08 June 2019 — Saturday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price drifted quietly lower almost from the open of trading in New York at 6:00 p.m. EDT on Thursday evening, with its low tick of the day coming at, or shortly after the 2:15 p.m. afternoon gold fix in Shanghai. It wandered higher without much conviction until the noon silver fix in London — and then began to head higher from there. The price really took off at 8:30 a.m. in New York when the less-than-happy job numbers hit the tape. JPMorgan et al were there in an instant as the dollar index cratered at the same moment. From that point it was held in a tight grip until the afternoon gold fix was put to bed in London — and then it rallied some more. But a minute or so after 10:30 a.m. EDT, ‘da boyz’ slammed all four precious metals lower — and that engineered price decline lasted until shortly after 3 p.m. in after-hours trading. The price managed to rally a few dollars after that, before trading sideways into the 5:00 p.m. close.
The low and high ticks for gold were recorded by the CME Group as $1,334.30 and $1,352.70 in the August contract.
Gold was closed in New York on Friday at $1,339.90 spot, up only $5.10 on the day. Net volume was enormous once again at just under 321,000 contracts — and there was just under 12,500 contracts worth of roll-over/switch volume in this precious metal.
The silver price didn’t do much of anything in Far East trading on their Friday — and volumes were noticeably on the light side. The price pattern starting at the London open was a carbon copy of what happened with gold, so I shan’t bother with the rest of the play-by-play. But the high tick in silver…back over $15 briefly…came at the same precise moment as the high tick in gold.
The low and high in this precious metal was recorded as $14.84 and $15.15 in the July contract.
Silver was closed at $14.97 spot, up 10 cents from Thursday. Net volume in silver was very heavy once again at just over 86,500 contracts — and there was a pretty healthy 21,500 contracts worth of roll-over/switch volume out of July and into future months.
The platinum price didn’t do much of anything in Far East trading on Friday, either…but began to crawl lower starting shortly after 10 a.m. CEST in Zurich. The low came on the jobs report number/dollar index crash at 8:30 a.m. in New York. Its ensuing rally was also capped by JPMorgan et al at the same time as silver and gold — and it was sold lower until shortly after 11:30 a.m. in New York trading. It gained a couple of dollars of that back by 1 p.m. EDT — and then traded ruler flat into the 5:00 p.m. close. Platinum was closed at $806 spot, up 4 dollars on the day.
The price pattern in palladium was mostly the same as it was for platinum, including the price-capping shortly before 10:30 a.m. in New York. It was sold lower until 1 p.m. in COMEX trading — and didn’t do much of anything after that. Palladium was closed at $1,338 spot, up 6 bucks from Thursday.
The dollar index closed very late on Thursday afternoon in New York at 97.04 — and opened down 3 basis points once trading commenced at 7:45 p.m. EDT on Thursday evening. It crawled higher from there at glacial speed — and the 97.18 high tick was printed at precisely 11:00 a.m. BST in London. The index crawled lower from there until the job numbers were released at 8:30 a.m. in Washington — and the result was the most spectacular waterfall decline I’ve seen in anything in years. Those ‘gentle hand’s were at battle stations — and managed to turn it higher at the 96.46 mark at 10:50 a.m. EDT. They didn’t get it higher by much — and from that juncture, it chopped quietly sideways until trading ended at 5:30 p.m. The dollar index finished the day at 96.54…down 50 basis points from its close on Thursday.
There’s no telling how far the dollar index would have fallen, nor how high the precious metals would have risen, if the PPT hadn’t been working overtime in all markets yesterday…including the equity markets.
Here’s the DXY chart from Bloomberg — and the waterfall decline should be admired, as it’s a beauty. Click to enlarge.
And here’s the 5-year U.S. Dollar index chart, courtesy of the folks over at the stockcharts.com Internet site. The delta between its close…96.49…and the close on the DXY chart above, was 5 basis points on Friday. Click to enlarge.
The gold shares gapped up about two percent at the open, but ran into selling right away. That selling pressure continued for most of the remainder of the Friday session — and the HUI actually closed down 0.18 percent.
It was the same for the silver equities, but they didn’t suffer the same ignominy as the gold stocks, as they managed to squeeze a positive close, as Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up by 0.34 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.
I had a brief chat with Keith Neumeyer, the Grand Poobah over at First Majestic Silver yesterday afternoon — and I asked him about the short position in his company’s shares — and why the precious metal equities were performing so poorly. His answer shocked me, although it shouldn’t have. He says that this happens on all rallies in the silver stocks, as all the same people that are short the metal in the COMEX futures market, short the shares as the rally progresses, knowing full well that precious metal prices are going to be hammered lower [by them] in the not-very-distant future. So not only are they making a killing in the futures market, their cleaning up in the silver and gold stocks as well…including GDX.
And if you’re looking for proof, all you have to do is look at the share price action in the HUI and the Silver 7 Index since Monday…with Friday’s price action being the perfect poster boy for that.
Here are a couple of 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. What a difference a week makes! It’s green across the board — and the only reason that the precious metal stocks, particularly the silver equities, have performed so poorly, is that there is active shorting going on, as per my conversation with Keith Neumeyer just above. Click to enlarge.
The month-to-date chart is the same as the weekly chart, as the month is only one week old, so I won’t bother posting it, as the numbers are identical on both.
Here’s the year-to-date chart — and it’s much improved. The fact that JPMorgan holds a current death grip on silver is obvious in this chart — and that’s certainly reflected in the state of the Silver 7 Index, plus the active shorting going on currently. Platinum is barely above unchanged, but that’s because ‘da boyz’ have been engineering its price lower over the last three weeks. Click to enlarge.
