Category Archives: Newsletter Archive

A Quiet Day in the Precious Metals on Monday

15 October 2019 — Tuesday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price was sold down about five bucks once trading commenced at 6:00 p.m. EDT in New York on Sunday evening — and it spent the Far East trading session crawling back to the unchanged mark.  It tacked on some more gains in morning trading in London, but minutes before 1 p.m. BST/8 a.m. in New York, it was sold quietly back to unchanged by shortly after 9 a.m. in New York.  It crept mostly higher from there until trading ended at 5:00 p.m. EDT.

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

Gold was closed at $1,492.50 spot, up $3.70 from Friday.  Net volume was nothing special at 218,000 contracts — and there was a bit under 11,000 contracts worth of roll-over/switch volume on top of that.

Except for the odd minor variation, silver traded in a very similar manner as the gold price on Monday everywhere on Planet earth — and its high tick came around the COMEX close.  It was sold a few pennies lower in after-hours trading.

The low and high ticks were reported by the CME Group as $17.455 and $17.67 in the December contract.

Silver was closed in New York on Monday afternoon at $17.62 spot, up 11 cents on the day.  Net volume was pretty light at a bit under 47,500 contracts — and there was only 1,545 contracts worth of roll-over/switch volume in this precious metal.

Like gold and silver, platinum was also sold lower during the first hour of trading once it began at 6:00 p.m. EDT in New York on Sunday evening.  From that juncture it chopped quietly sideways until noon in Zurich.  From there it rallied quietly and unenthusiastically until a few minutes before the 11 a.m. EDT Zurich close.  By noon EDT, ‘da boyz’ had the price back to down 3 bucks on the day — and that’s where it closed…at $891 spot.

Palladium was also sold lower at the Sunday evening open in New York, but it managed to rally back a few dollars above unchanged by around 10:45 a.m. CEST [Central European Summer Time] on their Monday morning.  From that point it was sold down to its low tick, which came a few minutes before 9 a.m. in New York.  The subsequent rally was capped and turned lower at 1 p.m. EDT — and that sell-off lasted until shortly before 3 p.m. in the very thinly-traded after-hours market — and it didn’t do much after that.  Palladium was closed at $1,688 spot, up 6 dollars from Friday.

The dollar index closed very late on Friday afternoon in New York at 98.30 — and opened up 6 basis points once trading commenced at 6:30 p.m. EDT on Sunday evening.  From that juncture it staggered very unevenly sideways…with a slight positive bias…until the 98.53 high tick was set [such as it was] somewhere around 4:30 p.m. in New York.  From that point it gave back a whole bunch of those gains…such as they were…by the 5:30 p.m. EDT close.  The dollar index finished the Monday session at 98.45…up 15 basis points from Friday.

If there was any correlation between the U.S. dollar and what precious metal prices were doing, I certainly failed to see any.

Here’s the DXY chart…courtesy of Bloomberg as always.  Click to enlarge.

And here’s the 6-month U.S. dollar index chart, courtesy of the fine folks over at the stockcharts.com Internet site.  The delta between its close…98.17…and the close on the DXY chart above, was 28 basis points on Monday.  Click to enlarge as well.

The gold stocks opened unchanged — and then rallied quietly and somewhat unevenly higher until a few minutes after the 1:30 p.m. COMEX close.  They were then sold equally quietly lower until trading ended in New York at 4:00 p.m. EDT.  The HUI closed higher by 0.47 percent — and well off their high ticks of the day.

The silver equities also opened unchanged — and chopped sideways around that mark until around 10:15 a.m. in New York trading.  They then vaulted higher — and the high tick was set a few minutes before the 11 a.m. EDT London close.  Then, like the gold shares, they hung in there until 1:30 p.m. — and then headed somewhat sharply lower from there…finishing in the red by a hair.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down a tiny 0.04 percent, so call it unchanged.  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.

With the light volume in silver and gold trading on the COMEX on Monday, not too much should be read into the share price activity, or into the price activity of their underlying precious metals.


The CME Daily Delivery Report showed that 20 gold and 68 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday.

In gold, the sole short/issuer was Advantage out of its client account.  The three long/stoppers were JPMorgan, Advantage and Australia’s Macquarie Futures, picking up 14, 4 and 2 contracts…JPMorgan and Advantage for their respective client accounts — and Macquarie for its own account.

In silver, the sole short/issuer was ABN Amro — and the of the five long/stoppers in total, the three biggest were JPMorgan, Advantage and Dutch bank ABN Amro, stopping 47, 11 and 8 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 October rose by an eye-opening 186 contracts, leaving 447 contracts still around, minus the 20 contracts mentioned a few paragraphs ago.  Friday’s Daily Delivery Report showed that 38 gold contracts were actually posted for delivery today, so that means that 186+38=224 more gold contracts just got added to the October delivery month.  Silver o.i. in October rose by 1 contract, leaving 339 still open, minus the 68 mentioned a few paragraphs ago.  Friday’s Daily Delivery Report showed that zero silver contracts were posted for delivery today, so that means that 1 more silver contract was added to October.

And while on the subject of open interest…there are 2,050 of those ten-ounce COMEX gold mini contracts still open in October.  In the 1,000 ounce COMEX mini-silver contracts, there’s only 45 contracts still around.


There were no reported changes in GLD on Monday, but there was a fairly hefty 2,150,440 troy ounces of silver withdrawn from SLV.

The folks over at Switzerland’s Zürcher Kantonalbank updated their website with the goings-on inside their gold and silver ETFs as of the close of business on Friday, October 11 — and this is what they had to report.  During that reporting week they added 18,071 troy ounces of gold, plus another 31,090 troy ounces of silver.

In other gold and silver ETFs on Planet Earth on Monday…net of what happened in COMEX warehouse stocks, SLV, GLD — and ZKB…there was a net 45,136 troy ounces of gold withdrawn — and in silver, there was a net 29,512 troy ounces taken out.

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

There was no in/out activity in gold over at the COMEX-approved depositories on the U.S. east coast on Friday.

There was a bit of activity in silver.  In the ‘in’ category, there was 11,061 troy ounces dropped off at CNT — and one truckload was shipped out…599,475 troy ounces departed Brink’s, Inc. — and that was it.  The link is here.

There was some activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Friday.  They received 64 of them — and shipped out 328.  All of this activity was at Brink’s, Inc. — and the link to that, in troy ounces, is here.


Here’s a chart that Nick Laird passed around last Friday that I didn’t have space for in my Saturday column.  It’s the chart showing the withdrawals from the Shanghai Gold Exchange, updated with September’s data.  It shows that they only took out 117.08 tonnes during that month.  As you can tell from the chart below, their monthly withdrawals over the last six months have been pretty skinny.  Click to enlarge.

Lawrie Williams has a story about the above in the Critical Reads section below.

I have an average number of stories for you today.


CRITICAL READS

Sears Will Close Another 100 Stores Amid Failed Turnaround

A new report by The Wall Street Journal indicates about 100 of the 425 Sears and K-mart stores that financier Edward Lampert acquired out of bankruptcy are set to close by year-end.

Lampert, who was chairman and chief executive of parent Sears Holdings Corp., decided in late 2018 to file for bankruptcy protection.

Lampert provided the parent company with numerous financing deals, one was upwards of $2.4 billion, to save the sinking retailer.

Earlier this year, he acquired 223 Sears and 202 Kmart stores, the Kenmore and DieHard brands, for approximately $5.2 billion.

The newly acquired assets were put into a new company called Transform Holdco LLC, which didn’t have $4 billion in debt and pension obligations that the parent company had. About 50% of the stores in the new company were profitable, according to one of The Journal’s sources.

The sources said by late summer, the profitability of at least 100 of the 425 stores owned by Transform Holdco saw rapid deterioration by late summer. Sources said the decision to cut 100 stores by year-end isn’t public knowledge yet, there are no filings that detail the plan.

Sears has struggled to reacquire suppliers after the bankruptcy proceedings, leaving many of its store shelves empty, and consumers disappointed with the selection.

As for the overall retail trend, our report from last month specified how 2019 store closures already outpaced all of 2018.

This news item put in an appearance on the Zero Hedge website at 12:30 p.m. EDT on Monday afternoon — and another link to it is here.


Global Authorities Aren’t Waiting for a Crisis to Move Toward More Debt — Bill Bonner

Here’s the latest. U.S. corporations are about to report more grim news.

The Financial Times has the story:

Wall Street analysts are bracing for a third consecutive quarter of falling earnings, the longest streak in more than three years, with the energy and tech sectors expected to be worst hit. […]

S&P 500 companies are expected to report around a 4.1 percent fall in earnings per share, according to FactSet[…] That follows a 0.4 per cent drop in the second quarter and a 0.3 per cent slide in the first.”

Warren Buffett says you can never go right by betting against U.S. business. But guess what? So far this century, that bet has been a winner. Charlie Bilello, a former hedge fund analyst, tweets:

Total Returns, last 20 years…

  • International Stocks: +110%
  • U.S. Stocks (S&P 500): +221%
  • Long-Term US Bonds: +329%
  • Gold: +365%

In what kind of economy does gold – which produces nothing, invents nothing, sells nothing, issues no reports, makes no sales or profits, pays no dividends, and has no CEO, no staff, no office, no parking lot, no coffee machine, no PR firm, and nobody to lie about the numbers – outperform the MBAs, capitalists, and people of “great and unmatched wisdom” who run its major corporations?

It is a strange world, you will say.

This worthwhile commentary from Bill showed up on the bonnerandpartners.com Internet site on Monday morning EDT — and another link to it is hereGregory Mannarino‘s post close market rant is linked here.


The Misconception of the “Man of System” — Jeff Thomas

In 1759, Scotsman Adam Smith, who is widely regarded as the world’s first true economist, published his first great work, The Theory of Moral Sentiments. In it, he postulated that all social evolution can be attributed to “individual human action,” as opposed to “individual human design.”

By this, he meant that whatever understanding worked well between any two people was likely to lead to progress. The reason for this was that such agreements would, of necessity, be based upon “trust and empathy.”

He believed that, if mankind were left alone to sort out all commerce and other interaction on their own, using truth and empathy, they’d succeed at moving the society forward.

He further postulated that, historically, the failure to progress could be attributed to what he termed to be the “Man of System.”

The Man of System was any individual who believed that he knew what was best for others and sought to impose his system (from the top, down) on the population, whether they agreed or not.

This interesting commentary from Jeff appeared on the internationalman.com Internet site on Monday sometime — and another link to it is here.


Turkish-Backed Forces Clash With Syrian Army, Advance on Manbij

On the evening of October 14, Turkish-backed militant groups officially announced an advance on the town of Manbij, which was controlled by the Kurdish-led Syrian Democratic Forces.  The advance started a few hours after units of the Syrian Army was deployed north of Manbij.

According to pro-Turkish sources, Turkey-led forces shelled several positions of the Syrian Army and even captured a battle tank.

On Monday, President Recep Tayyip Erdogan of Turkey said that his troops would continue to support an invasion of parts of northern Syria, despite the return of Syrian government forces. The official Turkish explanation for the offensive was to clear the area of the Kurdish-led militia that has close ties with a terrorist group that is banned in Turkey. At the start of the invasion, Turkish officials said they respected Syrian sovereignty.

Speaking at a news conference, Erdogan said a Turkish-backed force would press on with attempts to capture Manbij, a town at the crossroads of two major highways that the Kurdish authorities in northern Syria have handed over to the Syrian government. He then criticized NATO allies for not aiding in Turkey’s fight.

There is a struggle against terrorists — are you going to stand by your ally, a NATO member, or the terrorists?” he asked.

Of course there’s zero chance that any NATO country will back Edrogan in this fight.  This story was posted on the Zero Hedge website at 3:35 p.m. on Monday afternoon EDT — and another link to it is here.


Trump to Authorize Sanctions Against Turkish Officials, Reintroduce Steel Tariffs, Halt $100BN Trade Deal

Just as he promised earlier, President Trump and the White House are following through with sanctions against top Turkish officials following the Turkish military’s offensive against the Kurds of northeastern Syria.

In a tweet sent just minutes before the close, Trump published a statement outlining his plans for the sanctions, saying he would soon issue an executive order targeting current and former senior Turkish government officials and anyone found to have had a hand in Turkey’s “destabilizing actions” in northeastern Syria, which has kicked up a storm of fury in Congress among NatSec hawks on both sides of the aisle.

Trump reiterated that he is “fully prepared to destroy Turkey’s economy” if “Turkish leaders continue down this dangerous and destructive path.”

He also vowed to reintroduce steel tariffs, which will be increased back up to 50%, and immediately halt negotiations on a $100 billion trade deal.

As if Erdogan’s intentions weren’t clear even before Trump decided to pull the last remaining American forces from the area, the president warned that Turkey was “endangering civilians and threatening peace, security, and stability in the region. I have been perfectly clear with President Erdogan: Turkey’s action is precipitating a humanitarian crisis and setting conditions for possible war crimes.”

Turkish President Recep Tayyip Erdogan has long insisted that Kurdish forces deployed along the Turkish border represented an extant “terror” threat. The military operation was nominally launched to install a buffer zone along the border.

This news item appeared on the Zero Hedge website at 4:09 p.m. EDT on Monday afternoon — and another link to it is here.  The rt.com spin on this is headlined “‘Fully prepared to destroy economy’: Trump sanctions Turkish officials, raises steel tariffs & stops $100bn trade deal” — and I thank Swedish reader Patrik Ekdahl for that one.


Turkey Beats the War Drums — Eric Margolis

More war in wretched Syria. Half the population is now refugees; entire cities lie shattered by bombing; bands of crazed gunmen run rampant; U.S., French, Israeli and Russian warplanes bomb widely.

Now, adding to the chaos, President Donald Trump has finally given Turkey, NATO’s second military power, the green light to invade parts of northeastern Syria after he apparently ordered a token force of U.S. troops there to withdraw.

This, of course, puts the Turks in a growing confrontation with the region’s Kurds, who have occupied large swaths of the area during Syria’s civil war. The Kurdish militia, known as YPG (confusingly part of the so-called Free Syrian Army), is armed, lavishly financed and directed by the CIA and Pentagon.

Most Kurdish forces are deployed along the line of the former Berlin-Baghdad railway, a major source of warlike tensions before World War I. Interestingly, Turkey’s president, Recep Tayyip Erdogan, was making a state visit to blood enemy Serbia when the Turkish offensive kicked off.

Turkey calls the Kurdish militias ‘terrorists’ and links them to the original Kurdish resistance movement PKK which is on the U.S. and Turkish black list. I covered the brutal conflict in eastern Anatolia (southern Turkey) between the Turkish Army and Kurdish militias known as ‘peshmerga.’ If the U.S. can brand Syrian and Iraqi groups ‘terrorists,’ why can’t the Turks do their own terrorist branding? After all, Syria, Lebanon and Iraq are in their backyard.

The U.S. media is fiercely anti-Turkish because Ankara is seen as somewhat pro-Palestinian. Israel is a bitter foe of Turkey’s Erdogan. One rarely reads anything positive about Turkey or its leader. Not very many western readers even know that since the early 1500’s, Syria was part of the Ottoman Empire, the predecessor of modern Turkey. So were Iraq, Palestine, today’s Israel, Saudi Arabia, and Yemen.

Well, dear reader, if you want to read the nuts and bolts of how the modern Middle East came into existence, then you need look no further than the classic tome by David Fromkin…”A Peace to End All Peace: The Fall of the Ottoman Empire and the Creation of the Modern Middle East”  This very interesting and worthwhile commentary by Eric showed up on the unz.com Internet site on Saturday sometime — and I thank Larry Galearis for pointing it out.  Another link to it is here.


Hard to Obtain Liquidity” – South Korea’s Largest Hedge Fund Halts Redemptions

First it was the shocking junk bond fiasco at Third Avenue which led to a premature end for the asset manager, then the three largest U.K. property funds suddenly froze over $12 billion in assets in the aftermath of the Brexit vote; two years later the Swiss multi-billion fund manager GAM blocked redemptions, followed by iconic U.K. investor Neil Woodford also suddenly gating investors despite representations of solid returns and liquid assets, and most recently the ill-named, Nataxis-owned H20 Asset Management decided to freeze redemptions. Most recently, Arrowgrass Capital Partners shuttered when it slashed the valuation of its stake in Britain’s oldest surviving amusement park, piling further losses on investors in Nick Niell’s closed hedge fund.

By this point, a pattern had emerged, one which Bank of England Governor Mark Carney described best when he said that investment funds that promise to allow customers to withdraw their money on a daily basis arebuilt on a lie.” At roughly the same time, the chief investment officer of Europe’s biggest independent asset manager agreed with him, because while for much of 2019 the biggest risk bogeymen were corporate credit, leveraged loans, and trillions in negative yielding debt, gradually consensus emerged that investment funds themselves – and specifically their illiquid investments- gradually emerged as the basis for the next financial crisis.

There is no point denying we are faced with a looming liquidity mismatch problem,” said Pascal Blanque, who oversees more than €1.4 trillion ($1.6 trillion) as the CIO of Amundi SA, adding that the prospect of melting liquidity is one of “various things keeping me awake at night.”

Fast forward to today and South Korea’s largest hedge fund the latest reminder to investors just how toxic the threat of illiquid securities is.

As Bloomberg reports, Lime Asset Management, South Korea’s largest hedge fund with about $4 billion of assets, suspended withdrawals from more funds on Monday, freezing a total of $710 million of its portfolio, after the firm said last week it couldn’t sell assets fast enough to meet redemption demands.

The hedge fund halted an additional 243.6 billion won ($210 million) today after freezing funds worth 603 billion won on Oct. 10, Won Jong-Jun, chief executive officer at the Seoul-based firm, said in a press briefing this afternoon.

Due to the recent drop in the Kosdaq market and also declines in stocks of companies we’ve invested in, it became hard to obtain liquidity by converting the bonds into the stocks as we planned,” Won said at the briefing.

And that, precisely, is why central banks can never again allow risk asset prices to drop: the alternative means gating not one, or two, or a hundred funds, but halting the entire market, because once everyone start selling and price discovery finally returns to a market that has been dominated by central banks for the past decade, several generations of traders and investors who have grown up without price discovery will be shocked to discover just where “fair” market prices reside.

This is the second story on liquidity issues in hedge funds in the last ten days…first from the U.K. — and now from South Korea.  It was posted on the Zero Hedge website at 7:30 p.m. EDT on Monday evening — and it’s definitely worth reading.  Another link to it is here.


British regulator reviews JPMorgan metals trading amid U.S. probe: sources

Britain’s financial services regulator is examining allegations of precious metals market manipulation by JPMorgan Chase & Co traders following criminal charges by U.S. authorities, according to two people familiar with the matter.

The U.K. Financial Conduct Authority (FCA) is one of the various authorities that JPMorgan has previously said were investigating its metals trading, according to one of the people, who declined to be named due to the sensitivity of the matter. The watchdog has requested documents and other information from JPMorgan, the source said.

The exact scope of the FCA scrutiny or whether it will result in any charges was unclear.

The U.S. Department of Justice (DOJ) has charged five current and former JPMorgan metals traders, who worked in New York, London and Singapore, with alleged price manipulation between 2007 and 2016. Two of them have been charged in parallel by the Commodity Futures Trading Commission (CFTC). The joint investigation is ongoing, a DOJ official has said.

This Reuters article, co-filed from New York and London, put in an appearance on their Internet site at 9:15 a.m. EDT last Friday morning — and I found it in a GATA dispatch on Saturday afternoon.  Another link to it is here.


China gold demand still weak but offset by other factors — Lawrie Williams

The Shanghai Gold Exchange (SGE) gold withdrawal tonnage for September showed an improvement on the August figure, but was still well below the corresponding month’s figure for the previous few years.  While we hear anecdotal reports of stronger gold demand in the world’s largest consuming nation, this is not yet really filtering through to the SGE monthly gold withdrawal announcements, so it still looks as though the full year withdrawals figure, which we equate to be representative of the Chinese mainland’s real annual gold consumption, is likely to be well down on that for the preceding years.  At the moment it looks like coming in between 300 and 400 tonnes lower than for 2017 and 2018 unless there is a major (and perhaps unlikely) pick up in the final quarter of the year.

We do not see this apparent gold demand fall-off as being too surprising given the adverse effects of the U.S.-imposed trade tariffs on China’s economy and GDP growth. Meanwhile, as far as the global gold supply/demand equation goes, the Chinese demand shortfall is being offset by a big increase in gold being absorbed by the world’s gold ETFs and continuing strong take-up by central banks worldwide, while production growth is minimal – or possibly zero – as Peak Gold materialises, albeit marginally slower in coming about than many analysts have been predicting.

The World Gold Council (WGC) has published updates on gold ETF accumulations and central bank gold purchases so far this year.  On gold ETF increases, the WGC reports that in September global gold-backed ETFs and similar products recorded US$3.9 billion of net inflows across all regions, increasing their collective gold holdings by 75.2 tonnes to 2,808 tonnes, the highest levels of all time. Holdings surpassed late 2012 levels, at which time the gold price was near US$1,700/oz, 18% higher than current levels.  So far this year (to end-September) global gold ETFs have added 368 tonnes of gold – more than offsetting the decline in Chinese demand to date.

This interesting and worthwhile commentary from Lawrie was posted on the sharpspixley.com Internet site on Saturday sometime — and another link to it is here.


Central Bank Issues Stunning Warning: “If The Entire System Collapses, Gold Will Be Needed to Start Over

It’s not just “tinfoil blogs” who (for the past 11 years) have been warning that a monetary reset is inevitable and the only viable fallback option once trust and faith in fiat is lost, is a gold standard (something which even Mark Carney hinted at recently): central banks are joining the doom parade now too.

An article published by the De Nederlandsche Bank (DNB), or Dutch Central Bank, has shocked many with its claim that “if the system collapses, the gold stock can serve as a basis to build it up again. Gold bolsters confidence in the stability of the central bank’s balance sheet and creates a sense of security.

While gloomy predictions of a monetary reset are hardly new, they have traditionally been relegated to the fringe of mainstream financial thought – after all, as Mario Draghi stated on several occasions in recent years, the mere contemplation of a “doomsday scenario” is enough to create the self-fulfilling prophecy which materializes it. As such, it is stunning to see a mainstream financial institution open up about the superior value of limited supply, non-fiat, sound money assets. It is also hypocritical given the diametrically opposed Keynesian practices regularly engaged in by central banks and official institutions worldwide: after all, just a few months back, the IMF published a paper bashing Germany’s adoption of the gold standard in the 1870s as the catalyst for instability in the global monetary system.

Fast forward to today, when the Dutch Central Bank is admitting not only did gold not destabilize the monetary system, but it will be its only savior when everything crashes.

The article, titled “DNB’s Gold Stock” states:

A bar of gold retains its value, even in times of crisis. This makes it the opposite of “shares, bonds and other securities” all of which have inherent risk and prices can go down.

This item was posted on their website at 1:04 p.m. EDT on Sunday afternoon…but has been ‘rebranded’ — and now bears the posting time of 4:04 a.m. in Monday morning.  The first reader through the door with this story was Paul Wood — and another link to it is here.  Another version of this, which is just as good in my opinion…is headlined “Dutch Central Bank: World Will Need Gold if Entire System Collapses“.  It was posted on the cointelegraph.com Internet site on Monday sometime — and I found that on the Sharps Pixley website.


Treasure hunters uncover pristine gold coins in wreckage of ship that sank in 1840 ‘while carrying millions of dollars worth of currency’ off South Carolina coast

Treasure hunters have struck gold while diving a wreck thought to have sunk with tens of millions of dollars worth of currency.

The Steamship North Carolina, a 200 ft. long side wheel steamer, sank on July 25, 1840, after colliding with her sister ship, the Governor Dudley, 20 miles off the South Carolina coast.

And while all passengers and crew were able to escape from one ship to the other, their cargo was lost – including a hoard of gold coins.

Now, after months of archaeological field work, divers from Blue Water Ventures International (BWVI) and Endurance Exploration Group have confirmed the presence of gold at the wreck site.

Several gold coins were recovered in the first dive and it’s hoped that subsequent dives will reveal coins minted at the short-lived Dahlonega mint, which would now be valuable collectors’ items.

The location where the coins were found is commonly referred to as the ‘Copper Pot’ by divers. A dive organiser to the spot adds that the North Carolina’s boiler, shaft and hull are all still in one piece beneath 80 feet of water.

This treasure-related news item, complete with a few interesting photos, showed up on the dailymail.co.uk Internet site last Thursday.  It comes to us courtesy of Jim Gullo — and another link to it is here.


The PHOTOS and the FUNNIES

After departing Whistler/Blackcomb on June 30, I took it upon myself to check out the tiny settlement of D’Arcy…just north of Pemberton…which is on the way back to Lillooet, sort of.  This first shot of is Green Lake at the southern outskirts of Whistler as we headed north — and you can see some of the ski slopes on Blackcomb on the mountain on the left. The second shot is of the sign for D’Arcy — and the highway comes to an abrupt end 300 meters away at picturesque Anderson Lake…the third photo.  There’s a forestry road from there to Seton Portage.  I didn’t know it at that at the time — and even if I had, it was too late in the day for any new adventures.  Click to enlarge.


The WRAP

As I mentioned earlier, it was a very quiet trading session in the precious metals on Monday…both in price and in volume.  But, having said that, there were obvious signs that JPMorgan et al. had their fingers in all four of them yesterday.

Ted mentioned in his weekly review on Saturday that the Big 7 commercial short holders, who would be the same in both gold and silver, were still sitting on unbooked loses of $3.2 billion…down about $500 million from the prior week.  It’s how this situation resolves itself…with the usual ‘wash, rinse, spin’ cycle that we all know…or whether there will be a panic short covering rally by some of the smaller members of this ‘Group of 7’…that will determine the price direction going forward.

That’s all there is…there ain’t no more.

Here are the 6-month charts for the Big 6 commodities — and there isn’t a lot to see in the precious metals, but copper closed a hair higher — and WTIC gave up all its Friday gains, plus a bit more.  Click to enlarge.

And as I type this paragraph, the London open is less than a minute away — and I note that the gold price was sold a bit lower until shortly before 8 a.m. China Standard Time on their Tuesday morning — and then crept higher to its current high, which came a few minutes before noon CST. It has been sold down fairly aggressively since — and is lower by $2.60 an ounce. With some minor exceptions, the silver price has been handled in a similar manner — and it’s down 3 cents as London opens. The platinum price did nothing until 1 p.m. CST on their Tuesday afternoon, but was sold down a bit from there — and is lower by 3 bucks. Palladium had been trading very uneventfully sideways until 2 p.m. CST, but has ticked higher by a few dollars since — and is up 3 bucks as Zurich opens. All four precious metals are off their current lows.

Net HFT gold volume is coming up on 43,000 contracts — and there’s only 460 contracts worth of roll-over/switch volume in this precious metal. Net HFT silver volume is a tiny bit over 11,000 contracts — and there’s only 201 contracts worth of roll-over/switch volume on top of that.

The dollar index opened unchanged at 98.45 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 has been heading mostly quietly and very unevenly lower since — and that lasted until a few minutes after 2:26 p.m. CST. It fell off a bit of a cliff at that point — and is now down 15 basis points as of 7:45 a.m. BST in London/8:45 a.m. CEST in Zurich.


Today, at the close of COMEX trading, is the cut-off for this Friday’s Commitment of Traders Report — and I may be brave enough to stick my neck out with a guess as to what might be in it after seeing the Tuesday doji on the above charts later tonight.


And as I post today’s column on the website at 4:02 a.m. EDT, I see that the gold price continues to creep off its current low tick — and is down only 10 cents an ounce. Ditto for silver — and it’s down 2 cents as the first hour of London trading draws to a close. Platinum is now down only a dollar, after being down a bunch — and palladium is up 10 bucks at $1,698 spot, but was as high was $1,721 spot at the Zurich open.

Gross gold volume is around 55,500 contracts — and minus what little roll-over/switch volume there is, net HFT gold volume is 54,500 contracts. Net HFT silver volume is a bit over 12,500 contracts — and there’s still only 206 contracts worth of roll-over/switch volume in this precious metal…just 5 contracts more than an hour ago.

The dollar index has blasted higher off its current 2:40 p.m. China Standard Time 98.29 low tick — and after being up 5 basis points at 8:20 a.m. BST, is now down 3 basis points as of 8:45 a.m. in London/9:45 a.m. in Zurich.

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

Ed

The Precious Metal Equities Take a Big Hit

12 October 2019 — Saturday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price didn’t do much of anything in Far East trading until around 1:35 p.m. China Standard Time on their Friday afternoon.  It then began to rally — and that lasted until ‘da boyz’ showed up shortly after 9 a.m. in London.  They stair-stepped the price lower from there until the low tick was set a few minutes before 10:30 a.m. in COMEX trading in New York.  Not surprisingly, it began to rally anew from that juncture — and that state of affairs lasted until 12:15 p.m. EDT.  It was sold quietly lower from that point until 3:40 p.m. in after-hours trading, before taking off higher until trading ended at 5:00 p.m. in New York.

The high and low ticks for gold were reported by the CME Group as $1,508.00 and $1,478.00 in the December contract.

Gold finished the Friday session in New York at $1,488.80 spot, down $4.90 on the day — and miles off its low tick.  Net volume was ginormous at 460,000 contracts — and there was 26,500 contracts worth of roll-over/switch volume in this precious metal.

The silver price had virtually the same trading pattern as gold on Friday, but with three key differences.  Firstly, the rally that began around 1:35 p.m. CST was far more substantial than it was for gold — and the low tick in silver was set about ten minutes before the low was set in gold.  Secondly, the Big 7 traders couldn’t get it very far below Thursday’s close…and thirdly, the price rallied enough after that low was set, that silver actually closed up on the day.

The high and low ticks in silver were recorded as $17.785 and $17.37 in the December contract.

Silver finished the Friday session at $17.51 spot, up 3 cents from Thursday’s close.  Net volume was very heavy at a bit over 99,500 contracts — and there was 3,400 contracts worth of roll-over/switch volume on top of that.

The platinum price chopped quietly sideways in Far East trading on Friday — and its rally that began began around 1:30 p.m. China Standard time was capped at the $903 spot mark.  It bounced off that price ceiling for quite a number of hours until serious selling pressure showed up at 1 p.m. in Zurich.  The low was set at the Zurich close — and away it went to the upside after that…making it back to the unchanged mark in after-hours trading.  That wasn’t allowed to last — and the price was edged lower until trading ended at 5:00 p.m. in New York.  Platinum as closed at $894 spot, down 3 bucks on the day.

The palladium price was down a few dollars in morning trading in the Far East, but was back in positive territory by shortly before noon CST — and it crept quietly higher from there until ‘da boyz’ showed up shortly before 2 p.m. in Zurich.  The price spike lower didn’t last long — and it was back at unchanged on the day by shortly after the COMEX open.  It was sold quietly lower from that juncture, but recovered all of that in the thinly-traded after-hours market — and actually closed up a dollar on the day at $1,682 spot.

The dollar index closed very late on Thursday afternoon in New York at 98.70 — and opened exactly unchanged 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 sagged about 5 basis points during the first hour — and then didn’t do much of anything until 9:50 a.m. in London.  Then a choppy sell-off of some size occurred, with the 98.20 low tick coming exactly five hours later at 9:50 a.m. in New York.  The index chopped very unevenly higher until 4:45 p.m. EDT — and gave back a small handful of basis points going into the 5:30 p.m. close.  The dollar index finished the Friday session at 98.30…down 40 basis points from its close on Thursday.

The engineered price declines in both gold and silver started about forty minutes before the dollar index rolled over — and ‘da boyz’ had to fight that big headwind.  You’ll notice from the stair-step price declines in both on the Kitco charts above, that the moment they stopped spoofing the markets lower, their respective prices were quick to rise.  That was even more obvious after their respective low ticks had been set, as the dollar index and gold were actually rallying together as the New York trading session moved along.

Here’s the DXY chart from BloombergClick 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…98.00…and the close on the DXY chart above, was 30 basis points on Friday.  Click to enlarge as well.

The gold stocks gapped down at the open — and kept right on going lower until around 10:45 a.m. in New York trading.  There was a bit of a reprieve until a few minutes before the 1:30 p.m. COMEX close — and then they continued to crawl quietly lower into the 4:00 p.m. close…despite the fact that the gold price was well off its low tick of the day by that time.  The HUI finished virtually on its low tick of the day…down 4.57 percent.

The price path for the silver equities was virtually the same as it was for the gold shares.  That state of affairs lasted until shortly after 3 p.m.  EDT when a large position in one stock was dumped on the market — and the silver stocks were down 1 percent in an instant.  They kept on heading lower — and that’s despite the fact that silver was basically back at unchanged on the day by that point.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index got slammed by 5.71 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 the general equity markets blasting higher in New York, it seems obvious that a large group of traders headed for what they considered greener pastures yesterday.  But I suspect that a lot of precious metal shares were sold because they were previously bought on margin —  and  the margin calls certainly would have been going out yesterday — and that price action started to feed on itself.

There can be no other reason, because this mindless selling was out of all proportion to the engineered price declines in their underlying precious metals.  Even the rallies off their mid morning lows barely made a difference in how the the equities performed — and that was particularly true towards the end of the trading day, when the rallies off the lows in the precious metals became far more pronounced.  Nothing made any difference.

But the question that’s never asked on days like Friday is…who were the buyers?  There has to be one for every seller — and they weren’t weak hands…but the strongest hands of all.


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 platinum palladium, everything else was down…or in the case of silver…unchanged.  All of the week’s gains up to and including Thursday, were all taken back — and then some, by the close of trading on Friday.  Click to enlarge.

Here’s the month-to-date chart.  Everything is still in the green…albeit barely for the precious metal equities, as they are underperforming the metals by a goodly amount now — and that’s particularly true of the Silver 7 Index .  Click to enlarge.

Here’s the year-to-date chart.  It’s still all green, but some of the gains are starting to slip away, especially the silver equities, which continue to underperform badly.  That, as you already know is all thanks to JPMorgan, along with the dismal year-to-date performances of Buenaventura, Peñoles and Hecla.  However, all three have been showing signs of life lately, so there is hope.  Click to enlarge.

The usual ‘wash, rinse, spin’ cycle is back on…but not making much headway…at least at the moment.  We’re back below the 50-day moving averages in both gold and silver once again — and it remains to be seen where we go from here.  Can the Big 7 traders do the dirty to the downside — and if so, how far can they get?  We’ll find out in due course…but regardless of that, the physical movement into all known gold and silver ETFs and depositories continues unabated.


The CME Daily Delivery Report showed that 38 gold and zero silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.

In gold, the two short/issuers were Advantage and ADM, with 35 and 3 contracts from their respective client accounts.  There were four long/stoppers in total.  The biggest was Advantage, picking up 20 contracts for its client account — and in second spot was Australia’s Macquarie Futures, stopping 12 contracts for its own account.  In distant third was ADM, with 5 contracts for its client account.

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

So far in October, there have been 10,770 gold contracts issued/reissued and stopped — and that number in silver is 925.

The CME Preliminary Report for the Friday trading session showed that gold open interest in October rose by another 16 contracts, leaving 262 still around, minus the 38 contracts mentioned a few paragraphs ago.  Thursday’s Daily Delivery Report showed that 25 gold contracts were actually posted for delivery today, so that means that 16+25=41 more gold contracts were just added to the October delivery month.  Silver o.i. in October rose by 1 contract.  Thursday’s Daily Delivery Report showed that zero silver contracts were actually posted for delivery on Monday, so that means that 1 more silver contract was just added to October.


There were no reported changes in either GLD or SLV on Friday.

In the other gold and silver ETFs on Planet Earth on Friday…minus COMEX, GLD & SLV activity…there was a net 149,950 troy ounces of gold added — and in silver that number was a net 685,472 troy ounces.

