10 August 2019 — Saturday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price jumped up the moment that trading began at 6:00 p.m. EDT on Thursday evening in New York. It ran into “all the usual” suspects” almost immediately — and then chopped rather aimlessly sideways until the 2:15 p.m. China Standard Time afternoon gold fix in Shanghai. It was stair-stepped lower from there until the the low tick was set around 9:45 a.m. in New York. It rallied above the $1,500 spot mark for awhile, but then revisited its earlier low a few minutes before the 1:30 p.m. EDT COMEX close. It rallied back to the $1,500 spot mark within the next thirty minutes, but ‘someone’ was there to ensure that it didn’t break above it — and it was sold lower until 2:30 p.m. and the gold price chopped quietly sideways until trading ended at 5:00 p.m. EDT.
The gold price traded within a one percent price range on Friday, so I shan’t bother with the high and low ticks.
Gold was closed at $1,496.20 spot, down $4.50 from Thursday. Net volume in October and December combined was a bit over 324,000 contracts — and there was 10,500 contracts worth of roll-over/switch volume on top of that.
The silver price also jumped up a bit at the 6:00 p.m. open in New York on Thursday evening — and continued to crawl higher from there until shortly before noon CST. From that juncture it traded sideways until shortly before 2 p.m. CST — and at that point jumped to its high tick of the day — and was up 19 cents the ounce. Moments later the engineered sell-off commenced — and the low tick was set at, or a few minutes before, the afternoon gold fix in London. It rallied back above the $17 spot mark ever-so-briefly — and then was sold lower into the COMEX close — and didn’t do much of anything after that.
The high and low ticks in silver were recorded by the CME Group as $17.14 and $16.86 in the September contract.
Silver was closed on Friday afternoon EDT at $16.925 spot, up 3.5 cents from Thursday…and under $17 spot. Net volume was 78,000 contracts — and there was a bit over 19,000 contracts of roll-over/switch volume out of September and into future months.
The platinum price chopped sideways-to-lower in a random manner in Far East, Zurich and morning trading in New York on Friday — and the low tick was set sometime before 1 p.m. EDT. it rallied a few dollars into the COMEX close – and then traded flat for the rest of the day. Platinum was closed at $858 spot, down 5 bucks from Thursday.
The palladium price spent the entire Far East and Zurich trading sessions trading just above the unchanged mark by a handful of dollars. A rally of some substance developed at the COMEX open, but that was all taken away by 1 p.m. in New York trading — and it didn’t do much of anything after that, but was carefully closed below $1,400 spot at $1,399.
It’s surely no coincidence that gold, silver and platinum were closed below psychologically important round numbers…$1,500 in gold…$17 in silver — and $1,400 in palladium.
The dollar index closed very late on Thursday afternoon in New York at 97.62 — and opened down 5 basis points once trading commenced at 7:45 p.m. on Thursday evening, which was 7:45 a.m. China Standard Time on their Friday morning. From there it chopped very quietly sideways until around 10:50 a.m. in New York. It took a bit of a dive from there — and the low tick was set at precisely noon EDT. ‘Gentle hands’ appeared — and it crept rather unevenly higher until 5 p.m. EDT. Then it rolled over hard — and although the Bloomberg chart shows that it closed at 97.35…the ‘official’ close was 97.49. I suspect that there will be a downward revision at the New York open on Sunday evening. I also note that Bloomberg shows the dollar index low tick at 97.03. Something’s not right about these numbers. The dollar index closed down 13 basis point on the day.
Here’s the DXY chart, courtesy of Bloomberg as always. Click to enlarge.
And here’s the 5-year U.S. dollar index chart, courtesy of the folks over at the stockcharts.com Internet site. The delta between its close…97.32…and the close on the DXY chart above, was 17 basis points on Friday. Click to enlarge as well.
The gold shares opened down a bit, but fifteen minutes later they were headed higher — and their respective highs came around 10:25 a.m. in New York trading. Then about twenty-five minutes later, they were headed unevenly lower — and that trend continued almost right into the close. The HUI finished off its low tick by a hair — and down 1.13 percent.
Up until minutes after 1 p.m. EDT in New York trading, the silver equities traded in a similar manner as their golden brethren. A choppy but decent rally commenced at that point, but minutes before trading ended at 4:00 p.m. a not-for-profit seller drove the Silver 7 Index violently lower, although it did recover a bit as trading ended. Up until that point, the silver shares would have closed at unchanged, so I find that mindless selling minutes before the close to be of a highly suspicious nature. Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down 1.29 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.
Without doubt, there were ‘strong hands’ buying the silver equities once again in afternoon trading in New York. That’s the second time this week where their activities have been obvious.
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 it was a good week all around, although the precious metal equities weren’t allowed to shine as they should have, as that big short seller appeared on Wednesday — and spoiled the party…which I’m sure was the intent of it, I suppose. Platinum and palladium manged to eke out small gains after the pounding they’ve been taking over the last few weeks and months. Click to enlarge.
Here’s the month-to-date chart — and gold, plus its associated equities, continue to outperform their silver counterparts for reasons you already know. The beatings that palladium and platinum have taken recently are more than apparent on this chart. Click to enlarge.