As I’ve pointed out in this space over the last few weeks — and again today, the shorting of the precious metal equities…mostly silver, will certainly be rocket fuel during the next big rally in that precious metal. With gold overbought, I expect a ‘correction’ of some type [courtesy of JPMorgan et al] in the not-too-distant future, but it will only prove to be a temporary setback.
The CME Daily Delivery Report showed that 2 gold and 1 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday. I won’t bother expanding on these tiny amounts. But if you wish to look, the link to yesterday’s Issuers and Stoppers Report is here.
One thing I did notice in the above report was that JPMorgan issued 250 palladium contracts from its own account for delivery on Tuesday. There were ten long/stoppers in total, with JPMorgan picking up 49 contracts for its client account.
So far in the June delivery month…just one week old…only 361 gold, plus 309 silver contracts have been delivered. June is not a typical delivery month in silver — and gold deliveries for June are proceeding very slowly, with a huge number of short/issuers exiting their short positions once called upon for delivery for physical gold that they most likely didn’t have.
The CME Preliminary Report for the Friday trading session showed that gold open interest in June fell by 24 contracts, leaving 1,258 still around, minus the 2 mentioned a few brief paragraphs ago. Thursday’s Daily Delivery Report showed that 9 gold contracts were actually posted for delivery on Monday, so that means that 24-9=15 more gold contracts vanished from the June delivery month. Silver o.i. in June declined by 1 contract, leaving 4 left, minus the 1 contract mentioned two paragraphs ago. Thursday’s Daily Delivery Report showed that zero silver contracts were posted for delivery within the COMEX-approved depositories on Monday, so that means that 1 silver contract disappeared from the June delivery month.
For the second time this week — and the second since Wednesday, there was a withdrawal from GLD, as an authorized participant removed 37,748 troy ounces. There were no reported changes in SLV once again.
I don’t know if these counterintuitive withdrawals are masking large deposits on those same days or not. But as Ted mentioned in yesterday’s column, both ETFs are owed physical metal, so it’s a given that the authorized participants in both these ETFs are now shorting the shares in lieu of depositing physical metal. That makes it even more obvious that physical gold and silver in any size is just not available — and I know that Ted will certainly have something to say about all this in his weekly review this afternoon.
There was no sales report from the U.S. Mint yesterday.
Month-to-date the mint has only sold what I reported on Monday…1,000 troy ounce of gold eagles — 1,000 one-ounce 24K gold buffaloes — and 223,500 silver eagles.
There was no ‘in’ activity in gold over at the COMEX-approved depositories on the U.S. east coast on Thursday, but in the ‘out’ category, there was 32,214.300 troy ounces/1,002 kilobars [U.K./U.S. kilobar weight] that departed JPMorgan. [And the Reuters story suggesting that Jamie Dimon was seen running behind the Brink’s truck, crying…has already been denied by a company spokesman.] The link to that ‘activity’ is here.
There was certainly more activity in silver, as 99,475 troy ounces was reported received — and 678,572 troy ounces was shipped out. All of the ‘in’ activity was at Loomis International. In the ‘out’ category, there was one truckload…630,463 troy ounces…shipped out of CNT. The remaining 44,139 and 3,969 troy ounces, were shipped out of Scotiabank and Brink’s, Inc. respectively. The link to that is here.
There was a bit of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday. They reported receiving 300 of them — and shipped out 10. All this activity was at Brink’s, Inc. — and the link to that, in troy ounces, is here.
The Pentney Hoard is an Anglo-Saxon jewellery hoard, discovered by a gravedigger in a Pentney, Norfolk churchyard in 1978. The treasure consists of six silver openwork disc brooches, five made entirely of silver and one composed of silver and copper alloy. The brooches are decorated in the 9th century Trewhiddle style. The hoard is now in the British Museum.
The hoard consists of six silver, circular brooches. Five of the brooches are made entirely of silver; the sixth brooch was created with a copper alloy base and a silver overlay. There are two single brooches, which include the largest and smallest items of the hoard, and two non-identical pairs. The pairs are similar in layout, but have different decorative details. All brooches are centrally arranged in a cross-shaped pattern. The smallest brooch, stylistically, belongs to the late 8th century. The five larger brooches can be dated to the early ninth century. All items in the hoard are intricately decorated in the Trewhiddle style. The brooches were in very good condition when they were discovered. Evidence suggests that all the brooches were made in the same workshop. All of the brooches except for the smallest were complete, with intact pin, spring and hinge components.
“The largest brooch is a silver disc with an intricate openwork pattern and inlaid with black niello. This (10.2 cm) brooch is an excellent example of the Trewhiddle style. The outer edge of the brooch contains eight panels of intertwined creatures. The center of the brooch is ornamented with stylised animal and plant decorations. The back of the brooch is undecorated. The pin and spring hardware is intact and decorated with two stylised beasts.”
In 1978, William King, a sexton for the church of St. Mary Magdalene in Pentney, Norfolk was digging a grave and noticed a circular piece of metal embedded in the soil. In removing the metal, he uncovered five additional metal discs. King gave the artefacts to the church rector who saved them in the parish chest. Three years later, the new church rector, John Wilson, found the discs and gave them to the Norwich Castle museum. The British Museum was asked to evaluate the brooches. It was determined that the hoard items were Anglo-Saxon silver disc brooches. The finds were declared treasure trove and property of the Crown. The hoard contents were purchased by the British Museum. As discoverer of the hoard, King was awarded £137,000, £25,000 of which he gifted to the church. Click to enlarge.
The Commitment of Traders Report, for positions held at the close of COMEX trading on Tuesday, June 4, came in exactly as Ted stated they would…including silver, which he was “unsure” of.
