August: A Good Month for Silver

31 August 2019 — Saturday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price traded flat on Thursday evening in New York — and got hit for five bucks or so as soon as trading commenced at 8 a.m. China Standard Time on their Friday morning.  From there it didn’t do much of anything until noon over there — and then began to creep higher.  It jumped up a bit more starting around 1:30 p.m. CST — and the high of the day was set at, or just after, the afternoon gold fix in Shanghai.  From that juncture it was sold down until a minute or so after 9 a.m. in London.  It crawled quietly and unevenly higher until about 11:20 a.m. in New York…twenty minutes after the London close — and then JPMorgan et al. appeared.  The low tick was set about fifteen minutes after the 1:30 p.m. EDT COMEX close — and it rallied a bunch until shortly after 3 p.m.  It was booted back downstairs in the last hour of New York trading.

The high and low ticks in gold were recorded by the CME Group as $1,535.70 and $1,519.30 in the October contract — and $1,541.90 and $1,525.60 in December.

Gold was closed in New York on Friday afternoon at $1,519.60 spot, down $7.50 from Thursday.  Net volume in October and December combined was pretty heavy at around 320,000 contracts — and there was 18,500 contracts worth of roll-over/switch volume in this precious metal.

With some notable exceptions the silver price was handled in a similar manner as gold’s.  The three major difference were that silver’s low tick was set around 9 a.m. in Shanghai on their Friday morning…silver’s high of the day came a very few minutes after 9 a.m. in New York — and despite the engineered price decline after the London close, silver finished up on the day.

The low and high ticks in silver were reported as $18.41 and $18.02 in the September contract.

Silver was closed at $18.34 spot, up 11 cents from Thursday.  Net volume was monstrous at a bit over 109,000 contracts — and roll-over/switch volume was only about 6,900 contracts.

The platinum price didn’t do much of anything until around 1 p.m. China Standard Time on their Friday afternoon — and from that point it wandered somewhat unevenly higher until the high tick of the day was set at 9 a.m. in New York.  It was quietly down hill into the 1:30 p.m. EDT COMEX close — and it then crept a few dollars higher until trading ended at 5:00 p.m. EDT.  Platinum was closed at $931 spot, up 16 bucks from Thursday — and would have obviously closed considerably higher than that, if it had been allowed to trade freely.

The palladium price crept very quietly high until shortly before noon CST on their Friday morning — and then traded flat until shortly after Zurich opened.  It jumped up a bunch by around 10:45 a.m. CEST — and then traded mostly sideways until 2 p.m. CEST/8 a.m. in New York.  It blasted higher from there — and was obviously capped at the 10 a.m. EDT afternoon gold fix in London.  From there it chopped quietly sideways until a few minutes before 1 p.m. EDT — and at that juncture some selling pressure appeared.  That lasted until a very few minutes after the COMEX close, when the dollar index turned lower.  From there it inched a few dollars higher going into the 5:00 p.m. New York close.  Palladium finished the day back above $1,500 spot, at $1,517 spot…up 63 bucks on the day but, according to Kitco…37 dollars off its high tick in the spot market. One has to wonder what the true free-market price of palladium would be if it were allowed to trade freely…something I’ve opined on many times over the years.

Despite the fact that yesterday was the last business day before the long weekend, there was absolutely no sign that ‘da boyz’ were any less vigilant.  Whoever was watching over the precious metal markets on Friday, certainly made their presence felt during the entire New York trading session.  Maybe these gatekeepers in the precious metals on Friday will get an extra day off on Tuesday in lieu of what they lost yesterday.


The dollar index closed very late in New York on Thursday evening at 98.51 — and opened down about 8 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.  From that point it wander unevenly higher until around 9:50 a.m. in London — and then wandered lower until the 98.41 low tick was set at precisely 10 a.m. EDT…the afternoon gold fix in London.  Then away it went to the upside, with the 99.02 high tick coming at 1:45 p.m. in New York…fifteen minutes after the COMEX close.  It was all down hill from there — and although the DXY chart shows that it closed at 98.81…it was marked up 11 basis points — and was officially closed at the 98.92 mark…up 41 basis points from Thursday’s close.

The precious metals were following their own drummer yesterday — and when it became obvious that they weren’t going to decline on that big dollar index ‘rally’, they were guided in that direction by the powers-that-be.  Then their rallies on the dollar decline after 1:45 p.m. EDT were also nipped in the bud before they could fully reflect the continuing fall in the dollar index going into the 5:30 p.m. close.

Here’s the DXY chart, courtesy of Bloomberg — and the ‘rally’ that began at the afternoon gold fix in London is the stand-out feature.  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…98.86…and the close on the DXY chart above, was 6 basis points on Friday.  Click to enlarge as well.

