Ted Butler: The Shorts Getting Smoked

10 September 2019 — Tuesday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price had a six dollar up/down move between the 6:00 p.m. open in New York on Sunday evening and a minute or so after 9 a.m. in London.  It crept quietly higher from that point until exactly 9:00 a.m. in New York — and then ‘da boyz’ showed up.  The low tick of the day was set at the 11 a.m. EDT London close — and it crept higher from there until around 12:20 p.m. in New York.  It was sold quietly lower from that juncture until trading ended at 5:00 p.m. EDT.

The high and low ticks, both of which occurred during the COMEX trading session in New York, were recorded by the CME Group as $1,517.10 and $1,499.10 in the October contract — and $1,523.80 and $1,505.50 in December.

Gold was closed in on Monday at $1,498.60 spot, down $7.90 from Friday.  Net volume was very heavy at a hair under 300,000 contracts — and there was around 18,500 contracts worth of roll-over/switch volume on top of that.

The silver price was forced to follow a very erratic price path on Monday…trading just above the $18.20 spot mark — and just below the $18.00.  Of course it was closed at the bottom end of that price range…as JPMorgan made sure of that in COMEX trading in New York.

The high and low ticks were reported as $18.40 and $18.015 in the December contract.

Silver was closed yesterday at $17.995 spot, down 22.5 cents from Friday.  Net volume was sky high once again at just under 128,500 contracts — and there was around 7,800 contracts worth of roll-over/switch volume on top of that.

The platinum price wandered unevenly sideways until shortly before 11 a.m. in Zurich on their Monday morning — and from there proceeded to rally a bit until it ran into ‘da boyz’ shortly before 9 a.m. in New York.  It’s low tick was set around 12:20 p.m. EDT — and its tick higher after that was mostly taken away by the 5:00 p.m. close.  Platinum was closed at $944 spot, down 4 bucks on the day.

Palladium was sold down about 13 dollars in the first hour, once trading began at 6:00 p.m. EDT in New York on Sunday evening, but was back at unchanged by around 9:35 a.m. China Standard Time on their Monday morning.  It didn’t do much of anything after that until the Zurich open — and then it began to tick unevenly higher until the high was set shortly after 8:30 a.m. in New York.  About thirty minutes later it was headed lower — and most of the damage was done by the 1:30 p.m. EDT COMEX close.  It didn’t do a thing after that.  Palladium was closed at $1,524 spot, up 2 dollars from Friday.

The dollar index closed very late on Friday afternoon in New York at 98.39 — and opened up 3 basis points once trading commenced around 6:40 p.m. EDT on Sunday evening.  It crept up to its 98.51 high tick at 8:50 a.m. China Standard Time on their Monday morning — and was back to about unchanged an hour later.  It crept sideways from there until about fifteen minutes after the afternoon gold fix in Shanghai — and then began its long, slow and very uneven decline to its 98.14 low tick, which came at 12:30 p.m. in New York.  I suspect that the usual ‘gentle hands’ rescued it at that point — and it crawled unevenly higher until around 4:55 p.m.  It gave up a handful of basis points from there going into the 5:30 p.m. close.  The dollar index finished the Monday session in New York at 98.28…down 11 basis points from Friday’s close.

Once again, there was no correlation worthy of the name between the dollar index and what the precious metal prices were doing.

Here’s the DXY chart from Bloomberg, as usual.  Click to enlarge.

And here’s the 6-month U.S. dollar index chart, courtesy of the folks over at the stockcharts.com Internet site.  The delta between its close…98.25…and the close on the DXY chart above, was 3 basis points on Monday.  Click to enlarge as well.

The gold stocks opened unchanged — and ticked a bit higher for the first few minutes of trading, until the sellers showed up.  The low was set a minute or so after the 11 a.m. EDT London close…which coincided with the low tick in gold.  They continued to follow the gold price closely after that until the equity markets close at 4:00 p.m. in New York.  The HUI closed down 3.07 percent.

Except for the odd minor variation, the silver equities more or less followed the same price path as the gold shares and, would have most likely closed up on the day until ‘da boyz’ began to lean on the silver price once again around 12:30 p.m. EDT.  The silver shares also closed down on the day, but not to the same extent as the gold stocks.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed lower by 2.22 percent.  Click to enlarge if necessary.

