Ted Butler: On-the-Job Training

24 August 2019 — Saturday


The gold price crept quietly lower until shortly before 1 p.m. China Standard Time on their Friday afternoon — and then crawled a bit higher starting at the 2:15 p.m. afternoon gold fix in Shanghai.  From shortly after the London open it traded flat until exactly 1:00 p.m. BST/8:00 a.m. in New York. The price jumped up at that juncture, but really took off around 10:15 a.m. EDT when Trump went on a Tweet storm rampage…according to Gregory Mannarino.  The price was capped/ran out of gas about 11:20 a.m. EDT — and it chopped and flopped around from there until trading ended at 5:00 p.m. in New York.

The low and high ticks were reported by the CME Group as $1,496.90 and $1,534.00 in the October contract — and $1,503.00 and $1,540.30 in December.

Gold finished the Friday session in New York at $1,526.60 spot, up $29.10 from Thursday’s close.  Net volume was sky high at around 446,000 contracts — and there was 28,000 contracts worth of roll-over/switch volume in this precious metal.

And here’s the New York Spot Gold [Bid] chart from Kitco as well, so you can see all the fine detail of yesterday’s price move from 8:00 a.m. EDT — and until trading ended at 5:00 p.m.

The price activity in silver was virtually the same as it was for gold, including all the major price inflection points, so I won’t bother with the play-by-play in this precious metal.

The low and high ticks in silver were recorded as $16.96 and $17.465 in the September contract.

Silver was closed at $17.395 spot, up 39 cents on the day and, like gold, would have closed far higher than that, if allowed.  Net volume was nothing special at just under 56,500 contracts, but roll-over/switch volume out of September and into future months was extremely heavy — and virtually the same as net volume, at something over 56,500 contracts…most of which ended in the next new front month for silver, which is December.

And here’s the New York Spot Silver [Bid] chart from Kitco as well — and you can see it certainly appears as if the price was being aggressively capped at the $17.44 spot price mark in after-hours trading yesterday.

The platinum price was up a small handful of dollars by shortly after 10 a.m. in Zurich trading — and then it was sold lower until 9 a.m. in New York.  From that point it took off higher — and the high tick of the day came at the 11 a.m. EDT Zurich close.  It was hammered lower from there until minutes after 1 p.m. EDT.  It then rallied a bit until shortly before 3 p.m. in the thinly-traded after-hours market, but was sold a few dollars lower into the 5:00 p.m. close from there.  Platinum was closed at $855 spot, exactly unchanged from Thursday.  ‘Da boyz’ were taking no prisoners in platinum yesterday.

Palladium had a down/up move between 8 a.m. China Standard Time on their Friday morning — and minutes after 10 a.m. in Zurich — and it was up about 5 bucks at that juncture.  The price pressure began at that point — and became far more intense at 2 p.m. CEST/8 a.m. EDT.  The low tick was set at 9 a.m. in New York, just like it was for platinum — and every rally attempt after that got hammered into the dirt.  From about 11:40 a.m. EDT onwards, the palladium price didn’t do much of anything.  Palladium was closed at $1,441 spot, down 27 dollars on the day.

It’s obvious that both platinum and palladium would have finished in positive territory by very respectable amounts on Friday…but ‘da boyz’ said “no más“.

The dollar index closed very late on Thursday afternoon in New York at 98.17 — and opened up about two basis points once trading commenced around 7:45 p.m. EDT on Thursday evening, which was 7:45 a.m. China Standard Time on their Friday morning.  It crawled very quietly and evenly higher from that point — and the 98.45 high tick was set somewhere around 12:10 p.m. in London.  It began to head quietly lower from there.  The trap door opened at 10:40 a.m. in New York — and it was virtually all down hill right into the 5:30 p.m. EDT close — and the DXY chart below shows the close as 97.38…but somehow it was marked up to show a close of 97.64…down 53 basis points from Tuesday.

I’m not sure what should be read into that ‘adjustment’, but I expect we’ll find out around 6:30 p.m. on Sunday evening EDT when the currencies begin to trade in the Far East on their Monday morning.

Here’s the DXY chart from Bloomberg for the Friday trading session — and you can see this dichotomy for yourself.  Click to enlarge.

And here’s the 5-year U.S. dollar index chart, courtesy of the good folks over at the stockcharts.com Internet site.  The delta between its close…97.53…and the close on the DXY chart above, was 11 basis points on Friday.  Click to enlarge as well.

The gold shares gapped up a percent and change at the 9:30 open in New York on Friday morning — and then didn’t do much until the gold price blasted higher around 10:20 a.m. EDT.  The shares followed enthusiastically — and their respective highs came around 2:40 p.m.  Then then edged a hair lower into the close.  The HUI finished higher by a very respectable 4.59 percent.

It was virtually the same price path for the silver equities — and Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed higher by 4.84 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.

With some obvious volatility along the way, I’m certainly expecting many more days like this in the weeks and months ahead, as the “Print, or die” phenomenon gets cranked up on a world-wide basis during the remainder of this year — and beyond.

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’s a sight to behold, as everything silver related outperformed everything gold related.  That’s a trend that I expect to see continue — and intensify, as this bull market in the precious metal unfolds before us.  Click to enlarge.

Here’s the month-to-date chart — and the big sell-offs in both gold and silver earlier this month took their toll on the performance of everything over this time period.  The gold stocks are outperforming their golden brethren, but not by the amount they should be — and continuing suppression of the silver price is certainly more obvious in this chart. Click to enlarge.

Here’s the year-to-date chart — and JPMorgan et al.’s near death grip on the silver price is readily apparent in its lack-lustre price gains relative to gold — and in the underlying values of the associated stocks as well.  That will certainly change at some point — and yesterday’s price action was certainly a harbinger of things to come.  Click to enlarge.

