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The Shanghai Stock Crash and China Gold Demand

 -- Published: Tuesday, 14 July 2015 | Print  | Disqus 

By Ed Steer

11 July 2015 — Saturday


It was another very quiet day in gold on Friday—and the tiny rally that dared surface around noon in New York, got summarily dispatched.  But once COMEX trading ended, the gold price managed to creep back into the black.  It was another day where the highs and lows weren’t worth looking up.

Gold finished the Friday session in New York at $1,162.80 spot, up $3.50 from Thursday’s close.  Net volume was only 80,000 contracts.


The price action in silver was somewhat similar, complete with the rally going into the New York lunch hour.  It got dealt with shortly before 12:30 p.m. EDT—and its price path was similar to gold’s after that as well.

Silver traded in a two bit price range for the entire Friday session, so I shan’t look up the highs and lows for this precious metal either.

Silver finished the Friday session at $15.62 spot, up 23 cents from Thursday.  Net volume was also pretty light at 26,500 contracts.


The platinum price was up 15 bucks or so by around 1 p.m. in Zurich, but by the London p.m. gold fix, the price had been sold back to about unchanged.  From there the metal rallied into the close and finished at $1,032 spot, up 9 dollars on the day.


It was more or less the same price pattern in palladium, except its high tick of the day came at 9 a.m. in COMEX trading in New York.  From that point it got sold down until 11 a.m.—before rallying into the close.  It closed yesterday at $649 spot, up 14 dollars from Thursday’s close.


The dollar index closed late on Thursday afternoon in New York at 96.27—and from there continued its decline that had begun at the COMEX close that day.  ‘Gentle hands’ made another rescue attempt at the 96.00 mark, but at precisely 10 a.m. in London trading, the dollar index finally gave up the ghost, bottoming out at 95.48 minutes after 12 o’clock noon BST.  The subsequent rally made it back to the 96.13 level shortly before the COMEX close, but it rolled over once more, finishing the Friday session at 95.79—down 48 basis points.


Here’s the 6-month U.S. dollar index chart that puts yesterday’s move in some perspective.

110715 6-month USD

The gold stocks opened in the green, but slid into the red almost immediately—and traded there for most of the remainder of the Friday session, despite the positive close in the gold price.  The HUI closed down another 0.99 percent.


Despite the positive price action in the metal itself, the silver equities had a somewhat similar trading pattern, but they only closed down 0.14 percent.

110715Silver 7

Here’s the long-term Silver Sentiment Index—and it’s pretty ugly.  I haven’t looked at the long-term HUI chart, but I’m sure there would be a strong resemblance.

110715LT Silver 7

For the week, the HUI closed down another 6.42 percent—and the Intraday Silver Sentiment Index closed down 8.17 percent.  Ouch!  If you’re looking for a bottom to buy when there’s blood running in the streets, this would be it.

The CME Daily Delivery Report showed that zero gold and 24 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.  JPMorgan was the short/issuer on all 24 contracts out of its client account.  The largest long/stopper was Japan’s Mizuho bank once again with 11 contracts—and JPMorgan stopped 7 for its own account.  The link to yesterday’s Issuers and Stoppers Report is here.

The CME Preliminary Report for the Friday trading session showed that July open interest in gold increased by 8 contracts to 157 contracts.  Silver’s July o.i. fell by 178 contracts, leaving 393 still open.

There were no reported changes in GLD yesterday—and as of 10:58 p.m. EDT yesterday evening, there were no reported changes in SLV, either.

The folks over at the Internet site updated the short positions for both GLD and SLV as of the close of trading on Tuesday, June 30th—and this is what they had to report:

The short position in SLV increased by 14.41 percent from 11.80 million shares/troy ounces, up to 13.50 million shares/troy ounces.  This is not a material amount—and would probably represent normal short sales as the silver price continued to decline during the 15 day reporting period that ended on June 30.

But the short position in GLD went in the other direction, as it shrank by 29.87 percent—from 1.34 million troy ounces, all the way down to 941,150 troy ounces.  That should come as no surprise, as large amounts of gold were deposited in GLD during the 15-day reporting period, as an authorized participant was obviously covering a short position.  This remaining short position is basically immaterial in the grand scheme of things.

