More Silver Into SLV

16 August 2019 — Friday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price wandered around five bucks either side of unchanged in Far East and London trading on their respective Thursday’s — and the only rally that amounted to much began shortly after 9 a.m. in New York.  It crept quietly and unevenly higher from there until trading ended at 5:00 p.m. EDT.

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

Gold finished the Thursday session in New York at $1,522.90 spot, up $6.80 on the day.  Net volume in October and December combined was around 436,500 contracts — and there was 9,000 contracts worth of roll-over/switch volume on top of that.

The price pattern in silver was virtually identical — and even more subdued than it was for gold, so I won’t bother with the blow-by-blow in this precious metal.

The high and low ticks in silver certainly aren’t worth looking up, either.

Silver finished the day at $17.23 spot, up 5 cents from Wednesday’s close.  Net volume was a bit under 81,000 contracts — and there was a hair under 16,000 contracts worth of roll-over/switch volume out of September and into future months.

The platinum price also chopped quietly sideways, but that only lasted until 2 p.m. China Standard Time on their Thursday afternoon.  The selling pressure appeared at that juncture — and the low tick was set shortly after the equity markets opened in New York on Thursday morning.  It rallied rather sharply from there, but that was halted in its tracks shortly after 12 o’clock noon in New York.  From there it didn’t do much until shortly before 3 p.m. in the thinly-traded after-hours market — and it tacked on a couple of bucks going into the 5:00 p.m. close.  Platinum was closed at $837 spot, down 5 dollars from Wednesday.

Palladium was up about 10 dollars by around 10:30 a.m. CST on their Thursday morning — and from that point traded pretty flat until Zurich opened.  Selling pressure appeared at that point — and the low tick was set very shortly before noon CEST.  From there it chopped quietly higher until Zurich closed — and didn’t do much of anything after that.  Palladium finished the Thursday session at $1,428 spot, up 20 dollars from Wednesday.

The dollar index closed very late on Wednesday afternoon in New York at 97.99 — and opened down 4 basis points once once trading commenced at 7:45 p.m. EDT on Wednesday evening.  It began to creep unevenly lower starting a few hours after that — and the 97.82 low tick was set around 12:30 a.m. in London.  The rally that commenced at that juncture ran out of gas around 10:45 a.m. in New York — and it crawled very quietly and unevenly lower until trading ended at 5:30 p.m. EDT.  The dollar index finished the Thursday session at 98.14…up 15 basis points from Wednesday.

It was yet another day where there was virtually no correlation between what was happening in the currency market — and in the precious metals.

Here’s the DXY chart, courtesy of BloombergClick 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…98.00…and the close on the DXY chart above, was 14 basis points on Thursday.  Click to enlarge as well.

The gold stocks dipped a bit at the open — and then began to wander quietly higher, with each dip being well bought.  Their respective highs came around 2:40 p.m. in New York trading — and then they faded a bit into the 4:00 p.m. close from there.  The HUI closed up 1.26 percent on the day.

The silver equities opened about unchanged — and then began to head higher at, or minutes after, the afternoon gold fix in London.  Their respective highs came about 10:50 a.m. EDT — and then they proceeded to fall to their respective lows around 11:45 a.m. in New York trading.  They chopped rather broadly higher from there, with a quick spurt upwards a minute before the close.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed higher by 1.00 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 28 gold and 47 silver contracts were posted for delivery within the COMEX-approved depositories on Monday.

In gold, the three short/issuers were Marex Spectron, Advantage and International F.C. Stone with 14, 10 and 4 contracts out of their respective client accounts.  Of the five long/stoppers in total, the three biggest were JPMorgan with 13 contracts for its client account — and Macquarie Futures and Citigroup with 6 and 5 contracts for their respective in-house/proprietary trading accounts.

In silver, the sole short/issuer was Advantage — and the sole long/stopper was JPMorgan.  Both transactions 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 August fell a very chunky 730 contracts, leaving only 1,101 left, minus the 28 contracts mentioned a few paragraphs ago.  Wednesday’s Daily Delivery Report showed that 749 gold contracts were actually posted for delivery today, so that means that 749-730=19 gold contracts were just added to August.  Silver o.i. in August dropped by 91 contracts, leaving just 49 still open, minus the 47 mentioned a few paragraphs ago.  Wednesday’s Daily Delivery Report showed that 138 silver contracts were actually posted for delivery today, so that means that 138-91=47 more silver contracts just got added to the August delivery month — and it’s a safe bet that those are the same 47 silver contracts that are out for delivery on Monday.


There were no reported changes in GLD yesterday, but an authorized participant added another 3,976,785 troy ounces of silver to SLV.

During the last three business days, there have been 14.6 million troy ounces of silver added to SLV.

There were no other deposits worth mentioning in any of the other silver ETFs on Thursday.

There was a tiny sales report from the U.S. Mint on Thursday.  They sold 160,000 silver eagles — and that was it.

There was no physical movement in gold over at the COMEX-approved gold depositories on the U.S. east coast on Wednesday.  There was a paper transfer involving 72,255 troy ounces that was transferred from the Eligible category — and into Registered, with virtually all of that amount happening at HSBC USA.  I won’t bother linking this.

There was some activity in silver.  Once truckload…606,243 troy ounces…was received at CNT — and that was all the ‘in’ activity there was.  There was 51,748 troy ounces shipped out, with most of that…49,805 troy ounces…from CNT as well.  The remaining 1,943 troy ounces departed Brink’s, Inc.  The link to this is here.

There was a tiny bit of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Wednesday.  Nothing was reported received — and 100 were shipped out.  This occurred at Brink’s, Inc. of course — and I won’t bother linking this, either.


The Wickham Market Hoard is a hoard of 840 Iron Age gold staters found in a field at Dallinghoo near Wickham Market, Suffolk, England in March 2008 by car mechanic, Michael Dark using a metal detector. After excavation of the site, a total of 825 coins were found, and by the time the hoard was declared treasure trove, 840 coins had been discovered. The coins date from 40 B.C. to 15 A.D.

The hoard was described as “the largest hoard of British Iron Age gold coins to be studied in its entirety“, and was also significant in providing “a lot of new information about the Iron Age, and particularly East Anglia in the late Iron Age“. It was the largest hoard of staters to be found since the Whaddon Chase Iron Age hoard in 1849.

In June 2011, the hoard was purchased by Ipswich Museum for the sum of £316,000.  Click to enlarge.

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


CRITICAL READS

Inverted Yield Curve Signals Coming Recession — Bill Bonner

Is our Crash Alert flag still flying? We hope so. It’s been up the pole for so long, waiting patiently for the stock market to fall, we’d hate to miss it when it finally happens.

Stocks sold off yesterday, after the 30-year Treasury bond hit a record high and the yield curve well and truly inverted. The Dow ended the day 800 points lower, with the Dow-to-Gold ratio sinking below 17.

The index measures the fundamental inclination of the economy, by comparing gold to stock prices.

When the economy is healthy and growing, people buy stocks and the index generally goes up.

When it is fearful and correcting its mistakes, they buy gold and the index goes down.

It now takes 16.8 ounces of gold to buy the Dow stocks… down from 40 in 1999 and 22 in 2018.

Our guess is that it will continue going down until you can buy the Dow stocks for less than 5 ounces of gold.

A further guess is that this long decline in the Dow-to-Gold ratio (aka the Greed/Fear gauge) over the last 20 years marks not only the decline of America’s leading companies, but of America itself…

This worthwhile commentary from Bill, filed from Poitou in France, showed up on the bonnerandpartners.com Internet site early on Thursday morning EDT — and another link to it is here.  The Gregory Mannarino rant after the closing bell on Thursday is linked here.


The U.S. Treasury is about to flood the market with debt to fund a $1 trillion deficit. Here’s why that is a worry

There may be some limitations to the U.S. government’s borrowing after all.

An anticipated surge of U.S. borrowing in the global debt markets in the second half of this year is starting to create concern as Treasury is expected to ramp up its issuance of bills, notes and bonds to fund a soaring $1 trillion budget deficit.

The U.S. government’s budget gap has widened 27% compared to the first 10 months of fiscal 2018, as spending has risen 8% and receipts have grown by 3%. The federal fiscal year runs October through September. The Trump administration recently forecast a $1 trillion full-year shortfall, while the Congressional Budget Office is slightly more conservative, putting it at $896 billion.

Last month the U.S. Treasury laid out its plans to borrow $814 billion between July and December, after the Trump administration and Congress agreed to a two-year postponement of the U.S. debt ceiling, ensuring no government shutdown or a federal default.
Not only does the Treasury needs to borrow to cover the fiscal deficit created by Trump’s 2017 tax cuts and the inability of Congress to agree on spending cuts, but Treasury needs to rebuild its cash balance which was run down to pay the governments bills when the debt ceiling was hit in May.

The coming deluge of Treasury issuance has stoked worries on Wall Street about whether there is enough liquidity in the system in the short term to meet the supply without pushing up short-term borrowing costs and inverting the yield curve even further.

I had a news item on this subject in my Friday column from the Zero Hedge website, but it was a little on the ‘thick’ side.  Here’s a marketwatch.com story that is somewhat more ‘user friendly’.  I thank George Whyte for pointing it out — and another link to it is here.


U.S. Manufacturing Slumps Back Into Contraction

After this morning’s good news (regional Fed surveys and retail sales), macro data reality just hit with U.S. Industrial Production tumbling 0.2% MoM (notably worse than the +0.1% MoM) as manufacturing plunged.  Click to enlarge.

Manufacturing output slumped 0.4% MoM

It gets worse though as, on a year-over-year basis, Industrial production is barely growing (weakest since Feb 2017) and Manufacturing is back in contraction…Click to enlarge.

Mining was the biggest driver of the slowdown, falling 1.8% in July, “as Hurricane Barry caused a sharp but temporary decline in oil extraction in the Gulf of Mexico,” according to the report, but Machinery and Autos also declined.

This brief 3-chart Zero Hedge article put in an appearance on their Internet site at 9:25 a.m. on Thursday morning EDT — and another link to it is here. Another Zero Hedge article from an hour before that one has a conflicting and ‘positive’ headline that reads “Philly, Empire Fed Beat Expectations, Confirming Economic Rebound


It’s time to get Serious About Silver — David Smith

The World Silver Survey 2019 Review, the institute’s annual World Silver Survey said that global silver demand hit a three-year high in 2018, surpassing more than one billion ounces, an increase of 4% from 2017.

At the same time, global silver mine production fell for the third straight year, dropping 2% in 2018 to 855.7 million ounces.

The top 10 silver producing countries are: Peru, Bolivia, Australia, Argentina, Mexico, Chile, Poland, China, Russia and Guatemala.

And get this… in every one of these countries, silver production has been falling for the last 4 consecutive years!

  • Supply from scrap sources is at a 20-year low.
  • Silver fabrication (manufacturing) demand is just below record levels.
  • Silver demand for solar panels has risen for six consecutive years – and is expected to set a new record in 2019

This interesting commentary from David was posted on the fxstreet.com Internet site on Wednesday at 2:24 p.m. BST, which was 9:24 a.m. in New York — EDT plus 5 hours.  I found it on the Sharps Pixley website — and another link to it is here.


The PHOTOS and the FUNNIES

Still in Hope, B.C. on May 27, the first shot is of Kawkawa Lake taken from on high…looking across it at some of the ‘chicken shacks’ on the opposite shore.  In the second one, my daughter spotted this land snail on a plant by the shore of the Coquihalla River close to where it empties into the Fraser.  I’d never seen one before — and of course a photo was necessary.  The last picture is of Pacific dogwood flowers growing on a rather smallish tree beside a school in the town.  Click to enlarge.


The WRAP

@StockCats: “Thank you for calling the Plunge Protection Team. We are currently experiencing unusually heavy call volume, but your call is important to us…” — Thursday morning’s King Report…the day after Wednesday’s melt-down.


It was a pretty quiet trading day for both gold and silver on Thursday.  ‘Da Boyz’ were still around, if you knew where to look…with the most obvious time coming just after the COMEX close in New York — and also in early morning trading in the Far East.

Gold is still wildly overbought — and silver is very close to that mark as well.  That big engineered price decline on Tuesday did not make one whit of difference to either of these overbought conditions, because both silver and gold recovered strongly after the afternoon gold fix in London on that day.  At this juncture, one has to wonder whether that effort was the best they could do, or whether or not more attempts will be made.

Here are the 6-month charts for the four precious metals, plus copper and WTIC.  The overbought situation in gold in particular, should be noted.  It should also be noted that gold closed at a new high for this move up — and silver is not far behind.  Platinum was closed at a new low for its current engineered price decline — and palladium is being forced to mark time.  And after the price activity in WTIC over the last two days, it was closed back below both its 50 and 200-day moving averages for the second day in a row on Thursday.  Click to enlarge.

And as I type this paragraph, the London open is less than a minute away — and I see that, like in early morning trading in the Far East on Thursday morning, the smallish rally that developed in early trading on Friday in the Far East was turned lower as well — and at the moment, ‘da boyz’ have the gold price down $7.90 the ounce. Silver’s price was guided in a similar manner — and it’s down 7 cents. The platinum price has been inching lower ever since trading began at 6:00 p.m. in New York on Thursday evening — and it’s down 5 bucks currently. Palladium has been chopping very unevenly sideways during the same period of time — but it’s up 2 dollars as Zurich opens.

Net HFT gold volume is about 75,000 contracts — and there’s only 534 contracts worth of roll-over/switch volume in this precious metal. Net HFT silver volume is around 13,100 contracts — and there’s 1,816 contracts worth of roll-over/switch volume out of September and into future months.

The dollar index opened basically unchanged once trading commenced at 7:45 p.m. EDT on Thursday evening. Its current 98.25 high tick was set at 10:30 a.m. China Standard Time on their Friday morning, but has given up almost all of that since — and is up only 2 basis points as of 7:45 p.m. BST in London/8:45 a.m. CEST in Zurich.


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.  I mentioned in previous commentary on Wednesday that I wasn’t about to hazard a guess as to what the changes might be, considering the wild price swings during the reporting week — and this is what silver analyst Ted Butler had to say about the situation in this mid-week commentary to his paying subscribers on Wednesday…

Tuesday’s extreme price volatility and high trading volume makes it a ‘pick ‘em’ as far as this week’s new Commitments of Traders report on Friday. Up until Tuesday’s cutoff, we were likely looking at a big increase in managed money buying and commercial selling, mostly as a result of last Wednesday’s sharp rally in gold and silver. But there were already enough undercurrents of change, mostly on JPMorgan’s side in last week’s reports, as well as the surprise heavy selling by the managed money traders in silver in the prior reporting week, that I’m fully prepared to observe and analyze the numbers, rather than handicap them this week.”


And as I post today’s efforts on the website at 4:02 a.m. EDT, I note that gold and silver prices haven’t done much as the first hour of London trading draws to a close. Gold is down $8.30 the ounce — and silver is now down 8 cents. Platinum is still down 3 dollars — but palladium is now higher by 7 bucks as the first hour of trading in Zurich ends.

Gross gold volume is coming up on 90,000 contracts — and minus what little roll-over/switch volume there is, net HFT gold volume is a bit over 88,500 contracts. Net HFT silver volume is a bit over 16,000 contracts — and there’s 2,687 contracts worth of roll-over/switch volume out of September and into future months.

The dollar index has shot a bit higher starting around 8:05 a.m. BST — and as of 8:45 a.m. in London/9:45 a.m. in Zurich, it’s up 11 basis points.

That’s all I have for today, which wasn’t all that much.

Have a good weekend — and I’ll see you here on Saturday.

Ed

Yet Another Monster Silver Deposit Into SLV

15 August 2019 — Thursday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price didn’t do much of anything in Far East trading on their Wednesday — and began to head higher at 11 a.m. in London trading.  That rally was capped and turned lower at exactly 1:00 p.m. in New York — and it chopped quietly and very unevenly lower until trading ended at 5:00 p.m. EDT.

The low and high tick in the October contract were reported as $1,499.00 and $1,528.40 — and in December, those numbers were $1,504.50 and $1,534.90.

Gold was closed on Wednesday at $1,516.10 spot, up $15.20 on the day — and about six bucks off its high tick.  Net volume was ginormous as always at just over 483,500 contracts — and there was a hair under 13,000 contracts worth of roll-over/switch volume in this precious metal.

The price path that silver took on Wednesday was almost identical to that of gold’s…except that the price began to crawl quietly higher starting around 1:30 p.m. China Standard Time on their Wednesday afternoon.  The price was capped at the $17.29 spot mark at 1:00 p.m. in New York trading as well — and starting about five minutes before the 1:30 p.m. COMEX close, it was sold lower until a few minutes after 3 p.m. in after-hours trading.  It didn’t do much after that.

The low and high ticks in silver were recorded by the CME Group as $16.855 and $17.305 in the September contract.

Silver was closed on Wednesday at $17.18 spot, up 26 cents from Tuesday — and around 11 cents off of its high of the day.  Net volume was way up there at a bit under 100,500 contracts — and there was a bit over 16,000 contracts worth of roll-over/switch volume out of September and into future months.

The platinum price traded ruler flat until 9 a.m. in Shanghai on their Wednesday morning — and the selling pressure began at that point.  It turned higher shortly after the Zurich open — and made it back within a dollar of unchanged by minutes before 2 p.m. CEST/8 a.m. EDT…but that’s as high as it was allowed to get.  It was sold quietly lower until around 12:30 p.m. in New York — and its tiny gains after that had all disappeared by the 5:00 p.m. EDT close.  Platinum was closed at $842 spot, down 10 bucks from Tuesday.

Palladium was sold lower starting shortly after 8 a.m. in Shanghai — and that sell-off lasted for a couple of hours — and from that juncture the price didn’t do much until around 10:25 a.m. in Zurich on their Wednesday morning.  The price pressure in this precious metal began at that point — and the low tick was set about 11:40 a.m. in COMEX trading in New York.  And, like for platinum, its rally attempt after that was mostly negated by the 5:00 p.m. close.  Palladium was closed at $1,408 spot, down 19 dollars on the day.

The dollar index closed very late on Tuesday afternoon in New York at 97.81 — and opened down 2 basis points once trading commenced at 7:45 p.m. EDT on Tuesday evening, which was 7:45 a.m. China Standard Time on their Wednesday morning.  It crept a bit higher until around 1:20 p.m. CST — and then edged unevenly lower until a ‘rally’ developed about five minutes before the COMEX open in New York.  That ‘rally’ wasn’t overly exuberant — and ran out of gas around 4:05 p.m.  — and it slipped a tiny handful of basis points going into the 5:30 p.m. close.  The dollar index finished the Wednesday session at 97.99…up 18 basis points from Tuesday’s close.

It was another day where what was going on in the currency markets had pretty much zero to do with what happening in the precious metals.

Here’s the DXY chart, courtesy of Bloomberg as always.  Click 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…97.83…and the close on the DXY chart above was 16 basis points on Wednesday.  Click to enlarge as well.

The gold stocks opened up over 2 percent — and then were sold lower until around 11:40 a.m. in morning trading in New York.  They rallied almost back to their previous highs by a minute after 1 p.m. — and when gold was capped a turned lower at that juncture, the shares followed.  The HUI closed up only 0.17 percent.

The silver equities open up something less than two percent — and they were sold lower and back into negative territory shortly after than.  They managed to poke their respective noses back above the unchanged mark by around 1 p.m. EDT.  The silver price was also capped and turned lower at that time — and the shares zealously followed, as Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down another 2.35 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.

Although I suspect that some of yesterday’s sell-off in the precious metal stocks was related to the general swoon in the New York equity markets on Wednesday…I can’t shake the feeling that there’s a heavy hand showing up as a short seller…especially in the silver shares.  I could be wrong about that, but I have to call it the way I see it.  However, if I do get new information, I’m certainly prepared to change my mind.


The CME Daily Delivery Report showed that 749 gold and 138 silver contracts were posted for delivery within the COMEX-approved depositories on Friday.

In gold, the only one of the two short/issuers that mattered was HSBC USA, as they issued 744 contracts out of their in-house/proprietary trading account.  There were ten long/stoppers in total — and the four largest were JPMorgan with 342 for its client account…Macquarie Futures with 160 contracts for its own account…Citigroup with 134 for its own account as well — and in fourth spot was Advantage, with 70 contracts for its client account.

In silver, there four short/issuers in total — and the two biggest were International F.C. Stone with 106 contracts — and Advantage with 22 contracts.  There were five long/stoppers in total — and the two biggest there were JPMorgan and Advantage…picking up 80 and 48 contracts for their respective client accounts.

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 August declined by a further 236 contracts, leaving 1,831 still open, minus the 749 contracts mentioned a few paragraphs ago.  Tuesday’s Daily Delivery Report showed that zero gold contracts were posted for delivery today, so that means that 236 more gold contracts vanished from the August delivery month.  Silver o.i. in August fell by 41 contracts, leaving 140 still around, minus the 138 contracts mentioned a few paragraphs ago.  Tuesday’s Daily Delivery Report showed that 73 silver contracts were actually posted for delivery today, so that means that 73-41=32 more silver contracts just got added to August.

So far this month there have been 5,201 gold contracts issued and stopped — and that number in silver is now up to whopping 1,946 contracts.  That’s the largest number of silver contracts ever delivered in a non-traditional delivery month for silver that I’ve ever seen.  As I’ve said before, the scramble is now on for what’s left of the ever-dwindling supplies of physical sliver that there are.


After a chunky withdrawal from GLD on Tuesday, there was a very decent deposit on Wednesday, as an authorized participant added a hefty 245,189 troy ounces.  And there was another monstrous deposit into SLV…the second one in as many days…as an a.p. added 4,538,290 troy ounces.

In the other silver ETFs, there was 539,348 troy ounces added to Deutsche Bank’s XAD6 fund — along with 146,645 troy ounces added at Sprott.

Once again there was no sales Report from the U.S. Mint.

There was some decent movement in gold over at the COMEX-approved depositories on the U.S. east coat on Tuesday.  HSBC USA reported receiving 65,909.550 troy ounces/2,050 kilobars [SGE kilobar weight].  There was no ‘out’ activity.  Ted said that they most likely brought it in reluctantly.  But as one of the largest short/issuers in gold, it appeared to him that some of the long/stoppers were demanding delivery of physical metal, so they had to buy it, as they obviously had none of their own to deliver.  I suspect that this delivery situation will be resolved very shortly.  The link to this activity is here.  [I wrote this paragraph four hours before the Daily Delivery Report came out — and it’s now obvious that Ted called it exactly right. – Ed]

There wasn’t much going on in silver, as only 954 troy ounces was received — and 20,703 troy ounces was shipped out.  There was also a paper transfer of 9,976 troy ounces from the Registered category — and back into Eligible.  I won’t bother itemizing all this, but if you want to look for yourself, the link is here.

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


Here are two charts that I haven’t posted for a couple of months.  They show the total gold and silver holdings of all know depositories, mutual funds and ETFs over the last twenty years…plotted against the prices of their underlying precious metals.

Gold on deposit hasn’t yet reached its old high from back in late 2012 — and currently sits at 96.56 million troy ounces.  The amount of silver in these same depositories is at a new all-time high…1.13 billion troy ounces — and broke above its old all-time high just about five years ago.  Click to enlarge for both.

It was a fairly eventful news day — and I have a decent number of stories/articles for you again today.


CRITICAL READS

Bonds Signal Growing Global Distress After Key Yield Curve Flips

The U.S. government bond market sounded alarms Wednesday as investors fleeing riskier assets drove the 30-year bond’s yield to a record low and the 10-year yield fell below the rate on the two-year for the first time since 2007.

The 10-year Treasury yield dipped as much as 1.9 basis points below the two-year yield in what’s considered a harbinger of a U.S. economic recession beginning in the next 18 months. That expectation, nurtured in recent weeks by worsening U.S.-China trade relations and signs global growth is slowing, was bolstered Wednesday by weak Chinese and German economic data. The so-called inversion drew U.S. President Donald Trump’s ire, who tweeted Wednesday that Federal Reserve chairman Jerome Powell is “clueless.”

Bad European and Chinese data were the trigger for the global bond rally, said Praveen Korapaty, chief global rates strategist at Goldman Sachs Group Inc. “From the pace of the move, I suspect some long-held steepeners are being unwound as well.”

Another widely watched recession indicator, the yield difference between three-month and 10-year Treasuries, inverted in March and has been negative much of the time since, bedeviling investors who anticipated that the yield curve would steepen as the Federal Reserve began to cut interest rates. The global bid for bonds also inverted the two-year to 10-year U.K. yield curve Wednesday.

This Bloomberg article first appeared on their Internet site at 2:56 a.m. PDT on Wednesday morning — and was updated about ten hours later.  I thank Patrik Ekdahl for sending it our way — and another link to it is here.  The rt.com spin on this is headlined “‘Crazy inverted yield curve’: Trump launches blistering attack on Fed chief Powell” — and I thank George Whyte for that one.


Recession Warnings Pile Up for the Battered Global Economy

Another day, another round of bad news highlighting the risk that the global economy is headed for a serious downturn.

China reported the weakest growth in industrial output since 2002. Germany’s economy shrank as exports slumped, and euro-area production plunged the most in more than three years as the overall expansion cooled. U.S. and U.K. bond markets sent their biggest recession warnings since the global financial crisis.

News from the economic giants dented the market relief in the wake of U.S. President Donald Trump’s decision to delay some tariffs on Beijing. European stocks declined on Wednesday and bonds rose. The gap between two-year and 10-year government debt in both the U.K. and U.S. fell below zero, a shift that typically predates a contraction.

With trade spats, cooling global demand and geopolitical crises all coalescing to hit growth, the world economy is heading for its weakest expansion since the financial crisis. Central banks have rushed in to provide support, with the U.S. Federal Reserve among those cutting interest rates in recent weeks. The European Central Bank is widely expected to follow next month.

The downturn is also ramping up pressure on governments to step up to the plate with fiscal stimulus.

This is another Bloomberg article from Patrik Ekdahl.  It appeared on their website at 3:25 a.m. PDT on Wednesday morning — and another link to it is here.  And here’s another one of Gregory Mannarino’s classic rants from after the market close yesterday — and it’s worth watching.


Subprime Auto Loans Blow Up, Delinquencies at 2009 Level, Biggest 12-Month Surge Since 2010

The auto industry depends on subprime-rated customers that make up over 21% of total auto-loan originations. Without these customers, the wheels would come off the industry. And tightening up lending standards to reduce risks would cause serious damage to the undercarriage. Subprime lending is very profitable – until the loans blow up – because interest rates can be high. But those subprime auto loans are blowing up at rates not seen since the worst days of the Financial Crisis – and these are the good times!

Serious auto-loan delinquencies – 90 days or more past due – in the second quarter, 2019, jumped 47 basis points year-over-year to 4.64% of all outstanding auto loans and leases, according to New York Fed data released today. This is about the same delinquency rate as in Q3 2009, just months after GM and Chrysler had filed for bankruptcy. The 47-basis-point jump in the delinquency rate was the largest year-over-year jump since Q1 2010:

But this time there is no economic crisis. The unemployment rate and unemployment claims are hovering near multi-decade lows, and employers are griping about how hard it is to hire qualified workers without having to raise wages. So, unlike during the Financial Crisis, this surge in the delinquency rate has not been caused by millions of people having lost their jobs. It’s not the economy that did it. It’s the industry.

Of those $1.3 trillion in auto loans, 4.64%, or a record of $60.2 billion, are 90+ days delinquent, which gives the chart below quite an amazing trajectory. But this is not an employment crisis, when millions of people lose their jobs and cannot make the payments on their auto loans. What will this chart look like when the economy turns, and unemployment surges again, and people cannot make their car payments? No one has an appetite for making projections here.

This interesting, but not surprising 3-chart commentary from Wolf showed up on his Internet site on Tuesday sometime — and I thank Richard Saler for pointing it out.  Another link to it is here.


Macy’s Crashes to 9-Year Lows After Slashing Outlook

Macy’s shares are down 14% in the pre-market – the lowest since Feb 2010 – after missing Q2 expectations and cutting its full-year guidance for earnings, blaming weather, fashion, inventory and markdown issues.

Macy’s said diluted earnings for the three months ending in July came in at 28 cents per share, down 47.2% from the same period last year and well shy of the Street consensus forecast of 45 cents per share.

But it gets worse, as the company looks into 2019, Macy’s said it now sees diluted earnings in the region of $2.85 to $3.05 per share, down from a prior forecast of $3.05 to $3.25 per share.

We had a slow start to the quarter and finished below our expectations. Rising inventory levels became a challenge based on a combination of factors: a fashion miss in our key women’s sportswear private brands, slow sell-through of warm weather apparel and the accelerated decline in international tourism,” said CEO Jeff Gennette.

We took markdowns to clear the excess Spring inventory and are entering the Fall season with the right inventory to meet anticipated customer demand.”

Our 2019 strategic initiatives are on track to contribute to sales growth in the back half of the year, and we have plans to drive productivity and improve gross margins,” Gennette added.

Our team has responded quickly to the external environment, course corrected when needed and we remain confident

Cue the tweet from the president blasting Jeff Bezos (will Amazon take over the parade?)

This 1-chart Zero Hedge article showed up on their website at 8:15 a.m. on Wednesday morning EDT — and I thank Brad Robertson for sending it along.  Another link to it is here.


Inflation Has Eroded the U.S. and Chinese Economies — Bill Bonner

One day, the China trade imbalance is such a national emergency that you’re willing to disrupt hundreds of billions in world trade and risk a global recession to set it right. The next, you call it off because it might interfere with the Christmas shopping season.

That was the big news yesterday. Once again, Trump backed off. Scheduled to go “Full Retard” just two and a half weeks from now, he changed his mind.

This completely contradicts claims that the “Chinese pay the tariffs.” But it is consistent with our prediction…

The whole world is in an Inflate-or-Die trap. The world economy lives on cheap credit, not on real earnings.

That is, it depends on rising levels of monetary inflation (aka debt) to keep living in the style to which it has become accustomed.

China plays a key role in the whole inflation hullabaloo.

First, it has brought some 300 million peasants in from the fields so they could make things cheaply, thus keeping consumer price inflation low while asset price inflation runs wild.

Second, in order to build out its production capacity, it became the world’s biggest buyer of iron ore, copper, oil, and other primary resources – helping to keep money flowing to the raw material suppliers.

Third, it took its dollar profits and recycled them into U.S. bonds… helping finance Washington’s borrowing spree without raising interest rates.

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


Germany on Brink of Recession as Economy Shrinks in Q2

In the latest sign that the economic powerhouse of Europe is teetering on the edge of recession thanks to the trade war between the US and China, Germany’s export-heavy economy shrank by 0.1% in the three months through June, according to official data published Wednesday by Destatis, the country’s federal statistics office.

The disappointing economic data – the second contraction in four quarters – comes one day after the ZEW Survey of financial market experts showed that German economic sentiment in August dropped to its lowest reading since 2011, which is stoking concerns that the German economy could slide into recession during Q3.

The industrial sector tipped the economy into contraction in 2Q, said BBG economic Jamie Rush, and there’s risk of further weakness in the second half of the year.

If there’s any good news to take from this release, it’s that services must have continued to expand, indicating patches of resilience persist.”  Click to enlarge.

Economy Minister Peter Altmaier tried to put a positive spin on the numbers, telling Bild that Germany can avoid a recession if the government responds with the right policies. However, the Q2 data are a “a wake-up call and a warning sign,” Altmaier said.

We are in a phase of weak growth but not yet a recession,” he said. “The simmering trade conflicts are taking their toll and Germany’s export-orientated manufacturing sector is particularly affected” Germany needs “intelligent policies for growth,” including easing the burden on small and mid-sized companies, cutting corporate tax and a “clear plan” for the complete withdrawal of the so-called “Solidarity Tax.”

This 3-chart Zero Hedge story appeared on their Internet site at 6:40 a.m. EDT on Wednesday morning — and it’s another contribution from Brad Robertson.  Another link to it is here.


We Are Struggling:” Air Cargo Performance Slumps Across Major European Air Ports

The German ZEW headline number on Tuesday crashed to -44.1 versus -28.5 expectations and -24.5 last. The indicator measures economic sentiment shows the Germany economy could be teetering on the edge of a manufacturing recession.

The most recent escalation in trade disputes between the U.S. and China, the risk of a full-blown trade war and competitive devaluations, has put extreme pressure on the European economy, that is visible in declining freight performance at major airport cargo hubs.

