks in silver were recorded as $14.46 and $14.67 in the July contract.

Silver was closed at $14.56 spot, up 5.5 cents from Thursday.  Net volume was an eye-watering 80,000 contracts — and there was 9,300 contracts worth of roll-over/switch volume in this precious metal.

The platinum price wasn’t allowed to do much on Friday, but was sold down a bit in early trading in the Far East on their Friday morning.  Its rally in early morning trading in Zurich, along with the mid-morning rally in New York, were both sold lower — and platinum was closed at $791 spot, down 3 bucks on the day.

The palladium price chopped very quietly sideways in both Far East and Zurich trading yesterday, but ‘da boyz’ showed up shortly after 9 a.m. in New York — and took away all of Thursday’s gains, plus more, before trading ended at 5:00 p.m. EDT.  Palladium was closed at $1,310 spot, down 43 dollars on the day — and at a safe distance below its 50-day moving average, which it closed at on Thursday.

The dollar index closed very late on Thursday afternoon in New York at 98.14 — and opened up 1 basis point once trading resumed at 7:45 p.m. EDT on Thursday evening, which was 7:45 a.m. China Standard Time on their Friday morning.  From that juncture, it really didn’t do much of anything until around 12:50 p.m. CST — and it began to head lower at that point.  That lasted until 9:15 a.m. in London — and it began to edge higher from there.  It rolled over again starting around 12:45 p.m. in London/7:45 a.m. in New York — and was obviously saved by the usual ‘gentle hands’ at 10:40 a.m. EDT.  It shot higher — and back above the 98.00 mark briefly by 11:05 a.m. in New York — and it was sold quietly lower until around 4:15 p.m. EDT — and didn’t do much after that.

The dollar index finished the Friday session at 97.75…down 39 basis points points from its close on Thursday.

Here is the DXY chart from Bloomberg, as per usual.  Click to enlarge.

And here’s the 5-year U.S. dollar index chart, courtesy of the good folks over at the stockcharts.com Internet site.  The delta between its close…97.67…and the close on the DXY chart above, was 8 basis points on Friday.  Click to enlarge as well.

The gold stocks gapped up a bit over two percent at the open — and then continued to rally somewhat unevenly higher until a few minutes after 1 p.m. in New York trading.  They then crept a bit lower into the 4:00 p.m. EDT close from there.  The HUI finished higher by a healthy 4.37 percent.

Not surprisingly, the silver equities did not perform quite as well as their golden brethren, but their respective chart patterns were almost identical.  For that reason, I’ll spare you the play-by-play for them.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up 2.84 percent.  Click to enlarge.

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 three charts from Nick that show what’s been happening for the week, month — 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.  For a change we’ve got some green bars to look at — and considering the rotten price action in silver versus gold, the outperformance of the gold shares should not come as a surprise.  Platinum is down because of the ongoing engineered price decline in that precious metal, which appears to be at an end.  Click to enlarge.

The month-to-date chart, with the exception of the gold price — and equities, is still a sea of red.  Platinum is now down 11 percent on the month, but the decline in the silver equities has been particularly brutal.  That’s because of suspected short selling in the stock, plus the continuing punk action of the underlying precious metal.  Click to enlarge.

Here’s the year-to-date chart.  Gold is still up a hair — and its equities are barely in negative territory. But all of platinum’s big gains on the year have vanished, as ‘da boyz’ have been working that precious metal over pretty good for the last many weeks now.  But as I said above, the engineered price decline appears to be at, or very near its end.  Silver — and its associated equities are still down big…courtesy of JPMorgan…but they are off their lows of last week.  Click to enlarge.

As I’ve pointed out in this space over the last few weeks, the shorting of the precious metal equities…mostly silver, will certainly be rocket fuel during the next big rally in that precious metal.  Regarding gold’s 200-day moving average situation, I state further down, that it appears to be a “bridge too far” at the moment.  We’ll just have to wait and see how far this rally in gold is allowed to go, as it certainly hasn’t included the other three precious metals, at least not yet.

The CME Daily Delivery Report for Day 2 of June deliveries showed another quiet delivery day for gold, as only 32 contracts were posted for delivery on Tuesday.  There were also 45 silver contracts posted for delivery within the COMEX-approved depositories on Tuesday as well.

In gold, there were four short/issuers in total, the largest being Wedbush with 25 contracts — and in very distant second place was ADM with 5 contracts.  There were six long/stoppers dividing up those 32 contracts — and International F.C. Stone, ADM and JPMorgan picked up 11, 7 and 6 contracts respectively.  All contracts, both issued and stopped, involved their respective client accounts.

The delivery month in gold is starting off very slowly — and I’m not sure if anything should be read into that or not.

In silver, there were four short/issuers — and the three biggest were Advantage, JPMorgan and Morgan Stanley, with 16, 14 and 10 contracts out of their respective client accounts.  There were only two long/stoppers…JPMorgan and Advantage, stopping 26 and 19 contracts for their respective client accounts as well.

And also of note is the fact that ADM issued 15 one-thousand ounce mini silver contracts — and Advantage stopped them all.  I don’t recall any firm other than the CME Group issuing this particular contract in the past.

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 June fell by a rather large 1,371 contracts, leaving only 2,011 still open, minus the 32 contracts mentioned a few paragraphs ago.  Thursday’s Daily Delivery Report showed that only 58 gold contracts were actually posted for delivery on Monday, so that means that 1,371-58=1,313 gold contacts vanished from the June delivery month. That’s a lot.  The June delivery month in gold is turning into a non-event in a real hurry.   Silver o.i. in June dropped by 202 contracts, leaving just 50 left, minus the 45 mentioned several paragraphs ago.  Thursday’s Daily Delivery Report showed that 216 silver contracts were actually posted for delivery on Monday. That means that 216-202=14 more silver contracts just got added to June.