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

The CME Daily Delivery Report showed that 51 gold and 458 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday.

In gold, of the three short/issuers in total, the only two that mattered were International F.C. Stone, with 38 contracts from its client account — and in second spot was ADM, with 10 from its client account as well.  Of the 3 long/stoppers in total, the only one that mattered was JPMorgan, with 42 contracts in total…25 for clients, plus 17 for its own account.

In silver, there were six short/issuers in total.  The three largest were Goldman Sachs, International F.C. Stone — and S.G. Americas, with 157, 129 and 80 out of their respective client accounts.  Tied for fourth spot were ABN Amro and Advantage, with 44 contracts each — and from their client accounts as well.  There ten long stoppers in total — and the largest this time was Australia’s Macquarie Futures, with 119 for its own account.  In second spot was JPMorgan, with 105 contracts in total…69 for clients — and another 36 contracts for its own account.  In third and fourth place came ABN Amro and Advantage, with 93 and 85 contracts for their respective client accounts.

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

The CME Preliminary Report for the Monday trading session showed that gold open interest in September rose by another 31 contracts, leaving 96 still around, minus the 51 mentioned a few paragraphs ago.  Friday’s Daily Delivery Report showed that 14 gold contracts were actually posted for delivery today, so that means that 31+14=45 more gold contracts just got added to September.  Silver o.i. in September also rose…by 34 contracts, leaving 918 still open, minus the 458 mentioned a few paragraphs ago.  Friday’s Daily Delivery Report showed that 203 silver contracts were actually posted for delivery today, so that means that 34+203=237 more silver contracts were added to the September delivery month.


There was a big withdrawal from GLD — and a monster withdrawal from SLV on Monday.  In GLD, an authorized participant removed 235,692 troy ounces.  In SLV, that number was 5,425,557 troy ounces.  I’m not sure whether that was a conversion of shares for physical metal, or a completely legitimate withdrawal.  But it doesn’t really matter, as I would suspect that JPMorgan owns it now, regardless.

In other gold and silver ETFs, there was 36,345 troy ounce of gold added to the iShares IAU ETF — and 10,011 troy ounces of gold was removed from Deutsche Banks’ XAD5, along with 187,391 troy ounces of silver from their XAD6 silver ETF.

There was a sales report from the U.S. Mint to start off the week.  They sold 1,500 troy ounces of gold eagles — 442,000 silver eagles — and 82,500 of those ‘America the Beautiful’ 5-ounce silver coins…which nets out at 82,500×5=412,500 troy ounces of silver.

There was a bit of activity in gold over at the COMEX-approved depositories on the U.S. east coast on Friday.  There was 8,037.500 troy ounces/250 kilobars [U.K./U.S. kilobar weight] deposited at Loomis International.  Nothing was reported shipped out.  The link to this is here.

It was busier in silver, as 677,659 troy ounces was reported received, but only 3,897 troy ounces were shipped out.  Most of the ‘in’ activity was at CNT, as they picked up one truckload…601,318 troy ounces.  Most of the rest…75,350 troy ounces…was deposited at Brink’s, Inc. — and the remaining good delivery bar…990 troy ounces…found a home over at Delaware,  The ‘out’ activity…2,904 and 993 troy ounces…happened at Brink’s, Inc. and Delaware respectively. There was also a counterintuitive paper transfer from the Registered category and back into Eligible at Brink’s, Inc — and it was certainly Ted’s opinion that this silver belonged to JPMorgan, or its clients.  It was being transferred to save on storage charges.  The link to all this is here.

There was a very tiny bit of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Friday.  They didn’t receive any — and only shipped out 6 of them.  This occurred at Brink’s, Inc. — and I won’t bother linking it.


Here are the usual two charts from Nick that he passes around on the weekend.  They show the amount of gold and silver deposited/removed from all the world’s transparent gold and silver depositories as of the close of trading on Friday, September 6.  For that reporting week, there was 465,000 troy ounces of gold deposited on a net basis and, for the first time in about three months, there was a net 1,041,000 troy ounces removed from all the known silver depositories, mutual funds and ETFs last week.  Click to enlarge for both.