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

Month-to-date the mint has sold 6,000 troy ounces of gold eagles — zero one-ounce 24K gold buffaloes — 535,000 silver eagles — and 54,700 of the those ‘America the Beautiful’ 5-ounce silver coins.

There was no in/out activity in gold over at the COMEX-approved depositories on the U.S. east coast on Thursday.

It was yet another huge day in silver, as 602,090 troy ounces…one truckload…was received — and that ended up at JPMorgan.  There was 1,893,688 troy ounces reported shipped out.  In the ‘out’ category, there were two truckloads…1,202,295 troy ounces…that departed Brink’s, Inc.  Another very large truckload…673,255 troy ounces…left the CNT Depository.  And the remaining 18,137 troy ounces was shipped out of Delaware.  The link to all this activity is here.

There was no in/out activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday.


Here are two charts that Nick passed around yesterday afternoon.  They show gold and silver imports into India, updated with August’s data.  During that month they imported only 28.3 tonnes of gold, but 502.5 tonnes/16.15 million troy ounces of silverClick to enlarge for both.


The Commitment of Traders Report, for positions held at the COMEX close on Tuesday, October 8 were what Ted said they would be…small increases in the commercial net short positions in both gold and silver.

In silver, the Commercial net short position increased by 3,125 contracts, or about 15.6 million troy ounces.

They arrived at that number by increasing their long position by 320 contracts, but they also increased their short position by 3,445 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 made up only a portion of the change during the reporting week…adding 120 long contracts and reducing their short position by 1,883 contracts.  It’s the sum of those two numbers…2,003 contracts…that represents their change for the reporting week.

The difference between that number — and the change in the Commercial net short position…3,125 minus 2,003 equals 1,122 contracts.

That difference, as it must, was made up by the traders in the other two categories.  The ‘Other Reportables’ decreased their net long position by 1,064 contracts — and the ‘Nonreportable’/small traders increased their net long position by 2,186 contracts.  The difference between those two numbers is 1,122 contracts, which it must be.

Ted said that JPMorgan’s short position remained unchanged from last week…around 22,000 COMEX contracts, or 110 million troy ounces.

The Commercial net short position now stands at 384.5 million troy ounces…of which, JPMorgan holds about 29 percent.

Here’s the 3-year COT chart for silver from Nick…and there’s not a lot to see.  Click to enlarge.

Without doubt, there certainly has been improvement in the Commercial net short position in silver since the Tuesday cut-off.  But with two more trading days left in the reporting week…Monday and Tuesday…it’s too soon to tell whether that situation will remain that way or not.  But regardless of that fact, the structure of the COMEX futures market in silver is still in bearish territory…but not nearly as bearish as the current situation in gold.


In gold, the commercial net short position increased by 7,254 contracts, or 725,400 troy ounces of paper gold.

They arrived at that number by adding 4,705 long contracts, but they also increased their short position as well…by 11,959 contracts.  It’s the difference between 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 11,986 contracts — and also added 2,296 short contracts.  It’s the difference between those two numbers…9,690 contracts…that represents their change for the reporting week.

The difference between that number — and the commercial net short position…9,690 minus 7,254 equals 2,436 contracts.

The ‘Other Reportables’ and ‘Nonreportable’/small traders made up that difference, as the former decreased their net long position by 3,120 contracts — and the latter increased their net long position by 684 contracts.  The difference between those two numbers is 2,436 contracts, which it must be.

The commercial net short position in gold is back up 31.09 million troy ounces.

Here’s Nick’s 3-year COT chart for gold — and there’s not a lot to see.  Click to enlarge.

Like in silver, there has been some improvement in the commercial net short position in gold since the Tuesday cut-off.  But regardless of that fact, gold still remains in very bearish territory from a COT perspective.


In the other metals, the Manged Money traders in palladium increased their net long position by a further 963 COMEX contracts — and are now net long the palladium market by 14,872 contracts…almost 59 percent of the total open interest.  Total open interest in palladium is now up to 25,414 COMEX contracts.  In platinum, the Managed Money traders dumped longs and went short for the second week in a row, as ‘da boyz’ rigged prices lower during the reporting week. They decreased their net long position by a further 3,102 contracts. The Managed Money traders are now net long the platinum market by 14,508 COMEX contracts…a bit over 17 percent of the total open interest.  In copper, the Managed Money traders decreased their net short position in that metal by 5,012 COMEX contracts during the reporting week — but are still net short the COMEX futures market by 57,800 contracts, or 1.45 billion pounds of the stuff. That’s almost 23 percent of total open interest.


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 142 days of world silver production, which is down 2 days from last week’s report — and the ‘5 through 8’ large traders are short an additional 67 days of world silver production, up 3 days from last week’s report — for a total of 209 days that the Big 8 are short, which is seven months of world silver production, or about 488 million troy ounces of paper silver held short by the Big 8. [In the prior week’s COT Report, the Big 8 were short 208 days of world silver production.]

In the COT Report above, the Commercial net short position in silver was reported as 384 million troy ounces.  As mentioned in the previous paragraph, the short position of the Big 8 traders is 488 million troy ounces.  The short position of the Big 8 traders is larger than the total Commercial net short position by around 488-384=104 million troy ounces.

The reason for the difference in those numbers…as it always is…is that Ted’s raptors, the 31-odd small commercial traders other than the Big 8, are net long that amount…which is preposterous beyond belief.

As I mentioned in my COT commentary in silver above, Ted figures that JPMorgan is short around 22,000 COMEX silver contracts…unchanged from last week’s COT Report.

22,000 COMEX contracts…is 110 million troy ounces of paper silver, which works out to around 47 days of world silver production the JPMorgan is short, obviously unchanged from last week’s COT Report.

JPMorgan is still the biggest silver short on the COMEX futures market by a decent amount.  Citigroup is in second place — and not all that far behind.

The Big 4 traders in silver are short, on average, about…142 divided by 4 equals…35.5 days of world silver production each.  The four traders in the ‘5 through 8’ category are short around 67 days of world silver production in total, which is 16.75 days of world silver production each, on average.

The Big 8 commercial traders are short 45.5 percent of the entire open interest in silver in the COMEX futures market, which is a bit of an increase from the 44.2 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 50 percent mark.  In gold, it’s now 42.0 percent of the total COMEX open interest that the Big 8 are short, down a bit from the 43.3 percent they were short in last week’s report — and also approaching 50 percent, once the market-neutral spread trades are subtracted out.

In gold, the Big 4 are short 59 days of world gold production, up 1 day from what they were short in last week’s COT Report.  The ‘5 through 8’ are short another 31 days of world production, unchanged from what they were short last week…for a total of 90 days of world gold production held short by the Big 8…up 1 day from last week’s report.  Based on these numbers, the Big 4 in gold hold about 66 percent of the total short position held by the Big 8…up 1 percentage point from last week’s COT Report.

The “concentrated short position within a concentrated short position” in silver, platinum and palladium held by the Big 4 commercial traders are about 68, 69 and 79 percent respectively of the short positions held by the Big 8…the red and green bars on the above chart.  Silver is up down 1 percentage point from a week ago…platinum is up 3 percentage points from last week — and palladium is up 1 percentage point from a week ago.

I have an average number of stories/articles for your reading pleasure over the weekend.


CRITICAL READS

Repo Market Liquidity Unexpectedly Deteriorates as Funding Shortage Surges 35%

While the market has by now fully priced in that the Fed will resume “NOT A QE”, i.e. POMOs, i.e., BS-expanding Treasury Purchases as soon as the October FOMC (but more likely November), with Bank of America writing today that the Fed needs a “bazooka of asset purchases,” estimating that the central bank needs to add about $300BN of reserves to return to an “abundant level“, and Goldman predicting that the Fed will unleash no less than $60BN in POMO for the first 4 month of “NOT A QE“…

… as it seeks to rapidly blow out its balance sheet to avoid any more repo tremors of the kind observed in September that sent the overnight G/C repo rate to 9.25%, there was a modest hiccup in this best laid plan this morning, when the New York Fed unexpectedly announced that use of its overnight repo facility surged by 35% in one day, with $61.55BN in securities submitted ($58.35BN in TSYs, $3.2BN in MBS) to today’s op, up sharply from yesterday’s $45.5BN

While it could have been worse – the $75BN facility was not oversubscribed – it could have been better, as Wall Street indicated that the funding/reserve shortage spiked to the highest level since Sept 30, when $63.5BN in securities were submitted to the O/N repo facility.  Click to enlarge.

What to make of this? Well, with Wall Street now more than aware that the Fed will do everything it needs to to address the ongoing funding squeeze in the repo market, which in itself should be sufficient to ease the stress in overnight funding, this has so far failed to materialize. Worse, investors are becoming increasingly concerned that even with “NOT A QE“, year end could see even more dramatic repo market fireworks than those observed on December 31, 2018. In such a case, with the Fed literally throwing the “NOT A QE” kitchen sink at the problem, and the problem failing to go away, just how will Powell preserve the illusion that he knows what is causing the broken plumbing in the repo market if the Fed can’s unclog it even when using its “bazooka.” We will find out soon enough.

This Zero Hedge story appeared on their website at 9:25 a.m. on Friday morning EDT — and it’s the first offering of the day from Brad Robertson.  Another link to it is here.


QE4 “Not a QE” Begins: Fed Starts Buying $60BN in Bills Per Month Beginning Next Week

Just one day after we laid out what Goldman’s revised forecast for the Fed’s “NOT A QE” will look like, which for those who missed it predicted that the Fed would announce “monthly purchases of about $60BN for four months, split across Treasury bills and short maturity coupon Treasuries, in order to replenish the roughly $200bn reserve shortfall and support the pace of growth in non-reserve liabilities“, the Fed has done just that and moments ago – well ahead of consensus expectations which saw the Fed making this announcement some time in November – the U.S. central bank announced it would start purchasing $60BN in Bills per month starting October 15. This will be in addition to rolling over “all principal payments from the Federal Reserve’s holdings of Treasury securities and the continued reinvestment all principal payments from the Federal Reserve’s holdings of agency debt and agency mortgage-backed securities received during each calendar month.”

In short, the proposed schedule is virtually identical to the one Goldman “proposed” yesterday, one which sees the Fed purchase a grand total of $100BN or so in TSYs the near term, and one which is meant to “engineer a one-off level shift of roughly $200bn over the course of four months.”

But wait there’s more, because just as today’s surprising spike in repo use suggested, mere “NOT A QE” may not cut it, and just in case, in order to provide an “ample supply of reserves“, the Fed will continue with $75BN in overnight repos and $35 billion in term repos twice per week, “at least through January of next year.”

The Fed’s proposal indicates that between the continuation of repo operations, and the net $60BN balance sheet expansion, the Fed’s balance sheet will reach roughly $4.2-$4.3 trillion some time in Q2 2020.  Click to enlarge.

So with a combined firepower between POMO and Repo in the $100s of billions per month, someone will still have the gall not to call this QE 4 “NOT A QE“?

Inflate or die…that’s all there is, there ain’t no more, dear reader.  This Zero Hedge article showed up on their Internet site at 1:05 p.m. EDT on Friday afternoon — and it’s the second offering in a row from Brad Robertson.  Another link to it is here.  The Reuters spin on this is headlined “Fed launches Treasury bill buys in bid for ‘ample’ reserves” — and I got that from a GATA dispatch.  Gregory Mannarino‘s market close rant for Friday is linked here.


Where Are the Hundreds of Billions in Loans from the Fed Actually Going on Wall Street?

No one can say with any certainty where the hundreds of billions of dollars that the Federal Reserve has been pumping into Wall Street since September 17 are actually ending up. The Fed is not releasing the names of which of its primary dealers (securities firms) are taking the lion’s share of the loans nor does anyone know if those borrowers are making further loans with the money (which is a core purpose of a central bank’s lender of last resort function) or simply plugging a whole in their own leaky boat. Astonishingly, Congress has yet to call a hearing to ask these critical questions.

Last week Reuters’ David Henry reported that JPMorgan Chase may have contributed to the dangerous spike in overnight lending rates on September 17 by withdrawing liquidity from the system. The loss of liquidity triggered the New York Fed’s operation to pump billions of dollars of overnight and term loans into Wall Street each week since then. Henry wrote:

Analysts and bank rivals said big changes JPMorgan made in its balance sheet played a role in the spike in the repo market, which is an important adjunct to the Fed Funds market and used by the Fed to influence interest rates…

Publicly-filed data shows JPMorgan reduced the cash it has on deposit at the Federal Reserve, from which it might have lent, by $158 billion in the year through June, a 57% decline.”

The move by JPMorgan Chase, whose Chairman and CEO, Jamie Dimon, is the only person at the helm of a major Wall Street bank to have come through the 2007-2008 financial crisis, suggests that the bank is “getting closer to home” with its money, as the former CEO of Goldman Sachs, Lloyd Blankfein, phrased it during the last financial crisis.

As a major clearing bank offering services around the globe, no financial institution would be in a better position than JPMorgan Chase to see money outflows, warning signals, and a need to get its own liquidity “closer to home.”

This commentary/opinion piece put in an appearance on the wallstreetonparade.com internet site on Thursday sometime — and the first reader through the door with this article on Friday morning was Gordon Foreman.  Another link to it is here.


Wall Street Rush to Safety Is Biggest Since Lehman Brothers Collapse

Investors haven’t been this bearish since the collapse of Lehman Brothers. At least that’s what their positioning is signaling, according to Bank of America Merrill Lynch strategists.

Over the past six months, money market funds attracted $322 billion of inflows, the largest flight to safe assets since the second half of 2008. In similar fashion to 2007 and 2008, investors raised their cash holdings despite falling interest rates.  Click to enlarge.

Strategists led by Michael Hartnett wrote in a note on Friday that investors are suffering from “bearish paralysis,” driven by unresolved issues such as the trade war, Brexit, the Trump impeachment investigation and recession fears. Just in the seven-day period ending Oct. 9, investors continued to exit equity funds globally, with outflows reaching $9.8 billion, according to the strategists who cite data from EPFR Global. By contrast, bond funds enjoyed $11.1 billion of inflows.

Despite this wall of worries, the BofAML strategists have an “irrationally bullish” contrarian view, driven by the “bearish positioning, desperate liquidity easing, and ‘irrational contagion’ from bond bubble to equities.” After Greece auctioned negatively yielding bills and the U.S. auctioned record low-yielding 30-year government bonds this week, they see the current positioning in bonds delaying a global recession, which should drive further equity performance.

This 1-chart/4-paragraph long Bloomberg story showed up on their Internet site at 3:18 a.m. PDT [Pacific Daylight Time] on Friday morning — and I thank Swedish reader Patrik Ekdahl for pointing it out.  Another link to it is here.


After Unveiling ‘Not QE’, Fed Eases Liquidity Rules For Foreign Banks (Rescues Deutsche)

Having cracked down on Deutsche Bank in the past, The Fed appears to be playing good-regulator/bad-regulator as The Financial Times reports that Deutsche is expected to benefit most from an imminent change in The Fed’s liquidity rules.

Specifically, U.S. banking regulators have dropped an idea to subject local branches of foreign banks to tough new liquidity rules (forcing U.S. branches of foreign banks to hold a minimum level of liquid assets to protect them from a cash crunch).

As The FT further details, people familiar with his thinking say Randal Quarles, the vice-chair for banking supervision at the Fed, accepts the banks’ argument that any liquidity rules on bank branches should only be imposed in conjunction with foreign regulators.

Without some international agreement, we could have the situation where each country is trying to grab whatever isn’t nailed down if there is another scare.”

And Deutsche Bank benefits most (or rescued from major liquidity needs) since it has by far the largest assets in US branches…Click to enlarge.

Why would The Fed do this?

Simple, it cannot afford another Lehman-like move (or even the fear of one)…

This is yet another Zero Hedge news story.  It was posed on their Internet site at 4:15 a.m. EDT on Friday morning — and once again I thank Brad Robertson for passing it along.  Another link to it is here.


Doug Noland — What the Heck is Happening in the Cayman Islands?

Another quiet week…

When the Fed on Friday announced its “Not QE” balance sheet reflation strategy, the Dow was already 400 points higher on anticipation of a positive trade negotiation outcome. The Federal Reserve will Tuesday begin buying $60 billion of Treasury bills monthly through 2020’s second quarter. This follows a five-week period where Federal Reserve Credit surged $187 billion. In addition, the Fed said it will continue with its overnight and term “repo” market interventions, along with reinvesting proceeds from maturing longer-dated maturities.

I have speculated the Fed’s balance sheet might inflate to $10 TN over the course of the next crisis and down-cycle. It’s possible that we could see expansion approaching $500 billion over the next six to nine months.

Announcing its “Not QE” plan as markets were in the throes of an intense short squeeze creates poor optics. Most analysts had expected the roll-out to come at the Fed’s end-of-month meeting – or even during November. This is one more example of the Fed acting as if it is facing a serious risk to financial stability.

The GSEs, securitizations, sophisticated mortgage derivatives, and “repo” finance created the nucleus of the risk intermediation and leverage fueling precarious mortgage finance Bubble excess. I am convinced the mushrooming of government bonds, the proliferation of global “repo” markets and off-shore securities lending operations, along with unmatched global derivatives excess and leveraged speculation, are at the epicenter of the runaway “global government finance Bubble.”

The BIS (Bank for International Settlements) has expanded data for non-bank counterparties and offshore financial centers. While interesting – and certainly illustrating the enormous scope of offshore finance – I’m not confident that the BIS and global central bank community have a handle on what evolved into colossal global flows intermediated through securities finance and “offshore” finance. The recurring extensive revisions to the Fed’s Rest of World (ROW) Z.1 data informs me that there are major shortcomings and outright holes in the data. Indeed, What the Heck is Happening in the Cayman Islands?

It’s not clear to me how the global system doesn’t turn increasingly unstable, which I believe explains why the ECB and now the Fed have resorted again to QE.

Doug’s meaty commentary this week certainly falls into the must read category.  It was posted on his Internet site very early on Saturday morning EDT — and another link to it is here.


The Rich Will Be Scapegoats for the Next Financial Crisis — Bill Bonner

Today, we continue our jolly romp through the future.

We caution Dear Readers that there are thousands of different doors to tomorrow. The odds that we are opening the right one are slim.

Still, let’s pry it open and take a peek…

As we’ve seen, the first shock will likely be a deflationary crisis, à la 2008. This will be worse than the last, simply because there are bigger mistakes to correct.

In 2007, total U.S. debt, public and private, was under $50 trillion. Today, it’s over $73 trillion. In other words, there are as many as 23 trillion more dollars’ worth of mistakes to reckon with.
And look how a mistake in the market – mispricing a startup company like WeWork – has consequences in the real economy.

Yes, in the first shock, coming soon, the fake world of fake money and fake interest rates will collide with the real world.

Debts will deflate… along with stocks, employment numbers, art auction prices, Mr. Trump’s reelection bid… and much more.

Then comes the second shock, caused by the feds’ response to the first one.

Remember, it’s Inflate or Die. They will not hold back… inflating the economy with both monetary and fiscal stimulus. And (unless something really weird happens) it will lead to an inflationary crisis.

But it is the third shock that has our interest today…

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


Prioritizing Your Exit Plan — Jeff Thomas

An increasing number of people are coming to the conclusion that their home countries (particularly the U.S., E.U. and Canada) are in decline. More and more, such people are deciding to seek greener pastures elsewhere in the world.

Many of them have never “left home” before and are very unsure of how they should prioritize an exit.

Since International Man feature writer Jeff Thomas has for decades been advising those expatriating, we’ve asked him to weigh in on the topic.

International Man: If you could tell those who are planning to expatriate only one thing, what would it be?

Jeff Thomas: There are two primary priorities. Everything else would fall under sub-headings. The number one concern would be, “Get your money out.” I can’t stress that strongly enough. The number two concern would be, “Get yourself out.”

This Q&A session with Jeff put in an appearance on the internationalman.com Internet site on Friday sometime — and another link to it is here.


Silver Glitters in India as Record Prices Dull Gold’s Luster

Silver is outshining gold in India.

Imports of the poor man’s gold jumped 72% from a year earlier to 543.21 tons in August, according to the latest available data from India’s trade ministry. In contrast, inbound purchases of gold plunged by an equivalent amount to 32.1 tons, the lowest in three years, as record high prices sapped demand in the world’s second-biggest consumer of the metal.

Gold has gained about 18% this year as the U.S.-China trade war hurts global growth and central banks loosen policy. In India, benchmark gold futures in Mumbai rose to record highs last month, while silver futures, though up 18% in 2019, are still almost 40% away from an all-time high in 2011.

The metal, at around 45,900 rupees ($646) a kilogram, is about eighty times cheaper than gold and far more affordable as an investment or the token bullion purchases Hindus consider auspicious in the run-up to the festival of Diwali later this month.

The price point is so much lower that things are working in the favor of silver,” according to Chirag Sheth, a consultant at London-based Metals Focus Ltd. “It is still very, very reasonable to buy silver compared to gold.”

Wider use of silver including in electrical components and for religious occasions and weddings is boosting consumption, he said. In addition, for silver “the whole market structure has changed,” as designs have evolved and “are more in line with what millennials want.”

This silver-related news item appeared on the bloomberg.com Internet site at 9:05 p.m. PDT on Thursday evening — and I found it embedded in a GATA dispatch.  Another link to it is here.


Gold keeps on bouncing back to $1,500 — Lawrie Williams

There seem to have been multiple attempts to drive the gold price down, but so far the yellow metal’s price has been quick to bounce back and regain the $1,500 level, or thereabouts, which has to be encouraging for the gold bulls.  Seemingly the market seizes on any news that may not actually be gold-positive to see the price marked down sharply, but these, perhaps engineered, declines tend to be overdone with the precious metal then making a rapid recovery.

Yesterday and today was another case in point.  News came out that President Trump was to meet at the White House with China’s trade negotiations leader, the country’s vice premier Liu He, which created speculation that the ongoing trade war between the world’s two biggest economies might be mitigated, although a complete end to the dispute still seems far away.  China and the U.S. both remain intransigent on many key issues and although the dispute is damaging to both nations, neither seems prepared to capitulate on any of these.

However, some optimistic noises from both sides saw U.S. equities rise and gold fall nearly $20, before the latter started to recover in later trading.  This morning gold regained the $1,500 level yet again, although seemed reluctant to move much higher – presumably awaiting any statement following the high level meetings at the White House today.  We suspect some kind of conciliatory statement will materialise from the meeting, but doubt that much will actually change with the Chinese delegation due to head home after a fairly brief two days of negotiations.

We do anticipate increased volatility in gold and silver prices up until a true breakout above the key $1,550 gold level is achieved with prices rising and falling on each snippet of U.S. data seen as being positive or negative by the markets.  Once the $1,550 level is breached there may well be little to stop gold achieving $1,600 or higher.  Some kind of real settlement of the U.S.-China trade dispute would indeed be equity market positive and thereby negative for safe haven counters like gold, although an equities collapse, which we do see as on the cards at sometime in the relatively near future could drive investment into seemingly safer assets, although these too could be brought down initially as investors – particularly those who may have been buying on margin – struggle for liquidity.  We saw this happen in the 2008 market crash, but precious metals were far quicker to recover than equities gold (recovered its losses in a mere couple of months) and went on to achieve new highs over the following 3-4 years.  Thus we see an equities crash driving down precious metals too as creating a huge buying opportunity for the latter.

This commentary from Lawrie showed up on the Sharps Pixley website on Friday sometime — and another link to it is here.


The PHOTOS and the FUNNIES

Whistler/Blackcomb…a huge sprawling place…is a world-class ski/recreation resort of the first water — and was a zoo on the Canada Day long weekend.  The photos below only hint at the number of people wandering around the place.  The winter Olympics were held there in 2010.  Nothing’s cheap — and we left long before the afternoon was over.  The last shot shows the main chair lift converted from skiing, to mountain biking.  If we ever go back, it won’t be on that particular long weekend.  Click to enlarge.


The WRAP

Today’s pop ‘blast from the past’ was from a rock group formed during 1973 in Edinburgh, Scotland by former Bay City Rollers members David Paton and Billy Lyall.  They were ‘1-hit wonders’…but, as they saying goes…”what a hit it was!”  The link is here.

Today’s classical ‘blast from the past’ is Beethoven’s Symphony No. 7 in A major, Op. 92 which he composed between 1811 and 1812.  The work was premiered with Beethoven himself conducting in Vienna on 8 December 1813 at a charity concert for soldiers wounded in the Battle of Hanau.

The piece was very well received, such that the audience demanded the Allegretto movement be encored immediately. The instant popularity of the Allegretto resulted in its frequent performance separate from the complete symphony.

Here’s the Royal Concertgebouw Orchestra of Amsterdam in this January 2014 performance, with Iván Fischer conducting.  The link is here.


For the second day in a row ‘da boyz’ were facing the headwind of a sharply declining U.S. dollar index as they attempted to engineer prices lower.  They didn’t accomplish much in gold — and nothing at all in silver yesterday — and not all that much on Thursday, either.

But their associated equities were taken out behind the proverbial woodshed — and as I’ve already commented on in several places further up, I suspect that a major portion of yesterday’s sell-off was margin call related…with strong hands at the ready to scoop up everything that was being sold in a panic.

The Big 7 traders…especially the smaller ‘5 through 8’ large traders…are still in a world of hurt, as their unbooked margin loses are still horrific.  As Ted pointed out on the phone yesterday, unless they can engineer a price decline of Biblical proportions — and force the Managed Money traders onto the short time in record amounts, they won’t be able to cover them all.

And it’s still the resolution of this situation that will dictate the prices of both gold and silver going forward.  Nothing else matters.

Here are the 6-month charts for the Big 6 commodities — and along with the lack of much progress in the engineered price declines in gold and silver, the budding rallies in copper and WTIC should be noted, as the commercial traders begin to ring the cash register on the Managed Money traders that are monstrously short both of these essential commodities.  Click to enlarge.

The baby steps into “Print or Die” for the U.S. financial system began about three or so weeks ago.  It then suddenly morphed into something far more substantial, as the Fed came out with the new “Not Quantitative Easing” package yesterday…which now extends and vastly expands their repo operations out “until the second quarter of 2020, the central bank said“…according to Reuters.

Without doubt, this financial aid to the banking system [and probably others] is now a permanent fixture of the monetary landscape, at least until the dollar index starts to take a big hit.  But then again, maybe a lower U.S. dollar is part of the plan.

As I and others have already said on numerous occasions, this is a monetary black hole from which there is now no escape…none.  It can only end one way — and that’s destruction of the U.S. dollar’s purchasing power, along with the purchasing power of the rest of the world’s fiat currencies.  The abandonment of a currency has another name…hyperinflation — and the only thing not know is the speed of its arrival.  But arrive it will…that’s guaranteed…as night follows day — and Doug Noland pretty much lays out the peril the world’s financial system is now confronting in his commentary in the Critical Reads section above.

The headline to my Thursday column read…”The Gold ETFs Get Widespread Positive Press“.  The reason that this is happening is because the smart money is already on its way out the door, as they’re not going to wait around for the inevitable.  The general population has yet to catch on.  However they probably will at some point…but by that time, gold and silver prices will be at, or on their way, to new record high prices.

The price activity in silver and gold on Thursday and Friday was nothing more than a speed bump, as the large traders on the short side, recognizing the peril that they’re in, make every attempt to extricate themselves from the financial hole that they dug for themselves.  How successful they’ll be in that venture is yet to be determined.

But as we’ve been witnessing all week, JPMorgan continues to bring large quantities of gold and silver into their own warehouses in New York.  Their continued accumulation by them — and others, should tell you all you need to know about the future direction of precious metal prices.

Unfortunately, they’re operating on their timetable…not ours.  We don’t know what their plan is…however you can bet that they do have one — but it’s just not the timetable we would like it to be.  JPMorgan only answers to itself — and we’ll only know what the game is at a time suitable for them, or their peers.

Our current financial and economic system has been set up to fail — and fail it will.  That’s why I’ve always assumed that the end would come by design, rather than by circumstance.  However, when the denouement finally manifests itself, it may end up being a little of both.

Like you, I’m certainly not happy about how the precious metals and their associated equities are performing at the moment.  But through the work of Ted Butler, I’ve explained why this is happening — and how it must be resolved in the end…JPMorgan wins big — and the rest of the shorts burn.

I’m still “all in”.

I’m done for the day — and the week — and I’ll take this opportunity one more time to wish all my Canadian subscribers a happy Thanksgiving long weekend.

See you on Tuesday.

Ed

Engineered Price Declines of Limited Consequence

11 October 2019 — Friday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price vaulted higher in price shortly after trading began at 6:00 p.m. EDT in New York on Wednesday evening.  But ‘da boyz’ dealt with that less than an hour later — and the gold price down on the day by a bit just before London opened on their Thursday morning.  It crept quietly higher from there until some economic news or other was released at 8:30 a.m. in New York.  It was sold down to its 11:15 a.m. EDT low tick of the day in two separate stages – and then crawled unevenly higher until shortly after 2 p.m. in after-hours trading.  From that juncture it crept quietly lower until shortly before 4 p.m. EDT — and didn’t do much after that.

The high and low ticks were reported by the CME Group as $1,522.30 and $1,495.70 in the December contract.

Gold was closed in New York on Thursday afternoon at $1,493.70 spot, down $11.30 from Wednesday.  Net volume was sky high at a bit over 405,000 contracts — and there was 13,000 contracts worth of roll-over/switch volume on top of that.

And with few exceptions that mattered for anything, the silver price was guided in a similar manner as gold.  The exception that mattered was that silver’s low tick came at, or a few minutes before, the afternoon gold fix in London.  The rest is the same as it was for gold.

The high and low ticks in silver were recorded as $17.935 and $17.455 in the December contract.

Silver was closed in New York yesterday afternoon at $17.48 spot, down 21.5 cents on the day.  Net volume was pretty heavy at a bit over 90,500 contracts — and there was 3,700 contracts worth of roll-over/switch volume in this precious metal.

The platinum price chopped quietly and unevenly sideways throughout all of Far East and most of Zurich trading on their respective Thursdays.  Then a few minutes after 9 a.m. in New York, it was sold down to its low tick of the day, which occurred at the same time as silver…at, or minutes before, the afternoon gold fix in London.  It took off higher from there, but obviously ran into big resistance as it approached the $900 spot mark.  The price was capped at $901 spot — and was then sold lower in the thinly-traded after-hours market.  Platinum was closed at $897 spot, up 3 dollars from Wednesday.

The palladium price traded pretty flat in Far East trading on their Thursday, but began to edge ever-so-slowly higher starting at the 9 a.m. CEST Zurich open.  Like platinum, that lasted until minutes after 9 a.m. in New York — and it was sold down a few dollars going into the afternoon gold fix in London.  It rallied a decent amount from there, but obviously ran into ‘something’ at the 11:00 a.m. EDT Zurich close.  It traded pretty much ruler-flat from there until trading ended at 5:00 p.m.  Palladium was closed at $1,681 spot, up 17 bucks on the day.

The dollar index closed very late on Wednesday afternoon in New York at 99.12 — and opened down 14 basis points once trading commenced around 7:45 p.m. EDT on Wednesday evening, which was 7:45 a.m. China Standard Time on their Thursday morning.  It had a bit of an up/down move between then and around 10:25 a.m. CST…and then crept quietly higher until 2:25 p.m. CST on their Thursday afternoon.  A serious sell-off began at that juncture [which wasn’t allowed to be reflected in either gold or silver] and that lasted until around 10:55 a.m. in London.  It began to chop quietly higher from that point until shortly after 11:10 a.m. in New York — and it headed lower once again.  The 98.62 lot tick appeared to have been set at 2:00 p.m. EDT.  It crept higher for the next twenty-five minutes, before creeping sideways until trading ended at 5:30 p.m.  The dollar index finished the Thursday session at 98.70…down 42 basis points from Wednesday’s close.

There was no correlation between what the currencies and the precious metals were doing yesterday.  The price action in gold and silver was strictly a paper affair in the GLOBEX/COMEX futures market.

Here’s the DXY chart, courtesy of 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…98.41…and the close on the DXY chart above, was 29 basis points on Thursday.  Click to enlarge as well.

The gold shares were sold lower the moment that trading began in New York at 9:30 EDT on Thursday morning — and their respective low ticks came around 10:25 a.m.  They turned on a dime from there — and all the gains that mattered were in by 2:30 p.m. — and they didn’t do much after that.  The HUI closed up 0.31 percent.

The silver equities traded in a similar manner, except the rally off their morning lows in New York on Thursday morning were somewhat more robust — and lasted until shortly before the markets closed yesterday.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed higher by 0.90 percent.  Click to enlarge if necessary.

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

The CME Daily Delivery Report showed that 25 gold and zero silver contracts were posted for delivery within the COMEX-approved depositories on Monday.

In gold, the two short/issuers were Advantage and ADM, with 20 and 5 contracts from their respective client accounts.  There were four long/stoppers in total…and the three biggest were Australia’s Macquarie Futures, picking up 13 contracts for their own in-house/proprietary trading account.  The other two were Advantage and ADM, with 7 and 4 contracts for their respective client accounts.

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

The CME Preliminary Report for the Thursday trading session showed that gold open interest in October declined by 47 contracts, leaving 246 still open, minus the 25 contracts mentioned a few paragraphs ago.  Wednesday’s Daily Delivery Report showed that 75 gold contracts were actually posted for delivery today, so that means that 75-47=28 more gold contracts just got added to October.  Silver o.i. in October fell by 2 contracts, leaving 337 still open.  Wednesday’s Daily Delivery Report showed that 2 silver contracts were actually posted for delivery today, so the change in open interest and the deliveries match.


There was a withdrawal from GLD yesterday, as an authorized participant took out 66,074 troy ounces.  But there was a deposit into SLV on Thursday, as an a.p. added 1,449,250 troy ounces.

In the other ETFs and depositories on Planet Earth on Thursday…other than what happened in the COMEX depositories, GLD and SLV…there was a net 7,431 troy ounces of gold added — and that number was in silver was 31,597 troy ounces net.

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

There was some noteworthy activity in gold over at the COMEX-approved depositories on the U.S. east coast on Wednesday.  There was 70,999 troy ounces received at JPMorgan — and that came from a transfer of the exact same amount from HSBC USA.  The link is here.

It was much busier in silver, as 1,202,852 troy ounces was reported received — and 1,131,198 troy ounces shipped out.  Of that amount, there was one truckload…602,469 troy ounces…transferred from Brink’s, Inc. to JPMorgan.  The other ‘in’ activity was one truckload…600,383 troy ounces…that was shipped into Brink’s, Inc.  The other ‘out’ activity involved one smallish truckload…523,736 troy ounces…that departed HSBC USA.  The remaining amount shipped out was 4,992 troy ounces that left the vault over at CNT.  The link to all this activity is here.

There was some decent activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday.  They received 415 of them — and shipped out 650.   All of the ‘in’ activity was at Loomis International — and all the ‘out’ activity was at Brink’s, Inc.  The link to this, in troy ounces, is here.


Here’s a chart I lifted from a commentary from the folks over at the Bullion Management Group website on Thursday — and I thought it worth sharing.  It needs no explanation.  Click to enlarge.

I only have a tiny handful of stories for you today.


CRITICAL READS

China May Decide When the Next U.S. Financial Crisis Comes — Bill Bonner

Wall Street is on the edge of its chair… holding its breath.

Yahoo Finance explains why:

High-level trade talks between U.S. and Chinese negotiators are slated to resume in Washington, D.C., on Thursday, providing an opportunity for both sides to make progress on a deal before the next tranches of tariffs on Chinese imports take effect. […]

The months since negotiations fell apart in May have been replete with new tariff announcements and other policy-based retaliation. Each new update – be it by tweet, rumor or report – has sent markets reeling, as investors scrambled to recalibrate shifting odds of a near-term deal.”