The gold shares opened down a bit once trading began at 9:30 a.m. in New York on Friday morning — and after a bit of a roller coaster ride sideways, they managed to close in the green by a bit.  That’s rather amazing considering the closing price of gold on Friday. The HUI closed higher by 0.45 percent…so it’s obvious that bottom-fishing buyers were out and about in force yesterday, scooping up everything that John Q. Public was mindlessly dumping.

That price pattern in the silver equities was more positive, as they spent most of the Friday trading session in positive territory — and turned higher on a dime the moment that the dollar index topped out at 1:45 p.m. in New York.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up 1.07 percent….helped no doubt by the fact that the underlying precious metal closed in positive territory.  Click to enlarge if necessary.

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

Here are the usual three charts from Nick that show what’s been happening for the week, month — and year-to-date. The first one shows the changes in gold, silver, platinum and palladium for the past trading week, in both percent and dollar and cents terms, as of their Friday closes in New York — along with the changes in the HUI and the Silver 7 Index.

Here’s the weekly chart — and except for the gold price, it’s green bars across the board.   Platinum and palladium outperformed everything — and the silver equities continue to underperform.  But as I’ve pointed out earlier this week, its two of Nick’s stocks in the Silver 7 chart that are underperforming badly…Buenaventura and Peñoles.  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 — and the ongoing underperformance of Buenaventura and Peñoles 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 when it does, it will happen in a hurry.  Click to enlarge.

As I said last week — and the week before, 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…along with a pending series of interest rate cuts from the Fed.  However, as I point out further down, 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 by the in-the-know/deep pockets crowd.  The panic into them is yet to come.


The CME Daily Delivery Report for Day 2 of September deliveries showed that 242 gold and 619 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday.

In gold, the three largest of the four short/issuers were Marex Spectron, Advantage and ABN Amro, as they issued 121, 70 and 38 contracts out of their respective client accounts.  Of the nine long/stoppers in total, the largest was JPMorgan, picking up 82 contracts in total…56 for its own account, plus another 26 for its client account.  In second place was Australia’s Macquarie Futures, as they stopped 54 contracts for their in-house/proprietary trading account.  In third and fourth place were Marex Spectron and Advantage, stopping 38 can 37 contracts for their respective client accounts.

In silver, there were eight short/issuers in total.  The three biggest were ABN Amro with 148 contracts and R.J. O’Brien with 80 contracts — all for their respective client accounts.  Then came S.G. Americas with 64 contracts out of their own account.  There were six long/stoppers in total, with the largest of course being JPMorgan, as they picked up 279 contracts in total…153 for clients, plus another 126 for their own account.  In second place came Macquarie Futures, stopping 109 contracts for its own account as well — and in third place was Goldman Sachs with 89 for their client account.

There is more to see than just the above — and the link to yesterday’s Issuers and Stoppers Report is here.

The CME Preliminary Report for the Friday trading session showed that gold open interest in September fell by 1,098 contracts, leaving 286 still around, minus the 242 mentioned a few paragraphs ago.  Thursday’s Daily Delivery Report showed that 1,279 gold contracts were actually posted for delivery on Tuesday, so that means that 1,279-1,098=181 more gold contracts were added to September.  Silver o.i. in September cratered by 4,505 contracts, leaving 2,219 still open, minus the 619 contracts mentioned a few paragraphs ago.  Thursday’s Daily Delivery Report showed that 4,862 silver contracts were actually posted for delivery on Tuesday, so that means that 4,862-4,505=357 more silver contracts were added to the September delivery month.

In the first two days of the September delivery month, there have already been 1,521 gold contracts issued/reissued and stopped — and that number in silver is already up to a knee-wobbling 5,481 contracts…27.4 million troy ounces.  JPMorgan has been an active stopper in both precious metals, not only for its client account, but for its own account as well — and I just know that Ted will have lots to say about this in his weekly commentary later today.


There was a withdrawal from GLD yesterday, as an authorized participant took out 66,002 troy ounces.  There were no reported changes in SLV.  Ted figures that SLV is still owed many millions of ounces.

The other silver ETFs and Mutual Funds on Planet Earth added a net 469,000 troy ounces of silver on Friday.

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

For the month of August, the mint sold 6,000 troy ounces of gold eagles — 1,500 one-ounce 24K gold buffaloes — and 1,007,000 silver eagles.  These are pitiful amounts.

The only activity in gold over at the COMEX-approved gold depositories on the U.S. east coast on Thursday was a paper transfer of 29,461.860 troy ounces from the Eligible category and into Registered.  I would suspect that this amount is scheduled for delivery in September.  I won’t bother linking this.

There was some activity in silver…and except for one good delivery bar…954 troy ounces…shipped out of Delaware, all of the in/out/transfer action was at CNT.  They received 900,463 troy ounces…shipped out 50,233 troy ounces — and transferred 1,142,027 troy ounces from the Eligible category and into Registered. This transfer is obviously in preparation for delivery in September.  The link to all this is here.