Here’s the year-to-date chart — and it’s terrific looking — and a bit more terrific than it was a week ago. JPMorgan et al.‘s near death grip on the silver price is more than obvious in this chart as well. Click to enlarge.
And like last week in this space, ‘Da boyz’ are still out there going short against all comers — and there are no signs that I can see that they’re about to be overrun, at least not yet. It still remains to be seen if JPMorgan et al. can pull off another round of engineered price declines in both silver and gold, considering the current financial and monetary environment that they’re facing. But regardless of that, it appears that the gold and silver equities continue to be in accumulation mode, and that was more than evident a couple of times in the silver stocks this week…both on Thursday — and again on Friday
The CME Daily Delivery Report for Day 9 of the August delivery month showed that 24 gold and 81 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.
In gold, the two short/issuers were ABN Amro and Advantage, with 22 and 2 contracts out of their respective client accounts. There were five long/stoppers in total. JPMorgan picked up 9 contracts for its client account — and Citigroup and Macquarie Futures stopped 8 and 4 contracts for their respective in-house/proprietary trading accounts.
In silver, the three short/issuers were ABN Amro, Advantage and ADM, with 44, 29 and 8 contracts out of their respective client accounts. The three biggest of the four long/stoppers were JPMorgan, Advantage and ABN Amro, with 37, 26 and 15 contracts for their respective client accounts as well.
The link to yesterday’s Issuers and Stoppers Report is here.
So far in August, there have been 4,448 gold contracts issued/reissued and stopped — and that number in silver is now up to 1,686 contracts. Gold deliveries in August have slowed to a trickle lately — and I don’t understand why that’s the case.
The CME Preliminary Report for the Friday trading session showed that gold open interest in August fell by 33 contracts, leaving 2,385 contracts still open, minus the 24 mentioned a few paragraphs ago. Thursday’s Daily Delivery Report showed that 18 gold contracts were actually posted for delivery on Monday, so that means that 33-18=15 more gold contracts disappeared from the August delivery month. Silver o.i. in August dropped by 66 contracts, leaving 190 still around, minus the 81 mentioned a few paragraphs ago. Thursday’s Daily Delivery Report showed that 147 silver contracts were posted for delivery on Monday, so that means that another 147-66=81 silver contracts were just added to August deliveries — and those are probably the same 81 contracts that are posted for delivery on Tuesday.
The number of gold contracts that are disappearing from the August delivery month continues to grow larger by the day. Whereas in silver, the number of contracts being added to the August delivery month continues to increase every day. Physical silver is obviously in accumulation mode by ‘strong hands’ — and most likely insiders.
There were no reported changes in GLD on Friday. But there was another substantial deposit in SLV, as an a.p. added 2,245,896 troy ounces.
There wasn’t much going on in the other silver ETFs around the world, but I did notice that a net 676,386 troy ounces of gold was added to all know depositories, mutual funds and ETFs on Friday. The 4-week total additions into these various gold funds has risen to 2,959,927 troy ounces over the last four weeks — and that’s a lot.
Thanks to Ted, we have a new source of short position data for both SLV and GLD, as the folks over at the shortsqueeze.com Internet site stopped posting that information a few months ago. This new data comes to us courtesy of the wsj.com website.
The short position in SLV declined from 9.93 million troy ounces/down to 9.64 million troy ounces in the two-week reporting period that ended on July 31…a drop of 2.92 percent. The short position in GLD rose from 1,134,000 troy ounces, up to 1,295,000 troy ounces during the same reporting period, which is an increase of 14.12 percent. I’m sure Ted will have some comment on this in his weekly review later today.
There was no sales report from the U.S. Mint on Friday.
Month-to-date the mint has sold 1,000 troy ounces of gold eagles — 1,000 one-ounce 24K gold buffaloes — and zero silver eagles. This has to be the poorest start to a sales month for the U.S. Mint in the history of producing these bullion coins.
Once again there was no in/out movement in gold over at the COMEX-approved depositories on the U.S. east coast on Thursday.
There was some activity in silver, as one truckload…608,538 troy ounces…was received over at Loomis International. There was also one truckload shipped out…600,025 troy ounces…and that metal departed CNT. A link to that activity is here.
There was only a tiny bit of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday. They didn’t receive any — and shipped out only 18 of them. That activity was at Brink’s, Inc. as per usual — and I won’t bother linking it.
Here’s a chart that Nick Laird dropped in my in-box on Friday afternoon. It shows the withdrawals from the Shanghai gold exchange, updated with July’s data. During that month there was 129.33 metric tonnes taken out. Click to enlarge.
The Commitment of Traders Report, for positions held at the close of COMEX trading on Tuesday, August 6, showed a big positive surprise in silver — and Ted’s comment in Friday’s column about the 37,000 contract increase in gold open interest during the reporting week, turned out to be the actual increase in the commercial net short position in gold.
In silver, the Commercial net short position decreased by 8,650 contracts, or 43.2 million troy ounces of paper silver.
They arrived at that number by increasing their long position by 4,325 contracts — and also covered the exact same number of short contracts….4,325. 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 much more, as they decreased their long position by 5,754 contracts — and also added 9,946 contracts to their short position. It’s the sum of those two numbers…15,700 contracts…that represents their change for the reporting week.