In silver, the Commercial net short position increased by 13,404 contracts, or 67.0 million troy ounces of paper silver.
They arrived at that number by selling 4,599 long contracts — and increasing their short position by 8,805 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 Managed Money traders, plus a whole bunch more, as they increased their long position by 7,310 contracts, plus they covered 11,161 short contracts…all at a loss. It’s the total of those two numbers…18,471 contracts…that represents their change for the reporting week.
And as is always the case, it was the traders in the other two categories that made up for the difference between what the Managed Money bought — and the Commercial traders sold, in this case…18,471 minus 13,404 equals 5,067 contracts. Both categories decreased their net long positions during the reporting week…the ‘Other Reportables’ by 4,505 contracts — and the ‘Nonreportable’/small traders by 562 contracts. Those two numbers add up to 5,067 contracts…the difference between what the Commercials and the Manged Money traders did during the reporting week, which they must do.
The Commercial traders in the Producer/Merchant and Swap/Dealer category both increased their net short positions and added to long positions to the tune of 13,404 contracts mentioned earlier
The Commercial net short position in silver is back up to 61.4 million troy ounces.
I didn’t have a chance to talk to Ted about all this yesterday, as I got my times to call him mixed up. But in an e-mail from him yesterday afternoon he stated that “…the pleasant surprise [was] that JPM looks to be still long silver to the tune of 5,000 contracts or so.”
You’d never know it by looking at the Producer/Merchant category of yesterday’s COT Report, but the companion Bank Participation Report tells a completely different story — and my discussion on that is a bit further down.
Here is the 3-year COT chart from Nick Laird, updated with Friday’s data — and the increase should be noted. Click to enlarge.
Of course the Commercial net short position in silver is even larger now since the Tuesday cut-off, most likely significantly so. But by how much, won’t be know until the COT Report next Friday.
In gold, the commercial net short position blew out by 62,622 contracts, or 6.26 million troy ounces of paper gold.
They arrived at that number by selling 58,773 long contracts — and they also added 3,849 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 Managed Money traders, plus more as they added 40,349 long contracts — and they also reduced their short position by 29,559…all for big losses. The sum of those two numbers…69,908 contracts…represent their change for the reporting week.
The difference between that number — and the commercial net short position…69,908 minus 62,622 equals 7,286 contracts, was made up…as it has to be…by the traders in the other two categories. The ‘Other Reportables’ didn’t do much during the reporting week, decreasing their net long positions by 481 contracts. It was the traders in the ‘Nonreportable’/small trader category that did most of the heavy lifting, as they reduced their net long position by 6,805 contracts.
Of course the commercial traders in the Producer/Merchant and Swap/Dealers category, increased their net short positions by a considerable amount, with the traders in the latter category doing the largest percentage of that amount.
The commercial net short position in gold is back up to 17.26 million troy ounces.
Here is the 3-year COT chart for gold, courtesy of Nick Laird. Click to enlarge.
Like in silver, the commercial net short position in gold has grown even larger since the Tuesday cut-off. But by how much, remains to be seen.
In the other metals, the Manged Money traders in palladium increased their net long position in this precious metal by 248 contracts. The Managed Money traders are net long the palladium market by 9,532 contracts…over fifty percent of the total open interest. Total open interest in palladium is 18,724 COMEX contracts, down 1,381 contracts from the previous week. As you can tell, it’s a very tiny market. In platinum, the Managed Money traders increased their net short position by another 3,227 contracts. The Managed Money traders are now net short the platinum market by a fairly hefty 12,911 contracts. In copper, the Managed Money traders increased their net short position in that metal by a further 5,003 contracts during the reporting week — and are now net short the COMEX futures market by a whopping 45,769 contracts. That translates into a short position of 1.14 billion pounds of the stuff.
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 unchanged from last week’s report — and the ‘5 through 8’ large traders are short an additional 61 days of world silver production, down 1 day from last week’s report — for a total of 160 days that the Big 8 are short, which is a bit over 5 months of world silver production, or about 373.4 million troy ounces of paper silver held short by the Big 8. [In the prior week’s COT Report, the Big 8 were short 161 days of world silver production.]
In the COT Report above, the Commercial net short position in silver was reported as 61.4 million troy ounces. As mentioned in the previous paragraph, the short position of the Big 8 traders is 373.4 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 minus 61.4 equals 314.3 million troy ounces.
The reason for the difference in those numbers…as it always is…Ted’s raptors, the 41-odd small commercial traders other than the Big 8, are net long that amount.
As I mentioned in my COT commentary in silver above, Ted stated that JPMorgan’s long position in silver remains around the 5,000 contract mark. But, as I commented further up, the proof of that lies in the discussion on silver in the Bank Participation Report that follows.
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 still comes from the ranks of the Managed Money category, despite the increase in short covering during the reporting week.
The four traders in the ‘5 through 8’ category are short 61 days of world silver production in total, which is 15.25 days of world silver production each.
Ted’s of the opinion that there are most likely three Managed Money traders with short positions still large enough in the COMEX futures market to inhabit the Big 8 category.
The Big 8 commercial traders are short 34.6 percent of the entire open interest in silver in the COMEX futures market, which is basically unchanged from the 34.5 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 38.2 percent of the total COMEX open interest that the Big 8 are short, up quite a bit from the 34.4 percent they were short in last week’s report — and around the 45 percent once the market-neutral spread trades are subtracted out.
In gold, the Big 4 are short 39 days of world gold production,up 6 days from what they were short in last week’s COT Report. The ‘5 through 8’ are short another 25 days of world production, down 2 days from what they were short last week…for a total of 64 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 61 percent of the total short position held by the Big 8…up 6 percentage points 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 62, 68 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 up 2 percentage points from last week — and palladium is unchanged from a week ago…and still at its record high.