It still remains to be seen if JPMorgan et al. can pull off another round of engineered price declines in both silver and gold, especially considering the current financial and monetary environment that they’re facing.  However, as I point out in The Wrap section below, the current structure of the COT Report may not matter any more.  But the amount of physical silver [and gold] that’s disappearing into all the world’s ETFs and mutual funds at the moment shows that the walk towards physical precious metal ownership is quickly turning into a run.  The panic into them is yet to come.

The CME Daily Delivery Report was posted about an hour late on their website last night…around 10:50 p.m. EDT — and when I saw the numbers, I understood why.  It showed that 2,009 gold and zero silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.

In gold, the only short/issuer that mattered was Citigroup, which issued 1,853 contracts out of its in-house/proprietary trading account.  That was the entire amount, to the contract, that they had stopped for their own account earlier this month — and it’s a given that Ted will have something to say about it in his weekly review later today.  In very distant second place was Morgan Stanley with 143 contracts out of their client account.

There were 6 long/stoppers in total — and three biggest by far were JPMorgan, picking up 1,300 contracts in total…993 for its own account, plus another 307 for its client account.  In distant second place was Australia’s Macquarie Futures, stopping 487 contracts for its own account as well.  In distant third place was Advantage, stopping 163 for its client account.

On top of that, the CME Group stopped 9 contracts for its own account, which it immediately reissued as 9×10=90 of the ten-ounce COMEX gold mini contracts.  ADM and Advantage were the only two stoppers, picking up 54 and 36 contracts for their respective client accounts.

The link to yesterday’s Issuers and Stoppers Report is here — and is worth a look if you have the interest.

So far in August, there have been 8,402 gold contracts issued/reissued and stopped — and that number in silver is 1,997…which is a record number for a non-delivery month for silver.

The CME Preliminary Report for the Friday trading session, which didn’t appear on the CME’s website until around 1:15 a.m. EDT on Saturday morning, showed that gold open interest in August rose by another huge amount…835 contacts, leaving 2,222 still open, minus the 2,009 contracts mentioned several paragraphs ago.  Thursday’s Daily Delivery Report showed that 63 gold contacts were actually posted for delivery on Monday, so that means that 835+63=898 more gold contracts just got added to the August delivery month.  This level of activity at the end of a delivery month is virtually without precedent.  The long/stoppers wanted it bad — so the short/issuers had to deliver it.  Silver o.i. in August is unchanged at zero contracts, as silver deliveries in August are all done.

With the September delivery month in silver upon us late next week, one has to wonder if it will end up as big a blockbuster delivery month as it was for gold in August.  I’ll have more to say about this in The Wrap.

There were deposits in both GLD and SLV on Friday.  An authorized participant added 160,360 troy ounces of gold to GLD — and another a.p. added another 1,590,537 troy ounces of silver to SLV.

One can only fantasize as to how much these two ETFs, plus the others in the world, are owed after Friday’s price action.

In the other ETFs on Planet Earth yesterday, there was only 532,000 troy ounces added to the silver ETFs on a net basis — and that number in gold showed that a net 135,000 troy ounces was actually withdrawn.

For the week just past, Nick’s charts show that 543,000 troy ounce of gold, along with 10.79 million troy ounce of silver were added [on a net basis] to all know depositories, mutual funds and ETFs as of the close of business on Friday.  I’ll have those charts in Tuesday’s column.

There was no sales report from the U.S. Mint on Friday.

Month-to-date the mint has sold 5,500 troy ounces of gold eagles — 1,000 one-ounce 24K gold buffaloes — 869,000 silver eagles…plus 69,500 of those ‘American the Beautiful’ 5-ounce silver coins.  This is beyond pathetic — and far worse than even July’s U.S. Mint sales.

The Royal Canadian Mint finally got around to releasing their Q2/2019 report — and there’s even less information in this one than there was in the Q1/2019 report.  However, they did report dramatically increased sales in silver bullion products.  Here’s the snip from Page 8 of their Q2 financial statement, which is linked hereClick to enlarge.

The only activity in gold over at the COMEX-approved depositories on the U.S. east coast on Thursday, was 96.450 troy ounces/3 kilobars [U.K./U.S. kilobar weight] that were shipped out of the Manfra, Tordella & Brookes, Inc. depository — and I won’t bother linking this.

There was virtually no activity in silver, either…as only 2,999 troy ounces/3 good delivery bars were reported received at Delaware.  Nothing was shipped out.  I won’t bother linking this, either.

It was also a nothing day over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday.  Exactly 2 of them were dropped off at Brink’s, Inc.  — and nothing was shipped out.  Needless to say, this activity isn’t worth linking, either.

The Commitment of Traders Report for positions held at the close of COMEX trading on Tuesday, August 20 showed fairly impressive increases in the commercial net short positions in both silver and gold, so my hopes/expectations were very far off the mark — and Ted was certainly correct in passing on any sort of prediction.

In silver, the Commercial net short position increased by a healthy 5,630 contracts, or 28.1 million troy ounces of paper silver.

They arrived at that number by decreasing their long position by 1,539 contracts — and they also added 4,091 short contracts.  It’s the sum of those two numbers that represents their change for the reporting week.

Under the hood in the Disaggregated COT Report it was all Managed Money traders and much more, as they reduced their long position by 246 contracts — and they also reduced their short position by a chunky 10,182 contracts.  It’s the difference between those two numbers…9,936 contracts…that represents their change for the reporting week.

The difference between that number — and the change in the Commercial net short position…9,936 minus 5,630 equals 4,306 contracts…was made up, as it must be, by the traders in the other two categories.  Both categories decreased their net long position…the ‘Other Reportables’ by 2,491 contracts — and the ‘Nonreportable’/small trader category by 1,815 contracts.