There was another addition to GLD on Friday, the second one in the last three days — and this one was for 75,502 troy ounces.  There were no reported changes in SLV.

There was no sales report from the U.S. Mint on Friday, the last business day of May.

For that month, the mint sold 4,000 troy ounces of gold eagles — 3,000 one-ounce 24K gold buffaloes — and 866,000 silver eagles…plus 158,000 of those 5-ounce ‘America the Beautiful’ silver rounds.

There was a tiny bit of movement in gold over at the COMEX-approved depositories on the U.S. east coast on Thursday.  There was 1,200 troy ounces received at Brink’s, Inc. — and 200 troy ounces shipped out of HSBC USA.  I won’t bother linking this.

There was far more activity in silver.  One truckload…601,118 troy ounces…arrived at CNT — and that was all the ‘in’ activity there was.  There was 659,688 troy ounces shipped out — and that involved four different depositories.  But the vast majority of it, one truckload…600,698…troy ounces…departed Canada’s Scotiabank.  In second spot in the ‘out’ category was CNT, with 39,853 troy ounces.

But the big changes were on the paper side, as 2,999,505 troy ounces was transferred from the Registered category — and back into Eligible…2,465,987 troy ounces at CNT — and the remaining 533,517 troy ounces at Brink’s, Inc.  Along with the similar big category transfer earlier in the week, Ted’s of the opinion that this silver belongs to JPMorgan.  They just have no room for it in their silver vault in New York — and are storing it in the same warehouse that the previous owner had it before JPMorgan took delivery of it.  The reason that they’re doing this, is that it’s cheaper to store it in the Eligible category than it is in the Registered category.  The link to all this activity is here.

There was a bit of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday.  They didn’t report receiving any — and shipped out 350 of them.  This activity occurred at Brink’s, Inc. — and the link to that, in troy ounces, is here.

The Newark Torc is a complete Iron Age gold alloy torc found by a metal detectorist on the outskirts of Newark-on-Trent, Nottinghamshire, England, in February 2005.

The torc is made from electrum, an alloy of gold, silver and copper, weighs 700 grams (1.5 lbs) and is 20 cm in diameter. The body is formed from rolled gold alloy wires, which had then been plaited into eight thin ropes then twisted together. The terminals are ring-shaped and bear floral and point-work designs. The torc was probably made in Norfolk. It closely resembles the Great Torc from Snettisham, now displayed in the British Museum, and is also closely similar to one found at Sedgeford, north Norfolk – so much so that one expert has suggested that they might have been made by the same craftsman. The torc had been buried in a pit, and as such is considered a hoarded item rather than a stray loss. The reason for its deposition is uncertain, although Jeremy Hill, head of research at the British Museum, speculated that it might have been buried “possibly as an offering to the gods.”

“[It is] probably the most significant find of Iron Age Celtic gold jewellery made in the last 50 years … [it] shows an incredibly high level of technological skill in working the metal and a really high level of artistry. It is an extraordinary object.” he stated.

The torc has been dated to between 250 and 50 B.C., and is thought to have been buried in around 75 B.C. The torc was found by Maurice Richardson, a tree surgeon, while he was metal detecting in a field.   Click to enlarge.

The Commitment of Traders Report, for positions held at the close of COMEX trading on Tuesday, was everything that Ted was hoping for in silver, plus more…and just about what he predicted in gold.

In silver, the Commercial traders are now net long in the COMEX futures market, as they decreased their short position by 6,298 contracts, or 31.5 million troy ounces.

They arrived at that number by increasing their long position by 3,782 contracts — and they also covered 2,516 short contracts.  It’s the sum of those two numbers that represents their change for the reporting week.

Under the hood in the Disaggregated COT Report, it was all Manged Money traders, plus a whole lot more, as they reduced their long position by 2,644 contracts.  They also increased their short position by a further 5,932 contracts — and it’s the sum of those two numbers…8,576 contracts…that represents their change for the reporting week.

But it’s still very much a bifurcated report, because the reduction in the long position had to come from the non-technical/value investing Managed Money traders that got blown out of their long positions, as no brain-dead moving average-following Managed Money trader would be holding a single long contract at this price for silver.  They were the ones that added 5,932 short contracts to their already monstrous short position during the reporting week.

The difference between what the Managed Money traders did — and what the Commercial traders did…8,576 minus 6,298 equals 2,278 contracts.  That difference was made up, as it always is, by the traders in the ‘Other Reportables’ and ‘Nonreportable’/small trader categories, as both increased their net long position during the reporting week by that amount in aggregate.

The Commercial net long position in silver sits at 1,115 contracts, or 5.6 million troy ounces.  Not a large number to be sure…but a very rare occurrence, as it’s only happened once before in the last fifteen years — and I know that Ted will have something to say about it in his weekly review later today.

Ted figures that JPMorgan added at least a thousand contracts to their long position in silver — and that long position now stands at 6,000 contracts — and maybe a bit more.

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

To say that the set-up for silver is “white hot” bullish is severe understatement.  It’s ready to blow sky high — and will, the moment that JPMorgan allows it.

In gold, the commercial net short position only increased by 2,016 contracts.  I was expecting far worse.

They arrived at that number by adding 23,463 long contracts, but they also added 25,479 short contracts — and it’s the difference between those two numbers that represents their change for the reporting week.

Under the hood in the Disaggregated COT Report, it was a Ted though it might be…all Managed Money traders, plus way more.  They added 4,328 long contracts — and they also reduced their short position by 6,009 contracts.  It’s the sum of those two numbers…10,337 contracts…that represents their change for the reporting week.