The stock market is supposed to calmly weigh and assess each company, discounting the expected stream of earnings to present value. Then, every day, in open bid and ask, it discovers what that company is worth.

At least, that’s the idea… Instead, it is like a panicky mob… listening for rumors and ready to run helter-skelter at any moment.

Will trade negotiators strike a deal? Will Jay Powell lower rates? Brexit? Iran? Syria? Impeachment? What’s the latest news?

None of these things are likely to have much of an effect on the earnings American businesses can expect. But at this stage, America’s late, degenerate capitalism has been queered by the feds.

Politics rules.

This commentary from Bill appeared on the bonnerandpartners.com Internet site early on Thursday morning EDT — and another link to it is hereGregory Mannarino‘s post market close rant for Thursday is linked here.


For The First Time Ever, Greece Issues Negative Yielding Debt

As armies of fixed income strategists battle over whether US Treasuries are facing higher or lower yields, Greece has no such qualms and in a historic shift today, the former bond market pariah and Eurozone’s most indebted nation, joined the exclusive club of negative-yielding European nations when bond investors lined up to pay the nation that was at the heart of Europe’s sovereign debt crisis.

A sale of €487.5 million of 13-week bills on Wednesday drew Greece’s first-ever negative yield of minus 0.02% as investors now pay Athens for the privilege of lending it cash, as Bloomberg first reported. Greece joins the likes of Ireland, Italy and Spain – not to mention virtually all core Eurozone nations – which benefit from the ECB’s insane monetary policy and deepening fears of a global recession.

It’s been an unprecedented turnaround for twice bankrupt Eurozone member, whose bondholders suffered massive losses back in March 2012 when the country was forced to accept the biggest bond restructuring in history, bringing the Eurozone to the verge of collapse.

[D]espite Europe’s artificial, central bank-propped up bond market, nothing has been fixed with respect to the Greek economy: “There remain substantial risks around Greece’s financial position and it remains vulnerable to a significant economic slowdown,” Day said. “Current yields on their bonds do not reflect this risk.”  [Ya think!!! – Ed]

Indeed: as the world’s banks and investors founder, at least perpetually corrupt and incompetent governments are rewarded, and all it took was several years of insane monetary policy by a former Goldmanite to unleash the biggest revolution in the European bond market in history, one which will end in the biggest bond bubble crash ever seen.

But – as the supporters of the ECB will tell you – “not yet“…

I can hardly believe my eyes!  How is this possible? You couldn’t make this stuff up.  This news item showed up on the Zero Hedge website at 2:45 a.m. EDT on Thursday morning — and it comes to us courtesy of Brad Robertson.  Another link to it is here.


Trump to Exit ‘Open Skies’ Treaty, Banning Russian Recon Flights Over U.S.

The ‘Open Skies’ treaty which the U.S. signed in 1992 and went into effect in 2002 is the agreement which allows Russian surveillance planes to occasionally fly over the heart of North America, in an unusual arrangement which has U.S. residents understandably freaking out when they might look up and see a large Russian Tu-214ON aircraft overhead.

The post Cold War treaty allows its 34 member states to conduct short-notice, unarmed observation flights to monitor other countries’ military operations in mutual verification of arms-control agreements.

However, following the Trump administration’s pullout of the Intermediate-Range Nuclear Forces Treaty (INF), it seems the White House increasingly views the ‘Open Skies’ agreement as also obsolete. CNN reported late Tuesday the administration is expected to soon exit the treaty. “The Trump administration is expected to soon announce that it plans to exit the Open Skies treaty, a U.S. official tells CNN, a move that has already drawn condemnation from Democrats in Congress,” according to the report.

Critics of such a move have sounded the alarm that a withdrawal will only increase the likelihood of a new global arms race between the U.S. and Russia, given it would make it impossible for the U.S. military to closely monitor the Russian military in its own surveillance flights.

This story showed up on the Zero Hedge website at 9:25 p.m. on Thursday evening EDT — and another link to it is here.


Soaring Gold Prices Put Indian Buyers Off Ahead of Diwali

India’s festival of lights is bringing little cheer to jewelers in the world’s second-biggest gold consumer.

With less than a month to go before the Hindu festival of Diwali, a period when gold purchases typically peak, jewelers are lining up promotions to get buyers through the door as a rally in prices coincides with a collapse in consumer demand for everything from 7-cent cookies to cars.

Gold has soared in 2019, hitting a six-year high in dollar terms, as investors fret about the impact of the trade war, central banks cut rates and exchange-traded fund holdings surge. In India, where prices hit a record in September, the rally comes as the country’s growth slows, unemployment rises and a crisis of confidence engulfs the banking system. Its imports fell for a third month in September to the lowest in more than three years as jewelers cut purchases.

Buying of gold during festivals and wearing it has been our tradition for decades,” according to Manish Kotekar, a 28-year-old taxi driver in Mumbai. “We have been waiting for prices to drop before buying gold as the rates are too high,” and if prices don’t go down below current levels by Diwali, “we may not buy this year. It is just not within our budget to buy at these prices.”

Benchmark gold futures in Mumbai touched an all-time high of 39,885 rupees ($561) per 10 grams in early September and while prices have come off about 4% since that peak, they’re still more than 20% higher than last year. Diwali falls on Oct. 27 and is preceded by Dhanteras, the most auspicious day in the Hindu calendar to buy gold.

This gold-related Bloomberg article was posted on their Internet site at 5:00 p.m. PDT [Pacific Daylight Time] on Tuesday afternoon — and I found it on the Sharps Pixley website.  Another link to it is here.


While Out for a Walk, an Englishman Stumbled Upon a 4,000 Year Old Solid Gold Treasure

A metal detectorist is celebrating the find of a lifetime after discovering a beautiful 4,000-year-old gold torc worth tens of thousands of pounds.

Billy Vaughan, 54, was stunned when he unearthed the gleaming 22 carat gold band in a remote field near his home town of Whitehaven, Cumbria.

The Bronze Age piece of twisted jewellery was nestled 5 inches below the surface.

Mr Vaughan at first thought it was a piece of climbing equipment and it wasn’t until he sent a photo of it to a fellow detectorist that he identified it as a torc.

He was very excited about the find and told me to take it to a jeweller’s, who confirmed it was 11oz of 22 carat gold.

He said it had a value in gold of £11,000, but it was worth a lot more because of its age and what it was.

I was stunned and gobsmacked. I still can’t believe it.’

Mr Vaughan, a care worker, has alerted his local museum and the coroner who will rule if the find is ‘treasure’ under the Treasure Act (1996).

This very interesting photo-filled news item put in an appearance on the dailymail.co.uk Internet site on Monday morning BST — and I thank George Whyte for pointing it out.  Another link to it is here.


The PHOTOS and the FUNNIES

After our brief stop at Seton Lake minutes from Lillloeet on June 30, we were off down B.C. Highway 99 en route to Whistler.  It’s not a long drive on the map, but the mountainous terrain really slows you down.  The first shot was less than ten minutes from the lake — and shows some of the cliff-hanging roads you have to work your way through.  The next two photos were of flowers growing along the side of the road…wild lupines and lilies.  The fourth shot is of a lake whose name escapes me now.  This was another road that was very pretty to drive, but because of the trees right up against the road — and no shoulders to park on, there weren’t many photo ops along the way.  Besides which, you couldn’t take your eyes off the road for more than a few seconds at a time anyway.  Click to enlarge.


The WRAP

It was another day where the paper market ruled the price discovery mechanism in the precious metals, despite the huge down day in the U.S. dollar index.  ‘Da boyz’ were successful in closing both gold and silver back below their respective 50-day moving averages…however it wasn’t done with much authority.

I’m sure that weak hands were selling precious metal equities by the bucket full yesterday, but it was equally obvious that strong hands were in the market buying everything that was being sold…plus a bunch more when you look at how the HUI and Silver 7 performed on Thursday.

But it’s impossible to tell whether or not the Big 7 traders are done to the downside or not.  If this is the best they can do, then they are in a world of hurt going forward on any future rally. As Ted keeps saying, it’s the resolution of this outstanding short position, either by one more engineered price smash to the downside…or a short covering rally for the ages, that will determine how this price management scheme ends.

Here are the 6-month charts for all four precious metals, plus copper and WTIC.  There’s not a lot to see in the precious metals, as both gold and silver continue to trade either side of the respective 50-day moving averages.  But copper and WTIC showed some signs of life yesterday.  Click to enlarge.

And as I type this paragraph, the London open is less than a minute away — and I see that the gold price didn’t do much of anything until it had a brief down/up price dip in early morning trading in the Far East on their Friday. After that, it didn’t do a lot of anything until around 1:40 p.m. China Standard Time — and then it began to head higher. Gold is up $4.70 the ounce currently. The price path for silver was a carbon copy of gold’s — and it’s up 14 cents as London opens. The platinum price chopped sideways until the exact same 1:40 p.m. time — and it has jumped higher as well…up 5 bucks. Palladium has been edging unevenly sideways — and is up 2 dollars as Zurich opens.

Net HFT gold volume is a bit over 52,000 contracts — and there’s only a tiny 450 contracts worth of roll-over/switch volume in this precious metal. Net HFT silver volume is already around 16,500 contracts — and there’s a minuscule 114 contracts worth of roll-over/switch volume on top of that.

The dollar index opened at 98.70…precisely unchanged…around 7:45 p.m. EDT in New York on Thursday evening, which was 7:45 a.m. China Standard Time on their Friday morning. It had a rather violent up/down spike between 8:45 and 10:10 a.m. CST — and has been crawling quietly sideways to a bit lower ever since — and is down 9 basis points as of 7:45 a.m. BST in London/8:45 a.m. CEST in Zurich. I would think that up/down spike in the DXY coincided precisely with the down/up spike in silver and gold that occurred at that time.


Today, around 3:30 p.m. EDT, we get the latest Commitment of Traders Report for positions held at the close of COMEX trading on Tuesday, October 8.  I stated earlier this week that I wasn’t about to hazard a guess as to what might be in it — and I haven’t changed my mind about that.

However, silver analyst Ted Butler had a few words to say about it in his mid-week commentary on Wednesday…”As far as what to expect in this Friday’s COT report, both gold and silver ended the reporting week yesterday higher on the week, gold by $15 or so, silver by 40 cents. Not a firm prediction, but I would imagine some moderate amount of managed money buying and commercial selling in each, but don’t take that to the bank. I’ll be most interested in the details under the hood, particularly what JPMorgan may have been up to.”


And as I post today’s column on the website at 4:02 a.m. EDT, I note that both gold and silver continue to crawl higher as the first hour of London trading ends. Gold is currently up $8.40 an ounce — and silver by 22 cents. Platinum appears to have run into a price ceiling at $903 spot — and is up 6 dollars. Palladium is up a buck as the first hour of Zurich trading draws to a close.

Gross gold volume is getting up there at around 71,500 contracts — and minus what little roll-over/switch volume there is, net HFT gold volume is about 70,500 contracts. Net HFT silver volume isn’t exactly light either at about 19,500 contracts — and there’s still only 137 contracts worth of roll-over/switch volume in this precious metal.

The dollar index is off its current low tick by a bit — and as of 8:45 a.m. in London/9:45 a.m. in Zurich, it’s down 6 basis points.

Have a great weekend — and I’ll take this opportunity to wish all my Canadian subscribers a happy Thanksgiving.

See you tomorrow.

Ed

The Gold ETFs Get Widespread Positive Press

10 October 2019 — Thursday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price crept a bit higher in the first two hours after trading began at 6:00 p.m. EDT in New York on Tuesday evening.  But that gain was all gone an hour later — and it traded pretty flat until around 1:45 p.m. China Standard Time on their Wednesday afternoon.  It began to tick higher from there — and the brief spike higher during the first hour of London trading met the usual fate.  The low tick of the day [$1,500 spot] was set around 11:45 p.m. BST — and it rallied a bit until a few minutes before the 11 a.m. EDT London close.  From that juncture it was sold quietly and unevenly lower until trading ended at 5:00 p.m. in New York.

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

Gold was closed in New York yesterday at $1,505.00 spot, down a dime from Tuesday.  Net volume was very decent at a hair under 271,000 contracts — and there was a bit over 14,500 contracts worth of roll-over/switch volume in this precious metal.

Up until its spike high in the first hour of London trading, the silver price was handled in a similar fashion as gold’s.  But from that high tick of the day, it was sold quietly and very unevenly lower until London closed at 11 a.m. EDT — and it didn’t do a whole lot of anything after that.

The low and high ticks in this precious metal aren’t worth looking up, either…but it is interesting to note that Kitco reported the high price tick in the spot month was $18.03.

Silver was closed on Wednesday at $17.695 spot, down a penny on the day.  Net volume was fairly decent at just under 64,000 contracts — and there was a hair over 4,000 contracts worth of roll-over/switch volume on top of that.

The platinum price was up 4 bucks by shortly before noon China Standard Time on their Wednesday morning — and that was as high as it was allowed to get over there.  Then, like gold and silver, it was sold down hard around 9:45 a.m. in Zurich — and the low tick of the day was set shortly before 10 a.m. in New York.  It took off higher from there, but was capped at noon EDT — and turned lower a few minutes after that — and from 1 p.m. onwards, it didn’t do much.  Platinum was closed at $890 spot, up 2 dollars on the day…but would obviously closed much higher than that, if allowed.

Palladium was up 2 dollars by the time the other three precious metals got hammered lower at 9:40 or so CEST in Zurich.  It was at its low around 11 a.m. Central European Summer Time — and it was allowed to rally until shortly after 9 a.m. in New York.  It was hammered lower in price by ten dollars or so — and then traded sideways for the rest of the Wednesday session.  Palladium was closed at $1,664 spot, up 7 dollars from Tuesday.

The dollar index closed very late on Tuesday afternoon in New York at 99.13 — and then opened down 4 basis points once trading commenced around 7:45 p.m. EDT on Tuesday evening, which was 7:45 a.m. China Standard Time on their Wednesday morning.  About forty-five minutes later it was back at its Wednesday close, but then sagged back to unchanged around 9:35 a.m. CST.  It then traded sideways for a couple of hours before edging quietly higher until around 2:25 p.m. CST.  The bottom fell out a few minutes before the London open — and the usual ‘gentle hands’ appeared at the 98.90 low tick at 9:20 a.m. BST.  A ‘rally’ commenced at that juncture — and all of the gains that mattered were in by 12:50 p.m. in New York — and it chopped quietly sideways around the unchanged mark for the remainder of the Wednesday session.  The dollar index was closed at 99.12…down 1 whole basis point from Tuesday.

It was another day where it’s obvious that the dollar index would have crashed and burned if the powers-that-be hadn’t showed up to save it.

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

And here’s the 6-month U.S. dollar index chart, thanks to the folks over at the stockcharts.com Internet site.  The delta between its close…98.82…and the close on the DXY chart above, was 30 basis points on Wednesday.  Click to enlarge as well.

The gold stocks opened about unchanged — and hung in there until the 10 a.m. afternoon gold fix in London.  They began to head lower from there — and their respective lows of the day occurred around 12:30 p.m. in New York trading.  They turned higher from that point, even though the gold price wasn’t doing anything at the time — and that rally lasted until around 2:15 p.m. EDT.  From that juncture they sank quietly lower into the 4:00 p.m. close.  The HUI finished the Wednesday session down 1.19 percent.

In most respects that mattered, the silver equities followed an almost identical price path as their golden cousins, except for the fact that Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down 1.81 percent.  Click to enlarge if necessary.

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

The CME Daily Delivery Report showed that 75 gold and 2 silver contracts were posted for delivery within the COMEX-approved depositories on Friday.

In gold, the two short/issuers were Advantage and Marex Spectron, with 56 and 19 contracts.  Of the four long/stoppers in total, the three that mattered were Advantage, Morgan Stanley and JPMorgan, as they picked up 48, 15 and 10 contracts.  All contracts, both issued and stopped, involved their respective client accounts.

In silver, ADM issued both — and JPMorgan stopped both.  This activity was solely client account-related as well.

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

The CME Preliminary Report for the Wednesday trading session showed that gold open interest in October dropped by 144 contracts, leaving 293 still around, minus the 75 mentioned a few paragraphs ago.  Tuesday’s Daily Delivery Report showed that 229 gold contracts were actually posted for delivery today, so that means that 229-144=85 more gold contracts were just added to the October delivery month.  Silver o.i. in September declined by 4 contracts, leaving 339 still open, minus the 2 mentioned a few paragraphs ago.  Tuesday’s Daily Delivery Report showed that 2 silver contracts were actually posted for delivery today.  That means that 4-2=2 silver contracts vanished from the October delivery month.


For the third day in a row there were no reported changes in either GLD or SLV.

The new short report is out for both of the above ETFs… for the two 2-week reporting period that ended at the close of trading on Monday, October 30.  It showed that the short position in SLV fell from 23.08 million troy ounces, down to 20.82 million troy ounces…a decline of 9.79 percent.  And the short position in GLD cratered by a whopping 41.10 percent…from 1.436 million troy ounces, down to 846,000 troy ounces.

In the other depositories, mutual funds and ETFs on Planet Earth on Wednesday…net of what happened in GLD, SLV and the COMEX…there was a monstrous 271,393 troy ounces of gold added on a net basis — but that number in silver was only 44,769 troy ounces net.


There was a small sales report from the U.S. Mint on Wednesday.  They sold 1,000 troy ounces of gold eagles — and 75,000 silver eagles.

There was a tiny bit of activity in gold over at the COMEX-approved depositories on the U.S. east coast on Tuesday.  Nothing was reported received — and only 389 troy ounces was shipped out.  That activity was at Brink’s, Inc…which I won’t bother linking.

It was another busy day in silver, as 1,322,669 troy ounces was received — and 635,625 troy ounces was shipped out.  In the ‘in’ category, two truckloads…1,109,669 troy ounces…were dropped off at Brink’s, Inc. — and the remaining 213,000 troy ounces ended up at JPMorgan.  After a long hiatus, this is the third day in a row that they have taken delivery of physical silver in their own depository.  In the ‘out’ category, there was one truckload…600,383 troy ounces…shipped out of HSBC USA — and the remaining 35,242 troy ounces departed CNT.  There was also a transfer of 120,296 troy ounces out of the Registered category — and back into Eligible over at Brink’s, Inc. — and I would think that Ted suspects that this involves JPMorgan…silver being transferred to save on storage charges.  The link to all this is here.

It was another pretty quiet day over at the COMEX-approved gold kilobar depositories in Hong Kong on their Tuesday.  They didn’t receive anything — and shipped out 200 of them.  This occurred at Brink’s, Inc. — and I won’t bother linking this amount, either.


There was a whole raft of stories on Internet on Wednesday about how much gold is pouring into all the world’s depositories, mutual funds and ETFs lately…something that I’ve been pointing out with Nick’s charts every week for the last number of years.  It’s nice to see that the main stream media is finally paying some attention to that fact — and this sort of exposure will certainly cause even more money to flow into them as a result.  This is just another headwind that the Big 7 short holders in gold [and silver] are facing.

I posted the 2-year charts from Nick in Tuesday’s column…but here are the 10-year charts for both gold and silver to put things in more perspective.  The 10-year chart for silver is even more amazing than the one for gold.  Click to enlarge for both.

I only have a small handful of stories/articles for you today.


CRITICAL READS

Fed Takes $31 Billion Securities in Overnight Repos as “Not a QE” Looms

The New York Fed announced that it accepted $30.8BN in securities ($26.25BN in TSYs and $4.550BN in MBS) in its latest overnight repo operation, shortly after the latest overnight G/C repo rate printed at an “unstressed” 1.90% this morning.

This was down from Tuesday’s $37.5BN and was the lowest repo allotment since September 27.  Click to enlarge.

Of course, after Tuesday’s speech in which Powell pre-announced the return of POMOs, confirming that these “temporary” operations are set to become “not temporary” as the Fed grows permanently grows its balance sheet by purchases of Treasurys, reportedly Bills at first, the overnight POMO has now become just a placeholder until November when the new “not a QE” is set to begin and expand the Fed’s balance sheet by about $20BN in 10 Year equivalents every month.

As such, predictably the stress in the repo market is now effectively gone and the only question is what the final framework of the new POMO will look like, and specifically what the Fed will announce how many Treasuries the Fed will have to buy.

But wait, didn’t Powell say not to confuse what is coming with QE? Alas, as we first explained and then as Capital Economics confirmed, the Federal Reserve “will struggle to convince markets that a resumption of Treasury purchases to avoid future money-market turmoil is not another round of quantitative easing” according to Capital Economics chief U.S. economist Paul Ashworth: “Hard to communicate that effectively when the Fed’s organic balance sheet growth will be half the size of the ECB’s newly unveiled QE,” Ashworth wrote in note Tuesday.

Alas, in this “brave new world” where one is no longer allowed to call a spade a spade (especially if it risks jeopardizing Chinese investments, right NBA?), what one has to remember is that the return of QE is anything but. No matter what one calls it however, the Fed’s overnight repo no longer matters as the turmoil in the funding market has been stabilized for now, and certainly until POMO returns. The bigger problem is if we still have repo turmoil after “not a QE” is back. In that case, all bets will officially be off as the Fed loses its last shred of credibility.

This news item was posted on the Zero Hedge website at 8:59 a.m. on Wednesday morning EDT — and I thank Brad Robertson for sending it along.  Another link to it is hereGregory Mannarino‘s post market close rant for Wednesday is linked here.


Inflation Will Eliminate Excess Debt — Bill Bonner

We’ve seen how both Trump and Warren, the Federal Reserve, Congress, Krugman, Summers, the powers that be, and all the ships at sea are committed to inflating our way out of the debt trap.
Just yesterday, Jerome Powell, top honcho at the Fed, reaffirmed the bank’s readiness to pitch in as needed. The Financial Times reports:

The Federal Reserve will soon resume purchases of short-term US Treasury bonds to expand its balance sheet in hopes of preventing a repeat of the recent disruption in overnight “repo” markets, chairman Jay Powell said on Tuesday.”

Well, the good news is that if inflation is what they want, inflation is what they’ll get. But not necessarily the tame, friendly, housebroken inflation they are hoping for.

The monetary inflation that the Fed is pushing now will be followed by fiscal inflation (bigger deficits).

But fiscal inflation will lead to consumer price inflation, the kind that lowers the value of money, increases the prices of goods and services, and wreaks havoc on just about everyone.

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


Trump Again Threatens to “Wipe Out” Turkey’s Economy as Full Ground Invasion Begins

Update 4: Late into the night local time, the Turkish Defense Ministry announced a full ground operation has commenced. Turkish armored vehicles and tanks were seen crossing into Syria alongside Turkish-backed Syrian ‘rebel’ forces, advancing into towns just south of the border frontier area.

And following this in a late afternoon White House press briefing Trump issued a statement reiterating he’s prepared to “wipe out” Turkey’s economy if America’s Kurdish partners are hurt, after earlier in the day calling the operation “a bad idea“.

The president also for the first time indicated he’s ready to support Sen. Lindsey Graham’s call for economic sanctions on Turkey, adding he would support something “tougher” than sanctions should Erdogan not abide by all prior commitments.

Local monitors have reported 8 civilians are among nearly a dozen total dead in the Turkish assault on Syria, however, the death toll is expected to be much higher and is likely rising rapidly.

This long and unfolding story appeared on the Zero Hedge website at 9:26 a.m. EDT on Wednesday — and has been continually updated as the day progressed.  Another link to it is here.


Turkey Joins Russia’s Ruble-Based Alternative to SWIFT

After repeated warnings over the past couple of years, Turkey and Russia have signed a pact to increase use of the ruble and lira in cross-border payments, with Turkey signing on to Russia’s alternative to SWIFT, the international telecommunications protocol used by banks and central banks the world over.

Though SWIFT is an international cooperative owned by its members, with more than 10,000 banks worldwide relying on its system for handling sizable inter-bank transactions, the safety of the network was brought into question after a series of cyber attacks in 2015 and 2016 resulted in the theft of $101 million from the Central Bank of Bangladesh.

For the first time since SWIFT’s launch, the hacks stoked doubts about the system’s safety, and prompted many U.S. rivals, including Russia, to ramp up work on their alternatives to SWIFT.

In addition to Turkey, China and Russia have signed agreements to bolster trade between the two countries, including settling a larger percentage of their bilateral trade in rubles and renminbi. For China, bilateral trade with Russia grew from $69.6 billion in 2016 to $107.1 billion last year. China is Russia’s biggest partner for imports and exports.

There has also been talk about India joining Russia’s SWIFT alternative as Washington continues to threaten New Delhi with sanctions over its decision to purchase Russian-made missile-defense systems.

According to Reuters, Russian Finance Minister Anton Siluanov signed the agreement with Ankara on Tuesday. The agreement, signed on Oct. 4, will encourage the two countries to start using Russia’s system in mutual settlements.

As Putin warned, American sanctions against Russia are a “colossal strategic mistake” and eventually risk undermining the dollar-based hegemony of the global financial system.

This news item put in an appearance on the Zero Hedge website at 4:15 a.m. EDT on Wednesday morning — and I would have included it in yesterday’s column, except it was posted on the ZH website about ten minutes after I filed Wednesday’s column.  Another link to it is here.


Gold ETF Holdings Hit All Time High After Longest Stretch of Inflows Since the Financial Crisis

While some investors still naively hold on to the belief that the consistently manipulated (by both institutions and central banks) VIX index is a measure of overall turmoil sentiment in the market, others are rushing to the safest of assets and as global tensions escalate and signs of a global recession mount, more investors are turning to gold. According to Bloomberg, investor holdings in bullion-backed exchange-traded funds have expanded for 17 days in a row, the longest run of inflows since the global financial crisis.  Click to enlarge.

Gold inflows are likely to persist,” said Citigroup which expects the price of gold to rally to $1,700 an ounce over the next year. “Markedly weak manufacturing and services ISM data show that the slowdown in global trade is starting to bite the U.S. economy.”

Gold obviously stands to benefit” if China and the U.S. can’t reach a mini deal this week, said Adarsh Sinha, co-head of Asia FX and rates strategy at Bank of America Merrill Lynch.

With opinions turned decisively in gold’s favor, it is no surprise that in September, global gold-backed ETFs and similar products had US$3.9bn of net inflows across all regions, increasing their collective gold holdings by 75.2t to 2,808 tonnes(t), the highest levels of all time. According to the World Gold Council, ETF holdings surpassed late 2012 levels, at which time the gold price was near US$1,700/oz, 18% higher than current levels. Notably, the gold-backed ETF landscape is vastly different than in 2012 when two-thirds of global holdings were concentrated in North America. Today, North American- and European-listed funds make up 52% and 44% of global holdings respectively, with the remainder coming from funds listed in Asia and other regions.

This is no surprise to you, dear reader, but it would come as news to others.  This gold-related Zero Hedge article showed up on their website at 7:25 p.m. on Wednesday evening EDT — and another link to it is here.


Don’t stop me now: central bank demand in August — WGC

Gross purchases (of a tonne or greater) amounted to 62.1t in August, while gross sales were 4.8t by comparison. As a result, net purchases came to 57.3t. This is significantly higher than the modest demand of 12.8t in July. As we’ve spoken about previously, global uncertainty remains elevated with little indication that it will fall anytime soon. Against this backdrop, central banks continue to see a role for greater levels of gold in their reserve portfolios.

Same same, but different. Unlike previous months however, where we’ve seen several active purchasers, gross purchases in August were concentrated amongst four central banks. Of the total gross purchases, Turkey’s sizeable addition (+41.8t) to its gold reserves account for around two-thirds. Russia (11.3t), China (5.9t) and Qatar (3.1t) were the others that grew gold reserves by a tonne or more. Gross sales – again, totalling a tonne or more – were limited to two central banks: Kazakhstan (2.6t) and Uzbekistan (2.2t).

On a net basis, reported year-to-date purchases – of a tonne or more – now total over 450t. Of this, a total of 14 central banks have increased their gold reserves to far in 2019, compared to only two that have decreased their gold reserves. Should central banks remain net purchasers this year – which is looking like a racing certainty – it’ll also mark a decade since they switched from being net sellers.  Click to enlarge.

This brief 1-chart gold-related article was posted on the gold.org Internet site on Wednesday sometime — and I plucked it from the Sharps Pixley website.  Another link to it is here.  A related Bloomberg video interview is headlined “Any Pullback in Gold is a Buying Opportunity, Says UBS’s Schnider” — and that’s from the Sharps Pixley website as well.


The PHOTOS and the FUNNIES

Continuing with our Canada Day long weekend excursion to Lillooet and beyond, this first photo was taken on that old and now closed suspension bridge over the Fraser River.  The second shot is looking down the river…due south…showing a tiny part of the town on the west bank.  Shots 4 and 5 are of Seton Lake…just out of sight in the valley between the gap in the mountains in the second photo — and less than a 10-minute drive from the town center.  Those colourful kayaks came along at exactly the right moment in photo 3.  Photo 4 shows the lake from the top of the natural dam that blocks the valley.  The CN track bed is visible in the lower right.  Both photos were taken looking more or less due west.  Click to enlarge.


The  WRAP

The crux of the gold issue is that gold is a protective shield – the finest ever known to man – against the destruction of paper currencies. Gold is a survival tool. It guarantees you that the fruits of your labor will not be stolen.” — Robert J. Ringer, “How You Can Find Happiness During the Collapse of Western Civilization” c. 1983


After the prices of the precious metals were capped and turned lower shortly after the dollar index began to ‘rally’ in the first hour of London trading, nothing much was allowed to happen in either gold or silver — and both were carefully and deliberately closed down a hair on the day.  Other than that, there’s nothing much to talk about regarding the price action on Wednesday.

Here are the 6-month charts for the Big 6 commodities — and there’s nothing to see in any of them.  Click to enlarge.

And as I type this paragraphs, the London/Zurich opens are less than a minute away — and I note that the gold price took off higher shortly after trading commenced at 6:00 p.m. on Wednesday evening in New York. The price was capped and turned lower by ‘da boyz’ less than an hour later — and they used the rest of the Far East trading session to whittle away the rest of those gains, plus a bit more — and gold is up only $1.20 the ounce at the moment. It was the same ordeal for the silver price, but it was up a dime or so by around 1:40 p.m. China Standard Time. Then it really got hit — and as London opens, ‘da boyz’ have it back at unchanged Palladium was up a few dollars shortly after 6 p.m. in New York on Wednesday evening, but that tiny gain is gone — and it’s back at unchanged as well. Palladium didn’t do much in Far East trading — and it’s down 2 dollars as Zurich opens.

Net HFT gold volume is already enormous at around 99,000 contracts — and there’s 2,085 contracts worth of roll-over/switch volume on top of that. Net HFT silver volume is a bit over 22,000 contracts already — and there’s only 520 contracts worth of roll-over/switch volume in this precious metal.

The dollar index opened at 98.98…down 14 basis points once trading began around 7:45 p.m. EDT on Wednesday evening in New York, which was 7:45 a.m. China Standard Time on their Thursday morning. It popped a handful of basis points higher by 9:15 a.m. CST, but then sank back to about unchanged — and hasn’t done much since. As of 7:45 a.m. BST in London/8:45 a.m. CEST in Zurich, the index is down 15 basis points.


The amount of silver movement into and out of the COMEX warehouse still continues to amaze after all these years…about nine in total — and Ted is always wondering why none of the other so-called precious metal ‘analysts’ are talking about it.  That’s a very good question. The amount of gold and silver going into all the world’s ETFs and mutual funds isn’t exactly anything to sneeze at either.

And as I mentioned earlier in today’s commentary, JPMorgan has taken in almost 1.5 million troy ounces during the last three days — and here’s the chart from Nick showing their current warehouse stocks.  They’re back at their old high…or slightly above it…as of the close of business on Tuesday.  Click to enlarge.


And as I post today’s column on the website at 4:02 a.m. EDT, I see that the gold price hit its current low around 2:25 p.m. CST…about ten minutes after the afternoon gold fix in Shanghai…it has been edging quietly higher since — and is currently up $3.10 an ounce. Ditto for silver — and it’s up 4 cents as the first hour of London trading draws to a close. Platinum and palladium haven’t done much during the first hour of Zurich trading, with former down 2 dollars — and the latter by 1.

Gross gold volume is way up there at around 119,000 contracts — and minus roll-over/switch volume, net HFT gold volume is about 114,500 contracts. Net HFT silver volume is a bit over 24,500 contracts — and there’s still only 532 contracts worth of roll-over/switch volume in this precious metal.

The dollar index crept quietly higher until about ten minutes after the afternoon gold fix in Shanghai — and then began to head sharply lower — and is down 32 basis points as of 8:45 a.m. in London/9:45 a.m. in Zurich.

That’s all I have for today — and I’ll see you here tomorrow.

Ed

An Unusual Trading Session For Silver & Gold

09 October 2019 — Wednesday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


After ticking a bit higher at the 6:00 p.m. EDT open in New York on Monday evening, the selling pressure appeared shortly after — and the low tick of the day was set at 9 a.m. China Standard Time on their Tuesday morning.  It jumped back to the unchanged mark about thirty minutes later — and then drifted a bit lower until shortly after the 2:15 p.m. CST afternoon gold fix in Shanghai.  Then a quiet rally began that didn’t really run into any opposition worthy of the name until around 11:15 a.m. in London.  It struggled to its high tick of the day around 9:40 a.m. in New York — and it was then sold lower until the 1:30 p.m. COMEX close.  Seconds later it was heading higher — and it really began to sail a few minutes before 3 p.m. EDT.  That was capped — and it crawled a bit higher until 4 p.m. — and was sold a bit lower until trading ended at 5:00 p.m.

The low and high ticks in gold were recorded as $1,492.10 and $1,514.30 in the December contract.

Gold finished the Tuesday session in New York at $1,505.10 spot, up $12.00 on the day.  Net volume was very heavy at a bit over 356,000 contracts — and there was around 15,500 contracts worth of roll-over/switch volume in this precious metal.

And here’s the New York Spot Gold [Bid] chart, so you can see the after-hours price action in more detail.  Normally the post-COMEX close price/volume activity is rather muted…but it wasn’t yesterday.

The price action in silver was virtually the same as it was for gold…at least right up until 8:30 a.m. in New York.  It jumped up a bit at that point, but really took off at 9 a.m. EDT.  But, like gold, it was capped and turned lower at 9:40 a.m.  After that, it’s price action reverted to what was happening with the gold price.

The low and high ticks in this precious metal were reported by the CME Group as $17.305 and $17.86 in the December contract.

Silver was closed on Tuesday afternoon in New York at $17.705 spot, up an even 30 cents on the day. Net volume was very decent at a bit over 88,500 contracts — and there was about 2,800 contracts worth of roll-over/switch volume on top of that.

The platinum price was up a handful of dollars by shortly after 9 a.m. China Standard Time on their Tuesday morning — and it didn’t do much of anything until shortly after 11 a.m. in Zurich.  It headed unevenly higher from there — and its high tick of the day came a few minutes after 9 a.m. in New York.  It was sold lower until noon EDT — and then headed higher until a few minutes after 3 p.m. in the thinly-traded after-hours mark.  It didn’t do much of anything after that going into the 5:00 p.m. EDT close.  Platinum closed at $888 spot, up 12 bucks on the day.

The palladium price ticked quietly and unevenly higher — and was up 6 bucks by the 2:15 p.m. afternoon gold fix in Shanghai.  It was hit pretty hard at that time — and the price sagged until shortly after 11:30 a.m. in New York.  It headed sharply higher from there until shortly before 1 p.m. in New York — and added on a few more dollars in after-hours trading, before ticking lower into the close.  Palladium finished the Tuesday session in New York at $1,657 spot, up 13 dollars from Monday.  I note that Kitco shows the low and high ticks for palladium as $1,590 and $1,685 in the spot month…which is quite a range!