There was another sales report from the U.S. Mint yesterday—and unlike Thursday, they didn’t report selling any silver eagles.  What they did sell was another 8,000 troy ounces of gold eagles, along with another 1,000 one-ounce 24K gold buffaloes.

Month-to-date the mint has sold a whopping 56,000 troy ounces of gold eagles—8,000 one-ounce 24K gold buffaloes—and 2,709,000 silver eagles.  Based on these sales, the silver/gold ratio works out to 42 to 1.

There was little in/out movement in gold over at the COMEX-approved depositories on Thursday.  Nothing was reported received—and only 1,961 troy ounces were shipped out.

It was busier in silver.  There was only 1,078 troy ounces reported received, but 684,141 troy ounces were shipped out.  Almost all of the silver shipped out the door came from Canada’s Scotiabank—and the link to that activity is here.

For the second day in a row there was no activity over at the COMEX-approved gold kilobar depository in Hong Kong.

The Commitment of Traders Report for positions held at the close of COMEX trading on Tuesday, July 7 was pretty much as wildly bullish as Ted was expecting—and I was hoping for.  But I’d like to preface my comments on it by saying that there’s no way of knowing for sure whether all of the data from Tuesday’s engineered price declines in all four precious metals is in this report, or in the companion Bank Participation Report that also came out yesterday.  And even if they weren’t, the numbers that were there were very impressive.

The other take-away from this report was that the short position in gold held by the Managed Money traders is now so large, that several of them have most likely crept into the Big 8 category so, like silver, I’m not going to dwell on the internal changes inside the  Big 4,  the ‘5 through 8′, and raptors in either metal.

In silver, the Commercial net short position plunged by another 6,841 contracts, leaving the current net short position in that precious metal at 14,139 contracts, or 71.6 million troy ounces.  You’d have to go back to the lows of last October to see this small of a Commercial net short position.

In the Disaggregated COT Report, the Managed Money, only increased their short position by 2,085 contracts, so they look ‘full up’ on the short side.  The “Other Reportable” category decreased their long position by 1,258 contracts—and the “Nonreportable” category [traders with less than 150 COMEX silver contracts] sold 892 long contracts and added 2,861 contracts to their short position.

It was impossible for Ted to tell from either the COT Report and the new Bank Participation Report, what JPMorgan’s current short position is in the COMEX futures market.  He speculated on the phone yesterday that Citigroup may not only be short silver in the OTC market, they may have been snookered into replacing JPMorgan on the short side in the futures market as well.  And note that I bolded the word ‘speculated‘.

As usual, and not that I want to steal anything from the Bank Participation Report, there are only three U.S. banks holding silver short positions in the COMEX futures market.  They are, and always have been, Citigroup, HSBC USA and JPMorgan.  Which one has the old maid, as the net short position of the ‘3 or less’ U.S. banks currently sits at 15,698 COMEX silver contracts.

I’ll leave the rest up to Ted in his weekly commentary later today, as I know he’s going to be discussing this in far greater depth than I’m able to.  I’ll steal what I can for next week.

In gold, the Commercial net short position fell by a chunky 22,180 contracts, or 2.22 million troy ounces.  The Commercial net short position in this precious metal is now down to 5.26 million ounces, which is within a whisker of its lows of the last year or so as well.

The Managed Money traders reduced their long position by 3,706 contracts—and added 9,818 contracts to their short position, which is another new record.  In the “Other Reportables” category they added 6,189 short contracts, but at the same time they added 3,006 contracts to their already huge long position.  The small traders, the Nonreportables, added a chunky 5,425 contracts to their short position.

This COT Report is at what I call the “widows and orphans” stage of a price bottom, where everyone, including their dogs and cats, are on one side of the boat—and the smart money is on the other.  One wonders  what will happen when the rush to the other side of the boat begins?

Here’s Nick Laird’s “Days of World Production to Cover Short Positions” of all physically-traded commodities on the COMEX.  And as you can tell, the Big 4 and Big 8 in silver are in a world of their own, as they continue to be contaminated by some of the traders from the Managed Money category.  The Big 4 are short 119 days of world silver production—and the Big 8 are short 198 days of world silver production.

