Another Morning Rally in the Far East Pounded Flat

29 June 2019 — Saturday


NOTE: It’s a long weekend in Canada — and I’m taking a break for the next three days.  I’ll only be answering e-mails sporadically until late Monday, or early on Tuesday. — Ed

In a replay of Tuesday’s price action, gold took off higher about an hour after trading commenced in New York at 6:00 p.m. EDT on Thursday evening…only to run into the ‘da boyz’, showing up as short sellers of first resort once again just minutes before 10 a.m. in Shanghai on their Friday morning.  From that point they sold the price lower until shortly before the London open — and then it didn’t do much until 9 a.m. in New York.  Then there was a down/up movement of some size that lasted until shortly before the 11 a.m. EDT London close — and from that juncture it edged quietly lower, with some bored trader threading the Friday closing price between the Wednesday and Thursday closing prices by the 5:00 p.m. EDT close.

The high and low ticks were recorded by the CME Group as $1,427.80 and $1,408.60 in the August contract.

Gold was closed on Friday in New York at $1,408.90 spot, down 30 cents on the day.  Net volume was pretty beefy at a bit over 293,000 contracts — and there was a bit over 15,500 contracts worth of roll-over/switch volume on top of that.

The silver price followed a similar price path as gold, but the price action was both more subdued and choppy in Far East and London trading — and the price was down 2 cents by around 9:40 a.m. in New York.  It managed to struggle a few pennies higher from there — and was actually allowed to close in positive territory.

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

Silver was closed at $15.285 spot, up 6 cents on the day.  Net volume was nothing out of the ordinary at a bit under 54,500 contracts — and there was 3,340 contracts worth of roll-over/switch volume in that precious metal.

The platinum price had a smallish five dollar up/down move in sympathy with gold in morning trading in the Far East on their Friday morning.  That ended shortly before noon in Shanghai — and it traded almost ruler flat until the COMEX open.  Then a rally of some substance developed.  That was allowed to last until shortly before 1 p.m. in New York trading — and at that point the price was capped and turned lower into the 1:30 p.m. EDT COMEX close.  The price didn’t do a thing after that.  Platinum was closed at $834 spot, up 22 bucks from Thursday.

Like the other three precious metals, the palladium price was up a decent amount by minutes before 10 a.m. China Standard Time on their Friday morning — and from that point it traded very unevenly sideways until shortly after the Zurich open.  At that moment, the ‘long knives’ appeared for the first time.  That engineered price decline lasted until just after 9:30 a.m. in Zurich — and from there, continued to trade unevenly sideways until they reappeared shortly before 9 a.m. EDT.  That sell-off lasted until palladium touched the $1,500 spot mark at the open of the equity markets in New York.  It took off higher from there but, like platinum, was turned lower at 1 p.m. EDT — and it was sold quietly lower until trading ended at 5:00 p.m. in New York.  Palladium was closed at $1,516 spot down 16 dollars on the day.

It certainly appears as if JPMorgan is trying to turn the Managed Money traders in palladium into sellers in this precious metal, as these traders are net long 50 percent of the COMEX futures market in palladium.  I have more about this in the COT and ‘Days to Cover’ commentary.

The dollar index closed very late on Thursday afternoon in New York at 96.19 — and opened unchanged once trading commenced at 7:45 p.m. EDT on Thursday evening, which was 7:45 a.m. China Standard Time on their Friday morning.  It edged a bit higher from there until 1:40 p.m. CST on their Friday afternoon and began to head lower in a broad roller coaster manner from there.  I would suspect that the usual ‘gentle hands’ hadn’t appeared at the 96.02 mark at 10:45 a.m. in New York, it would have knifed through the 96.00 mark with ease.  The ensuing ‘rally’ flamed out around 12:55 p.m. — and it was back below the unchanged mark…mostly to stay…by around 2 p.m. — and it didn’t do much after that.  The dollar index finished the day at 96.13…down 6 basis points from its close on Thursday.

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

And here’s the 5-year U.S. dollar index chart, courtesy of the folks over at the Internet site.  The delta between its close…95.67…and the close on the DXY chart above, was 46 basis points on Friday.

The gold shares opened unchanged, dipped a bit — and then chopped to their high ticks of the day, which came at 11 a.m. in New York trading.  They sold off a bit over the next hour — and then crept unevenly higher for the remainder of the day…catching a bit of a boost from the Dow, as it got ramped into the close yesterday.  The HUI closed higher by 0.97 percent.

The silver equities followed their golden brethren in the same general manner, except their price path was far more erratic.  They caught a bid in the last hour of trading as well, as Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up 0.99 percent.  Click to enlarge if necessary.

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

Here are the usual 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 and, with the exception of silver, it’s green across the board for a second week in a row.  And even though ‘da boyz’ haven’t allowed the silver price to go anywhere…on a percentage basis, silver’s equities have still managed to outperform their golden brethren by a bit.  Click to enlarge.

The month-to-date chart is a joy to behold — and it should be noted that the equities vastly outperformed the underlying precious metals…the silver equities in particular once again.  Click to enlarge.

Here’s the year-to-date chart — and it’s much improved as well.  JPMorgan’s near death grip on the silver price is even more obvious in this chart — and that’s certainly reflected in the state of the Silver 7 Index. Palladium continues its climb off its recent low.  Click to enlarge.

The precious metal complex certainly appears to be in play now — and as I said in this space last week,  the four-letter gold word is being talked about in the financial media everywhere now.  However, the powers-that-be continue to fight this rally with everything they’ve got…especially silver.  But one has to wonder if it will be enough this time.  So we wait some more.