Most of the heavy lifting in the commercial category was done by traders in the Swap/Dealer category…as not much happened in the Producer/Merchant category…where the big banks hang out.  For that reason, Ted figures that JPMorgan didn’t do much of anything during the reporting week — and at the most increased their short position by a paltry 1,000 contracts.  But he’s still inclined to leave JPMorgan’s short position unchanged from last week, which was 15,000 contracts.

The Commercial net short position in silver is back up to 354.3 million troy ounces.

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

Of course, after yesterday’s price activity in silver…which I thought to be short covering…the above data regarding silver is very much “yesterday’s news”.  We’re also heavily into the final days of roll-over/switch activity out of the September contract — and that also adds to “yesterday’s news” scenario.

In gold, the commercial net short position increased by a rather hefty 12,523 contracts, or 1.25 million troy ounces of paper gold.

They arrived at that number by reducing their long position by 3,415 contracts — and they also added 9,108 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 the Managed Money traders made up for a bit less than half the change.  They only added 4,065 long contracts — and they reduced their short position by 2,170 contracts…for a total of 6,235 contracts.

The difference between that number — and the change in the commercial net short position…12,523 minus 6,235 equals 6,288 contracts.  That difference, as it must be, was made up by the traders in the ‘Other Reportables’ and ‘Nonreportable’/small traders categories…as both increased their net long positions during the reporting week…the former by 3,668 contracts — and the latter by 2,620 contracts.

The commercial net short position in gold now sits at 33.62 million troy ounces, which is another record high number for this move.

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

Yesterday’s price action in gold also looked like a short covering rally to me as well.  And if it was one, as Ted pointed out on the phone yesterday, it’s only the beginning.  That applies to silver too.  Ted has said in his past commentaries that the Big 8 traders [sans JPMorgan] are facing record non-realized loses, as the margin calls continue to mount.  Whoever it was that was covering short positions yesterday…if indeed it was a short covering rally…lost the least amount of money.  Those who follow, will suffer larger loses as silver and gold price are driven higher.  I’ll have more on this in The Wrap.

In the other metals, the Manged Money traders in palladium increased their net long by a tiny 281 contracts.  The Managed Money traders are net long the palladium market by 10,477 contracts…about 46 percent of the total open interest.  Total open interest in palladium is 22,902 COMEX contracts.  In platinum, the Managed Money traders decreased their net long position by a further 3,512 contracts during the reporting week.  The Managed Money traders are now net long the platinum market by only 3,035 COMEX contracts…3.9 percent of the total open interest.  The traders in the other two categories are net long platinum big time.  In copper, the Managed Money traders decreased their net short position in that metal by 6,676 COMEX contracts during the reporting week — but are still net short the COMEX futures market by a eye-watering 63,336 contracts, or 1.58 billion pounds of the stuff…just off their record short position from two weeks ago. That’s 22.5 percent of total open interest…which is a preposterous amount.

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 136 days of world silver production, which is up 7 days from last week’s report — and the ‘5 through 8’ large traders are short an additional 70 days of world silver production, down 1 day from last week’s report — for a total of 206 days that the Big 8 are short, which is about seven months of world silver production, or about 481 million troy ounces of paper silver held short by the Big 8. [In the prior week’s COT Report, the Big 8 were short 200 days of world silver production.]

In the COT Report above, the Commercial net short position in silver was reported as 354 million troy ounces.  As mentioned in the previous paragraph, the short position of the Big 8 traders is 481 million troy ounces.  The short position of the Big 8 traders is larger than the total Commercial net short position by 481 minus 354 equals 127 million troy ounces.

The reason for the difference in those numbers…as it always is…is that Ted’s raptors, the 41-odd small commercial traders other than the Big 8, are net long that amount.

As I mentioned in my COT commentary in silver above, Ted figures that JPMorgan is short around 15,000 COMEX silver contracts…unchanged from the prior week’s COT Report.

15,000 COMEX contracts is 75 million troy ounces of paper silver, which works out to around 32 days of world silver production…the middle of the pack of the Big 4 traders…as per the next paragraph.  Citigroup is still in the No. 1 spot as the biggest short in silver — and JPMorgan is No. 2.

The Big 4 traders in silver are short, on average, about…136 divided by 4 equals…34 days of world silver production each.  The four traders in the ‘5 through 8’ category are short 70 days of world silver production in total, which is 17.5 days of world silver production each, on average.

The Big 8 commercial traders are short 40.4 percent of the entire open interest in silver in the COMEX futures market, which is a tiny increase from the 40.0 percent they were short in last week’s report.  And once whatever market-neutral spread trades are subtracted out, that percentage would be something around the 45 percent mark.  In gold, it’s now 47.0 percent of the total COMEX open interest that the Big 8 are short, up a bit from the 45.5 percent they were short in last week’s report — and something over 50 percent, once the market-neutral spread trades are subtracted out.

In gold, the Big 4 are short 65 days of world gold production, up 4 days from what they were short in last week’s COT Report.  The ‘5 through 8’ are short another 32 days of world production, down 1 day from what they were short last week…for a total of 97 days of world gold production held short by the Big 8…up 3 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…up 2 percentage points from last week’s COT Report.

The “concentrated short position within a concentrated short position” in silver, platinum and palladium held by the Big 4 commercial traders are about 66, 69 and 78 percent respectively of the short positions held by the Big 8.  Silver is up 2 percentage point from a week ago, platinum is unchanged from last week — and palladium is down about 1 percentage point from a week ago.

The Valchitran Treasure is a Thracian treasure. It was discovered on 28 December 1924 by two brothers who were working in their vineyard near the village of Valchitran, 22 km southeast of Pleven, Bulgaria.  They did not realize the find’s value and even tried to cut the objects and use them as farm tools. Small portions of some of the items were damaged, but, in general, the treasure has been well kept since then.