110715Days to Cover


Along with yesterday’s Commitment of Traders Report came the companion Bank Participation Report [BPR] for July, for positions held in June.  And as I’ve said in the past—“This is data extracted directly from the above COT Report, which shows the COMEX futures contracts, both long and short, that are held by the U.S. and non-U.S. banks as of Tuesday’s cut-off.

In gold, 4 U.S. banks are net short 36,425 COMEX gold contracts which, surprisingly, is virtually unchanged from the short position held by ‘3 or less’ U.S. banks in the June BPR in gold when the net short position was 36,844 contracts.  Looking at the gold chart for the reporting period, there wasn’t a lot of change in the gold price, but it is rather strange, considering what comes next.

Also in gold, 22 non-U.S. banks were net short 26,015 COMEX contracts, which is a huge decline from the June BPR when the only 18 non-U.S. banks held 48,106 COMEX contracts net short.  Twenty-two banks divided into 26,015 contracts ain’t a lot per bank, although it’s my opinion that Canada’s Scotiabank owns a fair chunk of the total non-U.S. bank short position which, if true, would make the rest of the positions held by the non-U.S. banks even more irrelevant than they already are.

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 gold positions [both long and short] were outed in October of 2012.  The ‘click to enlarge’ feature is a must with these charts.

110715BPR Gold

In silver, ‘3 or less’ U.S. banks are net short 15,698 COMEX silver contracts.  That compares to the 18,459 COMEX contracts they were short in the June BPR.  So there was a decent decrease, but nearly as much as Ted Butler was expecting—and his speculation on Citigroup has already been discussed in the COT Report further up.

Also in silver, ’16 or more’ non-U.S. banks are net short 17,032 COMEX silver contracts.  That’s a huge decline from their position back in the June report when they were net short 29,703 COMEX contracts.  For reasons mentioned in the next paragraph, I’m prepared to bet that the vast majority of this short position is held by Canada’s Scotiabank.

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 in chart #5.

110715BPR silver

In platinum, ‘3 or less’ U.S. banks are net short 7,805 COMEX platinum contracts, which is an increase of 106 contracts from the June BPR.

Also in platinum, ’14 or more’ non-U.S. banks were net short 6,922 COMEX platinum contracts—and that’s a big drop from the 9,464 contracts that ’17 or more’ non-U.S. banks held in the previous BPR.  14 banks divided into 6,922 contracts ain’t a big number, so these positions are irrelevant in the grand scheme of things, unless they’re all trading together, which I doubt.

Here’s the BPR chart for platinum—and please note that the banks were never a factor in platinum until mid 2009.  Now look at them!  If you want to know why the platinum price isn’t going anywhere, despite the supply/demand fundamentals, look at the total long positions the banks have vs. their collective short positions—especially the positions of the three U.S. banks.

110715BPR platinum

In palladium, ‘3 or less’ U.S. banks are net short 4,019 COMEX contracts, down from 6,285 these same three banks held in the June BPR.

Also in palladium, ’10 or more’ non-U.S. banks are only net short 275 contracts between them.  In last month’s report, that net short position was 2,646 contracts.

Here’s the BPR chart for palladium updated with the June BPR data.  Like platinum above, just look at the long positions vs. the short positions held by the U.S. banks in Chart #5.  You couldn’t make this stuff up!  You should note that the U.S. banks were almost nowhere to be seen in the COMEX futures market in this metal until the middle of 2007—and they became the predominant and controlling factor by the end of Q1 of 2013, where they remain today.  I would bet, that like platinum, JPMorgan holds the vast majority of the U.S. banks’ short position in palladium—and maybe all of it.  But it’s obvious that the ‘3 or less’ U.S. banks that are calling the shots in this metal—and in the other three precious metals as well.

110715BPR palladium

Ted made the comment yesterday that  this was the biggest month-over-month change/improvement in market structure going back as far back as he can remember.

As I say every month at this time, along with the odd Wall Street investment house such as Morgan Stanley, these mostly U.S. banks are “da boyz”—the sellers of last resort—and you can call them what you like.  Until they decide, or are instructed to stand back, the prices of all four precious metals are going nowhere—supply and demand fundamentals be damned!

As Jim Rickards so correctly put it, the price management scheme is now so obvious they should be embarrassed about it.

But they obviously aren’t, at least not at the moment.

Here are a couple of charts Nick Laird passed around late last night.  The first is the imports to China through Hong Kong in May—and as you can see, it was a pretty healthy 70.846 tonnes.