The CME Daily Delivery Report for Day 2 of July deliveries shows that 193 gold and 515 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.

In gold, there were four short/issuers in total — and the two largest were Marex Spectron and Advantage, with 101 and 73 contracts out of their respective client accounts.  There were six long/stoppers in total, with the largest being JPMorgan, picking up 84 contracts in total…74 for clients — and 10 for their own account.  In second place was Advantage stopping 63 contracts — and in third and fourth spots were ABN Amro and Morgan Stanley, with 17 and 14 contracts respectively…all of which involved their respective client accounts.

In silver, there were ten short/issuers in total — and the three largest by far were ABN Amro, Citigroup and International F.C. Stone…with 182, 131 and 120 contracts out of their respective client accounts.  There were seven long/stoppers in total — and the only three that really mattered were HSBC USA, picking up 219 contracts for their in-house/proprietary trading account.  Morgan Stanley and JPMorgan came in second and third, with 146 and 100 contracts…all of which involved their respective client accounts.

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

The CME Preliminary Report for the Friday trading session showed that gold open interest in July fell by 201 contracts leaving only 223 left, minus the 193 mentioned a few paragraphs ago.  Thursday’s Daily Delivery Report showed that 371 gold contracts were actually posted for delivery on Monday, so that means that 371-201=170 more gold contracts just got added to the July delivery month.  Silver o.i. in July dropped by 2,456 contracts, leaving 1,410 still open, minus the 515 mentioned a few paragraphs ago.  Thursday’s Daily Delivery Report showed that 2,620 silver contracts were actually posted for delivery on Monday, so that means that 2,620-2,456=164 more silver contracts were just added to July.

For the fourth day in a row, there was a withdrawal from GLD, as an authorized participant took out 56,611 troy ounces.  And, for the second day in a row, there was a deposit into SLV, as an a.p. added 936,314 troy ounces.

There was another small sales report from the U.S. Mint on Friday.  They sold 1,000 troy ounces of gold eagles — and 180,000 silver eagles.

Month-to-date the mint has sold 5,000 troy ounces of gold eagles — 3,000 one-ounce 24K gold buffaloes — and 1,035,000 silver eagles.

There was a bit of activity in gold over at the COMEX-approved depositories on the U.S. east coast on Thursday, as 6,107 troy ounces was reported received — and nothing was shipped out.  There was 3,500.000 troy ounces received at HSBC USA — and that certainly represents 350 ten-ounce bars…most likely for delivery in August for the COMEX mini gold contract.  The remaining 2,607 troy ounces ended up at the Delaware depository.  The link to this is here.

There wasn’t much physical activity in silver, as only 350,370 troy ounces was received — and another 200,536 was shipped out.  All of that activity was at Canada’s Scotiabank.  But the big activity was the transfer of 4,191,794 troy ounces from the Eligible category — and into Registered over at CNT.  That certainly looks like its heading out the door as part of the July delivery month in silver.  The link to all this is here.

The only activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday was 1 lone kilobar/32.151 troy ounces [SGE kilobar weight] the departed the Brink’s, Inc. depository — and I won’t bother linking this for obvious reasons.

Here are three more charts that Nick passed around on Thursday.  The first shows the imports and exports into and out of the U.K…updated with April’s data.  For that month, they imported 77.5 tonnes — and exported 91.8 tonnesClick to enlarge.

The first chart shows the countries [plus amounts] that they received gold from — and the second chart showed the countries [plus amounts] that they shipped gold to during April.  Click to enlarge for both.

The Commitment of Traders Report, for positions held at the close of COMEX trading on Tuesday was a very pleasant surprise in gold — and a little worse than Ted was expecting/hoping for in silver.

In silver, the Commercial net short position increased by 19,065 contracts, which was 95.3 million troy ounces of paper silver.  Ted was hoping for no more than 15,000 contracts.

They arrived at that number by reducing their long position by 10,193 contracts.  They increased their short position by 8,872 contracts, as well — and it’s the sum of those two numbers that represents their change for the reporting week.

Under the hood in the Disaggregated COT Report, it was all Managed Money traders once again, as they increased their long position by 6,756 contracts — and reduced their short position by 12,190 contracts.  It’s the sum of those two numbers…18,946 contracts…that represents their change for the reporting week.

The difference between that number — and the change in the Commercial net short position was only 119 contracts.  That difference was made up by the traders in the other two categories, but both went about it in wildly different manners, as the ‘Other Reportables’ reduced their net long position by 2,897 contracts.  But the ‘Nonreportable’/small traders increased their net long position by 3,016 contracts.  The difference between those two numbers is 119 contracts, which it must be.

Ted wasn’t too sure about what JPMorgan did during the reporting week, but whatever they did, it didn’t appear to be a lot.  Whether or not they have any of their long position left is not known, either.  The next COT Report will also include the monthly Bank Participation Report — and that will allow him to clarify the situation regarding these crooks.

The Commercial net short position in silver is now up to 267.8 million troy ounces…not exactly a bullish number.

Here’s the 3-year COT chart for silver — and the increase in the Commercial net short position should be noted.  Click to enlarge.

Ted got the impression that not very much happened in silver in the COMEX futures market since the Tuesday cut-off.  But there are still two more reporting days before the cut-off for the next COT/BPR — and anything can happen between now and then.

In gold, the commercial net short position increased by ‘only’ 36,295 contracts.  Ted was expecting 50,000 contracts…possibly more.