Data from the Airports Council International (ACI) reports freight performance at Europe’s airports in 1H19 has been faltering, with only 30% of the top ten cargo gateways reporting YoY growth, reported JOC.

In 1H19, Madrid, Barcelona, and London were the only airports to record YoY growth. Frankfurt, the top air cargo hub in Europe, registered a drop of -2.5% YoY.

ACI said cargo gateways at airports across Europe, on an overall basis, recorded a -3.5% fall in 1H19.

Olivier Jankovec, director-general of ACI Europe, said European air freight data experienced significant deterioration in June, indicates that the rest of the summer through early fall could remain in decline. “The slump in freight traffic is where it really bites at the moment,” he said. “And it is not getting any better, with June registering a drop of 7.1%, the worst monthly performance in more than seven years.”

This news item was posted on the Zero Hedge website at 2:45 a.m. EDT on Wednesday morning — and another link to it is here.  A parallel Zero Hedge article from late Tuesday night EDT is headlined “USPS Reports First Drop in Package Volume in Nearly a Decade


Indian consumers defer old gold sales on hopes of further rise in prices

After a buoyant June quarter, Indian consumers are now staying away from fresh sale of old or used gold and jewellery to generate cash in July and August, due to forecasts of a further rise in bullion prices.

Data compiled by the World Gold Council (WGC), the global gold miners’ body, estimated a record 37.9 tonnes of gold recovered from scrap jewellery in April-June 2019 quarter, up 18.4 per cent from 32 tonnes reported in the corresponding period last year.

Since then, gold started moving up in the international market following estimates of US Fed’s interest rate cut, which weakened dollar but strengthened bullion. Analysts started forecasting robust safe-haven buying in gold amid fears of escalation in the ongoing trade war between the United States and China, and geo-political tensions in West Asia following global economic sanctions on Iran.

There has been less consumer turnout for sale of used jewellery since July due primarily to hopes of further price increase. Used jewellery sales have declined by 50-60 per cent in six weeks starting July 1,” said Manoj Kumar Jha, Managing Director, Kamakhya Jewels, a Mumbai-based jewellery maker and retailer.

Echoing a similar response, Anantha Padmanaban, Chairman of All India Gems and Jewellery Domestic Council (GJC) and managing director of Chennai–based NAC Jewellers said, “Indian consumers sell old jewellery only when they need urgent cash. Most had already sold their allocated quantity in the June quarter. Hence, sale of scrap jewellery in July and August has been significantly lower. We estimate a sharp decline in used jewellery sales during September quarter.”

When you see this sort of response from Indian consumers, you know that they now smell a much higher price for gold in the future — and they would be right about that.  This gold-related news item appeared on the business-standard.com Internet site at 9:43 p.m. IST [India Standard Time] on their Wednesday evening, which was 11:13 a.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 curbs gold imports as trade war heats up

China has severely restricted imports of gold since May, bullion industry sources with direct knowledge of the matter told Reuters, in a move that could be aimed at curbing outflows of dollars and bolstering its yuan currency as economic growth slows.

The world’s second largest economy has cut shipments by some 300-500 tonnes compared with last year – worth $15-25 billion at current prices, the sources said, speaking on condition of anonymity because they are not authorized to speak to the media.

The restrictions come as an escalating trade confrontation with the United States has dragged China’s pace of growth to the slowest in nearly three decades and pressured the yuan to its lowest since 2008.

China is the world’s biggest importer of gold, sucking in around 1,500 tonnes of metal worth some $60 billion last year, according to its customs data – equivalent to one-third of the world’s total supply.

But quotas have been curtailed or not granted at all for several months, seven sources in the bullion industry in London, Hong Kong, Singapore and China said.

There are virtually no import quotas now issued in China,” one source said. In June and July “next to nothing” was imported by banks, they said.

This Reuters story co-filed from London and Beijing, put in an appearance on their Internet site at 10:58 a.m. EDT on Wednesday morning — and was updated a few hours later.  I extracted it from a Zero Hedge article that Brad Robertson sent our way.  Another link to it is here.


Largest pink diamond ever found in Russia to fetch up to $65 million

A 14.83-carat pink oval diamond found and polished by Russia’s Alrosa could fetch up to $65 million when it goes up for sale in November.

The “fancy, vivid” purple-pink stone, cut from a rough found in 2017 at the Ebelyakh deposit in Yakutia, is the largest of its kind ever found in Russia. Before the diamond, named The Spirit of the Rose, was mined, the company’s biggest pink gem had weighed 3.86 carats.

In the last year, Alrosa has worked on boosting revenue from selling rare, coloured diamonds where demand is stable, although it is a niche business.

According to market analysts, the average price for pink, yellow, blue and green stones has risen consistently by 12% a year over the last few decades, driven by consumer demand for the exotic and unusual. This means they are less affected by other factors driving general diamonds’ supply and demand.

This interesting story, complete with a nice photo, was posted on the mining.com Internet site at 10:02 a.m. EDT on Wednesday morning — and it comes to us courtesy of Patrik Ekdahl.  Another link to it is here.


The PHOTOS and the FUNNIES

Here are three more photos from in and around Thacker Regional Park in Hope, B.C. on May 27.  The first is of Thacker Marsh, the second of the salmon-spawning stream that flows out of it — and the third a meadow of yellow wild flowers…not dandelions!  Spring is my favourite season of the year.  Click to enlarge.


The WRAP

It was another quiet rally day in both gold and silver — and if ‘da boyz’ did appear on Wednesday, their light touch showed up at 1 p.m. EDT in New York.  The sell-offs in both platinum and palladium…particularly the latter…appeared much earlier during the day.  It’s just unfortunate/suspicious that their respective equities aren’t being allowed to join in this fun over the last couple of trading days.

Here are the 6-month charts for the four precious metals, plus copper and WTIC.  Both gold and silver closed at new highs for this move up yesterday.  Platinum made a new low for this move down — and palladium gave up all its Tuesday’s gains, plus a bit more.  Most of the gains in copper and WTIC on Tuesday, disappeared as well.  Click to enlarge.

And as I type this paragraph, the London open is less than ten minutes away — and I see that the gold price began to rally at 9 a.m. China Standard Time on their Thursday morning — and was up 5 bucks and change about an hour later. That ran into ‘resistance’ almost right away. It has been edging very quietly lower since — and that sell-off picked up even more steam shortly before 2 p.m. CST — and ‘da boyz’ had gold down over 6 bucks at one point. It has bounced off its current low — and is only down $3.30 on the day as London opens. The price path for silver was guided in a similar manner — and from up 14 cents or so, it’s now down back at unchanged. Platinum hasn’t done much — and is sitting at unchanged currently. Palladium on the other hand rallied quietly until around 10:30 a.m. CST — and has been trading mostly sideways since — and is up 12 dollars as Zurich opens.

Net HFT gold volume is a bit over 83,500 contracts — and there’s 1,554 contracts worth or roll-over/switch volume on top of that. Net HFT silver volume is just under 20,000 contracts — and there’s 1,588 contracts worth of roll-over/switch volume out of September and into future months.

The dollar index opened down 3 basis points once trading commenced at 7:45 p.m. in New York on Wednesday evening, which was 7:45 a.m. China Standard Time on their Thursday morning. From that juncture it didn’t do much until around 10:15 a.m. CST — and it began to edge quietly lower from there. That lasted until around 2:35 p.m. CST, when it blasted back into positive territory by a hair in about five minutes flat. That didn’t last long — and as of 7:45 a.m. BST in London/8:45 a.m. CEST in Zurich, it’s down 2 basis points.


All is certainly not well in the U.S. equity markets, as the biggest ‘Everything Bubble’ in world history is on the brink of imploding…with the U.S. bank stocks — and Deutsche Bank…really taking it on the chin again yesterday.  Here’s the 5-year BKX/KBW Bank Index chart, so you can see this for yourself.  Click to enlarge.

Nothing can save it, along with the rest of the world, from the fate that was cast in stone ever since Nixon took the world off of what was left of the Bretton Woods gold standard.  All we’re waiting for now is the pin or black swan that marks the beginning of the end.  The PPT in the U.S…along with the rest of the central banks of the world…will be helpless when the final implosion commences, if they want to stop it at all, that is.


And as I post today’s missive on the website at 4:10 a.m. EDT, I note that gold is a bit lower as the first hour of London trading draws to a close. It’s down $3.70 the ounce — and silver is now down 5 cents. Platinum is down 2 dollars — and palladium is only up 7 bucks as the first hour of Zurich trading ends.

Gross gold volume is 56,500 contracts — and minus what little roll-over/switch volume there is, net HFT gold volume is about 54,500 contracts. Net HFT silver volume is 24,500 contracts — and there’s 1,905 contracts worth of roll-over/switch volume out of September and into future months.

The dollar index hasn’t done much in the last hour — and as of 8:45 a.m. in London/9:45 a.m. in Zurich, it’s down 5 basis points.

It’s impossible to know if JPMorgan et al. are going to reappear in force like they did on Tuesday.  According to Ted, the Big 8 traders [sans JPMorgan] are already in a record high financial hole with their “open and unrealized losses“…so all we can do is wait it out and see what happens going forward.

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

Ed

‘Da Boyz’ Are Back In Town…But For How Long?

14 August 2019 — Wednesday

YESTERDAY in GOLD, SILVER,PLATINUM and PALLADIUM


NOTE: The CME Group’s volume data has not been available since the close of COMEX trading on Tuesday, so none of that is available in today’s column…nor is the high/low price date for either gold or silver.  I’ve typed up the words — and will add that information to the website version of today’s column when it becomes available…which was around 5 a.m. EDT this morning.Ed


The gold price traded flat until 9 a.m. China Standard Time on their Tuesday morning — and over the next hour it rallied about seven dollars or so.  It then traded flat once again until shortly after 1:30 p.m. CST — and at that juncture it began to head quietly and unevenly higher until the price was capped and turned lower around 11:15 a.m. in London trading.  That sell-off continued until a very few minutes before the afternoon gold fix — and then ‘da boyz’ really hammered the price into the dirt. It recovered quickly from there…and back above $1,500 spot by a bit…until around 11:20 a.m. in New York trading — and didn’t do a whole lot of anything after that.

The low and high ticks in gold in October were recorded by the CME Group as $1,539.50 and $1,483.00 in the October contract — and $1,546.10 and $1,488.90 in December.

Gold was closed in New York yesterday at $1,500.90 spot, down $9.60 on the day.  Net volume in October and December combined was, as you can imagine, ginormous at 597,500 contracts — and there was a bit over 20,000 contracts worth of roll-over/switch volume on top of that.

The price path for silver was guided in an identical manner as gold’s, with exactly the same price inflection points as well, so I’ll spare you the play-by-play.

The high and low ticks in this precious metal were $17.49 and $16.51 in the September contract…a 98 cent intraday move…5.75 percent based on Monday’s closing price.

Silver was closed in New York on Tuesday at $16.92 spot, down 11.5 cents from Monday.  Net volume was monstrous at a bit over 147,500 contracts — and there was just under 38,000 contracts worth of roll-over/switch volume out of September and into future months.

Ditto for platinum — and it was closed at $852 spot, down 3 bucks on the day.

Palladium, as always seems to be the case, was the outlier yesterday.  It was up 14 dollars by shortly before 11 a.m. in Zurich — and its low tick was set shortly after 9:30 a.m. in New York.  From there it blasted skyward until shortly before 10:30 a.m. EDT — and from that juncture it crept very quietly and unevenly lower until trading ended at 5:00 p.m.   Platinum finished the Tuesday session at $1,437 spot, up 24 dollars from Monday’s close.

It was another blatant in-your-face engineered price decline in three of the four precious metals yesterday and, as always, the CFTC and the mining companies will say and do nothing.


The dollar index closed very late on Monday afternoon in New York at 97.38 — and it’s impossible to tell how it opened, as the DXY trace on the Bloomberg chart below didn’t start recording data until around 9:05 a.m. China Standard Time on their Tuesday morning.  It was up 10 basis points at that point.  The Far East high tick, such as it was, came at 11:20 a.m. CST — and from there the index began to creep quietly lower.  The sell-off became far more pronounced starting around 9:40 a.m. in London — and the 97.32 low tick came a very few minutes after the 8:20 a.m. COMEX open in New York.  A ‘rally’ began at that juncture that really took off a few minutes before 10 a.m. EDT — and that lasted until the afternoon gold fix in London, which came a few minutes later.  From that point it crawled quietly higher until the 97.85 high tick was printed around 4:35 p.m. — and it didn’t do a thing after that.  The dollar index was closed on Tuesday at 97.81…up 43 basis points from Monday.

Until the dollar index ‘rally’/ramp job commenced minutes after the COMEX open, there was no correlation between the precious metal prices and what was happening in the currency markets.  But the powers-that-be invented one so they could use it as an aid/cover to bash the precious metals — and it worked like a charm.

Here’s the DXY chart from Bloomberg as usual — and you should note the late start on the data trace…not the usual 7:45 p.m. EDT open.  Click to enlarge.

And here’s the 6-month U.S. dollar index chart, courtesy of stockcharts.com.  The delta between its close…97.63…and the close on the DXY chart above, was 18 basis points on Tuesday.  Click to enlarge as well.

The gold shares opened up a bit — and were then sold down hard into the afternoon gold fix in London…gold’s low tick of the day.  Then then proceeded to follow the gold price like a proverbial shadow for the remainder of the Tuesday trading session.  The HUI closed down 1.75 percent, which I didn’t think was all that bad, all things considered.

The silver equities followed the silver price like a shadow as well, but Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down a chunky 2.97 percent…which I thought was out of all proportion to the sell-off in the underlying precious metal.  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 for Day 10 of the August delivery month showed that zero gold and 73 silver contracts were posted for delivery within the COMEX-approved depositories on Thursday.

In silver, the three short/issuers were ADM, Advantage and ABN Amro, with 53, 15 and 5 contracts out of their respective client accounts.  Of the four long/stoppers in total, the three biggest were JPMorgan, Advantage and ABN Amro with 41, 22 and 9 contracts — and 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 August declined by 116 contracts, leaving 2,067 still open.  Monday’s Daily Delivery Report showed that 4 gold contracts were actually posted for delivery today, so that means that 116-4=112 more gold contracts disappeared from the August delivery month.  Silver o.i. in August fell by 29 contracts, leaving 181 still around, minus the 73 mentioned a few paragraphs ago. Monday’s Daily Delivery Report showed that 49 silver contracts are actually posted for delivery today, so that means that 49-29=20 more silver contracts were added to August.


There was a decent sized withdrawal from GLD yesterday, as an authorized participant removed a very chunky 357,249 troy ounces.  But it was the opposite in SLV, as an a.p. added an eye-watering 6,062,297 troy ounces of silver.

There were no other large additions or withdrawals from any of the other ETFs in either silver or gold on Tuesday.

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

The only activity in gold over at the COMEX-approved depositories on the U.S. east coast on Monday was 64.300 troy ounces/2 kilobars [U.K/U.S. kilobar weight] that departed Manfra, Tordella & Brookes, Inc. — and I won’t bother linking this.

It was far busier in silver once again, as 900,140 troy ounces was reported received, but only 50,261 troy ounces was shipped out.  Of the ‘in’ activity, there was one truckload…600,156 troy ounces, dropped off at CNT — and the remaining 299,984 troy ounces found a home over at Brink’s, Inc.  In the ‘out’ category, there was 30,182 troy ounces that departed CNT — and the remaining 20,079 troy ounces left the Loomis International depository.  There was also a paper transfer of 40,221 troy ounces from the Registered category — and back into Eligible over at CNT.  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 271 of them — and shipped out only 16.  All of this occurred at Brink’s, Inc. as usual — and the link to that, in troy ounces is here.


The West Bagborough Hoard is a hoard of 670 Roman coins and 72 pieces of hacksilver found in October 2001 by metal detectorist James Hawkesworth near West Bagborough in Somerset, England.  No trace of buildings or other structures were found in the area.

Following a treasure inquest at Taunton, the hoard was declared treasure and valued at £40,650. Somerset County Museum Services acquired the hoard, with the aid of Somerset County Council, the Heritage Lottery Fund, and £16,400 from the Victoria and Albert Museum/Resource Purchase Grant Fund. It is now displayed at the Museum of Somerset in the grounds of Taunton Castle.

The 681 coins included two denarii from the early 2nd century and eight miliarense and 671 siliqua all dating from the period A.D. 337 – 367, but including a large number of copies some silver and others from a copper alloy covered with silver sheet. The latest coins indicate that the hoard was buried in circa A.D. 365. The majority were struck in the reigns of emperors Constantius II and Julian and derive from a range of mints including Arles and Lyons in France, Trier in Germany and Rome. There were also 64 pieces of hacksilver, weighing a total of 722gm.  Click to enlarge.

After a huge list of stories/articles in Tuesday’s column, I have very little for you today.


CRITICAL READS

The Fed Should Let the Market Set Rates — Bill Bonner

Yesterday, stocks traded down. Investors are getting spooked by high bond prices (low yields).

Central bankers must think they are repairing a lawn mower. So rather than do the right thing – and let Mr. Market set prices and interest rates – they get out the screwdrivers and wrenches and go to work on it themselves.

Faced with the next crisis, the grease monkeys at central banks are going to do what everyone expects them to do. They’ll turn the screws on savers, harder than ever. They’ll buy bonds and force interest rates down – all to keep the (fake) money pumping into the bubble markets.

The gamblers are front-running the Fed, bidding trillions of dollars’ worth of bonds into negative-yield territory, confident that the Fed will push prices even higher.

But stock investors have eyes too.

They see the bond market flashing a warning: yikes, an “inverted yield curve” – with lower yields for long-term bonds than for short-term ones.

They know it signals recession. So they sell stocks – triggering the very sell-off the Fed was trying to avoid.

The level of claptrap is breathtaking.

This very worthwhile commentary from Bill put in an appearance on the bonnerandpartners.com Internet site early on Tuesday morning EDT — and another link to it is here.


Terrible” 52-Week Auction Confirms Plunge in Market Liquidity

When it comes to investing in safe assets such as U.S. Treasuries, the decision process is relatively simple: one buys coupon securities (with a maturity over 1 year), on specific expectations of inflation (or deflation) and receiving current income in the form of a cash coupon (assuming there is one). When it comes to T-Bills the decision is simpler: it’s all about liquidity preference – does one keep cash equivalents in the form of U.S. Dollars, whether paper or electronic, or does one purchase Bills, with a maturity from 4- to 52-weeks. If investors are mostly happy to exchange money for Bills, it is generally said that liquidity in the financial system is ample; if however investors are unwilling to part with their “cash” in order to fund the U.S. Treasury (as a reminder, in a time of chronic budget deficits, Uncle Sam has to issue debt to fund its operations), then there is a liquidity shortage.

We bring this up because last week we warned that as the Treasury scrambles to rebuild its cash balance to roughly $350BN from the latest $133BN in Treasury cash, a process that will require the aggressive gross and net issuance of T-Bills, liquidity in the system was set to collapse.  Click to enlarge.

In fact, according to Bank of America the liquidity shortage over the next two months – a period in which as shown in the chart above the Treasury would aggressively be issuing bills – would be so acute, that the Fed may be forced to launch QE, a conclusion which JPMorgan echoed just days later.

Today, we got the first proof that Bank of America may be right when we observed just how tight liquidity already is in today’s sale of $28 billion in 52 week bills by the Treasury, an auction which went so poorly it was widely panned by analysts, with Stone & McCarthy going so far to describe it as terrible.

The auction was so ugly, in fact, that it prompted Jefferies to notes that “if you are looking for a pretty auction, look someplace else” while SMRA chimed in that “the combination of extreme recent market volatility and the record auction size made for a terrible auction.”

While it remains unclear if the Fed will have to step in and launch QE in the next few months to offset the plunge in market liquidity, a few more “terrible” auctions like today’s 52-Week sale and Powell may have no choice.

No surprises here, as this issue has been sneaking up on the markets for a while now.  This Zero Hedge article was posted on their Internet site at 6:06 p.m. on Tuesday evening EDT — and another link to it is here.


Greenspan sees no barriers to negative yields on Treasuries

Former Federal Reserve Chairman Alan Greenspan says he wouldn’t be surprised if U.S. bond yields turn negative. And if they do, it’s not that big of a deal.

There is international arbitrage going on in the bond market that is helping drive long-term Treasury yields lower,” Greenspan, who led the central bank from 1987 to 2006, said in a phone interview. “There is no barrier for U.S. Treasury yields going below zero. Zero has no meaning, beside being a certain level.

Negative yields are confounding traditional fixed-income investors. Lenders traditionally were compensated for parting with their money, while borrowers paid to use that cash for some purpose. That’s no longer the case in many markets outside the U.S., with more investors coming to grips with the changing dynamics of global markets over the last few years.

Escalating trade tensions between the U.S. and China, worsening global growth, political tensions in Europe and more central banks embarking on policy easing has resulted in more than $15 trillion of negative-yielding bonds worldwide. Add in U.S. stock-market volatility that is prompting investors to scoop up Treasuries and the result is yields on benchmark U.S. securities racing toward record lows.  Click to enlarge.

This Bloomberg news item was posted on their website at 8:34 a.m. Pacific Daylight Time on Tuesday morning — and I plucked it from a GATA dispatch on Tuesday evening.  Another link to it is here.


Singapore second-quarter GDP falls 3.3%, cuts 2019 growth forecast

Singapore slashed its full-year economic growth forecast on Tuesday, as global conditions were seen worsening and final second-quarter data showed the economy shrank 3.3% on the quarter.
The government cut its forecast range for the city-state’s gross domestic product to zero to 1% from its previous estimate for 1.5% to 2.5%.

The second quarter’s 3.3% contraction was slightly smaller than the 3.4% decline seen in the government’s advance estimate on a seasonally adjusted and annualized quarter-on-quarter basis, but firmed bets a recession may be around the corner.

Economists in a Reuters poll had expected the final reading to show a 2.9% fall.

Looking ahead, GDP growth in many of Singapore’s key final demand markets in the second half of 2019 is expected to slow from, or remain similar to, that recorded in the first half,” the Ministry of Trade and Industry said in a statement on Tuesday.

This economic news item appeared on the cnbc.com internet site on Monday at 8:28 p.m. EDT — and was updated about thirty minutes after that.  I thank Swedish reader Patrik Ekdahl for pointing it out — and another link to it is here.


China July Industrial Output Growth Weakens to 17-Year Low

China posted the weakest industrial output growth since 2002 and slumping retail sales in July, as a cyclical slowdown and trade tensions add to the case to roll out more stimulus.

Industrial output rose 4.8% from a year earlier, retail sales expanded 7.6%, and fixed-asset investment slowed to 5.7% in the first seven months. While some seasonal effects likely compressed the data, all results were lower than forecast by economists in a Bloomberg survey.

The output data coupled with weak credit demand in the month signal that the world’s second-largest economy is still struggling to stabilize. A partial delay of President Donald Trump’s next tranche of tariffs is cheering markets, but adds little in the way of certainty for export companies already reeling from the year-long standoff.

The economy is facing strong headwinds and decelerating,’’ said Gene Ma, chief China economist at the Institute of International Finance in Washington. “More targeted monetary and credit easing are needed. We expect some sort of interest rate cut in the fall.’’

This Bloomberg news story appeared on their Internet site at 7:02 p.m. PDT on Tuesday evening — and was updated about four and a half hours later.  I thank Patrik Ekdahl for sliding it into my in-box in the week hours of Wednesday morning EDT — and another link to it is here.


Why China’s a Paper Tiger — Jim Rickards

Markets are still digesting last week’s Chinese devaluation that sent the Dow crashing over 700 points last Monday.

And as everyone knows by now, the Trump administration labelled China a currency manipulator.

The ironic part of it is that China has been manipulating its currency to strengthen it against the dollar.

Here’s the dynamic you need to understand…

The Chinese yuan is softly pegged to the dollar. To maintain the soft peg, the People’s Bank of China (PBoC) sells dollars and buys yuan.

That props up the yuan. It’s basic supply and demand economics.

One of the primary reasons China tries to strengthen the yuan is to prevent capital flight out of the country. If the yuan depreciates too rapidly, massive amounts of Chinese money would look to flee abroad where it can get much higher returns.

After all, would you want to hold a rapidly deteriorating asset that constantly loses value? Or if you were a Chinese investor, would you try to convert your money into a currency that holds its value?

That’s the question Chinese investors have been facing.

This worthwhile commentary from Jim showed up on the dailyreckoning.com Internet site on Tuesday, but is datelined Monday.  Another link to it is here.  Jim had a parallel/companion piece to this, also from the dailyreckoning.com website — and it’s headlined “China: Paper Tiger” — and it’s worth a look as well.


I didn’t see any precious metal-related news item that I thought worth posting.


The PHOTOS and the FUNNIES

Still in Hope, B.C. on May 27…we revisited one of our favourite spots…Thacker Regional Park — and I took these three photos…plus a bunch more.  My daughter spotted this green frog on a least water-lily pad — and it was a classic photo that I always wanted to take of any frog.  The second shot is of the flower of that type of water lily…complete with hoverfly — and last photo is of wild irises.  They’re a spring flower everywhere around water in B.C.  It’s a highly aggressive grower — and is now considered a noxious weed and banned in some states of the U.S.  Click to enlarge.


The WRAP

Well, the commercial traders, with or without the help of JPMorgan, were at it again yesterday, with the fig leaf of a dollar index ‘rally’ as cover.  Ted wasn’t sure whether this engineered price decline in both silver and gold…plus platinum, involved them or not.  But he was sure that they were covering short positions like mad while it was going on.

Gold didn’t break any moving averages of importance at its low tick on Tuesday, but silver did touch — and then bounce off its 20-day moving average.  The 50 and 200-day moving averages in both are still miles away — and it’s not clear at the moment whether ‘da boyz’ are going to go for a full clean out of the Managed Money longs this time around.  Let’s hope not.

Here are the 6-month charts for the four precious metals, plus copper and WTIC — and the wild intraday price moves in the gold, silver and platinum should be noted.  Palladium is continuing to hoe its own row.  Copper closed up a few cents, but WTIC blasted above — and closed above both its 50 and 200-day moving averages yesterday.  Click to enlarge for all.

And as I type this paragraph, the London open is less than a minute away — and I see that the gold price traded mostly around unchanged in the Far East on their Wednesday. But once the 2:15 p.m. afternoon gold fix was done for the day in Shanghai, the gold price was tapped lower — and it’s currently down $4.00 an ounce. It was mostly the same in silver — and it was also tapped a bit lower after the fix in Shanghai. It’s back at unchanged at the moment. Platinum traded flat until 9 a.m. China Standard Time on their Tuesday morning and, like silver and gold at that time, was sold lower as well. But unlike the other two precious metals, it hasn’t managed to recover from that — and it’s down 6 bucks. Ditto for palladium — and it’s down 9 dollars as Zurich opens.

Because the folks over at the CME’s website are still having issues with their silver and gold volume quotes, there is no volume data as of this time.

The dollar index opened down 2 basis points once trading commenced at 7:45 p.m. EDT on Tuesday evening in New York — and its current 97.73 low tick…such as it is…came at 9 a.m. CST on their Wednesday morning. It began to edge unevenly higher starting around 10:45 p.m. China Standard Time — and was back in the plus couple by a few basis points at one point. But it’s now back below unchanged — and down 4 basis points as of 7:45 a.m. BST in London/8:45 a.m. CEST in Zurich.


Yesterday, at the close of COMEX trading, was the cut-off for this Friday’s Commitment of Traders Report — and after Tuesday’s price action one would think that there will be some substantial decreases in the commercial net short positions in both silver and gold.

But as Ted also pointed out on the phone yesterday, because no major moving averages were broken to the downside during Tuesday’s engineered price declines, it’s difficult to say just how much Managed Money long selling was going on.  Some, most certainly…but how much is something that he will likely address in his mid-week commentary to his paying subscribers this afternoon.

Just looking at the Preliminary Report from yesterday evening suggests that there wasn’t that much, as there weren’t big changes in total open interest in either precious metal.  However, I’ve learned from hard experience that these numbers can’t be entirely trusted, as ‘da boyz’ can cover their tracks pretty good when it suits them.


And as I post today’s efforts on the website at 4:02 a.m. EDT, I note that the gold price has crept a tiny bit higher during the first hour of trading in London — and it’s only down $2.30 the ounce. But silver is now up 8 cents. Platinum is still down 6 bucks — and palladium is down 8 dollars as the first hour of Zurich trading ends.

The CME Group is still having “technical difficulties” with their gold and silver volume data — and as of ten minutes before posting today’s column on the website, this data is still not available.

The dollar index hasn’t done a thing during the last hour — and is still down 4 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

Gold & Silver Rise…Their Shares Get Shorted…Again

13 August 2019 — Tuesday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


NOTEMy ISP…Shaw Cable…decided to take our town down for maintenance about twenty minutes before I normally file my column at 4:02 a.m. EDT — and that’s why it’s late today.  — Ed


The gold price opened flat once trading commenced at 6:00 p.m. in New York on Sunday evening — and didn’t do much for the next hour.  Then it rallied back above the $1,500 spot mark by a bit, but a willing short seller appeared at exactly 8:00 a.m. China Standard Time on their Monday morning — and the price was back at unchanged within two hours.  It didn’t do much from there until 2 p.m. — and then the price pressure reappeared — and that lasted until around 8:30 a.m. in London.  It rallied rather smartly from there that juncture until shortly before 1 p.m. BST — and then was sold down to its New York low by a few minutes after 9 a.m.  It rallied a few dollars into the 10 a.m. EDT afternoon gold fix in London — and then traded pretty flat until it began to tick a bit higher around 2:30 p.m. in after-hours trading.  A sharp spike higher [probably short covering] occurred ten minutes later — and that was hammered lower in pretty short order — and the ensuing rally attempt wasn’t allowed to get far.

The low and high ticks in gold were reported by the CME Group as $1,492.40 and $1,513.50 in the October contract — and $1,498.60 and $1,519.90 in December.

Gold was closed in New York on Monday at $1,510.50 spot, up $14.30 from Friday’s closed.  Net volume in October and December combined was very heavy at 352,000 contracts — and there was 10,500 contracts worth of roll-over/switch volume on top of that.

With some minor variations, the price activity in silver was the same as it was for gold…including all the major price inflection points…plus the 2:40 p.m. EDT price spike in the thinly-traded after-hours market.  And it should be noted that, except for that price spike in after-hours trading, the silver price was pretty much in lock-down mode from 11:40 a.m. EDT onwards.

The low and high ticks in silver were reported as $16.80 and $17.075 in the September contract.

Silver was closed on Monday at $17.035 spot, up 11 cents from Friday and, like gold, well of its high tick.  Net volume was on the heavier side, but not overly so at 64,000 contracts — and there was just under 22,000 contracts worth of roll-over/switch volume out of September and into future months.

Those price spikes in gold and silver in after-hours trading yesterday came at the precise moment that the Dow was saved from oblivion…2:42 p.m. EDT.  Coincidence, you ask?  Hardly, as there aren’t any in the precious metals market. Here’s the snip from BloombergClick to enlarge.

The platinum price was up one or two dollars through morning trading in the Far East on their Monday.  But that all changed shortly before 1 p.m. China Standard Time on their Monday afternoon — and the low tick of the day in this precious metal came at the same moment as it did for both gold and silver.  From there it also rallied until both gold and silver topped out…shortly before 2 p.m. in Zurich/1 p.m. in London — and 8:00 a.m. in New York.  Platinum was then sold lower the moment that the COMEX opened for business — and its New York low was set a very few minutes before the Zurich close.  Its attempts to rally back above unchanged from that juncture were all turned aside — and platinum was closed at $855 spot, down 3 dollars on the day.

The palladium price traded flat in Far East trading yesterday, but the price path sideways became far more agitated once Zurich opened — and that lasted until the 8:20 a.m. COMEX open in New York.  Its rally attempt at that point was hammered lower into the afternoon gold fix in London…but the subsequent rally got capped about twenty minutes after the Zurich close.  Then at noon EDT, quiet selling pressure reappeared — and it was sold quietly lower until around 3:30 p.m. in the very thinly-traded after-hours market.  Palladium was closed at $1,413 spot, up 14 bucks on the day — and well off its high tick.