The finding is dated to the late Bronze Age. Its overall weight testifies to  the wealth of the Thracian rulers of that time. The objects in the collection are among the most remarkable examples of ancient metalwork.

The hoard consists of 13 receptacles, different in form and size — and weighs in total 12.5 kg:

  • two round platters
  • five round domed pieces, two with central handles
  • three cups with handles
  • a jug with handle
  • three leaf shaped vessels with handles
  • a bowl with two handles (4.5 kg of gold)

The gold metal has a natural mixture of 9.7% silver. The scientists dated the treasure back to 1300 B.C., at the time of the Thracians.  It is now one of the most valuable possessions of the National Archaeological Museum in Sofia.  Click to enlarge.

I have a lot of stories/articles and audio/video commentaries for you today….including a few that I’ve been saving for today’s column for the usual length and/or content reasons.  This should keep you off the streets for a while.


Trump Hikes Tariffs on Chinese Goods in Retaliation to Trade War Escalation

As widely expected, and as he himself previewed earlier in the day, Trump was set to unveil a major development in the U.S.-China trade war this afternoon. That happened moments ago, when the president, in a series of 4 tweets, confirmed that he indeed was hiking tariffs on both existing and future China tariffs.

Specifically, Trump announced that in response to the $75 billion in tariffs that China just imposed on the U.S. this morning – which “should not have” been put on as they were “politically motivated” – starting October 1, the existing 25% tariffs on $250BN in Chinese goods would rise to 30%, and the 10% tariffs on $300 billion in Chinese goods set to begin on September 1 will be 15%.

Of course, all of this was perfectly predictable the moment Jerome Powell underwrote Trump’s trade war, when he said on July 31 the Fed is now focusing on “global developments“, effectively assuring he would keep cutting rates the more trade war between the U.S. and China escalated.

And now we await China’s retaliation as Beijing has no choice but to retaliate again in tit-for-tat fashion, and is likely to hike the rate on its own tariffs targeting U.S. goods, which will then prompt Trump to raise tariffs even more, at which point China will retaliate in kind, until eventually all trade between the U.S. and China grinds to a halt, at which point the question is which country will succumb to recession and/or social unrest first.

Meanwhile, the real news this afternoon, is that there was still no announcement of currency intervention by Trump, or rather not yet. We expect that to come some time in the next 2-4 weeks.

This worthwhile Tweet-filled Zero Hedge commentary showed up on their Internet site at 5:09 p.m. EDT on Friday afternoon — and another link to it is hereGregory Mannarino‘s 25-minute rant after the markets closed in New York yesterday is linked hereand it’s a goody!  I thank Roy Stephens for sending it along.

In Unprecedented, Shocking Proposal, BOE’s Mark Carney Urges Replacing Dollar With Libra-Like Reserve Currency

After Jerome Powell’s neutral-to-slightly-dovish-but-mostly-boring speech on Friday morning, investors could be forgiven for suspecting that this year’s Fed-sponsored gathering in Jackson Hole might be disappointingly dull (especially with all that’s going on in Trump’s twitter feed, the escalating trade war and escalating geopolitical unrest).

Then along came former Goldman banker and current (outgoing) BOE governor, Mark Carney, who in his lunchtime address laid out a shocking, radical proposal – perhaps the most stunning thing to ever be unveiled at Jackson Hole – urging to replace the U.S. Dollar with a “Libra-like” reserve currency in a dramatic revamp of the global monetary, financial and economic order.

Of course, such a new system would bring about the end of U.S. hegemony, and effectively end the dollar-based global financial system, dramatically scaling back the U.S.’s influence in the global economy, and making rising powers like China and Russia critical players an increasingly multipolar world…. especially if they propose a gold-backed dollar alternative to the world. That this would quickly emerge as the new reserve currency – together with whatever stablecoin/crypto central bankers deign to be the dollar’s replacement – goes without saying.

Carney’s proposal comes just a few months before he’s due to step down from his position leading the Bank of England.

We note that, because it is a well known fact that central bankers tend to speak the truth once they have quit their position of power and influence. Yet it is quite shocking for Carnery to do so while still in office; the bottom line, Carney sounded like nothing less than an Austrian-school economist, who admits that the existing neo-liberal/Keynesian system has collapsed.

Speaking to fellow policy makers and academics at Jackson Hole, Wyoming, he said that in the short term central bankers must deal with the situation as it is. But he also warned that “blithe acceptance of the status quo is misguided,” and dramatic steps will ultimately be needed. It’s what he said next that was stunning:  “In the longer term, we need to change the game,” Carney said. “When change comes, it shouldn’t be to swap one currency hegemon for another.”  [Emphasis from ZH – Ed]

This really interesting article was posted on the Zero Hedge website at 3:48 p.m. on Friday afternoon EDT — and another link to it is here.  The Bloomberg commentary on this is headlined “Carney Urges Libra-Like Reserve Currency to End Dollar Dominance” — and I found that in a GATA dispatch yesterday.

Doug Noland: Trade War Escalation and Bombs

Beyond the obvious major ramifications of an escalating China/U.S. trade war, expect intensifying debate regarding the mental stability of our Commander and Chief. The President’s, “My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?” is especially alarming. Any suggestion that Chairman Powell is an enemy of the people crosses the line.

Having a disagreement with Federal Reserve monetary management is one thing. The President villainizing the head of the Federal Reserve in the current environment only further undermines a critical institution at a time of troubling market, economic, social and geopolitical instability. And doing so right after Powell delivered a Jackson Hole speech widely viewed as balanced and positively received by the markets does not instill confidence in the President’s rationality. That Friday’s tweets followed by a couple days the bizarre exchange over Greenland and the cancellation of the President’s state visit to Denmark is further disconcerting. And it’s worth recalling that the President threatened China with new tariffs back on August 1st over the objections of his advisors.