The dollar index closed very late on Monday afternoon in New York at 98.97 — and opened up 1 basis point once trading commenced around 7:45 p.m. EDT on Monday evening, which was 7:45 a.m. China Standard Time on their Tuesday morning.  It didn’t do much of anything until about 1:15 p.m. CST on their Tuesday afternoon — and at juncture it began to head quietly and very unevenly lower.  That lasted until about 10 a.m. in London — and then it traded nervously sideways until 8:40 a.m. in New York.  A ‘rally’ commenced at that point — and most of the gains that mattered were in by about 11:35 a.m. EDT.  It drifted mostly lower for the rest of the day, although the 98.85 high tick of the day was printed at 2:35 p.m.  The index closed on Tuesday at 98.13…up 14 basis points from Monday.

Here’s the DXY chart, thanks to BloombergClick to enlarge.

And here’s the 6-month U.S. dollar index chart, courtesy of the fine folks over at the stockcharts.com Internet site.  The delta between its close…98.82…and the close on the DXY chart above, was 31 basis points on Tuesday.  Click to enlarge as well.

The gold stocks gapped up about 2.5% at the open — and topped out when the gold price was capped and turned lower at 9:40 a.m. in New York trading.  They traded a bit lower until around 11:15 a.m. EDT — and then began to edge unevenly higher from there.  The rally became a bit more intense staring around 3:15 p.m. — and they closed right on their highs of the day, as the HUI finished up a respectable 2.96 percent.

The silver equities traded in lock-step with their golden brethren — and Nick Laird’s Intraday Silver Sentiment Index also closed on its high of the day…up 2.84 percent.  Click to enlarge if necessary.

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

The CME Daily Delivery Report showed that 229 gold and 2 silver contracts were posted for delivery within the COMEX-approved depositories on Thursday.

In gold, of the three short/issuers in total, the only one that mattered was Goldman Sachs with 224 contracts out of its in-house/proprietary trading account.  There were seven long/stoppers in total — and the three largest were…JPMorgan with 73 contracts for its client account…Advantage with 56 contracts for its client account — and Australia’s Macquarie Futures, with 42 contracts for its own account.  In fourth spot was ADM with 25 contracts for its client account.

In silver, Advantage issued both — and JPMorgan stopped both — and those transactions involved their respective client accounts.

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

The CME Preliminary Report for the Tuesday trading session showed that gold open interest in October rose by 23 contracts, leaving 437 still around, minus the 229 mentioned a few paragraphs ago.  Monday’s Daily Delivery Report showed that 13 gold contracts were actually posted for delivery today, so that means that 23+13=36 more gold contracts were added to October.  Silver o.i. in October declined by 5 contracts, leaving 343 still open, minus the 2 contracts mentioned a few paragraphs ago.  Monday’s Daily Delivery Report showed that 7 silver contracts were actually posted for delivery today, so that means that 7-5=2 more silver contracts just got added to the October delivery month.


There were no reported changes in either GLD or SLV on Tuesday.

In other ETFs, mutual funds and depositories on Planet Earth on Tuesday…net of what happened in the COMEX, GLD and SLV…there was a net 43,168 troy ounces of gold added — plus a net 131,568 troy ounces of silver.

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

There wasn’t any in/out movement in gold over at the COMEX-approved depositories on the U.S. east coast on Monday.

But, for the second day in a row, it was another big day in silver, as 1,796,689 troy ounces was received — and 851,672 troy ounces was shipped out.  In the ‘in’ category, there were four depositories involved — and the three biggest were Brink’s, Inc. with 902,269 troy ounces…JPMorgan, with a second truckload in as many days…595,272 troy ounces — and the International Depository Services of Delaware, with 298,165 troy ounces.  In the ‘out’ category, there was one big truckload…638,671 troy ounces…shipped out of Brink’s, Inc. — and the remaining 213,000 troy ounces departed CNT.  There was also 89,011 troy ounces transferred from the Registered category and back into Eligible over at Delaware.  The link to all this action is here.

There was no in/out activity over at the gold kilobar depositories in Hong Kong on their Monday.


Here’s a chart the Nick passed around a week ago, that I didn’t have room for until today’s column.  It shows gold imports into Turkey over the last ten years, updated with August’s data.  During the month they imported 11.2 tonnesClick to enlarge.

I don’t have all that much in the way of stories or articles for you today.


CRITICAL READS

U.S. Producer Prices Unexpectedly Plunge in September – Biggest Drop Since 2015

After falling (MoM) in July, U.S. producer prices rebounded in August offering some hope, but September has now massively disappointed with a headline tumble of 0.3% MoM (+0.1% exp).

This is the biggest headline drop MoM since Sept 2015.  Click to enlarge.

Excluding food and energy, producer prices decreased 0.3% in September from the prior month, compared with forecasts for a 0.2% increase.

Both headline and core PPI saw notable YoY slowdowns (although core PPI is at 2.0% or above for the 27th month in a row)…

The cost of goods fell 0.4% after dropping 0.5% the previous month.

Nearly half of the September decline in prices for final demand services can be traced to the index for machinery and vehicle wholesaling, which fell 2.7 percent. The indexes for automotive fuels and lubricants retailing; apparel, jewelry, footwear, and accessories retailing; airline passenger services; gaming receipts (partial); and professional and commercial equipment wholesaling also moved lower. Conversely, prices for hospital outpatient care rose 1.1 percent.

Theoretically, this provides Powell with some more ammo for cutting rates…BUT we note that despite all the mainstream media screaming over tariff-driven price surges crushing the consumer – there is no evidence of it at all.

This Zero Hedge news item appeared on their website at 8:38 a.m. on Tuesday morning EDT — and it’s the first contribution of the day from Brad Robertson.  Another link to it is here.


Fed Accepts $38BN in Both Overnight and Term Repos as Liquidity Stabilizes

Today’s overnight/term repo announcement by the Fed was “not great, not terrible.”

One day after the NY Fed accepted $47.05BN in securities for its latest overnight repo, demand for liquidity eased slightly, with the latest $75BN O/N repo operation seeing demand for exactly half of the maximum allotment, or $37.5BN, mostly in the form of TSYs, at $31.75BN.

And with the repo market seemingly stabilizing, the question is what happens as we approach the coming year-end period when as we recall from last year, the demand for collateral exploded, and whether the Fed will be content to manage liquidity demands with repo or whether it will launch POMOs some time in November as most investment banks now believe.

This Zero Hedge story showed up on their Internet site at 9:01 a.m. EDT on Tuesday morning — and it’s another offering from Brad Robertson.  Another link to it is here.


Fed Announces QE4 One Day After BIS Warns QE Has Broken the Market

Following Fed Chair Powell’s surprising announcement today that the Fed was resuming Permanent Open Market Operations after a 5 year hiatus, just as we said last month that it would…Click to enlarge.

…  there was a brief debate whether the Fed’s soon to be permanent expansion in its balance sheet is QE or not QE. The answer to this semantic debate simple: Powell defined Quantitative Tightening as removing reserves from the system. Thus, by that simple definition, adding reserves to the system on a permanent basis via permanent open market operations, i.e., bond purchases, is Quantitative Easing. Incidentally, the repo market fireworks were just a smokescreen: the real reason why the Fed is resuming QE is far simpler: the U.S. has facing an avalanche of debt issuance and with China and Japan barely able to keep up, someone has to buy this debt. That someone: the Fed.

Yet semantic bullsh*t aside, what is most infuriating about Powell’s “shocking” announcement (which we previewed a few weeks ago) is that it took place just one day after the central banks’ central bank, the Bank of International Settlements, finally caught up with what we first said in 2009 – for economists being only 10 years behind the curve is actually not terrible – and wrote that “the unprecedented growth in central banks’ balance sheets since the financial crisis has had a negative impact on the way in which financial markets function.”

Ignoring the fact that central bank policies are responsible for such phenomena as Brexit and Trump, as it is the flawed monetary policy of the past decade that made the rich richer beyond their wildest dreams by expanding the biggest asset bubble in history, while destroying the middle class…

But the BIS said these side-effects had so far only rarely affected financial conditions in such a way as to impede central banks’ monetary policy making, though it added that the full consequences were unlikely to become clear until major central banks started to shrink their balance sheets.

Worse, the BIS noted that regulations demanding liquidity at large banks might discourage the banks from offering to lend out their reserves — a source of same-day liquidity — into overnight markets. This is similar to what the large banks themselves have said in the last month. But the BIS also noted that since the financial crisis, risk management practices might have changed within the banks themselves.

Sadly, the Fed – which is fully aware of all of this – decided to ignore everything the BIS warned about, and by launching more POMO/QE/”don’t call it QE”, just ensured that the next financial crisis will be the last one.

This longish, chart-filled, but worthwhile Zero Hedge article was posted on their website at 3:57 p.m. EDT on Tuesday afternoon.  Another link to it is here.  Gregory Mannarino’s post mark closing rant for Tuesday is linked here.


Close to a Standstill“: IMF Warns Global Growth Will Be Cut to Lowest Since Lehman

Don’t expect any good news next week when the IMF holds its annual meeting and releases its latest World Economic Outlook report due on October 15.

According to the IMF’s new head, Bulgarian Kristalina Georgieva, the monetary fund will again cut its growth forecast for both 2019 and 2020; as a reminder back in July, the IMF again cut its projection for 2019 GDP growth to 3.2% this year and 3.5% next year, its fourth downgrade since last October, and the lowest since the financial crisis amid ever-escalating trade war. In fact, according to Georgieva, who apparently was brought in to take the blame for Lagarde’s disastrous legacy, global trade growth “is close to a standstill“, which last time we checked was 0%.

It means we are about about to have a new entry in the “worst since Lehman” category.

By now it is no secret to anyone that everyone – global institutions, economists and investors – have blamed the U.S.-China tariff war as the main reason for slowing global growth (and catalyst behind upcoming QE). The trade tensions have partly caused manufacturing to tumble and weakened investment, creating a “serious risk” of spillover to other areas of the economy like services and consumption, Georgieva said on Tuesday according to Bloomberg.

The global economy is now in a synchronized slowdown,” she said, noting that the fund estimates that 90% of of the world is seeing slower growth. This is a huge change to the global economy from two years ago, when growth was accelerating across three-quarters of the globe in a synchronized upswing.

To be sure, the IMF – as usual – is among the last to recognize what was already obvious to its peers. The OECD cuts its own forecast last month; on Monday, World Bank President David Malpass said that the lender is also preparing to downgrade its assessment from a projection of 2.6% it made in June.

As one would expect, the IMF’s admission of the sad state of affairs is not without a hidden motive,  in this case getting Germany to issue more debt and prop up Europe’s flailing economy.

This article put in an appearance on the Zero Hedge website at 12:10 p.m. on Tuesday afternoon EDT — and I thank Brad Robertson for sharing it with us.  Another link to it is here.


We Can’t “Grow Our Way Out” of Debt — Bill Bonner

Today, we turn to something no one cares much about, even though it threatens to cause the biggest financial calamity in U.S. history:  Debt

Glorious Valhalla

Total U.S. debt – public and private – now approaches $74 trillion. The economy that supports this debt has grown steadily, but nowhere near fast enough to keep up with it.

As we remarked yesterday, money is time. So when you owe money, what you really owe is time. And time is not something you can fool around with. It comes and it goes… no matter what you think or what you do.

Historically, Americans have owed 1.5 days of work in the future for every day of work in the present. That is, the ratio of debt to GDP averaged about 1.5 to 1 for the first eight decades of the 20th century.

Then, debt went up, and now stands at 3.5 days of future GDP for every day of present output.

Have we arrived in some great and glorious Valhalla, where the old rules no longer apply, where debt no longer matters… or where time is no longer our master, but our servant?

This commentary from Bill, filed from Youghal in Ireland, showed up on the bonnerandpartners.com Internet site early on Tuesday morning EDT — and another link to it is here.


Full Turkish Assault on NE Syria Coming “Next 24 Hours” as Kurds Make Late Night Appeal

The Washington Post reports that the expected major Turkish military incursion into northeast Syria which set off a firestorm early this week after the White House appeared to give the green light in a Sunday night statement will commence in the next 24 hours.

There are indications that it is coming in the next 24 hours. Most likely at Tal Abyad and Ras al-Ain, according to press reports and the Turkish build up,” the Post‘s Liz Sly stated, citing a prior report. This after Turkish warplanes had already conducted limited bombing of select Kurdish supply routes along the Syria-Iraq border. Turkey has confirmed the reports, via Reuters:

The Turkish military, together with the Free Syrian Army, will cross the Syrian border “shortly“, President Tayyip Erdogan’s communications director said early on Wednesday, as Ankara starts a military incursion in the region.

Separately, Foreign Policy is reporting “U.S. and Kurdish officials expect Turkey to launch a military operation within 24 hours as Trump tries to backpedal.”

That so-called backpedaling includes Trump tweeting Tuesday, “We may be in the process of leaving Syria, but in no way have we Abandoned the Kurds, who are special people and wonderful fighters.” He reiterated that “any unforced or unnecessary fighting by Turkey will be devastating to their economy and to their very fragile currency.”

Meanwhile, the U.S.-backed and Kurdish-led Syrian Democratic Forces (SDF) — who stand ready to face imminent Turkish air power while themselves not having airplanes, but only previously U.S. air support which will not be utilized against the invading Turks — issued a last ditch appeal to the world overnight Tuesday to stave off the Turkish attack.

This news story was posted on the Zero Hedge website at 9:05 p.m. EDT on Tuesday evening — and another link to it is here.


China adds more gold to reserves, but relatively small amount — Lawrie Williams

The latest figures for its Forex reserves as published by the People’s Bank of China (PBoC) claim its gold reserves rose by a relatively small 5.91 tonnes in September.  This brings the country’s total, as will be reported to the IMF, to just over 1,948 tonnes, still in 6th place among national gold holders as reported to the IMF, and now even further behind Russia in 5th place, which is accumulating gold at a faster rate according to IMF data.  (See: Russia continues gold purchases but volume down yoy).  According to the released data so far this year, both nations have been building gold reserves at a lower rate than before but, as we have suggested in previous articles, the Chinese figures in particular, as reported, have to be a little dubious and we suspect the real total is far higher.

So what evidence do we have of China under-reporting its gold holdings?  The country has a track record of reporting months, if not years, of zero gold reserve accumulations and then reporting very large gold reserve increases which, in retrospect, must have been built up over the years it reported zero increases.  In the past it has justified this by claiming this additional gold has been held in accounts separate from its Forex reserves and thus not reportable to the IMF.  It has gone through periods of reporting monthly increases – notably in the months leading up to the acceptance of the Chinese yuan as an integral component of the IMF’s Special Drawing Rights currency basket back in late 2016, following which it ceased reporting monthly increases for two years, but recommenced reporting monthly reserve increases, perhaps under IMF pressure, in December 2018.  We suspect that the nation was actually still building its gold reserves in the two non-reporting years.  Furthermore, given its past practice, we also even doubt the levels of its reported monthly reserve increases.  China remains the world’s largest gold producer, and exports virtually no gold, so has plenty of scope for surreptitiously adding to its gold reserve total and further building its reserves in those accounts it feels no need to report to the IMF.

So why should China be doing this?  In the past there have been instances of Chinese academics and government officials recommending in various speeches that the country expand its gold reserves to match those claimed by other leading nations – notably the U.S. which is reported to hold 8,133.5 tonnes of gold and Germany which reports holdings of 3,366.8 tonnes to the IMF.  The theory is that the huge debt positions being built up by many of the world’s leading economies will, at some stage in the future, lead to a major economic and currency reset, in which gold will play an important part and countries like China, and Russia which also appears to be accumulating gold reserves at a comparatively rapid rate, will be particularly advantaged in such a reset if they have sufficient reserves of gold at the time.

This interesting and worthwhile commentary from Lawrie put in an appearance on the Sharps Pixley website on Tuesday sometime — and another link to it is here.


The PHOTOS and the FUNNIES

The next morning, June 30, we headed back to the same viewpoint that I’d taken the last photo that was posted in my column yesterday.  Photo one is the same view of Lillooet, except in broad daylight, not very late evening.  The one-lane suspension bridge in the foreground has been retired from service — and is only available for foot traffic now.  Built in 1913, it replaced a winch ferry that was powered by the river current — and had been in use since 1860.  The second photo was taken from the same spot, but looking in the other direction up the river.  The CN Rail bridge is the point of interest. The last photo is of the town from a bit closer in.  The gap between the two mountains in the centre of the shot is the route for B.C. Highway 99CN Rail, the Seton River, Cayoosh Creek — and the power canal for the Seton powerhouse of the Bridge River Power ProjectClick to enlarge.


The WRAP

It was a very unusual trading session on Tuesday, as both gold and silver rallied quietly and almost without interruption from shortly after the afternoon gold fix in Shanghai on their Tuesday afternoon, until 9:40 a.m. in New York trading, when their respective prices were obviously capped and turned lower.  It’s apparent that JPMorgan et al. are still lurking about.

Along with high precious metal prices, I was certainly happy to see their associated equities do well…but I’m still on the look-out for a big engineered price decline.

But, having said that, the Fed’s announcement of “QE-4” yesterday is another big headwind for those traders who are short the precious metals market…especially the Big 7.

Here are the 6-month charts for the Big 6 commodities — and all the price activity that occurred after the COMEX close…which was quite a bit in gold and silver, doesn’t appear on their Tuesday dojis below.  Click to enlarge.

And as I type this paragraph, the London open is less than a minute away — and I see that after an initial five dollar rally in the first two hours of trading after New York opened on Tuesday evening, the gold price was sold back to unchanged an hour or so later. It began to creep higher shortly after 12 o’clock noon in Shanghai on their Wednesday — and at the moment, it’s up $2.40 the ounce. It was the same general price activity in silver as it was in gold — and that state of affairs lasted until the 2:15 p.m. China Standard Time afternoon gold fix, when it was up about 4 cents an ounce. Shortly after that it shot higher — and is currently up 16 cents as London opens. Platinum traded very unevenly higher until around 11:30 a.m. CST in Far East trading. Its price rise has been capped at the $892 spot level at the moment — and it’s up 4 bucks. Palladium has been trading quietly and unevenly sideways — and it’s up a dollar as Zurich opens.

Net HFT gold volume is nothing special…coming up on 40,500 contracts — and there’s only 727 contracts worth of roll-over/switch volume in this precious metal. Net HFT silver volume is way up there at around 13,800 contracts — and there’s a minuscule 92 contracts worth of roll-over/switch volume on top of that.

The dollar index opened down 4 basis points at 99.09 once trading commenced around 7:45 p.m. EDT on Tuesday evening, which was 7:45 a.m. China Standard Time on their Wednesday morning. It was back at unchanged about forty-five minutes later, but was then sold lower until 11:30 a.m. CST. It has jumped a bit higher since, but is off its current high by a bit…such as it was — and as of 7:45 a.m. BST in London/8:45 a.m. CEST in Zurich, the index is back at unchanged on the day.


Yesterday, at the close of COMEX trading, was the cut-off for this Friday’s Commitment of Traders Report.  And as I said yesterday in the space yesterday, I wasn’t about to stick my neck out as to what the numbers would show when released on the CFTC’s website.

Ted posts his mid-week commentary to his paying subscribers this afternoon — and I suspect that he’ll have something to say about this.  If he does, I’ll ‘borrow’ a few sentences for my Friday missive.


And as I post today’s column on the website at 4:02 a.m. EDT, I note that both gold and silver had been trending quietly higher during the last hour. That lasted until the dollar index bounced off its current low tick at around 8:25 a.m. BST/9:45 a.m. CEST. The former is now up only $2.60 at the moment — and the latter, which had been up 21 cents at its high, is now up only 15 cents as the first hour of London trading draws to a close. Platinum got hammered back to unchanged — and palladium is now down 6 dollars as the first hour of Zurich trading ends.

Gross gold volume is getting up there now at a bit under 61,500 contracts — and minus the tiny amount of roll-over/switch volume there is, net HFT gold volume is around 58,700 contracts. Net HFT silver volume is a bit over 18,000 contracts — and there’s still only 372 contracts worth of roll-over/switch volume in this precious metal.

The current high tick in the dollar index came around 2:20 p.m. China Standard Time on their Wednesday afternoon, which was the time that gold and silver began their upward moves. It drifted a few basis points lower from there, but fell off a cliff a very few minutes before the London/Zurich opens. Then it bounced a bit off its current 8:25 a.m. BST low. And as of 8:45 a.m. in London/9:45 a.m. in Zurich, the index is down 13 basis points.

That’s all I have for you today — and I’ll see you here tomorrow.

Ed

Gold & Silver: Back Below Their 50-Day Moving Averages Again

08 October 2019 — Tuesday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price gapped up a bit at the 6:00 p.m. EDT open in New York on Sunday evening — and ran into a not-for-profit seller immediately.  It crept a bit higher until shortly after 9 a.m. in Shanghai on their Monday morning — and was sold quietly and unevenly lower until 9:15 a.m. in New York.  It rallied a bit from there until 11:40 a.m. EDT — and then was sold off going into the 1:30 p.m. COMEX close. A minute after that, the rug got pulled out from under the gold price — and it was down another ten bucks over the next few minutes.  It crept quietly higher until trading ended at 5:00 p.m. in New York.

The high and low ticks were reported by the CME Group as $1,518.80 and $1,493.30 in the December contract.

Gold was closed in New York on Monday at $1,493.10 spot, down $10.90 from Friday — and back below $1,500 spot.  Net volume was very much on the lighter side, relatively speaking, at around 244,500 contracts — and roll-over/switch volume amounted to a bit over 13,500 contracts on top of that.

And with some minor variations that really didn’t matter, the silver price pattern was about the same on Monday as it was for gold, everywhere on Planet Earth that mattered.

The high and low ticks in this precious metal were recorded as $17.70 and $17.435 in December.

Silver was closed on Monday afternoon in New York at $17.405 spot, down 10.5 cents from Friday.  Net volume was unbelievably quiet…about 33,600 contracts — and I’m not sure what should be made of that fact.  Roll-over/switch volume was only 1,980 contracts.

The platinum price edged very unevenly lower in Far East trading on their Monday morning — and the low tick was set around 11:30 a.m. CEST in Zurich.  Then shortly after 1 p.m. over there, it began to head higher…under obvious resistance.  The high tick of the day was set at the 11 a.m. EDT Zurich close.  ‘Da boyz’ began to work their magic at that juncture — and it was sold lower until shortly before 3 p.m. in the thinly-traded after-hours market.  I didn’t do much of anything after that.  Platinum was closed at $876 spot, down 4 bucks from Friday.

Palladium traded flat until Zurich opened at 9 a.m. CEST on their Monday morning — and was sold quietly lower until 10:30 a.m. over there.  It crawled quietly and unevenly higher until 1 p.m. in New York — and was up 3 dollars or so at that point.  Of course that wasn’t allowed to last  — and it was sold quietly lower until trading ended at 5:00 p.m. EDT in New York.  Palladium was closed at $1,644 spot, down 3 dollars from Friday.

The dollar index closed very late on Friday afternoon in New York at 98.81 — and opened basically unchanged once trading commenced around 6:30 p.m. EDT on Sunday evening, which was 6:30 a.m. China Standard Time on their Monday morning.  It dipped a bit for an hour and change, before trending higher, with the London high coming around 9:40 a.m. BST.  It was then all down hill until around 8:10 a.m. in New York — and from that juncture it chopped quietly sideways until a ‘rally’ commenced about five minutes before the London close…10:55 a.m. EDT.  All the gains that mattered were in by about ten minutes after the 1:30 p.m. COMEX close in new York — and the index trading quietly sideways until the market closed at 5:30 p.m. EDT.  The dollar index finished the Monday session at 98.97…up 16 basis points from Friday.

Here’s the DXY chart, courtesy of 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…98.67…and the close on the DXY chart above, was 30 basis points on Monday.  Click to enlarge as well.

The gold stocks gapped down a bit at the 9:30 a.m. open in New York on Monday morning — and then rallied to their respective highs until around 10:45 a.m. EDT…which was the high for gold during the COMEX trading session.  They were sold quietly and unevenly lower from there — and the big engineered price spike lower a minute after the COMEX close, didn’t have all that much impact on their respective share prices.  The HUI close down 0.79 percent.

The silver equities followed an almost identical price path as their golden cousins, except their respective highs came shortly after 11 a.m. in New York trading — and the sell-off was much more pronounced on that water-fall price decline that began at 1:31 p.m. EDT.  But, like the gold stocks, they managed to recover some of that loss as the day worn on.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed lower by 0.68 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 13 gold and 7 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday.

In gold, the sole short/issuer was Advantage.   There were five long/stoppers it total — and the three largest were JPMorgan, Advantage and ADM…with 5, 4 and 2 contracts.  All contracts, both issued and stopped, involved their respective client accounts.

In silver, the two short/issuers were Advantage and ABN Amro with 4 and 3 contracts — and the two long/stoppers were JPMorgan and Advantage, with 5 and 2 contracts.  As in gold, all contracts issued and stopped involved their respective client accounts as well.

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 October rose by 19 contracts, leaving 414 still open, minus the 13 mentioned a few paragraphs ago.  Friday’s Daily Delivery Report showed that 44 gold contracts were actually posted for delivery today, so that means that 19+44=63 more gold contracts were just added to the October delivery month.  Silver o.i. in October declined by 17 contracts, leaving 348 still around, minus the 7 contracts mentioned a few brief paragraphs ago.  Friday’s Daily Delivery Report showed that 24 silver contracts were actually posted for delivery today, so that means that 24-17=7 more silver contracts just got added to October.


There were no reported changes in either GLD or SLV on Monday.

The folks over at Switzerland’s Zürcher Kantonalbank updated their gold and silver ETFs, as of the close of business on Friday, October 4 — and this is what they had to report.  They added 12,796 troy ounces of gold — and their silver ETF increased by 236,500 troy ounces.

In other gold and silver ETFs on Planet Earth on Monday… minus changes in COMEX warehouse stocks and Switzerland’s Zürcher Kantonalbank…there was a net 60,586 troy ounces of gold added — and that number in silver was 481,255 troy ounces.

The U.S. Mint had a sales report yesterday.  They sold 2,500 troy ounces of gold eagles — 180,000 silver eagles — and 12,500 of those ‘America the Beautiful’ 5-ounce silver coins.

There was only a tiny bit of activity in gold over at the COMEX-approved depositories on the U.S. east coast on Friday.  Nothing was reported received — and only 200.000 troy ounces was shipped out.  I would expect that amount represents 20 of the 10-ounce bars of the COMEX mini-gold contract type.  I won’t bother linking this amount.

It was a monster day in silver.  There was 673,343 troy ounces received — and 2,094,074 troy ounces shipped out.  In the ‘in’ category, there was one truckload…598,143 troy ounce…deposited at JPMorgan…the first receipt of silver for them for many months  — and the remaining 72,500 troy ounces was dropped off at Brink’s, Inc.  In the ‘out’ category, there were two truckloads…1,202,514 troy ounces shipped out of CNT — and another truckload…600,556 troy ounces…departed HSBC USA.  The remaining 291,002 troy ounces left the Delaware depository.  The link to all this activity is here.

Over at the COMEX-approved gold kilobar depositories in Hong Kong on their Friday, the folks over at the Brink’s, Inc. depository opened their doors long enough to ship out 87 of them, before resuming their Golden Week holiday.  I won’t bother linking this amount, either.


Here are the usual two charts that Nick Laird passes around every weekend.  They show the amount of gold and silver in all know gold and silver depositories, ETFs and mutual funds, as of the close of business on Friday.  For the week that was, there was 430,000 troy ounces of gold added on a net basis — and that number in silver was 5,120,000 troy ounces.  Click to enlarge for both.

I have an average number of stories for you today.


CRITICAL READS

Dollar Shortage Returns as Repo Usage Rises to Highest in a Week

One workday after the New York Fed took down only $38.55BN in collateral in its latest overnight repo operation, the funding market appears to again be getting tighter, and as the term repos are set to mature in the coming days, on Monday morning the New York Fed announced that it had accepted $47.05BN in collateral in its latest repo op, consisting of $36BN in TSYs and $11.05BN in MBS.

And even though quarter end is long behind us – and traders are starting to worry about the upcoming year end, which back in 2018 caused a mini explosion in repo rates – this was the third consecutive increase in repo op usage, the highest in a week and the second highest since the start of the month.  Click to enlarge.

Of course, on Friday the Fed itself hinted that the funding shortage persists when it announced that not only will it continue $75 billion overnight repo operations until at least November 4, effectively making the “temporary” repo operation into a permanent funding fixture, but also announced 8 term repo operations starting tomorrow and continuing through Oct 29, sized between $35BN and $45BN.

In short: don’t expect any normalization in the funding market at least until such time as the Fed announced POMO/QE4 at which point the question will be just how much does the Fed’s balance sheet have to expand by.

This news item put in an appearance on the Zero Hedge website at 8:53 a.m. on Monday morning EDT — and it’s the first offering of the day from Brad Robertson.  Another link to it is hereGregory Mannarino‘s post market close rant headlined “It’s a Lock… Dollar “Intervention” is Coming“.


Student, Car Loans Surge Most in Three Years

While the total increase in U.S. consumer credit in August was hardly a major outlier, rising by $17.9BN, below last month’s $23.05BN if above expectations for a $15.25BN print, and pushing the total number to a new record high of $4.14 trillion, the components of the overall number were surprising.  Click to enlarge.

The first surprise was the revolving, or credit card, debt, which after surging by almost $10BN in July, the biggest one month increase since 2017, shrank by $1.9BN in August as consumers paid down their credit cards. This was the biggest monthly drop since March, and only the 8th monthly drop in this series in the past 7 years.

Yet offsetting the drop in credit card debt was the surge in non-revolving debt, i.e. student and auto loans, which soared by $19.8BN. This was not only far above the consensus print, but it was the biggest monthly surge since August 2016, as consumers appeared to splurge in either colleges – unlikely in August – or cars, which is far more likely.

Finally, putting these numbers in context, there were $1.606 trillion in student loans as of June 30, with $1.2 trillion due under auto loans.

And while we don’t expect any of these numbers go down at any point in the future thanks to record low interest rates which incentivize U.S. consumers to take out even more debt, the bigger question is why was America’s chronically strong consumer so aggressive in paying down credit card debt in August, and is this an indication that this biggest force in the U.S economy, which accounts for 70% of GDP, is starting to tap out.

This article appeared on the Zero Hedge website at 3:20 p.m. on Monday afternoon EDT — and I thank Brad Robertson for sending it our way.  Another link to it is here.


Following the Greater Depression on eBay — Jeff Thomas

Although careful research into an economy can result in a relatively accurate prognostication, the timing is always the most difficult aspect to pinpoint.

However, a good indicator is to track how others within the economy are surviving the situation. This tells us much more than their questionable claims that they’re doing just fine.

One very telling way to do this is to follow their extravagances. In prosperous times, they’re likely to buy expensive toys. Then, as they increasingly feel the pinch, they’ll sell off those toys first, before resorting to selling their more essential possessions. For example, someone will sell off his beloved sports car before he sells the more essential family SUV. Or he’ll get rid of the vacation house before he puts his primary home on the market.

Therefore, an early warning that a people are facing financial difficulty is that they begin to offer such big toys for sale in order to continue to pay the bills. And an early warning that an entire economy is in trouble is when tens of thousands of people engage in such a sell-off. This is particularly true for those who bought their big toys with a bank loan.

Yachts are the first toy that most people will sell, since it’s pure luxury and a liability. A yacht has been defined as “a hole in the ocean that you shovel money into.” Quite so. They’re costly to maintain. And, of course, that’s why it’s prestigious to own one. Many people buy them to impress others, even if they can’t really afford them.

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


What’s Holding the Market Up? — Charles Hugh Smith

This 34:35 minute audio interview doesn’t really contain anything that you don’t already know.  But, having said that, the charts and graphs presented cast in stone a lot of the things you’ve read about over the last several years.

The interview, with host Gordon Long, runs for 34:35 minutes — and was posted on the marketsanity.com Internet site last Thursday.  I thank Judy Sturgis for pointing it out — and another link to it is here.


In the Next Crisis, Both Warren and Trump Will Push Towards More Inflation

We saw last week that we are doomed. So, we continue our jolly inspection of what doom will look like.

In short, we are in an Inflate-or-Die trap. No one wants to face the music and admit that the economy has been phonied up with fake money, unpayable debt, and falsified prices. Nobody wants to go through the pain and humiliation of rehab.

So what’s the alternative? Inflation – more debt, more phony prices, and more fake money.

For the last 30 years, the Federal Reserve added money via underpriced short-term loans. Speculators, banks, and insiders took the money and used it to run up stock and bond prices.

The rich got much richer; the poor stayed poor. Almost no one complained, because they were told that the “wealth effect” was making us all better off.

Donald Trump even believes that the stock market is the measure of his success.

What is really at work, though, is the old fashioned “debt effect.” Businesses, consumers, and the government go further and further into debt, borrowing at ultra-low rates from the future in order to live high on the hog in the present.

But there are limits. Time, for example. You can’t stretch it. You can’t fake it. You can’t counterfeit it.

This longish, but worthwhile commentary from Bill appeared on the bonnerandpartners.com Internet site early on Monday morning EDT — and another link to it is here.


HSBC plans to cut 10,000 more jobs worldwide, says report

HSBC plans to lay off up to 10,000 staff as it embarks on a fresh cost-cutting drive just months after ousting its chief executive.

The cuts would mostly affect high-paid roles and shrink the global workforce by 4%, the Financial Times reported. It comes as the U.K.-based bank grapples with falling interest rates, Brexit and global tariff wars. HSBC declined to comment.

The job losses would come on top of 4,700 redundancies – mostly senior jobs – announced in early August, when HSBC similarly warned about a challenging global environment linked to U.S. interest rate cuts, Britain’s E.U. divorce, the U.S.-China trade war, and unrest in Hong Kong.

The staff cuts would mark the first major shake-up under the interim boss, Noel Quinn, who took over after the surprise departure of the chief executive, John Flint, in August. Flint is believed to have left HSBC amid tensions with its new chairman, Mark Tucker, after failing to take swift action on tough decisions at the lender. HSBC said its strategy had not changed and insisted Flint left by “mutual” agreement.

Regarding the latest planned wave of cuts, the FT quoted an unnamed source as saying: “We’ve known for years that we need to do something about our cost base, the largest component of which is people – now we are finally grasping the nettle.”

The cuts could disproportionately hit HSBC’s European operations, where returns have lagged behind its Asian division. It was the only region to record a loss, totalling £520m, in the first half of the year.

This news item put in an appearance on theguardian.com Internet site at 2:42 p.m. BST on their Monday afternoon, which was 7:42 a.m. in New York — EDT plus 5 hours.  I thank Swedish reader Patrik Ekdahl for pointing it out — and another link to it is here.


U.K. settles Iranian bank’s damages claim via 3rd country to sidestep U.S. sanctions – reports

The United Kingdom has reportedly used a third country to bypass U.S. sanctions in settling a $1.6-billion damages claim with Iran’s Bank Mellat.

Iran’s largest private bank, in which the Iranian government owns a 20 percent stake, sued the U.K. government over sanctions it imposed back in 2009. The bank had originally sought $3.9 billion in damages, but the sum was reportedly later decreased to $1.6 billion with interest. Media reports state that the payment was conducted late this week using a third country, as the parties wanted to avoid U.S. sanctions. The third country in question was not specified.

Iran’s Ambassador to London Hamid Baeidinejad confirmed that the U.K. government made the long-awaited payment to Tehran, but did not specify how the procedure was carried out. He also described the settlement as an important legal success for his country.

The British government’s compensation has been paid to the Bank of Mellat. [This] is a major legal success for Iran,” Baeidinejad tweeted.

The U.K. sanctions from 2009 were part of a series of measures taken by Western nations against Iran after Tehran was accused of having plans to build an atomic weapon. However, the Islamic Republic insisted that it was pursuing only a civil nuclear program.