There was a tiny amount of in/out activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Friday.  They received 50 of them — and shipped out 1. This occurred at Brink’s, Inc. as per usual — and I won’t bother linking this, either.

Sicily, Syracuse, Agathokles, 317-310 B.C., Dekadrachma

Origin:  Ancient Greece     Material: Gold    Full Weight: 4.27 grams     Value: €2,460.00/USD$2,710


The Commitment of Traders Report, for positions held at the close of COMEX trading on Tuesday, August 27 showed that expected increase in the Commercial net short position in silver…but the big surprise came in gold, as the commercial traders actually reduced their short position by a bit.  That was totally unexpected.

In silver, the Commercial net short position increased by another 10,818 contracts, or 54.1 million troy ounces.

They arrived at that number by decreasing their long position by 5,288 contracts — and the also added 5,530 short contracts.  It’s the sum of those two numbers that represents their change for the reporting week.

Under the hood in the Disaggregated COT Report, it was all Managed Money traders, plus more…as they increased their long position by 6,460 contracts — and they also covered 5,432 short contracts.  It’s the sum of those two numbers…11,892 contracts…that represents their change for the reporting week.

The difference between that number — and the Commercial net short position…11,892 minus 10,818 equals 1,074 contracts.

That difference was made up, as it always is, by the traders in the other two categories.  The ‘Other Reportables’ increased their long position by a net 1,246 contracts — and ‘Nonreportable’/small trader category reduced their long position by a net 2,320 contracts.  The difference between those two numbers is 1,074 contracts, which it must be.

The Commercial net short position is now up to 81,681 contracts, or 408.4 million troy ounces!

The further unhappy news regarding silver was that Ted said that JPMorgan obviously increased their net short position during the reporting week — and if they hadn’t, the silver price would have exploded to the upside.  He said that they added a further 6,000 contracts or so to the 15,000 they had in last week’s report…bringing their total as of Tuesday’s cut-off up to around the 21,000 contract mark.

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

Ted said that this puts silver firmly back in bearish territory, although not as bearish as the current COMEX market structure in gold.


In gold, the commercial net short position was actually reduced during the reporting week…by a tiny 2,444 contracts, or 244,400 troy ounces of paper gold…barely a rounding error.  This was a huge surprise, but Ted had the obvious answer, which I’ll get to it a bit.

They arrived at that number by increasing their long position by 15,458 contracts, but they also added 13,014 short contracts — and it’s the difference between those two numbers that represents their change for the reporting week.

Under the hood in the Disaggregated COT Report the Managed Money traders, not surprisingly, added 8,573 long contracts.  But the shocker was that they also increased their short position by 11,703 contracts.

Since the gold price [like silver] was up a very decent amount during the reporting week, one would normally expect that the brain-dead moving average-following Managed Money traders would have been covering short positions like mad…just like they did in silver above.

Maybe they did.  But according to Ted — and correctly so, the non-technical Managed Money traders piled onto the short side big time, as they are anticipating the same engineered price decline as everyone else — and were positioning themselves accordingly.  Their short buying overwhelmed whatever short covering the brain-dead types were doing.  However, the jury is still out on whether it will turn out the way everyone presumes, or not.

Ted also pointed out that the Big 4 traders reduced their net short position by a whole bunch during the reporting week — and I mention the associated numbers in the ‘Days to Cover’ commentary a bit further down…which is worth a look.

The commercial net short position in gold now stands at 33.38 million troy ounces, virtually unchanged from last week’s COT Report.

Here’s Nick’s 3-year COT chart for gold — and the tiny improvement in the commercial net short position is barely noticeable.  Click to enlarge.

Gold is still in the ultra-bearish camp from a COT perspective.  But whether or not we get the usual ‘wash, rinse, spin…repeat’ cycle again this time, is still open for debate.  Don’t forget that, as Ted also correctly points out, that JPMorgan is the sole short seller of last resort in both gold and silver.  But they also have monstrous physical gold and silver holdings far in excess of what they’re short in the COMEX futures market.  Ted’s double cross scenario by JPMorgan of the other commercial traders…the Big 7…is still very much in play.  ‘Da boyz’ at JPMorgan could go fishing for two weeks — and still make massive profits on their remaining physical stockpiles.

So we await further developments.