110715HK China Imports

The chart below shows the withdrawals from the Shanghai Gold Exchange for the week ending July 3.  They took out 44.335 metric tonnes.


Before heading into today’s selection of stories, I’d like to cast my memory back to when I was writing for Casey Research just over a month ago.  As shabbily as I was treated when I got shown the door after the Stansberry takeover, their Tech guru, Alex Daley, got it even worse.  He used to be Casey Research‘s Chief Investment Strategist, Technology and CMO.

But he has finally landed on this feet—and you can track him down over at his new Internet site  The link to that is here.

I have a lot of stories today, including quite a number that I’ve been saving all week for today’s column—plus I have the usual number filed under the Grecian Kabuki Theatre category as well.


Doug Noland: Broken

The Shanghai Composite rallied 10% this week, enjoying the “biggest two-day rebound since 2008.” Friday saw Germany’s DAX surge 2.9%. French, Spanish and Italian equities rallied about 3%. European periphery bond yields dropped (some). The S&P500 advanced 1.2%. It was, however, another rocky week for commodities.

Global markets this week approached the edge – then recoiled, as they tend to do. Over recent years it’s become the typical pattern. Wait long enough and market stress is met with whatever desperate policy response it takes at that moment. Officials in China moved aggressively to adopt their belligerent brand of “whatever it makes” central market control. Crazy stuff. And as market participants expected, the Game of Chicken saw the Greeks and Europeans eventually cave to market pressure. Markets win again. Long live the king.

My view is that China and Greece are both Broken. But that certainly won’t stop the manic markets from their short-term focus and speculative impulses. Rewards have been too reliable for too long. There’s nothing like a bout of hedging and shorting to get market operators salivating at the prospect of an abrupt reversal of hedges and short squeeze. Still, we can’t take our focus off what is unfolding in the intermediate- and longer-term.

On a weekly basis, I attempt to place developments into context. I see the global government finance Bubble as the grand finale of a historic period of serial Bubbles spanning several decades. This is an extraordinarily dangerous period – financially, economically, socially and geopolitically. The Bubble has made it to the heart of the global monetary system, to the very foundation of “money” and Credit: to central bank “money” and government debt. Virtually unlimited demand for this “money” has ensured unprecedented over-issuance. Governments everywhere are desperate to contain monetary disorder that is now escalating out of control.

This absolute must read commentary by Doug appeared on his Internet site yesterday evening—and I found it before reader U.D. did.

Pentagon Concludes America Not Safe Unless It Conquers the World — Paul Craig Roberts

The Pentagon has released its “National Military Strategy of the United States of America 2015,” June 2015.  The document announces a shift in focus from terrorists to “state actors” that “are challenging international norms.”

It is important to understand what these words mean. Governments that challenge international norms are sovereign countries that pursue policies independently of Washington’s policies. These “revisionist states” are threats, not because they plan to attack the US, which the Pentagon admits neither Russia nor China intend, but because they are independent. In other words, the norm is dependence on Washington.

Be sure to grasp the point: The threat is the existence of sovereign states, whose independence of action makes them “revisionist states.” In other words, their independence is out of step with the neoconservative Uni-power doctrine that declares independence to be the right of Washington alone. Washington’s History-given hegemony precludes any other country being independent in its actions.

The Pentagon’s report defines the foremost “revisionist states” as Russia, China, North Korea, and Iran. The focus is primarily on Russia.  Washington hopes to co-op China, despite the “tension to the Asia-Pacific region” that China’s defense of its sphere of influence, a defense “inconsistent with international law” (this from Washington, the great violator of international law), by turning over what remains of the American consumer market to China. It is not yet certain that Iran has escaped the fate that Washington imposed on Iraq, Afghanistan, Libya, Syria, Somalia, Yemen, Pakistan, Ukraine, and by complicity Palestine.

This commentary by Paul appeared on his website yesterday—and is certainly an absolute must read for any serious student of the New Great Game.  This is the first offering of the day from Roy Stephens.

Eric Holder, Wall Street Double Agent, Comes in From the Cold — Matt Taibbi

Eric Holder has gone back to work for his old firm, the white-collar defense heavyweight Covington & Burling. The former attorney general decided against going for a judgeship, saying he’s not ready for the ivory tower yet. “I want to be a player,” he told the National Law Journal, one would have to say ominously.