They arrived at that number by increasing their long position by 18,235 contracts, but they also added 54,530 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, the Managed Money traders only made up part of the change for the reporting week, as they increased their long position by 13,152 contracts — and reduced their short position by 14,073 contracts.  The sum of those two numbers…27,225 contracts…represents their change for the reporting week.

The difference between that number — and the commercial net short position…36,295 minus 27,225 equals 9,070 contracts.  That difference, as it always does, was made up by the traders in the other two categories, as both increased their net long positions during the reporting week.  The ‘Other Reportables by 5,006 contracts — and the ‘Nonreportable’/small traders by 4,064 contracts.  The sum of those two numbers must add up to the 9,070 contract difference — and they do.

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

The other thing that Ted pointed out — and the other reason I posted the above table of numbers, was that despite the fact the there was an increase in the commercial net short position in gold, both groups in that category…the Producer/Merchant and Swap/Dealer not only didn’t sell any long positions during the reporting week.  In fact, they added to them…the former group by 4,995 contracts — and the latter by 10,357 contracts.  Ted was pleasantly surprised to see that, along with the fact that the traders in the ‘Other Reportables’ and ‘Nonreportable’/small traders increased their net long positions as well.

I know that Ted will have something to say about this in his weekly review this afternoon.

The commercial net short position in gold is now up to 26.02 million troy ounces, which is bearish on its face…but this week’s report could have been far worse than it was — and certainly had some positive aspects to it.

Here’s the 3-year COT Chart for gold — and the increase in the commercial net short position in this precious metal should be noted as well.  Click to enlarge.

The current market structure in gold could hardly be called bullish when viewed looking only at the headline numbers, but under the surface it’s not as bearish as it looks.

In the other metals, the Manged Money traders in palladium increased their net long position in this precious metal by a further 817 contracts.  The Managed Money traders are net long the palladium market by 11,586 contracts…a tad over 50 percent of the total open interest.  Total open interest in palladium is 22,889 COMEX contracts, up 1,308 contracts from the previous week.  And as you can see, it’s a very tiny market.  In platinum, the Managed Money traders increased their net short position by another 2,363 contracts during the reporting week.  The Managed Money traders are now net short the platinum market by 23,083 COMEX contracts…26 percent of the total open interest.  In copper, the Managed Money traders decreased their net short position in that metal by a further 8,371 COMEX contracts during the reporting week — and are still net short the COMEX futures market by 36,605 contracts, or 915 million pounds of the stuff.  And it was the very act of them covering these short positions that caused copper prices to rise during the reporting week.

Once again — and as always, it is Managed Money buying and commercial selling that account for virtually 100 percent of the price changes in the Big 6 commodities — and here’s the chart from Nick that shows that tight correlation in gold…at least 95 percent.  Normally I’d post the same chart for silver, but alas, as I said last week, Nick doesn’t have one.  Click to enlarge.

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 113 days of world silver production, which is up 13 days from last week’s report — and the ‘5 through 8’ large traders are short an additional 83 days of world silver production, which is also up 13 days from last week’s report — for a total of 196 days that the Big 8 are short, which is six and a half months of world silver production, or about 457.4 million troy ounces of paper silver held short by the Big 8.  That’s a huge increase from last week’s report.  [In the prior week’s COT Report, the Big 8 were short 170 days of world silver production.]

In the COT Report above, the Commercial net short position in silver was reported as 267.8 million troy ounces.  As mentioned in the previous paragraph, the short position of the Big 8 traders is 457.4 million troy ounces.  The short position of the Big 8 traders is larger than the total Commercial net short position by a chunky 457.4 minus 267.8 equals 189.6 million troy ounces.

The reason for the difference in those numbers…as it always is…is that Ted’s raptors, the 36-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 is unsure of what JPMorgan did during the reporting week, although it didn’t appear to be too much.  He’ll have a better idea once the new Bank Participation Report shows up on Monday, July 8.

The Big 4 traders are short, on average, about…113 divided by 4 equals…28.25 days of world silver production each.  The four traders in the ‘5 through 8’ category are short 83 days of world silver production in total, which is 20.75 days of world silver production each.

The Big 8 commercial traders are short 39.9 percent of the entire open interest in silver in the COMEX futures market, which is a big jump up from the 33.2 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 45 percent mark.  In gold, it’s now 42.9 percent of the total COMEX open interest that the Big 8 are short, up a bit from the 40.9 percent they were short in last week’s report — and something close to 50 percent once the market-neutral spread trades are subtracted out.

In gold, the Big 4 are short 58 days of world gold production, up 7 days from what they were short in last week’s COT Report.  The ‘5 through 8’ are short another 28 days of world production, up 4 days from what they were short last week…for a total of 86 days of world gold production held short by the Big 8…up 11 days from last week’s report.  Based on these numbers, the Big 4 in gold hold about 67 percent of the total short position held by the Big 8…down about 1 percentage point from last week’s COT Report.

The “concentrated short position within a concentrated short position” in silver, platinum and palladium held by the Big 4 commercial traders are about 58, 66 and 80 percent respectively of the short positions held by the Big 8.  Silver is down 1 percentage point from a week ago, platinum is unchanged from last week — and palladium is down 5 percentage point from a week ago…and off its record high by a bit.

I have an average number of stories for you today, including a Cohen/Batchelor interview.


Chicago PMI Plunges Into Contraction

On the heels of dismal weakness in all regional Fed outlook surveys, Chicago PMI just collapsed from 54.2 to 49.7 (drastically missing the 53.5 expectation) and back into contraction for the first time since Dec 2015.  Click to enlarge.