I have a very decent number of stories/articles for you today.


CRITICAL READS

Class 8 Heavy Duty Truck Orders Plunge 79% in August Marking 10th Straight Month of Declines

Every month, analysts are hopeful that Class 8 orders are on the verge of rebounding and every month so far in 2019, orders have continued to crash. Such was the case again in August, according to data supplied by Bloomberg and ACT Research.

According to Buckingham analyst Neil Frohnapple, preliminary Class 8 truck orders were down 79% in August to 10,900 units.  Total Class 5-7 orders were 18,800 units for the period, marking a fall of 22% Y/Y, he also noted.

Frohnapple wrote in a note to clients: “Overall, Class 8 net orders were slightly below our expectations as we were anticipating net orders in the low- to mid-teen unit range for the month of August.”

He also noted that August marked the tenth consecutive month of Y/Y declines after orders exceeded expectations in the seasonally weak third quarter last year. The robust demand last year was a result of fleets and dealers placing orders earlier than normal to secure build slots for 2019, he said.

Continuing declines for Class 8 orders in 2019 are a result of weaker freight indicators – traditionally seen as a good gauge of the overall U.S. economy – and declining used Class 8 truck prices.

Frohnapple’s outlook for September is also grim. He continued: “We anticipate that Class 8 net orders will remain depressed and in the low- to mid-teen range for the month of September as the market continues to correct.”

In early July we reported that Class 8 orders fell a stunning 70% in June to 13,000 units, according to FTR data. This followed a 71% decimation in May.

The industry continues to deal with bloated backlogs as a result of aggressive ordering in 2018, coupled with headwinds from the ongoing trade war and the onset of a recession.

This Zero Hedge story put in an appearance on their Internet site at 9:00 p.m. EDT on Sunday evening — and it comes to us courtesy of Brad Robertson.  Another link to it is here.


Crashing Angel: Moody’s Downgrades Ford, and Its $84 Billion in Debt, to Junk

With pundits warning for years about the threat of “fallen angels”, or low-rated investment grade names downgraded to junk, the market first paid attention to, then learned to ignore the warnings as credit continued to tighten, helped in no small part by trillions in negative yielding sovereign debt – despite the ongoing threat of deteriorating fundamentals.

That however may suddenly change as the universe of (split) junk bond names is about to become bigger by almost $100 billion when moments ago Moody’s downgraded Ford’s senior debt rating from investment grade Baa3 to junk Ba1 (stable outlook), in the biggest shot across the fallen angel bow in years.

According to Bloomberg, no less than $84 billion in debt is affected, making Ford the single biggest fallen angel in the U.S. bond market.

This longish news item showed up on the Zero Hedge website at 4:25 p.m. on Monday afternoon EDT — and I thank Brad Robertson for sharing it with us.  Another link to it is here.


Consumer Credit Card Debt Explodes in July Despite Rates at 18-Year Highs

Something is not quite right here.

Despite The Fed signaling rate-cuts as far as the eye can see, U.S. credit-card interest rates have soared to the highest since 2001.

And despite credit card rates being at 18-year highs, U.S. revolving debt (largely made up of credit card debt) has exploded in July to its highest on record.  Click to enlarge.

This was the biggest MoM jump in revolving debt since Nov 2017…

Is the American consumer really that healthy? The recent exuberance over retail sales gains seems to be largely predicated on the back of an average Joe who is forced to use his high-cost credit card to cover everyday expenses.

This tiny 2-chart Zero Hedge article is certainly worth quick look — and it’s another offering from Brad Robertson — and another link to it is here.


The U.S. Economy Is Just Waiting to Crash — Bill Bonner

Remember, corporations can do all the buybacks, mergers, and acquisitions they want. But unless they’re shipping the goods, the “boom” is phony.

That’s why we watch the Dow Jones Transportation Index. It hit a high in October 2018. Since then, despite all the stimulus, Fed talk, and speculative hype, it still has not moved higher.