These sanctions largely prevented Bank Mellat from doing business with the U.K. financial sector, and “substantially damaged the bank’s reputation,” as well as leading to the loss of profits and customers. In 2013, the U.K. Supreme Court ruled that sanctions imposed on the bank were unlawful, and that the government’s move had been “irrational” and “disproportionate.

This article showed up on the rt.com Internet site at 11:41 a.m. Moscow time on their Sunday morning, which was 4:41 a.m. in Washington — EDT plus 7 hours.  I thank George Whyte for pointing it out  — and another link to it is here.


Erdogan’s Syria Invasion Begins: Turkish Jets Filmed Bombing Kurdish Targets

Erdogan’s promised Turkish military operation in northeast Syria has begun, as confirmed by regional media and video footage. On Monday night Turkish fighter jets commenced bombing the Semelka Border Crossing in far northeast Syria on the border with Iraq.

Both Hezbollah-affiliated al-Mayadeen television channel and Israeli media are also reporting Turkish jets have attacked Kurdish targets in northern Syria.

This as the U.S. claimed to have effectively shut down Northern Syria airspace to Turkey, and while Russian jets have reportedly been observed patrolling southern Syria, presumably to ensure the Turkish incursion comes nowhere near Syrian Army positions. The Semelka crossing since 2016 acted as a key SDF supply point between Kurdistan Regional Government in Iraq and the Kurdish-led Autonomous Administration of North and East Syria.

Turkey’s Anadolu Agency also reports Turkish officers have been expelled from the Joint Air Operations Center which was the heart of coordinated anti-ISIL activities among the allies, meaning U.S. surveillance and reconnaissance data are no longer shared with Ankara. In northeast Syria a rapid U.S. withdrawal from border observation posts at Tel Abyad and Ras al Ain has reportedly already occurred, paving the way for the imminent Turkish incursion.

Citing Pentagon spokeswoman Carla Gleason, Anadolu noted, however:

She stopped short of saying that the air space has been shut down to Turkey, but noted “if you’re not on the air tasking order, it’s really hard to coordinate flights in that area.”

We might note that when it comes to the Kurds, Erdogan has never suffered qualms about having to “coordinate” his actions with allies.

It appears Trump’s dire Twitter warning to “obliterate” Ankara’s economy, directed both at the Turks and at U.S. hawks who accuse the president throwing Kurdish partner forces to the wolves, was ineffective, given by all indicators a Turkish aerial campaign has commenced.

This news story showed up on the Zero Hedge website at 4:45 p.m. on Monday evening EDT — and I thank Brad Robertson for this one as well.  Another link to it is here.  In a related story, this rt.com item is headlined “Trump threatens to OBLITERATE Turkey’s economy if it does ‘anything off limits’” — and I thank Larry Galearis for that one. Plus this ZH story from 8:45 p.m. EDT last night…”10,000 ISIS Unleashed: Syrian Kurds Warn of Mass Prison Break If Turkey Invades


China increases gold reserves by 5.91 tonnes in September

For the tenth consecutive month the People’s bank of China (PBoC) has increased its gold reserves, once again establishing itself as a dominant force in the gold market.

The latest data from the Chinese central bank, released over the weekend, shows that it bought 5.9 tonnes of gold in September. In total, the PBoC now holds 1,770 tonnes of gold.

Meanwhile, the value of PBoC reserves in September totaled $3.1 trillion.

Looking ahead, although the gold market has seen unprecedented demand from China, analysts don’t expect that this trend will end anytime soon.

Given that China’s gold holdings, as a proportion of its currency reserves, are still very low by Western standards, the PBoC is likely to continue to buy gold in the future,” said analysts at Commerzbank in a note Monday.

The World Gold Council noted in its second quarter gold report that central banks bought 374.1 tonnes of gold in the first half of the year,  the largest increase in global gold reserves in the council’s 19-year history.

Of course, as I keep pointing out, China’s reserves are far in excess of that, but these dribs and drabs they’re reporting every month is just the amount of gold that they wish the public to know about.  This gold-related news item was posted on the kitco.com Internet site at 10:05 a.m. EDT on Monday morning — and it comes to us courtesy of George Whyte.  Another link to it is here.  The Bloomberg spin on this is headlined “China’s Gold-Buying Spree Tops 100 Tons During Trade War” — and I found that in a GATA dispatch.


The PHOTOS and the FUNNIES

After frittering away a large part of Saturday exploring Deadman River valley and Jupiter Beach Provincial Park, it was already late afternoon on June 29…so it was pretty much “pedal to the metal” all the way to Lillooet from there.  The drive west down B.C. Highway 99 is pretty — and scenic…but not all that photogenic, if that makes any sense.  But once out of the low mountain pass, the highway makes a sharp turn to the south — and the scenery during the rest of the drive is on an epic scale…some photos of which have already appeared here.  Here are three photos taken from the highway — and all within half a kilometer of each other, as the Fraser River…buried in its canyon — and out of sight most of the time, becomes visible here for a brief period.  The highway — and the CN Rail track bed are also visible.  The last photo is of Lillooet at sunset as we descended into the town about 30 kilometers further down the road.  Click to enlarge.


The WRAP

With gold volume pretty light in gold — and vanishingly small in silver, I’m not prepared to read too much into Monday’s price action, except to note that there certainly was some sporadic selling pressure evident.  However, except for the down-drafts a minute after the COMEX close, there wasn’t much effort put into it.

The Big 7 traders that are short up the wazoo in the COMEX futures market in both silver and gold didn’t make any progress at all during the past week and, according to Ted in his weekly review on Saturday…”their total open losses actually increased by $100 million to $3.7 billion at Friday’s close.”

It is, as always, the resolution of  these short positions by these traders that will determine where precious metal prices go from here.  Can they cover most of all their losses by engineering new low prices…or will they be forced to cover and book enormous loses…driving prices sky high in the process?  And as Ted correctly points out…this is all that matters at the moment.

So we wait some more.

The 6-month charts for all four precious metals, plus copper and WTIC are below — and I’ll point out here that those waterfall price declines that occurred moments after the COMEX close, do NOT appear on the Monday dojis on the charts below.  All six of these charts end their respective trading days at the COMEX close — and any after-hours price shenanigans don’t show up in their dojis until the following day.

In gold and silver, it should be noted that both were closed back below their respective 50-day moving averages on Monday — and as you already know, more price damage was done after the COMEX close.  Both copper and WTIC have been ticking a bit higher over the last few days.  Click to enlarge.

And as I type this paragraph, the London open is less than a minute away — and I see that there’s been a bit of a tug-of-war going in gold and silver in the mostly thinly-traded markets in the Far East on their Tuesday morning. Gold is down $3.10 the ounce — and silver is down 3 cents as London opens. Platinum and palladium have been chopping very unevenly sideways in Far East trading…but with positive price biases in both. Platinum is up 3…but palladium go slammed a few minutes before the Zurich open — and it’s down 7 dollars. It was up 4 bucks just before the smack-down.

Net HFT gold volume is coming up on 49,500 contracts — and there’s an irrelevant 233 contracts worth of roll-over/switch volume on top of that. Net HFT silver volume is just a bit under 16,000 contracts already — and there’s a minuscule 159 contracts worth of roll-over/switch volume in this precious metal.

The dollar index opened up 1 basis point at 98.98 once trading commenced at 7:45 p.m. EDT in New York on Monday evening, which was 7:45 a.m. China Standard Time on their Tuesday morning. Its current high tick came around 8:55 a.m. CST — and it has been creeping unevenly lower since — and as of 7:45 a.m. BST in London/8:45 a.m. CEST in Zurich, the index is down 4 basis points.


Today, at the close of COMEX trading, is the cut-off for this Friday’s Commitment of Traders Report — and regardless of what the dojis show…unless it’s a monster move, up or down…I shan’t be sticking my neck out this week as to what it might show after the huge and embarrassing miss on silver last week.


And as I post today’s missive on the website at 4:02 a.m. EDT, I note that the gold price has shot higher in price in the last hour — and is currently up $2.20 — and silver is now up 4 cents as the first hour of trading in London ends. Platinum is up 4 dollars — and palladium has been under unsteady selling pressure ever since it got smacked lower just before the Zurich open. It’s now down 10 bucks as the first hour of Zurich trading draws to a close.

Gross gold volume is around 61,500 contracts — and minus the tiny amount of roll-over/switch volume there is, net HFT gold volume is 61,000 contracts. Net HFT silver volume is coming up on 18,500 contracts — and there’s a tiny 176 contracts worth of roll-over/switch volume on top of that.

The dollar index hasn’t been doing much of anything — and as of 8:45 a.m. in London/9:45 a.m. in Zurich, the index is down 4 basis points.

That’s all I have for today, which is more than enough — and I’ll see you here tomorrow.

Ed

The Precious Metal Equities Have a Good Day

05 October 2019 — Saturday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price crawled quietly higher until around noon China Standard Time on their Friday — and then didn’t do much of anything until the jobs report hit the street at 8:30 a.m. in New York.  It was sold down about ten bucks or so over the next thirty minutes — and back below $1,500 spot by a bit, but turned on a dime at precisely 9:00 a.m. EDT.  It edged unevenly higher until about fifteen minutes after the 11 a.m. EDT London close — and then chopped quietly and unevenly sideways, with a slightly negative bias until trading ended at 5:00 p.m.

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

The gold price was closed at $1,504.00 spot, down 80 cents on the day.  Net volume was very heavy at a bit over 326,500 contracts — and there was a bit under 18,500 contracts worth of roll-over/switch volume on top of that.

The price pattern in silver was virtually the same as it was for gold, although the sell-off at 8:30 a.m. on the jobs number was a bit more severe than it was for gold.  But it bounced back — and was in the green by about a nickel by the 1:30 p.m. EDT COMEX close in New York.  However, that tiny gain was taken away in the very thinly-traded after-hours market.

The high and low ticks in silver were reported by the CME Group as $17.745 and $17.33 in the December contract.

Silver was closed at $17.51 spot, down 1 cent from Thursday.  Net volume was pretty quiet, all things considered, at about 58,500 contracts — and there was only 1,590 contracts worth of roll-over/switch volume in this precious metal.

The platinum was price was stair-stepped quietly and unevenly lower starting shortly after 10 p.m. China Standard Time on their Friday morning.  It was then sold down hard starting at 2 p.m. CEST in Zurich/8 a.m. in New York.  Its low also came at 9 a.m. EDT and, like silver, crawled higher until the COMEX close.  It was sold a few dollars lower over the next thirty minutes, before trading sideways until trading ended at 5:00 p.m. EDT.

The palladium price mostly wandered around the unchanged mark until a vicious down/up spike occurred at noon in Zurich trading.  It then traded pretty flat until 9 a.m. EDT — and its subsequent rally was capped and turned lower around 11:35 a.m. in New York.  It was sold lower until 12:30 p.m. EDT — and didn’t do much of anything after that.  Palladium was closed at $1,647 spot, up 10 dollars from Thursday.

The dollar index closed very late on Thursday afternoon in New York at 98.86 — and then opened up 1 basis point 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 then spent the entire Friday session chopping around fifteen basis points either side of unchanged — and closed at 98.81…down 5 basis points on the day.  The 98.74 low tick was set around 12:35 p.m. BST in London — and the 98.996 high tick came at 8:35 a.m. in New York.  Nothing much to see here.

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

And here’s the 5-year U.S. dollar index chart, courtesy of the folks over at the stockcharts.com Internet site.  The delta between its close…98.49…and the close on the DXY chart above, was 32 basis points on Friday.  Click to enlarge as well.

The gold shares opened down a bit, but began to head quietly and unevenly higher at, or very soon after, the 10 a.m. EDT afternoon gold fix in London.  That price pattern more or less continued right into the 4:00 p.m. close of trading in New York.  The HUI closed up 2.07 percent.

The silver equities followed a similar price path, except their sell-off at the 9:30 a.m. open in New York was a bit more noticeable.  However, the rally that followed was  much more brisk — and Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed on its high of the day…up 2.49 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.

Two of our three laggards in the Silver 7 Index turned out to be the big movers of the day, as Buenaventura closed up 3.04 percent.  But Peñoles was the star, closing up 6.70 percent.  The other laggard, Hecla, was up 1.59 percent.


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 licking that ‘da boyz’ laid on platinum, there isn’t much to see, as pretty much everything netted out at about unchanged.  However, considering the way the week started, it could have ended up far worse.  Click to enlarge.

There’s no month-to-date chart this week, because of the way Nick’s chart program works, the four day of October have been included in all of September’s data, which is obviously useless.  This chart will be back to normal in next Saturday’s column.

Here’s the year-to-date chart — and it’s still all green by very decent amounts — and except for palladium it, for obvious reasons, hasn’t changed month from this time last week. The gold shares are still outperforming the silver equities.  That, as you already know is all thanks to JPMorgan, along with the already mentioned dismal year-to-date performances of Buenaventura, Peñoles and Hecla.  However, all three have been showing signs of life lately, so there is hope.  Click to enlarge.

The usual ‘wash, rinse, spin’ cycle got interrupted.  We’re back above the 50-day moving averages in both gold and silver — and it remains to be seen where we go from here.  Are we done to the downside, or are there more engineered lower prices in our futures?  We’ll find out in due course…however all the signs out there point to big goings-on under the surface just out of sight.


The CME Daily Delivery Report for Day 6 of October deliveries showed that 44 gold and 24 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.

In gold, the two short/issuers were Advantage and Goldman Sachs, with 42 and 2 contracts…the former was out of their client account — and Goldman’s 2 contracts were issued from their in-house/proprietary trading account.  There were five long/stoppers in total.  The three biggest were JPMorgan, Advantage and Australia’s Macquarie Futures, with 20, 13 and 7 contracts.  Macquarie stopped their 7 contracts in their own account…the rest were stopped in JPMorgan’s and Advantage’s respective client accounts.

In silver, the two short/issuers were Advantage and Dutch bank ABN Amro with 13 and 11 contracts.  The three long/stoppers were JPMorgan, Advantage and  ABN Amro, picking up 17, 4 and 3 contracts.  All contracts, both issued and stopped, involved their respective client accounts.

So far in October, there have been an eye-watering 10,390 gold contracts issued/reissued and stopped — and that number in silver is 914.

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 October declined by 955 contracts, leaving 395 contracts still around, minus the 44 contracts mentioned a few paragraphs ago.  Thursday’s Daily Delivery Report showed that 1,115 contracts were actually posted for delivery on Monday, so that means that 1,115-955=160 more gold contracts were just added to the October delivery month.  Silver o.i. in October dropped by 85 contracts leaving 365 still open, minus the 24 mentioned a few paragraphs ago.  Thursday’s Daily Delivery Report showed that 108 silver contracts were actually posted for delivery on Monday, so that means that 108-85=23 more gold contract were added to October.


There were no reported changes in either GLD or SLV on Friday.

In other gold and silver ETFs and mutual funds on Planet Earth on Friday…minus GLD, SLV and COMEX warehouse stocks…there was a net 138,817 troy ounces of gold added — and in silver, that number was 635,835 troy ounces. These are big numbers.

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

Month-to-date…the last four business days…the mint has sold 2,500 troy ounces of gold eagles — 280,000 silver eagles — and 42,200 of those ‘America the Beautiful’ 5-ounce silver coins.

There was some movement in gold over at the COMEX-approved depositories on the U.S. east coast on Thursday.  JPMorgan received 57,517 troy ounces.  The only ‘out’ activity was 32.151 troy ounces…one kilobar [SGE kilobar weight]…that departed Brink’s, Inc.  The link to that is here.

It was very busy in silver, as 1,672,358 troy ounces was received — and 784,428 troy ounces was shipped out.  In the ‘in’ category, there was 1,073,165 troy ounces dropped off at CNT — and the remaining truckload….599,193 troy ounces…found a home over at Brink’s, Inc.  There were five depositories involved in the ‘out’ category — and the three largest were…CNT, with one truckload…628,224 troy ounces.  Next came Canada’s Scotiabank and Brink’s, Inc…with 75,200 and 60,083 troy ounces respectively.  If you wish to see all this, plus more, the link is here.

Despite the ongoing Golden Week, there was a bit of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday.  They reported receiving 25 of them — and shipped out 50.  This activity was at Brink’s, Inc. — and I won’t bother linking this.

Maximilian I., Archduke of Austria, 1590-1618, Ducat

Origin: Roman German Empire   Mint: Hall in Tyrol   Material: Gold   Weight: 3.5 grams   Value: €980/US$1,080


The Commitment of Traders Report, for positions held at the close of COMEX trading on Tuesday, October 1 showed a disappointingly small reduction in the commercial net short position in silver, but a very hefty one in gold.

In silver, the Commercial net short position fell by a tiny 1,998 contracts, or 10 million troy ounces, which is barely a rounding error in the grand scheme of things.

They arrived at that number by selling 850 long contracts, but reduced their short position by 2,848 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, it was all Managed Money traders, plus more, as they reduced their long position by 3,553 contracts — and also added 1,178 short contracts.  It’s the sum of those two numbers…4,731 contracts…that represents their change for the reporting week.

As it must be, the difference between that number — and the Commercial net short position…4,731 minus 1,998 equals 2,733 contracts…was made up by the traders in the other two categories.  The ‘Other Reportables’ increased their net long position by 3,817 contracts — and the ‘Nonreportable’/small traders went in the other direction, decreasing their net long position by 1,084 contracts.  The difference between those two numbers is the aforesaid mentioned 2,733 contracts.

With the new Bank Participation Report in hand, Ted estimated that JPMorgan’s short position is around the 22,000 contract mark…basically unchanged from the 22-23,000 contracts that he estimated their short position to be in last week’s COT Report.

The Commercial net short position in silver is down to 368.9 troy ounces, little changed from the prior week’s report.

Here’s the 3-year COT chart for silver, courtesy of Nick Laird — and updated with yesterday’s data.  Click to enlarge.

So, despite the fact that silver’s 50-day moving average was broken to the downside with some authority during the reporting week, the technically oriented Managed Money traders basically stood their ground and didn’t sell much of anything — and therefore, the commercial traders weren’t able to cover very much of their short position.

So why was that, you ask?

As you can imagine, Ted and I had quite a discussion about that on the phone yesterday afternoon — and I’ll be more than interested in what he has to say in his weekly review later this afternoon.

I put forward the idea/theory that maybe the brain-dead moving average-following Managed Money traders did sell in droves…following their usual Pavlovian response to such moving average penetrations.  But that selling was masked by equally ferocious buying by the non-technical value investing Managed Money traders — and that their buying masked the true amount the former was selling.  If that was the case — and remember it’s only a theory, then the rather bearish COT Report that we’re looking at, may not be as bearish as it seems.

So it’s impossible to know if we’re done to the downside or not — and that will only sort itself out in the fullness of time — and not too much time, I hope.


In gold, the commercial net short position dropped by a far more substantial amount…41,457 contracts, or 4.15 million troy ounces of paper gold.

They arrived at that number by selling 535 long contracts, but also reduced their short position by a hefty 41,992 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, it was all Managed Money traders, plus more, as they decreased their long position by 45,518 contracts — and they also added 1,542 short contracts.  [Ted was surprised that they didn’t add more short contracts than they did.] It’s the sum of those two numbers…47,060 contracts…that represents their change for the reporting week.

The difference between that number — and the commercial net short position…47,060 minus 41,457 equals 5,603 contracts…was made up, as it always must be, by the traders in the ‘Other Reportables’ and ‘Nonreportable’/small trader categories.  Both increased their net long position during the reporting week…the former by 3,609 contracts — and the latter by 1,994 contracts.  The sum of those two numbers is 5,603 contracts.

Ted figures that JPMorgan reduced their short position in gold by around 10,000 contracts during the reporting week, leaving them with a short position of about 45,000 COMEX contracts.  There’s more about this in the Bank Participation Report data below.

The commercial net short position in gold is down to 30.36 million troy ounces.

Here’s Nick’s 3-year COT chart for gold, updated with yesterday’s data — and the improvement should be noted.  Click to enlarge.

Despite the improvement during the reporting week, gold is still very much in the bearish camp — and the only way to fix that situation is for the Big 8 traders to continue to engineer the gold price lower.  But whether that event is in our future, remains to be seen.  However, if/when does occur, then you’ll know the reason why.

And as Ted keeps pointing out, correctly I might add, the the COT Report is the only bearish feature of an otherwise wildly bullish environment for precious metal prices.  However, there is nothing in the above report that hints [at least on the surface] that JPMorgan et al. have loosened their iron grip in the slightest.


In the other metals, the Manged Money traders in palladium increased their net long position by a further 308 COMEX contracts.  And as you already know, it only take a small handful of contracts to move this market in a major way. The Managed Money traders are now net long the palladium market by 13,909 contracts…59 percent of the total open interest.  Total open interest in palladium is now up to 23,6242 COMEX contracts.  In platinum, the Managed Money traders dumped longs and went short as ‘da boyz’ rigged prices lower during the reporting week. They decreased their net long position by a very hefty 7,466 contracts. The Managed Money traders are now net long the platinum market by ‘only’ 17,610 COMEX contracts…a bit under 21 percent of the total open interest.  In copper, the Managed Money traders increased their net short position in that metal by a further 10,226 COMEX contracts during the reporting week — and are net short the COMEX futures market by 62,812 contracts, or 1.57 billion pounds of the stuff. That’s almost 26 percent of total open interest…a huge 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 144 days of world silver production, which is up 6 days from last week’s report — and the ‘5 through 8’ large traders are short an additional 64 days of world silver production, down 2 days from last week’s report — for a total of 208 days that the Big 8 are short, which is a hair under seven months of world silver production, or about 485 million troy ounces of paper silver held short by the Big 8. [In the prior week’s COT Report, the Big 8 were short 204 days of world silver production.]

In the COT Report above, the Commercial net short position in silver was reported as 368 million troy ounces.  As mentioned in the previous paragraph, the short position of the Big 8 traders is 485 million troy ounces.  The short position of the Big 8 traders is larger than the total Commercial net short position by around 485-368=117 million troy ounces.

The reason for the difference in those numbers…as it always is…is that Ted’s raptors, the 31-odd small commercial traders other than the Big 8, are net long that amount…which is preposterous beyond belief.

As I mentioned in my COT commentary in silver above, Ted figures that JPMorgan is short around 22,000 COMEX silver contracts…virtually unchanged from last week’s COT Report.

22,000 COMEX contracts…is 110 million troy ounces of paper silver, which works out to around 47 days of world silver production the JPMorgan is short, down 1 day from last week’s COT Report.

JPMorgan is still the biggest silver short on the COMEX futures market by a decent amount.  Citigroup is in second place — and not all that far behind.

The Big 4 traders in silver are short, on average, about…144 divided by 4 equals…36 days of world silver production each.  The four traders in the ‘5 through 8’ category are short around 64 days of world silver production in total, which is 16 days of world silver production each, on average.

The Big 8 commercial traders are short 44.2 percent of the entire open interest in silver in the COMEX futures market, which is a bit of a decrease from the 45.9 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 50 percent mark.  In gold, it’s now 43.3 percent of the total COMEX open interest that the Big 8 are short, up a hair from the 42.7 percent they were short in last week’s report — and also approaching 50 percent, once the market-neutral spread trades are subtracted out.

In gold, the Big 4 are short 58 days of world gold production, down 7 days from what they were short in last week’s COT Report.  The ‘5 through 8’ are short another 31 days of world production, down 3 days from what they were short last week…for a total of 89 days of world gold production held short by the Big 8…down 10 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 1 percent 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 69, 66 and 78 percent respectively of the short positions held by the Big 8.  Silver is up about 1 percent from a week ago…platinum is down 3 percent from last week — and palladium is unchanged from a week ago.  What these number show are the percentage differences between what the red bars and green bars show on the ‘Days to Cover‘ chart above.


The October Bank Participation Report [BPR] data is extracted directly from yesterday’s Commitment of Traders Report.  It shows the number of futures contracts, both long and short, that are held by all the U.S. and non-U.S. banks as of Tuesday’s cut-off in all COMEX-traded products.  For this one day a month we get to see what the world’s banks are up to in the precious metals —and they’re usually up to quite a bit.

[The October Bank Participation Report covers the time period from September 3 to October 1 inclusive.]

In gold, 4 U.S. banks are net short 94,438 COMEX contracts in the October’s BPR.  In September’s Bank Participation Report [BPR] 5 U.S. banks were net short 105,713 contracts, so there was a decrease of 11,275 COMEX contracts from a month ago.

JPMorgan, Citigroup and HSBC USA would hold the lion’s share of this short position.  But as to who other U.S. bank might be that is short in this BPR, I haven’t a clue, but it’s a given that their short position would not be material.  Ted mentioned on the phone yesterday that JPMorgan is short around 45,000 contracts of the total net short position held by these 4 U.S. banks as of Tuesday’s COT Report.  That’s just about 50 percent.

Also in gold, 28 non-U.S. banks are net short 96,587 COMEX gold contracts.  In the September’s BPR, 30 non-U.S. banks were net short 114,958 COMEX contracts…so the month-over-month change shows a reduction of 18,371 contracts.

At the low back in the August 2018 BPR…these same non-U.S. banks held a net short position in gold of only 1,960 contacts!

However, as I always say at this point, I suspect that there’s at least two large non-U.S. bank in this group, one of which would include Scotiabank.  It’s certainly possible that it could be the BIS in the No. 1 spot.  But regardless of who this second non-U.S. bank is, the short positions in gold held by the remaining 26 non-U.S. banks are immaterial.

As of this Bank Participation Report, 32 banks [both U.S. and foreign] are net short 31.5 percent of the entire open interest in gold in the COMEX futures market, which is down a bit from the 34.8 percent they were short in the September BPR.

Here’s Nick’s BPR chart for gold going back to 2000.  Charts #4 and #5 are the key ones here.  Note the blow-out in the short positions of the non-U.S. banks [the blue bars in chart #4] when Scotiabank’s COMEX short position was outed by the CFTC in October of 2012.  Click to enlarge.

In silver, 4 U.S. banks are net short 34,176 COMEX contracts in October’s BPR.  In September’s BPR, the net short position of 5 U.S. banks was 37,706 contracts, so the short position of the U.S. banks is down 3,530 contracts month-over-month — and most assuredly that decrease comes courtesy of JPMorgan.  Ted says of that JPMorgan is short about 22,000 contracts of that amount. Citigroup and HSBC USA would hold 99 percent of the rest.

As in gold, the three biggest short holders in silver of the four U.S. banks in total, would be JPMorgan, Citigroup and HSBC USA.  Whoever the remaining U.S. bank may be, their short position, like the short position of the smallest U.S. bank in gold, would be immaterial in the grand scheme of things.

Also in silver, 24 non-U.S. banks are net short 40,719 COMEX contracts in the October BPR…which is down from the 41,540 contracts that 23 non-U.S. banks were short in the September BPR.  I would suspect that Canada’s Scotiabank [and maybe one other, the BIS perhaps] holds a goodly chunk of the short position of these non-U.S. banks.  I believe that a number of the remaining 22 non-U.S. banks may actually net long the COMEX futures market in silver.  But even if they aren’t, the remaining short positions divided up between these other 22 non-U.S. banks are immaterial — and have always been so.  This is a JPMorgan-run operation…end of story.

As of October’s Bank Participation Report, 28 banks [both U.S. and foreign] are net short 35.3 percent of the entire open interest in the COMEX futures market in silver—virtually unchanged from the 35.1 percent that they were net short in the September BPR.  And much, much more than the lion’s share of that is held by JPMorgan, Citigroup, HSBC USA, Scotiabank — and maybe one other non-U.S. bank, which I suspect may be the BIS.

Here’s the BPR chart for silver.  Note in Chart #4 the blow-out in the non-U.S. bank short position [blue bars] in October of 2012 when Scotiabank was brought in from the cold.  Also note August 2008 when JPMorgan took over the silver short position of Bear Stearns—the red bars.  It’s very noticeable in Chart #4—and really stands out like the proverbial sore thumb it is in chart #5.  Click to enlarge.

In platinum, 5 U.S. banks are net short 19,056 COMEX contracts in the October Bank Participation Report.  In the September BPR, these same banks were net short 20,670 COMEX contracts…so there’s been slight decrease month-over-month…1,614 contracts worth.

[At the ‘low’ back in July of 2018, these same five U.S. banks were actually net long the platinum market by 2,573 contracts. That’s quite a change for the worse since then.]

Also in platinum, 20 non-U.S. banks are net short 18,701 COMEX contracts in the October BPR, which is up a bit from the 16,647 COMEX contracts that 19 non-U.S. banks were net short in the September BPR.  [Note: Back at the July 2018 low, these same non-U.S. banks were net short only 1,192 COMEX contracts.]

And as of October’s Bank Participation Report, 25 banks [both U.S. and foreign] are net short a grotesque 44.3 percent of platinum’s total open interest in the COMEX futures market, which is up a bit from the 42.1 percent they were net short in September’s BPR.

Here’s the Bank Participation Report chart for platinumClick to enlarge.

In palladium, 4 U.S. banks are net short 6,631 COMEX contracts in the October BPR, which is virtually unchanged from the 6,682 contracts that these same 4 U.S. banks were net short in the September BPR.

Also in palladium, 13 non-U.S. banks are net short 2,477 COMEX contracts—which is up a decent amount from the 1,965 COMEX contracts that these same 13 non-U.S. banks were short in the September BPR.

But when you divide up the short positions of these non-U.S. banks more or less equally, they’re completely immaterial…especially when compared to the positions held by the 4 U.S. banks.

As of this Bank Participation Report, 17 banks [both U.S. and foreign] are net short 38.5 percent of the entire COMEX open interest in palladium…almost as grotesque a number as platinum.  In September’s BPR, the world’s banks were net short 42.1 percent of total open interest…a bit of a decrease from a month ago.

Here’s the palladium BPR chart.  And as I point out every month, you should note that the U.S. banks were almost nowhere to be seen in the COMEX futures market in this precious metal until the middle of 2007—and they became the predominant and controlling factor by the end of Q1 of 2013 — and are even more so today.  Click to enlarge.

JPMorgan et al. are facing some rather serious and long-term headwinds…not only in the currencies, but in foreign bank and ETF gold purchases.  These headwinds are becoming ever more pronounced with each passing week…including this week.

However, it’s obvious that JPMorgan is still the short seller of last resort — and sometimes first resort as well, in order to keep a lid on precious metal prices.

But, as always, they are in a position to stick it to the rest of the short holders in both silver and gold if they so choose — and whether they will they or they won’t, remains to be seen.

And whether the current rallies in both gold and silver that began early this past week, are the indication that prices are up, up and away from here…or just a respite from continuing engineered price declines, remains to be seen as well.

I have a very decent number of stories/articles for you today — and a lot of them are certainly worth your while if you have the time over the weekend.


CRITICAL READS

September Payrolls Miss: 136K Jobs Added as Wage Growth Crashes

It wasn’t quite as bad as the whisper number, which saw September payrolls dropping below 100K, but it wasn’t great either: moments ago the BLS reported that in September the US added 136K jobs, below the 145K expected, however the big story here was that the August number – as has become customary – was revised notably higher, from 130K to 168K, the mirror image of what happened at ADP, which scrambled to catch down to the original NFP print.  Click to enlarge.

The change in total non-farm payroll employment for July was revised up by 7,000 from +159,000 to +166,000, and the change for August was revised up by 38,000 from +130,000 to +168,000. With these revisions, employment gains in July and August combined were 45,000 more than previously reported.

Of note: the three-month average of private payroll gains dropped to 119,000, the smallest since 2012, which however still remains above the organic growth in the labor force. If only it also helped raise wages.

Commenting on the data, Bloomberg economist Eliza Wanger writes “the still healthy 136k-payroll gain and drop in unemployment rate to 3.5% underscores that the labor market remains solid. While the trend in labor demand has been deteriorating and risks are rising, conditions in the labor market are tight and layoffs are exceptionally low.”

As for CIBC’s Kartherine Judge, despite the poor data, the October rate cut has been pushed into December: “The U.S. labor market appears to still be on relatively healthy footing despite the downside miss on payrolls for September…Overall, these data are constructive enough to allow the Fed to skip October in our view, and cut in December.”

This Zero Hedge story appeared on their website at 8:36 a.m. EDT on Friday morning — and it’s the first offering of the day from Brad Robertson.  Another link to it is here.


September Class 8 Heavy Duty Truck Orders Collapse 71%

Preliminary Class 8 order data for September is starting to trickle in and, like the data preceding it so far this year – it’s ugly.

Class 8 orders were crushed 71% in September, reaching 12,600 units, according to Baird and Morgan Stanley.

This follows a 79% plunge in August.

This makes September the 11th consecutive month of YOY order declines and the 9th consecutive month of orders below 20,000.

Class 8 orders are often seen as a pulse on the U.S. economy. Morgan Stanley analyst Courtney Yakavonis wrote in a note that she expects YOY order declines to continue into the year’s end. But Baird analyst David Leiker said he was gaining “increased confidence” that a bottom in declines was likely near – but that’s a story we have heard from ACT Research analysts all year and orders just continue to collapse.

The number of available used trucks continues to rise, leading to lower prices in that sector. Volvo trucks and Mack trucks are both taking two down weeks at their Virginia and Pennsylvania factories this quarter.

Donald Broughton, principal and managing partner of research firm Broughton Capital, told FOX Business in September that in 1H19 nearly 640 trucking firms failed. That equates to 20,000 trucks have been pulled off the road.

In 2018, only 310 trucking companies failed, which points to an accelerating trend that could transform into a major bust cycle for the industry in 2020.

And we’ve routinely pointed out that freight is a leading indicator of where the economy could be headed. At least 70% of domestic goods are moved on heavy-duty trucks, so when freight companies are cutting their workforce – it’s typically the onset of an economic downturn.

This news item put in an appearance on the Zero Hedge website at 1:10 p.m. on Friday morning EDT — and I thank Brad Robertson for this one as well.  Another link to it is here.  Another excellent article on this subject is from the wolfstreet.com Internet site.  It’s headlined “Orders of Heavy Trucks Collapse, Layoffs Start“.


N.Y. Fed Announces Extension of Overnight Repos Until Nov 4, Will Offer 8 More Term Repos

Anyone who expected that the easing of the quarter-end funding squeeze in the repo market would mean the Fed would gradually fade its interventions in the repo market, was disappointed on Friday afternoon when the NY Fed announced it would extend the duration of overnight repo operations (with a total size of $75BN) for at least another month, while also offer no less than eight 2-week term repo operations until November 4, 2019, which confirms that the funding unlocked via term repo is no longer merely a part of the quarter-end arsenal but an integral part of the Fed’s overall “temporary” open market operations… which are starting to look quite permanent.

What this means is that until such time as the Fed launches Permanent Open Market Operations – either at the November or December FOMC meeting, which according to JPMorgan will be roughly $37BN per month, or approximately the same size as QE1.

The New York Fed will continue to inject liquidity via the now standard TOMOs: overnight and term repos. At that point, watch as the Fed’s balance sheet, which rose by $185BN in the past month, continues rising indefinitely as QE4 is quietly launched to no fanfare.  Click to enlarge.

And remember: whatever you do, don’t call it QE4!

This Zero Hedge article showed up on their Internet site at 2:01 p.m. EDT on Friday afternoon — and I thank Brad Robertson for sending it our way.  Another link to it is hereGregory Mannarino‘s post market close rant on Friday is entitled “Game Changer. QE SIX BEGINS! Perpetual” — and it’s worth your while.


There’s Nothing Normal About the Fed Pumping Hundreds of Billions Weekly to Unnamed Banks on Wall Street: “Somebody’s Got a Problem”

Yesterday, the House Financial Services Committee released its hearing schedule for October. There is not a peep about holding a hearing on the unprecedented hundreds of billions of dollars that the Federal Reserve Bank of New York is pumping into unnamed banks on Wall Street at a time when there is no public acknowledgement of any kind of financial crisis taking place.