Holder will reassume his lucrative partnership (he made $2.5 million the last year he worked there) and take his seat in an office that reportedly – this is no joke – was kept empty for him in his absence.

The office thing might have been improper, but at this point, who cares? More at issue is the extraordinary run Holder just completed as one of history’s great double agents. For six years, while brilliantly disguised as the attorney general of the United States, he was actually working deep undercover, DiCaprio in The Departed-style, as the best defense lawyer Wall Street ever had.

Holder denied there was anything weird about returning to one of Wall Street’s favorite defense firms after six years of letting one banker after another skate on monstrous cases of fraud, tax evasion, market manipulation, money laundering, bribery and other offenses.

This essay by Matt showed up on the Rolling Stone website on July 8—and it’s definitely worth reading.  There’s also a video interview with Matt on this issue that’s embedded at the bottom of this article—and it’s worth watching as well.  I found this item in Thursday’s edition of the King Report.

Security Experts Oppose Government Access to Encrypted Communication

An elite group of security technologists has concluded that the American and British governments cannot demand special access to encrypted communications without putting the world’s most confidential data and critical infrastructure in danger.

A new paper from the group, made up of 14 of the world’s pre-eminent cryptographers and computer scientists, is a formidable salvo in a skirmish between intelligence and law enforcement leaders, and technologists and privacy advocates. After Edward J. Snowden’s revelations — with security breaches and awareness of nation-state surveillance at a record high and data moving online at breakneck speeds — encryption has emerged as a major issue in the debate over privacy rights.

Yet law enforcement and intelligence agency leaders argue that such efforts thwart their ability to monitor kidnappers, terrorists and other adversaries. In Britain, Prime Minister David Cameron threatened to ban encrypted messages altogether. In the United States, Michael S. Rogers, the director of the N.S.A., proposed that technology companies be required to create a digital key to unlock encrypted data, but to divide the key into pieces and secure it so that no one person or government agency could use it alone.

This very interesting article, filed from San Francisco, showed up on The New York Times website on Tuesday—and it’s another article that had to wait for today’s column.  It’s the second contribution of the day from Roy Stephens.

Las Vegas completing last straw to draw Lake Mead water

It took $817 million, two starts, more than six years and one worker’s life to drill a so-called “Third Straw” to make sure glittery casinos and sprawling suburbs of Las Vegas can keep getting drinking water from near the bottom of drought-stricken Lake Mead.

The pipeline, however, won’t drain the largest Colorado River reservoir any faster. It’s designed to ensure that Las Vegas can still get water if the lake surface drops below two existing supply intakes.

“You turn on the tap, you don’t think about it,” said Noah Hoefs, a pipeline project manager for the Las Vegas-based Southern Nevada Water Authority. “These are the things being done in order to live the lifestyle we want in the places we want to live.”

It’s the latest example of ways the parched West is scrambling to deal with 15 years of unprecedented drought.

This very interesting AP story was picked up by the Internet site last Sunday—and it’s something that had to wait for my Saturday column.  I thank reader M.A. for sharing it with us.

Old Farm Equipment And Scrap Metal Turned Into Stunning Sculptures

South Dakotan sculptor John Lopez creates life-sized scrap metal sculptures with a uniquely Western American twist. In his hands, old discarded farm equipment is recycled into sculptures of iconic creatures from the American West like a bison, a horse plowing a field, or a Texas Longhorn.

Lopez already had a career as a bronze sculptor, but after creating a family grave for his deceased aunt using scrap metal, he began creating recycled metal sculptures out of found or donated pieces of metal as well.

My favorite part about these pieces is the texture,” explains Lopez. “I just start grabbin’ stuff from the pile and welding it, in and if you weld enough of the same thing on over and over it creates this really cool texture that I’ve never seen in these kinds of pieces before. And I think that’s what draws people in.

This incredible photo essay showed up on the Internet site over a year ago, but it’s still worth a minute of your time to scroll through these incredible works of scrap metal art.

How Apple Makes the Watch

Apple is the world’s foremost manufacturer of goods. At one time, this statement had to be caged and qualified with modifiers such as “consumer goods” or “electronic goods,” but last quarter, Apple shipped a Boeing 787’s weight worth of iPhones every 24 hours. When we add the rest of the product line to the mix, it becomes clear that Apple’s supply chain is one of the largest scale production organizations in the world.