The dollar index closed very late on Friday afternoon in New York at 97.49 — and opened up 5 basis points once trading commenced at 6:30 p.m. EDT on Sunday evening, which was 6:30 a.m. China Standard Time on their Monday morning.  It crept quietly lower from there until around 2:25 p.m. CST on their Monday afternoon — and then a ‘rally’ began at that juncture that topped out at the 97.74 mark around 9:05 a.m. in London.  It was all pretty much down hill from there — and the 97.32 low tick came at 11:15 a.m. in New York.  It gained a bit of that back by 12:15 p.m. EDT — and then crept very quietly and somewhat unevenly lower until trading ended at 5:30 p.m.  The dollar index finished the Monday session at  97.38…down 11 basis points from Friday.

It should be noted that the secondary low in the dollar index in afternoon trading in New York came at the 2:42 mark…the same time as the equity markets were rescued — and when gold and silver both spiked higher.

Here’s the DXY chart, 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…97.32…and the close on the DXY chart above, was 6 basis points on Monday.  Click to enlarge as well.

The gold stocks gapped up a bit at the open, but obviously ran into resistance right away.  Their respective high ticks, such as they were, came at…or just before…the morning gold fix in London — and then, like last Wednesday, a major short seller[s] appeared.  Then, despite how well that gold was doing…including the price spike in after-hours trading…they were more or less driven into the dirt as the Monday trading session progressed.  The HUI was closed down 1.22 percent.

Ditto for the silver equities, so I shan’t repeat myself.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index was closed lower by 1.07 percent.  Click to enlarge if necessary.

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

There’s always a chance that the precious metal equities were being sold in order to raise funds to meet margin calls in the general equity markets yesterday, but I highly doubt it.


The CME Daily Delivery Report for Day 9 of August deliveries showed that 4 gold and 49 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday.

In gold, International F.C. Stone and Advantage issued 2 each from their respective client accounts.  JPMorgan stopped 2 contracts for its client account — and Citigroup picked up 2 for its in-house/proprietary trading account.

In silver, there were three short/issuers in total — and the only two that mattered were Advantage and ABN Amro, with 31 and 15 contracts.  Of the three long/stoppers, the two largest by far were JPMorgan and Advantage, picking up 29 and 15 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 Monday trading session showed that gold open interest in August declined by 202 contracts, leaving 2,183 still around, minus the 4 mentioned a few paragraphs ago.  Friday’s Daily Delivery Report showed that 24 gold contracts were actually posted for delivery today, so that means that 202-24=178 more gold contracts vanished from the August delivery month.  Silver o.i. in August rose again, this time by 20 contracts, leaving 210 still open, minus the 49 mentioned a few paragraphs ago.  Friday’s Daily Delivery Report showed that 81 silver contracts were actually posted for delivery today, so that means that 81+20=101 more silver contracts just got added to August.

COMEX gold contract deliveries for August continue to melt away…but in silver, they’re being aggressively added to the August delivery month.  The rush for physical silver seems to be getting more intense with each passing day and week.


After a decent sized withdrawal from GLD on Friday, there was an even larger deposit on Monday, as an authorized participant added 254,626 troy ounces.  There were no reported changes in 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, August 9 — and this is what they had to report.  Their gold ETF added 18,952 troy ounces — and their silver ETF increased by 657,547 troy ounces.

Except for what went on in COMEX warehouse stocks on Friday, there wasn’t much activity in silver in the other ETFs around the world. But a net 282,938 troy ounces of gold was added to various ETFs…and that number includes the net activity from the COMEX warehouses on Friday.

There was a small sales report from the U.S. Mint.  They sold 2,000 troy ounces of gold eagles –and 92,000 silver eagles…the first silver eagle sales in August.

There was a bit of activity in gold over at the COMEX-approved depositories on the U.S. east coast on Friday.  There was 4,510.000 troy ounces/140 kilobars [U.K./U.S. kilobar weight] received at Canada’s Scotiabank.  In the ‘out’ category there was 1,800.456 troy ounces/56 kilobars [SGE kilobar weight] shipped out of Brink’s, Inc.  The link to that is here.

It was busier in silver.  The only ‘in’ activity was one truckload…600,025 troy ounces…that arrived at Scotiabank — and one smallish truckload…550,120 troy ounces…departed Brink’s, Inc.  The only other ‘out’ activity was one good delivery bar…936 troy ounces…that was shipped out of Delaware.  There was some paper action as well.  There was 212,699 troy ounces that was transferred from the Registered category — and back into Eligible over at CNT.  I would assume that Ted would think that this was silver that JPMorgan’s clients just took delivery of — and was transferred from one category to the other to save on storage fees.  The link to all this is here.

There was a bit of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Friday.  There were 200 kilobars reported received — and another 50 were shipped out.  This activity happened over 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.  They show the amount of gold and silver that have been deposited in all the world’s know depositories, mutual funds and ETFs, as of the close of business on Friday, August 9th.  During the reporting week, there was 1,038,000 troy ounces of gold added…plus 10,784,000 troy ounces of silver.  Click to enlarge for both.

My back-of-the-envelope calculation based on the silver chart above shows that around 97 million troy ounces of silver have been added during the last eight week time period — and this amount of physical silver just isn’t available in the open market.

Why is that Ted is the only person talking about where all this silver is coming from that’s been going into these ETFs over the last two month?  Just asking.

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


CRITICAL READS

These Are Truly Historic and Dangerous Times” — David Rosenberg

[Authored by David Rosenberg, chief economist with Gluskin Sheff + Associates Inc. and author of the daily economic newsletter Breakfast with Dave. First published in the Globe and Mail]

We are living in dangerous times.

Mostly, everyone I speak to lives in the here and now. They seem more interested in telling people how crazy cheap the stock market is and how crazy expensive the ‎Treasury market is, rather than trying to look at the current environment in a historical perspective. We are living through a period of history that will be written about in textbooks in years and decades to come, and the undertones are none too good.

Instead of telling people there is no recession, these bulls should be discussing why the markets are busy pricing one in. What do these pundits know that the markets don’t know? We have a bond market in which a quarter of the universe trades at a negative yield. The long bond yield has gone negative in Germany. More than half of the world’s bond market is trading below the Fed funds rate. Investment grade yields, on average, are below zero in the euro area.

This is completely abnormal because it reflects an abnormal economic, financial and political backdrop. Those who point to the stock market’s performance with glee, because of its V-shaped recovery, don’t bother telling you that in the past 12 months the total return is marginal in real terms and the best performing sectors are the ones you can only typically rely on in a deflationary recession – real estate, utilities and consumer staples.

One of the problems coming out of the most recent recession is that the global debt load is infinitely larger now than it was at the peak of that prior credit-bubble cycle. The world is awash in debt. Years of monetary intervention among the world’s central banks created artificial asset-price inflation and exacerbated wealth inequalities at the same time. Fiscal policy failed to arrest the increasingly wide income disparity, a global dilemma that has become acute in the United States.

Think about what I am describing – gold soaring, bonds rallying sharply, an equity market rolling off the highs, deepening racism, and a tariff and currency war.

This sounds a lot like the 1930s to me. Back then it became a real war that cost millions of lives. This war won’t cost lives, but it will cost livelihoods.

This longish but worthwhile commentary by David was posted on the Zero Hedge website late on Sunday evening EDT — and it comes to us courtesy of Brad Robertson.  Another link to it is here.


We’re All Currency Manipulators Now — David Stockman

Call it the monetary theater of the absurd. After all, here is what a determined currency manipulator did between September 2002 and July 2008.

To wit, it pumped about $200 billion of new dollar liabilities into the world financial system, thereby expanding the Fed’s balance sheet by 26%. Clearly, global traders and U.S. trading partners didn’t welcome that flood of freshly minted fiat currency because during the same period, the traded-weighted dollar exchange rate plunged by 25%.

Moreover, there can be little doubt that the severe slump in the U.S. dollar shown below was deliberate. During much of that period, the Fed conducted an aggressive campaign to slash interest rates, goose domestic growth and perk-up the inflation rate. The last objective in particular was the brain child of newly appointed Fed head Ben Bernanke, who falsely warned Greenspan & Co. about the dangers of an imminent “deflation” that never remotely happened.

Needless to say, the impolite word for a policy of suppressing domestic interest rates and goosing inflation is trashing your own currency. All things being equal, foreigners will lighten their dollar holdings and trade the dollar down when authorities promise to reduce its purchasing power and to push yields lower relative to alternatives abroad.

The truth is, the U.S. Federal Reserve is the all-time champion of currency manipulation, and has been ever since Nixon severed the dollar’s tie to gold in August 1971.

That’s because in a fiat currency world, domestic monetary policy is inherently an exercise in currency manipulation: The effects of Fed policy changes (or those of any other significant central bank) are transmitted instantly into external FX and related global financial markets – once the protective moat of a fixed exchange rate is removed.

This loooong commentary from David was posted on the goldseek.com Internet site last Friday — and I found it on the gata.org Internet site.  Another link to it is here.


Bond market close to sending biggest recession signal yet

As Wall Street economists up the odds for a recession in the coming year, the bond market is sending its own scary warning about an economic downturn.

Various parts of the yield curve have been inverted, but the traditionally watched 2-year to 10-year spread looks set to invert any day now, with the curve at its flattest level since 2007.

The 10-year yield, at its low yield of 1.64% Monday came less than 6 basis points above the 2-year yield, which was at 1.58% in afternoon trading. The spread broke below 10 basis points last week. An inverted curve simply means a shorter-term interest rate is higher than the longer-term one that it is being compared too, and that inversion has been a reliable recession signal.

It’s the whole idea that the Fed is making a mistake. There’s more fear that the Fed is going to be slow in making moves, and the economy is going to to into recession,” said Andrew Brenner, National Alliance head of international fixed income.

This news item, which really shouldn’t be ‘news’ to anyone, showed up on the cnbc.com Internet site early on Monday afternoon sometime — and I thank Swedish reader Patrik Ekdahl for his first offering in today’s column.  Another link to it is here.  And here’s Gregory Mannarino’s post-market closing rant on this very issue — and it’s linked here.  I thank Brad Robertson for that one.


U.S. Surpasses Entire 2018 Budget Deficit With Two More Months to Go in 2019

There were no surprises in the U.S. budget deficit for July, the 10th month of fiscal 2019: it came in just as consensus had expected, at $120 billion, and about 55% higher than the $76.9BN deficit reported in July 2018. This was the 2nd biggest July deficit in the past 8 years…Click to enlarge.

…  and was the result of $251BN in government receipts in July, up 11.6% from the prior year, however offset by $371.0BN in government outlays, a rate of increase double that of revenues, or +22.8% from a year earlier. The biggest sources of government revenue were individual income taxes (127BN) and social insurance/retirement ($94BN), while the biggest outlays were social security ($88BN), Medicare ($56BN), National Defense ($56BN) and Health ($50BN).

On a year-to-date basis, for the first 10 months of Fiscal 2019, receipts were up 3.4%, while outlays increased more than double by 8.0%. More notably, on a cumulative basis, the U.S. budget deficit for the 10 months of fiscal 2019 was $867 billion, surpassing the $779 billion deficit for all of fiscal 2018, with more months of deficit spending in 2019 to go.

Finally, and perhaps most concerning, is that for the first ten months of this fiscal year, interest payments on the U.S. national debt hit $497 billion, $43 billion, or 9% more than in the same four-month period last year and the most interest ever paid in the first third of the fiscal year. According to the Treasury’s forecast, interest expense on U.S. public debt is on track to reach a record $577 billion this fiscal year, more than the entire budget deficit in FY 2014 ($483 BN) or FY 2015 ($439 BN), and equates to 2.7% of estimated GDP, the highest percentage since 2011.

This Zero Hedge article appeared on their website at 4:25 p.m. on Monday afternoon EDT — and another link to it is here.


Those Who Seek to Rule — Jeff Thomas

The reader may be familiar with the Russian parable of the frog and the scorpion.

A flood occurs and a scorpion finds himself on a small, dry patch of land, but will soon drown when the water rises. He sees a frog and says to him, “Please save me, I cannot swim. If I could get on your back and you swim to the higher ground, I’ll be saved.” The frog says, “But you are a scorpion – you might sting me and I would die.” The scorpion says, “That would be very foolish of me, for if I were to sting you, we would both drown.”

The frog nods his head and lets the scorpion climb onto his back. He swims toward the higher ground, but before they reach it, the scorpion stings him. As the frog feels the sting paralyzing him, he says, “What have you done, you trecherous fool? Now we will both drown.” The scorpion says, “I could not help it. It is my nature.”

It’s an insightful parable. People follow their nature. We should not be fooled into thinking that they will do otherwise.

We’d like to think that all people have a sense of compassion and fair play, but this isn’t so. Roughly ten percent of all people, in any population, are estimated to have traits associated with narcissism. Roughly four percent are estimated to be sociopathic and one percent are estimated to be psychopathic.

Unfortunately, those people who possess these pathologies have a far greater drive to achieve power than those who do not. So, the longer a government exists, the more riddled with pathological types it becomes.

This commentary from Jeff, which is definitely worth reading, put in an appearance on the internationalman.com Internet site on Monday morning sometime — and another link to it is here.


Fears of Argentina Default Loom Large as Traders Dump Everything

Suddenly, fears of a full-blown financial crisis in Argentina have once again come rushing to the fore.

In the wake of President Mauricio Macri’s stunning rout in primary elections over the weekend, investors dumped its stocks, bonds and currency en masse in a selloff that left much of Wall Street wondering whether the crisis-prone country was headed for yet another default.

The upset, widely seen as a preview of October’s presidential vote, threw the doors open to the very real possibility a more protectionist government will take power come December and unravel the hard-won gains that Macri made to regain the trust of the international markets. It deepened worries his populist opponent, Alberto Fernandez, and running mate, former president Cristina Fernandez de Kirchner, will try to renegotiate its debts as well as its agreements with the International Monetary Fund. The country has billions in foreign-currency debt due over the coming year.

The market is starting to price in default,” said Edwin Gutierrez, the London-based head of emerging-market sovereign debt at Aberdeen Asset Management. “The market is unwilling to give Fernandez the benefit of the doubt.”

Credit-default swaps now show that traders are pricing in a 75% chance that Argentina will suspend debt payments in next five years. On Friday, the likelihood was just 49%. Its dollar-denominated government bonds lost roughly 25% on average, pushing down prices to as low as 55 cents on the dollar. Yields on shorter-maturity notes soared past 35%.

The peso tumbled as much as 33% to a record-low 60 per dollar and the Merval stock index lost the most ever in intraday trading.

This Bloomberg news item was posted on their Internet site at 8:07 p.m. PDT on Sunday evening — and was updated about eighteen hours later.  I thank Patrik Ekdahl for this story.  Another link to it is here.  The longish chart-filled Zero Hedge spin on this is headlined “Macri Massacre Cuts Stocks in Half Today as Argentina Slides Into the Abyss“.


Risk of Nuclear Conflict in Asia Grows — Eric Margolis

Two of the world’s most important powers, India and Pakistan, are locked into an extremely dangerous confrontation over the bitterly disputed Himalayan mountain state of Kashmir.  Both are nuclear armed.

Kashmir has been a flashpoint since Imperial Britain divided India in 1947.  India and Pakistan have fought numerous wars and conflicts over majority Muslim Kashmir.  China controls a big chunk of northern Kashmir known as Aksai Chin.

In 1949, the U.N. mandated a referendum to determine if Kashmiris wanted to join Pakistan or India.  Not surprisingly, India refused to hold the vote.  But there are some Kashmiris who want an independent state, though a majority seek to join Pakistan.

India claims that most of northern Pakistan is actually part of Kashmir, which it claims in full.  India rules the largest part of Kashmir, formerly a princely state. Pakistan holds a smaller portion, known as Azad Kashmir.  In my book on Kashmir, ‘War at the Top of the World,’ I called it ‘the globe’s most dangerous conflict.’  It remains so today.

I’ve been under fire twice on the Indo-Pak border in Kashmir, known as the ‘Line of Control,’ and once at 15,000 feet atop the Siachen Glacier on China’s border.  India has over 500,000 soldiers and paramilitary police garrisoning its portion of Kashmir, whose 12 million people bitterly oppose often corrupt and brutal Indian rule – except for local minority Hindus and Sikhs who support it.  A bloody, bitter uprising has flared on against Indian rule since 1989 in which some 42,000 people, mostly civilians, have died.

About 250,000 Pakistani troops are dug in on the other side of the ceasefire line.

This very worthwhile commentary from Eric appeared on the lewrockwell.com Internet site on Saturday sometime — and the first reader through the door with it was Rick Martell.  Another link to it is here.


Hong Kong on the Edge: Chinese Troops Gather in Shenzen; 100s of Flights Cancelled Over Protester “Terrorism

Protesters flooded Hong Kong’s airport, one of the busiest in the world, on Monday, forcing authorities to cancel more than 100 flights as demonstrators expressed their anger over the violent police response to protests the night before.

Amid the unrest, Cathay Pacific, Hong Kong’s flagship carrier, has reportedly fired two employees and suspended a pilot for participating in the protests. The airline said over the weekend that it would ‘comply with a directive from China’s aviation authority’. According to the FT, Cathay’s move was “the starkest sign yet of Beijing’s growing readiness to make high-profile businesses choose between the protesters and the government. The company’s shares were off more than 4% in recent trade.”

More broadly speaking, European equities sold off as the developments in Hong Kong created a risk off mood on a morning that was mostly devoid of data.

Per The New York Times, the protesters gathered throughout the day, first filling up the arrival halls, before expanding upstairs to the departure halls. Monday’s protest is a continuation of a three-day peaceful sit-in at the airport which began on Friday.

But even more ominously, over the border in Shenzen, the Chinese city that lies directly across from Hong Kong, Chinese People’s Liberation Army forces were building up ahead of what appears to be a “apparent large-scale exercise,” according to the Global Times. “Numerous” armored personnel carriers, trucks and other vehicles of the paramilitary police were seen heading towards Shenzhen over the weekend. That means the long-awaited military intervention from the mainland could be just around the corner – something that the Hong Kong people have condemned.

This ever-developing story showed up on the Zero Hedge website at 6:00 a.m. EDT on Monday morning — and I thank Brad Robertson for sharing it with us.  Another link to it is here.


HSBC Greater China chief Wong leaves for external role

HSBC Holdings’ Greater China Chief Executive Helen Wong is leaving, a bank spokeswoman said on Friday, the second senior departure this week after the ousting of group CEO John Flint.

Wong has decided to leave to pursue an external opportunity, the spokeswoman said, adding that her role will be dropped and the Greater China region, which includes Hong Kong and Taiwan, would be run by the respective country heads.

Greater China is HSBC’s biggest profit driver, but the banking sector outlook in the region has been clouded by the tit-for-tat tariff war between China and the United States, as well as unrest in Hong Kong.

Flint and Wong’s exit also follows weeks of adverse Chinese media coverage over HSBC’s role in the arrest of Huawei finance chief Meng Wanzhou.

Wong, who joined HSBC in 1992 and rose to become its China CEO before being given the newly created role of Greater China chief in 2015, did not immediately respond to a request for comment sent to her official e-mail.

The HSBC spokeswoman said Wong’s resignation was submitted at the end of July and there was no connection between her decision and Flint’s departure.

This Reuters news item, filed from Hong Kong, put in an appearance on their website last Friday morning EDT — and I found it in the Monday edition of the King Report.  Another link to it is hereKyle Bass had this to say about it in a Tweet: “@Jkylebass: Wow – trouble brewing at HSBC. Remember, HSBC H.K. is ring-fenced and is bankruptcy remote. U.K. regulators aren’t going to bail out this leveraged [time bomb]. Depositors in H.K. better PAY ATTENTION. Better convert deposits to USD and wire them to an institution with a real backstop.”


Chinese 2019 gold demand still slipping but don’t panic — Lawrie Williams

Perhaps the U.S.-instigated trade war is beginning to bite with the Chinese consumer.  As readers of sharpspixley.com will be aware, we measure Chinese gold demand China is still the world’s largest gold consumer) by the reported gold withdrawal figures from the Shanghai Gold Exchange (SGE).  This is a consistent measure reported monthly by the SGE, so does provide comparative figures direct from source rather than estimates of consumption from the major precious metals consultancies, which seem to hugely underestimate known gold flows (published gold import figures from major sources) into the Middle Kingdom plus the nation’s own production.  The latest monthly figures for the past three years…suggest that Chinese gold demand this year will be substantially less than in the past couple of years – but perhaps more importantly the projected annual total will be the lowest for five years, as we reported just over a month ago on the release of the June withdrawal figures by the SGE.

On the basis of the year to date figures, full year Chinese gold demand, as measured by SGE withdrawals, may struggle to reach 1,800 tonnes as compared with over 2,000 tonnes in 2017 and 2018 – and in particular with the record annual figure in 2015 where full year withdrawals  totalled around 2,600 tonnes.  We speculated a month ago that the assessed drop in Chinese gold demand, coupled with an apparent continuing downturn in the annual Chinese growth percentage might be expected to be a positive factor in the ongoing trade discussions between the U.S. and China but it seems there has been little progress here – indeed trade tensions appear to have escalated with President Trump apparently imposing tariffs on another $3 billion worth of Chinese imports, while the Chinese have apparently allowed the yuan’s currency parity with the dollar to slip further to over 7 – an apparent U.S. ‘line in the sand’.  While the tariff impositions may well be beginning to hurt the Chinese economy, it is also adversely impacting that of the U.S. with higher prices for U.S. manufactured goods which rely on imported Chinese components becoming more expensive.  The 5.5% fall in the dollar/yuan parity since April will also be mitigating the effects of the Trump-imposed tariffs.

Despite the apparent disadvantage to China represented by the big trade imbalance in China’s favour, which theoretically should give the U.S. a ‘trade war’ advantage, President Trump is a businessman who believes that financial advantage is the be-all and end-all in monetary trade disputes.  But China is basically a Communist-led nation where economic advantage may well take second place to a long-term global growth plan.  It is also an Asian nation where ‘saving face’ may take priority over a purely monetary agenda.  Trade disputes thus are not necessarily subject to like with like agendas and President Trump may well have substantially over-estimated the likelihood of China capitulating to his demands, whatever the economic consequences.

This interesting and worthwhile commentary from Lawrie put in an appearance on the sharpspixley.com Internet site on Saturday BST sometime — and another link to it is here.


The PHOTOS and the FUNNIES

The first photo is of a columbine of some kind growing out of the granite rock face just outside the Othello Tunnel complex — and I spotted it as we were leaving.  We then took the old road into Hope, stopping by Kawkawa Lake, which is a five minute drive from the town center.  The second shot is looking south across the lake…as is the third photo.  If you can see it, the beach that appears in the second photo is partially obscured by a twig/branch on the left-hand side of the third shot.  Click to enlarge.


The WRAP

For the second time in less than a week there were unknown parties in the New York market selling the precious metal equities short all day long.  What began as a promising start to the day was completely extinguished — and then some, by the time that trading ended at 4:00 p.m. EDT.

I’m not sure whether these were acts of desperation by desperate men…or they know for sure that they’ll be able to buy them back far more cheaply at some later date.  I suppose they would know this if they were the same parties that were going to be responsible for the prices of both silver and gold to get engineered lower.  But how successful they might be in that attempt, remains to be seen.

And as I also said earlier, it could have been traders selling their winners to cover margin calls in other stocks…but I’m not convinced of that.

That’s speculation on my part, but the only possible answers I can come up with at the moment — and we’ll only know that in the fullness of time.

But as silver analyst Ted Butler mentioned in his weekly review on Saturday…”The commercials have never, ever been overrun to the upside. Therefore, if gold prices get forced substantially lower in the future, no one should be surprised.  All that said, there is nothing that guarantees that the commercials can’t possibly get overrun. Just because something has always worked does it mean it always will work.”

However, I’m expecting that any price decline at this juncture will be short lived, although potentially violent…an opinion that I stated in my Saturday missive as well.

But make no mistake about it…correction or not, precious metal prices in the medium and long term have a lot further to run to the upside — and the powers-that-be will be powerless to stop it.  The flight into gold and silver has already commenced — and as I’ve continually pointed out…the economic, financial and monetary situation continues to become more dire with each passing day.

Here are the 6-month charts for the four precious metals, plus copper and WTIC — and there’s really not that much to look at.  Click to enlarge.

And as I type this paragraph, the London open is less than a minute away — and I note that after doing virtually nothing for the first hour of trading after it began at 6:00 p.m. EDT in New York on Monday evening, gold and silver have been rising in stair step fashion in Far East trading on their Tuesday. Gold is up $11.90 — and silver is up 34 cents as London opens. Whether this represents new buying, or short covering is hard to tell, but I suspect the former. But why they’re doing it in such an illiquid market is a mystery to me, unless they’re Far East-based traders. Platinum also rallied between 9 and and 10 a.m. CST in Far East trading, but it was sold lower by 11 a.m. over there — and the didn’t do much until around 1:40 p.m. in Shanghai. It has ticked a bit higher since — and is up 6 bucks the ounce at the moment. Palladium has been chopping very unevenly higher in Far East trading — and is off its high tick by a handful of dollars — and is up only 5 bucks as Zurich opens.

Net HFT gold volume is already over 89,500 contracts — and there’s only 1,623 contracts worth or roll-over/switch volume in this precious metal. Net HFT silver volume is already up to about 26,000 contracts — and there’s 2,870 contracts worth of roll-over/switch volume out of September and into future months.

For whatever reason, the Bloomberg DXY chart didn’t start recording data until around 9 p.m. EDT on Monday evening, which was already 9 a.m. China Standard Time on their Tuesday morning. Its current 97.64 high tick was set around 11:20 a.m. CST — and it has been edging quietly and unevenly lower since — and as of 7:45 a.m. BST in London/8:45 a.m. CEST in Zurich, the dollar index is up 17 basis points.


Today, at the close of COMEX trading, is the cut-off for this Friday’s Commitment of Traders Report.  And barring any major surprises to the downside, there will certainly be increases in the commercial net short positions in both silver and gold…particularly silver.

Here’s a chart that I plucked from commentary by Chris Martenson over at the peakprosperity.com Internet site on the weekend.  It shows the price of gold plotted against the growth of negative-yielding debt in the world. Click to enlarge.

They look pretty correlated to me.


And as I FINALLY post today’s missive on the website at 7:00 a.m. EDT, I see that the gold price has continued higher in London trading — and its current high tick was set around 11:15 a.m. BST.  Silver also hit its current high at 11:15 a.m. in London — and is up 39 cents.  Platinum made it up to the $864 spot mark, but hasn’t been allowed to get any higher for the moment — and it’s up 8 bucks.  Palladium  traded very unevenly higher in both Far East and early Zurich trading — and from up 15 dollars shortly before 11 a.m. CEST, it’s now up only 3 dollars.

I won’t bother with the volume figures at this hour.

From its 11:20 a.m. Shanghai high, the dollar index chopped quietly lower until around 9:40 a.m. in London — and began to head sharply lower from there.  It appeared to get saved at 11:30 a.m. in London…just as it dipped into negative territory.  It’s above that by a hair now — and up 1 basis point as of 11:45 a.m. BST.

It could certainly prove to be an interesting trading session in the precious metals in New York when the COMEX opens at 8:20 a.m. EDT.

That’s it for another day, which is more than enough — and I’ll see you here tomorrow.

Sorry about being late today, but there was nothing I could do about it.

Ed

Gold Carefully Closed Back Below $1,500 Spot/Silver Below $17 Spot

10 August 2019 — Saturday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price jumped up the moment that trading began at 6:00 p.m. EDT on Thursday evening in New York.  It ran into “all the usual” suspects” almost immediately — and then chopped rather aimlessly sideways until the 2:15 p.m. China Standard Time afternoon gold fix in Shanghai.  It was stair-stepped lower from there until the the low tick was set around 9:45 a.m. in New York.  It rallied above the $1,500 spot mark for awhile, but then revisited its earlier low a few minutes before the 1:30 p.m. EDT COMEX close.  It rallied back to the $1,500 spot mark within the next thirty minutes, but ‘someone’ was there to ensure that it didn’t break above it — and it was sold lower until 2:30 p.m. and the gold price chopped quietly sideways until trading ended at 5:00 p.m. EDT.

The gold price traded within a one percent price range on Friday, so I shan’t bother with the high and low ticks.

Gold was closed at $1,496.20 spot, down $4.50 from Thursday.  Net volume in October and December combined was a bit over 324,000 contracts — and there was 10,500 contracts worth of roll-over/switch volume on top of that.

The silver price also jumped up a bit at the 6:00 p.m. open in New York on Thursday evening — and continued to crawl higher from there until shortly before noon CST.  From that juncture it traded sideways until shortly before 2 p.m. CST — and at that point jumped to its high tick of the day — and was up 19 cents the ounce.  Moments later the engineered sell-off commenced — and the low tick was set at, or a few minutes before, the afternoon gold fix in London.  It rallied back above the $17 spot mark ever-so-briefly — and then was sold lower into the COMEX close — and didn’t do much of anything after that.

The high and low ticks in silver were recorded by the CME Group as $17.14 and $16.86 in the September contract.

Silver was closed on Friday afternoon EDT at $16.925 spot, up 3.5 cents from Thursday…and under $17 spot.  Net volume was 78,000 contracts — and there was a bit over 19,000 contracts of roll-over/switch volume out of September and into future months.

The platinum price chopped sideways-to-lower in a random manner in Far East, Zurich and morning trading in New York on Friday — and the low tick was set sometime before 1 p.m. EDT.  it rallied a few dollars into the COMEX close – and then traded flat for the rest of the day.  Platinum was closed at $858 spot, down 5 bucks from Thursday.

The palladium price spent the entire Far East and Zurich trading sessions trading just above the unchanged mark by a handful of dollars.  A rally of some substance developed at the COMEX open, but that was all taken away by 1 p.m. in New York trading — and it didn’t do much of anything after that, but was carefully closed below $1,400 spot at $1,399.

It’s surely no coincidence that gold, silver and platinum were closed below psychologically important round numbers…$1,500 in gold…$17 in silver — and $1,400 in palladium.


The dollar index closed very late on Thursday afternoon in New York at 97.62 — and opened down 5 basis points once trading commenced at 7:45 p.m. on Thursday evening, which was 7:45 a.m. China Standard Time on their Friday morning.  From there it chopped very quietly sideways until around 10:50 a.m. in New York.  It took a bit of a dive from there — and the low tick was set at precisely noon EDT.  ‘Gentle hands’ appeared  — and it crept rather unevenly higher until 5 p.m. EDT.  Then it rolled over hard — and although the Bloomberg chart shows that it closed at 97.35…the ‘official’ close was 97.49.  I suspect that there will be a downward revision at the New York open on Sunday evening.  I also note that Bloomberg shows the dollar index low tick at 97.03.  Something’s not right about these numbers.  The dollar index closed down 13 basis point on the day.

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

And here’s the 5-year U.S. dollar index chart, courtesy of the folks over at the stockcharts.com Internet site.  The delta between its close…97.32…and the close on the DXY chart above, was 17 basis points on Friday.  Click to enlarge as well.

The gold shares opened down a bit, but fifteen minutes later they were headed higher — and their respective highs came around 10:25 a.m. in New York trading.  Then about twenty-five minutes later, they were headed unevenly lower — and that trend continued almost right into the close.  The HUI finished off its low tick by a hair — and down 1.13 percent.

Up until minutes after 1 p.m. EDT in New York trading, the silver equities traded in a similar manner as their golden brethren.  A choppy but decent rally commenced at that point, but minutes before trading ended at 4:00 p.m. a not-for-profit seller drove the Silver 7 Index violently lower, although it did recover a bit as trading ended.  Up until that point, the silver shares would have closed at unchanged, so I find that mindless selling minutes before the close to be of a highly suspicious nature.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down 1.29 percent.  Click to enlarge if necessary.

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

Without doubt, there were ‘strong hands’ buying the silver equities once again in afternoon trading in New York.  That’s the second time this week where their activities have been obvious.


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

Here’s the weekly chart — and it was a good week all around, although the precious metal equities weren’t allowed to shine as they should have, as that big short seller appeared on Wednesday — and spoiled the party…which I’m sure was the intent of it, I suppose. Platinum and palladium manged to eke out small gains after the pounding they’ve been taking over the last few weeks and months.  Click to enlarge.

Here’s the month-to-date chart — and gold, plus its associated equities, continue to outperform their silver counterparts for reasons you already know.  The beatings that palladium and platinum have taken recently are more than apparent on this chart.  Click to enlarge.

Here’s the year-to-date chart — and it’s terrific looking — and a bit more terrific than it was a week ago.  JPMorgan et al.‘s near death grip on the silver price is more than obvious in this chart as well.  Click to enlarge.