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.
The June Bank Participation Report [BPR] data is extracted directly from the data in yesterday’s Commitment of Traders Report. It shows the number of futures contracts, both long and short, that are held by all the U.S. and non-U.S. banks as of Tuesday’s cut-off in all COMEX-traded products. For this one day a month we get to see what the world’s banks are up to in the precious metals —and they’re usually up to quite a bit.
The June Bank Participation Report covers the time period from May 8 to June 4 inclusive.
In gold, 5 U.S. banks are net short 64,906 COMEX contracts in the June BPR. In May’s Bank Participation Report [BPR] these same 5 U.S. banks were net short 27,281 contracts, so there was a whopping increase of 37,625 contracts from a month ago. But on a gross basis, it’s far more than that.
This BPR in gold shows a gross long position of 8,163 contracts held by these five U.S. banks — and I would suspect that JPMorgan holds that entire amount — and they could hold a fairly chunky short position now as well. Citigroup and HSBC USA would also hold substantial short positions in gold as well. But as to who other two U.S. banks might be that are short in this BPR, I haven’t a clue, but it’s a given that their short positions would not be material.
Also in gold, 28 non-U.S. banks are net short 76,122 COMEX gold contracts, which is a bit under three thousand contracts per bank. In the May BPR, these same 28 non-U.S. banks were net short 55,851 COMEX contracts…so the month-over-month change is up a lot as well…20,271 contracts.
However, as I always say at this point, I suspect that there’s at least two large non-U.S. bank in this group, including Scotiabank. It’s certainly possible that it could be the BIS in No. 1 spot. But regardless of who this second non-U.S. bank is, the short positions in gold held by the remaining 26 non-U.S. banks are immaterial.
At the low back in the August 2018 BPR [for July] these same non-U.S. banks held a net short position in gold of only 1,960 contacts! So they’re back to being short big time — and almost a record short position to boot. The non-U.S. banks haven’t been this short gold since back in June of 2017. And it’s a given that they’re at a record now since the Tuesday cut-off.
As of this Bank Participation Report, 33 banks [both U.S. and foreign] are net short 29.3 percent of the entire open interest in gold in the COMEX futures market, which is up a huge amount from the 18.5 percent they were short in the May BPR.
Here’s Nick’s chart of the Bank Participation Report for gold going back to 2000. Charts #4 and #5 are the key ones here. Note the blow-out in the short positions of the non-U.S. banks [the blue bars in chart #4] when Scotiabank’s COMEX short position was outed by the CFTC in October of 2012. Click to enlarge.
In silver, 4 U.S. banks are net short 7,600 COMEX silver contracts in June’s BPR. In May’s BPR, the net short position of these same 4 U.S. banks was 9,642 contracts, so the short position of the U.S. banks is down 2,042 contracts from May BPR.
To give you an idea of how low this short position for these 4 U.S. banks is, this is the smallest net short position held by these banks since November 2014 — and the second smallest U.S. bank short position on record going back to 2011!
In the COT discussion on silver, Ted stated the JPMorgan still held a long position in COMEX silver. The reason he thinks that way is that the gross long position of these 4 U.S. banks in this BPR is 7,219 contracts, up from the 5,096 contracts they held in May’s BPR. I’m sure he suspects…correctly, I might add…that most, if not all of this amount, is held by JPMorgan. Then it becomes pretty obvious that Citigroup and HSBC USA now hold the lion’s share of the remaining short position of these four U.S. banks.
But JPMorgan could also be shorting the silver market as well — and it wouldn’t be obvious here, as traders in the Producer/Merchant category [i.e. banks] can be long and short the COMEX futures market in silver at the same time…a luxury that other traders aren’t allowed. But the take-away from this is that JPMorgan is hanging onto its long position in silver — and may even be adding to it at every opportunity, despite the fact that it has been going short this silver rally all the way up.
And whoever the remaining U.S. bank may be of the 4 U.S. banks in total, their short position, like the short positions of the two smallest banks in gold, is immaterial as well.
Also in silver, 21 non-U.S. banks are net short 27,559 COMEX contracts…which is down a bit from the 28,005 contracts that 22 non-U.S. banks were short in the May BPR. I would suspect that Canada’s Scotiabank [and maybe one other, the BIS perhaps] still holds a goodly chunk of the short position of these non-U.S. banks. I believe that a number of the remaining 19 non-U.S. banks may actually net long the COMEX futures market in silver. But even if they aren’t, the remaining short positions divided up between these other 19 non-U.S. banks are immaterial — and have always been so.
As of June’s Bank Participation Report, 25 banks [both U.S. and foreign] are net short 16.3 percent of the entire open interest in the COMEX futures market in silver—which is down a bit from the 18.9 percent that they were net short in the May BPR — with much, much more than the lion’s share of that held by Citigroup, HSBC USA, Scotiabank — and maybe one other non-U.S. bank. I’m sure JPMorgan now holds a short position in COMEX silver, but it would not be material compared to the other three, although it certainly may have increased since the Tuesday cut-off.
Here’s the BPR chart for silver. Note in Chart #4 the blow-out in the non-U.S. bank short position [blue bars] in October of 2012 when Scotiabank was brought in from the cold. Also note August 2008 when JPMorgan took over the silver short position of Bear Stearns—the red bars. It’s very noticeable in Chart #4—and really stands out like the proverbial sore thumb it is in chart #5. Click to enlarge.