While Boeing is happy to provide tours of their Everett, WA facility, Apple continues to operate with Willy Wonka levels of secrecy. In the manufacturing world, we hear rumors of entire German CNC mill factories being built to supply Apple exclusively, or even occasionally hear that one of our supplier’s process experts has been “disappeared” to move to Cupertino or Shenzhen. While we all are massively impressed with the scale of Apple’s operations, there is constant intrigue as to exactly how they pull it all off with the level of fit, finish and precision obvious to anyone who has examined their hardware.

This walk-through is a detailed narration of what we see in Apple’s Watch Craftsmanship videos. Of course, we only get to see a mere fraction of the process; I’ve tried to provide plausible explanations for the likely steps taking place between the processes shown on film, but these are assumptions and are included only to provide a more satisfying and complete narration.

This very long essay, with lots of photos, was posted on the Internet site back in March of this year—and I thank Roy Stephens for sending it our way.

The Grecian Kabuki Theatre:  11 Stories

1. Greek Plan Accepts Austerity to Get Debt Relief: New York Times  2. Greek PM Tsipras seeks party backing after abrupt concessions: Reuters  3. The Fate of Greece–Decision Time for Tsipras and Merkel: Spiegel Online  4. Tsipras Sells Out Referendum ‘No’ Vote Ahead Of Weekend Deadline: Zero Hedge  5. Greeks resigned to bailout plan despite voting against austerity: The Guardian  6. Greek PM Tsipras seeks party backing after abrupt concessions: Reuters  7. Greece’s Parliament Approves Prime Minister’s Bailout Plan: New York Times  7. In Athens, Greeks Wonder Whether Tsipras Folded or Restored DignityNew York Times  8. Crippled Greece yields to overwhelming power as deal looms: The Telegraph  9. Greek shops, cafes hit by capital controls: E.U. Observer  10. Greek debt crisis: Goldman Sachs could be sued for helping country hide debts when it joined euro: The Independent  11. Greek debt crisis: Meet the Goldman Sachs banker who got rich getting Greece into the euro: The Independent

Most of these stories were courtesy of Patricia Caulfield, but Roy Stephens added a couple—and there’s one in here from reader M.A., and one from James Kelly.

The Ukraine Imbroglio: John Batchelor Interviews Stephen F. Cohen

Most of the first half of this broadcast is about Russian and Western history since the last Cold War. It is an excellent preamble that describes the happenings that have brought us to this present. Cohen is unapologetic as to where the blame lies for the present difficulties.

Last week Stephen Cohen described a phone call on the 25th of June between Putin and Obama that turned out to be an important moment in history. Readers may recall that Putin called the White House and Obama made some extraordinary inappropriate demands in regards to Ukraine and Minsk2, Syria, Iran and Russian responses to the deployment of NATO forces along the Russian and Baltic States borders. Sure enough, Putin, from then on ceased to describe NATO countries as “our Partners”; they now became for him “our geopolitical opponents”. This is not an insignificant change. To Cohen, who understands Russians, it is a final acknowledgement that Putin and Russia have finally committed themselves to facing down the West in a new Cold War.  It was that June phone call that apparently crossed another red line. Nevertheless, it was still interesting that Putin sent Obama an official “Happy July 4th” to the American President (unacknowledged apparently) that shows that Putin remains ever the diplomat and conformist to old school relationships between states – even belligerent ones.

Both pundits then go on to describe some of the internal political changes that have taken place within the Russian Federation that further officially cements  this new Cold War reality. Putin also had to react politically at home to the provocation of NATO troops and armour on its borders. He mobilized his own televised discussion panel in order to define a defense response to NATO. This is also a serious and very public response that underlines his commitment to now reacting on the military level, and it is a strong statement (hopefully understood in Washington) that relationships have changed in a significant way.

This 39:52 minute audio interview put in an appearance on the Internet site on Tuesday and, as usual, I thank Larry Galearis for finding it for us.

Turkey’s President Issues Mandate to Form a New Government

President Recep Tayyip Erdogan of Turkey gave the country’s prime minister, Ahmet Davutoglu, a formal mandate on Thursday to form a new government, after days of criticism that the president had been dragging his feet.