Congressional committees should have been instantly on top of the Fed’s actions when they first started on September 17 because the Fed had gone completely rogue from 2007 to 2010 in funneling an unfathomable $29 trillion in revolving loans to Wall Street and global banks without authority or even awareness from Congress. The Fed also fought a multi-year court battle with the media in an effort to keep its giant money funnel a secret.

According to multiple sources we queried, the New York Fed has not made the names of these banks doing the borrowing available to either the Senate or House committees. And if there is push-back from the Committees, the public is not hearing about it. It was this exact kind of complacency and lack of leadership on the part of Congress in the early days of the financial crisis in 2007 that gave the Fed the guts to press a button and electronically create trillions of dollars to bail out the worst actors on Wall Street as they used large chunks of that money to reward themselves with tens of millions of dollars in bonuses and pay billions of dollars of the bailout money to lawyers to block their being prosecuted for fraud.

Journalists also failed to properly alert the public to the impending crisis – even when warning bells were loudly clanging.

There are only two ways to look at what is happening today. It starts with basic math. As of June 30 of this year, the four largest commercial banks held more than $5.45 trillion in deposits. The breakdown is as follows: JPMorgan Chase has $1.6 trillion; Bank of America clocks in at $1.44 trillion; Wells Fargo has $1.35 trillion; and Citibank is home to just over $1 trillion.

With $5.45 trillion in deposits, why isn’t there enough liquidity to make loans in the billions. Either the big banks are backing away because of something they see on the horizon or something very troubling has happened to their liquidity.

This longish, but very interesting article put in an appearance on the wallstsreetonparade.com Internet site sometime on Friday — and I found it posted on the gata.org Internet site.  Another link to it is here.


Market’s “$1.6 Trillion Time Bomb” Claims Another Victim as Arrowgrass Writes Down Illiquid Investment By 70%

First it was the shocking junk bond fiasco at Third Avenue which led to a premature end for the asset manager, then the three largest U.K. property funds suddenly froze over $12 billion in assets in the aftermath of the Brexit vote; two years later the Swiss multi-billion fund manager GAM blocked redemptions, followed by iconic U.K. investor Neil Woodford also suddenly gating investors despite representations of solid returns and liquid assets, and most recently the ill-named, Nataxis-owned H20 Asset Management decided to freeze redemptions.

By this point, a pattern had emerged, one which Bank of England Governor Mark Carney described best when he said that investment funds that promise to allow customers to withdraw their money on a daily basis are “built on a lie.” At roughly the same time, the chief investment officer of Europe’s biggest independent asset manager agreed with him, because while for much of 2019 the biggest risk bogeymen were corporate credit, leveraged loans, and trillions in negative yielding debt, gradually consensus emerged that investment funds themselves – and specifically their illiquid investments- gradually emerged as the basis for the next financial crisis.

There is no point denying we are faced with a looming liquidity mismatch problem,” said Pascal Blanque, who oversees more than €1.4 trillion ($1.6 trillion) as the CIO of Amundi SA, adding that the prospect of melting liquidity is one of “various things keeping me awake at night.”

Fast forward to today, when the recently shuttered Arrowgrass Capital Partners became the latest fund to remind investors just how toxic the threat of illiquid securities is, when it slashed the valuation of its stake in Britain’s oldest surviving amusement park, piling further losses on investors in Nick Niell’s closed hedge fund.

While we previously discussed “The $1.6 Trillion Ticking Time Bomb In The Market“, the Arrowgrass fiasco is merely the latest example of how pervasive investment in hard-to-mark illqiuid assets have become in Europe where money managers from Neil Woodford to H2O Asset Management have come under fire from politicians, regulators and investors. But really it’s the central bankers’ fault: having injected trillions in the market to crush yields and push investors into the riskiest assets, investment firms have had no choice but to venture into harder-to-sell assets such as real estate in a search for yield.

This dramatic imbalance of asset holdings at market making banks and buy-side “bagholders” of illiquid securities, is now posing a major problem for regulators, something the Bank of England acknowledged in a working paper published earlier this month, and highlighted by Mark Gilbert, to wit: “as the funds industry has supplanted banks as a source of credit in the past decade, households and companies have benefited from a useful alternative source of financing. But, the report warned, we don’t know how this market-based system will respond under stress.”

It is a bomb, given the risks of liquidity mismatch,” he warns. “We don’t know if what is sellable today will be sellable in six months’ time.”

That’s not the only we don’t know. As Blanque concluded, “we don’t know the channels of transmission, we don’t know how the actors will act. It is uncharted territory.”

And that, precisely, is why central banks can never again allow risk asset prices to drop: the alternative means gating not one, or two, or a hundred funds, but halting the entire market, because once everyone start selling and price discovery finally returns to a market that has been dominated by central banks for the past decade, several generations of traders and investors who have grown up without price discovery will be shocked to discover just where “fair” market prices reside.

This long, but very worthwhile commentary/story was posted on the Zero Hedge website at 11:34 a.m. EDT on Friday morning — and another link to it is here.


Doug Noland: Resurrecting M2

M2 “money” supply surged $70.2 billion last week, the strongest advance since the week of January 11, 2016. Notable to be sure, but apparently not worthy of a headline or article. Moreover, M2 was up $262 billion in 10-weeks and $575 billion over 22 weeks. The Fed’s weekly H.6 “Money Stock and Debt Measures” report presented a 13-week seasonally-adjusted M2 growth rate of 8.5%.

Let’s focus on the extraordinary $575 billion M2 growth over the past 22 weeks (that receives zero attention). This was the second strongest (22-week) monetary expansion in U.S. history, trailing only 2011’s “QE2” period (Fed expanded holdings by $600 billion) where M2 expanded as much as $616 billion over 22 weeks. M2 growth peaked at $530 billion (over 22 weeks) in February 2009 during the Federal Reserve’s inaugural QE operation.

I have posited that a bond market “melt-up” was instrumental in what has been a period of extraordinary Monetary Disorder. A weakening global economic backdrop along with escalating trade war risks and fragile markets spurred a dovish U-turn by the Fed, ECB and global central banks generally. The global yield collapse was largely fueled by a combination of speculative excess and risk market hedging. Such strategies have focused on safe haven sovereign and investment-grade corporate debt as instruments that would see rising prices in the event of a “risk off” backdrop and resulting central bank rates cuts and QE.

The surge in speculative leverage – exemplified by enormous “repo” market expansion – created a self-reinforcing surge in marketplace liquidity, of which a portion flowed into the “money” supply aggregates (notably through the expansion of commercial bank saving deposits and institutional money fund assets). Moreover, it’s my view that the abrupt September reversal of market yields and the prospect of end-of-quarter liquidity challenges spurred a reversal of some leveraged holdings that quickly manifested into a liquidity shortage and spike in overnight funding costs.

Federal Reserve Credit jumped $83.9 billion last week to $3.893 TN, the strongest weekly Fed balance sheet expansion since March 2009. This pushed four-week Federal Reserve liquidity operations to $170.5 billion – taking Fed Credit to the highest level since the week of April 17th.

I view the eruption of acute repo market instability as an urgent signal of mounting financial market instability. The Fed seemingly agrees.

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


The Narrative Failure is upon us! — Hedge fund manager Erik Townsend interviews Luke Gromen

This 25-minute audio interview is definitely worth your time, if you have it.  It was posted on the marketsanity.com Internet site on Wednesday — and I thought I’d save it for today’s column.  I thank Judy Sturgis for pointing it out.


What to do When Inflation Hits the Economy Soon — Bill Bonner

The end of the stock market boom…is unpredictable. But each passing day brings us a day closer to when it will crash and burn.

What will set it off? Hints of a forthcoming recession? A bad turn in the on-going trade war with China? A collapse of the Chinese economy? Or a sudden surge in the polls by Elizabeth Warren?

With Biden tainted by corruption… and Sanders by age and infirmity, Ms. Warren is the likely Democratic candidate.

The Democrats will blame the crash on Mr. Trump. The president will point the finger at the Fed… and the Democrat’s impeachment plan.

But a stock market crash will be more damaging to Mr. Trump than to the Democrats. It will call into question the one thing people still feel they can trust about the president – that he understands money.

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


Russia’s largest oil company ditches dollar in new oil deals

Russia’s largest oil company Rosneft has set the euro as the default currency for all new exports of crude oil and refined products.

As of September, Rosneft is seeking euros as the default option of payment for its crude oil and products, Reuters reported on Thursday, quoting tender documents the Russian firm has published.

Rosneft has recently adjusted all the new contracts for export supplies to euros,” a trader at a company that regularly procures oil from Rosneft told Reuters, adding that buyers have already been notified of the change.

The United States has not ruled out imposing sanctions on Rosneft over its involvement in trading oil from Venezuela. Rosneft has been reselling the oil from the Latin American country to buyers in China and India and thus helping buyers hesitant to approach Venezuela and its state oil firm PDVSA because of the U.S. sanctions on Caracas, and, at the same time, helping Venezuela to continue selling its oil despite stricter U.S. sanctions.

Rosneft’s move was seen by traders and analysts as a future hedge against potential new U.S. sanctions on Russia and/or its oil industry.

This news story was posted on the rt.com Internet site at 10:50 a.m. Moscow time on their Friday morning — and I thank George Whyte for pointing it out.  Another link to it is here.


Miner Alrosa Finds Russian Doll-Type Diamond With Another Gem Inside

Alrosa PJSC found a small, but unique diamond that has another gem moving freely inside it, resembling a traditional Russian Matryoshka doll.  Click to enlarge.

The stone, found at Alrosa’s Nyurba site in Siberia, weighs just 0.62 carats, with an internal cavity of 6 cubic millimeters holding another crystal of just 0.02 carats, the miner said in a statement. It’s the first diamond of that nature to ever be found and may be more than 800 million years old, Alrosa said, citing scientists.

The Russian gem producer has also made other rare finds in recent years. In August, it said it plans to sell a 14.83-carat pink gem, named The Spirit of the Rose, that is expected to fetch one of the highest prices ever for a diamond.

Alrosa plans to send the Matryoshka diamond to the Gemological Institute of America for further analysis, a spokesman said. There are no details yet on how much the gem may be worth.

This brief news item, along with two nifty photos, appeared on the Bloomberg website at 8:19 a.m. Pacific Daylight Time on Friday morning — and it comes to us courtesy of Swedish reader Patrik Ekdahl.  Another link to it is here.


Sales of gold soar during China’s holiday season

Sales of gold jewelry have been booming during the first few days of the National Day holiday break, boosted by a festive shopping mood, a busy wedding season and an upward growth trend of gold prices.

The week-long break, also known as the Golden Week, appears to be a golden business opportunity for retailers. The sales value of gold jewelry during this period can be twice or even three times higher than during a regular week, and many retailers are offering discounted prices to attract more consumers, industry experts observed.

Gold sales are expected to accelerate through the end of the year due to weakening global economic conditions, said Mike McGlone, a Bloomberg Intelligence senior commodity strategist.
As of Wednesday noon, gold prices stood at $1,498.93 per ounce on the back of weak U.S. manufacturing data. The precious metal continues to be a traditional safe-haven for investors amid economic uncertainties.

In the first six months, gold consumption in China reached 523.54 metric tons, down 3.3 percent year-on-year, with a declining consumption of gold bars and coins.

Yet, the spending on gold jewelry during the period has increased steadily. About 359 metric tons of gold were sold from January to June, edging up 1.97 percent year-on-year, according to the China Gold Association.

This gold-related news item showed up on the china.org.cn Internet site on Friday sometime — and it’s something I found on the Sharps Pixley website.  Another link to it is here.


Tocqueville Gold Strategy Third Quarter 2019 Investor Letter:  “A Dip That Needs to Be Bought

Following a strong first eight months of the year, the precious-metals complex may be in the process of offering investors one final chance to enter on attractive terms before lurking systemic risks erupt into breakaway price action. Year-to-date through September 30, 2019, gold prices rose 14.8% but fell 5.2% from peak levels in late August.  Standard technical analysis suggests that bullion prices may revisit the 200-day moving average currently at $1,360, which is down 7.6% from the month-end close of $1,472 to shatter investor confidence that was just beginning to find some legs following a six-year nuclear winter of non-performance.  This would make sense, based on excessively bullish sentiment, overbought RSI’s, Fibonacci retracements, head-and-shoulders breakdown, and the rest of the usual array of technical analysis.

Myopic attention to trading conventions aside, there is a much bigger picture on which to focus. Systemic risks have yet to trigger an appropriate market response, but those risks seem to be advancing from a simmer to a low boil.  Question: What, where, and when is the tipping point?

Answer: Timing is always devilishly complicated; still, warning signs and red flags proliferate. The debris field of mishaps, sudden policy shifts, dubious explanations, and ambiguous to bad economic data seems to expand daily. The bigger picture suggests to us that the established financial order may be on track for destinations unknown.

Gold’s breakout from a six-year base in June of this year may have signaled a secular turning point for interest rates, inflation and hard assets in general.  It seems quite plausible to us that it is gold’s turn to climb to record highs against the U.S. dollar.  It is already advancing in every currency, the definition of a gold bull market, and has summited to record highs against the AUD, CAD, EUR, GBP, and Yen.  Famed non-gold bug economist David Rosenberg (Gluskin Sheff) recently stated that $3,000 gold would not come as a surprise.  It would certainly not surprise us.

In the weeks ahead, according to conventional technical analysis, the precious-metals complex may be due for a well-deserved rest, considering the torrid first eight months of 2019. We would guess another four to six weeks before an important bottom. However, we suggest that investors keep their eye on the big picture and take advantage of any possible near-term weakness to build exposure.  This is a dip that needs to be bought.

This commentary by John showed up on the tocqueville.com Internet site on Thursday sometime — and another link to it is here.


The PHOTOS and the FUNNIES

It was the July long weekend, Canada Day — and we were on our way to Lillooet on June 29.  Deadman River Road and Juniper Beach Provincial Park were just diversions.  Before getting to the Lillooet photos, here are two shots that I forgot to post that I took along Deadman River Road.  I’ve posted photos of these yellow-bellied marmots before, but never in their natural setting.  This fellow was kind enough to pose for these two shots before heading underground.  Click to enlarge.


The WRAP

Today’s pop ‘blast from the past’ dates from 1970 — and firmly falls into the ‘one-hit wonder’ category.  It hit #2 on the U.K. singles chart and #4 on the U.S. Billboard Hot 100 singles chart — and I remember it all to well.  The link is here.  And if you’re into bass covers, there’s a good one linked here.

Last week’s classical ‘blast from the past’ was one of the ‘Big 4’ German violin concertos…in that case, Brahms.  But as much as love the Brahms work, I prefer Beethoven’s.  This week’s violin concerto from the ‘Big 4’ comes to us courtesy of Max Bruch…his Concerto No. 1 in G minor, Op. 26.  I’m sure I’ve featured it this year at least once before…but here it is again anyway.  The lovely and gifted Hilary Hahn does the honours, along with the Frankfurt Radio Symphony.  Andrés Orozco-Estrada conducts — and the link is here.  It doesn’t get any better than this.


It was a ‘nothing’ sort of day in the precious metals on Friday — and the sell-off that did come to pass on the jobs report more or less recovered by the end of the New York trading session.  I was also happy to see the gold price close above $1,500 spot.

Considering the price action in gold and silver, I was even more delighted to see how well their underlying equities performed in light of that.  They were under steady accumulation throughout the entire trading session…irrespective of what the precious metals themselves were doing.

But still at ‘Ground Zero’ as the near-term prices in silver and gold are concerned, is how the enormous short position in both is resolved…a fact that Ted reminded me of on the phone again yesterday.  There was a decent improvement in gold, but still light years away from being anywhere near bullish.  The situation for silver from a COT perspective is somewhat better, but still bearish as well.

The Big 7 traders are still sitting with enormous unbooked losses — and it remains to be seen if they get over run, or whether what we’ve see during September’s engineered price declines, is the best they can do.

Yesterday’s COT Report in silver is still very much top of mind for me…as it just made no sense at all — and my attempts to explain what may have happened, could turn out to be very wide of the mark.  If the Managed Money traders weren’t prepared to sell much when silver was pounded back below its 50-day moving average, then how can the Big 7 commercial traders hope to cover their short positions?  And what price would it take for these technical types to finally puke up longs and go short?  Questions with no answers at the moment.

However, never to be forgotten is the fact that JPMorgan, because of its huge physical holdings in both silver and gold, can walk away as short seller of last resort at any time — and leave all the remaining short holders… including the Big 7…twisting in the wind.

I look forward to hearing what Ted has to say about it all in his weekly review this afternoon, now that’s he’s had a chance to “sleep on it.”

Here are the 6-month charts for the Big 6 commodities — and there certainly weren’t any changes in the precious metals worthy of the name.  I note that both copper and WTIC had tiny ‘up’ days…but that’s not saying much considering how far they are below any moving average that matters.  Click to enlarge.

You’d think that everything has come up sunshine and moonbeams after the rallies in the equity markets in New York on Friday.  But nothing could be further from the truth.

The only reason that everything appears to be normal on the surface is because the PPT et al. are keeping it that way.  As I and others have pointed out on numerous occasions lately, there is no price discovery in anything any more.  The prices are whatever the powers-that-be set them at.

But down in the engine room in the money markets, there is big trouble stirring, as liquidity is vanishing at an alarming rate.  In a Zero Hedge article in the Critical Reads sections above, was this comment on a news story that broke on Friday afternoon in New York…”the New York Fed announced it would extend the duration of overnight repo operations (with a total size of $75BN) for at least another month, while also offer no less than eight 2-week term repo operations until November 4, 2019, which confirms that the funding unlocked via term repo is no longer merely a part of the quarter-end arsenal but an integral part of the Fed’s overall “temporary” open market operations… which are starting to look quite permanent.

And if that’s not a big straw wind, I don’t know what is.

Then there’s another Zero Hedge piece above headlined “Market’s “$1.6 Trillion Time Bomb” Claims Another Victim as Arrowgrass Writes Down Illiquid Investment By 70%“…to wit…”By this point, a pattern had emerged, one which Bank of England Governor Mark Carney described best when he said that investment funds that promise to allow customers to withdraw their money on a daily basis are “built on a lie.”“…”This dramatic imbalance of asset holdings at market making banks and buy-side “bagholders” of illiquid securities, is now posing a major problem for regulators, something the Bank of England acknowledged in a working paper published earlier this month

The article goes on to say…””It is a bomb, given the risks of liquidity mismatch,” he warns. “We don’t know if what is sellable today, will be sellable in six months’ time.”

That’s not the only we don’t know. As Blanque concluded, “we don’t know the channels of transmission, we don’t know how the actors will act. It is uncharted territory.”

And as Zero Hedge concludes, correctly I might add…”And that, precisely, is why central banks can never again allow risk asset prices to drop: the alternative means gating not one, or two, or a hundred funds, but halting the entire market, because once everyone start selling and price discovery finally returns to a market that has been dominated by central banks for the past decade, several generations of traders and investors who have grown up without price discovery will be shocked to discover just where “fair” market prices reside.

Amen to that, bro!…and it’s only a matter of time before it does happen — and that’s exactly why the world’s financial system is now on the slippery slope from which there is no escape, except by the final destruction of all fiat currencies through massive money printing.

Inflate, or die.” is a truism that’s only half that.  Ultimately it’s “Inflate — and die.”

The crack-up boom, as Ludwig von Mises pointed out, would unfold only when people come to the conclusion that the central bank will expand the money supply at ever-greater rates:

If once public opinion is convinced that the increase in the quantity of money will continue and never come to an end, and that consequently the prices of all commodities and services will not cease to rise, everybody becomes eager to buy as much as possible and to restrict his cash holding to a minimum size. For under these circumstances the regular costs incurred by holding cash are increased by the losses caused by the progressive fall in purchasing power. The advantages of holding cash must be paid for by sacrifices which are deemed unreasonably burdensome. This phenomenon was, in the great European inflations of the ‘twenties, called flight into real goods (Flucht in die Sachwerte) or crack-up boom (Katastrophenhausse).”  Click to enlarge.

Thinks Zimbabwe, dear reader…

I’m still “all in”.

I’m also done for the day — and the week — and I’ll see you on Tuesday.

Ed

The PPT Had Their Hands Full on Thursday

04 October 2019 — Friday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price traded a few dollars either side of the $1,500 spot mark right up until the ISM Services data was released at 10:00 a.m. EDT in New York on Thursday morning.  The algos kicked in, driving the gold price higher in an instant.  But ‘da boyz’ were obviously lying in wait, as it was capped and driven lower within a few minutes.  The ensuing quiet sell-off lasted right into the 5:00 p.m. close of trading.

The low and high ticks were reported by the CME Group as $1,501.70 and $1,525.80 in the December contract.

Gold was closed in New York on Thursday afternoon at $1,504.80 spot, up only $5.90 on the day.  Net volume was monstrous once again at just under 396,000 contracts — and there was a bit under 13,500 contracts worth of roll-over/switch volume on top of that.

The price path for silver was a bit more bumpy in Far East and London trading on their respective Thursdays — and the brief spike up shortly after 2 p.m. China Standard Time was dealt with in the usual manner.  From there it drifted unevenly lower until around 9:30 a.m. in New York.  Silver then had the same spike higher on the ISM news — and received the same treatment as the gold price at that juncture.  The rest is the same.

The low and high ticks in gold were recorded as $17.515 and $17.845 in December.

Silver was closed at $17.52 spot, up 0.5 cents on the day.  Net volume was about the same as it was on Wednesday…around 66,800 contracts — and there was a bit over 3,700 contracts worth or roll-over/switch volume on top of that.

Platinum had a four dollar up/down move between 8 a.m. and around 2:10 p.m. China Standard Time on their Thursday and, like silver and gold, jumped a bit higher.  But, unlike the other two precious metals, platinum rallied a bit going into the ISM number at 10 a.m. EDT.  Its spike higher was also capped at that point — and it was sold lower until a few minutes after 12 o’clock noon in New York.  It didn’t do much after that.  Platinum was closed at $888 spot, up 2 bucks from Wednesday.

The palladium price traded quietly sideways until a few minutes before 2 p.m. CEST in Zurich/8 a.m. EDT in New York — and then an engineered price decline began.  It also a had bump higher at 10 a.m. in New York, but that only delayed the sell-off for about twenty minutes.  The low tick was set around 11:40 a.m. EDT — and it edged a bit higher into the 5:00 p.m. close from there.  Palladium was closed at $1,637 spot, down an even 30 dollars from Wednesday’s close.

The dollar index closed very late on Wednesday afternoon in New York at 99.02 — and opened up about 1 basis point once trading commenced at 7:45 p.m. EDT on Wednesday evening, which was 7:45 a.m. China Standard Time on their Thursday morning.  It crept a bit higher until a couple of minutes before 2 p.m. CST — and then a more meaningful ‘rally’ began at that juncture.  The 99.19 high tick was set at the London open — and it chopped very unevenly lower until the ISM data hit the tape at 10:00 a.m. in New York.  The algos kicked in — and index went into free-fall, with the 98.64 low tick coming around 10:50 a.m. EDT when the usual ‘gentle hands’ appeared.  From that juncture it crawled a bit higher until 4:50 p.m. EDT — and then faded a bit into the 5:30 p.m. close from there.  The dollar index finished the Thursday session at 98.86…down 16 basis points from Wednesday’s close.

Without doubt, the dollar index, along with the equity markets in New York, would have crashed and burned if the PPT hadn’t been standing by.

Here is the DXY chart, courtesy of BloombergClick to enlarge.

And here’s the 6-month U.S. dollar index chart, courtesy of the good folks over at the stockcharts.com Internet site.  The delta between its close…98.54…and the close on the DXY chart above, was 32 basis points on Thursday.  Click to enlarge as well.

The gold stocks opened down a hair, but then jumped higher on the price spike in gold at 10 a.m. EDT.  But from there, it was quietly down hill into the 4:00 p.m. EDT close — and I was certainly surprised to see them finish in the red by a bit.  The HUI closed lower by 0.40 percent.

The silver equities chart below is almost a carbon copy of the HUI chart just above, so I’ll spare you the play-by-play.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down 0.32 percent.  Click to enlarge if necessary.

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

Of the three usual laggards, it was only Hecla that contributed to the negative close in the silver equities, as it finished down 2.07 percent.


The CME Daily Delivery Report for Day 5 of the October delivery month showed that 1,115 gold and 108 silver contracts were posted for delivery within the COMEX-approved depositories on Monday.

In gold, of the four short/issuers in total, the only one that mattered was Goldman Sachs, with 1,032 out of its in-house/proprietary trading account…which was every single contract that they’ve stopped so far in October.  Of the six long/stoppers in total, the largest was a surprise…Australia’s Macquarie Futures, picking up 992 contracts for its own account.  In very, very distant second and third spots were JPMorgan and Advantage, with 46 and 42 contracts for their respective client accounts.

In silver, the largest of the three short/issuers by far was ABN Amro, with 101 contracts.  There were four long/stoppers — and the biggest was JPMorgan with 82 contracts.  Advantage and ABN Amro were in very distant second and third place with 13 and 11 contracts.  All contracts, both issued and stopped, involved their respective client accounts.

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

The CME Preliminary Report for the Thursday trading session showed that gold open interest in October declined by only 8 contracts, leaving 1,350 still open, minus the 1,115 contracts mentioned a few paragraphs ago.  Wednesday’s Daily Delivery Report showed that 1,136 gold contracts were actually posted for delivery today, so that means that 1,136-8=1,128 more gold contracts were just added to the October delivery month!!!  Wow!  And those are most likely the ones out for delivery on Monday.  Silver o.i. in October fell by 41 contracts, leaving 450 still around, minus the 108 mentioned a few paragraphs ago.  Wednesday’s Daily Delivery Report showed that only 13 silver contracts were actually posted for delivery today, so that means that 41-13=28 silver contracts vanished from October.


For the second day in a row there were no reported changes in either GLD or SLV.

In the other gold and silver ETFs and mutual funds on Planet Earth…minus any and all activity in the COMEX warehouses — and GLD/SLV…there was a net 7,091 troy ounces of gold withdrawn on Thursday — and a net 1,385 troy ounces of silver was withdrawn as well.

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

There was some activity in gold over at the COMEX-approved depositories on the U.S. east coast on Wednesday.  Nothing was reported received, but 57,517 troy ounces was shipped out of Brink’s, Inc.  There was also a tiny paper transfer of 2,893.500 troy ounces/90 kilobars [U.K./U.S. kilobar weight] from the Eligible category — and into Registered.  That occurred at Brink’s, Inc. as well — and is, no doubt, destined for October delivery.  The link to all this, is here.

There was decent activity in silver — and all of it was of the ‘out’ variety…1,103,171 troy ounces in total.  There was one truckload…600,968 troy ounces…that departed CNT — and the remaining 502,203 troy ounces left the vault over at Canada’s Scotiabank.  The link to that is here.

Despite China’s Golden Week, the folks over at Brink’s Inc. in Hong Kong on their Wednesday, opened their doors long enough to receive 302 kilobars — and ship out 201.  The link to that, in troy ounces, is here.


Here are two more charts that Nick passed around on Wednesday, that I didn’t have space for in my Thursday column.  They show Perth Mint sales, updated with September’s data.  During that month they sold 46,837 troy ounces of gold bullion coins — and 1.35 million silver bullion coinsClick to enlarge for both.

I have an average number of stories/articles for you today.


CRITICAL READS

ISM Services Catches Manufacturing’s Cold — Tumbles to Weakest Since 2016

After a week of abysmal global PMIs (and U.S. manufacturing’s collapse to a standstill), expectations were ever hopeful for a small bounce in ISM Services data (even though it did bounce surprisingly in August) to save the world (and stocks).

  • Markit Manufacturing BEAT – 51.1 (5mo highs)
  • Markit Services MEET – 50.9 (up from 50.7 in August)
  • ISM Manufacturing MISS – 49.1 (contractionary print well below expectations and 10 year lows)
  • ISM Services MISS – 52.6 (lowest since August 2016)

Under the surface, employment stands out as a big drop…

Commenting on the PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

A disappointing service sector PMI follows news of lacklustre manufacturing and means the past two months have seen one of the weakest back-to-back expansions of business activity since 2009, sending a signal of slower GDP growth in the third quarter. The surveys are consistent with the economy growing at a 1.5% annualised rate in the third quarter, with forward-looking indicators suggesting further momentum could be lost in the fourth quarter.”

Finally, before the world starts to excuse these numbers by playing down the impact of manufacturing on the economy, here are a simple chart to explain why they’re wrong. While 86% of jobs are in the services economy (14% in manufacturing), manufacturing earnings make up a considerable majority 68% of S&P earnings (32% services), which means if we adjust the ISM Composite for this ‘real’ weight, things look considerably worse – contraction!

Based on the above, dear reader, one has to wonder what today’s job numbers will show.  This Zero Hedge new item put in an appearance on their website at 11:08 a.m. EDT on Thursday morning — and I thank Brad Robertson for sending it.  Another link to it is hereGregory Mannarino‘s post market close rant headlined…”Grey Aliens — and the Communist Manifesto“…is linked here.


Corporate Buybacks Accelerate to Strongest Weekly Level in History

When it comes to politics, one thing is certain: it is all about fake news, and how it is spun. Which is why some people prefer finance: after all, when it comes to math-based financial data, reality is either a 1 or a 0.

Unfortunately, it now turns out that even financial “data” can mean whatever one wishes to read from it. Case in point: today’s CNBC appearance by Goldman’s chief equity strategist David Kostin, who when commenting on the fate of the market in the context of trade war, warned that stock buybacks – the primary driver of stock upside together with the Fed in the past decade – “are getting muted” and thus clients are turning cautious.

There is just one problem with Kostin’s statement: it is dead wrong, at least according to the latest buyback data from Bank of America’s trading desk.

As BofA’s Jill Carey Hall writes in her latest client flow trends, “corporate buybacks accelerated to their strongest weekly level in our data history since 2009“, led by Tech buybacks for the fifth week. This is in line with BofA’s expectations, which had predicted that tech would benefit from a ramp up in buybacks YTD given the high announced/completed buyback ratio for the sector heading into the year.

As a result of this burst in stock repurchases, cumulative YTD buybacks are now +25% YoY, with 3Q to date buybacks +39% YoY and stronger than normal seasonal trends (which typically slow through late Sept, and pick up over the next ~6 weeks amid earnings season).

And since a substantial portion of the proceeds is used for stock buybacks, it should not come as a surprise that we just saw a record week for stock buybacks… and why stocks are surging today even as both PMIs now suggest the U.S. is headed for a recession.

But if companies are buying every share of their stock they can find – with no price discrimination – who are the sellers? We know that answer too: as we reported a week ago,  corporate insiders – typically CEOs, CFOs, and board members, but also venture capital and other early state investors – sold a combined $19BN of stock in their companies through to mid-September. Annualized, on track to hit $26BN for the year, which would mark the most active year for insider sales since 2000, when executives sold $37bn of stock amid the idiotic frenzy of the first tech bubble. That 2019 total would also set a post-crisis high, eclipsing the $25bn of stock sold in 2017.

Finally, as for Goldman once again completely misrepresenting reality and peddling “fake news”, we hope that by now that comes as no surprise to any of our regular readers.

This interesting new item appeared on the Zero Hedge website at 2:40 p.m. EDT on Thursday morning — and it comes to us courtesy of Brad Robertson.  Another link to it is here.


QE By Any Other Name

The short-term repo funding turmoil that cropped up in mid-September continues to be discussed at length. The Federal Reserve quickly addressed soaring overnight funding costs through a special repo financing facility not used since the Great Financial Crisis (GFC). The re-introduction of repo facilities has, thus far, resolved the matter. It remains interesting that so many articles are being written about the problem, including our own. The on-going concern stems from the fact that the world’s most powerful central bank briefly lost control over the one rate they must control.

What seems clear is the Fed measures to calm funding markets, although superficially effective, may not address a bigger underlying set of issues that could reappear. The on-going media attention to such a banal and technical topic could be indicative of deeper problems. People who understand both the complexities and importance of these matters, frankly, are still wringing their hands. The Fed has applied a tourniquet and gauze to a serious wound, but permanent medical attention is still desperately needed.

The Fed is in a difficult position. As discussed in Who Could Have Known – What the Repo Fiasco Entails, they are using temporary tools that require daily and increasingly larger efforts to assuage the problem. Taking more drastic and permanent steps would result in an aggressive easing of monetary policy at a time when the U.S. economy is relatively strong and stable, and such policy is not warranted in our opinion. Such measures could incite the most underrated of all threats, inflationary pressures.

The Fed is hamstrung by an economy that has enjoyed low interest rates and stimulative fiscal policy and is the strongest in the developed world. By all appearances, the U.S. is also running at full employment. At the same time, they have a hostile President sniping at them to ease policy dramatically and the Federal Reserve board itself has rarely seen internal dissension of the kind recently observed. The current fundamental and political environment is challenging, to be kind.

This commentary/opinion piece was posted on the Zero Hedge website at 2:10 p.m. on Thursday afternoon EDT — and it’s from Brad Robertson as well.  Another link to it is here.


Weakening the dollar is the last hope for the global economy, economist says

Weakening the dollar is the last throw of the dice in rescuing the global economy, according to Saxo Bank’s Steen Jakobsen.

In the online trading and investment specialist’s outlook report for the fourth quarter, published Thursday, Jakobsen said 2019 will most likely be remembered as the year that kick-started a global recession, despite the lowest ever nominal and real interest rates.

Monetary policy has reached the end of a very long road and has proven a failure,” Jakobsen, who is the chief economist and CIO at Saxo Bank, added.

Fears for the global economy have been exacerbated of late by the weakest manufacturing data out of the U.S. for over a decade, which compounded already fragile readings from across the euro zone and beyond.

In a global system of failed monetary policies and a long and difficult path to fiscal policy, there is only one other tool left in the box for the global economy and that is lower the price of global money itself: the U.S. dollar,” Jakobsen said.

The outlook report pointed to an estimated $240 trillion of debt worldwide, roughly 240% of global GDP, and argued that too much of this debt is denominated in dollars, due to the greenback’s role as global reserve currency and the deep liquidity of U.S. capital markets.

Weakening the Killer Dollar will likely put the final nail in the coffin of the grand credit cycle that started in the early 1980s, when the U.S. balance sheet was reset, and the USD was anchored by Volcker’s victory over inflation after Nixon abandoned the gold standard in 1971.”

This worthwhile news item showed up on the cnbc.com Internet site at 5:39 a.m. EDT on Thursday morning — and was updated about two and a half hours later.  I found it on the gata.org Internet site — and another link to it is here.


The Longest-Running Bull Market in History Won’t Last Much Longer — Bill Bonner

This is the longest-running bull market in history… and the oldest expansion ever seen. Whenever it ends, it will be “later.”

But nothing lasts forever. And neither the expansion nor the bull market is likely to defy the gods of time for much longer.

In 2007, the markets gave way when they finally realized that the average person couldn’t afford the average house. Today, as The Wall Street Journal informed us on Tuesday, the average person can’t afford the average car.

The average world citizen may be getting richer in time prices for basic commodities. Technology and innovation may be reducing costs and increasing efficiency and productivity. New fads, fashions, and gadgets may turn heads and waste time.

But for all the technological progress of the last 2,000 years, we still have wars, famines, disease, heartbreak, misery, depression, irritable bowels, crashes, suicides, flat tires, envy, passion, jealousy, and hate.

In the field of economics, for example, many are the new things that have come along in the last 100 years.

Exchange-traded funds (ETFs), algorithmic trading, the Fed’s dynamic stochastic model, negative rates, Keynesianism, Modern Monetary Theory (MMT), data dependence, hedonic price adjustments – and much, much more.

But none of these breakthroughs and innovations are going to prevent average Americans from going through Hell in the next few years. Instead, they’re going to make it worse.