The difference between that number — and the Commercial net short position…15,700 minus 8,650 equals 7,050 contracts. As is always the case, that difference was made up by the traders in the other two categories. The traders in the ‘Other Reportables’ category increased their net long position by a smallish 1,235 contracts…but it was the traders in the ‘Nonreportable’/small trader category that did most of the heavy lifting, as they increased their net long position by a very chunky 5,815 contracts. The sum of those two numbers add up to the 7,050 contract difference…which they must do.
Ted was surprised that the Managed Money traders added to their short position so aggressively during the reporting week, as no moving averages were penetrated to the down-side, as that’s their normal signal to begin going short.
The Commercial net short position in silver is down to 376.3 million troy ounces, which is still very bearish on its face.
With the latest Bank Participation Report in hand, Ted estimates JPMorgan’s short position in silver at no more than 20,000 contracts — and most likely a bit less. In last week’s COT Report, he had estimated that JPMorgan’s short position was in the 25-28,000 contract range — and was delighted that it turned out to be much less than that.
Here’s the 3-year COT Report for silver — and the surprise improvement should be noted. Click to enlarge.
With JPMorgan’s short position this low, Ted is still of the opinion that they could let the price rip any time — and leave the other Big 7 traders holding the bag…including Citigroup.
In gold, the commercial net short position increased by 36,358 contracts, or 3.64 million troy ounces of paper gold — and virtually all of that amount was at the hands of the Big 4 traders, as the traders in the ‘5 through 8’ category didn’t do much.
They arrived at that number by reducing their long position by 4,154 contracts — and they also added 32,204 short contracts — 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, plus much more…as they increased their long position by 33,106 contracts — and also decreased their short position by 8,014 contracts. It’s the sum of those two numbers…41,120 contracts…that represents their change for the reporting week.
The difference between that number — and the commercial net short position…41,120 minus 36,358 equals 4,762 contracts. That difference was made up by the traders in the other two categories, as both decreased their net long positions during the reporting week…the ‘Other Reportables’ by 2,963 contracts — and the ‘Nonreportable’/small traders by 1,799 contracts. Those two numbers add up to 4,762 contracts, which them must.
But the bullish surprise in gold came in the Producer/Merchant and Swap/Dealer categories, as the former category [read JPMorgan] only increased their net short position by 4,739 contracts — and the latter did the real work, as they increased their net short position by 31,619 contracts. The sum of those two numbers equals the commercial net short position, which they must do, because these two categories are the commercial traders.
The commercial net short position in gold is now up to 32.43 million troy ounces…which is very bearish.
Here’s the 3-year COT chart for gold, courtesy of Nick Laird — and the rather dramatic increase in the commercial net short position should be noted. Click to enlarge.
Although the COT Report in gold is hugely bearish on its face, the fact that it appears that JPMorgan was almost a no-show during the past reporting week, has Ted sniffing a double cross in this precious metal — and even the Bank Participation Report shows that something out of the ordinary is going on.
Could ‘da boyz’ smash gold and silver lower at any time, you ask? Sure, in a New York minute, as both are overbought and in bearish territory from a COT perspective. But I expect any attempt at that to be short-lived, but potentially violent.
In the other metals, the Manged Money traders in palladium decreased their net long position in this precious metal by 3,077 contracts. The Managed Money traders are still net long the palladium market by 11,251 contracts…about 47 percent of the total open interest. Total open interest in palladium is 24,019 COMEX contracts. In platinum, the Managed Money traders decreased their net long position by 2,282 contracts during the reporting week. The Managed Money traders are now net long the platinum market by only 7,485 COMEX contracts…10 percent of the total open interest. In copper, the Managed Money traders increased their net short position in that metal by a knee-wobbling 33,319 COMEX contracts during the reporting week — and are now net short the COMEX futures market by a record 75,114 contracts, or 1.88 billion pounds of the stuff…a hair under 25 percent of total open interest…which is preposterous.
Once again, here’s Nick chart showing the correlation between the gold price — and what the Managed Money traders are doing…or are tricked into doing.
You don’t need a degree in mathematics to see how tight this correlation is. Click to enlarge.
Here’s Nick Laird’s “Days to Cover” chart updated with the COT data for positions held at the close of COMEX trading on 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 134 days of world silver production, which is down 6 days from last week’s report — and the ‘5 through 8’ large traders are short an additional 79 days of world silver production, down 5 days from last week’s report — for a total of 213 days that the Big 8 are short, which is seven months of world silver production, or about 497.1 million troy ounces of paper silver held short by the Big 8. [In the prior week’s COT Report, the Big 8 were short 224 days of world silver production.]
In the COT Report above, the Commercial net short position in silver was reported as 376.3 million troy ounces. As mentioned in the previous paragraph, the short position of the Big 8 traders is 497.1 million troy ounces. The short position of the Big 8 traders is larger than the total Commercial net short position by 497.1 minus 376.3 equals 120.8 million troy ounces.
The reason for the difference in those numbers…as it always is…is that Ted’s raptors, the 39-odd small commercial traders other than the Big 8, are net long that amount, which is ridiculous.
As I mentioned in my COT commentary in silver above, Ted figures that JPMorgan is short is around 20,000 COMEX silver contracts, or a bit less…down a lot from the 25-28,000 contracts that they were short in the prior week’s COT Report.