That leaves our hypothesis – that the stock market topped out a year ago – still standing. And if it is correct, it means the Dow is a dead man walking… waiting to fall over.

And now, when we look at jobs in the shipping sector – trains, planes, and trucks – we see that hours spent on the job are falling fast.

Six months ago, the number of hours worked in transportation and warehousing was rising at a 5% annual rate. Now, it is rising at less than 1%.

And the Cass Freight Index – which measures monthly freight activity in North America – has been signaling a transportation recession for eight straight months. The index is now nearly 6% below where it was a year ago.

This very worthwhile commentary from Bill appeared on the bonnerandpartners.com Internet site early on Monday morning EDT — and another link to it is hereGregory Mannarino‘s post mark closing rant on Monday is linked here — and I thank Roy Stephens for that one.


Ron Paul Exposes Bill Dudley’s Noble Lie

Former Federal Reserve official Bill Dudley’s recent op-ed calling for the Federal Reserve to implement policies that will damage President Trump’s reelection campaign states that such action would be unprecedented. Dudley claims the Federal Reserve bases its policies solely on an objective evaluation of economic conditions.

This is an example of a so-called noble lie – a fiction told by elites to the masses supposedly for the people’s own good, but really designed to maintain popular support for policies that benefit the elites.

Dudley’s noble lie is designed to bolster a rapidly (and deservedly) eroding trust in the Federal Reserve.

Presidents have always tried to influence the Fed — usually pushing for lower rates to (temporally) boost the economy. President Richard Nixon was recorded joking with then-Fed Chair Arthur Burns about Fed independence. President Lyndon Johnson shoved Fed Chair William Martin against a wall after an interest rate increase. Johnson’s frustration may have been because he realized that the success or failure of his guns and butter policies was largely out of Johnson’s control. The success or failure of presidents’ agendas is often determined by a secretive central bank’s manipulations of the money supply. No wonder presidents spend so much time trying to influence the Fed.

The Fed’s history of influencing, and being influenced by, presidents is one more reason why Congress should pass the Audit the Fed bill. Auditing the Fed is supported by almost 75 percent of Americans across the political spectrum, including such leading progressives as Bernie Sanders and Tulsi Gabbard.

My Campaign for Liberty is leading a major push to get a majority of Congress members to cosponsor Audit the Fed in order to pressure House and Senate leadership to hold a vote on the bill. The American people have had enough of noble lies about the Federal Reserve. It is time for truth; it is time to audit the Fed.

This commentary from Ron was posted on the Zero Hedge website at 2:51 p.m. on Monday morning EDT — and it’s also from Brad Robertson.  Another link to it is here.


Brothers in Arms — Jeff Thomas

Mayer Amschel Rothschild died in 1812, so he could hardly be referred to as a pal of Xi Jinping, but the two have a great deal in common.

In the late eighteenth and early nineteenth centuries, Mr. Rothschild discovered that, as a major banker in Germany, he could control the country to a greater degree than its political leaders if he could find a way to control it economically. This he did through a series of loans, for which he wished never to be repaid. He instead presented his chits for collection at times when the German government was strapped for cash. By doing so, he was able to extend the loans, renegotiated to his advantage, and increase his control over both the political leaders and the government as a whole.

As he said at the time, “Let me issue and control a nation’s money and I care not who writes its laws.”

This was not a passing comment, but a basic principal through which he expanded his power. He sent each of his sons forth – to Naples, Paris, Vienna, Frankfurt, and most notably, London, where his son Nathan repeated his father’s postulate, saying, “I care not what puppet is placed upon the throne of England to rule the empire on which the sun never sets. The man who controls Britain’s money supply controls the British Empire and I control the British money supply.”

Each of his sons came to dominate a European country’s power, through banking, but Nathan was to create the world’s foremost bank – the Bank of England – in London. To this day, the Rothschild family control the majority of the world’s wealth.

This very interesting and worthwhile commentary from Jeff was posted on the internationalman.com Internet site on Monday afternoon EDT — and another link to it is here.


Draghi Primes ECB Easing That Will Test Global Currency Defenses

European Central Bank President Mario Draghi will test the composure of global policy makers this week as he unleashes a barrage of stimulus to shore up economic growth.