The difference between that number — and the commercial net short position…10,337 minus 2,016 equals 8,321 contracts.

One of the two surprises under the hood was that the Producer/Merchant category where the banks hang out didn’t do a thing on a net basis during the reporting week, as it was the commercial traders in the Swap Dealers category that was responsible for the small 2,016 contract change in the commercial net short position.

The other surprise was that the actual big changes for the week took place in the ‘Other Reportables’ category, as they decreased their net long position by 12,454 contracts during the reporting week, whereas the small traders in the ‘Nonreportable’ category actually increased their net long position by 4,133 contracts.  If you subtract those two numbers from each other, you get 8,321 contract change between what the Managed Money traders and the commercial traders did during the reporting week, which they must do.

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

The commercial net short position in gold stands at 11.0 million troy ounces, still a rather immaterial amount on an historical basis.

Here’s the 3-year COT chart from Nick — and as you can tell, the change is barely noticeable.  Click to enlarge.

With the decisive penetration and close above gold’s 50-day moving average on Friday, there certainly has been an increase in the commercial net short position in gold — and Ted was hoping that JPMorgan hadn’t shown up as a short seller of first resort yesterday.  But he’ll know more when next Friday’s Bank Participation Report is published.

In the other metals, the Manged Money traders in palladium increased their net long position in this precious metal by a further 853 contracts.  The Managed Money traders are now net long the palladium market by 9,284 contracts.  Total open interest in palladium is 20,105 COMEX contracts, down 400 contracts from the previous week.  It’s a very tiny, concentrated and illiquid market — and it doesn’t take too many contracts to move it.  In platinum, the Managed Money traders went net short a further 10,364 contracts during the reporting week.  The Managed Money traders are now net short the platinum market by 9,684 contracts — and are bit more net short since Tuesday’s cut-off.  Total open interest is 83,398 contracts, up 4,560 contracts from last week.  With copper engineered lower in price for yet another week, the Managed Money traders increased their net short position in that metal by a further 3,421 contracts — and are now net short the COMEX futures market by an eye-watering 40,766 COMEX contracts…1.02 Billion pounds worth!…and more since Tuesday’s cut-off!

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 99 days of world silver production, which is up 4 days from last week’s report — and the ‘5 through 8’ large traders are short an additional 62 days of world silver production, down 2 days from last week’s report — for a total of 161 days that the Big 8 are short, which is a bit over 5 months of world silver production, or about 375.7 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 long position in silver was reported as 5.6 million troy ounces.  As mentioned in the previous paragraph, the short position of the Big 8 traders is 375.7 million troy ounces.  The short position of the Big 8 traders is larger than the total Commercial net short position by a chunky 375.7 plus 5.6 equals 381.3 million troy ounces.

The reason for the difference in those numbers…as it always is…Ted’s raptors, the 40-odd small commercial traders other than the Big 8, are net long that amount.  Simply mind-boggling.

As I mentioned in my COT commentary in silver above, Ted said that JPMorgan added about 1,000 contracts or so to their current long position — and he figures that they’re net long the COMEX futures market by 6,000 contracts — and maybe a bit more.

The Big 4 traders now in that category are short, on average, about…99 divided by 4 equals…24.75 days of world silver production each — and at least one of them comes from the ranks of the Managed Money category

The four traders in the ‘5 through 8’ category are short 62 days of world silver production in total, which is 15.5 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 — and that’s obvious from the increase in the Big 4 category this week.

The Big 8 commercial traders are short 34.5 percent of the entire open interest in silver in the COMEX futures market, which is down a bit from the 35.3 percent they were short in last week’s report.  And once whatever market-neutral spread trades are subtracted out, that percentage would be around the 40 percent mark.  In gold, it’s now 34.4 percent of the total COMEX open interest that the Big 8 are short, up a bit from the 31.9 percent they were short in last week’s report — and around the 40 percent once the market-neutral spread trades are subtracted out.

In gold, the Big 4 are short 33 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 27 days of world production, up 3 days from what they were short last week…for a total of 60 days of world gold production held short by the Big 8…up 4 days from last week’s report.  Based on these numbers, the Big 4 in gold hold about 55 percent of the total short position held by the Big 8…down 2 percent 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 61, 66 and 84 percent respectively of the short positions held by the Big 8.  Silver is up 1 percentage point from a week ago, platinum is down 5 percentage points from last week — and palladium is up 2 percentage points…and back at its record high, if not a bit more.

If you look at the above ‘Days to Cover‘ chart above, you can see these percentages for yourself between the red and the green bars for each precious metal.  The grotesque short position of the Big 4 traders, relative to the positions of the Big 8 traders in palladium, should be noted.

I have a very decent number of stories/article for your weekend reading pleasure, including a Stephen F. Cohen interview that I’ve been saving for the last couple of days.


Has Trump Gone Nuts? — Bill Bonner

We never expected Trump to go Full Retard with his trade war shtick. His own wealth, his reputation, and his re-election are at stake.

And yet… there he goes.

And so zany is the thinking behind this latest move that many people are beginning to wonder: Is this president just dumb… or completely nuts? “Borderline crazy” says a Bloomberg headline.

Countries take responsibility for securing their own borders. They cooperate with other countries to police them. Occasionally, they put up walls. Or even seal them off completely.

But this is a first. The Donald is taxing Americans to force the Mexicans to protect the U.S. border. But if the U.S. can’t stop people from sneaking across the Rio Grande, how is Mexico supposed to do so?

We don’t know. But this buggy stock market must be looking for a windshield. And Mr. Trump has put a fleet of them out on the roads.