And so much for “good friend.” I’ll assume affixing the “enemy” label to Xi Jinping denotes serious trade war escalation. The “We don’t need China and, frankly, would be far better off without them” is frighteningly delusional. Along with the majority of Americans, I’ve believed a tougher stance with China was overdue. Yet I’ve also voiced serious concerns that the President’s abrasive and condescending approach with Beijing stood a low probability of success – with not insignificant odds of dangerous fallout.

Doug’s weekly commentary is always a must read for me — and this one is no exception. It was posted on his Internet site in the very wee hours of Saturday morning — and another link to it is here.

Germany May Abandon Its Beloved Black Zero

For years now, a balanced federal budget, known here in Germany as the “schwarze Null,” or black zero, without any fresh borrowing, has been a permanent fixture of German fiscal policy. After four decades of chronic borrowing to finance the German national budget, the shift stood for the renunciation of the debt state and became a symbol of sound policy.

But now the issue is the subject of debate again — not only due to expensive political plans, but also the threat of a recession in Germany. For now, the federal government is still sticking to its policy of a balanced budget. At the beginning of last week, Chancellor Angela Merkel of the conservative Christian Democratic Union (CDU) party announced she would continue to strive for a federal budget that doesn’t contain any new borrowing.

Her vice-chancellor, Finance Minister Olaf Scholz of the center-left Social Democratic Party (SPD), hastened to agree with her. But what about the country’s plan to eliminate the “solidarity tax” it implemented after German reunification? Or intended spending on climate protection? Or the possibility of an economic slowdown? “We can accomplish the tasks at hand without accruing new debt,” Scholz said.

The two most senior members of the German government expressing their commitment to a balanced budget is by no means self-evident. The idea of forgoing any new borrowing in the future has increasingly come under pressure in recent weeks, particularly among Schulz’s fellow Social Democrats, which are the junior partner in Merkel’s coalition government. The party is currently searching for a new leader and candidates for the SPD’s top job no longer want anything to do with a balanced budget, which is enforced in the form of a so-called “debt brake” that has been part of the German constitution since 2011. They see it as an obstacle to implementing their policies.

Efforts to loosen fiscal policy in Germany have broad support from many prominent economists across the country. For months now, economists from all sides of the fiscal spectrum — from Marcel Fratzscher, head of the economic think tank DIW Berlin, to Michael Hüther from the employer-friendly German Economic Institute — have been calling on the country to take out more loans. To many, the debt brake’s requirement that the federal government’s cyclically adjusted new debt not exceed 0.35 percent of gross domestic product (GDP), or about €12 billion, is increasingly viewed as a corset that constrains the economy.

This long article showed up on the German website spiegel.de on Thursday sometime — and I thank Roy Stephens for sending it our way.  Another link to it is here.

Radio Silence: German-U.S. Ties Are Breaking Down

When it comes to fostering relations between Germany and the United States, the Atlantik-Brücke in Berlin is the most important player. For almost 70 years, the non-profit organization has worked, according to its statutes, to “deepen the collaboration between Germany, Europe and America on all levels.”

The American ambassador usually plays a key role in this process. When a new chief U.S. diplomat arrives in the German capital, the Atlantik-Brücke organizes a big dinner, an event that has become a regular tradition.

When U.S. Ambassador Richard Grenell took up his posting in Germany last year, there were plans to welcome him according to that custom, but Grenell didn’t want to. He wasn’t interested.

The ambassador also turned down the invitation to speak at a meeting of the organization’s members in late June of last year. Nor did Grenell want to hold a talk at the ensuing barbecue, where he was described as the “guest of honor.” He instead gave two students an interview that mostly centered on his dog and its importance to the ambassador’s life. Then he disappeared again.

Since then, there has been radio silence between Donald Trump’s representative in Berlin and the most important German-American lobby group. The only thing that exceeds Grenell’s demonstrative disinterest in the Atlantik-Brücke, it seems, is his pretension to power. When it comes to who should lead the group, the U.S. ambassador still wants to have his say.

This very interesting, but very long essay put in an appearance on the spiegel.de Internet site on Wednesday — and for obvious reasons, had to wait for today’s column.  I thank Larry Galearis for sharing it with us — and another link to it is here.

The Yuan Is Crashing

According to CNBC, Trump is currently meeting with his trade aides to decide what additional measures and tariffs to declare against China, and if there is one currency that Trump’s economic team is currently keeping an eye on it is China’s yuan.

What said team is seeing is nothing short of carnage, because – somewhat paradoxically – even as the Bloomberg dollar index is plunging ever since Trump unleashed his tirade targeting China for daring to retaliate to U.S. tariffs, the offshore yuan is plunging even more, tumbling below 7.13 – a new 11.5 year low – in what the White House can correctly interpret as official intervention to weaken the currency which should be rising against the greenback, yet is doing precisely the opposite.  Click to enlarge.

Which brings us to the only possible question: when will the U.S. intervene in the FX market, and how much offshore Yuan will the U.S. Treasury buy? As a reminder, the U.S. could deploy up to $146 billion in yuan purchasing power if intervention was launched, the combination of the Treasury’s Exchange Stabilization Fund and the central bank’s firepower.

If an intervention does go ahead, I think the U.S. would probably target specific currencies such as the renminbi, rather than attempt to achieve broad-based dollar weakness,” said Stephen Oh, global head of credit and fixed income at PineBridge Capital, which manages $97bn of assets.

The only question then is how will China respond. And luckily, we wrote an article on precisely that last night, and noted that top Chinese bankers in London warned that the “drama” that would follow any U.S. attempt to weaken the dollar by intervening in renminbi markets — a move that would be seen by Beijing as a “political act.” A hostile “political act.”