The monetary easing will probably feature the centerpiece of an interest-rate cut that widens the difference between borrowing costs in the euro area and elsewhere. That will potentially affect foreign exchange markets — and risk the ire of critics such as Donald Trump.

While Draghi has a mantra ready that his institution strives for price stability and doesn’t target the euro, that won’t stop the U.S. president or others from accusing the ECB of fighting a “currency war,” a term coined by former Brazilian finance minister Guido Mantega. Trump has a history of citing the weakness of the euro when piling pressure on the U.S. Federal Reserve to cut its own rates.  Click to enlarge.

The timing of Draghi’s action won’t help blunt such calls either, coming a week before the Fed determines its own response to a slowing economy impaired by global trade tensions. Meetings of the Bank of Japan and Swiss National Bank are also due then.

Draghi is pressing for something significant,” said Kit Juckes, chief global FX strategist at Societe Generale SA, who expects at least a rate cut. “I don’t know that it’ll trigger a big FX response, but the more it does, the more likely it is to elicit a response from the president.”

This Bloomberg article showed up on their Internet site at 9:00 p.m. PDT [Pacific Daylight Time] on Sunday evening — and was updated about four hours later.  I thank Swedish reader Patrik Ekdahl for sending it our way.  Another link to it is here.  There was a parallel opinion piece on this from Bloomberg by bond king Mohaned A. El-Erian.  It’s headlined “Fed and ECB Are Stuck in a Shrinking Corner” — and I found that in this morning’s edition of the King Report.


Germany considers ‘shadow budget’ to circumvent national debt rules — sources

Germany is considering setting up independent public agencies that could take on new debt to invest in the country’s flagging economy, without falling foul of strict national spending rules, three people familiar with talks about the plan told Reuters.

The creation of new investment agencies would let Germany take advantage of historically low borrowing costs to spend more on infrastructure and climate protection, over and above debt limits enshrined in the constitution, the sources said.

Germany’s debt brake allows a federal budget deficit of up to 0.35% of gross domestic product (GDP). That’s equivalent to about €12 billion a year but once factors such as growth rates have been taken into account, Berlin only has the scope to increase new debt by 5 billion next year.

Europe’s largest economy is teetering on the brink of recession and pent-up demand for public investment from towns and cities across the country is estimated at €138 billion by state-owned development bank KfW.

Under the “shadow budget” plan being considered by government officials, new debt taken on by the public investment agencies would not be accounted for under the federal budget, said the sources, who declined to be named.

Germany too!  Now they’re all on the slippery slope.  This news story put in an appearance on the uk.reuters.com Internet site at 5:49 a.m. EDT on Monday morning — and I found it in yesterday’s edition of the King Report.  Another link to it is here.


Who Is Holding Back the Russian Economy? — Tom Luongo

Russia’s economy has been a sore spot for more than two years now. Since the ruble crisis of late 2014 the role of the Bank of Russia has been to apply IMF-style counter-cyclical tightening to stabilize the situation in the wake of the decision to allow the ruble to float freely on the open market.

That was the right decision then. It was the move the US did not expect President Vladimir Putin to make. It was expected Putin would hold to his natural conservatism and keep the ruble trading in the 30’s versus the U.S. dollar as opposed to risking a collapse in exchange rate in the face of an historic drop in oil prices over the eighteen months between July 2014 and the low made in late January 2016.

Oil dropped from $120+ per barrels to around $28 during that period. And if Putin hadn’t proactively allowed the ruble to fall from RUB32 to a high of RUB85 in early 2016 Russia would have been bankrupted completely.

During that time Bank of Russia President Elvira Nabullina raised the benchmark lending rate to 17.00% and Russia began the slow, painful process of de-dollarizing its economy.

It’s been five years since those dramatic times. But a lot of damage was done, not just to the Russian people and their savings but also to the mindset of those in charge at the Bank of Russia.

Nabullina has always been a controversial figure because she is western trained and because the banking system in Russia is still staffed by those who operate along IMF prescriptions on how to deal with crises.