And like last week in this space, ‘Da boyz’ are still out there going short against all comers — and there are no signs that I can see that they’re about to be overrun, at least not yet.  It still remains to be seen if JPMorgan et al. can pull off another round of engineered price declines in both silver and gold, considering the current financial and monetary environment that they’re facing.  But regardless of that, it appears that the gold and silver equities continue to be in accumulation mode, and that was more than evident a couple of times in the silver stocks this week…both on Thursday — and again on Friday


The CME Daily Delivery Report for Day 9 of the August delivery month showed that 24 gold and 81 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.

In gold, the two short/issuers were ABN Amro and Advantage, with 22 and 2 contracts out of their respective client accounts. There were five long/stoppers in total.  JPMorgan picked up 9 contracts for its client account — and Citigroup and Macquarie Futures stopped 8 and 4 contracts for their respective in-house/proprietary trading accounts.

In silver, the three short/issuers were ABN Amro, Advantage and ADM, with 44, 29 and 8 contracts out of their respective client accounts.  The three biggest of the four long/stoppers were JPMorgan, Advantage and ABN Amro, with 37, 26 and 15 contracts for their respective client accounts as well.

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

So far in August, there have been 4,448 gold contracts issued/reissued and stopped — and that number in silver is now up to 1,686 contracts.  Gold deliveries in August have slowed to a trickle lately — and I don’t understand why that’s the case.

The CME Preliminary Report for the Friday trading session showed that gold open interest in August fell by 33 contracts, leaving 2,385 contracts still open, minus the 24 mentioned a few paragraphs ago.  Thursday’s Daily Delivery Report showed that 18 gold contracts were actually posted for delivery on Monday, so that means that 33-18=15 more gold contracts disappeared from the August delivery month.  Silver o.i. in August dropped by 66 contracts, leaving 190 still around, minus the 81 mentioned a few paragraphs ago.  Thursday’s Daily Delivery Report showed that 147 silver contracts were posted for delivery on Monday, so that means that another 147-66=81 silver contracts were just added to August deliveries — and those are probably the same 81 contracts that are posted for delivery on Tuesday.

The number of gold contracts that are disappearing from the August delivery month continues to grow larger by the day.  Whereas in silver, the number of contracts being added to the August delivery month continues to increase every day.  Physical silver is obviously in accumulation mode by ‘strong hands’ — and most likely insiders.


There were no reported changes in GLD on Friday.  But there was another substantial deposit in SLV, as an a.p. added 2,245,896 troy ounces.

There wasn’t much going on in the other silver ETFs around the world, but I did notice that a net 676,386 troy ounces of gold was added to all know depositories, mutual funds and ETFs on Friday.  The 4-week total additions into these various gold funds has risen to 2,959,927 troy ounces over the last four weeks — and that’s a lot.

Thanks to Ted, we have a new source of short position data for both SLV and GLD, as the folks over at the shortsqueeze.com Internet site stopped posting that information a few months ago.  This new data comes to us courtesy of the wsj.com website.

The short position in SLV declined from 9.93 million troy ounces/down to 9.64 million troy ounces in the two-week reporting period that ended on July 31…a drop of 2.92 percent.  The short position in GLD rose from 1,134,000 troy ounces, up to 1,295,000 troy ounces during the same reporting period, which is an increase of 14.12 percent.  I’m sure Ted will have some comment on this in his weekly review later today.

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

Month-to-date the mint has sold 1,000 troy ounces of gold eagles — 1,000 one-ounce 24K gold buffaloes — and zero silver eagles.  This has to be the poorest start to a sales month for the U.S. Mint in the history of producing these bullion coins.

Once again there was no in/out movement in gold over at the COMEX-approved depositories on the U.S. east coast on Thursday.

There was some activity in silver, as one truckload…608,538 troy ounces…was received over at Loomis International.  There was also one truckload shipped out…600,025 troy ounces…and that metal departed CNT.  A link to that activity is here.

There was only a tiny bit of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday.  They didn’t receive any — and shipped out only 18 of them.  That activity was at Brink’s, Inc. as per usual — and I won’t bother linking it.


Here’s a chart that Nick Laird dropped in my in-box on Friday afternoon.  It shows the withdrawals from the Shanghai gold exchange, updated with July’s data.  During that month there was 129.33 metric tonnes taken out.  Click to enlarge.


The Commitment of Traders Report, for positions held at the close of COMEX trading on Tuesday, August 6, showed a big positive surprise in silver — and Ted’s comment in Friday’s column about the 37,000 contract increase in gold open interest during the reporting week, turned out to be the actual increase in the commercial net short position in gold.

In silver, the Commercial net short position decreased by 8,650 contracts, or 43.2 million troy ounces of paper silver.

They arrived at that number by increasing their long position by 4,325 contracts — and also covered the exact same number of short contracts….4,325.  It’s the sum of those two numbers that represents their change for the reporting week.

Under the hood in the Disaggregated COT Report, it was all Managed Money traders, plus much more, as they decreased their long position by 5,754 contracts — and also added 9,946 contracts to their short position.  It’s the sum of those two numbers…15,700 contracts…that represents their change for the reporting week.

The difference between that number — and the Commercial net short position…15,700 minus 8,650 equals 7,050 contracts.  As is always the case, that difference was made up by the traders in the other two categories.  The traders in the ‘Other Reportables’ category increased their net long position by a smallish 1,235 contracts…but it was the traders in the ‘Nonreportable’/small trader category that did most of the heavy lifting, as they increased their net long position by a very chunky 5,815 contracts.  The sum of those two numbers add up to the 7,050 contract difference…which they must do.

Ted was surprised that the Managed Money traders added to their short position so aggressively during the reporting week, as no moving averages were penetrated to the down-side, as that’s their normal signal to begin going short.

The Commercial net short position in silver is down to 376.3 million troy ounces, which is still very bearish on its face.

With the latest Bank Participation Report in hand, Ted estimates JPMorgan’s short position in silver at no more than 20,000 contracts — and most likely a bit less.  In last week’s COT Report, he had estimated that JPMorgan’s short position was in the 25-28,000 contract range — and was delighted that it turned out to be much less than that.

Here’s the 3-year COT Report for silver — and the surprise improvement should be noted.  Click to enlarge.

With JPMorgan’s short position this low, Ted is still of the opinion that they could let the price rip any time — and leave the other Big 7 traders holding the bag…including Citigroup.


In gold, the commercial net short position increased by 36,358 contracts, or 3.64 million troy ounces of paper gold — and virtually all of that amount was at the hands of the Big 4 traders, as the traders in the ‘5 through 8’ category didn’t do much.

They arrived at that number by reducing their long position by 4,154 contracts — and they also added 32,204 short contracts — and it’s the sum of those two numbers that represents their change for the reporting week.

Under the hood in the Disaggregated COT Report, it was all Managed Money traders, plus much more…as they increased their long position by 33,106 contracts — and also decreased their short position by 8,014 contracts.  It’s the sum of those two numbers…41,120 contracts…that represents their change for the reporting week.

The difference between that number — and the commercial net short position…41,120 minus 36,358 equals 4,762 contracts.  That difference was made up by the traders in the other two categories, as both decreased their net long positions during the reporting week…the ‘Other Reportables’ by 2,963 contracts — and the ‘Nonreportable’/small traders by 1,799 contracts. Those two numbers add up to 4,762 contracts, which them must.

But the bullish surprise in gold came in the Producer/Merchant and Swap/Dealer categories, as the former category [read JPMorgan] only increased their net short position by 4,739 contracts — and the latter did the real work, as they increased their net short position by 31,619 contracts.  The sum of those two numbers equals the commercial net short position, which they must do, because these two categories are the commercial traders.

The commercial net short position in gold is now up to 32.43 million troy ounces…which is very bearish.

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

Although the COT Report in gold is hugely bearish on its face, the fact that it appears that JPMorgan was almost a no-show during the past reporting week, has Ted sniffing a double cross in this precious metal — and even the Bank Participation Report shows that something out of the ordinary is going on.

Could ‘da boyz’ smash gold and silver lower at any time, you ask?  Sure, in a New York minute, as both are overbought and in bearish territory from a COT perspective.  But I expect any attempt at that to be short-lived, but potentially violent.

In the other metals, the Manged Money traders in palladium decreased their net long position in this precious metal by  3,077 contracts.  The Managed Money traders are still net long the palladium market by 11,251 contracts…about 47 percent of the total open interest.  Total open interest in palladium is 24,019 COMEX contracts.  In platinum, the Managed Money traders decreased their net long position by 2,282 contracts during the reporting week.  The Managed Money traders are now net long the platinum market by only 7,485 COMEX contracts…10 percent of the total open interest.  In copper, the Managed Money traders increased their net short position in that metal by a knee-wobbling 33,319 COMEX contracts during the reporting week — and are now net short the COMEX futures market by a record 75,114 contracts, or 1.88 billion pounds of the stuff…a hair under 25 percent of total open interest…which is preposterous.


Once again, here’s Nick chart showing the correlation between the gold price — and what the Managed Money traders are doing…or are tricked into doing.

You don’t need a degree in mathematics to see how tight this correlation is.  Click to enlarge.


Here’s Nick Laird’s “Days to Cover” chart updated with the COT data for positions held at the close of COMEX trading on Tuesday. It shows the days of world production that it would take to cover the short positions of the Big 4 — and Big ‘5 through 8’ traders in each physically traded commodity on the COMEX. Click to enlarge.

For the current reporting week, the Big 4 traders are short 134 days of world silver production, which is down 6 days from last week’s report — and the ‘5 through 8’ large traders are short an additional 79 days of world silver production, down 5 days from last week’s report — for a total of 213 days that the Big 8 are short, which is seven months of world silver production, or about 497.1 million troy ounces of paper silver held short by the Big 8. [In the prior week’s COT Report, the Big 8 were short 224 days of world silver production.]

In the COT Report above, the Commercial net short position in silver was reported as 376.3 million troy ounces.  As mentioned in the previous paragraph, the short position of the Big 8 traders is 497.1  million troy ounces.  The short position of the Big 8 traders is larger than the total Commercial net short position by 497.1 minus 376.3 equals 120.8 million troy ounces.

The reason for the difference in those numbers…as it always is…is that Ted’s raptors, the 39-odd small commercial traders other than the Big 8, are net long that amount, which is ridiculous.

As I mentioned in my COT commentary in silver above, Ted figures that JPMorgan is short is around 20,000 COMEX silver contracts, or a bit less…down a lot from the 25-28,000 contracts that they were short in the prior week’s COT Report.

20,000 COMEX contracts is a hundred million troy ounces of paper silver, which works out to around 43 days of world silver production.  Based on that number, JPMorgan is back in number one position as the biggest short holder in the COMEX futures market in silver.  But if it’s less than that amount, as Ted suspects, then those 43 days they are short would be reduced accordingly.  But that still leaves them as the No. 1 or possibly No. 2 short holder in COMEX silver…as per the next paragraph.

The Big 4 traders in silver are short, on average, about…134 divided by 4 equals…33.5 days of world silver production each.  The four traders in the ‘5 through 8’ category are short 79 days of world silver production in total, which is 19.75 days of world silver production each, on average.

The Big 8 commercial traders are short 41.5 percent of the entire open interest in silver in the COMEX futures market, which is a smallish decrease from the 43.8 percent they were short in last week’s report.  And once whatever market-neutral spread trades are subtracted out, that percentage would be something over the 45 percent mark.  In gold, it’s now 44.7 percent of the total COMEX open interest that the Big 8 are short, up a bit from the 43.5 percent they were short in last week’s report — and a bit over 50 percent, once the market-neutral spread trades are subtracted out.

In gold, the Big 4 are short 62 days of world gold production, up 7 days from what they were short in last week’s COT Report.  The ‘5 through 8’ are short another 31 days of world production, up 1 day from what they were short last week…for a total of 93 days of world gold production held short by the Big 8…up 8 days from last week’s report.  Based on these numbers, the Big 4 in gold hold about 66 percent of the total short position held by the Big 8…up 1 day from last week’s COT Report.

The “concentrated short position within a concentrated short position” in silver, platinum and palladium held by the Big 4 commercial traders are about 63, 70 and 80 percent respectively of the short positions held by the Big 8.  Silver is unchanged from a week ago, platinum is down 2 percentage points from last week — and palladium is up 1 percentage point from a week ago.


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

[The August Bank Participation Report covers the time period from July 2 to August 6 inclusive.]

In gold, 5 U.S. banks are net short 82,387 COMEX contracts in the August BPR.  In July’s Bank Participation Report [BPR] these same 5 U.S. banks were net short 107,222 contracts, so there was a sharp decrease of 24,835 COMEX contracts from a month ago.

JPMorgan, Citigroup and HSBC USA would hold the lion’s share of this short position.  But as to who other two U.S. banks might be that are short in this BPR, I haven’t a clue, but it’s a given that their short positions would not be material.

Also in gold, 29 non-U.S. banks are net short 132,469 COMEX gold contracts.  In the July BPR, 28 non-U.S. banks were net short 105,459 COMEX contracts…so the month-over-month change is up huge for the second month in a row…27,010 contracts.

However, as I always say at this point, I suspect that there’s at least two large non-U.S. bank in this group, one of which would include Scotiabank.  It’s certainly possible that it could be the BIS in No. 1 spot.  But regardless of who this second non-U.S. bank is, the short positions in gold held by the remaining 27 non-U.S. banks are immaterial.

At the low back in the August 2018 BPR [for July] these same non-U.S. banks held a net short position in gold of only 1,960 contacts!  Now they hold their biggest net short position in history — and by a very wide margin.  Ted is wondering if JPMorgan has been able to transfer a big chunk of its short position to the non-U.S. banks/BIS during the last few months…especially this last month, since the U.S. bank short position fell by 24,835 contracts during July.

As of this Bank Participation Report, 34 banks [both U.S. and foreign] are net short 35.8 percent of the entire open interest in gold in the COMEX futures market, which is up a hair from the 35.1 percent they were short in the July BPR.  But ‘under the hood’ the ownership of this short position has changed drastically.

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

In silver, 4 U.S. banks are net short 32,314 COMEX contracts in August’s BPR.  In July’s BPR, the net short position of these same 4 U.S. banks was 27,489 contracts, so the short position of the U.S. banks is up 4,825 contracts month-over-month.

As in gold, the three biggest short holders of the four U.S. banks in total, would be JPMorgan, Citigroup and HSBC USA.  Whoever the remaining U.S. bank may be of the 4 U.S. banks in total, their short position, like the short positions of the two smallest U.S. banks in gold, are immaterial.

Also in silver, 23 non-U.S. banks are net short 43,142 COMEX contracts in the August BPR…which is up from the 36,928 contracts that 26 non-U.S. banks were short in the July BPR.  I would suspect that Canada’s Scotiabank [and maybe one other, the BIS perhaps] holds a goodly chunk of the short position of these non-U.S. banks.  I believe that a number of the remaining 21 non-U.S. banks may actually net long the COMEX futures market in silver.  But even if they aren’t, the remaining short positions divided up between these other 21 non-U.S. banks are immaterial — and have always been so.

As of August’s Bank Participation Report, 27 banks [both U.S. and foreign] are net short 31.6 percent of the entire open interest in the COMEX futures market in silver—which is down a bit from the 36.5 percent that they were net short in the July BPR — with much, much more than the lion’s share of that held by JPMorgan, Citigroup, HSBC USA, Scotiabank — and certainly one other non-U.S. bank, which I suspect may by the BIS.

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

In platinum, 5 U.S. banks are net short 15,202 COMEX contracts in the August Bank Participation Report.  In the July BPR, these same banks were net short 10,554 COMEX contracts…so there’s been an almost fifty percent increase month-over-month.  [At the ‘low’ back in July of 2018, these same five U.S. banks were actually net long the platinum market by 2,573 contracts.] That’s quite a change for the worse since then.

Also in platinum, 19 non-U.S. banks are net short 14,013 COMEX contracts in the August BPR, which is up 48 percent from the 9,456 COMEX contracts that 18 non-U.S. banks were net short in the July BPR.  [Note: Back at the July 2018 low, these same non-U.S. banks were net short only 1,192 COMEX contracts.]

And as of August’s Bank Participation Report, 24 banks [both U.S. and foreign] are net short 38.7 percent of platinum’s total open interest in the COMEX futures market, which is up huge from the 24.9 percent they were net short in July’s BPR.

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

In palladium, 4 U.S. banks are net short 6,539 COMEX contracts in the August BPR, which is down a decent amount from the 7,765 contracts that these same 4 U.S. banks held net short in the July BPR.

Also in palladium, 14 non-U.S. banks are net short 1,576 COMEX contracts—which is also down a very decent amount from the 2,352 COMEX contracts that 15 non-U.S. banks were short in the July BPR.

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

As of this Bank Participation Report, 18 banks [U.S. and foreign] are net short 33.8 percent of the entire COMEX open interest in palladium.  In July’s BPR, the world’s banks were net short 42.0 percent of total open interest…a decent decline from a month ago.

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

For the second  month in a row, it wasn’t a very happy BPR in gold as the banks have obviously been at battle stations for the last two months.  But it’s the change in ownership of that short position that’s the stand-out feature in this report.  The short positions in both silver and platinum have risen as well, as the powers-that-be are there as continuing short sellers of last resort.

It remains to be seen if we get yet another wash, rinse, spin…repeat cycle this time around…as JPMorgan et al. are facing some rather serious and long-term headwinds…not only in the currencies, but in foreign bank and ETF gold purchases.  These headwinds are becoming ever more pronounced with each passing week.

But, as always, JPMorgan is in a position to stick it to the other short holders in both silver and gold — and that became more apparent with this week’s COT and BPR.  But will they or won’t they remains to be seen.  I know that Ted will have a few things to say about it in his weekly review later today.

I have very little in the way of stories/articles for you…but I do have several that I’ve been saving for my Saturday missive for length and/or content reasons.


CRITICAL READS

What Our Grand Kids Taught Us About Buying the Dip — Bill Bonner

[On Thursday], automatic, algorithm-driven investment programs bought the dip, as they were programmed to do, leaving the Dow up 371 points. Trade wars… approaching recession… inverted yields… $15 trillion in negative yields!… jimmied prices… cockeyed signals… soaring debt… Who cares!

Buying the dip has been the winning formula for the last 40 years. Stocks hit a bottom in 1980. They were ready to go up.

Then, in 1987, Alan Greenspan pulled out his “Greenspan Put”; this was the beginning of a new phase in market history. The Federal Reserve had investors’ backs.

If you had bought stocks in 1980… and simply held on through the dips and slips… you would have multiplied your investment 26 times. Buying more on each dip would have increased your profits further.

And now, both investors and their algorithms are programmed to believe that the Fed still has their backs… and that only chumps sit on the sidelines in gold.

But it is not just the stock market we are looking at today…

This commentary from Bill appeared on the bonnerandpartners.com Internet site early on Friday morning EDT — and another link to it is here.  And here’s Gregory Mannarino’s must watch 13-minute rant from Friday, courtesy of Roy Stephens.


Bailout #3: Chinese Bank With $200 Billion in Assets is Nationalized

Step aside Baoshang Bank and Bank of Jinzhou, it’s time for Chinese bank bailout #3.

Last month, when reporting on the imminent failure of yet another Chinese bank in the inglorious aftermath of Baoshang Bank’s late May state takeover, we dusted off a list of deeply troubled Chinese financial institutions that had delayed their 2018 annual reports…

… and noted that the #2 bank on this list, Bank of Jinzhou recently met financial institutions in its home Liaoning province to discuss measures to deal with liquidity problems, and in a parallel bailout to that of Baoshang, the bank was in talks to “introduce strategic investors” after a report that China’s financial regulators are seeking to resolve its liquidity problems sent its dollar-denominated debt plunging.

Just a few days later, that’s precisely what happened, when in late July, Industrial and Commercial Bank of China (ICBC), the country’s largest lender by assets, China Cinda Asset Management and China Great Wall Asset Management, two of China’s four largest distressed debt managers, said on Sunday they would take stakes in Bank of Jinzhou.

And so, fast forward to this week when overnight, the SCMP reported that China’s sovereign wealth fund has taken over Heng Feng Bank – the bank at the very top of the list shown above, one with roughly $200 billion in assets –  a troubled lender linked to fugitive financier Xiao Jianhua, in the third case in as many months of the state exerting its grip over wayward financial institutions.

According to the report, Central Huijin Investment, a subsidiary of the China Investment Corporation that acts as the Chinese government’s shareholder in the country’s four biggest banks, emerged as a strategic investor in Heng Feng, according to a brief report overnight by Shanghai Securities News, published by state news agency Xinhua.

In short, a 3rd Chinese bank in as many months received an implicit (or explicit) state bailout, and with the dominoes now falling, it’s just a matter of time before most if not all of the banks shown in the list above collapse.

This long news story showed up on the Zero Hedge website at 9:41 a.m. EDT on Friday morning — and I thank Brad Robertson for sending it along.  Another link to it is here.


Doug Noland:  “Hot Money” Watch

The collapse of Italian bond yields has been one of the more dramatic global market moves. After trading to almost 3.60% last October, Italian 10-year yields ended Wednesday trading at 1.42%. For a country so hopelessly over-indebted ($3 TN plus), Italian bond prices are arguably one of the more distorted assets in a world of distorted asset markets. Italian yields reversed sharply higher into the end of the week, rising 12 bps Thursday and a notable 27 bps on Friday – on political instability after Deputy Prime Minister Matteo Salvini called for early elections (breaking with its Five Star Movement coalition partner). Italian stocks were hit 2.5% in Friday trading, ending the week down 3.4%. Global “risk off” could prove an especially challenging backdrop for vulnerable Italian assets.

Italy, the U.K., China, India, Brazil and others… Global central bank-induced liquidity excess has kept numerous remarkably leaky boats afloat in recent years. There will be systemic hell to pay when the dam finally breaks.

I’ll assume Monday’s global market convulsions will have the U.S. administration and Beijing treading cautiously next week. Yet I expect it will prove more difficult this time to squeeze the genie back into the bottle. To see such high cross asset correlations around the globe is disconcerting. And we saw Monday how critical a stable renminbi has become to global finance. It’s not a stretch to say this global party comes to [a] rapid conclusion the moment markets fear a disorderly Chinese currency devaluation.

Like so many aspects of this long boom, it works miraculously – until it doesn’t. At this point, the key analysis is that reserve holdings surely overstate resources available for countries to combat a more enduring period of “risk off” capital flight. Moreover, the perception of EM resilience has ensured unprecedented Credit and speculative excess throughout a systemic EM Bubble.

I am clearly not alone in the view that Beijing took a huge gamble in moving to devalue the Chinese currency this week. They today have a large international reserve position. Over the coming weeks and months, I expect analysts to increasingly question the adequacy of these reserves in light of extraordinary financial and economic vulnerabilities.

The key take-away from another critical week: As the marginal provider of global liquidity and economic growth, Chinese finance has become the epicenter of crisis dynamics. Global markets are highly correlated; speculative dynamics remain extraordinarily synchronized. At this point, a bet on global risk markets is a bet on China – a bet on the ongoing inflation of China’s historic Bubble. Developments – market, policy, economic and geopolitical – are corroborating the analysis that it’s very late in the game. I’ll assume the flow of “hot money” away from global risk markets has commenced.

This weekly commentary from Doug, which is always a must read for me, showed up on his website in the very week hours of Saturday morning — and another link to it is here.


Media silent on dismissal of DNC suit against Julian Assange

A federal court ruling last Tuesday dismissing a Democratic National Committee (DNC) civil suit against Julian Assange “with prejudice” was a devastating indictment of the U.S. ruling elite’s campaign to destroy the WikiLeaks founder. It exposed as a fraud the entire “Russiagate” conspiracy theory peddled by the Democratic Party, the corporate media and the intelligence agencies for the past three years.

The decision, by Judge John Koeltl of the U.S. District Court for the Southern District of New York, rejected the smears that Assange “colluded” with Russia. It upheld his status as a journalist and publisher and dismissed claims that WikiLeaks’ 2016 publication of leaked emails from the DNC was “illegal.”

Despite the significance of the ruling, and its clear newsworthiness, it has been subjected to an almost complete blackout by the entire media in the U.S. and internationally.

The universal silence on the court decision—extending from The New York Times (which buried a six-paragraph report on the ruling on page 25) and The Washington Post, to “alternative” outlets such as the Intercept, the television evening news programs and the publications of the pseudo-left—can be described only as a coordinated political conspiracy.

Its aim is to suppress any discussion of the court’s exposure of the slanders used to malign and isolate Assange, and to justify the unprecedented international pursuit of him over WikiLeaks’ exposure of U.S. war crimes, surveillance operations and diplomatic conspiracies.

The New York Times, The Washington Post and other corporate outlets have relentlessly smeared Assange as a “Russian agent” and depicted him as the linchpin of a conspiracy hatched in Moscow to deprive Democratic Party candidate Hillary Clinton of the presidency in the 2016 US elections.
Now that their claims have been subjected to judicial review and exposed as a tissue of lies and fabrications, they have adopted a policy of radio silence. There is no question that if the court ruling had been in favour of the DNC, it would have been greeted with banner headlines and wall-to-wall coverage.

The response exposes these publications as state propagandists and active participants in the campaign by the Democratic Party, the Trump administration and the entire ruling elite to condemn Assange for the rest of his life to an American prison for the “crime” of publishing the truth.

This very interesting news item, which I haven’t seen anywhere else, showed up on the greanvillepost.com Internet site a week ago Friday — and I thank Larry Galearis for pointing it out.  For obvious reasons this had to wait for my Saturday column — and another link to it is here.


The Invention of Money — John Lanchester…The New Yorker

In three centuries, the heresies of two bankers became the basis of our modern economy.

hen the Venetian merchant Marco Polo got to China, in the latter part of the thirteenth century, he saw many wonders—gunpowder and coal and eyeglasses and porcelain. One of the things that astonished him most, however, was a new invention, implemented by Kublai Khan, a grandson of the great conqueror Genghis. It was paper money, introduced by Kublai in 1260. Polo could hardly believe his eyes when he saw what the Khan was doing:

He makes his money after this fashion. He makes them take of the bark of a certain tree, in fact of the mulberry tree, the leaves of which are the food of the silkworms, these trees being so numerous that whole districts are full of them. What they take is a certain fine white bast or skin which lies between the wood of the tree and the thick outer bark, and this they make into something resembling sheets of paper, but black. When these sheets have been prepared they are cut up into pieces of different sizes. All these pieces of paper are issued with as much solemnity and authority as if they were of pure gold or silver; and on every piece a variety of officials, whose duty it is, have to write their names, and to put their seals. And when all is prepared duly, the chief officer deputed by the Khan smears the seal entrusted to him with vermilion, and impresses it on the paper, so that the form of the seal remains imprinted upon it in red; the money is then authentic. Anyone forging it would be punished with death.”

That last point was deeply relevant. The problem with many new forms of money is that people are reluctant to adopt them. Genghis Khan’s grandson didn’t have that difficulty. He took measures to insure the authenticity of his currency, and if you didn’t use it—if you wouldn’t accept it in payment, or preferred to use gold or silver or copper or iron bars or pearls or salt or coins or any of the older forms of payment prevalent in China—he would have you killed. This solved the question of uptake.

Marco Polo was right to be amazed. The instruments of trade and finance are inventions, in the same way that creations of art and discoveries of science are inventions—products of the human imagination. Paper money, backed by the authority of the state, was an astonishing innovation, one that reshaped the world. That’s hard to remember: we grow used to the ways we pay our bills and are paid for our work, to the dance of numbers in our bank balances and credit-card statements. It’s only at moments when the system buckles that we start to wonder why these things are worth what they seem to be worth. The credit crunch in 2008 triggered a panic when people throughout the financial system wondered whether the numbers on balance sheets meant what they were supposed to mean. As a direct response to the crisis, in October, 2008, Satoshi Nakamoto, whoever he or she or they might be, published the white paper that outlined the idea of Bitcoin, a new form of money based on nothing but the power of cryptography.

The quest for new forms of money hasn’t gone away. In June of this year, Facebook unveiled Libra, global currency that draws on the architecture of Bitcoin. The idea is that the value of the new money is derived not from the imprimatur of any state but from a combination of mathematics, global connectedness, and the trust that resides in the world’s biggest social network. That’s the plan, anyway. How safe is it? How do we know what libras or bitcoins are worth, or whether they’re worth anything? Satoshi Nakamoto’s acolytes would immediately turn those questions around and ask, How do you know what the cash in your pocket is worth?

This long, but very interesting essay was posted on the newyorker.com Internet site back on July 29 — and I thank Patricia Caulfield for sharing it with us.  Another link to it is here.


The Elite Club That Rules the Diamond World Is Starting to Crack

It’s one of the world’s most exclusive clubs, known over the years as the Syndicate, the Central Selling Organization and the Diamond Trading Company.

For more than a century, De Beers has sold most of its rough diamonds to a select number of customers, a list that reads like a who’s who of the opaque gem-trading world. Tiffany & Co., Graff Diamonds and Signet Jewelers Ltd. all own subsidiaries in this group, guaranteeing a steady supply of gems with the pedigree of being vetted by De Beers.

In the diamond trading world, becoming one of De Beers’s elite buyers is viewed as essential to achieving success and making money. Now, it’s no longer so easy.

De Beers sells its gems through 10 sales each year in Botswana’s capital of Gaborone, and the buyers—known as “sightholders”—have to accept the price and the quantities they’re offered. It’s a system that originated in the 1890s and designed to benefit both miner and customer, who receives the diamonds at a discounted rate.

But the discount has been shrinking. In some cases the prices have been higher than the going trading rate, forcing customers to sell at a loss, according to people familiar with the matter. Some sightholders now struggle to make money from a business that was once highly lucrative.

The problems in the diamond industry are twofold. High-end jewelry sales are stagnating as other luxury offerings, like shoes, handbags and resort vacations, crowd the field. It’s also harder for diamond trading companies to find financing because banks are abandoning the sector after being hit by frauds and bad loans.

This interesting article put in an appearance on the bloomberg.com Internet site back on July 28 — and it comes to us courtesy of Swedish reader Patrik Ekdahl — and like the other two articles posted above, had to wait for my Saturday missive.  Another link to it is here.


China says it added 10 tonnes to gold reserves in July — Lawrie Williams

The People’s Bank of China (PBoC)- China’s central bank, says it added a further 9.96 tonnes of gold to its forex reserves in July – a seemingly particularly astute move given the strong recent advance in the gold price so far this month.  This is just one of the world’s Central Banks adding regularly to its gold reserves this year.  So far the PBoC says it has added a total of around 84 tonnes to its reserves over the first seven months of the year.  However, the latest increase is yet another reduction in the level of its monthly reported reserve accumulations after adding 10.26 tonnes in June.  China is thus tending to add rather less gold to its reserves than Russia which has announced additions of around 96.5 tonnes in the first half of the year.  It won’t report any reserve increase for July for another couple of weeks (it usually announces any gold reserve increases on the 20th of the month).

Of course, as we have pointed out beforehand, the veracity of the actual reserve additions by China – or for any other central bank for that matter – is always open to question as reported figures are not independently audited.  The PBoC has a track record of announcing what appear to be misleading statements regarding its gold reserves in the past in going for long periods of reporting zero increases and then announcing mega rises which must have been built up during the years and months of zero addition reporting.  China has claimed in the past that this gold has been lodged in accounts it has not been required to report to the IMF and only reports this when it is merged into its forex figures at a time it feels appropriate to let the world know.

Overall though even the total amount of gold held by China in its reserves has been questioned by many analysts – some think it is actually considerably more than the total of a little under 2,000 tonnes currently reported to the IMF.  The nation is thought to have a target of at least matching the U.S.’s reported holding of 8,133.5 tonnes (a figure which many also doubt given the resistance to it being audited).  China is thought to believe that gold holdings may have an increasingly important role to play in any future global monetary re-alignment which may come about in the next few years.

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


The PHOTOS and the FUNNIES

Here are the last four shots from our trip through the Othello tunnels on the long-defunct Kettle Valley Railway right-of-way just outside of Hope, B.C.  The first two are within the tunnel complex itself, the third was taken of the south portal — and the last one a few hundred meters along the railway right-of-way from the previous photo.  The area on this side of the Pacific Coastal Range is all temperate rain forest — and received prodigious amounts of precipitation…mostly rain, except during the summer.  Click to enlarge.


The WRAP

Plucked out of almost total obscurity by Burt Bacharach in early 1960s, this now 6-time Grammy Award-winning American singer had her first Top 10 single way back in November 1963 — and what a hit it was.  I’ve posted this before, but it’s time for a revisit — and the link is here.