Yet such an act looks increasingly likely after Trump has repeatedly taken aim at China (and Europe) both on Twitter and elsewhere for “playing currency games” as the trade war has morphed into a currency war, if not a full-blown one yet.

How likely is that the U.S. and China would launch all out currency war at each other in the FX market?

It’s on now, dear reader…as is a full-blown trade war.  This worthwhile 1-chart Zero Hedge story was posted on their website at 12:18 p.m. EDT on Friday afternoon — and I thank Brad Robertson for pointing it out.  Another link to it is here.

The Greatest Political Leader of All Time — Bill Bonner

We’ve known a few politicians personally.

Some were earnest and honest, merely trying to guide the feds toward sensible policies.

Some were empty-headed scoundrels, enjoying the fame and power of the political limelight.

And some were real sociopaths, sure that they knew what was best for people and eager to make sure they got it good and hard.

The trouble with the honest ones was that they never seemed to understand their own métier.

Earnest, well-meaning men and women are disarmed; they have no more place in politics than a vegan in a steakhouse or a virgin in a cat house. That leaves the field open to the rogues and the criminally insane.

The rascals are sometimes fun to watch. The insane ones are often dangerous.

Every decent citizen knows that politicians are the chief threat to his liberty and his prosperity; he despises and distrusts them all.

And one of the great failures of modern democracy is how few of them are hung.

This rather whimsical and comical commentary from Bill appeared on the bonnerandpartners.com Internet site early on Monday morning EDT and, unfortunately, it’s not very far from the truth.  Another link to it is here.

Greenland: Trump’s MAGA Idea! — Patrick Buchanan

After the Spanish-American War of 1898, William McKinley would make us an imperial power by annexing Puerto Rico, Hawaii, Guam and the Philippines, the last in a brutal war that cost 200,000 Filipino lives.

McKinley’s successor, Theodore Roosevelt, would engineer the secession of Panama from Colombia and America’s acquisition of the Canal Zone.

I took Panama!” boasted T.R.

Ronald Reagan’s opposition to Jimmy Carter’s transfer of the Canal Zone and the canal itself to Panama would prove crucial to Reagan’s 1980 nomination and rout of Carter in a 44-state landslide.

Harry Truman also wanted to acquire Greenland, and in 1946, he offered Denmark $100 million in gold. The Danes declined, though they had sold the Virgin Islands to Woodrow Wilson in 1917.
How, then, did America acquire her vast territory?

By revolution, purchase, invasions, annexations, war, theft and expulsions — of French, British, Mexicans, Spanish and Native Americans. Quite a record.

While Trump’s diplomacy in the Greenland matter was not as deft as Seward’s in acquiring Alaska, the attitude exhibited would not be unfamiliar to many of the great men in our history.

And the cancellation of Trump’s state visit to Copenhagen aside, this issue of Greenland’s future has been tabled. It is not going away.

I know Thule, Greenland very well…having been there at least a dozen times back in the early 1970s.  If there were any resources worthy of the name in that forsaken land, they would have been exploited already.  Virtually of all of Greenland is covered by about two miles of ice — and bedrock is thousands of feet below sea level.  This is purely a strategic military move on the part of the American Empire. This rather, interesting but alarming commentary from Pat appeared on his Internet site on Friday — and I thank Phil Manuel for bringing it to our attention.  Another link is here.

Chinese Scientists warn of imminent Global Cooling

Climate change is real, the climate changes — this fact is never disputed. A new study, led by prominent Chinese scientists, has found that winters in northern China have been warming for the past 6,000 years –unrelated to human activity– but now the prospect of a sudden and severe bout of global cooling is on the horizon and poses a serious danger.

The paper, which has been accepted for publication by the online Journal of Geophysical Research, found that winds from Arctic Siberia have been growing weaker for thousands of years, the conifer tree line has been retreating north, and there has been a steady rise in biodiversity in a general warming trend that continues today. And that’s another thing AGW alarmists fail to address — increasing temperatures ALWAYS result in increased biodiversity. Life loves warmth, and, furthermore, it loves carbon.

This weakening of the Siberian wind, according to the researchers, appears to have nothing to do with the increase in greenhouse gases which began with the industrial revolution. Lead scientist Dr Wu Jing, from the Chinese Academy of Sciences, said the study had found no evidence of human influence on northern China’s warming winters.

Driving forces include the sun, the atmosphere, and its interaction with the ocean,” Wu explained. “We have detected no evidence of human influence. But that doesn’t mean we can just relax and do nothing.”

Wu and her colleagues are worried that, as societies become further indoctrinated by the concept of global warming, people will develop a misplaced confidence in our ability to control the climate — which we cannot. Nature, they warned, will likely trick us and catch us totally unprepared — potentially causing chaos, panic, famine and even wars.

As I’ve been careful to point out in my various postings on climate change over the years…I’m far more concerned with the possibility of global cooling at this stage of the solar cycle, than I have ever been of global warming.  This rather brief essay appeared on the electroverse.net website on August 14, 2019 — and for obvious reasons it had to wait for my Saturday column.  It comes to us courtesy of Roy Stephens — and another link to it is here.

Russia’s President Putin Cancels VAT on Gold and Other Precious Metals Investments

Russian President Vladimir Putin signed a law eliminating the value-added tax (VAT) on investments in gold and other precious metals.

The signed bill was reported by Russian media, citing the Official Internet Portal Of Legal Information.

The law makes banking operations involving precious metals (excluding coins), as well as investments into precious metals bank accounts, to be tax-free by eliminating the 20% VAT tax. The new law, however, does not mention anything about the 20% VAT on physical purchases of precious metals.

Russian newspaper Izvestia estimates that in the next five years the demand for precious metals like gold and silver could surge up to 50 tonnes a year, which is an increase of 15 times from current levels.

Investments in gold will become one of the main ways of accumulating funds in the state treasury since the metal is protected from the U.S. dollar inflation,” the newspaper wrote.