This commentary from Bill appeared on the bonnerandpartners.com Internet site early on Thursday morning EDT — and another link to it is here.


“Revelation” Mode — Andrei Martyanov

Vladimir Putin at Valdai today drops a bomb.

Не знаю, большой тайны, наверно, не открою, все равно это станет ясно. Мы сейчас помогаем нашим китайским партнерам создать систему СПРН – систему предупреждения о ракетном нападении. Это очень серьезная вещь, которая капитальным, кардинальным образом повысит обороноспособность КНР. Потому что сейчас такую систему имеет только США и Россия

Translation: “I don’t know, I probably wouldn’t open a huge secret, it will become known one way or another. We are helping our Chinese partners to create (SRPN) Missile Attack Early Warning System. This is a very serious system, which radically increases China’s defensive capabilities. Currently only Russia and the United States have such systems.”

This is stunning, honestly. It also answers a gigantic host of questions about the future of Eurasia and of Europe, and the United States. This also, especially in a view of Russia successfully shooting down hyper-sonic targets by S-400s, begs an irresistible question–what are OTHER technologies Russia is not talking about, considering the fact that she helps to completely redefine China’s defensive capabilities. It is also funny against the background of lament of Russia getting ready to export (in Russian) her latest radar Rezonans-NE (E stands for export) capable of detecting any types of targets, including hypersonic ones (which are extremely difficult to detect, unlike “Stealth”) at the over-horizon ranges up to 1,100 kilometers.

This rather brief, but very interesting commentary put in an appearance on the smoothiex12.blogspot.com Internet site on Thursday sometime — and I thank Larry Galearis for bringing it to my attention.  Another link to it is here.  The Zero Hedge spin on this is headlined “Putin: China Ready to Buy as Much Soybeans, Wheat as Russia Can Produce Amid U.S. Trade War” — and it was posted on their Internet site at 11:45 p.m. on Thursday night.


Gold regains $1,500 – where to next? — Lawrie Williams

As we predicted in our most recent article published here on October 1st, after its recent sharp price fall the gold price bounced back rapidly to retake the $1,500 level.  U.S. economic data is just not nearly as strong as the Trump Administration would have us believe.  As a consequence, equities markets today took yet another big dive, re-igniting safe haven demand for precious metals, and gold and silver in particular, both of which saw big percentage increases, although neither are back to their recent highs.  And strength in the gold price even filtered through to the pgms, although in reality these should be considered industrial metals and should be driven more closely by the strength, or otherwise, of the global economy.

Is the U.S. thus heading for a recession?  Maybe.  Whatever the likelihood is of this, this latest economic data has to raise the odds of the U.S. Federal Reserve moving to reduce interest rates yet again at this month’s FOMC meeting – due at the end of the month.  And possibly again at the December meeting if no improvement is seen before then.  Lower U.S. interest rates are positive for gold in U.S. dollar terms at least and it is U.S. dollars that markets view the gold price, despite the yellow metal being at, or close to, all-time highs in much of the rest of the world.

We would anticipate that the latest data will kick gold back up to the $1,530-40 level this week or next, but we are not sure what will happen immediately thereafter.  Again, as we have pointed out before, every time gold looks like it might exceed the $1.550 level it leads to a big engineered decline initiated in the futures markets by those who see higher gold prices as an adverse reflection on the state of the U.S. economy which, in effect, it is.  But as we have also noted, the U.S. economy is not quite as strong as the Administration would have us believe, and we feel it’s only a matter of time before it breaks out above $1,550 and starts to test the $1,600 level.  This could easily be in the next couple of months and probably certainly be by early in the new year.  It may take an external geopolitical event, or a major equities market downturn,  to initiate the breakthrough, but there is huge global uncertainty and such a trigger could happen at any time.

This worthwhile commentary by Lawrie was posted on the Sharps Pixley website on Wednesday sometime — and another link to it is here.


Record Gold Prices Keep India’s Imports at Lowest in Three Years

Gold imports by India plunged in September to the lowest monthly inflow in at least three years, weighed down by all-time high prices amid poor demand.

Inbound shipments slid for a third month, slumping 86% from a year earlier to 13.5 tons in September, according to a person familiar with the data, who asked not to be identified as the information isn’t public. That’s even lower than the 14.8 tons bought in August and the lowest monthly figure in records going back to January 2016, data compiled by Bloomberg shows.

Total imports in the top consumer after China fell 12% from year earlier to 520.6 tons during January to September, the person said. Finance Ministry spokesman Rajesh Malhotra wasn’t immediately available for comment.

Benchmark gold futures in Mumbai have jumped 22% this year and touched a record of 39,885 rupees ($561) per 10 grams in early September. Prices have since come off a bit but jewelers are concerned that the elevated prices, slowing economic growth and floods in many regions may eat into demand during the peak festival season this month and the wedding season that follows. Prices were last trading 0.8% higher at 38,190 rupees at 1 p.m. in Mumbai.

Everything is affecting consumers’ sentiment,” N. Anantha Padmanaban, chairman of the All India Gem and Jewellery Domestic Council, said by phone. However, the slight dip in prices has given some hope to jewelers that the weakness in demand expected during the 15 days before Diwali may be less severe, he said. Diwali falls toward the end of the month this year and demand typically spikes in the two weeks preceding the festival as Hindus consider it an auspicious time to buy gold.

Each one is trying in their own way to pull in customers,” he said on jewelers’ efforts to promote sales during the festival season.

The above paragraphs are all there is to this Bloomberg story that appeared on their Internet site at 1:21 a.m. Pacific Daylight Time on Thursday morning — and I thank Swedish reader Patrik Ekdahl for pointing it out.  Another link to it is here.


Global Silver Investment — Metals Focus/The Silver Institute

This 31-page report, which I haven’t read — and have no intentions of doing, was posted on the silverinstitute.org Internet site on Wednesday.  Like any report from them, CPM Group, or the World Gold Council, they are suitable for only one thing…if you have a bird cage, that is.  I thank Judy Sturgis for sending it our way.


The PHOTOS and the FUNNIES

We’re still in Juniper Beach Provincial Park on June 29 — and still trying to leave, but I was getting side-tracked by every turn off on the way back to the Trans-Canada Highway.  As soon as we crossed the CN tracks, there was a dirt road leading off to the west that I just had to take.  It didn’t go that far…about a kilometer…but I did take this first shot looking back down the tracks towards Kamloops. The second shot was from the road that led from Cache Creek east to Savona’s Ferry on Kamloops Lake in the gold rush days.  It meanders all over the landscape in order to prevent too steep a grade for the horse-drawn wagons that had to use it a more than a hundred years prior.  Large stretches of it are still visible from the highway — and it’s easily visible in the immediate foreground of the fourth photo.  The park we left is in the centre right of this shot at the bend in the river. I took the third photo from the same spot as photo #2…except I was looking southwest down the Thompson RiverClick to enlarge.


The WRAP

Well, the PPT/’Da Boyz’/the powers-that-be/’Gentle Hands’…call them what you will, had their hands full yesterday…in the equity markets, the currencies, the bond market and, of course, the precious metals.  Nothing that wanted to crash and burn was allowed that luxury — and everything with real intrinsic value that wanted to explode higher, had their respective prices capped and turned lower.  Nothing was left to chance…or to the free market.  There is no real price discovery allowed in anything anymore — and that was in full view of all…except for those whose jobs and careers depend upon them not seeing it…as Upton Sinclair pointed out way back when.

Here are the 6-month charts for the four precious metals, plus copper and WTIC — and all show the same thing, as their respective rallies were capped and turned lower.  Both copper and WTIC closed at new lows for this moved down, as the Managed Money traders buried themselves further on the short side in both.  Click to enlarge.

And as I type this paragraph, the London open is less than a minute away — and I see that the gold price crawled quietly higher until around noon China Standard Time on their Friday — and gave a decent amount of that back by minutes after 2 p.m. CST. It ticked a bit higher at that point — and is currently up $3.20 the ounce. The silver price was up about a dime by shortly after 10 a.m. CST — and virtually all of that was taken back by a few minutes after 2 p.m. CST as well. But it’s higher now — and up 4 cents as London opens. Platinum traded flat until around 10:20 a.m. CST on their Friday morning — and it was sold quietly lower until the same time as silver and gold. It’s also off its current low tick — but down 4 dollars. And including a bit of a rally in morning trading in the Far East, the palladium price path was the same as the other three precious metals — and it’s up 4 bucks as Zurich opens.

Net HFT gold volume is pretty quiet at a bit over 30,000 contracts — and there’s only 1,264 contracts worth of roll-over/switch volume in this precious metal. Net HFT silver volume is very quiet as well, at only 4,500 contracts — and there’s a below minuscule 42 contracts worth of roll-over/switch volume in this precious metal.

The dollar index opened up 1 basis point at 98.88 once trading commenced around 7:45 p.m. on Thursday evening in New York, which was 7:45 a.m. China Standard Time on their Friday morning. It dipped to its current 98.79 low tick around 10:05 a.m. CST — and then crept higher until about 1:50 p.m. CST. Ten minutes or so later, it headed a bit lower — and as of 7:45 a.m. BST in London/8:45 a.m. CEST in Zurich, the dollar index is down 1 basis point. Nothing much to see here.


At 8:30 a.m. EDT we get the jobs report — and based on all the other negative numbers that have been coming in over the last few weeks, the odds-on bet is that it could be ugly as well.  And as I said in yesterday’s missive, I’m sure that the precious metals will ‘react’ in some fashion — and if it’s violently to the upside like it was yesterday, how many minutes after that will it be, before JPMorgan et al. show up as willing short sellers one wonders.

Then, around 3:30 p.m. we get the latest COT Report for positions held at the close of COMEX trading on Tuesday…along with the monthly Bank Participation Report.  This report gives Ted the opportunity to recalibrate JPMorgan’s short position in silver — and whatever number that it is, I’ll have it for you in Saturday’s column.

I’m already on record saying that there should be some decent improvements in the commercial net short positions in both gold and silver — and this is what silver analyst Ted Butler had to say about it in his mid-week commentary on Wednesday: “…it looks like a lead-pipe cinch that there was very significant managed money selling and commercial buying, most likely along the lines of what I previously expected as of September 10…at least 25,000 net contracts of silver — and more than 70,000 net contracts of gold“.


And as I post today’s efforts on the website at 4:02 a.m. EDT, I note that the gold price hasn’t done much in the last hour of trading — and is currently up $3.40 the ounce — and silver is up 3 cents as the first hour of London trading ends. Platinum is down 3 bucks the ounce — and palladium is up only a dollar as the first hour of Zurich trading draws to a close.

Gross gold volume is still very light at a bit over 42,500 contracts — and minus what little roll-over/switch volume there is, net HFT gold volume is 40,000 contracts. Net HFT silver volume is even lighter at 6,200 contracts — and there’s still only a minuscule 52 contracts worth of roll-over/switch volume in this precious metal.

The dollar index hasn’t been doing much of anything over the last hour…chopping quietly sideways…and is back at unchanged as of 8:45 a.m. in London/9:45 a.m. in Zurich.

It’s ultra quiet out there as the clock ticks down to 8:30 a.m. EDT in Washington.


I hope you have an enjoyable weekend — and I’ll see you here tomorrow with my longest report of the month.

Ed

Gold & Silver: Back Above Their 50-Day Moving Averages

03 October 2019 — Thursday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price began heading lower a few minutes before 8 a.m. China Standard Time on their Wednesday morning — and the low tick was set shortly before 2:30 p.m. CST on their Wednesday afternoon.  From that juncture, the price rallied unevenly higher until about ten minutes after the 1:30 p.m. EDT COMEX close in New York.  It was above $1,500 spot by a handful of dollars at that point, but it wasn’t allowed to close there.

The low and high ticks in gold were recorded by the CME Group as $1,480.50 and $1,511.40 in the December contract.

Gold finished the Wednesday session in New York at $1,498.90 spot, up $20.30 from Tuesday’s close — and back above its 50-day moving average by a bit.  Net volume was heavy at around 374,500 contracts — and there was a bit under 19,500 contracts worth of roll-over/switch on top of that.

The silver price was up 8 cents or so by around 8:30 a.m. in Shanghai on their Wednesday morning — and it was sold back to a bit below unchanged by around 1 p.m. CST.  It rose and fell about a dime between then and the noon silver fix in London — and then began to head higher.  Its high tick was also set a few minutes after the COMEX close in New York, but was sold down a bit shortly after that — and then traded pretty flat into the 5:00 p.m. EDT close from there.

The low and high ticks in silver were reported as $17.24 and $17.73 in the December contract.

Silver was closed in New York on Wednesday at $17.515 spot, up 30.5 cents from Tuesday — and back above its 50-day moving average as well.  Net volume was on the heavier side, but not overly so, at a bit under 68,000 contracts — and there was 3,500 contracts worth of roll-over/switch volume in this precious metal.

Platinum was up a dollar or so by 8:30 a.m. in Shanghai, but was sold lower until minutes after 10 a.m. CST — and it didn’t do much of anything from that point until around 10:30 a.m. in Zurich.  It began to creep quietly and somewhat unevenly higher in a very similar fashion as silver and gold until about ten minutes after the COMEX close in New York.  It was also sold a bit lower until 3 p.m. EDT in the after-hours market — and it then traded ruler-flat into the 5:00 p.m. close from there.  Platinum was closed at $886 spot, up 11 bucks on the day.

It was the same price pattern in palladium as it was for platinum in the early going.  But that all ended a few minutes after 10 a.m. CEST in Zurich trading.  It got kicked downstairs at that juncture, but never looked back after that…working its way very unevenly higher until about twenty minutes after the 11 a.m. EDT Zurich close.  An hour later, it was sold a bit lower until around 2:20 p.m. in the very thinly-traded after-hours market — and didn’t do much of anything after that.  Palladium was closed at $1,667 spot, up 29 dollars on the day…gaining back everything it lost on Tuesday, plus a bit more.

The dollar index closed very late on Tuesday afternoon in New York at 99.13 — and opened up 4 basis points once trading commenced around 7:45 p.m. EDT on Tuesday evening, which was 7:45 a.m. China Standard Time on their Wednesday morning.  It dipped a bit until a few minutes after 8:30 a.m. CST — and then crept unevenly higher until around 1:55 p.m. CST.  A ‘rally’ commenced at that point — and the 98.96 high tick was set about 10:05 a.m. in London.  It was unevenly down hill from there, until the usual ‘gentle hands’ appeared a few minutes before 2 p.m. in New York.  The 98.96 low was set at that juncture.  It bounced a bit until about 2:45 p.m. EDT — and then traded quietly sideways until the market closed at 5:30 p.m.  The dollar index finished the Wednesday session at 99.02…down 11 basis points from Tuesday’s close.

There was a bit of correlation between the currencies and the precious metals on Wednesday, but that was more by pure chance than anything else.

Here’s the DXY chart, courtesy of Bloomberg as always.  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…98.69…and the close on the DXY chart above, was 33 basis points on Wednesday. Click to enlarge as well.

The gold stocks gapped up about 2 percent at the open — and their respective high ticks came about fifteen minutes later.  Then they were sold down pretty hard, but bounced back by around 11:40 a.m. in New York trading — and it was all unevenly sideways-to-down a bit by the time the markets closed at 4:00 p.m. EDT.  The HUI closed up 1.81 percent.

The price action in silver was mostly similar to gold’s…at least in the up/down move during the first hour of trading in New York…except the up move was more impressive, as was the down move that followed.  The rebound after that wasn’t quite as robust — and ended at 10:40 a.m. EDT.  From there the silver shares edged quietly lower until shortly before 2:30 p.m. — and then crawled unevenly higher into the close from there.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up only 1.04 percent.  Click to enlarge if necessary.

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

Once again, the reason for the under-performance of the silver equities falls at the feet of our two friends…Buenaventura and Peñoles.  The former closed down 2.55 percent, but Peñoles was crushed for a 9.00 percent loss on the day.  The other usual laggard, Hecla, did great…up 4.89 percent.


The CME Daily Delivery Report for Day 4 of October deliveries showed that 1,136 gold and 13 silver contracts were posted for delivery on Friday.

In gold, there were seven short/issuers in total, but the only one that mattered was JPMorgan, with 1,000 contracts out of its so-called ‘client’ account.  There were ten long/stoppers in total — and it was “all the usual suspects” once again…JPMorgan picked up 469 contracts, Australia’s Macquarie Futures – 240, Goldman Sachs – 181 — and Citigroup stopped 130 contracts.  All contracts stopped involved their respective in-house/proprietary trading accounts.

In silver, the two short/issuers were Advantage and Dutch bank ABN Amro…with 7 and 6 contracts from their respective client accounts.  There were three long/stoppers in total, but the only one that mattered was JPMorgan, picking up 10 contracts for its client account.

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

The CME Preliminary Report for the Wednesday trading session showed that gold open interest in October fell by 582 contracts, leaving 1,358 still open, minus the 1,136 mentioned a few paragraphs ago.  Tuesday’s Daily Delivery Report showed that 598 gold contracts were actually posted for delivery today, so that means that 598-582=16 more gold contacts were just added to October.  Silver o.i. in October declined by 54 contracts, leaving 491 still around, minus the 13 mentioned a few paragraphs ago.  Tuesday’s Daily Delivery Report showed that 63 silver contracts were actually posted for delivery today, so that means that 63-54=9 more silver contracts were added to the October delivery month.


There was a fairly decent addition to GLD on Wednesday, as an authorized participant deposited 94,253 troy ounces.  There was a tiny withdrawal from SLV, as an a.p. took out 166,124 troy ounces — and I would suspect that this amount would represent a fee payment of some kind.

In other gold and silver ETFs on Planet Earth on Wednesday…minus the changes in COMEX warehouse stocks — and GLD/SLV…there was a net 9,837 troy ounces of gold added.  But in silver, there was 101,454 troy ounces withdrawn on a net basis.

There was a very tiny sales report from the U.S. Mint yesterday.  They sold 4,500 of those ‘America the Beautiful’ 5-ounce silver coins — and that was all.

There was no physical activity in gold over at the COMEX-approved depositories on the U.S. east coast on Tuesday…but there certainly was on the paper side.  There was 96,450.000 troy ounces/3,000 kilobars [U.K/U.S. kilobar weight] transferred from the Eligible category and into Registered over at the International Depository Services of Delaware, plus 5,900 troy ounces was transferred in the same direction over at Canada’s Scotiabank.  Without doubt, this is all scheduled for delivery in October.  The link to this is here.

It was far busier in silver, as 1,212,331 troy ounces…two truckloads…was received — and that all ended up at Brink’s, Inc.  There was only 78,070 troy ounces shipped out…72,107 from CNT — and the the remaining 5,962 troy ounces from Delaware.  There was also a paper transfer of 99,753 troy ounces from the Registered category — and back into Eligible over at Brink’s, Inc. — and that transfer has the stench of JPMorgan on it.  The link to this is here.

And because it’s the Golden Week in China, there was no activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Tuesday.  But that hasn’t stopped them [in the past] from opening their depository during that time if the need arose — and it may again before the week is over.


Here are two charts that Nick passed around yesterday evening.  They show gold and silver bullion coins sales for the U.S. Mint, updated with September’s data.  During that month, the mint sold 6,500 troy ounces of gold eagles and buffaloes — and 1,589,000 troy ounces of silver eagles and “America the Beautiful” 5-ounce coinsClick to enlarge for both.

For the second day in a row I have a very decent number of stories for you.


CRITICAL READS

ADP Employment Disappoints, Suffers Drastic Downward Revisions

After May’s collapse, ADP employment gains have rebounded notably but were expected to slow once again in September (which makes some sense given the collapse in ISM/PMI employment indices).  Click to enlarge.

But things were considerably worse – not only did September’s data miss (+135k vs +145k exp) but August’s big jump of 195k was revised drastically lower to just 157k.

The job market has shown signs of a slowdown,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute.

The average monthly job growth for the past three months is 145,000, down from 214,000 for the same time period last year.”

Goods-producing jobs rose 8.2k and Services rose 126.7k – but both slowed down and also saw notable downward revisions…

Mark Zandi, chief economist of Moody’s Analytics, said, “Businesses have turned more cautious in their hiring. Small businesses have become especially hesitant. If businesses pull back any further, unemployment will begin to rise.”

This news item put in an appearance on the Zero Hedge website at 8:21 a.m. on Wednesday morning EDT — and it’s the first offering of the day from Brad Robertson.  Another link to it is here.


Fed Takes $42BN in Second October Repo as Funding Pressures Ease

One day after the Fed raised eyebrows when it accepted $55BN in collateral in its first repo operation after the notorious quarter-end liquidity crunch, an amount that was just higher than the first repo op the Fed concluded in mid-September after a 10+ year hiatus ($53.2BN) and which some saw as too high for a new month with $139BN still locked up in 2-week term repos, moments ago the Fed concluded the second overnight repo operation for October, one which confirmed that the recent repo turmoil appears to again be easing, as $42.05BN in collateral was submitted (and accepted) in the $75BN operation, a $13BN decline from the $54.85BN repoed yesterday.  Click to enlarge.

The composition of the repo showed that while Treasury collateral declined from $50BN to $35BN, MBS actually increased modestly from $4.75BN to $7.05BN, with no Agency use again.

While the drop in total repo use was certainly an improvement from yesterday’s operation, the continued demand for reserves, even with $139BN in liquidity locked up in 2-week term repo which expire in the second week of October, suggests that the funding shortage is anything but a calendar event, and confirms that there is an acute reserve shortage, one which the Fed will have to address, most likely by resuming POMO operations to the tune of roughly $20BN per month… which for all the QE denialists, will be the same size as QE1.

This brief 2-chart Zero Hedge article showed up on their website at 8:53 a.m. on Wednesday morning EDT — and another link to it is here.  I thank Brad for that one as well.  Gregory Mannarino‘s post market close rant on Wednesday is linked here.


New York Business Conditions Collapse

Just in case you thought the ISM number was a flukey ‘transitory’ one-off, the New York City ISM just plunged, with the outlook collapsing to its lowest since Feb 2009.  Click to enlarge.

And ahead of Friday’s payroll print, NYC ISM’s employment index plunged to 52.5 from 69.0.

In September, top line and forward revenue guidance fell considerably. Both reached the lowest level reported since they were added to the report in February 2012. Current Revenues fell from the breakeven point of 50.0 in August to 38.1 in September. Current Revenues has never been in the 30s before. Expected Revenues, the largest mover this month, fell 37.1 points from 82.3 in August to 45.2 in September. The largest drop month over month before September was 21.4,
reported in December 2014. Expected revenues has been at the break-even point a handful of times in the past, but has never been below it before.

It’s getting harder for stocks to ignore reality.

This brief 2-chart Zero Hedge article appeared on their Internet site at 11:20 a.m. EDT on Wednesday morning — and it’s another offering from Brad Robertson.  Another link to it is here.


Auto Financing Forces Poor Buyers Deeper Into Debt Than Ever Before

Since 2009, the average auto transaction price has gone from $30,000 to $40,000. Since the average wage has been little changed – around $23 per hour – that means the time price has gone from about 1,300 hours to about 1,700.

When Henry Ford introduced the Model T, the sticker price was $850. Then, with his conveyor belt assembly lines, he was able to get the price down to $360 by 1925.

As near as we can figure, hourly wages in 1925 were between $1 and $1.50. So, the auto – basic transportation for the Roaring Twenties – cost the typical wage earner about 300 hours of his time. Now, he must work nearly six times as much for his wheels.

Is that progress? Is he richer? Is he better off?

You decide.

But as automotive technology advanced, so did auto finance.

In the 1920s, installment sales were just becoming popular. But the typical buyer still had real money and savings. Even by the end of the boom, half of auto buyers paid cash for their cars.
Today, the cash buyer is rare. The auto dealers – who make most of their money from financing cars, not from selling them – scarcely give him the time of day.

This longish, but very worthwhile commentary from Bill showed up on the bonnerandpartners.com Internet site early on Wednesday morning EDT — and another link to it is here. Then these two auto-related news items showed up on Zero Hedge last night…”Auto Loans Stretch to Eight Years to Accommodate Irresponsible Car Buyers“…and…”Initial U.S. Auto Sales For September Paints an Ugly Picture“.


U.S. Gross National Debt Jumps by $1.2 Trillion in Fiscal 2019, to $22.7 Trillion, Hits 106.5% of GDP — Wolf Richter

The U.S. gross national debt jumped by $110 billion on the last two business days of Fiscal Year 2019, and by a breath-taking $1.2 trillion during the entire fiscal year, after having already jumped by $1.27 trillion in Fiscal 2018, the Treasury Department reported today. This ballooned the U.S. gross national debt to a vertigo-inducing $22.72 trillion.

These beautiful trillions whipping by are a joy to behold: so much action in so little time. The flat spots in the chart below are the results of the debt-ceiling charade in Congress. When the debt ceiling is lifted, the debt spikes back to trend, and nothing changed.

During Fiscal 2019, the gross national debt increased by 5.6% and now amounts to 106.5% of current-dollar GDP, up from 105.4% at the end of Fiscal 2018.

The thing to remember here is that this isn’t the Great Recession or the Financial Crisis, when over 10 million people lost their jobs and credit froze up and companies went bankrupt and tax revenues plunged while outlays soared to pay for unemployment insurance and the like. This isn’t even the Collapse of Everything, but the longest expansion of the economy in U.S. history.

This commentary from Wolf was posted on his Internet site on Tuesday sometime — and I thank Richard Saler for pointing it out.  Another link to it is here.


U.S. to Slap Tariffs on European Airplanes, Cheese, Wine, Scotch and Coffee

In the aftermath of today’s surprising WTO decision, in which the global trade mediator sided with the U.S. in finding some $7.5BN in European Airbus subsidies illegal, moments ago the U.S. Trade Rep confirmed that the U.S. will waste no time in retaliating to what – for years – were illegal trade practices.

According to the USTR office, the U.S. will impose a total of $7.5 billion in retaliatory tariffs on E.U. imports starting October 18, with 10% tariffs on large commercial aircraft, and 25% on agricultural and other industrial goods.

  • U.S. WILL IMPOSE TARIFFS ON $7.5 BILLION OF EUROPEAN UNION IMPORTS BEGINNING OCTOBER. 18, USTR SAYS
  • U.S. WILL IMPOSE 10% TARIFFS ON LARGE COMMERCIAL AIRCRAFT — AND 25% TARIFFS ON OTHER AGRICULTURAL AND INDUSTRIAL GOOD

And with that, instead of easing, the global trade war just sprung another major front, one which will see the E.U. retaliate in kind and impose tariffs on billions in U.S. imports to the E.U., guaranteeing that consumer prices in both the U.S. and Europe will spike just as the world is entering a global recession, making further rate cuts by the Fed that much more complicated.

This news item was posted on the Zero Hedge website at 6:12 p.m. on Wednesday evening — and another link to it is here.


German economic forecasts plunge as global industrial recession fears mount

Germany’s leading economic research institutes have sharply downgraded their forecasts for Europe’s largest economy.

With Germany facing an industrial recession, the Ifo Institute’s joint economic forecast for 2019, published Wednesday, has been revised down from the 0.8% GDP (gross domestic product) growth projected in the spring to just 0.5%.

Reasons for poor performance include falling worldwide demand for capital goods, which has hit Germany’s export-reliant economy, along with political uncertainty and structural changes in the automotive industry.

German industry is in recession, and this is now also impacting the service providers catering to those companies,” said Claus Michelsen, head of forecasting and economic policy at the German Institute for Economic Research (DIW Berlin).

The fact that the economy is expanding at all is due primarily to the continuing positive spending mood of private households, which is being buoyed by good wage agreements, tax breaks, and the expansion of government transfers.”

This story put in an appearance on the cnbc.com Internet site at 6:22 a.m. EDT on Wednesday morning — and I thank Swedish reader Patrik Ekdahl for bringing it to our attention.  Another link to it is here.


Protests Rage as Ukraine’s Zelensky Allows Election in Separatist-Controlled East

Comedian turned president of Ukraine Volodymyr Zelensky’s unlikely rise to power was based in large part on convincing voters that he would dramatically ease tensions with Russia and seek a peaceful resolution to the war in Donbass, raging since 2014.

But now in a potentially explosive Maiden 2.0 scenario, hardcore Ukrainian nationalists have taken to the Kiev square which has come to symbolize resistance to Russia in order to protest the popular president’s dovish and rapprochement-signalling policies. Hours after Zelensky gave an unprecedented go ahead to allow a local election in Donbass which could result in Kiev granting a special status to the region, hundreds of nationalists flooded the square holding signs that read: “No to capitulation!”.

Zelensky insisted all candidates and political parties should be allowed to run according to Ukrainian law, which has enraged the anti-Russian nationalists, who say Ukraine’s sovereignty is on the line. The new election has the blessing of Russia and European monitors.

Both government and pro-Russian separatist forces have agreed to withdraw troops from key locations in the Donetsk and Luhansk regions next week to ensure “free and fair” elections, which international monitors will also observe.

Former president Petro Poroshenko also added fuel to the fire, saying the agreement is “a capitulation to Russia“.

Without that, this [Minsk agreement] is capitulation to Russia. I draw your attention to the fact that they [the Ukrainian government] were not offered anything, they were offered only to be there at the meeting. And for this meeting Ukraine risks paying and surrendering,” he said.

Poroshenko further echoed other critics who’ve said Ukraine is not gaining anything from the agreement after sacrificing soldiers that died fighting the separatists in a conflict that’s taken 13,000 lives – thousands of them civilians – on both sides.

Meanwhile, Russia has welcomed the news, with one senior Russian politician hailing it as “a victory for common sense and an overall success.” Kremlin officials also said they hope this will lead to substantive peace talks on the ground.

This interesting and welcome news story put in an appearance on the Zero Hedge website at 1:55 p.m. on Wednesday afternoon EDT — and I thank Brad Robertson for this one.  Another link to it is here.


U.S. move to weaponize its currency is destroying dollar in international trade – Putin

Russia never wanted to turn away from the U.S. dollar but American policies have forced it, as well as many other countries, to do so, President Vladimir Putin told participants of the Russian Energy Week forum on Wednesday.

The U.S.’ attempts to weaponize its national currency and use dollar settlements as an instrument of political pressure is a great mistake, according to the Russian president. He explained that Washington’s actions have already forced many countries, including U.S. allies, to reconsider the greenback as a reserve currency, while dollar settlements have already slid from 50 percent to 45 percent.

The dollar enjoyed great trust around the world. It was almost the only universal currency in the world. For some reason, the United States began to use dollar settlements as a political tool, to impose restrictions on the use of the dollar,” Putin told the audience.

They [the U.S.] are biting the hand that feeds them,” he said, adding that sanctions only “undermine the trust in the dollar, isn’t it clear, that they are destroying it with their own hands?

Moscow has recently slashed by half the share of the U.S. dollar in its foreign currency reserves. However, such a move is not Russia’s choice, but the result of Washington’s sanctions and restrictions as Moscow and its allies want to protect themselves and diversify settlements, according to Putin. Thus more than 70 percent of settlements between the members of the Russia-led Eurasian Economic Union (EAEU) are in rubles, while many other countries are switching to payments in national currencies instead of the dollar.

The above paragraphs are all there is to this article that showed up on the rt.com Internet site at 2:33 p.m. Moscow time on their Wednesday afternoon, which was 7:33 a.m. in Washington — EDT plus 7 hours.  I thank George Whyte for sending it our way — and another link to the hard copy is here.


Saudi Arabia gives ‘green light’ for talks with Iran

Saudi Arabia has given a green light to Iraqi Prime Minister Adel Abdul Mahdi to arrange a meeting with Iran as a first step towards de-escalating tensions in the region, Middle East Eye can reveal.

Abbas al-Hasnawi, an official in the prime minister’s office, told MEE on Tuesday that Abdul Mahdi was mediating between the leaderships in Riyadh and Tehran and had communicated each side’s conditions for talks to the other.

Hasnawi was speaking after a spokesperson for the Iranian government said on Monday that Saudi Arabia had sent messages to Iranian President Hassan Rouhani via “the leaders of some countries”.

Hasnawi confirmed to MEE that Abdul Mahdi was acting as an intermediary with the aim of easing tensions since attacks on Saudi oil facilities blamed on Iran earlier this month appeared to have tilted the Gulf rivals closer to open conflict.

The Iraqi leadership has channels with both sides. Our Sunni brothers [in the government] liaise with the Saudis and our Shia brothers with the Iranians,” he said.

The Saudis have conditions before the negotiations process starts and the same with Iranians. We have liaised these conditions to each side. It is not an easy task to get together two opposite sides in terms of their ideology, sect and their alliances in the region.”

I haven’t seen this story anywhere else on the Internet, but I thought I’d pass it along FYI.  It was posted on the middleeasteye.net Internet site at 10:35 British Summer Time on Tuesday morning, which was 5:35 a.m. in Washington — EDT plus 5 hours.  I thank Larry Galearis for pointing it out — and another link to it is here.


Morgan Stanley, Mitsubishi fined for spoofing in gold and silver futures

The U.S. Commodity Futures Trading Commission today announced that civil enforcement actions were filed and simultaneously settled against two trading firms and one bank for violating the Commodity Exchange Act’s (CEA) prohibition on spoofing (bidding or offering with the intent to cancel the bid or offer before execution).  These cases were brought in connection with the Division of Enforcement’s Spoofing Task Force.

As these cases demonstrate, the CFTC is committed to preserving the integrity of our markets—like the financial and precious metals futures markets at issue here—and to rooting out unlawful practices like spoofing,” said CFTC Enforcement Director James McDonald.  “We will continue to vigilantly investigate and prosecute misconduct by entities that spoof in our markets.”

But the real criminal activity by JPMorgan goes unspoken — and unpunished.  Ted was so underwhelmed/disgusted by this CFTC dispatch that he never bothered to even mention it in his mid-week commentary on Wednesday…which was headlined “Trashing the Rule of Law“.  That’s precisely what it is, dear reader.  You would think they would know the meaning of the legal term fiduciary responsibility, but they obviously had to abandon those principles [if they ever had them to begin with] when they joined the CFTC…and the DoJ.  I found this on the gata.org Internet site yesterday — and another link to it is here.


The PHOTOS and the FUNNIES

Still in Juniper Beach Provincial Park on June 29…and just as we were leaving, I came across a bunch of orange beetles of a type unknown to me, sitting on a milkweed plant.  The first photo is the best I could do with my walk-around lens, so I went running back to the car to get the extension tube for a better close-up — and the second photo is the result.  The critter is less than 1 inch/25 mm long.  I could have cropped it much closer than that, but wanted to show the whole seed pod in the shot.  Then as were heading out back to the Trans-Canada Highway, I saw this dead tree with bunches of domestic baby’s breath…an invasive species…growing wild in the foreground.  I asked my daughter to please go stand where I asked her — and I took this photo.  The CN railway track-bed is directly behind the fence at the back of the shot — and you have to cross it when entering and leaving the park. It would be a noisy place to camp, as the trains run 24/7.  Click to enlarge.


The WRAP

I was certainly happy to see that precious metal prices were up nicely on the day when I powered up my computer on Wednesday morning.  Their respective rallies began long before there was any currency movements worth of the name — and virtually without exception, went their own merry ways yesterday.  Add to the surprise was the fact that both silver and gold were allowed to close above their respective 50-day moving averages.

From their respective intraday lows on Tuesday, gold is up about 43 bucks — and silver is higher by 74 cents.

Does this mean that the engineered price declines are done — and this was the best that the commercial traders could do…with or without JPMorgan’s help?  It’s certainly way too soon to say that — and I wouldn’t be prepared to bet any money on it, either.  Only in the fullness of time will we know that.

Here are the 6-month charts for the four precious metals, plus copper and WTIC — and all the Wednesday dojis are going in the direction that we want.  Copper didn’t do much, but WTIC was crushed once again, closing below both its 50 and 200-day moving averages for the fourth day in a row — and at another new low for this move down.  But looking at its RSI trace, it’s still not close to being oversold.  Click to enlarge.