If you have the time — and the interest, this article by Tom is definitely worth your while.  It put in an appearance on the lewrockwell.com Internet site on Monday sometime — and I thank Brad Robertson for pointing it out.  Another link to it is here.


Erdogan Says Turkey to Soon Cut Interest Rates to Single Digits

President Recep Tayyip Erdogan said Turkey will lower interest rates to single digits soon and inflation will follow suit.

We are lowering and will lower interest rates to single digits in the shortest period,” Erdogan said in a televised speech on Sunday. “After it falls to single digits, inflation will also slow to single digits.”

The drop in inflation after rate cuts is an apparent reference to Erdogan’s personal belief that price gains slow when the cost of borrowing is reduced. Most economists think the opposite is true.

Erdogan’s comments come a day after he said he believes the central bank will lower interest rates when its monetary policy committee meets on Thursday. The president sacked the central bank governor in July for failing to live up to his expectations for rapid cuts to interest rates. The new governor delivered a 425 basis-point cut to the benchmark rate in the first meeting he chaired. The rate now stands at 19.75%.

The lira jumped 2.1% in the five days through Sept. 6, its first weekly gain since Aug. 9.

Et tu Turkey?  The above five paragraphs are all there is to this brief Bloomberg article…the second of the day from Patrik Ekdahl.  It was posted on their Internet site at 7:57 p.m. PDT — and another link to it is here.


Gold is the way to go’ as interest rates fall, says Mark Mobius

Veteran investor Mark Mobius is bullish on gold as central banks around the world cut interest rates.

Physical gold is the way to go, in my view, because of the incredible increase in money supply,” said Mobius, the founding partner of Mobius Capital Partners.

All the central banks are trying to get interest rates down, they are pumping money into the system. Then, you have all of the cryptocurrencies coming in, so nobody really knows how much currency is out there,” he told CNBC’s “Street Signs” on Friday.

Amid expectations of slowing global growth, central banks around the world have been lowering interest rates, as they seek to boost money supply in the economy, stoke demand and provide an impetus to growth.

Mobius recommends that investors hold 10% of their portfolios in physical gold, with the rest invested in dividend yielding equities. That’s especially if the dollar gets weaker.

In his view, “the U.S. government, the Trump White House, does not want a strong dollar.”

People are going to finally realize that you got to have gold, because all the currencies will be losing value,” he added.

He would be right about that, dear reader…and that includes silver, plus all precious metal equities…a fact he failed to mention.  This gold-related news item appeared on the cnbc.com Internet site at 10:28 a.m. EDT on Sunday morning — and was updated about twenty hours later.  I thank Patrik Ekdahl for sending it our way — and another link to it is here.


Golden rule: Russia brings bullion & foreign currency reserves to new highs

Russia’s gold bullion holdings have reached $109.5 billion as the nation continues to shift its growing international reserves away from the U.S. dollar, according to the latest data released by the country’s central bank.

Russia has increased its stockpile of the precious metal by more than $7.5 billion in one month, figures released by the Central Bank of Russia (CBR) on Friday show. Thus, the share of gold in the nation’s reserves has set a new record, jumping to 20.7 percent from the previous 19.6 percent.

At the same time the country continues to boost its international reserves, which have reached record highs not seen since February 2013. The foreign exchange reserves rose around $9.2 billion or 1.8 percent in one month to reach $529.083 billion on September 1.

Russia has been consistently stockpiling gold bullion in recent years to cut reliance of the economy on the greenback. Thanks to the massive purchases of the precious metal, Russia was crowned  the world’s largest purchaser of gold last year.

As of the end of July, Russia’s gold holdings amounted to around 2,217.68 tonnes after it added another 9 tonnes of the yellow metal to its coffers in one month. Since the beginning of the year, the central bank has increased its bullion holdings by a total of 106 tonnes.

This gold-related news item, showed up on the rt.com Internet site on Saturday afternoon Moscow time — and I thank Jack Watt for sharing it with us.  Another link to it it here.  A parallel Bloomberg story to this was posted on the finance.yahoo.com Internet site on Sunday.  It’s headlined “Russia’s Huge Gold Stash is Now Worth More Than $100 Billion” — and I thank reader ‘Giff G.’ for that one.