Well, Putin couldn’t have picked a more auspicious day to do it…regardless of whatever shortcomings the bill may have…which we may find out more about as time progresses.  This news item, which I found on Sharps Pixley, appeared on the kitco.com Internet site at 3:51 p.m. EDT on Thursday afternoon — and another link to it is here.

The Silver Price Surges Higher as Mine Supply Falls in Top Producing Countries

As the silver price rally continues, mine supply from three of the top producing countries fell significantly this year.  Peru, Chile, and Mexico all reported declines in silver mine supply in the first half of the year, with Peru suffering the largest drop-off.  With these three countries accounting for 45% of total global silver production, a reduction in mine supply can impact the overall market.

According to the mine supply data reported by each country, Peru’s silver production is down 10% in the first half of the year, while Chile fell 7% and Mexico was lower by 4% (Jan-May). The total decline in silver production from these three countries in just the first half of the year is 12 million oz (Moz):  Click to enlarge.

I could not get the total mine supply data for Russia, but its largest primary silver mining company, Polymetal, reported a 15% decline in silver production for 1H 2019 vs. the same period last year. So, it seems that many countries are showing declines in silver mine supply this year, right when the silver price has broken above a 6-year resistance level.

This chart-filled commentary from the srsroccoreport.com Internet site yesterday, was something Jim Gullo sent our way — and another link to it is here.

Ted Butler: On-the-Job Training

Tuesday’s announcement by the Justice Department of a guilty plea by a long term former trader from JPMorgan for spoofing COMEX precious metal futures was the second such guilty plea since October. Both traders are cooperating in the DoJ’s ongoing investigation.

While it took way too long for the Justice Department and the CFTC to finally crack down on spoofing, I suppose it’s a case of better late than never. And there can be little doubt that the regulators have cracked down on the illegal practice, which involves the entry and immediate cancellation of large orders solely designed to manipulate prices in the short term.

But there is another aspect of Tuesday’s announcement that pertains strictly to JPMorgan of all the firms where spoofing has occurred. Only at JPMorgan has the Justice Department alleged that the two traders pleading guilty had learned the practice from more senior traders at the bank and spoofed with the full knowledge and consent of their immediate supervisors. Those are the Justice Department’s words, not mine. This brings new meaning to the term — on-the-job training.

The two traders pleading guilty had worked at JPMorgan for more than a decade, making them each around 23 years old when they began their careers at JPMorgan. I remember what it was like getting a job at a prestigious financial firm at such a young age when I began working at Merrill Lynch nearly 50 years ago. Like the two former JPM traders, I felt lucky to have been given the opportunity to work in such a profession and would do anything I could to succeed at it. If someone told me to jump – I would have asked, how high? I wouldn’t have done anything illegal, but at twenty-something years of age, I’m not sure I would even know for sure what was illegal. How much do we really know at 23 years of age?

This short and to-the-point commentary from Ted was posted on the silverseek.com Internet site at 2:15 a.m. MDT [Mountain Daylight Time] on Friday morning  — and for that reason, it didn’t make by Friday column.  It’s certainly worth reading — and another link to it is here.

Ted Butler: 100+ Million Ounce Silver Trade…J.P. Morgan Busted Again — Interview

Another long-time JP Morgan precious metals trader busted by the U.S. Justice Department this week.

In the last three months, we have witnessed over 100+ million troy ounces of silver bullion flow into three significant silver ETFs…an amount of silver bullion nearly equivalent to both the 1980 Hunt Brothers and late pre-2000 Warren Buffett Berkshire Hathaway silver hoards.

This week, we speak with multi-decade silver analyst Ted Butler about these big silver news items and more.

We discuss who is possibly making a multi-billion dollar move into the physical silver investment market and what this kind of movement may portend for some of the precious metal derivative trading entities on the short side of silver moving ahead.

This 39-minute audio interview with Ted begins at the 2:48 minute mark…with host James Anderson…and was posted on the sdbullion.com Internet site very late on Friday evening — and it’s a must listen in my opinion.  Another link to it is here.


Our last stop on the way back to Merritt via Princeton on May 26…was at the Hope Slide.  The Hope Slide was the largest recorded landslide in Canada except for the similarly sized 2010 Mount Meager landslide. It occurred in the morning hours of January 9, 1965 in the Nicolum Valley in the Cascade Mountains near Hope, British Columbia, and killed four people. The volume of rock involved in the landslide has been estimated at 47 million cubic metres/61 million cubic yards.  The first shot is from the main part of the debris field left by the slide — and looking generally north at the mountain where all that material had come from.  Photos 2 and 3 are from the same spot…looking west down the Nicolum Valley/Cascade Range towards Hope in Photo 2 — and east towards Princeton in Photo 3. The red patch in the center of Photo 3 is an area of clear-cut forest.  Click to enlarge.


Last week’s pop ‘blast from the past’ was in honour of the 50th anniversary of Woodstock — and in that column I presented that tune, as performed by Crosby, Stills, Nash & Young — and linked here.  The song “Woodstock” was originally composed and performed by Canadian singer/songwriter Joni Mitchell, whose version Im not at all fond of — and is linked here.  But there was another version of the tune that had been running through my mind for the last 50 years — and late last Friday evening I gave up looking for it, because I assumed that it had also been recorded by C,S,N&Y.  It wasn’t, as it turned out, when I finally found it very late last Sunday night.  It was recorded by a British group named Matthews Southern Comfort and, without doubt, is my hands-down favourite version of this song.  The steel guitar accompaniment, along with minor key in which it sung, will be with me always.  The link is here.

And if you’re sick of that song, here’s another number that showed up on the main stage at Woodstock fifty years ago.  It’s Grace Slick of Jefferson Airplane fame at the time…stoned out of her head…doing her best with one of the tunes that made them famous back then — and the link is here.