This was well below the lowest estimate of 51.0 from 25 economist surveyed.

This drags the ‘soft’ survey data “hope” down to its weakest since March 2016…Click to enlarge.

Nothing that a 50bps rate cut in July can’t fix, eh?

This brief story was posted on the Zero Hedge website at 9:55 a.m. on Friday morning EDT — and it comes to us courtesy of Brad Robertson.  Another link to it is here.

Why Both Political Parties Favor Inflation — Bill Bonner

We’ve been pulling on threads for the last two weeks. Today, we try to knit them together.

First, we observed that “stimulus,” no matter what they call it, is really just a form of inflation. Whether the feds run deficits, push rates down, offer tax cuts, or buy bonds – the idea is always the same… to put more money in play.

And as a preamble, note that the feds can’t really “add” to the money supply at all. They have no real money. All they can do is dilute the existing stock of money with counterfeit money, thereby reducing the real value of each unit. That is the meaning of “inflation.”

When the president says the Federal Reserve should cut rates, for example, he is just calling for more inflation. Without it, he believes, bad things will happen.

And he’s not alone. As Milton Friedman observed four decades ago, “We’re all Keynesians now.” He meant that almost all economists agreed that they could fiddle with interest rates to provide a little – but not too much – inflation. The outcome, they all believed, would be better than “laissez faire.”
Vladimir Putin is on board, too. Today’s Financial Times quotes him as saying that the idea of open markets and open societies is “obsolete.”

Republicans, Democrats, socialists, conservatives, communists, Bolsheviks, and Trotskyites – now, everyone seems to believe it… and they’re even ready to rig the most important price in capitalism – the price of capital itself – to prove it.

This commentary from Bill, filed from Paris, showed up on the Internet site early on Friday morning EDT — and another link to it is here.

Trump Wants the Fed to Weaken the Dollar. Powell Says That’s Not His Job

President Donald Trump wants a weaker dollar to help boost exports, and is counting on the Federal Reserve to help make that happen. But the central bank’s chairman, Jerome Powell, has made clear it’s not his job.

It’s a new twist in the broader pressure campaign the president has brought to bear on Powell to cut interest rates to energize the stock market and fuel growth.

Trump’s focus on the dollar surfaced last week after the European Central Bank said it might ease policy, prompting the euro to drop against the dollar. Trump seized on the move to say on June 18 that the Fed’s failure to lower rates was putting U.S. exporters at a competitive disadvantage. He later mused on June 26 he’d rather have ECB President Mario Draghi running the Fed.

Powell, once again, is finding himself on the defensive, trying to shield the Fed from political influence. He deflected Trump’s calls back at the administration.

The Treasury Department — the administration — is responsible for exchange rate policy — full stop,” Powell said June 25 in response to a question from the audience after a speech in New York. “We don’t comment on the level of the dollar. We certainly don’t target the level of the dollar. We target domestic economic and financial conditions as other central banks do.”

The feud between Trump and the Fed is getting nastier by the day.  But Powell will find out in a hurry who really controls the value of the U.S. dollar if they cut interest rates by 50 basis points at the next FOMC meeting.  But he knows that already.  This Bloomberg article showed up on their Internet site at 1:00 a.m. Pacific Daylight Time on Friday morning — and I found it embedded in a GATA dispatch. Another link to it is here.  A parallel story to this is this Bloomberg/Yahoo article from Thursday headlined “U.S. Is Heading to a Future of Zero Interest Rates Forever” — and I thank Jim Gullo for that one.

Doug Noland: History Rhymes

But extending the “Terminal Phase” has ensured a historic parabolic surge in systemic risk. Consumer (chiefly mortgage) borrowings have increased 17.2% over the past year (40% in two years!). Thousands of uneconomic businesses continue to pile on debt. Unprecedented over- and mal-investment runs unabated. Millions more apartments are constructed. The bloated Chinese banking system continues to inflate with loans of rapidly deteriorating quality.

Global risk markets have been conditioned for faith both in Beijing’s endless capacity to sustain the boom and global central bankers’ determination to sustain system liquidity and economic expansion. So long as Chinese Credit keeps flowing at double-digit rates, inflating perceived wealth ensures Chinese spending and finance continue to buoy vulnerable emerging market booms and the global economy more generally. Global risk markets remain more than content.

At this stage, however, global bonds have adopted an altogether different focus: China’s financial and economic structures are untenable. Sustaining rapid Credit growth is increasingly fraught with peril. With market players now questioning Beijing’s implicit guarantee for smaller and mid-sized banks and financial institutions, financial conditions are in the process of tightening at the financial system’s “periphery.” And tightened Credit conditions have begun to reverberate in the real economy.

And what about the possible impact of a positive G20 and momentum toward a U.S./China trade deal? Stocks, no surprise, are readily excitable. For global safe haven bonds, however, it’s of little consequence. How can this be? Because even a trade deal would at this point have minimal impact on what has become deep and rapidly worsening structural impairment. Trade deal or not, Chinese exports to the U.S. will decline, right along with capital investment. Even with a deal, the Chinese financial system faces the consequences of years of rapid expansion as economic prospects deteriorate. Sure, 6% growth as far as the eye can see. That implies a further surge in consumer debt and even more dangerous mortgage finance and apartment Bubbles. Unparalleled overcapacity and maladjustment.