China Has Added Nearly 100 Tonnes of Gold to Its Reserves

China has added almost 100 tons of gold to its reserves since it resumed buying in December, with the consistent run of accumulation coming amid a rally in prices and the drag of the trade war with Washington.

The People’s Bank of China raised bullion holdings to 62.45 million ounces in August from 62.26 million a month earlier, according to data on its website at the weekend. In tonnage terms, August’s inflow was 5.91 tons, following the addition of about 94 tonnes in the previous eight months.

Bullion is near a six-year high as central banks including the Federal Reserve cut interest rates as signs of a slowdown mount amid the U.S.-China trade war. Central-bank purchases have been another key support for prices as authorities from China to Russia accumulate significant quantities of bullion to help diversify their reserves. That buying spree likely to persist in the coming years, according to Australia & New Zealand Banking Group Ltd.

Trade war restrictions, in the case of China, or sanctions, as with Russia, give “an incentive for these central banks to diversify,” John Sharma, an economist at National Australia Bank Ltd., said in an email. “Also, with increasing political and economic uncertainty prevailing, gold provides an ideal hedge, and will therefore be sought after by central banks globally.”

China has previously gone long periods without revealing increases in gold holdings. When the central bank announced a 57% jump in reserves to 53.3 million ounces in mid-2015, it was the first update in six years.

As I keep repeating, yes China is always buying gold, but it has thousands of tonnes squirreled away on its books that it has yet to report.  So these monthly “purchases” they’ve been reporting are pretty much meaningless in the grand scheme of things.  This Bloomberg article appeared on their website at 7:49 p.m. PDT on Sunday evening — and it’s the final contribution of the day from Patrik Ekdahl.  Another link to it is here.


Ted Butler: Shorts Getting Smoked — Silver $19.50 is only the beginning

This 38-minute audio interview with Ted occurred last Wednesday before JPMorgan showed up in the futures market on Wednesday evening/Thursday morning…but that fact does not diminish what Ted has to say one iota.

Ted sent me the link for this, buried in another e-mail he sent me late last week — and I missed it entirely until Brad Robertson jogged my memory on Monday morning.

It’s definitely worth your time — and it was hosted by the Wealth Research Group — and posted on the youtube.com Internet site on September 4th.


The PHOTOS and the FUNNIES

After lunch at the Talking Rock Golf Course on June 16, we spent some time along the shore of Little Shuswap Lake…whose photos graced my Saturday column.  Besides the usual view shots, I got a couple of tiny critters as well…the first one being some variety of cicada — and certainly much smaller than the kind I’ve seen on the prairies, as this one was only about 30mm long.  It was too far to walk back to the car and get the extension tube for a real good close-up, so I did the best I could with my ‘walk around’ lens.  The second shot is of a butterfly that landed on the sand.  This was the only photo I got before it flew off.  It was about 50mm/2 inches and a bit, across. The third photo is of a bunch of horsetails, which grew in profusion higher up along the shore.  That last picture is of some sort of daisy.  I only took it because it was the only non-white one that I’d seen.  Note the profusion of horsetails around it.  Click to enlarge.


The WRAP

The state is that great fiction by which everyone tries to live at the expense of everyone else..” – Frederic Bastiat


Gold set a new intraday low price tick — and was also closed at a new low for this move down.  Although silver closed down 22.5 cents in the spot month according to the Kitco chart near the top of today’s column, it actually close up a nickel in the December contract…which I found rather interesting.  That’s reflected in the doji for silver in the chart below.  Platinum, palladium and copper were closed a bit lower as well.  However, WTIC rallied above — and then closed above both its 50 and 200-day moving averages.

Here are the 6-month charts for the Big 6 commodities.  Click to enlarge for all.