This worthwhile commentary from Bill showed up on the bonnerandpartners.com Internet site on Friday morning EDT — and another link to it is here.

Doug Noland: So Much for the Trump Put

The PBOC’s $36 billion Wednesday injection raises a crucial question: What will be the scope of liquidity needs when a major bank finds itself in trouble – when escalating systemic stress begins fomenting a crisis of confidence? It’s worth noting that Chinese sovereign CDS jumped six bps this week to 59 bps, the high since January. Overnight repo and inter-bank lending rates rose, along with Chinese corporate bond yields. According to Bloomberg, issuance of negotiable certificates of deposit slowed sharply this week. Chinese finance is tightening, an ominous development for a fragile Bubble.

This is where the analysis turns absolutely fascinating – and becomes as important as it is chilling. The PBOC is at increasing risk of confronting the same predicament that other emerging central banks faced when their Bubbles succumbed: in the event of a mounting crisis of confidence in the stability of the financial system and the local currency, large central bank injections work to fan market fears while generating additional liquidity available to flow out of the system. “Everyone has a plan until they get punched in the mouth.”

If President Trump is determined to squeeze rate cuts out of the Federal Reserve, he made impressive headway this week. This CBB began with, “So Much for the Trump Put.” As for the “Beijing put,” a $36 billion PBOC liquidity injection was indiscernible beyond Chinese markets. Investors in U.S. securities would be wise to anticipate zero favors from China.

As such, markets are left with the “Fed put.” For the most part, U.S. stocks, equities derivatives and corporate Credit have been comfortable banking on the Federal Reserve backstop. But with things turning dicey in China, risk aversion is gaining a foothold. Investment-grade funds saw outflows surge to $5.1 billion the past week (“most since 2015”). Corporate spreads and CDS prices have begun to indicate liquidity concerns. With the “Fed put” now in play, there are important questions to contemplate: Where’s the “strike price” – what degree of market weakness will it take to compel the Fed to move – and, then, to what effect? Markets, after all, have already priced in aggressive rate cuts. It could very well require some “shock and awe” central banking to reverse markets once panic has begun to set in. And it’s as if global safe haven bond markets are anticipating a bout of panic in the not too distant future.

Doug’s weekly commentary was posted on his website in the very wee hours of Saturday morning — and another link to it is here.

Jim Grant: Who’s Buying All the Sub-Zero Debt?

[Excerpted from Jim Grant’s Barron‘s op-ed: “The World Created By Upside-Down Interest Rates“]

The quoted value of negative-yielding debt the world over hit $11 trillion the other day, the highest such total since September 2016 and almost double the volume in place last October.  Click to enlarge.

These are remarkable facts. You can as easily imagine a five-pawed St. Bernard or a suitable candidate for public office as you can the situation of a lender paying a borrower for the privilege of extending a loan.

The institution of negative yields serves to remind us that radical monetary policy only begets more radical monetary policy.

But the central bankers misjudged the human animal. Confronted with a novelty unprecedented in 4,000 years of interest-rate history (negative money-market interest rates are nothing new, but substantially negative note and bond yields are a post-2000 B.C. first), people not unreasonably suspected that something was wrong. And when something is wrong, you save more, not less.

Five years into the negative rate experiment, and a decade on in radical monetary improvisation, the central bankers are looking for a way back to normalcy…

But as Grant asks and answers: Do you wonder who’s buying all of the subzero debt?

This rather brief 1-chart commentary appeared on the Zero Hedge website at 1:30 p.m. EDT on Friday afternoon — and I thank Jim Gullo for sending it our way.  Another link to it is here.

Fed candidate Shelton slams central bank’s ‘Soviet’ power over markets

Judy Shelton, a senior U.S. official who is being vetted for a job on the board of the Federal Reserve, has attacked the central bank for wielding undemocratic, Soviet-style powers over markets and suggested it should not even be in the business of setting interest rates.

In an interview with the Financial Times at the Trump International Hotel in Washington this week, Ms. Shelton called on the Fed to “think about whether they are doing more harm than good.” If appointed to the board, she would be “asking tough questions” about its most basic mission, she said.

How can a dozen, slightly less than a dozen, people meeting eight times a year, decide what the cost of capital should be versus some kind of organically, market-supply-determined rate? The Fed is not omniscient. They don’t know what the right rate should be. How could anyone?” Ms. Shelton said.

If the success of capitalism depends on someone being smart enough to know what the rate should be on everything…we’re doomed. We might as well resurrect Gosplan,” she said, referring to the state committee that ran the Soviet Union’s planned economy. Ms. Shelton did post-doctoral research on the Soviet economy at Stanford University’s Hoover Institution and was designated to be the Russia expert on the board of the National Endowment for Democracy.

This worthwhile Financial Times news item is posted in the clear in this GATA dispatch — and another link to it is here.

What diplomacy? Here are 36 countries the U.S. has bullied this week

It’s been a busy few days for American diplomacy, with three dozen nations ending up at the receiving end of threats, ultimatums and sanctions this week alone. And it’s only Friday.

Mexico is the latest target, slapped with 5 percent tariffs on each and every export, gradually increasing to 25 percent until it stops the flow of Latin American migrants into the U.S., thus fulfilling one of President Donald Trump’s election promises. Most of those migrants aren’t even from Mexico.

On the other side of the world, India is reportedly about to be forced to face a choice: ditch the purchase of Russian S-400 air defense systems or face sanctions under the Countering America’s Adversaries Through Sanctions Act (CAATSA, Washington’s go-to cooperation enforcement instrument).