I would closely follow unfolding developments in Chinese Credit – funding issues for small and mid-sized banks; ructions in the money markets; trust issues with repo collateral, inter-banking lending, and counterparties; vulnerabilities in local government financing vehicles (LGFV); heightened concerns for speculative leverage; and the overarching issue of the implicit Beijing guarantee of essentially the entire Chinese financial system. The overarching issue is one of prospective losses of monumental dimensions. These losses will have to be shared in the marketplace. As much as global markets bank on Beijing bankrolling China’s entire financial apparatus, the Chinese government will not welcome the prospect of bankrupting itself.

This week’s edition of Doug Noland’s weekly commentary is certainly a must read — an it appeared on his website very early on Saturday morning EDT — and another link to it is here.

Deutsche Bank to Fire Up to 20,000: One in Six Full-Time Positions

While Deutsche Bank finally delivered some good news for a change to its long-suffering investors, when it miraculously failed to fail the latest Fed stress test, on Friday the chronically sick bank reverted to its “cutting into muscle” baseline when the largest German lender with the €45 trillion notional derivatives was said to be preparing “to cut as much as half its global workforce in equities trading as part of a broad restructuring to boost profitability“, according to Bloomberg with the WSJ adding that the total number could be between 15,000 and 20,000 job cuts, or more than one in six full-time positions globally.

The cuts being contemplated by senior executives reflect an acceleration of Deutsche Bank’s downsizing and another major pullback from its global ambitions. If followed through, the reduction would represent 16% to 22% of Deutsche Bank’s workforce of 91,463 employees, as disclosed by the bank as of the end of March.

Some employees in the bank’s equities department, anticipating cuts, have cleared personal belongings from their desks, and salespeople have curtailed client calls and meetings, WSJ reports citing people inside the bank.

Additionally, the investment bank, which had about 38,000 full-time employees at the end of March, is expected to take a big hit in any downsizing. The bank’s global equities operation, which has steadily lost clout to U.S. banks with stronger balance sheets, lost about €750 million in 2018, the Journal reported in March.

According to the proposed plan the bank will eliminate hundreds of positions in equities trading and research, as well as derivatives trading, and is expected to start informing staff of cuts – including in the U.S. and Asia – as soon as next month. Rates trading is also affected.

This news item put in an appearance on the Zero Hedge website at 9:38 a.m. EDT on Friday morning — and the first person to point out this story was Swedish reader Patrik Ekdahl.  Another link to it is here.

E.U. Announces Channel to Circumvent SWIFT and Iran Sanctions, is Now Operational

With the world waiting for the first headlines from the Trump-Xi meeting, the most important and unexpected news of the day hit moments ago, when Europe announced that the special trade channel, Instex, that will allow European firms to avoid SWIFT — and bypass American sanctions on Iran, is now operational.

Following a meeting between the countries who singed the Iran nuclear deal, also known as the Joint Comprehensive Plan of Action (JCPOA), which was ditched by U.S., French, British and German officials said the trade mechanism which was proposed last summer and called Instex, is now operational.

As a reminder, last September, in order to maintain a financial relationship with Iran that can not be vetoed by the US, Europe unveiled a “Special Purpose Vehicle” to bypass SWIFT. The mechanism would facilitate transactions between European and Iranian companies, while preventing the U.S. from vetoing the transactions and pursuing punitive measures on those companies and states that defied Trump. The payment balancing system will allow companies in Europe to buy Iranian goods, and vice-versa, without actual money-transfers between European and Iranian banks.

The statement came after the remaining signatures of JCPOA gathered in Vienna for a meeting that Iranian ministry spokesman Abbas Mousavi called  “the last chance for the remaining parties…to gather and see how they can meet their commitments towards Iran.”

The announcement will likely send president Trump off the rails, because in late May Bloomberg reported that as part of Trump’s escalating battle with “European allies” over the fate of the Iran nuclear accord, he was “threatening penalties against the financial body created by Germany, the U.K. and France to shield trade with the Islamic Republic from U.S. sanctions” including the loss of access to the U.S. financial system.

This longish Zero Hedge news item appeared on their website at 3:52 p.m. on Friday afternoon EDT — and I thank Brad Robertson for sending it our way.  Another link to it is here.

Pretty Clear: And Without Double Meaning — Andrei Martyanov


«В контексте прозвучавших со стороны наших партнеров оценок в отношении крупной региональной державы, которой является Иран, хотел бы отметить следующее: Иран был и остается нашим союзником и партнером, с которым мы последовательно развиваем отношения как в двустороннем плане, так и в многосторонних форматах. В этой связи любые попытки представить Тегеран в качестве главной угрозы региональной безопасности и тем более поставить его в один ряд с ИГИЛ* или другими террористическими группировками для нас неприемлемы».

Translation: “In the context of assessments from our partners in relation to an important regional state, such as Iran, I would like to point out next: Iran was and remains our ally and partner, with which we steadily develop our relations in bi- and multilateral formats. In this case, any attempts to present Tehran as a main threat to regional stability and equate it with ISIS and other terrorist groups are unacceptable.”

This is Russia’s Security Council Secretary (in realty, second most influential man in Russia after Putin) Nikolai Patrushev’s statement today in Jerusalem at the meeting with Netanyahu and Bolton.  Recall what I wrote more than two years ago:

If to discount a highly improbable, yet still possible, version that this whole situation is a political theater to cover up something more substantial and logical happening behind the stage, a very serious military alliance between Russia and Iran may begin to emerge very soon. At this stage, it seems to be a very logical and sensible step. Russia and Iran (through Azerbaijan and Caspian Sea) are tightly connected both by geography and now by common security objectives. Russia will not allow any kind of hostilities, much less regime change in her Caspian underbelly. Iran knows it and she has to make her moves in economic field to accommodate Russia’s efforts. Iran may start with buying Sukhoi Super Jets 100s and signing the contract for deliveries of MC-21 passenger jets after their trials are over by 2019. This will be a very good step, while Russia makes sure that Iran’s armed forces are properly armed.”