20,000 COMEX contracts is a hundred million troy ounces of paper silver, which works out to around 43 days of world silver production. Based on that number, JPMorgan is back in number one position as the biggest short holder in the COMEX futures market in silver. But if it’s less than that amount, as Ted suspects, then those 43 days they are short would be reduced accordingly. But that still leaves them as the No. 1 or possibly No. 2 short holder in COMEX silver…as per the next paragraph.
The Big 4 traders in silver are short, on average, about…134 divided by 4 equals…33.5 days of world silver production each. The four traders in the ‘5 through 8’ category are short 79 days of world silver production in total, which is 19.75 days of world silver production each, on average.
The Big 8 commercial traders are short 41.5 percent of the entire open interest in silver in the COMEX futures market, which is a smallish decrease from the 43.8 percent they were short in last week’s report. And once whatever market-neutral spread trades are subtracted out, that percentage would be something over the 45 percent mark. In gold, it’s now 44.7 percent of the total COMEX open interest that the Big 8 are short, up a bit from the 43.5 percent they were short in last week’s report — and a bit over 50 percent, once the market-neutral spread trades are subtracted out.
In gold, the Big 4 are short 62 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 31 days of world production, up 1 day from what they were short last week…for a total of 93 days of world gold production held short by the Big 8…up 8 days from last week’s report. Based on these numbers, the Big 4 in gold hold about 66 percent of the total short position held by the Big 8…up 1 day 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 63, 70 and 80 percent respectively of the short positions held by the Big 8. Silver is unchanged from a week ago, platinum is down 2 percentage points from last week — and palladium is up 1 percentage point from a week ago.
The August 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 August Bank Participation Report covers the time period from July 2 to August 6 inclusive.]
In gold, 5 U.S. banks are net short 82,387 COMEX contracts in the August BPR. In July’s Bank Participation Report [BPR] these same 5 U.S. banks were net short 107,222 contracts, so there was a sharp decrease of 24,835 COMEX contracts from a month ago.
JPMorgan, Citigroup and HSBC USA would hold the lion’s share of this short position. 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, 29 non-U.S. banks are net short 132,469 COMEX gold contracts. In the July BPR, 28 non-U.S. banks were net short 105,459 COMEX contracts…so the month-over-month change is up huge for the second month in a row…27,010 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, one of which would include 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 27 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! Now they hold their biggest net short position in history — and by a very wide margin. Ted is wondering if JPMorgan has been able to transfer a big chunk of its short position to the non-U.S. banks/BIS during the last few months…especially this last month, since the U.S. bank short position fell by 24,835 contracts during July.
As of this Bank Participation Report, 34 banks [both U.S. and foreign] are net short 35.8 percent of the entire open interest in gold in the COMEX futures market, which is up a hair from the 35.1 percent they were short in the July BPR. But ‘under the hood’ the ownership of this short position has changed drastically.
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 32,314 COMEX contracts in August’s BPR. In July’s BPR, the net short position of these same 4 U.S. banks was 27,489 contracts, so the short position of the U.S. banks is up 4,825 contracts month-over-month.
As in gold, the three biggest short holders of the four U.S. banks in total, would be JPMorgan, Citigroup and HSBC USA. 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 U.S. banks in gold, are immaterial.
Also in silver, 23 non-U.S. banks are net short 43,142 COMEX contracts in the August BPR…which is up from the 36,928 contracts that 26 non-U.S. banks were short in the July BPR. I would suspect that Canada’s Scotiabank [and maybe one other, the BIS perhaps] holds a goodly chunk of the short position of these non-U.S. banks. I believe that a number of the remaining 21 non-U.S. banks 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 21 non-U.S. banks are immaterial — and have always been so.
As of August’s Bank Participation Report, 27 banks [both U.S. and foreign] are net short 31.6 percent of the entire open interest in the COMEX futures market in silver—which is down a bit from the 36.5 percent that they were net short in the July BPR — with much, much more than the lion’s share of that held by JPMorgan, Citigroup, HSBC USA, Scotiabank — and certainly one other non-U.S. bank, which I suspect may by the BIS.
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 15,202 COMEX contracts in the August Bank Participation Report. In the July BPR, these same banks were net short 10,554 COMEX contracts…so there’s been an almost fifty percent increase month-over-month. [At the ‘low’ back in July of 2018, these same five U.S. banks were actually net long the platinum market by 2,573 contracts.] That’s quite a change for the worse since then.
Also in platinum, 19 non-U.S. banks are net short 14,013 COMEX contracts in the August BPR, which is up 48 percent from the 9,456 COMEX contracts that 18 non-U.S. banks were net short in the July BPR. [Note: Back at the July 2018 low, these same non-U.S. banks were net short only 1,192 COMEX contracts.]
And as of August’s Bank Participation Report, 24 banks [both U.S. and foreign] are net short 38.7 percent of platinum’s total open interest in the COMEX futures market, which is up huge from the 24.9 percent they were net short in July’s BPR.
Here’s the Bank Participation Report chart for platinum. Click to enlarge.
In palladium, 4 U.S. banks are net short 6,539 COMEX contracts in the August BPR, which is down a decent amount from the 7,765 contracts that these same 4 U.S. banks held net short in the July BPR.