Turkey is facing a similar ultimatum: abandon S-400s (something Ankara has repeatedly refused to do) or lose access to the F-35 fighter jet program. This threat was repeated on Thursday by Kathryn Wheelbarger, US acting assistant secretary of defense for international security affairs. Ankara has already invested some $1.25 billion into the super-expensive American fighter, but with a lot of its parts being made in Turkey, it’s still an open question who would be the bigger loser.

The entire European Union could be facing punishment if it tries to trade with Iran using its non-dollar humanitarian mechanism to bypass the American embargo. Having worked hard on the 2015 nuclear deal with Tehran, which has repeatedly been confirmed to be working, E.U. member states are not ready to ditch trade at Trump’s whim – and U.S. Special Representative to Iran Brian Hook on Thursday reaffirmed the threat of CAATSA sanctions.

This news item put in an appearance on the rt.com Internet site at 12:52 p.m. Moscow time on their Friday afternoon, which was 4:25 a.m. in Washington — EDT plus 7 hours.  I thank Larry Galearis for bringing it to our attention — and another link to it is here.

Mike Pence declares war on the world at West Point — John Wight

The commencement address Trump’s VP, Mike Pence, gave to West Point graduates recently goes down in history for all the wrong reasons.

It was an address littered with war talk that was so extreme it was more compatible with a speech you would expect to hear from a character in a Hollywood spoof than from a leading politician and government official.

This was no spoof, though, be assured, and as such the world needs to wake up to the fact that this administration is staffed with enough cranks and crackpots to fill an entire ward.

Here, for your consideration, is one of the more tame sections of Pence’s West Point commencement address: “It is a virtual certainty that you will fight on a battlefield for America at some point in your life. You will lead soldiers in combat. It will happen. Some of you may even be called upon to serve in this hemisphere.”

But then there’s this…

Some of you will join the fight against radical Islamic terrorists in Afghanistan and Iraq.  Some of you will join the fight on the Korean Peninsula and in the Indo-Pacific, where North Korea continues to threaten the peace, and an increasingly militarized China challenges our presence in the region.  Some of you will join the fight in Europe, where an aggressive Russia seeks to redraw international boundaries by force. And some of you may even be called upon to serve in this hemisphere. And when that day comes, I know you will move to the sound of the guns and do your duty, and you will fight, and you will win.”

Though we can justifiably speculate that whoever wrote the Vice President’s speech might well have been drunk at the time, the man himself has no such excuse. He was, in fact, completely sober while delivering it to the packed assembly of military graduates arrayed in front of him. It is to be hoped that at least a few of them, listening, let loose an inner scream along the lines of “Whaaat?! Are you nuts?!

This commentary from John is certainly worth reading if you have the interest.  It was posted on the rt.com Internet site at 1:01 p.m. Moscow time on their Wednesday afternoon, which was 6:01 a.m. in Washington — EDT plus 7 hours.  I thank George Whyte for pointing it out — and another link to it is here.

Russiagate is #1 threat to U.S. national security –- Stephen Cohen

The systemwide U.S. Russophobia that reached its nadir with Russiagate has created a “catastrophe” for both domestic politics and foreign relations that threatens the future of the American system, professor Stephen Cohen tells RT.

War with Russia could easily break out if the U.S. insists on pursuing the policy of “demonization” that birthed Russiagate instead of returning to detente and cooperation, New York University professor emeritus of Russian history Stephen Cohen argues on Chris Hedges’ On Contact. While NATO deliberately antagonized post-Soviet Russia by expanding up to its borders, the U.S. deployed missile defense systems along those borders after scrapping an arms treaty, leaving President Vladimir Putin devoid of “illusions” about the goodwill of the West – but armed with “nuclear missiles that can evade and elude any missile defense system.”

Cohen believes the conspiracy theory – which remains front-page news in U.S. media despite being thoroughly discredited, both by independent investigators and last month by special counsel Robert Mueller’s report – is the work of the CIA and its former director, John Brennan, who are dead set against any kind of cooperation with Russia. Attorney General William Barr, who is investigating the FBI over how the 2016 counterintelligence probe began, should take a look at Brennan and his agency, Cohen says.

If our intelligence services are off the reservation to the point that they can first try to destroy a presidential candidate and then a president…we need to know it,” Cohen says. “This is the worst scandal in American history. It’s the worst, at least, since the Civil War.” And the damage wrought by this “catastrophe” hasn’t stopped at the U.S. border.

The 28:25 minute Chris Hedges video interview with Stephen F. Cohen is embedded in this article that appeared on the rt.com Internet site at 2:56 a.m. Moscow time on their Friday morning…7:56 p.m. in Washington on Thursday evening — EDT plus 7 hours.  I thank both Larry Galearis and Jim Gullo for contributing to this story.  Another link to it is here.

U.S. Coalition Attacks Syrian Oil Transport Boats on Euphrates River

In a huge development out of eastern Syria, where U.S.-backed Syrian Democratic Forces (SDF) share tense front lines with pro-Assad forces on the other side, the American coalition has reportedly attacked at least two Syrian government boats that were transporting oil across the Euphrates River to the government side.

The news broke via the Beirut-based Middle East News site Al-Masdar which is well-known for often being the first to report Syria news, given its rare sources in the Syrian military. According to the Al-Masdar report:

“According to reports from the Deir Ezzor Governorate, the U.S. Coalition and the SDF both targeted the Syrian government boats with heavy machine gun fire in front of the town of Al-Shuhayl.

Pro-SDF accounts later released photos showing smoke rising from one of the ferries that were targeted by their machine gun fire.”

Kurdish media and SDF accounts, along with a number of Middle East analysts also confirmed the incident, which is reportedly the second such attack on government oil supplies in under a month.