I guess, Patrushev was more than explicit today in Israel. It is yet another “win” for Trump’s Administration and those “wins” and “victories” continue to pile up. It seems that Iran’s path to SCO is pretty much predetermined now. Iran already had experience of hosting Russia’s VKS and it is well-known fact–where Russian “little green men” or “little green S-400s” or “little green SU-35s” appear, wars tend to wind down or not start at all. Interesting to hear what Iranians are thinking about it. I guess, Putin will have some things to tell DJT at Osaka this week, and no, I don’t mean assurances that Russia did not interfere with Israe… pardon me, U.S. elections.  Boy, these events are picking up the pace. Amazing.

The above handful of paragraphs are all there is to this brief commentary by Andrei on Tuesday.  I was saving this as a companion piece to the Cohen/Batchelor interview below.  It was posted on his Internet site on Tuesday, as I just mentioned — and I thank Larry Galearis for pointing it out.  Another link to the hard copy is here.

Tales of the New Cold War: Waiting for the G-20 meet between Trump and Putin — John Batchelor interviews Stephen F. Cohen

Part 1: Two very significant meetings, if not historically significant, were scheduled this week between the major players in the M.E. The first was held this past Monday in Jerusalem, Israel between the Israeli Prime Minister, Netanyahu, his Nat. Sec. Advisor, Meir Ben-Shabbat, U.S. Nat. Sec. Adviser, Bolton and Russian Nat. Sec. Advisor, Nikolai Petrushev, a gathering that John Batchelor describes as unusual. This meeting was most importantly about their respective relationships with Iran. Specifically that Russia was warning against war as Russia considered Iran an important ally. The other meeting is potentially between Putin and Trump at the G-20 Meeting in Osaka, Japan this Friday and Saturday. The discussion this week encompasses much speculation about what the goals are, how they compare with past summits between Trump and Putin, G-20 Summits, and what, if any, may be called positive outcomes in light of past difficulties. And Cohen reminds listeners that Putin was recently snubbed when he remained uninvited to the ceremony celebrating D-Day, and the Helsinki Summit of a year ago was a domestic media disaster for Trump. The Democrats and MSM are still rabid over Russiagate and that has not changed. It will surface, Cohen opined, during the election campaign.

The professor continues with saying that Iran is not a strategic concern for the USA, but decidedly is a major concern for Russia. It is a major neighbour for Russia, it is a major Muslim country, and Russia has a major minority of Muslim citizens and has good relations with them. Most importantly for the professor in Jerusalem was a statement made by Mr. Petrushev, who emphatically stated that: “Iran remains Russia’s ally and partner”. He also said that “Iran was not a threat or enemy like ISIS is in the M.E.” Essentially he told Israel and the USA to back off and cease the vilifying of Iran.  The Russian also said that the drone shoot down was legitimate according to what he has seen.  Cohen concludes by his observations of three or four years that Russia is Syria’s protector, and that also extends to Iran. Both pundits rate war with Iran as a low probability, but still possible. And they do not discount a token US air strike. That puts Russia in an awkward position if war does break out. Iran is almost as important to Russia as China. Batchelor adds, astutely, that Iran is a major way point country in the Silk Road Initiative and its status is therefore key for China. And all three countries are moving to a strategic alliance.

Part 2: This podcast opens with a short comment from the host about how much Russiagate will continue to hinder Trump in his dealings with Russia. Cohen describes how Russian American experts consider this very bizarre behavior, but bizarre still creates the question for Putin about whether Trump can deliver anything. Batchelor then brings up Putin’s domestic problems with a somewhat struggling economy and whether this is a  significant problem on the Russian side. Cohen responds with a guarded, yes, but he also feels that hard times makes corruption stand out to the people. And yes, popularity has declined a little. They give praise to him for his saving the country, and for Crimea, but he needs to do something for a laggard economy. And Batchelor rightly mentions that economic warfare is also working here. But Cohen’s position is there is no one else to blame for this but Putin. So the people, mostly in the provinces, complain.  From the energy sector Putin created a sovereign wealth fund, to reinvest some of the higher profits back into serving the public good. But problems always mount and solutions are not necessarily timely or even easy. Russia also created a fund that invests in American securities that is also a public sore point.

There are two main policy sources used in Russia that come from Putin’s advisers; one led by a man named Sergei Glazyev and the other, one Alexi Kudurin. The latter is a monetarist (Batchelor describes as like a “Republican”) and the former (Batchelor describes) as more socialist but with a belief in the role of markets and in government funding for the people. Putin has been the monetarist in his world view for most of his mandate, but is now leaning toward Glazyev’s postion. This, according to Cohen, will be a fundamental change if those sovereign wealth funds are used directly for the people.

As for the G-20 Meeting with Trump, the professor just hopes for a change in reaction from the U.S. MSM to start acting responsibly.