In platinum, 5 U.S. banks are net short 10,394 COMEX contracts in the June Bank Participation Report. In the May BPR, these same banks were net short 17,112 COMEX contracts…so there’s been a whopping decrease of 6,718 contracts month-over-month, which reversed the equally big increase in the May BPR. [At the ‘low’ back in July of 2018, these same five U.S. banks were actually net long the platinum market by 2,573 contracts.] That’s quite a change for the worst since then, even with the ‘improvement’ in June’s BPR.
Also in platinum, 19 non-U.S. banks are net short 7,095 COMEX contracts in the June BPR, which is down a lot from the 11,487 COMEX contracts they were net short in the May BPR. [Note: Back at the July 2018 low, these same non-U.S. banks were net short only 1,192 COMEX contracts.]
This big decline is not surprising considering the engineered price decline in this precious metal during the current reporting period.
And as of June’s Bank Participation Report, 24 banks [both U.S. and foreign] are net short 20.9 percent of platinum’s total open interest in the COMEX futures market, which is a whopping big decrease from the 38.2 percent they were net short in May’s BPR.
Here’s the Bank Participation Report chart for platinum — and the big drop in the world bank’s short position is more than obvious. Click to enlarge.
In palladium, 4 U.S. banks are net short 7,425 COMEX contracts in the June BPR, which is up a tad from the 7,298 contracts that these same 4 U.S. banks held net short in the May BPR.
Also in palladium, 15 non-U.S. banks are net short 923 COMEX contracts—which is also up a bit from the 687 COMEX contracts that these 15 non-U.S. banks were short in the May BPR.
When you divide up the short positions of these non-U.S. banks more or less equally, they’re completely immaterial…especially when you compare them to the positions held by the 4 U.S. banks.
As of this Bank Participation Report, 19 banks [U.S. and foreign] are net short 44.6 percent of the entire COMEX open interest in palladium. In May’s BPR, the world’s banks were net short 37.1 percent of total open interest, so there’s been an unhealthy increase in the short position of the banks in this precious metal over the last month.
And just as a point of interest, these 4 U.S. banks hold 89 percent of the total short positions held in palladium by all the worlds’ banks combined.
Here’s the palladium BPR chart. You should note that the U.S. banks were almost nowhere to be seen in the COMEX futures market in this precious metal until the middle of 2007—and they became the predominant and controlling factor by the end of Q1 of 2013 — and are even more so today. Click to enlarge.
This certainly wasn’t a very happy BPR in gold. Silver appeared to be the surprise with a slight decrease from the May BPR, but it was coming off a major price low back on May 28 — and virtually all of that improvement was lost by the time the BPR came out a week later on June 4. If we could see a Bank Participation Report as of the COMEX close on Friday, it wouldn’t make for happy reading in either metal.
But it should be mentioned that along with JPMorgan’s gross long position in the COMEX futures market in silver — and most likely gold as well, Ted figures they’re sitting on 20 million ounces of physical gold, plus around 850 million troy ounces of silver. They could allow precious metal prices to explode at any time — and they’d still come out smelling like a rose.
But will they? They answer is…I don’t know, nor does anyone else.
I don’t have all that many stories for you today. However, I should point out that Doug Noland’s commentary this week is a must read.
For once, ADP was right.
With the market unsure how to trade today’s payrolls number, with both a very strong and a very poor report likely to spark selling, we just got the verdict: at only 75,000 jobs created in May…Click to enlarge.
… this was not only the worst print since the shocking 56,000 February report, but also 100,000 below the consensus number of 175,000. It was also below the lowest Wall Street forecast, and 4-sigma below consensus as not one of the 77 Wall Street analysts guessed a lower number, confirming broader economic weakness and boosting calls for a rate cut as President Trump’s trade wars hit the U.S. economy.
The two-month revision subtracted a total of 75,000 jobs, as March was revised down from +189,000 to +153,000, and the change for April was revised down from +263,000 to +224,000, making it a net zero for the month and suggesting some serious deceleration in the labor market amid the trade war.
The jobs market slowdown is becoming increasingly clearer: monthly job gains have now averaged 164,000 in 2019, compared with an average gain of 223,000 per month in 2018. The 3-month average of jobs growth declined to 151k in May, the fifth sequential slowing and the smallest gain in 20 months. The post-recession average is 175k, so growth is back below a long-term trend according to Reuters‘ Jeoff Hall.
Verdict? A July rate cut is now virtually assured with the market pricing in 71% odds of a cut in the next FOMC meeting… and a 37% probability as soon as June. And while that is possible, as Bloomberg‘s Steve Matthews writes, “it would be inconsistent with the Fed’s repeated statements that it would be “patient” in moving rates in either direction.”
This longish chart-filled news item showed up on Zero Hedge website at 9:55 a.m. on Friday morning EDT — and I thank Brad Robertson for sharing it with us. Another link to it is here.
One month after an unexpectedly poor March consumer credit print, when just $10.3 billion (since revised to $11 billion) in revolving and non-revolving debt was created to fund another month of US purchases on credit, moments ago the Fed reported that in April, things went back to normal, as total consumer credit jumped by $17.5 billion, more than the $13 billion expected and the most since November’s $21.7 billion…Click to enlarge.
… thanks to a surge in credit card debt as the latest revolving credit print was a whopping $7 billion injection, up from a draw of $2 billion in March, and not only more than all the credit card debt issued in the first three months of the year but the highest since last November.
Meanwhile, as credit card debt soared, non-revolving credit – auto and student loans – posted a surprisingly soft print, with only $10.5 billion in new debt created. This was $2.5 billion below last month’s print, and the lowest since June 2018.