Today’s classical ‘blast from the past’ is one I hummed and hawed about for a bit before posting it in today’s column.  I’ve featured it at least once before — and why it popped into my head at this particular time remains unknown.  Of all of Mozart’s compositions, this certainly ranks in the Top 5…even the Top 3 for me.  This particular performance was the one I posted last time, as I was totally blown away by it.  I’ve heard this performed live on several occasions, but this performance tops all others.   It’s Mozart’s Requiem Mass in D minor, Op. 626 which lay unfinished at the time of the composer’s death.  The stories surrounding it are the stuff of legend…which Miloš Forman turned into the 1984 Oscar winning blockbuster, Amadeus.  This performance runs for about 52 minutes — and the link is here.


For all intents and purposes, I looked on Friday as mostly a ‘care and maintenance’ sort of day…as gold was carefully closed below $1,500 spot — and silver below $17 spot.

I’m not sure what the short-term prospects are for these two precious metals, particularly gold, as the commercial net short position is wildly bearish on the surface…and not much better in silver, although the stuff ‘under the hood’ in yesterday’s COT and BPR suggests to Ted that JPMorgan continues to slide towards the exits in both precious metals.

That fact certainly doesn’t diminish the possibility of an engineered price decline in the near future because, as I mentioned in my COT discussion, they could pull it off in a New York minute if that was their wish.

But in the longer term, the prices of both will continue to rise as the economic, financial and monetary clouds continue to darken on a world-wide basis.

Here are the 6-month charts for all of the Big 6 commodities — and there’s not really a lot to see.  But it should be noted once again that the  Managed Money short position in copper was at a new record low as of Tuesday’s cut-off — and I suspect that virtually the same situation exists in WTIC as well.  Click to enlarge for all.

Not even ten days has passed since the last FOMC meeting — and the talk of more rate cuts is in the air for their next meeting in September, if not sooner, as Trump called for a full 100 basis point cut in the Fed’s fund rate in a Tweet yesterday.  The yield curve in the U.S. bond market has been fully inverted for a while now — and as Gregory Mannarino pointed out in his rant in my Thursday column, the 10-year will soon fall below the 2-year rate.  I’m not a bond guy, but I know what this portends.

The powers that be are even more fully engaged in market management now than they have been in the past, particularly in the equity markets.  The rallies in the Dow over the last few days, after big down openings, are more than proof of that.

Here’s a chart that Brad Robertson dropped into my in-box yesterday morning.  It shows the S&P500 [as of April 2019] going back to around 1998 — and the enormity of the current ‘Everything Bubble’ is plain to see.  Of course the ‘Everything Bubble’ doesn’t include the precious metals…for obvious reasons.  However, that will change — and is already changing.  This — and a falling dollar, brought about by an ever-declining Fed funds rate, are the headwinds that JPMorgan et al. are fighting.  As I’ve said before, not only will they fail…they will fail spectacularly when the time comes…with the only question being whether it will be by circumstance, or design.

The world is in a deflationary spiral that they are no longer able to get out of, as all interest rates that aren’t already Zero Lower Bound, will be there at some point…including the U.S. and the rest of the Western world.  It is a trap from which there is no escape using what’s left of conventional monetary policy, which is Doug Noland’s area of expertise.  And if you you’re not reading his weekly blog, which is always posted in my Saturday column, you owe it to you to do so.

As far as I can tell from where we are in this downward spiral, the only possible way out is some sort of major inflationary event — and the only one that comes to mind is if the central banks finally get around to playing the gold card.  It’s the only arrow they have left in their quiver, but as you are already keenly aware, they are loath to play it.

Of course we’re already starting to signs that it is breaking out on it own, despite the efforts of the world’s central banks and the BIS to manage its price.

The danger in that of course, is that once that genie is unleashed willingly or otherwise…good luck to them getting it back in the bottle, as the rush from paper assets into hard assets of any kind…particularly the precious metals, will be well-nigh impossible to stop until the stampede burns itself out.

But it’s a trap that the central banks and most western governments have been building ever since the U.S. went off the gold standard back in 1971.  If the powers-that-be had allowed the precious metals and other commodities to gradually rise alongside the prices of other assets as world currencies were debased [Warburton: April 2001] then this issue would not exist today.

But they have kept hard asset prices in chains for over two generations now…Imperialism via the COMEX futures market — and when it all comes undone, as it will at some point, the current economic, financial and monetary system that has existed since that time, will vanish as well — and good riddance to it.

However, I do fear what might follow — and I’m still ‘all in’.

I’m done for the day — and the week — and I’ll see you here on Tuesday.

Ed

A Nice Rally in the Silver Equities on Thursday

09 August 2019 — Friday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The tiny rally attempts in gold in Far East trading on their Thursday morning were all turned quietly lower, as was the tiny one going into the 2:15 p.m. China Standard Time afternoon gold fix in Shanghai.  From that point the gold price crawled quietly lower until 9 a.m. in New York — and from there, it crept higher until 1 p.m. EDT.  The rally became a bit more intense at that juncture — and that was allowed to last until around 2:50 p.m. in after-hours trading.  It was sold quietly lower until shortly after 4:30 p.m. — and didn’t do much after that going into the 5:00 p.m. EDT close.

The low and high in gold in the October contract was reported as $1,495.50 and $1,514.90 — and in the December contract, they were $1,501.60 and $1,521.30.

Gold was closed in New York on Thursday at $1,500.70 spot, down 20 cents from Wednesday.  Net volume in October and December combined was just about 403,000 contracts — and there was around 11,500 contracts worth of roll-over/switch volume in this precious metal.

The price pattern in silver was mostly similar — and once the afternoon gold fix was done in Shanghai on their Thursday afternoon, it was sold quietly lower until the 8:20 a.m. COMEX open in New York.  The low tick was set at precisely 9 a.m. EDT – and from that point, the price path in silver was identical to gold’s for the remainder of the Thursday session.

The high and low ticks in silver were reported by the CME Group as $17.225 and $16.81 in the September contract.

Silver was closed yesterday afternoon in New York at $16.89 spot, down 19 cents from Thursday — and back below $17 spot.  Net volume was enormous, as almost always seems to be the case these days, at a bit under 101,000 contracts — and there was 25,500 contracts worth of roll-over/switch volume out of September and into future months.

And just FYI, here’s the New York Spot Silver [Bid] chart from Kitco that shows the precision of the 9:00 a.m. low tick in that precious metal.  There’s nothing free market about it.

After an up/down move that lasted until the 2:15 p.m. CST afternoon gold fix in Shanghai, the platinum price was sold down hard, with the low tick of the day also coming at 9 a.m. in New York.  It rallied back nicely from there — and the high tick was set a few minutes before 3 p.m. in the thinly-traded after-hours market.  Platinum finished the Thursday session at $863 spot, up 1 whole dollar from Wednesday’s close.

Palladium’s price was all over the map on Thursday.  Its rally in New York was stopped at the morning gold fix in London…10 a.m. EDT…and once Zurich closed, it was sold unevenly lower until trading ended at 5:00 p.m. in New York.  Palladium was closed at $1,398 spot up a 1 buck from Wednesday.

The dollar index closed very late on Wednesday afternoon in New York at 97.54 — and opened up 5 basis points once trading commenced at 7:45 p.m. on Wednesday evening, which was 7:45 a.m. China Standard Time on their Thursday morning.  From that juncture, it really didn’t do much of anything until about fifteen minutes before the London open.  It began a bit of a roller coaster ride around the unchanged mark at that point — and by the time trading was done at 5:30 a.m. in New York, the dollar index was pretty much back where it started, closing at 97.62…up 8 basis points from Wednesday’s close.

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 good folks over at the stockcharts.com Internet site.  The delta between its close…97.43…and the close on the DXY chart above, was 19 basis points on Thursday.  Click to enlarge as well.

The gold stocks gapped down well over two percent at the open, but at that point strong buying appeared — and that lasted until around 3:20 p.m. in New York trading, which was about twenty minutes after the high tick in gold was set.  From there they sold off a bit into the 4:00 p.m. close.  The HUI closed up 0.88 percent.

The silver equities gapped down just under two percent at the open — and that panic sell-off was met by even stronger buying pressure than appeared in the gold shares.  The rally ended at the same time as it did for the gold stocks — and they edged a hair lower into the close.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index finished higher by 2.65 percent.  Click to enlarge if necessary.

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

It certainly wasn’t your average retail investor buying the precious metal equities on Thursday, as they were the ones selling in a panic at the 9:30 a.m. EDT open.  No, these were ‘strong hands’/deep pocket buyers — and I was certainly happy to see it.


The CME Daily Delivery Report for Day 8 of the August delivery month showed that 18 gold and 147 silver contracts were posted for delivery with the COMEX-approved depositories on Monday.

In gold, the two short/issuers were International F.C. Stone and ADM, with 16 and 2 contracts out of their respective client accounts.  There were four long/stoppers in total — and the two biggest were JPMorgan and Citigroup…the former stopping 7 contracts for its client account — and the latter picking up 6 contracts for its own account.

In silver, the three short/issuers were ABN Amro, Advantage — and ADM, with 76, 57 and 14 contracts…all out of their respective client accounts.  The three largest of the four long/stoppers were JPMorgan, ABN Amro and Advantage, with 61, 44 and 34 contracts for their respective client accounts as well.

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 August declined by 122 contracts, leaving 2,418 still around, minus the 18 mentioned a few short paragraphs ago.  Wednesday’s Daily Delivery Report showed that 6 gold contracts were actually posted for delivery today, so that means that 122-6=116 more gold contracts vanished from the August delivery month.  Silver o.i. in August fell by 180 contracts, leaving 256 still open, minus the 147 mentioned a few paragraphs ago.  Wednesday’s Daily Delivery Report showed that 326 silver contracts were actually posted for delivery today, so that means that 326-180=146 more silver contracts just got added to August.

August gold deliveries continue to creep along at glacial speed — and deliveries in silver for this month keep rising at an eye-opening rate.  Very unusual.

There was a withdrawal of some size from GLD yesterday, as an authorized participant took out 179,189 troy ounces — and whether or not that was a normal withdrawal, or an exchange of GLD shares for physical metal is hard to tell.  However, it does seem rather counterintuitive…all things considered.  There was a deposit into SLV, as a.p. added 1,403,703 troy ounces.  It’s a very good bet that both of these ETFs are owned decent amounts of physical metal, especially after the price activity on Wednesday.

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

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

But that wasn’t the case in silver, as 1,205,236 troy ounce was reported received — and 342,010 troy ounces were shipped out.  And except for 9,563 troy ounces that was shipped out of the International Depository Services of Delaware…all of the rest of the in/out activity took place over at CNT.  There was also a paper transfer of 1,200,451 troy ounces from the Eligible category — and into Registered.  That occurred at CNT as well — and is most likely destined for delivery in August, as that amount only represents about 240 COMEX contracts.  The link to all this activity is here.

There wasn’t much activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Wednesday.  They didn’t receive any — and shipped out 50 of them.  This activity was at Brink’s, Inc. of course — and I won’t bother linking it.


Here are two charts that I dug up on Nick’s website.  Now that India has reported its gold imports for June, here is the updated ‘Silk Road Gold Demand’ chart…showing the four largest importers of gold.  There are quite a few other countries on the ‘Silk Road’, but their overall demand is somewhat immaterial.  Since 1995 these countries have imported 40,000+ tonnes of gold.  And as you can see from the small insert chart at the bottom, these four countries have taken up virtually all of the newly-mined gold in the world each and every year for about the last six years.  Click to enlarge.

And here’s a chart that shows the Silk Road Gold Demand for Month 6/June of these same four countries — and it’s pretty impressive.  Click to enlarge as well.

And it should be most carefully noted that if China’s true gold reserves were suddenly made public, both these above charts would look radically different, as it’s widely acknowledged that they’re holding far more reserves than they’re letting on.

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


CRITICAL READS

Gold Tells Us the Stock Market’s True Condition — Bill Bonner

The feds can fool some of the people some of the time, and they can fool stock market investors almost all the time. But they can’t fool gold.

Gold is real money. Yes, it gets overexcited once in a while… and it tends to exaggerate. But over time, it faithfully records what things are worth. And right now, it’s telling us that the stock market is worth less than half of what it was worth 20 years ago.

We will pause to let you absorb that info-grenade.

If we’re right about this, it tells us what we’ve long suspected… that from an economic perspective, the whole 21st century has been a bust.

America’s most precious capital – its leading industrial companies – has lost half its capital value. Whizzbang technology has gained these companies nothing.

Wall Street has been unable to add a single penny. The feds, the manipulators with PhDs at the Federal Reserve, and the genius elite have totally failed to produce a richer society. Instead, they’ve produced a poorer one.

Could it be? Could that be right? What are we missing?

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


Bonds, Gold Bid As Italian Political Crisis Re-Emerges: Salvini Demands Fresh Elections

Italy’s ruling party leader Matteo Salvini has just written in a note:

We are going to Parliament immediately to acknowledge that there is no longer a majority, as is evident from the vote on the Tav, and we quickly return the word to the voters.”

…it is pointless for government to go ahead amid continuous quarrels.”

Salvini went on to say that he has told PM Conte that “it is necessary to formalize the crisis in parliament” following a failed vote on a new railroad link with France, and demanded “fresh elections.”

De Maio confirmed, via Ansa, that Five Star is ready for a vote.

Italian equity markets are sliding (MSCI ETF as local markets closed).

As The Telegraph notes, “The League has by far the most to gain from fresh elections – its public support has more than doubled since last year from 17% to around 38%. After riding a wave of optimism during the general election last year, Five Star is now polling just 17% – half what it won at the election.  If the League were to ally with other Right-wing parties such as Brothers of Italy and Silvio Berlusconi’s Forza Italia, the bloc would win more than 50% of the vote, polls suggest.”

As we detailed earlier, Italy is about to have an express date with political chaos again.

Overnight, Italian bond yields spiked following the latest media reports that Deputy PM, and Italy’s defacto leader, Matteo Salvini had issued a Monday ultimatum to shake up the cabinet and threatened that if his partners in the Five Star Movement don’t yield to his demands he’ll dissolve the government.

While hardly new, threats from Italy’s de facto leader to his Five Star government alliance “partners” have been escalating in severity in recent days, urging that either they stop trying to delay his agenda or he’s ready to pull the plug on the government and try to force early elections. Salvini, the League party leader, has called for deep tax cuts and investments, even if they fall afoul of European Union rules.

Italian bonds took another leg lower after reports that PM Conte was set to meet with President Mattarella, ahead of the coming government collapse and subsequent elections that will assure that Salvini is Italy’s undisputed leader, one who no longer need a coalition partner to govern.

This news item put in an appearance on the Zero Hedge website at 2:20 p.m. on Thursday afternoon EDT — and I thank Richard Saler for sending it our way.  Another link to it is here.


Smugglers make hay as Indian govt hikes import duty on gold

With the Indian government jacking up import duty on gold, smuggling of the yellow metal from Persian Gulf countries, Singapore and Malaysia is in full swing.

Ever since customs duty on the precious metal was raised from 10 per cent to 12.5 per cent on July 5 in a desperate attempt to narrow the fiscal deficit, not a day passes without the arrest of gold-runners by eagle-eyed officials at one airport or the other in the country.

While techno-savvy customs sleuths at Kochi (Kerala) on August 6 busted a gang of six who had sneaked in 25 kg of gold bars from Dubai in the past few days, Sri Lankan officials collared six Chennai-bound Indian tourists carrying contraband gold worth Rs 17 million, at an international airport on August 4.

On August 3, even as gold prices zoomed to almost Rs 37,000 per 10 gram, seven gold biscuits worth Rs 2.9 million were recovered from a passenger, who had arrived at New Delhi from Dammam (Saudi Arabia), and his accomplice, an employee of Air India SATS, a joint venture between Air India Limited and Singapore-based SATS Limited.

What’s more, whip-smart contrabandists have hit upon novel tricks to bamboozle even alert law-keepers for pushing gold into India. If three women who had travelled from Colombo with gold paste concealed in plastic sheaths in their rectum were hauled up at Bengaluru airport, 2 kg of gold in paste form hidden in a waist band and floppy slippers was confiscated from a frequent flyer who had landed at Kochi from Dubai.

Indeed, among other ingenious modus operandi, smugglers have of late been hiding gold in toys, radios, bag handles, brass pipes, induction cookers, damaged chairs, emergency lights, vacuum cleaners, and hidden cavities of cars to throw dust in the eyes of the airport officials.

No wonder, members of the all-India Jewellery Trade Council (GJF) recently met federal finance minister Nirmala Sitharaman in New Delhi and told her that the import duty hike would only encourage gold smuggling, and pointed out that 300 tonnes of gold was being brought into India through unofficial channels, leading to huge revenue losses.

This long, interesting — and photo-filled gold-related news item appeared on the connectedtoindia.com Internet site on Wednesday sometime.  I found it on the Sharps Pixley website — and another link to it is here.


Central banks change their policy on gold but not their madness — Chris Powell

Over a weekend in April six years ago, without any corresponding news, the gold price was smashed out of the blue for nearly $200. For months before the smash analysts often said that China had put a floor under the gold price, buying whatever it could to hedge its U.S. dollar exposure without pushing gold’s price up too much.

That analysis made sense, since, with its estimated $3 trillion in foreign-exchange reserves, mostly in U.S. dollar instruments, China was in a position to control any market on the planet.

But over that weekend in April six years ago the supposed Chinese floor under gold disappeared. Regardless of how much gold China had been buying, no collapse of that size could have happened in any major international market without China’s cooperation or consent.

The gold smash was clearly a coordinated intervention by central banks. So soon there was speculation that the central banks had decided that the gold price was getting away from them too fast, particularly for China’s dollar-hedging purposes.

Now, over the last week, gold and silver prices have been spiking dramatically and unprecedentedly, and central bank intervention against gold seems to be diminishing. This is suggested by the gold-trading footnotes in the monthly reports of the Bank for International Settlements, as well as by the lapsing of the European Central Bank’s gold sales agreement with its members. The decline in intervention may result in part from the exhaustion of central bank gold available for intervention, just as the collapse of the London Gold Pool in 1968 was caused by exhaustion of the gold reserves of the participating Western central banks.

So who is buying the gold?

Central banks not so closely allied with the United States have announced substantial purchases in the last couple of years, and over the last eight months even most-secretive China has resumed announcing purchases, if small ones that may represent only a fraction of that nation’s purchases. Of course China still has a huge foreign-exchange reserve in dollars with which it can dominate any market, at least for a significant time.

So either central banks now are divided on policy toward gold or they no longer want or are able to suppress the price with sales, leases, swaps, and futures market intervention. Indeed, with even President Trump clamoring for a cheaper U.S. dollar, the gold policy of the U.S. government itself may have changed, though the government long has refused to say what its gold policy is.

This worthwhile commentary from Chris was posted on the gata.org Internet site on Wednesday — and another link to it is here.


Government Action Will Push Gold Higher — Egon von Greyerz

As I discussed in last week’s article, central banks are now panicking. They know that the world economy and the financial system is standing on a foundation of quicksand. The effects of quicksand is that the harder you try to get out, the deeper you sink. And this will be the next phase for the world economy. Central banks only have two pills at their disposal. One is called money printing and the other is interest rate manipulation.

Since Nixon closed the gold window in 1971, central banks have overdosed these two medicines with ever increasing frequency. The consequences for the world have been disastrous but virtually no one has noticed. For example, the average house in the UK cost £4,700 in 1971. Today the price is £230,000 even though you would only get a shed for that money in South East England. Still, the average price has gone up almost 50x or 4,800%. Let’s say that instead of buying a house, the person put £4,500 in the bank earning 4% per annum for 48 years between 1971 and 2019. Today he would have £30,000 in total, including the interest. So his money in the bank went up 6x whilst the house went up 50x. Obviously, he can’t now afford to buy a house with his savings having lost most of their purchasing power.

This is how savers have been crushed by governments irresponsible destruction of the value of money. Credit expansion and money printing have totally demolished the value of money and also the incentive to save. Today it is even worse for savers since it is no longer possible to earn an annual interest return of 4%. In most European countries, you earn nothing or negative interest. Currently savers thus have to pay a penalty to the government for being thrifty. This is totally outrageous and will soon lead to the destruction of the financial system. As anyone who understands the basics of economics knows, real investment returns come from savings. To achieve real growth and a stable currency, total investments must equal savings.

Most people don’t understand that the value of their money in the pocket is deteriorating all the time. They live under the illusion that prices are going up which is totally erroneous. It is not prices that are going up but the value of money which is declining rapidly. The example of the house above going up 50x in 48 years is a good illustration. In real terms, the house has not gone up in value at all. It is the value of the money that has collapsed in all countries since Nixon closed the gold window.

This interesting and worthwhile commentary from Egon was posted on the goldswitzerland.com Internet site on Thursday sometime — and I thank Phil Manuel for pointing it out.  Another link to it is here.


The PHOTOS and the FUNNIES

Here are three more photos from our stop at the Kettle Valley Railway Othello Tunnels just outside of Hope, B.C. — and as I pointed out in my Thursday column, no photos can do this place justice…at least on the device your looking at them on now.  But on a 65″ flat-screen TV at 22 mega-pixels per photo — and sitting 2 meters/6 feet from the screen, they look far different.  Click to enlarge.


The  WRAP

The gold price was sold back below $1,500 spot shortly after the 2:15 p.m. afternoon gold fix in Shanghai.  But at 9 a.m. in New York it headed higher and managed to close back above that price mark.  It was the same for silver at the $17 spot mark, but ‘someone’ was there to make sure, it didn’t close back above it by the 5:00 p.m. close yesterday.

Here are the 6-month charts for the Big 6 commodities.  Gold is still hugely overbought, but silver managed to dip below that after Thursday’s price activity.  And as you can see, platinum and palladium didn’t do much.  Copper has been crawling off its Monday low tick ever day since then — and WTIC closed up a bit.  Click to enlarge.

And as I type this paragraph, the London open is less than a minute away — and I note that gold’s rally attempt at the 6:00 p.m. open in New York on Thursday evening, was met by ‘da boyz’ right away — and from there it chopped sideways until shortly before the 2:15 p.m. CST afternoon gold fix in Shanghai.  It was sold down about four bucks and change at that juncture, but is off its current low — and is only up $2.00 an ounce at the moment.  Silver crept unevenly higher until shortly before noon CST — and then didn’t do much until shortly before 2 p.m. over there.  It jumped up a bit at that point — and was up 18 cents, but JPMorgan et al. worked their magic — and sold it back to unchanged.  It has rallied a bit since — and is up 4 cents currently.  Platinum was up a buck by around 1:30 p.m. CST — and it go the same treatment as both silver and gold — and is now down 3 dollars.  Palladium was up 11 dollars by shortly before 1 p.m. in Shanghai, but it was sold lower as well — and is only up 4 bucks as Zurich opens.

Net HFT gold volume in October and December combined is a bit under 75,000 contracts — and there’s only 1,025 contracts worth of roll-over/switch volume on top of that.  Net HFT silver volume is a bit under 22,500 contracts — and there’s 2,335 contracts worth of roll-over/switch volume out of September and into future months.

The dollar index opened down 5 basis points once trading commenced at 7:45 p.m. in New York on Thursday evening, which was 7:45 a.m. China Standard Time on their Friday morning.  It’s current low tick, such as it is, came about 1:50 p.m. CST — and it has moved a bit higher since — and is down 2 basis points as of 7:45 a.m. BST in London/8:45 a.m. CEST in Zurich.  I guess that 7 basis point ‘rally’ off its current low tick was all the excuse ‘da boyz’ needed to turn the precious metals sharply lower.


Today we get the latest Commitment of Traders Report — and companion Bank Participation Report for positions held at the close of COMEX trading on Tuesday.  I’m on record as stating that we’ll see a decent increase in the commercial net short position in gold, but wasn’t about to take a stab at what the silver number would look like.

Silver analyst Ted Butler had this to say in his mid-week column to his paying subscribers on Wednesday…”At least through yesterday’s close and the cutoff for the reporting week, I don’t detect any move by the big shorts to stop adding shorts or to begin buying back existing shorts. Accordingly, I would expect significant new commercial shorting in gold in Friday’s new COT report given the $40+ gain over the reporting week and the sharp increase in total open interest of 37,000 contracts. It’s possible that there was some commercial short covering in [Wednesday’s] trading, but it’s way too soon to know for sure. Silver, on the other hand, didn’t do anything price-wise during the reporting week — and total open interest remained unchanged, so I wouldn’t expect much overall positioning change in Friday’s report.”


And as I post today’s column on the website at 4:02 a.m. EDT, I see that the gold price has faded a bit more during the first hour of London trading — and is currently up only 80 cents the ounce . The silver price has recovered a bit — and is now up 9 cents. Platinum is up 2 bucks — and palladium is still up 4 dollars as the first hour of Zurich trading draws to a close.

Gross gold volume in October and December combined is a bit over 91,500 contracts — and minus what little roll-over/switch volume there is, net HFT gold volume is a bit over 88,500 contracts. Net HFT silver volume is now up to a hair over 26,000 contracts — and there’s 2,454 contracts worth of roll-over/switch volume out of September and into future months.

The dollar index hasn’t done much during the first hour of London trading — and is down 3 basis points as of 8:45 a.m. in London/9:45 a.m. in Zurich.

That’s it for today.  Have a good weekend — and I’ll see you here tomorrow with my longest report of the month.

Ed

Huge Shorting of the Precious Metal Equities

08 August 2019 — Thursday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price began to head higher a bit over an after trading began at 6:00 p.m in New York on Tuesday evening.  That rally lasted until a few minutes before 10 a.m. China Standard Time on their Wednesday morning.  Then gold was sold lower by a hair until a few minutes before 2 p.m. CST — and then began to crawl unevenly higher.  The rally became a bit more intense starting at the noon silver fix in London/7 a.m. EDT — and the spike high at the afternoon gold fix in London was capped and sold lower immediately.  It continued to edge a bit higher until around 12:20 p.m. — and then it chopped quietly sideways until around 3:30 p.m. in after-hours trading.  It was sold back below the $1,500 spot mark at that juncture, but it managed to rally back above it starting around 4 p.m. — and closed above it.

The low and high ticks in gold were reported as $1,478.40 and $1,516.20 in the October contract — and $1,484.30 and $1,522.70 in December.

Gold was closed on Wednesday at $1,500.90 spot, up $26.90 on the day — and about ten bucks off its high tick.  Net volume in October and December combined was gargantuan at around 648,500 contracts — and there was a bit under 29,000 contracts worth of roll-over/switch volume in this precious metal.

Silver’s price path in morning trading in the Far East on their Wednesday was much more impressive — and as I said yesterday, certainly looked like short covering to me.  It also was sold quietly lower from there until a few minutes before 2 p.m. in Shanghai — and the rest is the same as it was for gold except its rally was capped and turned lower starting around 2:45 p.m. in after-hours trading in New York.

The low and high ticks in silver were recorded by the CME Group as $16.45 and $17.26 in the September contract.

Silver was closed at $17.08 spot, up 65.5 cents from Tuesday.  Net volume was the highest I’ve ever seen in this precious metal at just over 147,500 contracts — and there was a hair under 30,000 contracts worth or roll-over/switch volume out of September and into future months.

The platinum price chopped very unevenly sideways-to-higher in both Far East and Zurich trading on their respective Wednesdays, but ‘da boyz’ were waiting at the 8:20 a.m. EDT open — and it was sold down to its low of the day by shortly after 9 a.m.  It rallied rather sharply from there, but under obvious resistance — and the high tick of the day was set around 12:45 p.m. in New York.  It was sold lower until 4 p.m in the thinly-traded after-hours market — and didn’t do a thing after that.  Platinum was closed at $862 spot, up 12 bucks on the day.

The palladium price had a negative price bias starting from a few minutes before 10 a.m. CST on their Wednesday…just like the other three precious metals.  It was sold very quietly and unevenly lower until shortly before 2 p.m. in Zurich — and then was sold down to its low of the day which, like platinum, came shortly after 9 a.m. in New York.  Its subsequent rally lasted until the Zurich close — and it was then sold lower until noon EDT — and it didn’t do much of anything after that.  Palladium was closed at $1,396 spot, down 25 dollars from Tuesday.

The dollar index closed very late on Tuesday afternoon in New York at 97.63 — and opened down 7 basis points once trading commenced at 7:45 p.m. EDT on Tuesday evening, which was 7:45 a.m. China Standard Time on their Wednesday morning.  The Far East low tick was set about 9:50 a.m. CST, which was the top of the price rallies in the four precious metals in morning trading over there.  It began to edge quietly and unevenly higher until around 8:15 a.m. in London..its 97.85 high tick.  It hung in there until a few minutes before noon BST…the noon silver fix…and then began its downward descent.  The 97.31 low tick was printed around 12:25 p.m. in New York — and it proceeded to ‘rally’ from there [with the help of the usual ‘gentle hands’ I suspect] until a few minutes after 4 p.m. EDT — and traded quietly sideways until the currency market closed at 5:30 p.m.   The dollar index was closed on Wednesday session at 97.54…down 9 basis points from its Tuesday…although if you look at the DXY below, it closed around the 97.62 mark

The PPT was very busy yesterday — and rescuing the dollar index was on their ‘to do’ list…as was rescuing the equity markets.

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…97.35…and the close on the DXY chart above, was 19 basis points on Wednesday.  Click to enlarge as well.

The gold stocks gapped up over three percent at the open — and at that point they ran into ‘something’.  Their respective high ticks came at, or minutes after, the afternoon gold fix in London — and it was mostly down hill from there into the 4:00 p.m. EDT close.  Despite gold’s impressive rally during the New York trading session, JPMorgan et al…or their proxies…were shorting the hell out of the gold shares, as the HUI closed up only 0.68 percent.

It was the same price pattern for the silver equities, as the short sellers…’da boyz’…were shorting everything in sight…also starting at, or minutes, after the afternoon gold fix.  The Big 7 silver stocks actually traded in negative territory a couple of times during the New York trading session, but managed to eke out a positive close…albeit barely…as Nick Laird’s Intraday Silver Sentiment/Silver 7 Index finished up only 0.25 percent.  Click to enlarge if necessary.

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

The in-you-face shorting of the precious metal equities in New York trading on Wednesday certainly shows their level of desperation.  On one of the biggest daily gains in gold — and certainly in silver for a very long time, some of my silver and gold equities actually closed down on the day.  I didn’t think that was possible.  I’ll have more about this in The Wrap.


The CME Daily Delivery Report for Day 7 of the August delivery month showed that 6 gold and 326 silver contracts were posted for delivery within the COMEX-approved depositories on Friday.

In gold, the two short/issuers were International F.C. Stone and Advantage…with 4 and 2 contracts out of their respective client account.  The three long/stoppers were JPMorgan, with 3 contracts for its client account — and the other two were Citigroup and Macquarie Futures, picking up 2 and 1 contracts for their own accounts.

In silver, of the four short/issuers in total, the three biggest were ABN Amro, International F.C. Stone and ADM…with 174, 82 and 58 contracts from their respective client accounts.  There were five long/stoppers in total, with JPMorgan being the largest, with 146 contracts for its client account.  In second and third spots were ABN Amro and Advantage, with 76 and 57 contracts for their respective client accounts as well.  And in fourth place was Australia’s Macquarie Futures stopping 45 contracts for its in-house/proprietary trading 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 August dropped by 214 contracts, leaving 2,540 still around, minus the 6 contracts mentioned a few paragraphs ago.  Tuesday’s Daily Delivery Report showed that only 19 gold contracts were actually posted for delivery today, so that means that 214-19=195 gold contracts disappeared from the August delivery month.  Silver o.i. in August actually rose by 29 contracts, leaving 436 still open, minus the 326 contracts mentioned a few paragraphs ago.  Tuesday’s Daily Delivery Report showed that 54 silver contracts were actually posted for delivery today, so that means that 29+54=84 more silver contracts just got added to August.


There was a very decent deposit in GLD yesterday, as an authorized participant added 273,502 troy ounces.  There were no reported changes in SLV.

In the other silver ETFs yesterday, there was 397,525 troy ounces added to Sprott.

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

The only activity in gold over at the COMEX-approved depositories on Tuesday was 321.500 troy ounces/10 kilobars [U.K/U.S. kilobar weight] that was shipped out of Canada’s Scotiabank.  I won’t bother linking this.