There is not a lot of good news that has come out of the Jerusalem meeting, and Russia’s stating such firm support for Iran has an element of working at cross-purposes to it. Given that it is very difficult to second guess what the very stupid will do, a war party extremist like Bolton may even be filled with joy by the possibility of drawing in Russia to a M.E. war. Recall that after Trump cancelled the (so-called) air strike over the drone shoot down, he threatened to obliterate the country if there was a repeat offence. Heads of state know better than to verbally abuse a country like this as it negates the possibility of negotiation. But when one also considers the demands made by Trump in order to satisfy U.S. demands for change in that country in order to call off U.S. hostilities (that would essentially destroy the country anyway) there seems to be no comprehension that this behavior shows a marked determination to Iran’s leadership to go to war against Iran, and there also seems to be no comprehension of this by Trump. His chief advisers, however, may know differently.  Iran has also stated that there would be no token strike made against the country that would not start a war, and one might be tempted to believe, if both are not just exchanging verbal abuses for their respective medias, that both antagonists are now at the same point of an aggressive stance.

This 2-part audio interview, with each section being about twenty minutes long, appeared on the Internet site on Tuesday.  But for obvious length and content reasons, had to wait for my Saturday missive…so here it is now.  As always, I thank Larry Galearis for excellent executive summary — and personal comments.  The link to Part 1 is in the headline — and here.  And the link to Part 2 is here.

The Saker interviews A.B. Abrams about the geostrategic developments in Asia

I recently received a copy of a most interesting book, A.B. Abrams’ “Power and Primacy: the history of western intervention in Asia” and as soon as I started reading it I decided that I wanted to interview the author and ask him about what is taking place in Asia in our times.  This was especially interesting to me since Putin has embarked on the Russian version of Obama’s “pivot to Asia“, with the big difference that Putin’s pivot has already proven to be a fantastic success, whereas Obama’s was a dismal failure.  I am most grateful to A.B. Abrams for his time and expertise.

The Saker


The Saker: Please introduce yourself and your past and present political activities (books, articles, memberships, etc.)

A.B. Abrams: I am an expert on the international relations, recent history and geopolitics of the Asia-Pacific region. I have published widely on defense and politics related subjects under various pseudonyms. I am proficient in Chinese, Korean and other regional languages.

I wrote this book with the purpose of elucidating the nature of Western intervention in the region over the past 75 years, and analyzing prominent trends in the West’s involvement in the Asia-Pacific from the Pacific War with Imperial Japan to the current conflicts with China and North Korea. I attempt to show that Western conduct towards populations in the region, the designs of the Western powers for the region, and the means by which these have been pursued, have remained consistent over these past decades. This context is critical to understanding the present and future nature of Western intervention in the Asia-Pacific.

I’d never heard of this gentleman before reading this interview with the Saker, but having read it, I found it very worthwhile, even though it’s certainly on the looongish side.  It showed up on Internet site on Wednesday sometime — and it’s the third and final offering of the day from Larry Galearis.  Another link to this interview is here.

Asia Gold-Price rally sours demand in major centres

Gold discounts in India widened to the highest in nearly three years this week, with demand subdued in major Asian centres as a rally in bullion prices to multi-year highs curbed purchases.

Indian dealers were offering a discount of up to $25 an ounce over official domestic prices, the highest since September 2016. This compares with a discount of $15 offered last week. The domestic price includes a 10% import tax and 3% sales tax.

Prices have risen too much in a short span. Customers are waiting for a correction,” said B Govindan, president of All Kerala Gold and Silver Merchants Association.

Gold prices XAU-24C-PB in the world’s second biggest consumer hit a record high of 35,4960 rupees per 10 grams earlier this week, tracking gains in the world market.

Jewellers have nearly stopped buying gold due to negligible retail demand and rising supplies of old jewellery, according to a Mumbai-based dealer with a bullion importing bank.

Gold imports will fall sharply in June,” the dealer said.

This gold-related Reuters article, co-filed from Mumbai and Bengaluru, showed up on their Internet site at 6:19 a.m. EDT on Friday morning — and it’s something I found on the Sharp Pixley website.  Another link to it is here.

Peru’s Largest Primary Silver Mine Production Plummets 54% in Q1/2019

As the world financial system heads closer to the abyss, global production of the second most important precious metal, silver, continues to deal with serious problems.  According to Peru’s Ministry of Energy and Mines, the country’s largest primary silver mine saw its production plummet by 54% in the first quarter of 2019.

The Uchucchacua Mine, run by Buenaventura, is not only the largest primary silver mine in Peru, but it is also ranked third in the world.  Buenaventura reported that silver output at the Uchucchacua Mine decreased during Q1 2019 due to a contractor strike that lasted 21 days and significant rains.  However, silver production at Uchucchacua continued to be weak in April, three months after the strike ended.

Interestingly, silver production at Uchucchacua started to decline in the third and fourth quarter of 2018.

Uchucchacua’s silver production fell from 4.3 million ounces (Moz) in Q1 2018, to 3.2 Moz in Q4 2018, and further to 1.99 Moz in Q1 2019.  And, if we look at the data put out by the Peru Ministry of Energy and Mines, Uchucchacua’s silver production fell another 20% in April 2019 vs. the same month last year.  So, there seems to more trouble going on at Uchucchacua than a strike and heavy rains.

This interesting and chart-filled commentary put in an appearance on the Internet site on Thursday sometime — and the first reader through the door with it was Brad Robertson.  Another link to it is here.


Continuing on the back roads to Princeton on May 5, the valley that we found ourselves in, in yesterday’s photo sequence, lead through a swampy/marshy area for many miles along the valley floor, before it emptied into the north end of Otter Lake near the town of Tulameen, which we’d visited late last fall.  We were amazed at how many multi-million dollar chicken shacks/’cottages’ that there were along this lake, which is basically in the middle of nowhere. The ‘town’ of Tulameen is at the south end of the lake — and featured at a distance in the last shot.  The now-defunct Kettle Valley Railway right-of-way runs along the shoreline on the far left of this photo — and is visible in photo #2 — and is part of the Trans Canada Trail system.  Click to enlarge.