The general elections June 7 left the governing Justice and Development Party 18 seats short of a majority in Parliament, necessitating a coalition government for the first time in a decade. But the formal process of creating one does not begin until the president issues the mandate.

Opponents accused Mr. Erdogan of deliberately stalling to maintain his grip on power, undermine his opponents and push the country into snap elections that might restore a majority for the party, known by its Turkish initials, A.K.P.

Mr. Davutoglu and the previous Justice and Development administration have continued to govern the country as caretakers in the meantime.

This New York Times article, filed from Istanbul on Thursday, is courtesy of Patricia Caulfield.

Tunisia backlash against Britain as PM warns of terror ‘repercussions’

Britain’s advice that tourists should leave Tunisia because of the risk of another terror attack will “have repercussions”, the country’s prime minister has said.

Habib Essid said he would telephone David Cameron on Friday to respond to Foreign Office advice that the North African nation was unsafe for holidays.

Tunisia’s ambassador to London has already warned Britain is playing into the hands for terrorists with the new threat warning, which is likely to devastate the Tunisian tourist industry.

Mr Essid said: “We will ring the British prime minister to tell him we have done everything we can to protect all British interests and those of others countries – that’s out duty.

This news item was posted on the Internet site at 5:27 p.m. BST on Thursday afternoon, which was 12:27 p.m. EDT.  It’s also courtesy of Patricia Caulfield.

Iran: The Nuclear Situation — 4 Stories

1. Iran, powers give themselves to Monday for nuclear deal: Reuters  2. Iran’s Unserious Critics: N.Y. Times  3. Blame game: Progress in Iran deal ‘painfully slow,’ Tehran laments ‘excessive demands’: Russia Today  4. The Iran nuke stalemate in one tweet — Pepe Escobar: Asia Times 

The commentary by Pepe Escobar is a must read.

Two of these stories are from Patricia Caulfield—and the other two are courtesy of Roy Stephens

The Chinese Stock Market Disaster — 3 Stories

1. Chinese Stocks Rise, but Fears Persist: N.Y. Times  2. Chinese Markets Continue to Recover, but Uncertainty Remains: TIME  3. Why China’s Stock Market Bailout Just Might Work: N.Y. Times

All three stories are courtesy of Patricia Caulfield, for which I thank her.

Island Nation Burns Boats to Deter Illegal Fishing 

In a fiery crackdown on illegal fishing, officials from the Pacific island nation of Palau burned a cluster of Vietnamese fishing boats off their coast on Thursday, sending black smoke and flames over turquoise water.

Palau law enforcement captured the wooden vessels in recent weeks. The ships’ captains remain incarcerated in Palau while the 77 crew members are being sent home on two remaining fishing boats, with enough food and fuel to make it back to Vietnam.

“We hope to send a very clear message to poachers, who are raping our marine environment,” Tommy E. Remengesau, Jr., the president of Palau, told National Geographic. “We will not tolerate any more unsustainable acts. Palau guarantees, you will return with nothing.”

The fishermen were spotted from the shore harvesting tube-shaped invertebrates known as sea cucumbers by scooping them up in buckets. Palau authorities found over eight metric tons of sea cucumbers and reef fish on board, according to the president’s office.

This very interesting article appeared on the National Geographic‘s website back in mid June—and I thank West Virginia reader Elliot Simon for sharing it with us.  For obvious reasons it had to wait for today’s column.

The Shanghai Stock Crash and China Gold Demand: Mike Kosares 

At present, up to 12 trillion yuan stays in domestic residents’ saving accounts. The launch of individual gold investment, therefore, will allow residents to change currency assets into gold assets. At the macro level, it will expand channels for changing savings into investment, thus adjusting the money supply; in the micro aspect, allowing citizens to trade and keep gold can improve social welfare, benefiting both the country and the population. Moreover, with the dual attributes of common commodity and currency commodity, gold is a desirable instrument for hedging. Therefore, developing gold trade for individuals is practical.” – Zhou Xiaochuan, Governor, the People’s Bank of China

Shanghai stocks have fallen over 30% since mid-June. The equivalent in U.S. terms would be for the DJIA to fall 6000 points to the 11,000 level – a crash by any definition. Most of the commentary on this important subject has centered around the potential contagion effect for stock markets in the rest of Asia and beyond. There is another aspect to the crash worth considering though, and that has to do with the effect it will have on Chinese gold demand.