And while April’s sharp rebound in credit card use may ease concerns about the financial stability and propensity of the U.S. consumer to spend, one place where there were no surprises, was in the total amount of student and auto loans: here as expected, both numbers hit fresh all time highs with a record $1.6 trillion in student loans outstanding, a whopping increase of $30 billion in the quarter, while auto debt also hit a new all time high of $1.16 trillion, an increase of $8.3 billion in the quarter.
In short, whether they want to or not, Americans continue to drown even deeper in debt, and enjoying every minute of it.
This 4-chart Zero Hedge article appeared on their Internet site at 3:22 p.m. EDT on Friday afternoon — and it comes courtesy of Brad Robertson. Another link to it is here.
Fed Balance Sheet Drops by $42 Billion in May, Sheds MBS at Fastest Pace, Starts the Reverse of Operation Twist — Wolf Richter
May was the first month of the Fed’s new plan of slowing QT and altering it in other ways. And suddenly, everything is in flux: It shed Treasury securities at a slowing pace, as announced, but for the first time – and not part of the pre-announced plan for May – the Fed replaced some longer-term Treasuries with short-term Treasury bills, thus doing the opposite of its QE-era “Operation Twist.” And it shed the most Mortgage Backed Securities since the QE unwind started.
Total assets fell by $42 billion in May, as of the balance sheet for the week ended June 5, released this afternoon. This was the balance-sheet week that included May 31, the date when Treasuries rolled off. This drop reduced the assets to $3,848 billion, the lowest since October 2013. Since the beginning of the “balance sheet normalization” process, the Fed has shed $613 billion. Since peak-QE in January 2015, the Fed has shed $669 billion:
According to the Fed’s new regime, announced in March, the maximum amount of Treasury securities that would be allowed to roll off when they mature would be cut in half, to $15 billion in May. And that’s about what we got.
The Fed doesn’t sell its Treasury securities outright. Instead, when they mature at mid-month or at the end of the month, it just doesn’t replace them.
On May 15, three issues of Treasuries matured, and on May 31, three more issues matured, for a total of about $58 billion. The Treasury Department redeemed these securities and paid the Fed for them. And Fed reinvested most of this money into a new batch of Treasury securities but allowed the remainder to roll off without replacement. The balance of Treasuries dropped by $14 billion, to $2,110 billion, the lowest since October 2013.
This 3-chart commentary from Wolf showed up on the wolfstreet.com Internet site on Thursday sometime — and I thank Richard Saler for pointing it out. Another link to it is here.
I have posited that the Fed’s balance sheet could swell to $10 TN during the next crisis. When the current Bubble bursts, the Fed and global central bankers will see no alternative than to flood the global financial system with central bank Credit. This is a terrible, reprehensible prospect.
I warned a decade ago that QE was a slippery slope. After a decade, central bankers would surely today prefer to rebrand QE as a “conventional” – and elemental – part of their arsenals. But it will not be until the next bursting Bubble phase before there is a modicum of a “body of evidence” (from only one cycle) for assessing the effectiveness of history’s most radical monetary experiment. Today, global securities markets are eagerly anticipating the return of zero rates and more QE. Chairman Powell, Draghi and others are conveying the message that they are getting their arsenals ready.
Powell, Draghi, Kuroda and the like fully appreciate that a decade of ultra-loose monetary policies have fueled dangerous Bubbles. But they’ve thrown in the towel; a fight they are afraid to confront. The Fed has not only abandoned “normalization,” it has deserted its primary responsibility for safeguarding financial stability. We’re witnessing nothing short of a historic failure in the Bernanke inflationary policy doctrine, today masked by precarious Speculative Dynamics throughout the risk markets and a historic melt-up in global sovereign bond prices.
History has never experienced such powerful financial Bubbles on a globalized basis. The scope of international trend-following and performance-chasing finance is unprecedented (many tens of Trillions). And with these Bubbles at risk of bursting, central bankers are resolved to employ “whatever it takes” monetary stimulus to hold dislocation at bay. The upshot is only further emboldened market participants, more intense speculation, a greater accumulation of speculative leverage and even more precarious “Terminal Phase” Bubble excess.
Draghi’s replacement will suffer the same fate as Bernanke’s successors. Once you’ve pulled out the monetary bazooka, there will be no dropping it from the arsenal. Nothing in fact will suffice but a bigger bazooka. Bigger Bubble Demands Bigger Bazooka. And global bond markets are these days priced for a Horde of Jumbo Bazookas. Yet there’s more to this story than central banks held hostage by speculative Bubbles. More than trade wars, weak global manufacturing and even the fragile European banking system, the vulnerable Chinese Bubble is a potential catalyst that could rather abruptly panic global markets and central bankers alike.
There’s “tremendous room to adjust monetary policy” – that is, until the renminbi buckles and Beijing faces a run on its currency and financial system. “Everyone, please don’t worry.” Worry. “China’s stock market was hit by the biggest outflow of foreign capital on record…” How about the huge international flows that were enticed into China’s booming bond market? “A $647bn blind spot in financial reporting by China’s city and rural commercial banks…” “Steps to cool the property market.” All the characteristic of an unfolding crisis.
This absolute must read commentary from Doug was posted on his Internet site in the wee hours of Saturday morning — and another link to it is here.
As the economy softens, the feds prepare to make their next mistake.
Recall that monetary policy is really just a series of mistakes.
First, they keep rates too low for too long – thus creating a dangerous bubble.
Second, they need to raise rates to engineer a “soft landing.”
Third, and finally, when the stocks crash, they cut rates in a panic, leading to another bubble.
Over time, the distortions increase (which we can measure as debt… up $20 trillion in the last 10 years), thus creating the need for bigger and bigger mistakes to overcome Mr. Market’s longing for a correction.