In the other metals, the Manged Money traders in palladium increased their net long by a further [and tiny] 289 contracts.  There are never big position changes in palladium.  The Managed Money traders are net long the palladium market by 10,766 contracts…about 52 percent of the total open interest.  Total open interest in palladium is 20,769 COMEX contracts.  In platinum, the Managed Money traders increased their net long position by 4,438 contracts during the reporting week.  The Managed Money traders are now net long the platinum market by 7,473 COMEX contracts…9.5 percent of the total open interest.  The traders in the other two categories are net long platinum big time as well.  In copper, the Managed Money traders increased their net short position in that metal by 7,185 COMEX contracts during the reporting week — and are now net short the COMEX futures market by a eye-watering 70,521 contracts, or 1.76 billion pounds of the stuff…a hair under their record short position from three weeks ago. That’s about 27 percent of total open interest…which is an obscene 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 148 days of world silver production, which is up 12 days from last week’s report — and the ‘5 through 8’ large traders are short an additional 70 days of world silver production, unchanged from last week’s report — for a total of 218 days that the Big 8 are short, which is a bit over seven months of world silver production, or about 508 million troy ounces of paper silver held short by the Big 8. [In the prior week’s COT Report, the Big 8 were short 206 days of world silver production.]  The Big 4 traders were responsible for the entire increase in the short position in silver during the reporting week.

In the COT Report above, the Commercial net short position in silver was reported as 408 million troy ounces.  As mentioned in the previous paragraph, the short position of the Big 8 traders is 508 million troy ounces.  The short position of the Big 8 traders is larger than the total Commercial net short position by 508 minus 408 equals 100 million troy ounces.

The reason for the difference in those numbers…as it always is…is that Ted’s raptors, the 37-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 21,000 COMEX silver contracts…up 6,000 from the prior week’s COT Report.

21,000 COMEX contracts is 105 million troy ounces of paper silver, which works out to around 45 days of world silver production, up a huge amount from the 32 days they were short in last week’s COT Report.  Citigroup and JPMorgan would now be about tied for the No. 1 spot as the biggest shorts in silver.

The Big 4 traders in silver are short, on average, about…148 divided by 4 equals…37 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 42.4 percent of the entire open interest in silver in the COMEX futures market, which is a bit of an increase from the 40.4 percent they were short in last week’s report.  And once whatever market-neutral spread trades are subtracted out, that percentage would be a bit under the 50 percent mark.  In gold, it’s now 42.0 percent of the total COMEX open interest that the Big 8 are short, down big from the 47.0 percent they were short in last week’s report — and something over 45 percent, once the market-neutral spread trades are subtracted out.

As I mentioned in the COT Report discussion on gold further up, Ted said that the Big 4 traders reduced their net short position in gold big time during the reporting week…as you can see in the next paragraph.

In gold, the Big 4 are short 61 days of world gold production,down 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, unchanged from what they were short last week…for a total of 93 days of world gold production held short by the Big 8…down 4 days from last week’s report.  Based on these numbers, the Big 4 in gold hold about 65 percent of the total short position held by the Big 8…down about 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 68, 69 and 75 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 3 percentage points from a week ago.

I have an average number of stories/articles for you today, plus I have a couple that I’ve been saving for today’s column for length and/or content reasons.


CRITICAL READS

University of Michigan Confidence Plummets In August as Consumers Face “Tariff Cliff”

Following the collapse in preliminary data, August’s final University of Michigan Sentiment index was expected to bounce modestly (given the exuberance in stocks), but instead tumbled further.

This was the biggest drop in six years, slumping to the lowest level of Donald Trump’s presidency as Americans expressed concern about how his tariffs will affect the economy.

The University of Michigan’s final sentiment index fell to 89.8 in August from a previously reported 92.1 and 98.4 in July, data showed Friday. The gauge of current conditions dropped to the lowest since October 2016, while the expectations index matched January as the weakest since that same period.  Click to enlarge.

The 8.6-point drop from July was the largest since December 2012, while the 89.8 reading for the sentiment index was the lowest since October 2016.

The recent decline is due to negative references to tariffs, which were spontaneously mentioned by one in three consumers,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement.

Trump’s tariff policies have been subject to repeated reversals amid threats of higher future tariffs. Such tactics may have some merit in negotiations with China, but they act to increase uncertainty and diminish consumer spending at home.”

The data indicate that the erosion of consumer confidence due to tariff policies is now well underway. Compared with those who did not reference tariffs, consumers who made spontaneous negative references to tariffs also voiced higher year-ahead inflation expectations, more frequently expected rising unemployment, and expected smaller annual gains in household incomes

This 3-chart Zero Hedge news item was posted on their website at 10:09 a.m. EDT on Friday morning — and I thank Brad Robertson for this one.  Another link to it is here.  Then there was this ZH article from Brad headlined “Chicago PMI Rebounds Into Expansion In July“.


For Second Week In A Row, Fed Buys Treasuries (AKA, QE4!?!)

Summary:

  • After 250 weeks without a purchase of Treasuries (since Oct. 2014), for the second week in a row, the Federal Reserve bought Treasuries.
  • The $14 billion in purchasing is in stark contrast to the zero purchases and selling during Quantitative Tightening.
  • When the Fed sells Treasuries, asset prices struggle, but when the Fed buys Treasuries, asset prices have surged.