The Chinese people, it is well known, already have a cultural affinity to gold. That attachment just received a shot of adrenaline. Prior to June, trading volumes on the Shanghai Gold Exchange (SGE) were already running 20% higher than the previous year.  Now, with crash psychology affecting thinking up and down the spectrum of investors, SGE is reporting volumes off the charts. In early July, Want China Times reported that “SGE posted a record trading volume of 48.33 million grams in a single day in late June.” (48.3 metric tonnes, a big number.)

This commentary by Michael Kosares over at the Internet site yesterday was sent to us by reader P.T. Holland.


110715Cat 5110715Frogs110715Hillary 2110715Ramirez110715Grecian Urn


Because JPMorgan stepped aside in late April and into May from buying Silver Eagles (because it knew it would rig prices lower soon, the Mint started to build inventories of Silver Eagles and began to get worried about what it would do with the excess coins. That prompted the Mint to announce in late May that it had all the Silver Eagles anyone wanted to buy. But because it was JPMorgan’s show, once the bank rigged prices lower, it stepped in and cleaned out the Mint’s inventory at the lower silver prices, saving several millions of dollars in the bargain.
What happens with Silver Eagles from here is anyone’s guess, but what has occurred up until now is no guess. I suppose some will conclude that this is clear proof of a silver shortage, but a temporary shortage of Silver Eagles is not the same as an overall silver shortage. I think that overall shortage is coming, but only at much higher prices and circumstances. Let’s face it, we’ve had nearly consistent rationing of Silver Eagles for the past four years and not only has there been no general physical shortage, but prices have moved ever lower. The real story in Silver Eagles has been the total number sold and who’s doing the main buying, which I claim is JPMorgan.Silver analyst Ted Butler: 08 July 2015

Today’s pop ‘blast from the past’ is one that has graced this column before, but it’s been many years.  Singer/songwriter B.W. “Buckwheat” Stevenson was a 1-hit wonder back in 1973, but what a hit it was!  The link is here.

I was listening to Camille Saint-Saëns “Carnival of the Animals” on CBC-FM the other day while I was driving somewhere—and I plucked this short piece for strings, solo cello and piano out of it for today’s classical ‘blast from the past’.  It is the penultimate movement of the composition—and the link to that is here.

There certainly isn’t much to report regarding yesterday’s price activity, as prices were kept in line rather easily, as there was no volume worth mentioning in any precious metal.  So anyone with an agenda could push price wherever they wished.  At the moment we appear to in some sort of “care and maintenance” mode.

Here are the charts for all four precious metals, plus copper and WTIC.

110715 6-month gold

110715 6-month silver110715 6-month platinum110715 6-month palladium110715 6-month copper110715 6-month WTIC

Like you, I’m just sitting here waiting for what comes next.  I’m in total agreement with Doug Noland’s commentary, which is the first article in the Critical Reads section, when he said this:

I see the global government finance Bubble as the grand finale of a historic period of serial Bubbles spanning several decades. This is an extraordinarily dangerous period – financially, economically, socially and geopolitically. The Bubble has made it to the heart of the global monetary system, to the very foundation of “money” and Credit: to central bank “money” and government debt. Virtually unlimited demand for this “money” has ensured unprecedented over-issuance. Governments everywhere are desperate to contain monetary disorder that is now escalating out of control.

All they have left is the gold card—and it remains to be seen whether they play it or not.  But all signs point in that direction, as the powers-that-be have gone to great lengths to set up the conditions for a moon shot in the Big 6 commodities whose charts appear above.

Along with those signs are the other critical ones that Ted Butler has gone to great length to point out over the last little while.  The reduction of the short positions in GLD and SLV—the distinct possibility that JPMorgan is out of its short position in COMEX silver—along with their accumulation of every ounce of silver that hasn’t been nailed down for the last four years.

We appear to be at the cusp of some great moment, the financial reset of this or any other age.  All we await is the catalyst.  But whatever that catalyst is, it won’t be a random event, as too much preparation has gone into this moment [if this is the moment] to leave anything to chance.

So we wait some more.

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



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