And as I type this paragraph, the London open is less than a minute away — and I see that the gold price was engineered lower starting almost the moment that trading began at 6:00 p.m. EDT in New York on their Monday evening. The current low tick was set just before 9:30 a.m. China Standard Time on their Tuesday. It came off that low by a bit right away — and has been edging quietly sideways since — and is currently down $8.00 an ounce. Silver followed an almost identical price path right up until the 2:15 p.m. CST afternoon gold fix in Shanghai. It spiked lower at that point, but has jumped a bit from there — and is down 9 only cents the ounce as London opens. Platinum price path has been almost the same as silver’s — and it has jumped up a bit in the last hour as well — and is down only 5 dollars. The palladium price has been wandering sideways-to-down throughout all of Far East trading, but has jumped higher in the last hour and change — and is now up 4 bucks as Zurich opens.

Net HFT gold volume is already up to around 93,500 contracts — and there’s 3,100 contracts worth of roll-over/switch volume in this precious metal. Silver o.i. is pretty heavy as well, at about 25,500 contracts — and there’s only 755 contracts worth of roll-over/switch volume on top of that.

The dollar index opened up 5 basis points once trading commenced around 7:45 p.m. in New York on Monday evening, which was 7:45 a.m. China Standard Time on their Tuesday morning. It crawled to its current 98.40 high tick, which came around 9:10 a.m. CST — and has been creeping ever-so-quietly lower since. But starting around 2:25 p.m. CST, it began to head lower a bit faster — and is up only 4 basis points as of 7:45 a.m. BST in London/8:45 a.m. CEST in Zurich.


Because of the eye-opening and record volumes in silver and gold on Thursday and Friday of last week, I mentioned in Saturday’s missive that I was really looking forward to what silver analyst Ted Butler had to say in his weekly column on Saturday afternoon…and here it is in a nutshell:

1. There was record two day trading volume in COMEX gold and silver (and in SLV) on the sharp sell-off Thursday and Friday.

2. On every big price drop in history, the managed money traders have always sold big and the commercials have always bought big.

3. If that occurred this time, as appears likely, because the managed money traders sold way above their average purchase price — and well above the key moving averages, any sales were closed out with big realized profits. Likewise, any commercial buy backs involved the booking of large realized losses.  Both occurrences would be unprecedented.

4. If the managed money traders did sell as expected, the most dominant commercial buyer was likely JPMorgan, which was the only commercial short seller into the very top of the price move. It’s possible JPM bought back its entire COMEX gold and silver short position — an event that Ted feels is beyond bullish and would cap off JPM’s double cross of the other commercial shorts.

5. JPMorgan appears to have done the same in SLV — shorting as many as 15 to 20 million shares into the price top — and then buying back all those short sales on the two day price drop…eliminating the need to deposit metal that was “owed” to the trust.

6. We should know a lot more in this Friday’s COT report — and the cut-off for that will occur at the close of COMEX trading at 1:30 p.m. EDT this afternoon.

In other news, Mario, “Whatever It Takes” Draghi, in his last act as the grand poo-bah of the ECB, will diddle with interest rates once again on Thursday — and it’s expected that he will lower them again…further into negative territory.   That will certain draw a Tweet-storm from Trump.

Then next week we have the FOMC meeting, plus both Japan and Switzerland’s central banks will meet and do whatever to their respective interest rates — and Germany is now signalling that it will provide fiscal stimulus as well.

The next week or so are going to be very interesting.


And as I post today’s column on the website at 4:02 a.m. EDT, I note that the gold price has been edging a bit higher since the 2:15 p.m. afternoon gold fix in Shanghai — and is only down $4.90 currently. Silver is down 6 cents as the first hour of London trading draws to a close. Platinum’s price was capped at the Zurich open — and it’s down 8 bucks. All of palladium’s earlier gains are now gone,plus more — and it’s down 3 dollars as the first hour of Zurich trading ends.

Gross gold volume is around 117,000 contracts — and minus what little roll-over/switch volume there is, net HFT gold volume is a bit under 110,000 contracts. Net HFT silver volume is about 29,300 contracts — and there’s only 815 contracts worth of roll-over/switch volume in this precious metal.

The dollar index was down about 3 basis points by 8:10 a.m. in London…its current low tick of the day. It has bounced off that rather sharply– and is now up 13 basis points as of 8:45 a.m. in London/9:45 a.m. in Zurich.

That’s it for another day — and I’ll see you here tomorrow.

Ed