Chart below shows the Fed’s total Treasury holdings (red line) versus the weekly change in Treasuries (black columns) since 2014.  The QE taper is visible with the first dashed yellow line, the Quantitative Tightening and then the QT taper.  The Fed has begun a new period of Treasury purchasing…but for how long, who knows.

To put things in perspective, the chart below shows the Fed holdings of Treasuries (red line) and weekly change in Treasury buying (black columns) since 2003.  Clearly visible is the activist role the Fed has taken since the GFC…QE1, QE2, Operation Twist, QE3, Quantitative Tightening…and now???

This multi-chart commentary appeared on the economica.blogspot.com Internet site on Friday — and I borrowed it from a Zero Hedge article that Brad Robertson sent our way.  Another link to it is here.


The Unstoppable Surge in Negative Yields Reaches $17 Trillion

The global stock of negative-yielding debt is now in excess of $17 trillion as rising market volatility lends extra force to this year’s unprecedented bond rally.

Thirty percent of all investment-grade securities now bear sub-zero yields, meaning that investors who acquire the debt and hold it to maturity are guaranteed to make a loss. Yet buyers are still piling in, seeking to benefit from further increases in bond prices and favorable cross-currency hedging rates—or at least to avoid greater losses elsewhere.  Click to enlarge.

The negative-yield phenomenon is turning financial markets on their head—raising the specter of a bond bubble, draining pension funds of a valuable source of income and incentivizing riskier companies to mortgage their assets. At the same time, banks are having to reassure citizens that they won’t suddenly start charging customers to store their money.

With recession signals flashing around the globe—such as the inverted Treasury yield curve—and with a trade war between the U.S. and China heating up, there are arguments for the stock of negative-yielding debt to keep expanding. Monetary policy may also play a role, with the European Central Bank set to decide in September whether to cut interest rates further below zero. It could also end up expanding its €2.6 trillion ($2.9 trillion) package of quantitative easing.

This commentary put in an appearance on the bloomberg.com Internet site on Friday morning sometime — and I thank Swedish reader Patrik Ekdahl for sending it our way.  Another link to it is hereGregory Mannarino‘s 14-minute rant after the close of trading on Friday is linked here.  I thank Roy Stephens for sending it.


Doug Noland: Dudley Sticks His Neck Out

What a fascinating environment; each week brings something extraordinary. Yet there is this dreadful feeling that things are advancing toward some type of cataclysm.

U.S. President Donald Trump’s trade war with China keeps undermining the confidence of businesses and consumers, worsening the economic outlook. This manufactured disaster-in-the-making presents the Federal Reserve with a dilemma: Should it mitigate the damage by providing offsetting stimulus, or refuse to play along? If the ultimate goal is a healthy economy, the Fed should seriously consider the latter approach… There’s even an argument that the election itself falls within the Fed’s purview. After all, Trump’s reelection arguably presents a threat to the U.S. and global economy, to the Fed’s independence and its ability to achieve its employment and inflation objectives. If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020.” Bill Dudley, Bloomberg op-ed, August 27, 2019

What Dudley is really questioning is whether the Fed needs to make a departure from its regime in response to the market, economic, institutional and geopolitical risks posed by an unorthodox President increasingly considered unstable and pursuing a dangerously ill-advised policy course. Should the Fed continue to backstop the financial markets when the marketplace is responding rationally to increasingly high-risk financial, economic and geopolitical backdrops? With the administration clearly pursuing a risky strategy while placing a gun to Powell’s head, should the Federal Reserve continue to enable such a policy course when it is deemed to put so many things at great risk?

It is now universally accepted the Federal Reserve (and global central bankers) should backstop financial markets to promote economic growth and wealth creation. The Fed, market participants and most pundits prefer to ignore that such a doctrine places the central bankers at the epicenter of Credit, resource and wealth allocation. Such a position ensures the Fed now wades chest deep in the political muck. It’s been a slippery slope I’ve been chronicling now for over 20 years.

The Fed’s market-centric and interventionist approach has essentially supported incumbent Presidents and Washington politicians. From this perspective, it is clearly “establishment” and susceptible to “deep state” innuendo. This regime is today challenged by President Trump, with his penchant for tariffs, confrontation, and scathing attacks on the Fed and its Chairman. The President is essentially blackmailing the Fed: Play ball or you’ll be blamed, ridiculed and targeted, with clear risk of losing your jobs along with the institution’s coveted independence.

The Fed’s political problem will not end with Donald Trump or Chinese trade negotiations. Going forward, our central bank will be under unrelenting pressure to support the markets and boost the economy – and will be a target for the party on the losing side of election outcomes.

With ominous developments in global bonds and currencies, global equities bent but didn’t break. After a summer of discontent, expect a tumultuous autumn.

This weekly commentary by Doug showed up on his Internet site in the very wee hours of Saturday morning EDT — and another link to it is here.


Since the Turn of the Century, Government Corruption Has Become More Flagrant — Bill Bonner

In the later days of the Roman Empire, losing power was often a death sentence. The new emperor got rid of his rivals in a conclusive way; he had them killed.