Also in palladium, 14 non-U.S. banks are net short 1,576 COMEX contracts—which is also down a very decent amount from the 2,352 COMEX contracts that 15 non-U.S. banks were short in the July BPR.
But when you divide up the short positions of these non-U.S. banks more or less equally, they’re completely immaterial…especially when compared to the positions held by the 4 U.S. banks.
As of this Bank Participation Report, 18 banks [U.S. and foreign] are net short 33.8 percent of the entire COMEX open interest in palladium. In July’s BPR, the world’s banks were net short 42.0 percent of total open interest…a decent decline from a month ago.
Here’s the palladium BPR chart. And as I point out every month, 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.
For the second month in a row, it wasn’t a very happy BPR in gold as the banks have obviously been at battle stations for the last two months. But it’s the change in ownership of that short position that’s the stand-out feature in this report. The short positions in both silver and platinum have risen as well, as the powers-that-be are there as continuing short sellers of last resort.
It remains to be seen if we get yet another wash, rinse, spin…repeat cycle this time around…as JPMorgan et al. are facing some rather serious and long-term headwinds…not only in the currencies, but in foreign bank and ETF gold purchases. These headwinds are becoming ever more pronounced with each passing week.
But, as always, JPMorgan is in a position to stick it to the other short holders in both silver and gold — and that became more apparent with this week’s COT and BPR. But will they or won’t they remains to be seen. I know that Ted will have a few things to say about it in his weekly review later today.
I have very little in the way of stories/articles for you…but I do have several that I’ve been saving for my Saturday missive for length and/or content reasons.
[On Thursday], automatic, algorithm-driven investment programs bought the dip, as they were programmed to do, leaving the Dow up 371 points. Trade wars… approaching recession… inverted yields… $15 trillion in negative yields!… jimmied prices… cockeyed signals… soaring debt… Who cares!
Buying the dip has been the winning formula for the last 40 years. Stocks hit a bottom in 1980. They were ready to go up.
Then, in 1987, Alan Greenspan pulled out his “Greenspan Put”; this was the beginning of a new phase in market history. The Federal Reserve had investors’ backs.
If you had bought stocks in 1980… and simply held on through the dips and slips… you would have multiplied your investment 26 times. Buying more on each dip would have increased your profits further.
And now, both investors and their algorithms are programmed to believe that the Fed still has their backs… and that only chumps sit on the sidelines in gold.
But it is not just the stock market we are looking at today…
This commentary from Bill appeared on the bonnerandpartners.com Internet site early on Friday morning EDT — and another link to it is here. And here’s Gregory Mannarino’s must watch 13-minute rant from Friday, courtesy of Roy Stephens.
Step aside Baoshang Bank and Bank of Jinzhou, it’s time for Chinese bank bailout #3.
Last month, when reporting on the imminent failure of yet another Chinese bank in the inglorious aftermath of Baoshang Bank’s late May state takeover, we dusted off a list of deeply troubled Chinese financial institutions that had delayed their 2018 annual reports…
… and noted that the #2 bank on this list, Bank of Jinzhou recently met financial institutions in its home Liaoning province to discuss measures to deal with liquidity problems, and in a parallel bailout to that of Baoshang, the bank was in talks to “introduce strategic investors” after a report that China’s financial regulators are seeking to resolve its liquidity problems sent its dollar-denominated debt plunging.
Just a few days later, that’s precisely what happened, when in late July, Industrial and Commercial Bank of China (ICBC), the country’s largest lender by assets, China Cinda Asset Management and China Great Wall Asset Management, two of China’s four largest distressed debt managers, said on Sunday they would take stakes in Bank of Jinzhou.
And so, fast forward to this week when overnight, the SCMP reported that China’s sovereign wealth fund has taken over Heng Feng Bank – the bank at the very top of the list shown above, one with roughly $200 billion in assets – a troubled lender linked to fugitive financier Xiao Jianhua, in the third case in as many months of the state exerting its grip over wayward financial institutions.
According to the report, Central Huijin Investment, a subsidiary of the China Investment Corporation that acts as the Chinese government’s shareholder in the country’s four biggest banks, emerged as a strategic investor in Heng Feng, according to a brief report overnight by Shanghai Securities News, published by state news agency Xinhua.
In short, a 3rd Chinese bank in as many months received an implicit (or explicit) state bailout, and with the dominoes now falling, it’s just a matter of time before most if not all of the banks shown in the list above collapse.
This long news story showed up on the Zero Hedge website at 9:41 a.m. EDT on Friday morning — and I thank Brad Robertson for sending it along. Another link to it is here.
The collapse of Italian bond yields has been one of the more dramatic global market moves. After trading to almost 3.60% last October, Italian 10-year yields ended Wednesday trading at 1.42%. For a country so hopelessly over-indebted ($3 TN plus), Italian bond prices are arguably one of the more distorted assets in a world of distorted asset markets. Italian yields reversed sharply higher into the end of the week, rising 12 bps Thursday and a notable 27 bps on Friday – on political instability after Deputy Prime Minister Matteo Salvini called for early elections (breaking with its Five Star Movement coalition partner). Italian stocks were hit 2.5% in Friday trading, ending the week down 3.4%. Global “risk off” could prove an especially challenging backdrop for vulnerable Italian assets.