We are now, apparently, at the tippy-top of a giant bubble that the feds created after the panic of 2008-2009. This time, they added some $12 trillion in monetary and fiscal stimulus, not to mention negative real lending rates during almost the entire time.
This produced the weakest recovery ever – with trailing 10-year GDP growth rates only about 1.5% – barely half the rate of the late 1990s. And it sent all the key, traditional relationships into bizarre and unhealthy territory.
This commentary from Bill put in an appearance on the bonnerandpartners.com Internet site on Friday morning EDT — and another link to it is here.
It used to be that America was a country of free thinkers.
“Say what you think, and think what you say.” That’s an expression you don’t hear much anymore.
It’s much more like the world of 1984 where everything is “double think.” You need to think twice before you say something in public. You think three times before you say something when you’re standing in an airport line.
Regrettably, the U.S. is no longer the land of the free and the home of the brave. It’s become the land of whipped and whimpering dogs that roll over on their backs and wet themselves when confronted with authority.
Now, why are Americans this way? Let me give you two reasons—though there are many more.
First, there’s a simple absence of virtue. Let’s look at the word virtue. It comes from the Latin vir, which means manly, even heroic. To the Romans, virtues were things like fortitude, nobility and courage. Those virtues are true to the root of the word.
When people think of virtues today they think of faith, hope, charity—which are not related to the word’s root meaning. These may pass as virtues in a religious sense. But, outside a Sunday school, they’re actually actually vices. This deserves a discussion, because I know it will shock many. But I’ll save that for another time.
This commentary from Doug, which I admit that I haven’t had the time to read yet, was posted on the internationalman.com Internet site on Friday sometime — and another link to it is here.
It would appear that Trump’s tariff threat worked.
“I am pleased to inform you that The United States of America has reached a signed agreement with Mexico,” President Trump tweeted Friday.
“The Tariffs scheduled to be implemented by the U.S. on Monday, against Mexico, are hereby indefinitely suspended.”
Mexico has agreed to “strong measures to stem the tide of Migration through Mexico, and to our Southern Border,” Trump wrote.
It would seem Chuck Schumer’s claim that Trump’s tariffs were a bluff are proved wrong.
This rather brief Zero Hedge story put in an appearance on their website on Friday evening at 8:48 p.m. EDT — and another link to it is here.
Citigroup Inc. and Barclays Plc are among global banks fined a total of 90 million Swiss francs ($91 million) by Switzerland’s competition regulator for their roles in colluding on foreign-exchange rates.
Barclays was fined 27 million francs, Citigroup 28.5 million francs and JPMorgan Chase & Co. was hit with a 9.5 million-franc penalty, Switzerland’s Competition Commission said Thursday. UBS Group AG avoided a fine because it helped reveal the existence of the cartel.
The Swiss sanctions come after years of investigation by regulators on both sides of the Atlantic into how traders used chat rooms to fix leading currency exchange rates. Five of the banks agreed last month to pay 1.07 billion euros ($1.2 billion) to resolve a European Union probe into forex collusion.
Traders at Barclays, Citigroup, JPMorgan, Royal Bank of Scotland Group Plc and UBS ran online chatrooms to share sensitive information over six years in a cartel that was known as the “Three-way banana split,” according to Comco. Traders at Barclays, MUFG Bank, RBS and UBS operated the so-called Essex Express, named for the commuter train they all took, to fix trades in a similar manner between 2009 and 2012, according to the Swiss regulator.
More coffee money fines. This Bloomberg news story was posted on their website on Wednesday — and was updated early in the morning PDT on Thursday morning. I found it in a GATA dispatch — and another link to it is here.
I didn’t find any precious metal-related stories that I thought worth posting.
The PHOTOS and the FUNNIES
This 3-photo sequence was taken about 6 kilometers/3 miles north of Lillooet on Route 40 at the confluence of the Bridge River where it runs into the Fraser River. Up until 1961, it was a major tributary of the Fraser. The majority of its flow, however, was near-completely diverted into Seton Lake with the completion of the Bridge River Power Project, with the water now entering the Fraser just south of Lillooet as a result. Note the erosion in the rocks that show what the river level used to be. In the first and second photos, the first cut in the canyon wall is the CN rail bed — and the one above it is B.C. Highway 99. I’ll have a photo of the confluence of these two rivers taken from that highway in my Tuesday column. Click to enlarge.
Today’s pop ‘blast from the past’ is all Canadian. Their rock song “American Woman”…which I didn’t particularly care for…broke them into the U.S. market big time back in 1970 — and the rest, as they say, is history. They had a lot of big hits here north of border — and another one from that break-out album was one of them. The link is here.
Although summer in the northern hemisphere is still officially two weeks away, it arrived in the semi-arid climate of Merritt, B.C. about three weeks ago. So in honour of that, I’m going to feature Antonio Vivaldi’s violin concerto No. 2 in G minor, Op 8, RV315…also known in Italian as “L’estate“…or in English…’Summer’. Here’s Cynthia Freivogel and the Voices of Music doing the honours. The recording is wonderful — and the video quality is the best I’ve ever seen on the Internet. The link is here.
The jobs numbers, along with the waterfall decline in the dollar index that occurred concurrently at 8:30 a.m. in New York yesterday morning, was met full force in the precious metals, as JPMorgan et al showed up with all guns blazing. What rallies that did develop in all four were capped at the same moment, around 10:30 a.m. EDT — and a vast majority of what gains were allowed up to that point, disappeared before the COMEX close, or shortly thereafter.