Politics in the U.S. have become meaner and more corrupt, too, as the empire ages.

The peak in U.S. power, prestige, and economic vitality probably came at the end of the 20th century. But the corruption was already running deep.

Eisenhower had warned about it in 1961. The next president, who appeared ready to bring the Deep State’s clandestine attack dog – the CIA – to heel, was assassinated.

By 1981 the spooks had their own man – George Herbert Walker Bush – in the vice president’s role.

Eight years later, he was in the Oval Office… followed by a pair of easily corruptible scoundrels (the Clintons), who were succeeded by Mr. Bush’s son.

By then, the Deep State was in almost complete control.

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


Yemen President urges end of UAE strikes, fears secession

Yemen’s president urged Saudi Arabia on Thursday to rein in the United Arab Emirates after warplanes from his former ally staged airstrikes on Yemeni government troops, killing and wounding dozens as they headed to retake the key southern port city of Aden from separatists backed by the UAE.

In a rare statement, President Abed Rabbo Mansour Hadi condemned the UAE, a former ally, for “blatant intervention” in Yemen by providing “support, money and plans” for separatists who aim at “dividing up” the country.

His government called upon the United Nations Security Council to condemn the attacks.

The development raises concerns about the future of a Saudi-led coalition that has been fighting Yemen’s Houthi rebels since 2015 and adds another complex layer to the civil war that has ravaged the Arab world’s most impoverished country.

Infighting has raged for weeks between forces loyal to Yemen’s internationally recognized government and the southern separatists, backed by the UAE — all ostensibly allies in the coalition.

You couldn’t make this stuff up.  Of course the U.S. and the U.K. are up to their necks in this conflict as well.  This AP story, filed from Sanaa in Yemen, showed up on the news.yahoo.com Internet site on Thursday sometime — and I thank Larry Galearis for pointing it out.  Another link to it is here.


The Environment — Listen to the Trees!

This summer I taught a class on the Natural History of the Sierra Nevada for San Francisco State University’s Sierra Nevada Field Campus. The first day we taught students how to identify the trees. Once students know their trees, they can easily see how tree species vary with elevation, temperature, moisture, and snow pack. They can see which species colonize open sunny areas and which trees need shade before they can invade. Old time naturalists used trees to identify “life-zones” where different species of mammals, birds, insects and other plants can be found. Furthermore, when you listen to the trees, you can see change.

The class explored forests along the North Yuba River. Free from politics, trees tell us about changes in fire frequency, logging, climate change and ecosystem resilience. Photographs taken during the late 1800s during California’s gold rush days, revealed the total devastation of local forests. Gold miners needed wood for heating and cooking, for their metal forges, and for timbers to reinforce their mines. They needed wood to build flume boxes that altered river courses to expose riverbeds. Flume boxes also carried water from high to low elevations where giant water cannons completely washed away hillsides in their search for gold.

Still, by comparing catastrophic photos of forests during the gold miners’ days to our current forest conditions, I was filled with optimism. The forests had totally recovered and again are quite dense. So dense, that local inhabitants fear there’s too much fuel on the forest floor that could feed catastrophic fires. Nevertheless, the lush re-growth is testimony to our forest’s amazing resilience.

We counted tree rings and determined a majority of trees were no more than 170 years old. Those trees began their lives shortly after the gold miners had cut down all their older relatives. Occasionally we found a few larger trees, 300 years or older, that fortuitously avoided the miners’ ravenous saw blades.

Scientists determine the natural frequency of fires by reading tree rings and fire scars. Low elevation trees like Ponderosa Pines naturally endured wildfires about every 25 years. At higher elevations, where temperatures are colder and the snow pack lingers, fire scars suggest wildfires naturally happen about every 100 years. In contrast to media hype, fire scars in living and fossil trees suggest wildfires were far more common during the cool Little Ice Age.

This very interesting and worthwhile commentary was posted on the landscapeandcycles.net Internet site on August 20 — and I thank John Holden for pointing it out.  For obvious reasons, it had to wait for today’s column — and another link to it is here.


Gold touches $1550 before being brought down sharply yet again — Lawrie Williams

On Thursday morning trading in Europe, the gold price rose sharply to $1,550 before being brought back down to well below the $1,540 level – whether this was profit taking, or a suppression move by the usual suspects will be the subject of argument.  We think it may be a bit of both.  However it does suggest that gold could have the potential momentum to move higher and breach the $1,550 level permanently – but perhaps not until next week as we somehow doubt it will be allowed to end the current week above that level.  Much will depend on U.S. markets later today as to gold’s short term progress.

Silver, which has been catching fire recently, also moved up sharply to the $18.70 level, before also being brought back down to a little below $18.50 – still an enormous improvement for silver investors given the metal was languishing below $16 only around 6 weeks ago.