Italy, the U.K., China, India, Brazil and others… Global central bank-induced liquidity excess has kept numerous remarkably leaky boats afloat in recent years. There will be systemic hell to pay when the dam finally breaks.
I’ll assume Monday’s global market convulsions will have the U.S. administration and Beijing treading cautiously next week. Yet I expect it will prove more difficult this time to squeeze the genie back into the bottle. To see such high cross asset correlations around the globe is disconcerting. And we saw Monday how critical a stable renminbi has become to global finance. It’s not a stretch to say this global party comes to [a] rapid conclusion the moment markets fear a disorderly Chinese currency devaluation.
Like so many aspects of this long boom, it works miraculously – until it doesn’t. At this point, the key analysis is that reserve holdings surely overstate resources available for countries to combat a more enduring period of “risk off” capital flight. Moreover, the perception of EM resilience has ensured unprecedented Credit and speculative excess throughout a systemic EM Bubble.
I am clearly not alone in the view that Beijing took a huge gamble in moving to devalue the Chinese currency this week. They today have a large international reserve position. Over the coming weeks and months, I expect analysts to increasingly question the adequacy of these reserves in light of extraordinary financial and economic vulnerabilities.
The key take-away from another critical week: As the marginal provider of global liquidity and economic growth, Chinese finance has become the epicenter of crisis dynamics. Global markets are highly correlated; speculative dynamics remain extraordinarily synchronized. At this point, a bet on global risk markets is a bet on China – a bet on the ongoing inflation of China’s historic Bubble. Developments – market, policy, economic and geopolitical – are corroborating the analysis that it’s very late in the game. I’ll assume the flow of “hot money” away from global risk markets has commenced.
This weekly commentary from Doug, which is always a must read for me, showed up on his website in the very week hours of Saturday morning — and another link to it is here.
A federal court ruling last Tuesday dismissing a Democratic National Committee (DNC) civil suit against Julian Assange “with prejudice” was a devastating indictment of the U.S. ruling elite’s campaign to destroy the WikiLeaks founder. It exposed as a fraud the entire “Russiagate” conspiracy theory peddled by the Democratic Party, the corporate media and the intelligence agencies for the past three years.
The decision, by Judge John Koeltl of the U.S. District Court for the Southern District of New York, rejected the smears that Assange “colluded” with Russia. It upheld his status as a journalist and publisher and dismissed claims that WikiLeaks’ 2016 publication of leaked emails from the DNC was “illegal.”
Despite the significance of the ruling, and its clear newsworthiness, it has been subjected to an almost complete blackout by the entire media in the U.S. and internationally.
The universal silence on the court decision—extending from The New York Times (which buried a six-paragraph report on the ruling on page 25) and The Washington Post, to “alternative” outlets such as the Intercept, the television evening news programs and the publications of the pseudo-left—can be described only as a coordinated political conspiracy.
Its aim is to suppress any discussion of the court’s exposure of the slanders used to malign and isolate Assange, and to justify the unprecedented international pursuit of him over WikiLeaks’ exposure of U.S. war crimes, surveillance operations and diplomatic conspiracies.
The New York Times, The Washington Post and other corporate outlets have relentlessly smeared Assange as a “Russian agent” and depicted him as the linchpin of a conspiracy hatched in Moscow to deprive Democratic Party candidate Hillary Clinton of the presidency in the 2016 US elections.
Now that their claims have been subjected to judicial review and exposed as a tissue of lies and fabrications, they have adopted a policy of radio silence. There is no question that if the court ruling had been in favour of the DNC, it would have been greeted with banner headlines and wall-to-wall coverage.
The response exposes these publications as state propagandists and active participants in the campaign by the Democratic Party, the Trump administration and the entire ruling elite to condemn Assange for the rest of his life to an American prison for the “crime” of publishing the truth.
This very interesting news item, which I haven’t seen anywhere else, showed up on the greanvillepost.com Internet site a week ago Friday — and I thank Larry Galearis for pointing it out. For obvious reasons this had to wait for my Saturday column — and another link to it is here.
In three centuries, the heresies of two bankers became the basis of our modern economy.
hen the Venetian merchant Marco Polo got to China, in the latter part of the thirteenth century, he saw many wonders—gunpowder and coal and eyeglasses and porcelain. One of the things that astonished him most, however, was a new invention, implemented by Kublai Khan, a grandson of the great conqueror Genghis. It was paper money, introduced by Kublai in 1260. Polo could hardly believe his eyes when he saw what the Khan was doing:
“He makes his money after this fashion. He makes them take of the bark of a certain tree, in fact of the mulberry tree, the leaves of which are the food of the silkworms, these trees being so numerous that whole districts are full of them. What they take is a certain fine white bast or skin which lies between the wood of the tree and the thick outer bark, and this they make into something resembling sheets of paper, but black. When these sheets have been prepared they are cut up into pieces of different sizes. All these pieces of paper are issued with as much solemnity and authority as if they were of pure gold or silver; and on every piece a variety of officials, whose duty it is, have to write their names, and to put their seals. And when all is prepared duly, the chief officer deputed by the Khan smears the seal entrusted to him with vermilion, and impresses it on the paper, so that the form of the seal remains imprinted upon it in red; the money is then authentic. Anyone forging it would be punished with death.”