Washington has imposed a complete oil and fuel embargo on Syria, which Damascus’ close ally Iran has recently sought to circumvent.

Turkish media also confirmed the attack, which according to early reports left four dead.

Though U.S.-backed forces maintain control of eastern Syria’s largest oil and gas fields, such as al-Omar, which the country’s largest oil field and located in the Deir Ezzor region, it has long been suspected that Syrian Kurdish groups have cut secret deals with the Assad government to purchase and transfer supplies to the fuel-starved government side of the Euphrates.

This story put in an appearance on the Zero Hedge website at 12:25 p.m. on Friday afternoon EDT — and I thank Brad Robertson for this one.  Another link to it is here.

Russian Jets Launch Airstrikes on Idlib After Ceasefire Talks With Turkey Collapse

On Thursday more than five Russian fighter jets began launching airstrikes over the Idlib Governorate following the collapse of ceasefire talks with Turkey.

According to a military source in northwestern Syria, the ceasefire talks collapsed after Turkey demanded that the Syrian Arab Army (SAA) withdraw from all the areas they captured in northwestern Hama.

The Russian military reportedly rejected Turkey’s demands and restarted their aerial campaign over the Idlib province.

The Syrian Air Force had already launched airstrikes over the Idlib Governorate on Thursday, but the Russian military had only carried out limited attacks due to their ceasefire talks with Turkey.

The source added that the Syrian Army has yet to receive the green light to resume their ground offensive against the jihadist forces in northwestern Hama.

The Turkish regime had been pushing for a new ceasefire deal around the Idlib deescalation zone after their rebel allies lost a great deal of territory in northwestern Hama.

This story appeared on the Zero Hedge website at 8:47 a.m. on Friday morning EDT — and I thank Brad Robertson for his second offering in today’s column.  Another link to it is here.

Dalio warns of U.S.-China ‘war’ slipping out of control

Markets continue to more or less shrug off the prospect of a dramatic escalation in the US-China trade conflict, with major U.S. stock benchmarks in the green on Thursday as of early afternoon. But a realization is finally taking hold that the leaders of the world’s two largest economies have little political room to back away from doubling down.

Many analysts’ base-case scenarios have already shifted from a short-term resolution to the U.S.-China tariff war to an expectation that the current stalemate will be the new status quo for the foreseeable future.

But Ray Dalio, founder of one of the world’s largest hedge funds, said he is worried about a worst-case scenario, one that sees Washington and Beijing slide into a disastrous export control war aimed at crippling sectors of each other’s economies.

As someone in these negotiations wisely said, history shows that countries in conflict have seen that such conflicts can easily slip beyond their control and become terrible wars that all parties, including the leaders who got their countries into them, deeply regretted,” Dalio wrote in a LinkedIn post.

What is now most important at this time of brinkmanship is seeing what actually happens next—i.e. whether we see the “tariff war” slip into an “export embargo war” intended to shut parts of the other country down,” he warned.

This worthwhile commentary/news item by the Asia Times Staff showed up on their Internet site on Thursday sometime — and I thank Tolling Jennings for sharing it with us.  Another link to it is here.

For the U.S. and China, it’s not a trade war anymore — it’s something worse

What started out two years ago as an effort by President Trump to wring better terms from China on the nuts-and-bolts of foreign trade now threatens to become a far wider and more ominous confrontation.

The conflict continues to be framed as a “trade war” between the world’s two biggest economies — as Washington and Beijing pursue an escalating series of tariff hikes and other retaliatory measures.

Even as Trump moved Thursday to open a new, potential damaging trade war with Mexico, however, the conflict with China has widened beyond the original trade-based issues.

Beneath the surface, a new tone has begun to emerge since trade talks broke down in early May and Trump ratcheted up tariffs on imported goods from China, an action met with retaliatory duties from Beijing. Officials on both sides of the Pacific have begun to portray the U.S.-China relationship in nationalistic and emotion-charged terms that suggest a much deeper conflict.

Recently, for example, a private group of American economists and trade experts with long-standing experience in China traveled to Beijing, expecting their usual technical give-and-take with Chinese government officials.

Instead, a member of the Chinese Politburo harangued them for almost an hour, describing the U.S.-China relationship as a “clash of civilizations” and boasting that China’s government-controlled system was far superior to the “Mediterranean culture” of the West, with its internal divisions and aggressive foreign policy.

On the U.S. side, a senior State Department official, during a forum last month in Washington, warned of a deepening confrontation with China that she cast in something close to racial terms.

That’s pretty much what it’s turning into, dear reader…Samuel P. Huntingon’s “Clash of Civilizations“.  The U.S. is attempting to destroy China before it overtakes the U.S. economically and in political influence.  This commentary/news item, which is definitely worth reading, showed up on the latimes.com Internet site at 7:00 a.m. Washington time — and I thank ‘Zoey’ for sending it our way.  Another link to it is here.

Will the U.S. now try to overthrow Malaysia’s prime minister too?

Malaysian PM Mahathir Mohamad has floated the idea of creating a gold-backed common trading currency for all of East Asia, slamming regional currency exchange as “manipulative” and criticizing the U.S.’s heavy-handed foreign policy.

In the Far East, if you want to come together, we should start with a common trading currency, not to be used locally but for the purpose of settling of trade,” Mahathir said at the Nikkei Future of Asia conference in Japan, suggesting the currency be “based on gold because gold is much more stable” and warning that promoting any one country’s currency over others would result in conflict.

Exchange rates would be based on the country’s economic performance and not subject to the volatility of forex markets.