Today’s pop ‘blast from the past’ dates from 1971, when I was spinning record at Alert, N.W.T…500 nautical miles from the North Pole — and this L.P. by an American rock band got a lot of air time while I was behind the mic.  A cut from it is linked here.  And while I’m at, here’s another.

Today’s classical ‘blast from the past’ is from a composer/virtuoso violinist that I’ve never featured before.  It’s Niccolò Paganini…[1782-1840].  He was an Italian violinist, violist, guitarist, and composer. He was the most celebrated violin virtuoso of his time, and left his mark as one of the pillars of modern violin technique. His 24 Caprices for Solo Violin Op. 1 [his first effort] are among the best known of his compositions, and have served as an inspiration for many prominent composers.  You have to be a top-drawer prodigy to even attempt this.  Here’s the cute-as-a-button and enormously gifted Hillary Hahn doing the honours — and the link is here.

It was the second time this past week that a major rally in gold [and silver] in morning trading in the Far East was snuffed out by JPMorgan et al before it could develop into something far more serious…which it certainly would have done if left to its own devices.

Silver is still lagging — and it’s certainly doing that because ‘da boyz’ aren’t allowing it to go anywhere in the COMEX futures market, where the prices of all of the Big 6 commodities, plus others are set.  They’re set by the dos-à-dos between the Managed Money traders on one side — and the commercial traders on the other.  And in the case of the precious metals, it’s ‘4 or less’ U.S. banks that have them on that proverbial short leash.

As to when that situation might change, I don’t know.  But as Ted pointed out on the phone yesterday, those charges brought against Merrill  and the Bank of America, were certainly a pointed warning to JPMorgan et al.  Whether or not that makes in any difference in the short or long term, remains to be seen.

Here are the 6-month charts for all four precious metals, plus copper and WTIC.  There’s nothing to see in gold and silver, but the big price spike in platinum closed it back above both its 50 and 200-day moving averages by a hair on Friday.  As far as palladium is concerned, it’s my belief that the U.S. banks are trying to engineer a price decline in that precious metal, as the Managed Money traders are mega long in the COMEX futures market.  Copper sagged a bit — and WTIC was closed back below both its 50 and 200-day moving averages, which isn’t as big a deal as it sounds, as they’re only dimes apart.  Click to enlarge.

Well, the ‘War on Iran’ is on pause right now, but the news yesterday that Europe has finally launched its version of SWIFT…Instex…to get around the U.S. sanctions against Iran, will certainly get everyone’s knickers in a twist at the White House.

But the fact that Europe chose the G-20 meeting to break the news is a big ‘Up Yours’ to the U.S. from their ‘friends’ in still American-occupied Europe.  And whether the fall-out begins on the weekend, or starts next week, remains to be seen.  But there will be repercussions…so let the games begin.

The ongoing sniping between President Trump and Jay Powell over at the Fed is getting more serious and obvious with each passing exchange.  At some point the U.S. dollar will become a casualty in all this…whether by Trump’s doing, or that 50 basis points rate cut that Wall Street and all say is coming at the end of the next FOMC meeting.  And if not then, then certainly long before the year is out.

As far as I’m concerned, the dollar is already a dead man walking — and has been for some time.  If you follow my daily comments on the U.S. dollar index, you’ll note the increasing frequency in the appearance of the usual ‘gentle hands’ that keep preventing it from seeking its intrinsic value.  What its true value is, isn’t known — and the powers-that-be are ever vigilant in ensuring that free market forces never are allowed to discover it…just like in the precious metals.  Right now it’s the cleanest dirty shirt in the laundry hamper.  But that won’t last.

As far as the current price management scheme in the precious metals is concerned, that fact is known far an wide, not only by us investors, but the miners themselves — and world governments.  That knowledge now permeates the trading in the COMEX futures market, because as Ted pointed out on the phone yesterday, spoofing has vanished from the scene.  So it’s obvious that the conviction of that JPMorgan trader — and now the deferred judgement against Merrill/BAC for the same practice, has had the desired effect.

Of course, if all convicted parties are cooperating as they say they are to avoid jail or fines…or both…then all fingers will be pointing at JPMorgan.  Then one has to wonder if the DoJ is now nosing around the trading records of Citigroup, plus others as well.

When it all ends, it will be obvious in the price — and as Ted stated in his closing paragraphs of his now-public essay “Stranger Than Fiction“…

Unfortunately for the DoJ, the case against JPMorgan is so straightforward so as to be inescapable. Being the largest paper short seller for more than a decade and then using the resultant depressed prices to accumulate more physical silver (and gold) than anyone in history is such a cut and dried market manipulation that a jury of 12 year olds could decide the matter in minutes. Yes, I understand that putting JPMorgan out of business works against the collective interest, but so does letting these crooks continue to manipulate.”

“The only practical alternative is for the Justice Department to force JPMorgan to end the silver (and gold) manipulation quietly and without the repercussions of straight criminal charges. Regardless of the precise format such an order would involve, the direct visible result would be an explosion in the price of silver, practically the minute JPM lifts its heavy hand off the price. I thinks most silver investors and producers could live with that.”

Yes, dear reader, we could.

I’m done for the day — and the week — and I’ll see you here on Tuesday with a VERY brief column, because as I stated at the top of today’s missive, I’m taking this Canada Day long weekend off.  I will answer my e-mails, although don’t expect an immediate reply.