There was some activity in silver.  Nothing was reported received — and 603,279 troy ounces was shipped out.  Most of that, one truckload…598,426 troy ounces…departed CNT — and the remaining 4,853 troy ounces was shipped out of Delaware.  There was another big paper transfer from the Registered category — and back into Eligible, as 591,250 troy ounces made that move over at Brink’s, Inc.  Undoubtedly this is silver that belongs to JPMorgan’s clients, which Ted says is being transferred back into the Eligible category to save on storage charges.  The link to all this is here.

There was also a bit of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Tuesday.  Nothing was reported received — and 904 kilobars were shipped out.  All of this activity was at Brink’s, Inc. of course — and the link to that, in troy ounces, is here.


Here are two charts that Nick passed around on the weekend that I didn’t have room for until now.  They show U.S. Mint sales for gold and silver bullion coins, updated with July’s dataThe gold coin sales include both eagle and buffalo sales…and the silver coin sales include the silver eagle and the 5-ounce ‘America the Beautiful’ coin sales as well.  But that doesn’t change the fact that retail demand in precious metals is nearly at rock bottom.  Click to enlarge for both.

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


CRITICAL READS

Smart Money Should Beware of a Bear Market Bounce — Bill Bonner

Stocks rose 311 points on the Dow on Tuesday. This is typical bear market action; sell-offs are followed by about a 50% bounce.

If it really is a bear market, the buyers will regret it. They will turn out to be the “dumb money” that stays too late at the party and pays too much for the stocks on offer.

Meanwhile, Bezos is selling.

Beyond Meat’s CEO, Ethan Brown, is selling.

Buffett ain’t buying. His company, Berkshire Hathaway, is holding a record amount of cash – $122 billion – because Buffett can’t find companies he wants to buy at reasonable prices.

And Barron’s reports that “at the end of the first quarter, a coalition of 750 members of a group called TIGER 21, with a combined fortune of $75 billion, had more cash than at any time since 2013.”

TIGER 21 Chairman Michael Sonnenfeldt says stocks are already “priced to perfection.” Adds Nomura strategist Masanari Takada: “At this point, we think it would be a mistake to dismiss the possibility of a Lehman-like shock as a mere tail risk.”

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


Financial World Gone Nuts: $15 Trillion Negative Yielding Debt — Wolf Richter

Every day brings new indications that the financial world is going from already nuts to even nuttier. According to Bloomberg, the total amount of bonds outstanding globally that are trading with a negative yield exceed for the first time $15 trillion. This includes government and corporate debt, and also some euro junk bonds that have joined the elite group.  Click to enlarge.

A chart like this, of markets and central banks chasing each other further and further into the negative-yield absurdity, is crying out loudly: “Somebody has got to put a stop to this race to hell.

The Fed was dabbling in trying to stop this race that is now leading ever deeper into negative-yield absurdity, and had even tried to reverse it, and got shouted down as can be seen in the above chart.

Yes, there are still juicy yields out there, but you have to risk your first-born to get them, if you’ll ever get paid the interest or principal. For example, Zambia. The 10-year yield on its euro-denominated bonds is now over 31%.

Moody’s rates Zambia’s government debt Caa2, just three tiny notches from default (my plain-English cheat sheet for credit rating scales by Moody’s, S&P, and Fitch). Moody’s cited the high debt burden, liquidity risk, and external vulnerability.

The bond market is beyond dangerous — and it’s just a matter of when, not if, the whole thing melts down.  This commentary from Wolf put in an appearance on his Internet site on Tuesday sometime — and I thank Richard Saler for sending it along.  Another link to it is here.  And here’s Gregory Mannarino’s must watch classic rant after Wednesday market close.  It runs for 9 minutes — and the the link is here.  As always, I thank Roy Stephens for this one.


Consumer Credit Rises to Record $4.1 Trillion as Student, Auto Loans Hit All-Time High

After two months of torrid gains for revolving, or credit card debt, moments ago the Fed reported in its monthly consumer credit report that in June U.S. consumer hit the brakes hard on new credit-fueled spending.

In June, revolving credit declined by $80.5 million, the first such drop since March, and only the sixth decline since 2015. However, this was more than offset by a $14.7 billion increase in non-revolving, or student and auto loan, credit as total consumer credit in June rose by $14.6 billion, modestly below the $16.1 billion expected. Meanwhile, the May data was revised upward, from $17.1 billion to $17.8 billion.

And while the reversal in June credit card use may prompt fresh questions about the strength of the US consumer despite the latest upward revision in the personal saving rates, one place where there were no surprises, was in the total amount of student and auto loans: here as expected, both numbers hit fresh all time highs, with a record $1.605 trillion in student loans outstanding, an increase of $6.8 billion in the quarter, while auto debt also hit a new all time high of $1.174 trillion, an increase of $8.4 billion in the quarter.  Click to enlarge.

In short, whether they want to or not, Americans continue to drown even deeper in debt, and enjoying every minute of it.

This is another Zero Hedge story from Brad. This one appeared on their website at 3:20 p.m. on Wednesday afternoon EDT — and another link to it is here.


Trump Renews Powell Attack: “I Was Right… Fed Must Cut Rates Bigger and Faster

The ink on the Fed’s latest rate cut – the first in a decade – still hasn’t dried, and here comes the president demanding, drum-roll…more.

As we expected earlier, when we noted the not one, not two, but three surprise rate cuts by Asian central banks, and said that it’s only a matter of time for Trump to chime in, Donald Trump did just that when in a trio of tweets, the president once again lashed out at Powell for not only not cutting more than just 25 bps – because it is “too proud to admit their mistake of acting too fast and tightening too much (and that I was right!)” – but also because the rest of the world is now winning the race to the bottom: “They must Cut Rates bigger and faster, and stop their ridiculous quantitative tightening NOW” Trump boomed, even though the Fed ended their “ridiculous quantitative tightening” LAST WEEK.

Trump also unveiled that he is now a yield curve expert, although what he means by “yield curve is at too wide a margin” is not exactly clear since the 3M-10Y curve just hit a new 12 year low of -40bps as the entire yield curve now screams recession.

Trump’s rant, of course begs the question: why is he desperately trying the Fed to panic into more rate cuts in what Trump has repeatedly dubbed the ‘greatest economy ever.’

And just in case Powell gets an angry phone call this morning, don’t be surprised if we get an emergency rate cut from the Fed one of these days: and why not — [as] the Fed’s credibility is now almost entirely gone.

This worthwhile news item showed up on the Zero Hedge website at 9:10 a.m. on Wednesday morning EDT — and is yet another contribution from Brad Robertson.  Another link to it is here.


When You Get an E-mail Like This From the Fed, It May Be Time to Panic

Yesterday, in a lengthy article referencing the escalating dollar and funding liquidity shortage as a result of the aggressive rebuild of the Treasury’s cash balance from $133BN to $350BN in the aftermath of the debt ceiling deal, we said “Forget China, The Fed Has a Much Bigger Problem on Its Hands.”

As we explained in detail, the main reason why the Fed should be concerned, is that according to a research report from BofA’s Marc Cabana which we used extensively in the report, the Fed may be forced to launch Quantitative Easing as soon as Q4 to provide the market with the much needed liquidity, or else suffer the consequences of a major liquidity shortage. To wit, in describing the various steps the Fed can engage in, this is what the BofA strategist said:

“Outright QE: after OMO dealer capacity is exhausted the Fed may need to start permanently expanding its balance sheet. The Fed would likely describe this as offsetting “bank reserve demand and growth in other non-reserve liabilities”. Regardless, it would represent the Fed permanently buying USTs outright to maintain control of funding markets well above the ZLB.

Well, it appears that the Fed paid attention, because moments ago we received an e-mail from a Federal Reserve researcher which should make everyone very, very nervous. Specifically, the “rather urgent request” from a Fed staffer (no, not Edward Quince) seeks the full Cabana report whose gist, as noted above, is that the Fed will have to launch QE4 in very short notice to offset the upcoming liquidity drain.  Click to enlarge.

Incidentally, this was our conclusion to our Tuesday article…

For what it’s worth, Bank of America believes “the Fed will need to step in to offset these funding market pressures through outright balance-sheet expansion or QE, potentially in 4Q.” And while the Fed could get ahead of these issues by laying out a framework around money market control before greater criticisms and questions emerge about the independence of monetary/fiscal policies or the path to MMT, it won’t do that, and instead it will wait for another, even greater “Lehman-like” crash to float the idea of imminent QE… which is precisely what Nomura warned about earlier in the day.”

Based on the Fed’s e-mail, we wonder if it means the Fed is now seriously contemplating following through on Cabana’s recommendation, and if so, does the market crash first, or is it about to price in QE4 and soar. We expect to find out very soon.

This very interesting Zero Hedge article showed up on their Internet site at 9:46 a.m. EDT on Wednesday morning — and I thank Brad Robertson for sharing it with us.  Another link to it is here.


Heavy Clashes Erupt Between Indian, Pakistani Forces in Kashmir

Reuters reports intense clashes broke out Wednesday along the Line of Control in contested Kashmir between Indian and Pakistani troops.

Citing local media, Reuters described that “troops on the border had exchanged heavy fire and that Pakistani troops have fired mortars in the clashes.” The exchange of fire took place according to local media at the Sunderbani Sector along the Line of Control (LOC) after 10pm local time, with each side blaming the other for breaching a ceasefire.

Though few details were given, especially with a near total communications blackout on the Indian-administered side in Jammu and Kashmir (J&K), military observers have been expecting intensifying shelling and clashes between the nuclear armed rivals after earlier this week the Hindu nationalist Bharatiya Janata leadership in New Delhi revoked Article 370 of the constitution which protected Muslim-majority J&K’s special autonomous status.

PM Khan further directed the military to “continue vigilance” after previously saying Pakistan would take “all possible options” in support of Kashmir’s Muslim-majority population – this after regional media reported “tens of thousands” of Indian troops have surged into Kashmir, while a phone and Internet blackout is in place.

A day prior to the fresh clashes, which are likely to escalate without external mediation, Khan had suggested a “genocide” could be unfolding as Indian reinforcements continued pouring into the restive border region.

This story was posted on the Zero Hedge website at 6:55 p.m. EDT on Wednesday evening — and it comes to us courtesy of Brad Robertson as well.  Another link to it is here.  A parallel ZH story to this is headlined “Pakistan Suspends Bilateral Trade With India, Expels Envoy” — and that’s from Brad as well.


Sprott will acquire Tocqueville gold fund — and its managers

Central banks around the world taking dovish turns, an intensifying U.S.-China trade war, and revved-up stock-market volatility have pushed gold over $1,500 an ounce for the first time since 2013.

And it isn’t just the precious commodity that’s getting a boost right now—gold funds seem to be feeling the optimism as well. Sprott, an alternative-asset manager with about $8 billion in assets, said on Wednesday that it was acquiring the Tocqueville Asset Management’s gold strategies business.

The companies said in a statement that Sprott would pay up to $50 million in cash and stock to acquire gold strategies and institutional accounts with $1.9 billion in assets under management based on Tuesday’s market prices, including the Tocqueville Gold fund. The Tocqueville gold portfolio management team will join Sprott when the deal closes, which is expected in January 2020.

Sprott President Whitney George said that the Tocqueville team is “among the world’s most respected gold equities managers and we have enjoyed an excellent working relationship during the planning and launch of our joint venture over the past year.”

Sprott has a globally recognized brand with a dedicated precious metals platform and a long history in the sector,” said John Hathaway, Tocqueville’s senior portfolio manager.

The above five paragraphs are all there is to this brief gold-related news item that appeared on the barrons.com Internet site at 10:39 a.m. EDT on Wednesday morning.  I found it on the gata.org Internet site — and another link to the hard copy is here.


China Scoops Up More Gold for Reserves During Trade War

There’s a powerful constant amid the to-and-fro of the U.S.-China trade war as currency policy gets dragged into the standoff between the world’s two top economies: Beijing wants more gold in its reserves.

China’s central bank expanded gold reserves again in July, pressing on with a run that stretches back to December. The People’s Bank of China raised holdings to 62.26 million ounces from 61.94 million a month earlier, according to data on its website. In tonnage terms, the inflow was close to 10 tons, following the addition of about 84 tons in the seven months to June.

It is important for the country to diversify away from the U.S. dollar,” Philip Klapwijk, managing director at consultant Precious Metals Insights Ltd., said before the PBOC’s latest figure was released. “Over the long run, even relatively small-scale gold purchases add up and help to meet this objective.”

China added 320,000 troy ounces/9.95 metric tonnes of gold to their reserves in July.  But this is gold that they’ve moved from an undeclared account and into public view.  Yes, they’re still buying gold, but have far more gold than they are acknowledging.  They’re just making their gold holding public in dribs and drabs like you see in this Bloomberg story.  It was posted on their website at 2:11 p.m. PDT [Pacific Daylight Time] on Wednesday morning — and updated two hours later.  I found it in a GATA dispatch yesterday — and another link to it is here.


The PHOTOS and the FUNNIES

On May 26…the day after our junket to Chase via the back road…we were off to the Othello Tunnels.  It was a place that we had visited very late last year, but they were shut for the season.  This is where the construction engineers from the now-defunct Kettle Valley Railway blasted their way through solid granite in order to get through the Coastal Mountain Range of B.C.  The spring run-off in the Coquihalla River was on in earnest — and it was an amazing place…a must visit if you’re ever in these parts.  The first photo is of the snow sheds on the Coquihalla Highway as we descended towards Hope…the second along the railway right-of-way on the short walk to the tunnels — and the third and fourth photos are part of the tunnel complex itself.  Even my super wide-angle 14mm lens couldn’t get it all in.  Almost all of the photos within the tunnel complex itself were shot with this lens — and are uncropped.  No photos, or group of photos, could do this place justice.  Click to enlarge.


The WRAP

Both gold and silver, but especially silver, would have blown sky high in price if they had been allowed to trade freely yesterday.  It was only the interventions of JPMorgan et al. at the afternoon gold fix — and later, that they were able to keep their respective prices in check.

But the most egregious act yesterday was the shorting of the precious metal equities, which would have been up an easy ten percent or more by the time trading ended at 4:00 p.m. in New York.  I watched my huge portfolio gains on Wednesday morning quickly melt away as the session moved along.  The only thing that allowed me to end the day with decent gains was the fact that only two of my stock portfolio are in Nick’s Silver Sentiment/Silver 7 Index.  The rest are smaller juniors.  But even their double-digit gains were gone by day’s end.

I have a long memory for days such as this…where gold and silver were screaming higher — and their associated equities were getting sold lower — and that is going back ten or fifteen years ago when an event like that was the forerunner of a big engineered price smash to the downside by ‘da boyz’.

Whether or not that’s what in the cards this time around, remains to be seen, especially considering the current economic, political and monetary environment that we find ourselves surrounded by today.

My head tells me that they won’t be able to pull it off but, as Ted Butler so carefully points out, never underestimate the treachery of JPMorgan et al.  So we wait some more.

Here are the 6-month charts for the four precious metals, plus copper and WTIC — and it should be pointed out yet again, that any price activity that occurred after the 1:30 p.m EDT COMEX close, is not included in the dojis on any of these charts.  Gold is hugely overbought — and silver is now in the same category by a bit.  WTIC got slammed to a new low close for this move down, so it’s pretty much a given that the Managed Money traders are net short up the wazoo in WTIC, just like they are in copper at the moment.  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 hasn’t done much in Far East trading, as even the smallest rallies were turned lower…including the tiny on leading up to the 2:15 p.m. CST afternoon gold fix in Shanghai. Gold is currently lower by $4.10 the ounce — and back below $1,500 spot. It was the same in silver — and it’s currently down 3 cents. After getting sold a bit lower in the first couple of hours of Far East trading, platinum began to edge higher but, like both gold and silver, was tapped a bit lower at the afternoon gold fix in Shanghai — and is now back at unchanged. Palladium has fared far better, but it’s off its current high tick as well — and is up 9 bucks as Zurich opens.

Net HFT gold volume in October and December combined is already sitting at around 96,000 contracts — and there’s only a tiny 572 contracts worth or roll-over/switch volume on top of that. Net HFT silver volume is about 20,700 contracts — and there’s 1,796 contracts worth of roll-over/switch volume out of September and into future months.

The dollar index opened up 5 basis points once trading commenced at 7:45 p.m. EDT in New York on Wednesday evening. It has been edging very unevenly lower since then — and the current 97.48 low tick was set right at the 2:15 p.m. CST afternoon gold fix in Shanghai. It has jumped higher by a bit since then — and as of 7:45 a.m. BST in London/8:45 p.m. in Zurich, the dollar index is in positive territory by 3 whole basis points.


As bad as tomorrow’s COT Report will be in gold, it’s certainly measurably worse after yesterday’s price action.  And if there was any improvement in silver during the last reporting week, that has all vanished, plus more, after Wednesday’s big run-up in price.

JPMorgan et al. are still out there going short against all comers — and Ted says that the margin call losses of the Big 7 [The Big 8 sans JPMorgan] are close to, or at record high amounts.  So the guessing game is still the same…will they be able to engineer a price decline big enough to cover their losses, or will one or more of them be forced to cover as their losses become too great to bear?

That’s what it all boils down to now.


And as I post today’s column on the website at 4:02 a.m. EDT, I note that the gold price hasn’t done much during the first hour of London trading — and it’s down $3.40 the ounce currently. Silver is continuing on its downward path — and is lower by 7 cents at the moment. Ditto for platinum and palladium, as the former is now down 6 dollars — and the latter by 2 bucks, as the first hour of Zurich trading ends.

Gross gold volume in October and December combined is around 113,500 contracts — and minus what little roll-over/switch volume there is, net HFT gold volume is a bit over 111,500 contracts. Net HFT silver volume is now up to about 25,800 contracts — and there’s 2,955 contracts worth of roll-over/switch volume out of September and into future months.

The dollar index began to head lower starting around 7:45 a.m. in London — and as of 8:45 a.m. BST/9:45 in Zurich, the dollar index is down 6 basis points.

That’s it for another day — and I look forward to today’s New York trading session with some interest.

See here on Friday.

Ed

Another Rally in Morning Trading in the Far East Snuffed Out

07 August 2019 — Wednesday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price jumped higher the moment that trading began at 6:00 p.m. EDT in New York on Monday evening, but ran into the usual set of not-for-profit sellers immediately — and the low tick of the day was set shortly after 12 o’clock noon in Shanghai on their Tuesday morning.  From that juncture it crawled quietly and unevenly higher until trading ended in New York at 5:00 p.m. EDT.

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

Gold finished the Tuesday session at $1,474.00 spot, up $10.60 on the day.  Net volume for October and December combined was way up there once again at around 377,500 contracts — and there was a bit under 13,500 contracts worth of roll-over/switch volume in this precious metal.

Silver’s rally attempts in Far East trading on Tuesday met the same fate as the identical rallies in gold, except the low tick in it was set at 11 a.m. BST in London.  From that point the silver price also crawled unevenly higher until 5:00 p.m. EDT in New York.

The high and low ticks in this precious metal really aren’t worth looking up, either.

Silver finished the Tuesday session at $16.425 spot, up 7 cents from Monday.  Net volume was fairly decent at 61,500 contracts…which may be the new normal these days — and there was 11,500 contracts worth of roll-over/switch volume out of September and into future months.

It was mostly the same for platinum in morning trading in Shanghai — and from there, it edged unevenly sideways until JPMorgan et al. appeared at the COMEX open.  It was sold down hard from that juncture until Zurich closed at 5:00 p.m. CEST/11:00 a.m. EDT in New York.  It rallied quietly from there until minutes after 4 p.m. in the thinly-traded after-hours market — and didn’t do much of anything after that.  Platinum was closed at $850 spot, down 3 bucks from Monday.

Palladium developed a slightly positive price bias right from the 6:00 p.m. New York open onwards on Monday evening, but the rally turned much more choppy starting at noon CST.  Then, like on Monday, the palladium price began to rally during the last thirty minutes going into the run-up to the COMEX open in New York.  And also like on Monday, ‘da boyz’ were laying in wait — and it was sold lower until a few minutes after 10 a.m. EDT.  It didn’t do much for the next hour, but began to creep higher from that point until 1 p.m.   From there it traded virtually ruler flat until trading ended at 5:00 p.m. EDT.  Palladium finished the day at $1,421 spot, up an even 20 bucks from Monday.

The dollar index closed very late on Monday afternoon in New York at 97.52 — and opened down a chunky 28 basis points once trading commenced at 7:45 p.m. EDT on Monday evening, which was 7:45 a.m. China Standard Time on their Tuesday morning.  About fifty minutes after the open it began to head higher — and that rally lasted until around 12:10 p.m. in Shanghai.  At that juncture it was up 16 basis points — and from there it chopped very quietly and very unevenly sideways until trading ended at 5:30 p.m. in New York on their Tuesday afternoon.  The dollar index finished the day at 97.63 — up 11 points from Monday’s close.

Here’s the daily DXY chart…courtesy of the folks over at bloomberg.comclick 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…97.42…and the close on the DXY chart above, was 21 basis points on the Tuesday. Click to enlarge as well.

The gold stocks gapped down a bit at the open in New York on Tuesday morning, but that didn’t last long.  They began to rally a few minutes later — and their respective highs came around 10:35 a.m. EDT.  From that point they chopped quietly lower — and back into negative territory.  Another rally commenced about 2:40 p.m. — and that lasted until trading ended at 4:00 p.m. in New York.  The HUI managed to close in positive territory by a bit…up 0.49 percent on the day.  I was underwhelmed.

The price path for the silver equities was virtually identical to the one for the gold shares, except their initial sell-off was a bit deeper — and the sell-off that began around 10:45 a.m. EDT went deeper as well.  The ensuing rally that began at their afternoon lows, wasn’t strong enough to lift the shares back into positive territory, but they came close.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down only 0.34 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 for Day 6 of August deliveries showed that 19 gold and 54 silver contracts were posted for delivery on Thursday.

In gold, there were five short/issuers in total.  The two biggest were Advantage and International F.C. Stone with 6 contracts each out of their respective client accounts.  There were four long/stoppers.  JPMorgan picked up 7 for its client account — and Citigroup and Macquarie Futures stopped 6 and 4 contracts for their respective in-house/proprietary trading accounts.  In fourth spot was Advantage with 2 contracts for its client account.

In silver, the three short/issuers were ADM, ABN Amro and Advantage, with 24, 21 and 9 contracts…all from their respective client accounts.  There four long/stoppers.  JPMorgan, ABN Amro and Advantage picked up 22, 13 and 10 contracts for their respective client accounts…and in fourth spot was Australia’s Macquarie Futures stopping 9 contract for its own account.

I’m surprised how slowly the delivery month is unfolding…particularly in gold.

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 August dropped by 144 contracts, leaving 2,754 still around, minus the 19 mentioned a few paragraphs ago.  Monday’s Daily Delivery Report showed that 92 gold contracts were actually posted for delivery today, so that means that 144-92=52 gold contracts vanished from the August delivery month.  Silver o.i. in August declined by 7 contracts, leaving 407 still around, minus the 54 mentioned a few paragraphs ago.  Monday’s Daily Delivery Report showed that 51 silver contracts were actually posted for delivery today, so that means that 51-7=44 more silver contracts just got added to August.


There were more deposits into both GLD and SLV on Tuesday.  An authorized participant added 56,587 troy ounces of gold to GLD — and another a.p. added a hefty 2,994,643 troy ounces to SLV.

In the other silver ETFs, there was 723,475 troy ounces added to Deutsche Bank’s XAD6 fund.

There was another tiny sales report from the U.S. Mint yesterday.  They sold 1,000 troy ounces of gold eagles — and 500 one-ounce 24K gold buffaloes.

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

The only activity in silver on Monday was the one truckload…600,251 troy ounces… that was shipped out of CNT.  The other activity was a big paper transfer from the Registered category and back into Eligible…1,284,755 troy ounces… and that occurred at CNT as well.  In my conversation with Ted yesterday, he certainly felt that this silver belonged to JPMorgan’s customers — and was being transferred from one category to the other because of the cheaper storage fee that’s charged in the Eligible category.  The link to all this is here.

There was only a little bit of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Monday.  Nothing was reported received — and only 51 kilobars were shipped out.  That activity, as usual, was at Brink’s, Inc. — and I won’t bother linking it.


Here are two charts that Nick passed around on Sunday.  They show India’s gold and silver imports, updated with June’s dataDuring that month they imported 61.74 tonnes/1.98 million troy ounce of gold — and a hefty 865.4 tonnes/27.82 million troy ounces of silver. That’s a lot of silver!  Click to enlarge for both.

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


CRITICAL READS

What the U.S. Government Isn’t Telling You About the Trade War With China — Bill Bonner

Stocks lost $1.4 trillion in value over the last four trading days. The press is reporting it as a “monster bloodbath.”

Bloodbath? Today, the Dow is still over 25,000. Investors still expect more rate cuts. And most still think the master deal maker, Donald J. Trump, will strike a deal with China in time to boost the stock market for the 2020 election.

But the whole ball of trade wars, Federal Reserve rate cuts, currency manipulation, inverted yield curves, and negative yields is so tangled up in deception and claptrap it is almost impossible to unravel.

Less than a week ago, the Fed cut interest rates in an “insurance” move. But insurance against what? A recession? A bear market?

Can a weatherman insure against winter?

If investors had thought about it more, they might have realized that there is no way the Fed can insure against a correction. The Fed can only delay it and make it worse.

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


Traffic Declines Across U.S. Railroads Signals Broad Industrial Slowdown

New data from the Association of American Railroads (AAR) reported U.S. Class I rail traffic for the week ended July 27, of 534,498 carloads and inter-modal containers, down 4.4% compared with the same week last year, reported Railway Age.

The slowdown in rail traffic is the result of a broad-based industrial downturn that is hitting American manufacturers, originating from Asia and Europe as a global synchronized structural decline. Trade disputes between the U.S. and China have accelerated the downturn on almost every continent, sending world trade volumes lower.

Total carloads for the week were 261,706 carloads, declined 3.5% YoY, while U.S. weekly inter-modal container volume was 272,792 for the week, slipped 5.3% YoY.  Click to enlarge.

About 70% of carload commodity groups posted negative YoY change versus the same week in 2018. Only nonmetallic minerals, petroleum and petroleum products, and “other” posted gains for the same week in 2018.

For the first 30 weeks of 2019, railroads reported the cumulative volume of 7,549,879 carloads, down 3.2% from last year. Inter-modal containers for the first 30 weeks posted 7,963,475 units, down 3.6% from last year. All rail traffic combined for the first 30 weeks this year was 15,513,354 carloads and inter-modal container units, a drop of 3.4% compared to last year.

One of the main reasons behind the sudden rail decline in the US could be the broad-based industrial slowdown that started shifting U.S. manufacturing PMIs lower in late 2018.

Rail freight is alternative data that gives us a more transparent measurement of what’s happening in the real economy, without government numbers that could be significantly altered for a political agenda

The decline in rail freight is an ominous sign that the economy is headed for a cycle of vulnerability that could trigger a shock so great that a recession would shortly follow.

This news item showed up on the Zero Hedge website at 2:50 p.m. EDT on Tuesday afternoon — and I thank Brad Robertson for this one.  Another link to it is here.


Negative Yield Debt Hits Record $15 Trillion, Up $1 Trillion in 2 Business Days

Negative debt implies a negative time preference. In the real world, that cannot happen.

In easy to understand terms, negative time preference means someone would rather have 90 cents ten years from now than a dollar today.

Such a construct is only possible with massive central bank intervention.

This article is a series of Tweets about the insanity in the bond market.  It was posted on Mish Shedlock’s website on Tuesday sometime — and I thank Richard Saler for sending it our way.  Another link to it is here.  A parallel Bloomberg story on this issue is headlined “UBS’s Rich Clients to Feel Negative Rates as Fees Extended” — and I found that in a GATA dispatch yesterday.  And Gregory Mannarino’s 11:30 minute rant from Tuesday is linked here…thanks to Roy Stephens.


Robbers steal millions in gold coins from Mexican mint

Mexico’s security ministry announced on Tuesday that an armed group of robbers broke into the nation’s mint, stealing the equivalent of 50 million Mexican pesos (€2.23 million, $2.5 million) in gold coins.

The announcement came after sources from the Department of Finance and Public Credit confirmed the crime to news agency EFE.

According to a Mexico City police report, two people, one with a firearm, broke into the mint after throwing a security guard to the ground and taking his gun.

One of the robbers then went to an open vault and filled a backpack with 1,567 gold coins. The robbers then carried the gold centennials directly from the scene.

Officials from Mexico City’s Secretariat for Citizen Security are currently in the testimonial process of the case.

Officials from the government coin manufacturer are suspected of assisting the robbers.

This gold-related news item showed up on the dw.com Internet site on Tuesday sometime — and I found it on the gata.org Internet site in the wee hours of Wednesday morning EDT.  Another link to it is here.


The PHOTOS and the FUNNIES

These four photos are the last from our trip to Chase via the back road on the north side of the South Thompson River on May 25.  The first is a just a landscape shot with wild lupins and yarrow flowering in the foreground.  The next two are shots of a horse chestnut in flower in someone’s yard on the main drag in Chase — and the last is a pastoral sort of picture looking southwest down the South Thompson River  three kilometers or so out of Chase as the day ends.  Click to enlarge.


The WRAP

Except for the fact that the rallies in silver and gold in morning trading in the Far East weren’t allowed to go anywhere, it was a fairly quiet trading session in both metals on Tuesday — and both were allowed to close in positive territory.  It should also be noted that the palladium price didn’t get pushed back below $1,400 spot.

Here are the 6-month charts for the four precious metals, plus copper and WTIC.  Gold is now a bit further into overbought territory, but silver has a ways to go.  Copper appears to be in a bottoming pattern, as Friday’s COT Report will certainly show that the Managed Money traders now hold a new record short position in that metal.  WTIC was closed at a new low for this move down, but is not even close to being in oversold territory.  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 edged unevenly higher until 9 a.m. China Standard Time on their Wednesday morning — and then jumped a bit higher until a few minutes before 10 a.m. CST. It was sold quietly lower from that point until a few minutes before 2 p.m. over there — and has been heading rather sharply higher since. But once it broke above $1,490 spot, it was smacked down a bit — and as London opens, gold is up $11.60 the ounce. It was the same price path for silver — and it’s rally at 9 a.m. CST, like the one in gold, had most of the hallmarks of a short-covering rally. That also ended a few minutes before 10 a.m. CST — and after that it followed the gold price to the tick — and is up 25 cents currently. Platinum had an up/down move that took it back below unchanged by 2 p.m. CST, it has ticked a bit higher since — and is up a dollar at the moment. Palladium’s high tick also came a few minute before 10 a.m. CST — and was then sold very unevenly lower until 2 p.m. CST as well and, like platinum, is off that low by a bit, but still down 5 dollars as Zurich opens.

Net HFT gold volume in October and December combined is already enormous at around 134,500 contracts — and there’s only a tiny 1,340 contracts worth of roll-over/switch volume on top of that. Silver’s net volume is sky high as well at a bit over 32,500 contracts — and there’s also 3,958 contracts worth of roll-over/switch volume out of September and into future months.

The dollar index opened down 7 basis points once trading commenced at 7:45 p.m. EDT in New York on Tuesday evening, which was 7:45 a.m. China Standard Time on their Wednesday morning. It chopped quietly lower from that juncture — and its current 97.43 low tick was set around 9:50 a.m. in Shanghai, which was the end of the rallies in all four precious metals. It has been edging unevenly higher since — and is now down only 3 basis points as of 7:45 a.m. BST in London/8:45 a.m. CEST in Zurich.


Yesterday, at the close of COMEX trading, was the cut-off for this Friday’s Commitment of Traders Report — and companion Bank Participation Report, so none of this morning’s price action in the Far East will be in it.

Just eye-balling the last five dojis in gold and silver on the above charts, I’m expecting that there might be some decrease in the Commercial net short position in silver, but a rather sizeable increase in gold.  But Ted is the real authority on this — and will have his thoughts on this in his mid-week column today.  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 see that the gold price continues to struggle higher, but is off its current high tick — and as the first hour of London trading draws to a close, gold is up $11.20 an ounce. Ditto for silver — and it’s up 26 cents. Platinum is now up 4 bucks — and palladium is down only 1 dollar as the first hour of Zurich trading ends.

Gross gold volume in October and December combined is gargantuan for this time of day at around 159,500 contracts — and minus what little roll-over/switch volume there is, net HFT gold volume is a bit over 156,500 contracts. Net HFT silver volume continues to climb steadily as well — and is sitting at around 36,300 contracts — and there’s 4,253 contracts worth of roll-over/switch volume out of September and into future months.