Then, to add insult to injury, ‘da boyz’ were shorting the precious metal shares again yesterday, like they’ve been doing almost all week. And as Keith Neumeyer pointed out in my discussion on the HUI and Silver 7 Indexes further up, it’s a near certainty that sometime in the very near future, ‘da boyz’ will engineer precious prices lower so that they will not only stick it to the Managed Money traders, but they’ll also make a killing on the precious metal shares as well.
But despite what appears to be inevitable in the very short term, it will only be a temporary set-back, as it’s a given that U.S. interest rates are headed lower, as will the U.S. dollar. There’s nothing that can stop that now, as it’s obvious that the U.S. is headed for a major recession, or worse.
All that JPMorgan et al are doing, is delaying the inevitable for as long as possible.
Here are the 6-month charts for the four precious metals, plus copper and WTIC. Gold is certainly in overbought territory now — and silver would be there as well if its price wasn’t being as actively managed as it is. Platinum is still miles below any moving average that matters — and palladium was barely allowed to break above its 50-day moving average yesterday. Copper, on the other hand, traded at a new intraday low for this engineered price decline, but didn’t close at a new low. WTIC managed to added to its mall gains on Thursday. Click to enlarge.
I never thought I’d live to see times that we are living in today. Central banking run amok — and the equity and bond markets now the biggest financial casinos the world has ever known. It’s global in scope — and it’s starting to contract. Bubbles don’t work in reverse — and as the world’s central banks know all to well, so it’s “Print, or die” on an unimaginable scale going forward.
As Doug Noland so eloquently put it in his commentary in the Critical Reads section…
“Powell, Draghi, Kuroda and the like fully appreciate that a decade of ultra-loose monetary policies have fueled dangerous Bubbles. But they’ve thrown in the towel; a fight they are afraid to confront. The Fed has not only abandoned “normalization,” it has deserted its primary responsibility for safeguarding financial stability. We’re witnessing nothing short of a historic failure in the Bernanke inflationary policy doctrine, today masked by precarious Speculative Dynamics throughout the risk markets and a historic melt-up in global sovereign bond prices.”
And then this…
“Draghi’s replacement will suffer the same fate as Bernanke’s successors. Once you’ve pulled out the monetary bazooka, there will be no dropping it from the arsenal. Nothing in fact will suffice but a bigger bazooka. Bigger Bubble Demands Bigger Bazooka. And global bond markets are these days priced for a Horde of Jumbo Bazookas. Yet there’s more to this story than central banks held hostage by speculative Bubbles. More than trade wars, weak global manufacturing and even the fragile European banking system, the vulnerable Chinese Bubble is a potential catalyst that could rather abruptly panic global markets and central bankers alike.”
I’m sure that British economist Peter Warburton, along with a lot of others back nearly twenty years ago, could have ever imagined that the world’s financial system would have degenerated into the Frankenstein monster that has come shambling forth over the last generation, particularly in the last six or seven months. The situation is now totally out of control.
I’m going to trot out Warburton’s four most famous paragraphs from April 2001 yet one more time…
“What we see at present is a battle between the central banks and the collapse of the financial system fought on two fronts. On one front, the central banks preside over the creation of additional liquidity for the financial system in order to hold back the tide of debt defaults that would otherwise occur. On the other, they incite investment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, soft commodities or anything else that might be deemed an indicator of inherent value. Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the U.S. dollar, but of all fiat currencies. Equally, they seek to deny the investor the opportunity to hedge against the fragility of the financial system by switching into a freely traded market for non-financial assets.
It is important to recognize that the central banks have found the battle on the second front much easier to fight than the first. Last November I estimated the size of the gross stock of global debt instruments at $90 trillion for mid-2000. How much capital would it take to control the combined gold, oil, and commodity markets? Probably, no more than $200 billion, using derivatives.
Moreover, it is not necessary for the central banks to fight the battle themselves, although central bank gold sales and gold leasing have certainly contributed to the cause. Most of the world’s large investment banks have over-traded their capital so flagrantly that if the central banks were to lose the fight on the first front, then the stock of the investment banks would be worthless. Because their fate is intertwined with that of the central banks, investment banks are willing participants in the battle against rising gold, oil, and commodity prices.
Central banks, and particularly the U.S. Federal Reserve, are deploying their heavy artillery in the battle against a systemic collapse. This has been their primary concern for at least seven years. Their immediate objectives are to prevent the private sector bond market from closing its doors to new or refinancing borrowers and to forestall a technical break in the Dow Jones Industrials. Keeping the bond markets open is absolutely vital at a time when corporate profitability is on the ropes. Keeping the equity index on an even keel is essential to protect the wealth of the household sector and to maintain the expectation of future gains. For as long as these objectives can be achieved, the value of the US dollar can also be stabilized in relation to other currencies, despite the extraordinary imbalances in external trade.”
Now it’s not just the Fed fighting this battle, it’s now all the central banks of the world…”all for one, and one for all.” But in the precious metals market, it’s mostly three U.S. banks.
The powers-that-be in the U.S. simply cannot allow any significant amounts of the tens of trillions of dollars sloshing around out there to find a home in hard assets, at least not at the moment. And that’s why they’ve been preventing the Big 6 commodities from rising in price in response to an ever-increasing money supply — and desperate money looking for yield. This is one of their last attempts to prevent that from happening.
They will fail.
And when they do, they will fail spectacularly. Once the run to hard assets begins, there will be no stopping it. And as I’ve said before on many occasions, that failure will come through either circumstance, or by design. But it is coming.
All that I’m doing now is watching all this unfold with stark disbelief. If you’re not afraid of the impending financial and monetary train wreck that draws ever nearer at an accelerating rate with each passing month…you should be.
I’m done for the day — and the week — and I’ll see you here on Tuesday.