Interestingly the Gold:Silver ratio (GSR) as I write has come back to around 83.3 – again a substantial change from the 93 it had hit in June.  We had suggested in previous articles that the GSR would come back to 80, meaning silver would be rising in percentage terms rather faster than gold, but this seems as if it maybe be happening sooner than expected.  If 80 is breached on the downside the next target for silver investors would be 75 – and if gold continues its upwards run and reaches say $1,600, a GSR of 75 would pit silver at over $21 – a substantial gain for the silver bulls.  As we have noted in another recent article, there have been enormous silver inflows into the silver ETFs – notably SLV – suggesting that the big money was seeing great potential for a substantial silver price gain, and this seems to be being borne out currently in the markets.

This rather brief commentary from Lawrie put in an appearance on the Sharps Pixley website on Thursday sometime — and another link to it is here.


The Reserve Bank of India raises gold holdings by 9%

Reserve Bank of India increased its gold holdings by 9.2% in the year ended June, its biggest in nearly a decade amid trade war tensions and global slowdown.

The central bank bought 51.93 tonnes of gold last year, raising total holdings to 618.16 tonnes, according to the bank’s annual report released on Thursday.

It is most since the 200 tonnes it bought from International Monetary Fund in 2009-10.

Central banks have added 374.1 tonne in the first six months of 2019, pushing the demand for the precious metal to a three-year high, according to the World Gold Council.

According to Australia & New Zealand Banking Group Ltd, the gold-buying by central banks, including China, is likely to persist in the coming years.

This gold-related news item appeared on the dnaindia.com Internet site on Friday sometime — and I found it on the Sharps Pixley website.  Another link to it is here.


The Curse of the Ship of Gold

How a brilliant scientist went from discovering a mother lode of treasure at the bottom of the sea to fleeing from authorities with suitcases full of cash.

In November 2018, a 66-year-old man named Tommy Thompson was wheeled into Judge Laurel Beatty Blunt’s courtroom in Columbus, Ohio, clad in a dark blue suit and looking like he had just served four years in federal prison. Thompson’s hair, once thick black curls, had given way to a bald pate, and with a long white beard and piercing eyes, he looked like a slightly hairier Christopher Lee, the actor who played the wizard Saruman in The Lord of the Rings.

Throughout the trial, Judge Blunt interrupted Thompson’s testimony to reprimand him for veering wildly off course. Thompson had long insisted that he suffers from neurological problems and chronic fatigue syndrome, which impairs his memory, and that his meandering explanations were a symptom of the distress foisted upon him.

But Judge Blunt, like other officials who’d presided over civil and criminal cases against Thompson, claimed that his malingering was the maneuvering of a hyper-intelligent con man. Indeed, Thompson’s legs were shackled as he sat through his trial. As everyone knew, he’d already fled from authorities once.

Thompson was genuinely sickened and overwhelmed, however, and he found it extremely frustrating that nobody seemed to take his condition seriously. He’d been living a hectic life for almost 30 years, and he tried to make the jury understand the unique stress that had put him in such a weak state. His problems had all begun when he’d discovered one of the largest caches of gold in human history, a lost treasure at the bottom of the sea. In the 30 years since, the weight of the find had upended partnerships, ended his marriage, and set loose the specter of greed. What began as a valiant mission of science turned into something else entirely.

This very, very long essay/novel showed up on the narratively.com Internet site very recently.  It’s a “fascinating essay by Dylan Taylor-Lehman about Tommy Thompson, the inventor and explorer who discovered the gold-laden wreck of the SS Central America, retrieved some of its cargo, and ended up running from the law as investors and insurance companies fought over the recoveries.

The essay updates the gripping story told brilliantly in Gary Kinder’s 1998 book “Ship of Gold in the Deep Blue Sea.””  I found it on the gata.org Internet site last Sunday — and for very obvious reasons, it had to wait for today’s missive.  Another link to it is here.


The PHOTOS and the FUNNIES

Continuing on our trip to Kamloops down B.C. Highway 5A on June 15…the first two shots are of some of the scenery along the way — and were taken right from the edge of the highway.  The third photo is one overlooking part of Kamloops towards the downtown area — and the confluence of the South and North Thompson Rivers…both of which are barely visible in this shot.  The fourth photo is of the downtown central park in the city…which is right at the confluence.  The North Thompson River is just out of frame on the left.  Click to enlarge.


The WRAP

Everybody, sooner or later, sits down to a banquet of consequences.” — Robert Louis Stevenson


Today’s pop ‘blast from the past’ started life off as an instrumental in Europe back in 1961…but once it found its way into the hands of 14 year old Margaret Annemarie Battavio from Lansdale, Pennsylvania back in 1963…the rest, as they say, is history.  The link is here.  Those were the days…sigh.