Earlier this week, U.S. President Donald Trump warned Malaysia that it could be placed on the U.S. Treasury’s list of “currency manipulators” and required close scrutiny, though Malaysia’s central bank retorted that it maintains a floating exchange rate and strong external balance. During the 1997 financial crisis, the bank pegged the ringgit to the dollar and imposed capital controls, but those measures were discontinued in 2005.

Mahathir is a long-time critic of the status quo in currency trading. He blames billionaire financier George Soros for triggering the 1997 Asian financial crisis by betting against the ringgit and baht and has accused the financier of attempting to “colonize” Malaysia through his network of NGOs, claiming his end goal is “regime change.”

Libyan leader Muammar Gaddafi proposed a pan-African gold dinar that would be used to sell the country’s oil on the world market in 2009, less than two years before his government fell to a NATO-backed regime change operation that has left the once-prosperous nation a conflict-ridden warzone. One of the ‘moderate’ rebels’ first actions upon brutally murdering Gaddafi was to create a central bank to replace the state-owned monetary authority that had previously managed Libya’s wealth. The U.S. has historically not taken kindly to countries that attempted to trade oil in non-dollar currencies, as Iraq’s Saddam Hussein can attest – or could, if he hadn’t been regime-changed as well. Syria, too, dropped its peg to the dollar in 2007, not long before the West went from awarding Bashar al-Assad the French medal of honor, to declaring him a bloodthirsty monster.

This news item was posted on the rt.com Internet site at 3:40 a.m. Moscow time on their Friday morning, which was 8:40 a.m. in Washington — EDT plus 7 hours…and was updated about an hour later.  The actual headline to this story reads “‘Gold is more stable’: Malaysia needles U.S. with proposal for pan-Asian bullion-backed currency“.  I found it on the gata.org Internet site — and another link to it is here.

Asia Gold-China premiums rise as trade woes boost buying; India demand tapers

Gold premiums in top consumer China rose this week as investors bought the metal as a safe-haven due to rising trade tensions with the United States, while bullion demand moderated in India as local prices jumped to two-week highs.

In China, premiums rose to about $14-$18 an ounce over the benchmark from $12-14 an ounce last week.

Investment demand has been picking up, due to uncertainties on trade disputes and the lacklustre performance in the stock market, while jewellery demand still remains quiet,” said Samson Li, a Hong Kong-based precious metals analyst with Refinitiv GFMS.

Weak yuan and lower gold import volumes also pushed premiums higher, Li said, adding that imports in the first four months of this year were much less than a year earlier.

Net gold imports via main conduit Hong Kong rose 20.5% in April from a month ago, but were down about 17% on year in the first four months.

This Reuters news item put in an appearance on their Internet site at 3:40 a.m. EDT on Friday morning — and I found it on the Sharps Pixley website.  Another link to it is here.

Ted Butler: The CFTC’s summer camp letter

About 30 years ago, my wife arranged for our then ten-year old son to attend a sleep-away YMCA summer camp in Tallulah Falls, in the Georgia Mountains. While Ross wound up going back to the same camp for several years, eventually serving as a counselor, I knew the first year would involve more than a little concern for his mother (and me) for how he was doing. Since the only communication would be by postal mail (no cellphones or texting back then) and I knew my son was not likely to write without some prodding, I sent him off with a number of pre-printed letters, in which all he had to do was fill in the blanks.

Given the CFTC’s abject failure to respond to simple questions about how commodity prices are being set through speculative futures positioning, I thought it might be instructive to attempt to make it as simple as possible for it to answer – in a fill in the blank and multiple choice format. The attempt is not to put words in the agency’s mouth, but just help it address the important issues at stake. Feel free to send along any you might wish to add.

1. The main purpose of futures trading is to allow (real producers and users to hedge price risk or large paper speculators to make bets). An alternative default answer to all questions is we don’t know or haven’t looked or JPMorgan told us not to look.

If the answer to #1 is to allow real producers and users and to hedge price risk, then why are there no real producers and users present in COMEX silver futures and managed money speculators are the largest single category?

If the answer to #1 is “we don’t know or haven’t thought about that,” then go back to sleep and forget the rest of the quiz. If the answer to #2 is “because JPMorgan told us not to look,” then proceed.

This very worthwhile commentary from Ted first appeared in his mid-week commentary to his paying subscribers on Wednesday — and I’m happy to see that it ended up in the public domain, which is where it really belongs.  Another link to it is here.


These three photos are taken at exactly the same spot…about two kilometers/one mile north of Spences Bridge on the east side of the Trans-Canada Highway.  The first shot was taken looking due east — and back down the Nicola River valley towards Merritt…66 kilometers away.  You can just make out where the river flows under the CN Rail bridge and into the Thompson River on the far left of the shot.  The second photo is looking due south — and down the T-CH to Spences Bridge…population: 99 as of the 2016 census.  That’s CP Rail‘s main line center left — and main-line CN Rail is the cut in the rocks on the east shore of the Thompson River on the far left.  B.C. Highway 8 runs just underneath that.  The last photo was taken looking due north.  This hot, dry semi-arid country is in the rain shadow of the Northern Cascade MountainsSagebrush and a peculiar kind of ground-hugging prickly-pear cactus is everywhere.  Click to enlarge.


Today’s pop ‘blast from the past’ dates from late 1977.  This American rock band was basically a 1-hit wonder, but the tune certainly falls into the “what a hit it was” category.  The link is here.

Today’s classical ‘blast from the past’ is one I’ve featured before, but I just can’t remember how long its been.  It’s Tchaikovsky’s Violin Concerto in D major, Op. 35 which he composed in a month in 1878 while in a resort in Switzerland.