The dollar index barely made it above the unchanged mark by the 8:00 a.m. London open — and has faded a bit since — and is now down 4 basis points as of 8:45 a.m. BST/9:45 a.m. CEST.

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

Ed

Gold Rallies Sharply as the Yuan is ‘Revalued’

06 August 2019 — Tuesday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


The gold price didn’t do much of anything for the first two hours in New York on Sunday evening.  But starting at 8 a.m. in Shanghai on their Monday morning it began to head unevenly higher.  The price was capped and turned a bit lower starting at 10:45 a.m. in New York when things looked like they were going to get too frisky to the upside — and then they hit the price for another ten or eleven bucks the moment that London closed at 11 a.m. EDT.  It resumed its rally about fifteen minutes later, but got tapped lower around 3:15 p.m. in after-hours trading.  It recovered a bit from there going into the 5:00 p.m. close.

The low and high ticks were reported by the CME Group as $1,443.00 and $1,475.90 in the October contract — and $1,448.80 and $1,481.80 in December.

Gold finished the Monday session at $1,463.40 spot, up $23.40 on the day, but would have obviously closed considerably higher than that, if allowed.  Net volume in October and December combined was  beyond monstrous at 534,000 contracts — and roll-over/switch volume was 14,500 contracts.

Silver also attempted to rally at 8 a.m. in Shanghai on their Monday morning, but was sold down to its low of the day a bit over an hour later.  Then around 10:30 a.m. CST it jumped up a bunch — and the high tick of the day came at the London open.  The silver price was sold unevenly lower until, like gold, it ran into ‘something’ at 10:45 a.m. in New York and was also hammered lower once London closed.  It crawled a bit higher from there, but also got sold lower at 3:15 p.m. in after-hours trading — and it didn’t do much after that.

The low and high ticks in silver were recorded as $16.135 and $16.59 in the September contract.

Silver was closed at $16.355 spot, up 17 cents from Friday.  Net volume was enormous at a bit under 108,000 contracts — and there was a hair over 8,500 contracts worth of roll-over/switch volume in this precious metal.

Platinum followed silver’s price path up until around noon China Standard Time on their Monday — and then it chopped unevenly sideways until shortly after 11 a.m. in Zurich.  It edged a bit higher before getting hit at: 1] the COMEX open, 2] shortly after 9 a.m. EDT — and then, like silver and gold…10:45 a.m. in New York — and fifteen minutes later at the Zurich close.  I rallied from there until shortly after 2 p.m. in after-hours trading — and was then sold a bit lower until trading ended at 5:00 p.m. EDT.  Platinum was closed at $853 spot, up 10 bucks on the day.

The palladium price traded very unevenly sideways up until around 1:30 p.m. in Zurich, which was 7:30 a.m. in New York.  A rally of some merit developed at that point, but was capped and sold lower shortly after trading on the COMEX began at 8:20 a.m. EDT.  That uneven engineered price decline lasted until around 2:20 p.m. in after-hours trading — and it traded sideways into the close from there.  Palladium was closed at $1,401 spot, up 9 dollars from its close on Friday…but was up over 40 bucks at its high.

One has to wonder what the true free-market price of any of these four precious metals would be if they were allowed to trade freely.


The dollar index closed very late on Friday afternoon in New York at 98.07 — and then opened up 4 basis points once trading commenced at 6:30 p.m. EDT on Sunday evening, which was 6:30 a.m. China Standard Time on their Monday morning.  It then dropped at bit starting at 8 a.m. in Shanghai — and then crept a bit higher starting around 9:40 a.m. CST.  That lasted until a couple of minutes after the London open — and then down it went, with the low tick of the day coming at 1 p.m. in New York.  It crept unevenly higher from there until trading ended at 5:30 p.m.  The dollar index finished the Monday session at 97.52…down 55 basis points from Friday’s close.

With Jim Rickard’s ‘Currency Wars’ now on in earnest, it will be interesting to watch how the gold price reacts…or is allowed to react…to any changes in the currency market.  The situation is very dynamic — and very fluid, as we’re in uncharted territory now.

Here is 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…97.31…and the close on the DXY chart above, was 21 basis points on Monday.  Click to enlarge as well.

The gold stocks gapped up over two percent at the open — and hit their respective highs at 10:45 a.m. when ‘da boyz’ capped the gold price — and then drove it lower when London closed fifteen minutes later.  It recovered all of that by 1:15 p.m. — and then were sold lower when JPMorgan et al. appeared at 2:15 p.m.  They recovered a hair in the last twenty minutes of trading.  The HUI closed higher by 4.30 percent and, like the gold price itself, would have closed a lot higher.

The silver equities also hit their respective highs at 10:45 when ‘da boyz’ showed up, but their recovery only lasted until shortly after 12 o’clock noon in New York trading.  It was mostly quietly down hill from there, with the final insult coming at 2:15 p.m. EDT…just like happened with the gold stocks.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed up 3.45 percent — and far off its high tick of the day.  Click to enlarge.

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 for Day 5 of August deliveries showed that 92 gold and 51 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday.

In gold, of the four short/issuers in total, the three largest were International F.C. Stone, Advantage — and ABN Amro…with 39, 27 and 19 contracts out of their respective client accounts.  There were seven long/stoppers in total.  The three biggest were JPMorgan, Citigroup and Australia’s Macquarie Futures.  JPMorgan stopped 35 for its client account — and Citigroup and MacQuarie picked up 26 and 17 contracts for their respective in-house/proprietary trading accounts.

In silver, the three short/issuers were ADM with 33…ABN Amro with 18 — and Advantage with 10 contracts.  All came from their respective client accounts.  The four long/stoppers were JPMorgan, ABN Amro, Advantage and Macquarie Futures.  The first three of those four picked up 21, 17 and 11 contracts for their respective client accounts.  The 12 that Macquarie Futures stopped was for their own account.

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 August fell by 475 contracts, leaving 2,898 still around, minus the 92 mentioned a few paragraphs ago.  Friday’s Daily Delivery Report showed that 495 gold contracts were actually posted for delivery today.  This means that 495-475=20 more gold contracts were just added to the August delivery month.  Silver o.i. in August declined by 11 contracts, leaving 414 still open, minus the 51 contracts mentioned a few paragraphs earlier.  Friday’s Daily Delivery Report showed that 66 silver contracts were actually posted for delivery today, so that means that 66-11=55 more silver contracts were just added to August.


There were deposits in both GLD and SLV on Monday.  An authorized participant added 141,468 troy ounces to GLD — and in SLV, an a.p. added 2,339,655 troy ounces.

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, August 2…and this is what they had to report.  They added 21,058 troy ounces of gold — and 306,011 troy ounces of silver.

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

The only activity in/out gold over at the COMEX-approved depositories on the U.S. east coast on Friday, was 1,199 troy ounces that was shipped out of HSBC USA — and I won’t bother linking it.

There was some decent activity in silver, as 1,200,680 troy ounces was reported received, but only 49,086 troy ounces was shipped out.  In the ‘in’ category, one truckload…600,025 troy ounces…ended up at CNT — and the other truckload…600,654 troy ounces…was dropped off at HSBC USA.  All of the ‘out’ activity was at Canada’s Scotiabank.  There was also a paper transfer of 284,387 troy ounces from the Registered category — and back into Eligible.  I’m sure that Ted would surmise that this silver is now owned by JPMorgan’s clients — and the transfer was done to save on storage charges.  The link to all his is here.

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


Here are two of the usual charts that Nick passes around on the weekend, which you’re now more than familiar with.  They show the total gold and silver holdings of all know depositories, mutual funds and ETFs, as of the close of business on Friday, August 2.

During that reporting week, there was 1,067,000 troy ounces of gold added — and in silver, that number was another eye-watering amount…14,820,000 troy ouncesClick to enlarge for both.

I have a lot of stories/articles for you today.


CRITICAL READS

Currency war begins as China hurls devaluation back in Trump’s face — Ambrose Evans-Pritchard

China has hit back against the Trump administration with a drastic exchange rate devaluation, almost guaranteeing a superpower showdown and a lurch towards full trade war.

The yuan blew through the symbolic line of seven to the dollar for the first time since the global financial crisis, with the offshore rate in Hong Kong spiking to 7.07 in moves that stunned seasoned traders.

The calculated action by the People’s Bank (PBoC) threatens to unleash a wave of deflation across the world and risks pushing East Asia and much of Europe into recession. It is certain to provoke a ferocious response from the White House.

Capital Economics said Beijing has taken the fateful step of “weaponising” its exchange rate and is digging in for a long struggle: “The fact that they have now stopped defending 7.00 against the dollar suggests that they have all but abandoned hopes for a trade deal with the U.S.

Commerzbank said China’s decision to engineer such a sudden move in its tightly managed currency has far-reaching implications for the whole international system. “It looks like a tsunami is coming.”

Most of this commentary, but not all, is posted in the clear on the gata.org Internet site — and it’s definitely worth reading.  It appeared on the telegraph.co.uk Internet site on Monday at 12:37 p.m. BST, which was 7:37 a.m. in Washington — EDT plus 5 hours.  Another link to the GATA dispatch is here — and the article itself at The Telegraph is linked here.  Here’s a companion/follow-on story to this from the gata.org Internet site as well — and it’s headlined “Pot calls kettle black as U.S. labels China a currency manipulator


China Retaliation Is ‘11’ on Scale of 1 to 10, Wall Street Warns

Agriculture equipment makers Deere & Co. and AGCO Corp. tumbled as China suspended imports of U.S. agricultural products. The escalating trade tensions are also a major risk for the U.S. automotive industry, which has a significant exposure to the country. According to UBS’s Global Wealth Management Chief Investment Officer Mark Haefele, the latest spat raises the possibility that “tariffs could also be placed on auto imports.”

President Donald Trump tweeted about China and the Fed on Monday morning, saying: “China dropped the price of their currency to an almost a historic low. It’s called ‘currency manipulation.’ Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!

Krueger called China’s retaliation “massive,” adding that “on a scale of 1-10, it’s an 11.” He cited the Chinese government calling on state buyers to halt U.S. agricultural purchases, while there’s “increased anecdotal evidence that the Chinese government is tightening its overview of foreign firms.”

While there were measures that could have been chosen with larger direct effects on supply chains, the announcements from Beijing represent a direct shot at the White House and seem designed for maximum political impact,” Krueger said. “ We expect a quick (and possibly intemperate) response from the White House, and consequently expect a more rapid escalation of trade tensions.”

There now will be increased expectations that the Fed will cut again in September to offset the drag caused by this escalation in the trade war,” he added. “Such moves will only be a partial, lagged offset to the recessionary headwinds a cycle of retaliation would cause.”

This Bloomberg article put in an appearance on their website at 5:31 a.m. PDT [Pacific Daylight Time] on Monday morning — and was updated about seven hours later.  I thank Swedish reader Patrik Ekdahl for sending it our way — and another link to it is here.  Here’s a companion story to this from Reuters headlined “China yuan’s slide past 7/dollar had policymakers’ blessing: sources” — and I plucked that from another GATA dispatch.


Is the dollar’s “exorbitant privilege” coming to an end? — J.P. Morgan/Private Bank

The U.S. dollar (USD) has been the world’s dominant reserve currency for almost a century. As such, many investors today, even outside the United States, have built and become comfortable with sizable USD overweights in their portfolios. However, we believe the dollar could lose its status as the world’s dominant currency (which could see it depreciate over the medium term) due to structural reasons as well as cyclical impediments.

As such, diversifying dollar exposure by placing a higher weighting on other currencies in developed markets and in Asia, as well as precious metals makes sense today. This diversification can be achieved with a strategy that maintains the underlying assets in an investment portfolio, but changes the mix of currencies within that portfolio. This is a completely bespoke approach that can be customized to meet the unique needs of individual clients.

It is commonly perceived that the U.S. dollar overtook the Great British Pound (GBP) as the world’s international reserve currency with the signing of the Bretton Woods Agreements after World War II. The reality is that sterling’s value was eroded for many decades prior to Bretton Woods. The dollar’s rise to international prominence was fueled by the establishment of the Federal Reserve System a little over a century ago and U.S. economic emergence after World War I. The Federal Reserve System aided in the establishment of more mature capital markets and a nationally coordinated monetary policy, two important pillars of reserve-currency countries. Being the world’s unit of account has given the United States what former French Finance Minister Valery d’Estaing called an “exorbitant privilege” by being able to purchase imports and issue debt in its own currency and run persistent deficits seemingly without consequence.

There is nothing to suggest that the dollar dominance should remain in perpetuity. In fact, the dominant international currency has changed many times throughout history going back thousands of years as the world’s economic center has shifted.

This interesting commentary from Craig Cohen an FX, Commodities and Rates Strategist over at JPMorgan private banking was posted on the privatebank.jpmorgan.com Internet site back on July 10, 2019 — and I thank Judy Sturgis for pointing it out.  Another link to it is here.


Buffett Steers Clear of Buying Stocks; Berkshire’s Cash Pile Hits a Record

Warren Buffett’s distaste for overpaying is winning out over his frustration with sitting on a lot of cash.

With stocks at record highs, Berkshire Hathaway Inc. sold $1 billion more worth of stocks than it bought last quarter, its biggest net selling since the end of 2017. Buffett spent last year building a massive stake in Apple Inc. and pouring billions into investments in the biggest U.S. banks. This year’s rally hasn’t drawn him in.

Buffett has previously dealt with the issue of cash piling up as he waits to strike, but never at this size. He hasn’t had a major acquisition in several years and has even pulled back on one of his newer ways to deploy cash, slowing down repurchases of Berkshire’s own stock in the second quarter. The result was that the company’s cash hoard — a major focus for investors in recent years — surged to a record $122 billion.

It would be hard to look at the cash balance and their uses of cash in recent quarters and not be disappointed that they haven’t bought any companies, they haven’t bought much stock, and they haven’t bought back a lot of their own stock,” Jim Shanahan, an analyst at Edward Jones, said in a phone interview Saturday.

The growing cash pile is a reflection of the strength of the operating businesses that Buffett has assembled under one roof, and allows the billionaire investor flexibility to move quickly when big deals emerge. But he has acknowledged that having more than $100 billion earn little return for several years weighs on the company’s growth.

This Bloomberg article showed up on their website on Saturday morning — and was updated about a day later.  I thank Swedish reader Patrik Ekdahl for finding it for us — and another link to it is here.


Meanwhile, Inside The Plunge Protection Team: Chaos

It was almost ten years ago that we first profiled the most important trading desk in the world: not one situated in any of the (increasingly empty) massive trading floors of the world’s commercial banks located in either the financial district, midtown or Connecticut, but the one inside the 9th floor of 33 Liberty Street, the home New York Fed, the one which is also known in trader folklore as the “Plunge Protection Team.”

This is what we said back then:

“Mr. Sack, 39 years old, is an economist who runs the markets group at the Federal Reserve Bank of New York. The group runs the Fed’s trading, making it the bridge between the marble corridors of the Federal Reserve in Washington and the bustling trading floors of Wall Street.

The markets group grew enormously during the crisis, from about 225 employees to 400 people who monitor the markets for the Fed, manage its portfolio and run the many new trading programs it has started. The Fed holds more than 20,000 individual securities.”

Of course, back then said “most important trading desk” was controlled by one Brian Sack, then only 39-year-old, who has since moved on to the far more lucrative pastures of DE Shaw. Sack was replaced in the summer of 2012, by the levitating market wizard, Simon Potter, who promptly realized that to crush the bears one simply had to crush the VIX specs, and the rest would promptly follow.

Then, in the end of May 2019, something unexpected happened: Simon Potter, arguably the most important trader in the world, manning the world’s most important trading desk, unexpectedly announced his “resignation.” Not only that, but Potter took with him the second most important person at the N.Y. Fed’s “Plunge Protection Team“, the head of the Financial Services Group, Richard Dzina.

What was odd, as we briefly noted two months ago, was the sudden and unexpected nature of this departure: it came from nowhere, and prompted some very delicate and substantial questions about continuity at the desk that has so far managed to keep the U.S. stock market from entering a bear market since the global financial crisis over a decade ago.

This long, but very worthwhile Zero Hedge article appeared on their Internet site at 4:41 a.m. EDT on Monday morning.  Embedded in it is another must read Bloomberg report on this story.  I thank Jim Gullo for sending it our way — and as I’ve already said, it’s definitely worth your while.  Another link to it is here.


Trump imposes total U.S. freeze on Venezuelan government assets

U.S. President Donald Trump imposed a freeze on all Venezuelan government assets in the United States on Monday, sharply escalating a diplomatic and sanctions drive aimed at removing socialist President Nicolas Maduro from power.

The executive order signed by Trump goes well beyond the sanctions imposed in recent months against Venezuela’s state-run oil company PDVSA and the country’s financial sector, as well as measures against dozens of Venezuelan officials.

All property and interests in property of the Government of Venezuela that are in the United States … are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in,” according to the executive order released by the White House.

The scope of the announcement came as a surprise even to some Trump administration allies. “This is big,” said Ana Quintana, senior policy analyst with the Heritage Foundation, a conservative Washington think tank.

Quintana said it appeared the order would be a sweeping embargo on doing business with Venezuela…

This Reuters article, filed from Washington was posted on their website at 6:20 p.m. EDT on Monday evening — and updated about an hour later.  I found this embedded in a GATA dispatch — and another link to it is here.


When Idiocy Becomes Hardwired — Jeff Thomas

At this point, virtually all of us over the age of forty have encountered enough “snowflakes” (those Millennials who have a meltdown if anything they say or believe is challenged) to understand that, increasingly, young people are being systemically coddled to the point that they cannot cope with their “reality” being questioned.

The post-war baby boomers were the first “spoiled” generation, with tens of millions of children raised under the concept that, “I don’t want my children to have to experience the hardships that I faced growing up.”

Those jurisdictions that prospered most (the E.U., U.S., Canada, etc.) were, not coincidentally, the ones where this form of child rearing became most prevalent.

The net result was the ’60s generation – young adults who could be praised for their idealism in pursuing the peace movement, the civil rights movement, and equal rights for women. But those same young adults were spoiled to the degree that many felt that it made perfect sense that they should attend expensive colleges but spend much of their study time pursuing sex, drugs, and rock and roll.

Flunking out or dropping out was not seen as a major issue and very few of them felt any particular guilt about having squandered their parents’ life savings in the process.

When I first started reading this commentary, I wondered where Jeff was going with it…until I got to the end.  Then it made perfect sense.  It was posted on the internationalman.com Internet site early on Monday morning EDT — and it’s certainly worth reading — and another link to it is here.


HSBC boss in shock exit as bank warns of ‘challenging‘ times

HSBC on Monday announced the shock exit of chief executive John Flint, but denied talk of a management split as it also axed 4,000 jobs and warned of dark clouds on the horizon.

The London-headquartered lender gave no reason for Flint’s sudden departure after just 18 months in the job, but said there was “no personal clash“, adding it needed a change at the top.
Asia-focused HSBC also revealed it would axe two percent of its global workforce, or roughly 4,000 mostly management jobs, in a new restructuring aimed at weathering global turmoil.

HSBC Holdings plc announces that John Flint has today stepped down as Group Chief Executive and as a director by mutual agreement with the board,” read a statement.

The exact amount Flint will get as a payoff remains unknown until he leaves.

This AFP news story was posted on their Internet site on Monday morning CEST — and it’s the final offering of the day from Patrik Ekdahl.  Another link to it is here.  The chart-filled Zero Hedge spin on this is headlined “Hong Kong Riots Reveal a Looming Crisis at the World’s 6th Largest Bank


Putin’s pledge to ditch the dollar is slowly being fulfilled

Russia is acting on a pledge by President Vladimir Putin to shrink the role of dollar in international trade as tensions sour between Washington and Moscow.

The shift is part of a strategy to “de-dollarize” the Russian economy and lower its vulnerability to U.S. sanctions. But while the central bank was able to quickly dump half of its dollar holdings last year, progress in trade has been slow due to ingrained use of the greenback for many transactions.

The share of euros in Russian exports increased for a fourth straight quarter at the expense of the U.S. currency, according to central bank data. The common currency has almost overtaken the dollar in trade with the European Union and China and trade in rubles with India surged. The dollar’s share in import transactions remained unchanged at about a third.

There’s been a strong incentive to change, not just for Russia but for its trading partners too,” said Dmitry Dolgin, an economist at ING Bank in Moscow. “The European Union is also now facing trade pressure from the U.S.” pushing them to try to reduce dependence on the dollar, he said.

This Bloomberg article appeared on their website at 8:00 p.m. PDT on Saturday evening — and was updated about twenty-eight hours later.  I found this in a GATA dispatch on the weekend — and another link to it is here.  A mostly parallel article on this subject was posted on the rt.com Internet site yesterday — and it’s headlined “Russia undermines U.S. dollar dominance by shifting trade to local currencies“.  I thank George Whyte for that one.


Kashmir on Lock-down: India Strips Muslim-Majority Region of Autonomy, Troops Move In

In a dramatic escalation following a worsening crisis, which over the weekend saw intensive shelling along the Line of Control (LoC) that separates Indian-controlled and Pakistani-controlled parts of Kashmir, New Delhi has revoked the key constitutional article which gives Indian-administered Kashmir special status.

The unprecedented move signals India is willing to take greater military action in the disputed border region, which is virtually guaranteed to not only spark severe local unrest, but put India and Pakistan on a direct collision course for war. Specifically, Article 370 is legally and historically what assured a high degree autonomy for Indian administered Muslim-majority state, enshrined in the constitution, which the majority of inhabitants there see as justifying remaining part of India.

The Indian administered side of Kashmir, called Jammu and Kashmir (J&K), was granted its status in the 1950s, which included maintaining its own state constitution, as well as law making bodies, making it the most independent of all Indian states. But starting Monday this will all be revoked, following a resolution introduced on Monday by Home Minister Amit Shah and quickly put into law by President Ram Nath Kovind.

Ultimately, as the BBC reports, “the BJP [the Hindu nationalist Bharatiya Janata, India’s largest political party] has irrevocably changed Delhi’s relationship with the region.” Currently, there’s reported to be a lockdown across J&K, with some phone and internet services reported cut.

This rather disturbing story appeared on the Zero Hedge website at 12:10 a.m. on Monday morning EDT — and I thank Richard Saler for pointing it out.  Another link to it is here.  A companion piece to this story is head lined “India Will Come to Regret Today’s Annexation of Jammu And Kashmir” — and that’s from the moonofalabma.org Internet site.  I thank Larry Galearis for that one.


Kyle Bass Warns Yuan Could Sink Another 40% if PBOC Pulls Support

Too bad Kyle Bass closed his yuan short earlier this year. If he had held that position, he would have made a killing on Monday, when the Chinese currency broke below 7 to the dollar and continued to tumble as the currency war between the world’s two largest economies officially began.

Though Bass insists that the HKD, against which he has taken a large position betting that its more than 30-year-old peg against the dollar will soon break, won’t be far behind the yuan now that Beijing has seemingly stopped supporting the formerly tightly controlled yuan, the hedge fund manager, who still probably profited off his short positions against the currencies of several regional rivals, appeared on CNBC‘s “the Closing Bell‘ Monday afternoon to talk China.

Inviting Bass to speak made sense: He’s established himself as one of the most prominent China bears in the West, even joining with Steve Bannon to warn investors and ordinary people of the dangers of China’s constant manipulation of the U.S. And during Friday’s interview, which came as U.S. stocks locked in their worst daily performance of the year.

As Bass explained, President Trump’s claim that Beijing manipulates its currency is accurate.

What’s happening in China is they have to have dollars to sell to buy their own currency to hold it up. If they were to ever free float their currency, I think it would drop 30% or 40%,” Bass told CNBC’s “Closing Bell.”

And the reason is they claim to be 15% of global GDP in dollar terms, but less than 1% of global transactions settled in their own currency,” Bass added. “And so, they prop their currency up…everyone calling them a currency manipulator – they are trying to hold this whole thing together.”

Bass has warned American corporations not to pressure the Trump Administration to strike a deal with China. He added that Beijing has a history of never living up to its promises re: trade since joining the WTO since 2001.

This Zero Hedge story, with a 4:43 minute video clip embedded, put in an appearance on their website at 6:50 p.m. on Monday evening EDT — and another link to it is here.  Then there’s this Bloomberg story from very late Monday afternoon EDT headlined “China limits yuan’s fall after being labeled currency manipulator” — and that came from the gata.org Internet site.


Why We’re Raising Our “Crash Alert” Flag — Bill Bonner

Watch out, Dear Reader, this could be a tough week for investors.

Investor’s Business Daily reports:

Dow Jones futures sold off sharply Sunday night, along with S&P 500 futures and NASDAQ futures, as China’s yuan tumbled to a record low. That follows a tough week for the current stock market rally as new Trump tariffs escalated the China trade war.”

So far, the big, fat, ugly Dow has sat on the wall and stubbornly refused to tumble. But last week, Donald J. Trump gave Humpty a shove.

He turned up the Trade War Dial, from 1/2 retard to 3/4 retard. China retaliated with its own version of retard, cutting agricultural purchases from the U.S. and letting the yuan fall.

China, like the U.S., is in an Inflate-or-Die trap. Its economy is even more grotesque and distorted than the U.S.’

It has millions of empty apartments… silent factories… roads to nowhere… bridges that connect nothing to nobody… and whole ghost towns, put up to satisfy a demand that wasn’t really there. It has excess capacity in almost every sector.

Now, it can’t just sit back and let Mr. Market correct Mr. Party Functionary’s mistakes. It must keep the money flowing, or the economy may collapse… and drag its communist rulers down with it. A weaker yuan helps it inflate domestic prices… while making its exports even harder to resist.

Almost all major countries are stuck. They’ve all built their economies on fake money and phony interest rates. Soon, they’ll all be competing to debase their currencies to keep the fake money flowing and the whole fandango going.

This worthwhile commentary from Bill put in an appearance on the bonnerandpartners.com Internet site early on Monday morning EDT — and another link to it is here.  And also is another classic must watch rant from Gregory Mannarino.  This one runs for 23 minutes.  Roy Stephens sent it to me late last night — and it’s linked here.


India’s July gold imports hit 3-year low on record prices — government source

India’s gold imports in July plunged 55% from a year ago to the lowest level in three years as a rally in local prices to a record high and a hike in import taxes curtailed demand, a government source said on Monday.

Lower purchases by the world’s second biggest consumer could cap gains in global prices that jumped to the highest level in over 6-years on Monday, but help the south Asian country in bringing down the trade deficit and supporting rupee.

India imported 39.66 tonnes of gold in July, down from 88.16 tonnes a year ago, the source said, who was not allowed to speak to the media. In value terms, the country’s imports in the month fell 42% to $1.71 billion, he said.

Local gold prices jumped to record high last month tracking gains in overseas market and as New Delhi raised import taxes on the precious metal to 12.5% from 10% earlier.

The surprise hike in the import tax and price rise badly affected demand last month, said Mukesh Kothari, director at dealer RiddiSiddhi Bullions in Mumbai.

Even in August, imports would be much lower than last year. Demand is not improving,” he said.

This gold-related Reuters article, co-filed from New Delhi and Mumbai, showed up on their Internet site at 6:33 a.m. on Monday morning EDT — and it’s the first of several stories that I picked up off of the Sharps Pixley website.  Another link to it is here.  A related story headlined “China’s consumption of gold dropped in H1/19” was posted on the menafn.com website on Sunday — and it’s also from Sharps Pixley.


Perth Mint’s July gold sales rise, silver sales nearly triple

The Perth Mint’s gold product sales in July rose 10.6% from the previous month, the refiner said on Monday.

Sales of gold coins and minted bars in July climbed to 21,518 ounces from 19,449 ounces in June, the mint said in a blog post.

Meanwhile, silver sales in July leaped 186.5% to 987,040 ounces. This would be its highest monthly sales since Oct. 2018.

The above three paragraphs are about all there is to this tiny Reuters story, which showed up on the lse.co.uk Internet site on Monday at 6:59 a.m. BST.  I found it on the Sharps Pixley website — and another link to the hard copy is here.


The PHOTOS and the FUNNIES

Still on the back/dirt road east of Kamloops on May 25 — and en route to Chase, this tiny slough yielded three shots of this yellow-headed blackbird.  Their territorial call [third photo] sounds like that of a blackbird with bad case of laryngitis.  The last photo is another along the dirt/gravel road [looking east] that we were on.  Click to enlarge.


The WRAP

The news of the ‘devaluation’ of the Chinese yuan came as no surprise to me…as it was inevitable at some point.  But the markets had an apoplectic fit — and the precious metals were the beneficiaries yesterday.

But as wonderful as it was, JPMorgan et al. were there going short against all comers in all four precious metals in the COMEX futures market yesterday.  They’ve shown no signs of giving up.  However, as Ted has been pointing out for the last few weeks, the paper loses of the smaller banks and investment houses in the Big 8 category are starting to get up there — and are markedly worse after Monday’s price activity…particularly in gold.

Here are the 6-month charts for the four precious metals, plus copper and WTIC…courtesy of stockcharts.com.  Gold is back in overbought territory once again…by a bit — and silver’s price yesterday was certainly well managed.  It’s also obvious that both platinum and palladium were kept on very short leashes as well.  Copper was closed at a new low for this move down — and WTIC closed lower as well.  Click to enlarge.

And as I type this paragraph, the London open is less than a minute away — and I see that gold’s rally attempts since the 6:00 p.m. EDT open in New York on Monday evening have all been thwarted — and ‘da boyz’ now have gold down $1.50 on the day.  It was up 12 or 13 bucks in early morning trading in Shanghai.  Silver was up 11 cents at 9 a.m. China Standard Time on their Tuesday morning, but is now up only 2 cents.  Platinum’s high was also at 9 a.m. CST — and JPMorgan et al. have the price down a dollar on the day.  Palladium has bucked the trend — and is up 5 dollars as Zurich opens — but well of its 2 p.m. CST high.

Net HFT gold volume in October and December combined is already an eye-popping 131,000 contracts — and there’s around 3,700 contracts worth of roll-over/switch volume on top of that.  Net HFT silver volume is a bit over 21,000 contracts already — and there’s 1,717 contracts worth of roll-over/switch volume out of September and into future months.

The dollar index opened down a whopping 28 basis points once trading commenced at 7:45 p.m. in New York on Monday evening, which was 7:45 a.m. China Standard Time on their Tuesday morning.  It ‘rallied’ back above unchanged by 16 basis points by around 12:10 p.m. CST — and has been edging quietly and unevenly lower since — and is up only 4 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 in New York is the cut-off for this Friday’s Commitment of Traders Report.  And regardless of what happens during Tuesday’s trading session, I’m already bracing myself for a big increase in the commercial net short position in gold — and maybe a smallish decrease in the Commercial net short position in silver.

But Ted is the real authority on the COT Report — and he’ll certainly have something to say about what it might contain in his mid-week commentary to his paying subscribers tomorrow.


And as I post today’s efforts on the website at 4:02 a.m. EDT, I note that the price pressure on gold has it down $2.40 the ounce as the first hour of London trading draws to a close — and they now have silver down 2 cents on the day. But platinum is now up 2 dollars — and palladium is up 14 bucks as the first hour of Zurich trading ends.

Gross gold volume in October and December combined is about 157,000 contracts — and minus the roll-over/switch volume, net HFT gold volume is around 149,500 contracts. Net HFT silver volume is about 23,400 contracts — and there’s 1,831 contracts worth of roll-over/switch volume on top of that.

The dollar index has turned a bit lower in the last hour of trading — and as of 8:45 a.m. in London/9:45 a.m. in Zurich, the index is down 7 basis points.

With gloves now off in a budding currency war, it’s certainly going to make for volatile trading action in just about all markets…most of which will not be of the free-market variety.  Because as Chris Powell stated eleven years ago now…”There are no markets anymore, only interventions“.  That statement is even more true today than it was back then.

See you here tomorrow.

Ed

Another Price Capping Operation on Friday

03 August 2019 — Saturday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM


There was absolutely no follow-through to Thursday’s gold price rally in Far East trading on their Friday, as ‘da boyz’ began to lean on the price the moment that trading began at 6:00 p.m. EDT in New York on Thursday evening.  That price decline lasted until around noon in Shanghai on their Friday — and it crawled higher until a minute or so before 9 a.m. in London.  It traded pretty flat until the job numbers were released at 8:30 a.m. in Washington.  There was a tiny up/down move at that point — and it began to head higher around 9:30 a.m. EDT.  That rather anemic rally was capped and turned lower a few minutes after 12 o’clock noon in New York — and it crept quietly lower until trading ended at 5:00 p.m. EDT.