Today’s classical ‘blast from the past’ is the overture to William Shakespeare’s 1595 A.D. play “A Midsummer Night’s Dream“.  It was written in the Key of E major — and was composed by Felix Mendelssohn when he was 17 years and 6 month old in back in 1826.  It’s an older video recording, but it’s all I could find.  The link is here.


It certainly was an interesting day in all four precious metals on Friday — and if all of them had been left to their own devices, all would have closed far higher than then were allowed to.  The [cough,cough] ‘rally’ in the dollar index only had an impact on the precious metals because ‘da boyz’ had to make it happen long after it began, as they weren’t following the game plan on their own.

Then add to that the fact that the gold stocks actually closed up on the day.  Not by much, mind you, but it was certainly indicative of the fact that strong hands were buying everything offered for sale, plus a bit more.

With the Labour Day long weekend only hours away on Friday, I was also expecting price activity to drop off starting at noon EDT, but that never happened.  Yes, they did get sold off initially when they were forced to follow the script as the dollar index rose, but all of them came back in after-hours trading.  ‘Da boyz’ were at their desks right up until the 5:00 p.m. EDT close.

Here are the 6-month charts for all four precious metals, plus copper and WTIC — and I’ll point out once again that all the price activity that occurred after the COMEX close, is not reflected in their respective Friday dojis on the stockcharts.com graphs below.  And I note that WTIC got blasted back below both its key moving averages — and was closed there.  Click to enlarge.

In the big wide financial/economic/monetary world out there, nothing has changed since I wrote on this topic last week at this time…except things continue to deteriorate no matter in which direction one looks.  The ‘Everything Bubble’ has stalled — and getting ever closer to that proverbial pin.

In just the last few months, the amount of paper that’s yielding a negative interest rate has ballooned from just over $12 trillion dollars, to just under $17 trillion as of late this week.  The yield curve in U.S. Treasuries is inverted — and the 10-year Treasury is now lower than the 2-year — and just screaming recession, if not worse.  The U.S. stock market, along with others on Planet Earth, are all hugely overvalued…thanks to all that E-Z money out there.

And it will continue to get worse until the entire credit market either blows up, or melts down, as all interest rates are zero-bound, or lower.  There is no escape from this slippery slope…none whatsoever.  Doug Noland and Gregory Mannarino…each at the opposite ends of the credit market…have made this fact abundantly clear.

And while all this has been going on…starting over a year ago, the walk towards hard assets turned into a jog starting at the beginning of the year.  But in the last few months that jog is showing obvious signs of morphing into a run.  Not by the general public, mind you, as they’ve forgotten how to spell the words silver and gold.  It’s the smart money with deep pockets that’s quietly buying up everything in sight.

The signs are everywhere you care to look…including the amount of precious metals going into the various mutual funds and ETFs, along with the appearance of Ted Butler’s ‘whale’ that quietly swallowed up around 100 million troy ounces of silver…which he things that JPMorgan leased to the various ETFs involved in order to prevent the silver price from blowing sky high.  Another straw in the wind was the eye-opening 11.56 million troy ounces of silver that got transferred from the Registered category — and back into Eligible in the COMEX depositories on Thursday…the day before First Day Notice of all things.  Ted figures that JPMorgan most likely owns that now.  Then there were the monster gold deliveries in August — and the record silver deliveries for a non-standard delivery month for silver during the same month.  Then there are the huge deliveries in both silver and gold to start off September.

If this is the ‘running to the precious metals’ phase of this bull market, it boggles the mind as to what the panic into them will look like when it finally does manifest itself.  And at some point the public will wake up to that fact as well — and then look out!

The Plunge Protection Team has been at battle stations more or less continuously for the last couple of decades now.  Their efforts to keep everything propped up that wants to crash and burn…plus keep the prices of everything that wants to blow sky high…under their collective thumbs, will fail at some point.  A fact that I’ve mentioned all too many times.

The powers-that-be are 100 percent cognisant of the fact that they can’t keep it up forever — and I’m totally convinced beyond a shadow a doubt that it will be allowed to fail at the time of their choosing.

Nothing happens by chance in the markets these days, as there have been literally giant flocks of those proverbial ‘black swans’ out there for years now, including the market meltdown in 2008/09 — and they’ve managed to keep them all at bay.  But this new ‘Everything Bubble’ is too big even for them, which is a fact they already know — and I suspect that they’ll only make token efforts to save the system when the bust finally hits.

I suspect that it’s these ‘deep state/deep pocket’ players that have been actively buying up everything precious metal-related over the last year and change — and as I’ve already pointed out, that process appears to be accelerating.

They don’t want to get caught with their pants down when the precious metals really begin to sail — and they won’t be.

And neither will you.

I’m done for the day — and the week — and I’ll see you here on Tuesday.  And since this is the Labour Day long weekend in North America, I’ll be on the road most of Monday, so what you get in your mailbox on Tuesday will be as brief as I can make it.

Ed