That last point was deeply relevant. The problem with many new forms of money is that people are reluctant to adopt them. Genghis Khan’s grandson didn’t have that difficulty. He took measures to insure the authenticity of his currency, and if you didn’t use it—if you wouldn’t accept it in payment, or preferred to use gold or silver or copper or iron bars or pearls or salt or coins or any of the older forms of payment prevalent in China—he would have you killed. This solved the question of uptake.
Marco Polo was right to be amazed. The instruments of trade and finance are inventions, in the same way that creations of art and discoveries of science are inventions—products of the human imagination. Paper money, backed by the authority of the state, was an astonishing innovation, one that reshaped the world. That’s hard to remember: we grow used to the ways we pay our bills and are paid for our work, to the dance of numbers in our bank balances and credit-card statements. It’s only at moments when the system buckles that we start to wonder why these things are worth what they seem to be worth. The credit crunch in 2008 triggered a panic when people throughout the financial system wondered whether the numbers on balance sheets meant what they were supposed to mean. As a direct response to the crisis, in October, 2008, Satoshi Nakamoto, whoever he or she or they might be, published the white paper that outlined the idea of Bitcoin, a new form of money based on nothing but the power of cryptography.
The quest for new forms of money hasn’t gone away. In June of this year, Facebook unveiled Libra, global currency that draws on the architecture of Bitcoin. The idea is that the value of the new money is derived not from the imprimatur of any state but from a combination of mathematics, global connectedness, and the trust that resides in the world’s biggest social network. That’s the plan, anyway. How safe is it? How do we know what libras or bitcoins are worth, or whether they’re worth anything? Satoshi Nakamoto’s acolytes would immediately turn those questions around and ask, How do you know what the cash in your pocket is worth?
This long, but very interesting essay was posted on the newyorker.com Internet site back on July 29 — and I thank Patricia Caulfield for sharing it with us. Another link to it is here.
It’s one of the world’s most exclusive clubs, known over the years as the Syndicate, the Central Selling Organization and the Diamond Trading Company.
For more than a century, De Beers has sold most of its rough diamonds to a select number of customers, a list that reads like a who’s who of the opaque gem-trading world. Tiffany & Co., Graff Diamonds and Signet Jewelers Ltd. all own subsidiaries in this group, guaranteeing a steady supply of gems with the pedigree of being vetted by De Beers.
In the diamond trading world, becoming one of De Beers’s elite buyers is viewed as essential to achieving success and making money. Now, it’s no longer so easy.
De Beers sells its gems through 10 sales each year in Botswana’s capital of Gaborone, and the buyers—known as “sightholders”—have to accept the price and the quantities they’re offered. It’s a system that originated in the 1890s and designed to benefit both miner and customer, who receives the diamonds at a discounted rate.
But the discount has been shrinking. In some cases the prices have been higher than the going trading rate, forcing customers to sell at a loss, according to people familiar with the matter. Some sightholders now struggle to make money from a business that was once highly lucrative.
The problems in the diamond industry are twofold. High-end jewelry sales are stagnating as other luxury offerings, like shoes, handbags and resort vacations, crowd the field. It’s also harder for diamond trading companies to find financing because banks are abandoning the sector after being hit by frauds and bad loans.
This interesting article put in an appearance on the bloomberg.com Internet site back on July 28 — and it comes to us courtesy of Swedish reader Patrik Ekdahl — and like the other two articles posted above, had to wait for my Saturday missive. Another link to it is here.
The People’s Bank of China (PBoC)- China’s central bank, says it added a further 9.96 tonnes of gold to its forex reserves in July – a seemingly particularly astute move given the strong recent advance in the gold price so far this month. This is just one of the world’s Central Banks adding regularly to its gold reserves this year. So far the PBoC says it has added a total of around 84 tonnes to its reserves over the first seven months of the year. However, the latest increase is yet another reduction in the level of its monthly reported reserve accumulations after adding 10.26 tonnes in June. China is thus tending to add rather less gold to its reserves than Russia which has announced additions of around 96.5 tonnes in the first half of the year. It won’t report any reserve increase for July for another couple of weeks (it usually announces any gold reserve increases on the 20th of the month).
Of course, as we have pointed out beforehand, the veracity of the actual reserve additions by China – or for any other central bank for that matter – is always open to question as reported figures are not independently audited. The PBoC has a track record of announcing what appear to be misleading statements regarding its gold reserves in the past in going for long periods of reporting zero increases and then announcing mega rises which must have been built up during the years and months of zero addition reporting. China has claimed in the past that this gold has been lodged in accounts it has not been required to report to the IMF and only reports this when it is merged into its forex figures at a time it feels appropriate to let the world know.
Overall though even the total amount of gold held by China in its reserves has been questioned by many analysts – some think it is actually considerably more than the total of a little under 2,000 tonnes currently reported to the IMF. The nation is thought to have a target of at least matching the U.S.’s reported holding of 8,133.5 tonnes (a figure which many also doubt given the resistance to it being audited). China is thought to believe that gold holdings may have an increasingly important role to play in any future global monetary re-alignment which may come about in the next few years.
This worthwhile commentary from Lawrie showed up on the Sharps Pixley website on Thursday — and another link to it is here.