Gold traded within a one percent price range on Friday, so I won’t bother with the low and high ticks.

Gold was closed in New York yesterday at $1,440.00 spot, down $5.10 from Thursday.  Net volume in October and December combined was ginormous once again at just under 498,000 contracts — and there was only about 9,700 contracts worth of roll-over/switch volume on top of that.

Silver’s price path was guided in a similar manner to gold’s, so I shan’t bore you with a repeat of the above play-by-play.  The only difference of note was the fact that silver’s low was set around 9 a.m. in New York.

The high and low ticks were reported by the CME Group as $16.385 and $16.03 in the September contract.

Silver was closed on Friday at $16.185 spot, down 11 cents from Thursday.  Net volume was very heavy at a bit under 92,000 contracts — and there was just under 9,300 contracts worth of roll-over/switch volume out of September and into future months.

The platinum price was up 5 dollars by shortly before 9 a.m. China Standard Time on their Friday morning, but was back around the unchanged mark two hours later — and from that juncture it traded flat until the Zurich open.  Price pressure began at that point — and it was bounced off its $840 spot low tick multiple times during early morning trading in New York.  It rallied a bit until around 1 p.m. EDT — and then was sold quietly lower into the 5:00 p.m. close from there.  Platinum was closed at $843 spot, down 8 dollars on the day.

Palladium was up 14 dollars by the Zurich open — and the engineered price decline picked up from where it left off during the Thursday trading session.  The low tick that mattered came at the COMEX open in New York — and although it rallied back above the $1,400 spot mark, it was sold lower [like platinum] starting at 1 p.m. EDT.  From the COMEX close onwards, it traded flat until trading ended at 5:00 p.m. in New York.  Palladium was closed at $1,392 spot, down another 14 dollars from Thursday, but miles off its low tick of the day.

The dollar index closed very late on Thursday afternoon in New York at 98.37 — and opened up 4 basis points points once trading commenced at 7:45 p.m. EDT on Thursday evening, which was 7:45 a.m. CST on their Friday morning.  It proceeded to chop and flop around a few basis points either side of unchanged until about 11:50 a.m. in Shanghai — and at that point it began to head very unevenly lower.  The 98.05 low tick was set at 1 p.m. in New York — and it edged unevenly sideways until trading ended at 5:30 p.m. EDT.  The dollar index finished the Friday session at 98.09…down 28 basis points from Thursday’s close.

It was certainly apparent that JPMorgan et al. weren’t going to allow a falling dollar index interfere with their price engineering in the precious metals yesterday.

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

And here’s the 5-year U.S. dollar index chart, courtesy of the good folks over at the stockcharts.com Internet site.  The delta between its close…97.85…and the close on the DXY chart above, was 24 basis points on Friday.  Click to enlarge as well.

The gold shares were sold a bit lower at the 9:30 open in New York yesterday morning — and their respective lows came minutes after 10 a.m. EDT.  They rallied to their highs by around 10:50 a.m. — and from that juncture the traded very quietly and unevenly lower until the markets closed at 4:00 p.m.  The HUI closed down 0.57 percent.

The silver equities were sold down a bit more than two percent at the 9:30 a.m. open — and never got a sniff of positive territory during the subsequent rally, which also ended at 10:50 a.m. in New York.  They were quietly and unevenly sold lower until their respective lows were set around 1:50 p.m. EDT — and from there, crept very quietly and unevenly higher until the 4:00 p.m. close.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down 2.02 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.

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 only gold — and its associated equities, managed to close in the green.  The continuing price pressure in silver is more than obvious.  The engineered price decline in palladium over the last two trading days sticks out like the proverbial sore thumb that it is.  Click to enlarge.

I won’t bother with the month-to-date chart as it’s only two days old.

Here’s the year-to-date chart — and it’s terrific looking, but not as terrific as it was a week ago.  JPMorgan et al.’s near death grip on the silver price is more than obvious in this chart as well.  Click to enlarge.

‘Da boyz’ are still out there going short against all comers — and there are no signs that I can see that they’re about to be overrun, at least not yet.  And as I said in this space last week, it still remains to be seen if JPMorgan et al can pull off another round of engineered price declines in both silver and gold, considering the current financial and monetary environment that they’re facing.  But regardless of that, it appears that the gold and silver equities continue to be in accumulation mode, as it’s pretty much a given that ‘strong hands’ are buying every one of those equities that were being sold this past week.


The CME Daily Delivery Report for Day 4 of August deliveries shows that 495 gold and 66 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.

In gold, of the five short/issuers in total, the only one that mattered was ABN Amro with 476 contracts out of its client account.  There were nine long/stoppers in total, with the three largest being Citigroup with 204 contracts for its in-house/proprietary trading account, JPMorgan with 137 for its client account — and Australian’s Macquarie Futures, with 80 contracts for its own account.

In silver, of the three short/issuers in total, the only two that mattered were ABN Amro and Advantage, with 53 and 11 contracts out of their respective client accounts.  There were four long/stoppers…JPMorgan picked up 27…ABN Amro 18…and Advantage with 10 contracts — and all for their respective client accounts.   Macquarie Futures stopped 11 contracts for its own account.

So far this month, there have been 4,289 gold contract issued/reissued and stopped — and that number in silver is already up to the 1,017 contract mark.  That’s quite a bit…with much more to go.

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 August declined by 186 contracts, leaving 3,373 still open, minus the 495 contracts mentioned a few paragraphs ago.  Thursday’s Daily Delivery Report shows that 221 gold contracts were posted for delivery on Monday, so that means that 221-186=35 more gold contracts just got added to the August delivery month.  Silver o.i. in August remained unchanged at 425 contracts, minus the 66 mentioned a few paragraphs ago.  Thursday’s Daily Delivery Report showed that 66 silver contracts were actually posted for delivery on Monday, so that means that 66 more silver contracts were added to August and, without doubt, those are the same 66 contracts that are out for delivery on Tuesday.


There was another addition to GLD on Friday, as an authorized participant added 94,314 troy ounces.  There was a tiny withdrawal from SLV, as an a.p. removed 142,027 troy ounces.  A withdrawal of that size usually represents a fee payment of some kind.

In the other silver funds, I noticed that 439,898 troy ounces of silver was added to SIVR yesterday.  And in all the gold ETFs, there was a net 385,000 troy ounces added on Friday, which includes the deposit in GLD mentioned above — and in the last four weeks that number is 2,136,320 troy ounces.

There was a tiny sales report from the U.S. Mint to start off the month.  They sold 500 one-ounce 24K gold buffaloes — and anther 2,000 of those ‘America the Beautiful’ 5-ounce silver coins.

The only activity in gold over at the COMEX-approved depositories on the U.S. east coast on Thursday was another lone kilobar…32.150 troy ounces…that was shipped out of Manfra, Tordella & Brookes, Inc. — and I won’t bother linking this.

There wasn’t much activity in silver, either.  Nothing was reported received — and only 9,675 troy ounces was shipped out of the International Depository Services of Delaware.  There was a big paper transfer, however, as 1,620,976 troy ounces was moved from the Registered category — and back into Eligible over at CNT.  I’m sure that Ted would suspect that this was silver now owned by JPMorgan’s ‘client account’ that was transferred to save on storage charges.  The link to this is here.

There was a bit of movement over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday.  Nothing was reported received, but 116 kilobars were shipped out.  That happened over at Brink’s, Inc. of course — and I won’t bother linking this.


The Winchester Hoard is a hoard of Iron Age gold found in a field in the Winchester area of Hampshire, England, in 2000, by a retired florist and amateur metal detectorist, Kevan Halls. It was declared treasure and valued at £350,000—the highest reward granted under the Treasure Act 1996 up to the time.

The hoard contains two sets of gold jewellery; each includes a torc, a pair of brooches, or fibulae, linked by a chain (of which only one chain was found), and a bracelet (of which one was broken in half). They were all made with a very high gold content – between 91% and 99% – determined by X-ray fluorescence tests at the British Museum. The total weight of the hoard is 1,158.8 g (40.88 oz) (37.25 troy ounces). It is dated from 75–25 B.C., which places it in the Late British Iron Age.

The find was described as “the most important discovery of Iron Age gold objects” for fifty years; and the items were probably an “expensive“, “diplomatic gift“. The brooches alone were “the third discovery of its kind from Britain“.   Click to enlarge.


The Commitment of Traders Report, for positions held at the close of COMEX trading on Tuesday, showed no change in the commercial net short position in gold, but a slightly larger increase in the Commercial net short position in silver than Ted was expecting/hoping for.

In silver, the Commercial net short position increased by another 7,778 contracts, or 38.9 million troy ounces of paper silver.

They arrived at that number by adding 2,481 long contracts, but they also increased their short position by 10,259 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 increased their long position by 3,975 contracts — and they also reduced their short position by 6,931 contracts.  It’s the sum of those two numbers…10,906 contracts…that represents their change for the reporting week.

The difference between that number — and the change in the Commercial net short position, was…10,906 minus 7,778 equals 3,128 contracts.

That difference was made up by the traders in the other two categories, as both reduced their net long positions during the reporting week…the ‘Other Reportables’ by 1,370 contracts — and the ‘Nonreportable’/small traders by 1,758 contracts.  The sum of those two numbers equals 3,128 contracts, which it must do.

Ted says that JPMorgan most likely increased their short position in silver during the reporting week — and pegs them at somewhere between 25-28,000 contracts net short.  Next Friday’s Bank Participation Report will allow him to get a more accurate picture of what the true number really is.

The Commercial net short position in silver is now up to 419.6 million troy ounces…a monstrous number.

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

Silver is now far into bearish territory — and it’s to early to predict what next week’s COT Report will look like with still two more trading days to go before the cut-off.  But JPMorgan et al are still there as short sellers of both first and last resort.


In gold, there was no change in the commercial net short position worthy of the name, as they increased their net long position by an insignificant 128 contracts.

They arrived at that number by selling 34,621 long contracts, but they also reduced their short position by 34,493 contracts — and it’s the difference between those two numbers that represents their change for the reporting week.

Under the hood in the Managed Money category increased their net long position by 7,540 contracts.  They arrived that number by adding 7,428 long contracts — and they also reduced their short position by 112 contracts.  It’s the sum of those two numbers that represents their change for the reporting week.

The difference between what the Managed Money and commercial traders did…7,540 minus 128 equals 7,412 contracts and, as is always the case, it was made up by the traders in the other two categories, as both decreased their net long positions during the reporting week.  The ‘Other Reportables’ decreased their long position by 4,402 contracts — and the traders in the ‘Nonreportable’/small trader category reduced their short position by 3,010 contracts.  The sum of those two numbers…3,010 plus 4,402 equals 7,412 contracts…which it must do.

The commercial net short position in gold stands at 28.80 million troy ounces…unchanged from last week.

Here’s Nick’s 3-year COT chart for goldClick to enlarge.

Like in silver, gold is firmly in bearish territory — and also like in silver, it’s too early to tell what next Friday’s COT Report will look like…but in a lot of respects, the above data is pretty much “yesterday’s news” after the wild price action since the Tuesday cut-off.

In the other metals, the Manged Money traders in palladium increased their net long position in this precious metal by a tiny 249 contracts.  These are the kind of volumes that move the palladium market…piddling.  The Managed Money traders are net long the palladium market by 14,328 contracts…56 percent of the total open interest.  Total open interest in palladium is 25,548 COMEX contracts, down 514 contracts from the previous week.  But after Thursday’s and Friday’s price smashes, I’m sure the changes in the next report will be far more significant.  In platinum, the Managed Money traders increased their net long position by a further 9,244 contracts during the reporting week — and are now net long the platinum market by 9,767 contracts.  These huge increases in long buying is the sole reason why the platinum price has risen during the last three weeks.  In copper, the Managed Money traders increased their net short position in that metal by a further 9,366 COMEX contracts during the reporting week — and are now net short the COMEX futures market by 41,795 contracts, or 1.04 billion pounds of the stuff.


Here’s Nick Laird’s “Days to Cover” chart updated with yesterday’s COT data for positions held at the close of COMEX trading last 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 140 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 84 days of world silver production, unchanged from last week’s report — for a total of 224 days that the Big 8 are short, which is seven and a half months of world silver production, or about 522.8 million troy ounces of paper silver held short by the Big 8. [In the prior week’s COT Report, the Big 8 were short 218 days of world silver production.]

In the COT Report above, the Commercial net short position in silver was reported as 419.6 million troy ounces.  As mentioned in the previous paragraph, the short position of the Big 8 traders is 522.8 million troy ounces.  The short position of the Big 8 traders is larger than the total Commercial net short position by 522.8 minus 419.6 equals 103.2 million troy ounces.

The reason for the difference in those numbers…as it always is…is that Ted’s raptors, the 33-odd small commercial traders other than the Big 8, are net long that amount, which is preposterous.

As I mentioned in my COT commentary in silver above, Ted figures that JPMorgan is short is around 25-28,000 COMEX silver contracts, up from the 20-25,000 contracts that they were short in the prior week’s COT Report.

The Big 4 traders are short, on average, about…140 divided by 4 equals…35 days of world silver production each.  The four traders in the ‘5 through 8’ category are short 84 days of world silver production in total, which is 21 days of world silver production each, on average.

The Big 8 commercial traders are short 43.8 percent of the entire open interest in silver in the COMEX futures market, which is a tiny increase from the 43.4 percent they were short in last week’s report.  And once whatever market-neutral spread trades are subtracted out, that percentage would be something close to the 50 percent mark.  In gold, it’s now 43.5 percent of the total COMEX open interest that the Big 8 are short, up a decent amount from the 40.4 percent they were short in last week’s report — and around 50 percent, once the market-neutral spread trades are subtracted out.

In gold, the Big 4 are short 55 days of world gold production, up 3 days from what they were short in last week’s COT Report.  The ‘5 through 8’ are short another 30 days of world production, down 5 days from what they were short last week…for a total of 85 days of world gold production held short by the Big 8…down 2 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…up 5 days from last week’s COT Report…which is a pretty big jump from the 60 percent they held in the prior COT Report.

The “concentrated short position within a concentrated short position” in silver, platinum and palladium held by the Big 4 commercial traders are about 63, 72 and 79 percent respectively of the short positions held by the Big 8.  Silver is up 2 percentage points from a week ago, platinum is up 6 percentage points from last week — and palladium is up 1 percentage point from a week ago.

I don’t have all that many stories for you today.


CRITICAL READS

164K Jobs Added in July, Just as Expected, But Wage Growth Comes Hot

Heading into today’s payrolls report, there was some “whisper” expectation that the July print would be a blowout due to a spike in census hiring, however that did not happen and instead the BLS reported that last month 164K jobs were added, right on top of the 165K expected. Click to enlarge.

The strong headline print however, was weakened by substantial historical downward revisions, to wit: the change in total non-farm payroll employment for May was revised down by 10,000 from +72,000 to +62,000, and the change for June was revised down by 31,000 from +224,000 to +193,000. With these revisions, employment gains in May and June combined were 41,000 less than previously reported.

What was perhaps most notable is that the report made no mention of hiring in advance of the 2020 census, and even more inexplicably federal payrolls rose just 2,000.

Looking at the 6 month moving average, it’s obvious that the U.S. economy peaked some time in 2017 and is all downhill from there…

This longish news item showed up on the Zero Hedge website at 8:37 a.m. EDT on Friday morning — and I thank Brad Robertson for sending it our way.  Another link to it is herePaul Craig Roberts has an opinion on the jobs numbers — and it’s headlined “More Fake Happy News About Jobs” — and I thank Brad for that one as well.  Paul issued a correction to this “More Fake Happy News About Jobs” on Saturday morning — and that’s linked here.


U.S. hiring slows; shorter factory workweek a red flag

U.S. job growth slowed in July and manufacturers slashed hours for workers, which together with an escalation in trade tensions between the United States and China could give the Federal Reserve ammunition to cut interest rates again next month.

The Labor Department’s closely watched monthly employment report on Friday came a day after President Donald Trump announced an additional 10% tariff on $300 billion worth of Chinese imports starting Sept. 1, a move that led financial markets to fully price in a rate cut in September.

The U.S. central bank on Wednesday cut its short-term interest rate for the first time since 2008. Fed Chairman Jerome Powell described the widely anticipated 25-basis-point monetary policy easing as insurance against downside risks to the 10-year old economic expansion, the longest in history, from trade tensions and slowing global growth.
Related Coverage

Fed officials don’t exactly have mud in their eyes after cutting interest rates this week as job growth is slowing with the rest of the world,” said Chris Rupkey, chief economist at MUFG in New York. “We see nothing in today’s report to stop a second rate cut next month.”

This Reuters story, filed from Washington was posted on their Internet site late on Thursday evening EDT  — and I thank Swedish reader Patrik Ekdahl for sending it our way.  Another link to it is here.


The Government Encourages Debt and Destroys Capital — Bill Bonner

Oh my… There he goes again.

Yesterday, Donald J. Trump dialed up his trade war.

Not to Full Retard… but at least 3/4 retard. Barron’s:

Stocks lost early gains and fell into the negative territory on Thursday as President Donald Trump tweeted that he will impose 10% tariffs on an additional $300 billion worth of imports from China.”

We predicted (among other things) that Trump would never go “Full Retard” in his trade war with China.

He has too much to lose – his reputation as a deal maker, the next election… and his personal fortune.

All of them depend on more inflation – that is, on more money sloshing around the world to pump up asset prices and consumer living standards. That’s why he is pressuring the Federal Reserve to lower rates further and faster.

But Europe, Britain, Japan, China, and the U.S. – all the world’s major economies – are already softening, slowing, and straining to move ahead. It’s Inflate or Die for them all.

This worthwhile commentary from Bill, filed from Piotou in France, appeared on the bonnerandpartners.com Internet site early on Friday morning EDT — and another link to it is here.


Doug Noland: Trump’s China Tariff Tweets

I view the markets’ responses to the President’s threat of additional Chinese tariffs as providing important analytical clarity. Let there be no doubt: Chinese developments have become the critical factor for global markets. And the issue is not the possibility of 10% tariffs on an additional $300 billion of Chinese imports. The critical issue is Chinese financial and economic fragilities, and the very real possibility that an escalating trade war pushes a vulnerable China over the edge.

There were analysts quick to suggest it was no coincidence that Trump’s China Tariff Tweet followed closely on the heels of the snub from Chairman Powell. The President could dismember two fowl with one stone: ratchet up the pressure on Chinese trade negotiators, while signaling to Powell that there’s an easy way and a hard way that will end at the same destination: monetary policy will now be dictated from the Oval Office.

I’ll repeat the same view that I’ve posited since early in the administration. The President is playing a dangerous game with the Chinese.

The administration is hellbent on cornering the wounded animal. China’s historic financial and economic Bubbles are in trouble. Beijing has been working intensively to stabilize its money market and corporate lending markets. More generally, China’s overheated Credit system has become deranged. Financial conditions have recently tightened dramatically for small banks and financial institutions, while real estate finance remains in a runaway speculative Bubble blow-off. System Credit is on track to approach a record $4.0 TN this year, as Credit quality rapidly deteriorates.

President Trump sees the opportunity to use China’s weakened economy to extract trade concessions. As it drifts closer to a systemic crisis of confidence, Chinese finance is the more pressing issue. Remember how such circumstances tend to unfold: very slowly then suddenly quite quickly.

If they believed a trade deal would resolve the U.S. administration’s chief concerns, Beijing would likely be more willing to compromise. But at this point I take them at their word: “China will not accept any form of pressure, intimidation or deception.” There is a clear and present risk of problematic escalation.

Beijing has been working diligently to stabilize their fragile financial and economic systems. It no doubt presents the administration an irresistible opportunity to partake in barefaced hardball. But at this point pushing China closer to the crisis point basically unleashes global “risk off,” with myriad repercussions.

This weekly commentary from Doug is definitely worth your time.  It was posted on his Internet site in the very early hours of Saturday morning — and another link to it is here.


Deutsche Bank sets aside $1.1 billion to exit derivatives

Deutsche Bank has set aside over €1 billion ($1.1 billion) to cover the cost of offloading derivatives in its ‘bad bank,’ or capital release unit, three sources at the bank told Reuters.

The cost, which has not been publicly disclosed, is included within the 7.4-billion euro budget the German lender has set aside for its restructuring, which will also see 18,000 jobs axed as the bank exits unprofitable businesses.

Key to the restructuring is the creation of a ‘bad bank’ to house €288 billion of unwanted assets earmarked for sale or wind-down, including equity derivatives and long-dated interest rate and credit derivatives.

Deutsche Bank is still assessing and gauging interest in the assets before repackaging some for sale, the sources said.

Deutsche Bank declined to comment.

I think this is going to cost a lot more. I don’t see how they’re going to get away with this little expense to wind all this down,” says Mayra Rodriguez Valladares, managing principal at consultancy MRV Associates . “Deutsche will have to hire external auditors to make sure everything is in order and there will be additional IT expenses.”

Deutsche Bank’s Chief Executive Officer Christian Sewing is looking to restore confidence among investors who have seen the bank’s stock lose more than three-quarters of its value over the past four years.

US$1.1 billion isn’t even coffee money.  This Reuters article, filed from New York at 8:16 a.m. on Friday morning EDT, is the second offering of the day from Patrik Ekdahl — and another link to it is here.


India’s gold demand up 13% despite volatile prices

Gold demand in the June quarter was up 13 per cent at 213 tonnes against 189 tonnes logged in the same period last year amid volatile prices. In terms of value, it jumped 17 per cent to Rs 62,422 crore (Rs 53,260 crore).

Jewellery demand during the quarter under review jumped 12 per cent at 169 tonne (150 tonne) while in value terms it was up 17 per cent at Rs 49,380 crore (Rs 42,200 crore).

While gold prices were down at Rs 32,500 per 10 grams in April and May against Rs 33,500 logged in February, it suddenly jumped to a record high of Rs 34,006 per 10 grams towards the second half of June in line with global trend.

Demand plunged with the sharp jump in gold prices towards the second half of June. Discount offered on gold bars to jewellers hit $23 an ounce, a level not seen since 2016.

Gold imports increased 28 per cent to 274 tonnes (193 tonnes) on anticipation of higher demand, said the Gold Demand and Trend report released by World Gold Council. However, the slowing economic trend and restrictions on movement of cash were a drag on demand in April and May, it said.

Somasundaram PR, Managing Director (India), World Gold Council said the demand was boosted by robust trade promotions, a higher number of auspicious days and a positive consumer response to softer prices in April and May. Significantly, he said bar and coin demand grew to a 5-year high in June quarter.

This gold-related news item from India put in an appearance on thehindubusinessline.com Internet site on their Thursday sometime — and it’s the first of several articles that I found on the Sharps Pixley website.  Another link to it is here.


Indians sell record amount of old gold as prices hit 7-year-high

Consumers in India are selling old gold to benefit from high prices. The same is reflected in the data for the June quarter that the World Gold Council released on Thursday, in Gold Demand Trends.
The report stated consumers during the quarter sold 37.9 tonnes of old gold, which is the highest quarterly sale after September 2016, when old gold sale, or scrap supply, was 39 tonnes.

Gold jewellery sold and repurchased, or remaking gold, is not calculated as part of old gold sale.
In June, the gold price crossed $1,400 an ounce in global markets, which was a six-year high, and since then has remained above that. In addition, import duty has been raised by 2.5 percentage points, making gold even costlier.

On an annual basis, the supply of scrap gold in India is likely to be at a seven-year high and may rise to 100 tonnes, according to P R Somasundaram, managing director (India) of the World Gold Council.

In 2012, the supply of scrap gold stood at 118 tonnes because people cashed their jewellery owing to a surge in local prices.

This is another story about India and gold.  This one, filed from Mumbai, showed up on the business-standard.com Internet site at 1:17 a.m. IST on their Friday morning, which was 4:47 p.m. in New York — EDT plus 9.5 hours.  It comes from the Sharps Pixley website as well — and another link to it is here.


China’s H1/19 gold consumption down 3.3% y/y to 523.5 tonnes — association

* China’s gold consumption fell by 3.3% year-on-year to 523.54 tonnes in the first half of 2019, the China Gold Association said on its website on Friday.

* Consumption of gold jewellery increased by 2% year-on-year to 358.77 tonnes in January-June, while consumption of gold bars slumped by 17.3% year-on-year to 110.51 tonnes.

* China, the world’s biggest gold consumer, saw its own output of the precious metal slip 5.1% year-on-year to 180.68 tonnes in the first half, the association said.

* It cited factors including the withdrawal of mining rights in nature reserves for the decline in production.

China’s gold production has really taken a tumble over the last several years — and is likely to fall even more as time progresses…if one can use the past as prologue.  The above four paragraphs are all there is to this brief Reuters article that was filed from Beijing on their Friday.  I found it on the Sharps Pixley website — and another link to the hard copy is here.


WGC: Peak gold continues to be elusive — Lawrie Williams

While the latest quarterly Gold Demand Trends report from the World Gold Co uncil (WGC) finds an encouraging pattern of gold demand growth in Q2 2019, largely due to seemingly ever-increasing Central Bank demand and some substantial inflows into gold ETFs over the quarter, along with a big pick-up in gold jewellery demand in India.  What will be disturbing for some commentators/analysts on gold is that supply – far from plateauing or diminishing, as many have been suggesting, is actually continuing to rise making the ‘peak gold’ theory something of a gold bug’s myth  – at least for the time being.  We have ourselves suggested that supply may be peaking, but not according to the WGC’s latest research.

While global mine output continues to grow, albeit by only a small amount, the higher gold prices received in Q2 led to a 9% rise in recycled gold.

On the mining front, despite contractions – quite severe in some cases – in some major gold mining nations like China, South Africa and Indonesia, new mined gold output continued to grow from some others among the world’s biggest gold mining nations – notably Russia, the U.S. and Canada (all up around 9%), and Australia up around 6%.  This led to overall new mined gold production growth of around 2% in Q2 2019 compared with the same quarter a year earlier.  This follows on from a record Q1 too.  Overall the WGC estimates H1 new mined gold production at 1,730.2 tonnes – up 1.1% on H1 2018.  Kazakhstan – a mid-sized gold producer saw output rise by a massive 18% benefiting from the continued ramp-up of Polymetal’s Kyzyl project which is continuing towards full production by the end of the current year.  In West Africa, Ghana – nowadays the continent’s largest producing nation – saw a 6% year-on-year increase in production, primarily from Ahafo and Akyem.

This longish, but very worthwhile commentary from Lawrie was posted on the Sharps Pixley website on Friday sometime — and another link to it is here.  A companion story to this, also from the Sharps Pixley website, is headlined “Gold demand increases 8% globally in Q2


The PHOTOS and the FUNNIES

Here are four more photos from our May 25 trip on the back roads east of Kamloops…heading towards Chase.  The first is of a swallow-tail butterfly that was just sitting on the road — and made no attempt to fly away.  The second is a scenery shot looking generally southwest down the South Thompson River Valley.  The third is a western kingbird sitting on a barbed-wire fence very close to where I took the last two photos.  The last photos was taken on the ‘back road’ — and within a few hundred meters of where I took the previous three photos.  I wasn’t at all happy that it was as cloudy as it was.  Click to enlarge.


The WRAP

Today’s C&W/pop ‘blast from the past’ came in at No. 15 on Billboard’s Year-End Hot 100 singles of 1960.  It was a huge hit for Marty Robbins back then — and it’s still an awesome ballad even today.  Here’s a live version of the tune served up on the stage of the Grand Ole Opry — and the link is here.

Today’s classical ‘blast from the past’ is one the I haven’t featured in many a moon, so it’s time for a repeat.  It’s Beethoven’s Piano Concerto No. 5 in E-flat major…a diabolical key if there ever was one.  It was composed in Vienna between 1809 and 1811 — and its first public performance was in Leipzig on 28 November 1811.  It’s as big and bold as all outdoors — and is called the ‘Emperor Concerto’ for very good reason.

Here’s the Bavarian Symphony Orchestra with the great Daniel Barenboim as soloist, who could probably play this in his sleep.  Mariss Jansons conducts — and the link is here.


Despite the continuing decline in the dollar index on Friday, it was obvious that JPMorgan et al. were not going to allow the precious metal prices to rise further — and they spent the entire day leaning on them.  With no exceptions, all were closed lower on the day.  Copper got smacked for 8 cents, which is a huge one-day move for it.  But, like the precious metals, it was all paper trading on the COMEX — and had nothing to do with any supply/demand fundamentals.

Here are the 6-month charts for all of the Big 6 commodities — and with the very obvious exceptions of palladium, copper and WTIC…the other three; gold, silver and platinum…are well above any moving average that matters.  It still remains to be seen whether, in the current political and financial environment, ‘da boyz’ can pull off another one of their patented ‘wash, rinse, spin…repeat’ cycles in them or not.  Click to enlarge.

Not a thing has changed since last week from an economic, financial or monetary viewpoint.  The ‘everything’ bubble is still as gargantuan as ever — and the powers-that-be are continuing to pull out all the financial stops to prevent this Frankenstein monster they’ve created from imploding.

As Jim Rickards said in a commentary on thedailyreckoning.com Internet site on Wednesday…headlined “One Manipulation Leads to Another“…

“[T]he current expansion is already the longest on record. It can’t be expected to last much longer. When it does strike, the next recession may be impossible to get out of. The central banks just don’t have the “dry powder” to fight it with.

And that comes back to a deeper problem…

The problem with any kind of market manipulation (what central bankers call “policy”) is that there’s no way to end it without unintended and usually negative consequences. Once you start down the path of manipulation, it requires more and more manipulation to keep the game going.

Finally it no longer becomes possible to turn back without crashing the system.

…the central bankers ride to the rescue of corrupt or mismanaged banks. This saves the wrong people (incompetent and corrupt bank managers and investors) and hurts the everyday investor or worker who watches his portfolio implode while the incompetent bank managers get to keep their jobs and big bonuses.

All it does is set the stage for a bigger crisis down the road.

The bigger problem is there’s no way out, as I said. One manipulation leads to another.”

Then there’s Bill Bonner‘s comments in the Critical Reads section of today’s column…

The Fed’s ultra-low interest rates also cause speculators to put real capital into goofball companies – such as Beyond Meat, Tesla, or WeWork – at outrageous prices. Cheap credit keeps these freaks and zombie businesses alive, destroying more and more capital.

When a company makes a loss, it takes valuable vital resources – most importantly, savings – and uses them to make products that are worth less than the resources that went into them.

In other words, they are destroying capital. Today, 29% of small businesses are making losses – the highest rate since 2008.

And British economist Peter Warburton back on 09 April 2001…

What we see at present is a battle between the central banks and the collapse of the financial system fought on two fronts. On one front, the central banks preside over the creation of additional liquidity for the financial system in order to hold back the tide of debt defaults that would otherwise occur. On the other, they incite investment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, soft commodities or anything else that might be deemed an indicator of inherent value. Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the U.S. dollar, but of all fiat currencies. Equally, they seek to deny the investor the opportunity to hedge against the fragility of the financial system by switching into a freely traded market for non-financial assets.

It is important to recognize that the central banks have found the battle on the second front much easier to fight than the first. Moreover, it is not necessary for the central banks to fight the battle themselves, although central bank gold sales and gold leasing have certainly contributed to the cause. Most of the world’s large investment banks have over-traded their capital so flagrantly that if the central banks were to lose the fight on the first front, then the stock of the investment banks would be worthless. Because their fate is intertwined with that of the central banks, investment banks are willing participants in the battle against rising gold, oil, and commodity prices.”

They can fight this battle for only so long — and to repeat a sentence from Jim Rickards posted above…”Finally it no longer becomes possible to turn back without crashing the system.

And that, dear reader, is precisely the ‘Print, or Die’ path that we’re on right now…with no way out…none.  And if you want another opinion, here’s another classic rant from Gregory Mannarino from Friday afternoon — and it’s worth your while!

But it’s a battle they will lose at some point…either by circumstance, or design — and is the sole reason why the flight to precious metals is on in earnest by so many countries and their central banks.  And as I said last week in this space, that flight will, at some point, turn into a stampede.

Then all the COMEX paper in the world won’t be able to put the precious metal fire out, as the run from paper assets to hard assets will be unstoppable.

What we’ve been witnessing at an ever-increasing pace this year, are the precursors to whatever event precipitates the great unwinding.

And that’s why I’m still “all in”.

I’m done for the day — and the week — and I’ll see you here on Tuesday.

Ed