And as I type this paragraph, the London open is less than a minute away — and I note that the gold price didn’t do much of anything through most of Far East trading on their Thursday. But it was down a dollar and change by minutes after 2 p.m. China Standard Time — and it then shot up into the green [and back above $1,500 spot] by $3.70 or so, but was turned lower hard almost right away — and is now down $2.70 the ounce. Ditto for silver — and it’s now down 2 cents, after being up 17 cents at its high tick. Platinum rose and fell four bucks between 8 and 9 a.m. CST on their Thursday morning — and then didn’t do much of anything until minutes after 2 p.m. CST as well — and from down a dollar, it’s was up 5 at one point, but it has been hammered back to unchanged. Palladium was up a few dollars shortly after trading commenced in New York at 6:00 p.m. EDT on Wednesday evening. It was been trading quietly sideways since — but is now up only a dollar now as Zurich opens.

Net HFT gold volume is a bit over 46,500 contracts — and there’s only 261 contracts worth of roll-over/switch volume in this precious metal. Net HFT silver volume is a bit under 8,000 contracts — and there’s only 319 contracts worth of roll-over/switch volume on top of that.

The dollar index opened up one basis point at 99.03 around 7:45 p.m. in New York on Wednesday evening, which was 7:45 a.m. China Standard Time on their Thursday morning. It then sank to it current low tick minutes before 8:30 a.m. CST. It has been ticking quietly but unevenly higher since — and as of 7:45 a.m. BST in London/8:45 a.m. CEST in Zurich, the index is higher by 10 basis points.


Tomorrow we get the latest COT and and Bank Participation Report — and none of Wednesday’s price activity will be in them.

Also on Friday we get the latest job numbers — and I’ll be very surprised if doesn’t have an affect on precious metal prices, even though they shouldn’t.  I have no idea what they will show, but it’s pretty much a given that the BLS will have massaged them to perfection — and Gregory Mannarino will certainly have an opinion, which I’ll link in my Saturday column.


And as I post today’s missive on the website at 4:02 a.m. EDT, I see that the gold price has ticked a bit higher as the first hour of London trading draws to a close — and it’s down 1.60 an ounce — and silver is now up 4 cents. Platinum is still up a dollar — and palladium is up 4 as the first hour of Zurich trading ends.

Gross gold volume is coming up on 68,500 contracts — and minus the tiny amount of roll-over/switch volume, net HFT gold volume is a bit over 67,500 contracts. Net HFT silver volume is just under 11,500 contracts — and there’s still only 400 contracts worth of roll-over/switch volume in this precious metal.

The dollar index hit its current 99.19 high tick right at the 8:00 a.m. BST London open — and has retreated a bit since — and is up 13 basis points as of 8:45 a.m. in London/9:45 a.m. in Zurich.

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

Ed

New Intraday Lows Set in Silver & Gold Yesterday

02 October 2019 — Wednesday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


After creeping higher by a few dollars during the first two hours and change on Monday evening in New York, ‘da boyz’ appeared once again.  The gold price was then sold quietly and unevenly lower until the low tick of the day was set around 9:15 a.m. in London.  It then had an up/down move that lasted until the 10 a.m. afternoon gold fix in London, when the latest U.S. ISM numbers hit the tape.  The gold price shot higher at that point — and ran into massive…and I mean massive resistance.  The high of the day was set around 12:15 p.m. EDT — and it was sold quietly lower until 2:45 p.m. in after-hours trading.  It wasn’t allowed to do much after that.

The low and high ticks in gold were recorded by the CME Group as $1,465.00 and $1,493.50 in the December contract.

Gold was closed in New York on Tuesday at $1,478.60 spot, up $7.10 from Monday.  Net volume was gargantuan at a bit over 432,000 contracts…15,000 contracts more than Monday’s volume…and there was around 19,500 contracts worth of roll-over/switch volume in this precious metal.

The silver price was sold lower until 2:15 p.m. China Standard Time on their Tuesday afternoon, which is the usual time for their afternoon gold fix — and it began to head quietly higher from there.  It dipped a bit in early morning trading in New York, but also took off higher at the 10 a.m. EDT afternoon gold fix and, like gold, ran into very stiff resistance — and for all intents and purposes, all the gains that mattered were in by the 11 a.m. EDT London close.  It chopped quietly sideways until trading ended at 5:00 p.m. in New York.

The low and high ticks were reported as $16.94 and $17.375 in the December contract.

Silver was closed in New York yesterday at $17.21 spot, up 25.5 cents from Monday.  Net volume was reasonably heavy at about 79,000 contracts — and there was around 4,800 contracts worth of roll-over/switch volume on top of that.

The platinum price didn’t do much of anything on Tuesday…trading a half a dozen dollar either side of unchanged during the entire day.  But it was carefully closed lower on the day at $875 spot, down 5 bucks from Monday.

The palladium price chopped quietly but nervously sideways in Far East trading on their Tuesday — and the price pressure began in this precious metal shortly after the Zurich open — and it traded very unevenly lower for the remainder of the day.  It finished the Tuesday session at $1,638 spot, down 18 dollars from Monday’s close.

The dollar index closed very late on Monday afternoon in New York at 99.38 — and opened up a couple of basis points once trading commenced around 7:45 p.m. EDT on Monday evening.  It then had a very broad 18 basis point up/down move that lasted until 12:20 p.m. in London on their Tuesday afternoon.  It began to head higher from there until the U.S. ISM numbers hit the tape at 10 a.m. in New York — and it fell off a cliff at that point.  The index appeared to get rescued around 1:10 p.m. at its 99.07 low tick — and it rallied a bit for the next thirty minutes, before fading into the 5:30 p.m. close.  The dollar index finished the Tuesday session at 99.13…down 25 basis points from Monday.

Here’s the DXY chart, courtesy of Bloomberg as always.  Click to enlarge.

And here’s the 6-month U.S. dollar index chart, courtesy of the fine folks over at the stockcharts.com Internet site.  The delta between its close…98.78…and the close on the DXY chart above, was 35 basis points on Tuesday.  Click to enlarge as well.

The gold shares gapped down a bit at the open — and then traded sideways until a minute or so after 10 a.m. — and then blasted higher as the gold price did the same.  Most of the gains that mattered were in by shortly after 11 a.m. EDT — and they then began to fade an hour and change later.  The were almost back at unchanged on the day by a few minutes before 3 p.m. in New York trading.  But the gold price began to creep higher at that point — and the shares followed.  The HUI closed up only 0.43 percent.

The silver equities followed an almost identical price path as their golden cousins…complete with the day-ending rally that saved them from falling into the red by the close.  And it should be noted that the silver equities didn’t begin their rallies until 3 p.m…about ten minutes after the gold stocks began to head higher.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up by 0.82 percent.  Click to enlarge if necessary.

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

I would suspect that the precious metal equities wouldn’t have sold off as much in afternoon trading in New York, if the rest of the equity markets hadn’t been so far in the red.  But it was certainly obvious that there was some serious bottom fishing going on in the last hour or so of the Tuesday trading session.


The CME Daily Delivery Report for Day 3 of October deliveries showed that 598 gold and 63 silver contracts were posted for delivery within the COMEX-approved depositories on Thursday.

In gold, there were six short/issuers in total, but the only two that mattered were JPMorgan and Scotia Capital/Scotiabank, with 495 and 59 contracts…JPMorgan from their so-called ‘client’ account — and Scotiabank from their in-house/proprietary trading account.  There were twelve long/stoppers in total — and the four largest were the same as the have been since the month began…JPMorgan, Macquarie Futures, Goldman Sachs and Citigroup…with 250, 121, 99 and 69 contracts — and all for their respective in-house/proprietary trading accounts.

In silver, the two short/issuers were Advantage and ABN Amro, with 38 and 25 contracts from their respective client accounts.  The three long/stoppers were JPMorgan, Advantage — and ABN Amro, picking up 50, 7 and 6 contracts…all for their respective client accounts as well.

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

The CME Preliminary Report for the Tuesday trading session showed that gold open interest in October dropped by 262 contracts, leaving 1,944 still open, minus the 598 contracts mentioned a few paragraphs ago.  Monday’s Daily Delivery Report showed that 283 gold contracts were actually posted for delivery today, so that means that 283-262=21 more gold contracts were just added to October.  Silver o.i. in October fell by 519 contracts, leaving 545 still around, minus the 63 mentioned a few paragraphs ago.  Monday’s Daily Delivery Report showed that 585 silver contracts were actually posted for delivery today, so that means that 585-519=66 more silver contracts were added to the October delivery month.


There were no reported changes in either GLD or SLV on Tuesday.

In the other ETFs, mutual funds and depositories on Planet Earth on Tuesday…minus the movements in COMEX warehouse stocks, GLD & SLV…there was a net 24,993 troy ounces of gold added — and in silver, there was a net 38,385 troy ounces withdrawn.

The U.S. Mint had a small sales report to start off the new month.  They sold 2,500 troy ounces of gold eagles — 280,000 silver eagles — plus 37,700 of those ‘America the Beautiful’ 5-ounce silver coins.

The only activity in gold over at the COMEX-approved gold depositories in North America on Monday was 128.600 troy ounces/4 kilobars [U.K./U.S. kilobar weight] that were withdrawn from Canada’s Scotiabank.  I won’t bother linking this amount.

But it was very busy in silver, as 1,805,220 troy ounces was reported received — and 1,211,330 troy ounces was shipped out.  There was a truckload each [600,000+ troy ounces] into Brink’s, Inc., CNT and Scotiabank — and one good delivery bar…1,017 troy ounces…was dropped off at Delaware.  In the ‘out’ category, there was one truckload out of HSBC USA — and another from Scotiabank.  One good delivery bar…999 troy ounces…departed CNT.  In the paper category, there was 399,026 troy ounces transferred from the Eligible category and into Registered over at CNT as well and, without doubt, that’s destined for delivery in October.  The link to all this activity is here.

There was a bit of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Monday.  They reported receiving 225 of them — and shipped out 245.  All of this occurred at Brink’s, Inc. — and the link to that, in troy ounces, is here.


Here are the usual two charts that Nick passes around every weekend that show the amount of gold and silver in all known depositories, mutual funds and ETFs, as of the close of the business week on Friday, September 27.

As I mentioned in my Tuesday column there was a net 1,604,000 troy ounces of gold added during that week, which is a huge amount.  That number in silver was a net 1,188,000 troy ounces.

That silver number has been very low, or negative recently — and that’s mainly because of the big conversion of shares into physical metal at SLV, plus other ETFs — and that is not the negative connotation that you should take away from looking at the silver chart.  The other reason the numbers are low is that there just isn’t any silver available to deposit — and JPMorgan hasn’t provided any for the last month.  They provided the 100+ million ounces that Ted Butler’s “whale” took on the sly, but other than that, they haven’t parted with another ounce.  Click to enlarge for both.

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


CRITICAL READS

U.S. Manufacturing Weakest Since 2009: “Business Sentiment Stuck at Gloomy Levels

It’s been an ugly night for global economic surveys. September manufacturing PMIs from South Korea, Indonesia, South Africa, Italy, and the U.K. all printed below 50.0, confirming ongoing global weakness, and Sweden was a disaster.

Only Canada and Brazil managed upside surprises as all eyes are firmly focused on U.S. manufacturing surveys – hoping they will track the massive surge in U.S. economic surprise data.

  • Markit Manufacturing PMI 51.1 (51.0 exp), up from 50.3 in August
  • ISM Manufacturing 47.8 (50.0 exp), down from 49.1 in August

This is the weakest ISM since June 2009, with New Orders weakest since March 2009.  Click to enlarge.

This is the second straight reading below 50, the line separating expansion and contraction, extending the drop from a 14-year high just over a year earlier.

The pullback in the employment gauge, to 46.3 from 47.4, comes amid economist projections that the main monthly Labor Department report Friday will show limited manufacturing payroll growth. Economists forecast a 3,000gain in factory employment for a second month.

The measure of export orders, a proxy for overseas demand, fell to 41, the lowest level since March 2009, while the imports index remained in contraction.

Chris Williamson, Chief Business Economist at IHS Markit said:

News of the PMI hitting a five-month high brings a sigh of relief, but manufacturing is not out of the woods yet. The September improvement fails to prevent US goods producers from having endured their worst quarter for a decade. Given these PMI numbers, the manufacturing recession appears to have extended into its third quarter.

It’s also far from clear that the trend will improve in the fourth quarter. Inflows of new work remain worryingly subdued, to the extent that current production growth is having to be supported by firms increasingly eating into order book backlogs. Business sentiment about the year ahead is also stuck at gloomy levels.

This Zero Hedge news item put in an appearance on their website at 10:03 EDT on Tuesday morning — and it’s the first offering of the day from Brad Robertson.  Another link to it is here.  Two companion stories on this from Swedish reader Patrik Ekdahl are headlined “Fed rate-cut in October seen as more likely after weak ISM report” — and “Trump targets ‘pathetic’ Federal Reserve after worst manufacturing reading in a decade…the first from Market Watch — and the second from CNBC.


New York Fed Starts New Quarter With Unexpectedly High $55BN Repo Operation

Many expected the funding shortage sweeping across the U.S. financial community to be mostly a function of one-time mid-September items coupled with traditional quarter-end liquidity: it explained why in addition to three term repos, on the last day of the quarter, the Fed conducted an overnight repo which saw a surprisingly high, $63.5BN uptake on Monday.

Well, it’s now the new quarter… and contrary to clearly erroneous conventional wisdom, the funding shortage still persists. Moments ago the N.Y. Fed reported that in the first overnight repo operation of the quarter, one which saw the maximum allotted size shrink from $100 billion to $75 billion, dealers submitted a surprisingly high $54.85BN in collateral, all of which was accepted by the Fed.

Specifically, dealers tendered $50BN in TSYs and $4.75BN in MBS, as well as a $100MM in Agencies, to boost their liquidity.

The continued demand for reserves, even with $139BN in liquidity locked up in 2-week term repo which expire in the second week of October, suggests that the funding shortage is anything but a calendar event, and confirms that there is an acute reserve shortage, one which the Fed will have to address, most likely by resuming POMO operations to the tune of roughly $20BN per month… which for all the QE denialists, will be the same size as QE1.

This brief, but not entirely surprising news item showed up on the Zero Hedge website at 8:46 a.m. EDT on Tuesday morning — and it comes to us courtesy of Brad Robertson.  Another link to it is hereGregory Mannarino‘s post market close rant is linked here — and it’s worth watching.  I thank Roy Stephens for this.


Too big to lend? JPMorgan cash hit Fed limits, roiling U.S. repos

JPMorgan Chase & Co has become so big that some rival banks and analysts say changes to its $2.7 trillion balance sheet were a factor in a spike last month in the U.S. “repo” market, which is crucial to many borrowers.

Rates in the $2.2 trillion market for repurchase agreements rose as high as 10% on September 17 as demand for overnight cash from companies, banks and other borrowers exceeded supply.
While not seen as an sign of distress as it was during the collapse of Bear Stearns and Lehman Brothers in 2008, the spike did prompt the U.S. Federal Reserve to promise to lend at least $75 billion each day until Oct. 10 to relieve the pressure.

Analysts and bank rivals said big changes JPMorgan made in its balance sheet played a role in the spike in the repo market, which is an important adjunct to the Fed Funds market and used by the Fed to influence interest rates.

Publicly-filed data shows JPMorgan reduced the cash it has on deposit at the Federal Reserve, from which it might have lent, by $158 billion in the year through June, a 57% decline.

This interesting news item was posted on the uk.reuters.com Internet site at 7:10 a.m. EDT on Tuesday morning — and I thank Doug Milne for sliding it into my in-box late last night.  Another link to it is here.


Soviet Catastrophe Paints Grim Picture of America’s Future — Bill Bonner

We begin today with a bold prediction: Elizabeth Warren will be our next president. (Biden’s candidacy died in the Ukraine.)

If the stock market collapses before the next election, she will win in 2020. If it doesn’t, she may have to wait until 2024.

We take no joy in this prediction. Ms. Warren is a pigheaded, sanctimonious know-it-all, with all the wrong ideas about how an economy functions.

In that regard, she is little different from Donald Trump. But Ms. Warren has “plans” for everything.

And as we will see, they are all bad.

This interesting commentary from Bill was posted on the bonnerandpartners.com Internet site early on Tuesday morning EDT — and another link to it is here.


Euro-Area Inflation Slows, Adding to Case for ECB Stimulus Move

Euro-area inflation unexpectedly slowed last month, handing another argument to those in favor of the European Central Bank’s recent monetary stimulus package.

Consumer prices rose an annual 0.9% in September, less than half the ECB’s goal of just under 2% and below economists’ estimates. The core measure, which excludes more volatile elements such as energy, food and tobacco, rose to 1%, exceeding the headline rate for the first time since late 2016.

Policy makers’ decision to cut interest rates further below zero and restart quantitative easing — one of the most controversial in the institution’s history — was driven by concerns that inflation won’t move back to the ECB’s goal.

Weakening economic growth is at least partially to blame. Manufacturing is mired in a deepening slump, hurt by trade tensions, weakening global demand and geopolitical uncertainty. New orders saw the sharpest contraction in almost seven years, pointing to a further deterioration in output, according to a separate report from IHS Markit.

With below-trend growth expected to persist well into next year and inflation expectations sliding, the ECB is concerned that the current slowdown may push underlying inflation in the wrong direction.”

This Bloomberg article showed up on their Internet site at 2:00 a.m. PDT [Pacific Daylight Time] on Wednesday morning — and it’s another contribution from Patrik Ekdahl.  Another link to it is here.


E.U. Braces for U.S. Tariffs Over Airbus and Vows to Retaliate

European Union officials appeared to lose hope of dodging additional punitive U.S. tariffs, as the bloc’s calls for a negotiated settlement over aircraft subsidies have gone unanswered by President Donald Trump’s administration.

EU’s trade chief Cecilia Malmstrom told reporters in Brussels that she expects the World Trade Organization to unveil a specific figure this week, authorizing the U.S. to hit the bloc with import duties in retaliation for illegal subsidies to Airbus SE. “We have not received a positive response” to proposals for a settlement, Malmstrom said after a meeting with E.U. trade ministers on Tuesday.

The additional tariffs are expected as soon as this month, Malmstrom said. If that happens, the E.U. will respond in kind when the WTO rules early next year on the bloc’s dispute over U.S. subsidies to Boeing Co.

Europe is also looking “at all options,” including retaliation based on old WTO dispute rulings with which the U.S. isn’t complying, though no decision has been made, Malmstrom said, adding that any response would be compliant with WTO rules.

There’s always a risk that things will escalate,” Malmstrom said, adding that the WTO decision over the subsidies to Airbus “may come tomorrow.”

The WTO will authorize the U.S. to impose tariffs on nearly $8 billion of European goods due to illegal state aid provided to the aircraft maker, Bloomberg reported last week. The U.S. duties will target planes and parts as well as luxury products such as wine and spirits like Dom Perignon and Moet & Chandon — and leather goods under labels such as Givenchy and Louis Vuitton, according to a list published by the U.S. Trade Representative’s office.

This is another Bloomberg story from Patrik.  This one was posted on their website at 7:00 a.m. PDT yesterday morning as well — and another link to it is here.


Fitch downgrades Saudi credit rating over tensions

Fitch Ratings on Monday downgraded Saudi Arabia’s credit rating by one notch, citing “rising geopolitical and military tensions in the Gulf region” after unprecedentedly large attacks on the kingdom’s oil industry.

The agency said in a statement it had lowered oil-rich Saudi Arabia’s long-term foreign currency issuer rating from A+ to A, with a stable outlook.

Drone and missile attacks on September 14 on two key facilities, the Khurais oilfield and the world’s largest oil processing plant at Abqaiq, knocked out half of Saudi production.

We have revised our assessment of the vulnerability of Saudi Arabia’s economic infrastructure to regional military threats as a result of the most recent attack,” Fitch said.

In a statement, the Saudi finance ministry criticized the downgrade, saying it did not reflect the kingdom’s quick restoration of oil output after the attacks, and it urged Fitch to reverse its decision.
Quoted by the official Saudi Press Agency, the ministry said that it was “disappointed that Fitch took a swift decision to downgrade the kingdom”.

This AFP story, filed form Dubai, was posted on the asiatimes.com Internet site on Monday sometime — and it comes to us courtesy of Tolling Jennings.  Another link to it is here.


The Darkening Outlook For Trade Is Discouraging:” WTO Sharply Lowers Global Outlook Amid Trade Conflicts

A synchronized global downturn and an escalating trade war with China has prompted the World Trade Organization (WTO) to reduce its global growth forecasts for 2019 and 2020.

World merchandise trade volumes are expected to only expand by 1.2% in 2019, substantially slower than the 2.6% growth forecast in April. The 2020 global growth forecast is expected to be 2.7%, down from 3% previously.

WTO economists said the global downturn is partly due to President Trump’s trade war, but also “reflects country-specific cyclical and structural factors, including the shifting monetary policy stance in developed economies and Brexit-related uncertainty in the European Union.”

The economists were firm in their global outlook: “Macroeconomic risks are firmly tilted to the downside.”

WTO confirms that the economic rebound or “green shoots” Wall Street was predicting for 2H19 is fake news. A growth scare for stocks is nearing; determining the trigger for the next stock market plunge is currently what every concerned money manager is trying to figure out.

This chart-filled story showed up on the Zero Hedge website at 8:37 a.m. on Tuesday morning EDT — and it’s another offering from Brad Robertson.  Another link to it is here.


It’s Almost Impossible to Buy“: Japanese Bond Crash, Margin Call Send Shock Waves Around the Globe

For a dramatic preview of what will happen in the blink of an eye to all those record low interest rates without the backstop of central banks and ravenous pension fund buying, look no further than what happened in Japan overnight where bond futures suffered the biggest one-day crash since August 2, 2016, sliding as much as 0.97 yen to 154.05, and triggering margin calls for investors after the worst 10-year debt auction in three years.  Click to enlarge.

More ominously, once the rout started it quickly spread outside of Japan, because as yields jumped, the sell-off spilled into U.S. Treasuries and European debt.

There were three things behind the swift collapse: the first catalyst was the Bank of Japan’s Monday decision to slash bond purchases in October for the four major maturity buckets in order to steepen the curve and avoid further flattening which Kuroda has repeatedly expressed concern about in the past; the BOJ had indicated it may even stop buying debt of more than 25 years. It also sought to anchor yields from the one-to-three year zone by raising purchases in a regular operation earlier in the day and lifting the purchase band for the sector in October.

The BOJ is showing its clear intention to correct distortions in the curve through flexible adjustments in market operations,” said Mari Iwashita, chief market economist at Daiwa. “While cutting the lower end of purchases in bonds maturing over 25 years to zero looks shocking, the BOJ will probably cut buying in this zone slowly.

The BOJ’s operation change had a huge psychological impact,” said Eiji Dohke, chief bond strategist at SBI Securities in Tokyo. “Investors are reluctant to buy given the risk of the BOJ skipping a purchase.”

If Japan can ever have a failed bond auction, this was about as close to it as it could get.

Tuesday’s rout was merely the latest hit for Japanese sovereign bonds, which were already reeling from a dismal September, when they lost 1.1%, their first monthly drop since April. Click to enlarge.

And as JGBs dumped, so did Bunds and U.S. Treasurys in a coordinated global move that saw yields in the U.S. and German both spike as a result of tremors started in little, old Japan, confirming that once the central banks lose control, the collapse will be quick and painful (this is for all you MMT watchers out there).

Summarizing this ominous day for Japan’s bond market – and economy – MUFG Bank’s Takahiro Sekido put it best: “Japanese bonds have reached the point where it’s almost impossible to buy.”

For the sake of Japan, the global bond market, and the entire global financial system, he better be wrong.

This is another chart-filled Zero Hedge story.  This one put in an appearance on their website at 7:33 a.m. EDT on Tuesday morning — and it’s the final contribution of the day from Brad Robertson.  Another link to it is here.


India’s jewellery sales surge as gold price declines 1.5% on easing trade tensions

Standard gold (0.995 purity) in Mumbai’s popular Zaveri Bazaar slumped to Rs 36,924 per 10 gram on Tuesday morning. This level has not been seen since August 7. Buyers, waiting for a correction ahead of the peak Dussera and Diwali season, saw this as an opportunity to buy the yellow metal.
The decline, however, was followed by a similar move in the international markets, which recorded 5.5 per cent fall since September 4 to trade currently at $1,468 per ounce (oz).

The sudden upsurge in demand has not only helped in the recovery of prices, but also narrowed the discount to Rs 80 per 10 gram on Tuesday, against Rs 160 per 10 gram a week ago.

In fact, gold prices have declined by 4.6 per cent from their lifetime highs of Rs 39,031 per 10 gram the bullion hit on September 4 this year.

The fall in gold prices has prompted consumers to book their requirement for the ongoing festival/wedding season. There was a huge customer turnout at jewellery shops with bookings for current and future deliveries. We have seen 15-20 per cent increase in our daily average sales on Tuesday,” said Kumar Jain, director, Umedmal Tilokchand Zaveri, a jewellery retailer in Zaveri Bazaar.

Despite higher prices, the Indian consumers’ appetite for gold has not dimmed. The data compiled by the Ministry of Commerce showed India’s gold imports have jumped by 35.6 per cent to $11.4 billion in the April–June quarter this year, compared to $8.4 billion in the same period last year. Gold imports continued thereafter with a temporary slump in early September.

This gold-related news item, filed form Mumbai, appeared on the business-standard.com Internet site at 22:06 India Standard Time on their Tuesday night, which was 1:36 p.m. in New York — EDT plus 9.5 hours.  I found it on the Sharps Pixley website — and another link to it is here.


China gold imports still hugely significant despite earlier cuts — Lawrie Williams

Gold investors may have had their attention drawn to reports that China has been severely curtailing its gold imports earlier this year.  This is true – at least in part – with significant cutbacks in May, June and July, but the Middle Kingdom nonetheless still remains a hugely important importer and consumer of gold – and the gold import numbers appear to have been beginning to pick up again.

So far this year (to end-August), according to Nick Laird; www.goldchartsrus.com figures,  China has imported a shade under 700 tonnes of gold as against 1,126 tonnes to August 2018 and 864 tonnes in the first 8 months of 2017.  It is still on track for imports over the full year to exceed 1,000 tonnes, which together with the country’s own domestic gold production, plus an allowance for gold scrap recycling, would probably still put China’s annual gold absorption at around 1,600 to 1,700 tonnes.  This is well above the figures publicised by major consultancies like GFMS and Metals Focus, which seem to limit their consumption estimates to only some limited demand categories.  This latest figure would still leave China as comfortably the world’s largest annual consumer of gold, despite the apparent slowdowns implemented earlier in the year and supported by lower Shanghai Gold Exchange withdrawal data so far this year.

But does this signify a global gold demand slowdown.  We don’t think so because of the big pick up in gold inflows into the gold-based ETFs around the world which has happened at the same time, along with the overall gold price advance.  Gold is up around 13% year to date and even silver, which has been underperforming gold so far, is up 9% this year, despite the latest sharp price falls.  These are reasonably respectable performances vis-à-vis equities which have the overhanging ongoing likelihood of a major crash ahead according to many respected financial commentators.

According to the World Gold Council, Gold ETFs added some 292 net tonnes of gold up until end-August, and the figures have risen further since.  The biggest gold ETF of all, GLD in the USA, has alone added 126 tonnes of gold to its holdings since the beginning of the year, and as a guide to global inflows in the past month, added around 31 tonnes in September alone.  Assuming global totals rose at a similar rate to those of GLD, global ETF holdings will have risen by a total of around 360 tonnes of gold year to date – countering most of the fall-off in Chinese imports.

This worthwhile commentary from Lawrie showed up on the sharpspixley.com Internet site on Tuesday morning BST sometime — and another link to it is here.


13.5 tonnes of gold found piled in Chinese ex-governor’s home

One Chinese official has some serious explaining to do after investigators came across mounds of gold in his house in Haikou City, Hainan province.

Zhang Qi, a member of provincial and municipal party committees, was reportedly undergoing a disciplinary review and being investigated for possible illegality when the enormous stash was uncovered.

Authorities found some 13.5 tonnes of gold, as well as millions of yuan in cash and antiques, plus evidence of a huge portfolio of luxury real estate. According to local reports, the disciplinary commission announced in early September that they were looking into the ex-governor’s affairs.

Officials convicted of ‘economic crimes’ or corruption can face the death penalty in China.

The above four paragraphs are all there is to this photo-filled rt.com news item that was posted on their website at 1:37 p.m. Moscow time on their Tuesday morning, which was 6:37 a.m. in New York — EDT plus 7 hours.  I thank George Whyte for digging this up for us — and another link to it is here.


Perth Mint gold sales are going gangbusters, U.S. Mint is “meh

The global gold market is seeing mixed demand for physical bullion with the Perth Mint reporting its best sales so far this year and the U.S. Mint reporting lackluster interest in September.

In a blog post Tuesday, the Perth Mint said that it sold 46,837 ounces of gold in September, its highest level since November 2018. So far this year the Australian-based mint has sold 223,821 ounces of gold,  up 21% compared to the first nine months of 2018.

On the other side of the globe, the U.S. Mint continues to see lackluster demand, selling 5,500 ounces of gold in various denominations of American Eagle gold coins, down compared to 6,000 ounces sold in August. The U.S. mint is seeing its worst demand for gold coins.

So far this year the U.S. Mint has sold 126,500 ounces of gold, down more than 75% compared to sales in 2019. The lackluster demand comes as gold prices hit a six-year high.

Although gold demand has been fairly lackluster, physical silver demand has been relatively stable so far this year.

The Perth Mint continued to lead the way, selling 1.35 million ounces of silver last month, its best sales figure since September 2018.

So far this year the Australian mint has sold 7.79 million ounces of silver, up 18% from 2018.
The U.S. Mint sold 1.02 million ounces of silver last month; for the year it has sold 13.29 million ounces, down only 2% compared to the first nine months of the year.

This interesting precious metal-related new item appeared on the kitco.com Internet site at 2:07 p.m. EDT on Tuesday afternoon — and it’s the second offering in a row from George Whyte.  Another link to it is here.


Ted Butler: JPMorgan Charged by DoJ: The Tip of the Iceberg

The (JPM) defendants and others allegedly engaged in a massive, multiyear scheme to manipulate the market for precious metals futures contracts and defraud market participants…” ​– U.S. Dept of Justice, FBI’s New York Field Office, w/ assistance of the Commodity Futures Trading Commission’s Division of Enforcement.

Renowned silver analyst Ted Butler, founder of ButlerResearch.com, returns to Reluctant Preppers to weigh in on recent charges by the U.S. DoJ of an ongoing investigation into criminal activity by the Gold and Silver trading desk of JP Morgan. Ted also fields a wide range of your viewer questions!

The audio interview runs for 38 minutes.  The first 21 comprise the interview with Ted — and the remainder of the segment is related to questions from listeners.  It was posted on the youtube.com Internet site on Monday sometime — and the interview was conducted on the weekend I believe.  It’s certainly worth your while — and another link to it is here.


The PHOTOS and the FUNNIES

After our brief side trip up the Deadman River Valley on June 29, we headed west towards our ultimate destination, which was Lillooet.  But we got side-side tracked once again at Juniper Beach Provincial Park…a postage stamp sized park at a quiet spot on the Thompson River about twenty minutes drive from Cache Creek on the Trans-Canada Highway.  It’s one of the very tiny handful of places on the entire Thompson River that you can drive/walk right down to the water.  The first two photos were taken from the road leading into the park, the first looking southwest downstream — and the second…east southeast. The third and fourth photos were taken from the exact same spot along the river in the park…the first one looking generally east up the river — and the other looking mostly west.  With a very rock bottom, plus a swift current further out, you certainly swim here at your own risk.  Click to enlarge.


The WRAP

Although it was obvious that ‘da boyz’ were out and about during Far East trading on their Tuesday, plus very early morning trading in London, they didn’t get far…although new intraday lows were set in both.  There was also no hard sell-off in the early going in the COMEX trading session in New York.  Silver actually spent most of London — and all of New York trading, sitting in positive territory by a goodly amount.  Gold’s spike higher at 10 a.m. in New York, although it met with ferocious resistance, that precious metal managed to stay in positive territory for the rest of the day as well.

Here are the 6-month charts for the Big 6 commodities — and the new intraday lows in silver and gold should be noted.  Both platinum and palladium were closed lower.  Copper was also closed at a new low for this move down, with a big spike lower in intraday trading as well.  Ditto for WTIC.  Click to enlarge.

I find it somewhat intriguing that 5 of the Big 6 commodities are well below one or more key moving averages all at that same moment in history — and I am wondering why that is so.


And as I type this paragraph, the London open is less than a minute away — and I see that the gold price edged a few dollar higher until minutes before 8 a.m. China Standard Time on their Wednesday morning — and it has been quietly and unevenly down hill since. At the moment, gold is down $2.80 the ounce. Silver was up 8 cents or so by 8 a.m. CST, but about thirty minutes later it met the same fate as the gold price — and silver is currently up 2 cents as London opens. Platinum and palladium were both sold lower between 9 and 11 a.m. CST — and both have been trading pretty much ruler-flat since. Platinum is down 4 dollars — and palladium by 6 as Zurich opens.

Net gold volume is pretty light at around 34,500 contracts — and there’s only 1,165 contracts worth of roll-over/switch volume in this precious metal. Net HFT silver volume is very quiet at a bit over 6,300 contracts — and there’s a minuscule 91 contracts worth of roll-over/switch volume on top of that.

The dollar index opened up 4 basis points at 99.17 once trading commenced around 7:45 p.m. EDT on Tuesday evening, which was 7:45 a.m. China Standard Time on their Wednesday morning. It dipped to its current 99.08 low tick about forty-five minutes later — and it crept higher from there until 1:55 p.m. CST. Then it jumped higher — and as of 7:45 a.m. BST in London/8:45 a.m. in Zurich the index is up 12 basis points.


Yesterday, at the close of COMEX trading, was the cut-off for this Friday’s Commitment of Traders Report — and companion Bank Participation Report.  With the exception of perhaps palladium, there should be fairly substantial decreases in the commercial net short positions in the Big 6 commodities.  As for any actual numbers, I’m not qualified to say.  But it’s a certainty that Ted will have something to say about it in his mid-week commentary this afternoon — and I’ll ‘borrow’ a few sentences for my Friday column.

It’s impossible to tell whether or not we’re done to the downside in price or not.  If the Big 8 short holders were making an effort to engineer prices lower on Tuesday, it was rather an anemic affair — and of course the news at 10 a.m. in New York really threw a spanner in the works.  It’s a given that this sort of economic bad news is in our future for many more years — and this is the headwind that ‘da boyz’ have to overcome if they ever have any hope of covering more of their outstanding short positions.

So we wait some more.


My ISP went down thirty minutes before I was supposed to file today’s column, so it’s around 4:20 a.m. when I filed today’s column — and London and Zurich have already been open for fifteen minutes.

Gold headed higher at the London open — and is currently up $2.90 the ounce — and silver is up 3 cents.  Both are off their current high ticks by a hair.  Platinum is down only 3 bucks now, but palladium got hit a few minutes after 10 a.m. CEST — and is down 14 dollars as of 4:10 a.m. EDT.

Gross gold volume is around 60,500 contracts — and minus what little roll-over/switch volume there is, net HFT gold volume is about 58,000 contracts.  Net HFT silver volume is 9,000 contracts — and there’s a piddling 134 contracts worth or roll-over/switch volume in this precious metal.

The dollar index  continues to edge unevenly higher — and as of 9 a.m. in London/10 a.m. in Zurich, it’s up 16 basis points at 99.29.

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

Ed