It’s premiere in Vienna on December 4, 1881 was not all that well received…”The influential critic Eduard Hanslick called it “long and pretentious” and said that it “brought us face to face with the revolting thought that music can exist which stinks to the ear”, labeling the last movement “odorously Russian”. Hanslick also wrote that “the violin was not played but beaten black and blue.”

However, a lot of things change over the years — and now its one of the most popular and beloved violin concertos in the repertoire.  Here’s Itzhak Perlman doing it up right.  I can tell it’s an old recording because Eugene Ormandy is conducting the Philadelphia Orchestra — and it’s been many, many decades since he held that position — and Itzhak is pretty youngish looking.  The link is here.

We’re back above gold’s 50-day moving average with some conviction after Friday’s trading session — and it remains to be seen whether this rally turns into the real deal or not.  It could turn out to be just another head-fake where the commercial traders are about to slam the Managed Money traders back down through that moving average for fun, profit — and price management purposes.  I’m certainly hoping for the former, but fearful of the latter.

The net volume in gold was absolutely monstrous — and all we got out of that was a $17 rally in gold.  I was underwhelmed.

There’s still gold’s 200-day moving average that hasn’t been broken to the downside, but that really does seem like a “bridge too far” at the moment.

None of the other three precious metals were allowed to join in the fun yesterday, with palladium being taken out to the proverbial woodshed.  Silver wasn’t allowed to get anywhere yesterday — and I found the associated heavy volume rather disturbing.  Ted has his opinion on this, which he will divulge in detail to his paying subscribers today — and I hope he’s right.  But that takes nothing away from the fact that the set-up for silver in the COMEX futures market is just about the most extreme in history.

The other Big 2 of the Big 6 commodities…copper and WTIC…both got hit hard again yesterday and, without doubt, the Managed Money traders were puking up long contracts and piling in on the short side in both of these essential commodities.  They sold those long positions for big losses — and the new short positions they put on are all guaranteed money-losing trades when the commercial traders allow their respective prices to rally, as they’ll be covering them at a loss as well.

Here are the charts for the Big 6 commodities — and the changes I spoke of above, should be noted. Click to enlarge.

Every day the headlines coming out of the U.S. become more bizarre — and this Mexican tariff thingy was just the latest in a long string of threats against foreign countries.  That’s bad enough in and of itself, but the internal bickering and fighting going on between what’s left of both the Democratic and Republican parties, is both sad and horrifying to watch…especially to those of us that are not U.S. citizens — and who are on the outside looking in.

As the threats and fights continue…all around them, both internally and externally, the economies of the U.S. and the other nations of the world, slide into recession or worse.  It’s a process that is being accelerated by the Tweets coming from the White House.  It’s difficult for the average person to understand why Trump et al would risk sinking the Chinese economy — and not realizing at the same time that the U.S. economy would fall into the abyss shortly thereafter…never mind the rest of the world.

It’s a dangerous game of Brinkmanship that will end up sinking everyone.

It’s impossible to look at the world we live in today — and understand how the world equity, currency and bond markets can continue to operate in the rarefied atmosphere of the biggest financial bubble the world has ever known.  And I doubt it’s just me that sees danger in every direction.

Like I’ve stated before, I see the signs in things like Tesla and Uber — and in negative interest rates — and in the constant cry from Wall Street and the banks for yet lower interest rates and more Q.E. to keep this fantastic paper machine running for just another week, month or year…all the while the markets are massaged to as much perfection as possible 24/7.  It’s a circumstance that cannot last forever — and it’s been going on in one iteration or another since 1971.

This paper market that we’ve been living in since back then has been building slowly since that date.  Saved in 1987, then in 1999/2000…and the powers-that-be came close to losing it all in 2008/09 as spelled in horrific detail and plain English in the movie “The Big Short“.

The entire world is now involved in that classic experiment of a frog in a pot of water, where the heat has been turned up quietly and slowly through the generations — and unless you are of a certain vintage, everything appears normal.  But those of us who are, know better.

More and more with each passing week I feel like Frodo Baggins in Shelob’s Lair.  I can sense the rapidly increasing danger all around me — and I feel it, but can’t quite get a clear picture of the whole beast as it grows in size exponentially…shrouded in the happy talk coming from Washington, Wall Street, the Fed and the constant barrage coming from the main stream media — and not just the U.S. media, either.

And is it just me that thinks that all this will end suddenly — and most likely terribly — and soon?

So when everything paper begins to return to its intrinsic value, not only in the U.S., but world wide…where is that remaining money going to run to?

True, some of it will go into the bond markets, driving interest rates negative across the entire yield curve.  But, in reality, it will flow into the only remaining asset class that will be showing a positive return — and that will be commodities, particularly the precious metals.

And as I look at the Big 6 commodities through that particular lens, what I see is a set-up like few others that have been presented to us in modern times.  The commercial traders have snookered the Managed Money traders into record, or near record short positions in silver, platinum, copper and WTIC. This all looks deliberate and premeditated to Ted — and to me.

JPMorgan is long in the COMEX futures market in silver plus, according to Ted Butler, they hold at least 20 million ounces of physical gold and 850 million ounces of silver — and the only reason they are holding them is to make a boatload of money.  Heaven only knows what they and the other banks, both U.S. and foreign, hold in the Over-the-Counter market.

As I stated a few paragraphs ago, this financial and monetary bubble cannot go on forever.  It must and will end — and as I’ve said on several occasions before, it will happen either by circumstance, or by design.  And as I’ve also said on many occasions, this event will not happen in a news vacuum.

All the mice are in the trap, except for us precious metal holders.  And with the U.S. equity markets rolling over yet again, it’s not a matter of if JPMorgan et al pull the pin on all this, it’s just a matter of when.

So we wait some more.

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