The PHOTOS and the FUNNIES
Here are the last four shots from our trip through the Othello tunnels on the long-defunct Kettle Valley Railway right-of-way just outside of Hope, B.C. The first two are within the tunnel complex itself, the third was taken of the south portal — and the last one a few hundred meters along the railway right-of-way from the previous photo. The area on this side of the Pacific Coastal Range is all temperate rain forest — and received prodigious amounts of precipitation…mostly rain, except during the summer. Click to enlarge.
Plucked out of almost total obscurity by Burt Bacharach in early 1960s, this now 6-time Grammy Award-winning American singer had her first Top 10 single way back in November 1963 — and what a hit it was. I’ve posted this before, but it’s time for a revisit — and the link is here.
Today’s classical ‘blast from the past’ is one I hummed and hawed about for a bit before posting it in today’s column. I’ve featured it at least once before — and why it popped into my head at this particular time remains unknown. Of all of Mozart’s compositions, this certainly ranks in the Top 5…even the Top 3 for me. This particular performance was the one I posted last time, as I was totally blown away by it. I’ve heard this performed live on several occasions, but this performance tops all others. It’s Mozart’s Requiem Mass in D minor, Op. 626 which lay unfinished at the time of the composer’s death. The stories surrounding it are the stuff of legend…which Miloš Forman turned into the 1984 Oscar winning blockbuster, Amadeus. This performance runs for about 52 minutes — and the link is here.
For all intents and purposes, I looked on Friday as mostly a ‘care and maintenance’ sort of day…as gold was carefully closed below $1,500 spot — and silver below $17 spot.
I’m not sure what the short-term prospects are for these two precious metals, particularly gold, as the commercial net short position is wildly bearish on the surface…and not much better in silver, although the stuff ‘under the hood’ in yesterday’s COT and BPR suggests to Ted that JPMorgan continues to slide towards the exits in both precious metals.
That fact certainly doesn’t diminish the possibility of an engineered price decline in the near future because, as I mentioned in my COT discussion, they could pull it off in a New York minute if that was their wish.
But in the longer term, the prices of both will continue to rise as the economic, financial and monetary clouds continue to darken on a world-wide basis.
Here are the 6-month charts for all of the Big 6 commodities — and there’s not really a lot to see. But it should be noted once again that the Managed Money short position in copper was at a new record low as of Tuesday’s cut-off — and I suspect that virtually the same situation exists in WTIC as well. Click to enlarge for all.
Not even ten days has passed since the last FOMC meeting — and the talk of more rate cuts is in the air for their next meeting in September, if not sooner, as Trump called for a full 100 basis point cut in the Fed’s fund rate in a Tweet yesterday. The yield curve in the U.S. bond market has been fully inverted for a while now — and as Gregory Mannarino pointed out in his rant in my Thursday column, the 10-year will soon fall below the 2-year rate. I’m not a bond guy, but I know what this portends.
The powers that be are even more fully engaged in market management now than they have been in the past, particularly in the equity markets. The rallies in the Dow over the last few days, after big down openings, are more than proof of that.
Here’s a chart that Brad Robertson dropped into my in-box yesterday morning. It shows the S&P500 [as of April 2019] going back to around 1998 — and the enormity of the current ‘Everything Bubble’ is plain to see. Of course the ‘Everything Bubble’ doesn’t include the precious metals…for obvious reasons. However, that will change — and is already changing. This — and a falling dollar, brought about by an ever-declining Fed funds rate, are the headwinds that JPMorgan et al. are fighting. As I’ve said before, not only will they fail…they will fail spectacularly when the time comes…with the only question being whether it will be by circumstance, or design.
The world is in a deflationary spiral that they are no longer able to get out of, as all interest rates that aren’t already Zero Lower Bound, will be there at some point…including the U.S. and the rest of the Western world. It is a trap from which there is no escape using what’s left of conventional monetary policy, which is Doug Noland’s area of expertise. And if you you’re not reading his weekly blog, which is always posted in my Saturday column, you owe it to you to do so.
As far as I can tell from where we are in this downward spiral, the only possible way out is some sort of major inflationary event — and the only one that comes to mind is if the central banks finally get around to playing the gold card. It’s the only arrow they have left in their quiver, but as you are already keenly aware, they are loath to play it.
Of course we’re already starting to signs that it is breaking out on it own, despite the efforts of the world’s central banks and the BIS to manage its price.
The danger in that of course, is that once that genie is unleashed willingly or otherwise…good luck to them getting it back in the bottle, as the rush from paper assets into hard assets of any kind…particularly the precious metals, will be well-nigh impossible to stop until the stampede burns itself out.
But it’s a trap that the central banks and most western governments have been building ever since the U.S. went off the gold standard back in 1971. If the powers-that-be had allowed the precious metals and other commodities to gradually rise alongside the prices of other assets as world currencies were debased [Warburton: April 2001] then this issue would not exist today.
But they have kept hard asset prices in chains for over two generations now…Imperialism via the COMEX futures market — and when it all comes undone, as it will at some point, the current economic, financial and monetary system that has existed since that time, will vanish as well — and good riddance to it.
However, I do fear what might follow — and I’m still ‘all in’.
I’m done for the day — and the week — and I’ll see you here on Tuesday.