Today’s classical ‘blast from the past’ is one I’ve featured several times over the years, but it’s been at least a year since I posted it last…so it’s time for a revisit.  It’s Maurice Ravel’s most famous work…Bolero — and no one was more surprised by its instant fame than the composer himself, as it was a sensational success when it was premiered at the Paris Opéra on 22 November 1928.

Ravel had predicted that most orchestras would refuse to play it.  According to a possibly apocryphal story from the premiere performance, a woman was heard shouting that Ravel was mad. When told about this, Ravel is said to have remarked that she had understood the piece.

This work was composed for a large orchestra — and if you haven’t heard this performed live…you owe it to you to do so.  Here’s Gutavo Dudamel conducting the Berlin Philharmonic in this live recording from 18 September 2010 — and this is as good as it gets.  Full screen viewing is a must — and the link is here.

I must admit that I was somewhat taken aback by what I saw when I turned my computer on around noon EDT, which was a few minutes after I got up.  Although the big rallies in the silver and gold in morning trading in the Far East had all the hallmarks of short covering, the volume number for gold in Saturday morning’s Preliminary Report from the CME Group may indicate otherwise, as there was a huge increase in gold open interest.  However, the preliminary volume number for silver in that same report was far more conducive to such an event.  Ted wasn’t sure if that’s what it was or not.  Next week’s COT Report will shed more light on Friday’s activities…unless they get buried by the activity during the two remaining trading days left in this reporting week…Monday and Tuesday.

I would suspect that the big increase in volume in gold yesterday set a new record all-time high in the commercial net short position in this precious metal, going back to January 1, 1973 when the COMEX futures market was set up for gold.  And the commercial net short position in silver, although not as bad, is still bad enough.

One way or another, these ‘overbought’ conditions must be resolved, either by the same-old, same-old ‘wash, rinse, spin…repeat’ cycle that we’ve lived through countless times already.  The other possibility that is starting to loom large is that one or more of the Big 8 traders [sans JPMorgan] get over run — and are forced to cover…as the margin calls must have been whoppers across the board for them yesterday.

With their huge physical stashes of both silver and gold, Ted says that JPMorgan has a built-in ‘Get Out of Jail Free’ card.  It’s the other traders that Ted is watching like a hawk…especially those smaller traders in the ‘5 through 8’ category.  Ted says that JPMorgan is in a position to pull the double-cross of the ages if they desire to do so…walking away from the carnage smelling like that proverbial rose.  All they have to do is not be the short sellers of last resort when it suits them.  I don’t know if JPMorgan was in the market yesterday or not — and only next week’s COT Report will indicate that.

But as Ted has also pointed out on several occasions already…this price management scheme must end this way no matter what happens.  JPMorgan wins — and all the other shorts get hung out to dry.

That time would appear to be approaching rather rapidly now — and because of that fact, the ultra bearish COMEX short position in gold — and in silver to a certain extent as well, may no longer matter.

With the August delivery month already done in silver — and coming to a quick end in gold early next week, all eyes should now be focused on the September delivery month in silver.  Roll-over/switch volumes in silver have been extremely heavy over the last few days — and all the large traders that aren’t standing for physical delivery in that month, have to roll or sell their positions by the close of COMEX trading on Wednesday — and the remainder have to be out by the close of COMEX trading on Thursday.  It’s going to be a busy week going into the Labour Day long weekend.

Here are the 6-month charts for the four precious metals, plus copper and WTIC.  The up days in gold and silver should be noted…as should the down days in both platinum and palladium.  I note that ‘da boyz’ have the Managed Money traders in copper at a new record short position, as copper was closed at a new low for this moved down on Friday — and WTIC had its fourth low close in a row yesterday as well.  Both of these vital commodities are now well below their respective 50 an 200-day moving averages.  Click to enlarge.

I’m sure I’m not the only one that felt that the earth moved under our feet yesterday — and I consider the events from Friday, particularly the Trump Tweet storm, as some sort of inflection point in the current history of the U.S. — and it’s now obviously faltering equity markets.  Gregory Mannarino called it the way it was in a rant linked here.

It’s times like this that I become far more reflective of what has happened in my life time — and wondering how it all came to this moment.  For me, it was like that now-infamous line from Hotel California…”You can check out anytime you like, but you can never leave.”  We are all trapped in the world that the central bankers, the politicians and the Deep State have been slowly crafting for as long as I’ve been on this planet.

There is no longer a shadow of doubt in my mind that that the collapse of everything that we’ve know all our lives, is now in sight — and there’s not a damn thing that any of us can do about it.

And you’ll excuse me for thinking this, but the Bank of England’s governor, Mark Carney’s comments about urging “a replacement for the U.S. Dollar with a “Libra-like” reserve currency in a dramatic revamp of the global monetary, financial and economic order”…was hardly a straw in the wind.  Certainly not coming from him — and at that venue.  It reeked of an already planned future event, as the stench of the IMF and the BIS were all over it — and stands in the shadow of this always-talked-about New World Order.

As I, amongst many others, have stated over the years, the current economic, financial and monetary system that has blow up this ‘Everything Bubble’ starting in 1971…cannot and will not survive.  It’s certainly no accident that it has been unfolding as it has since way back then — and the process has accelerated in a parabolic fashion ever since the world’s central banks pulled us back from the abyss of the market melt-down of 2008/9.

They cannot — and will not even try the next time.  And when the time comes, they may actually be standing there to throw more fuel on the fire.

It will, as I’ve stated many times in the past, be by design…rather than circumstance when the moment arrives.  I just hope that the precautions that we’ve taken over the years will allow us to ride out the storm and survive because, as I’ve also stated before…I fear what follows.

I’m still “all in” — and doing very well so far this year — and I’ll see you here on Tuesday.