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If Gold Is Just a ‘Pet Rock’ — Why Are Central Banks So Secretive About It?


 -- Published: Tuesday, 11 August 2015 | Print  | Disqus 

By Ed Steer

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM

The gold price traded sideways until 2 p.m Hong Kong time on their Friday—and then began to rally sharply.  That got squashed starting minutes after the London open.  It got hit again on the 8:30 a.m. job numbers, with the low tick of the day coming minutes after that.  It chopped quietly higher until around 9:30 a.m.—and then it quickly tacked ten bucks onto the price, but ran into pretty formidable resistance after that as it attempted to take out the $1,100 spot mark.  The powers-that-be were standing by at that point and threw whatever COMEX paper was necessary at the rally to make it go away—and from noon onwards, it traded flat for the remainder of the Friday session.

The low and high ticks were reported by the CME Group as $1,081.40 and $1,098.90 in the December contract.

Gold was closed in New York yesterday at $1,093.80 spot, up only $4.30 on the day.  Net volume was very decent at 153,000 contracts—and it’s a given that some of the the Managed Money traders were running for cover yesterday.  I’ll have more about this in The Wrap.

080815gold

Here’s the 5-minute gold tick chart from Brad Robertson—and you can see that the volume was pretty hefty during the New York session, with most of it coming before 12:15 p.m. EDT, which is 10:15 MDT on this chart.  The gray line is midnight EDT—add two hours for EDT—and use the ‘click to enlarge‘ feature.

080815 5-minute gold

The price action in silver yesterday was very similar—and JPMorgan et al were out with the necessary firepower to prevent the silver price from breaking through the $15 mark around 10:40 a.m. EDT.  From there it got sold down about two bits by 3:10 p.m. EDT—and it gained back a nickel or so going into the close.

The low and high ticks were recorded as $14.565 and $14.99 in the September contract.

Silver finished the Friday session at $14.81 spot, up only 15.5 cents from Thursday’s close.  Net volume was very healthy at 48,000 contracts.

080815silver

The platinum price followed the gold price pretty closely as well, with the same high and low tick times—as “da boyz’ weren’t going to let this precious metal go anywhere either.  Platinum closed at $961 spot, up twelve bucks from Thursday.

080815platinum

Palladium’s first rally got capped two hours after the Zurich open—and was sold back down just below $600 spot on the job numbers.  It rallied back to its high of the day shortly before 11 a.m. EDT—and JPMorgan had it back below $600 spot by the end of the New York trading session.  Palladium was closed at $599 spot, up 2 dollars on the day.

080815palladium

The dollar index closed late on Thursday afternoon in New York at 97.78—and it made it as high as 97.93 around 2:20 a.m. Hong Kong time on their Friday afternoon.  It began to head lower from there, but had a big 65 point up/down move that lasted for a bit more than two hours—and the index continued lower from there, hitting its 97.51 low tick shortly after 12 o’clock noon in New York—and chopped sideways from there.  The dollar index finished the Friday session at 97.59—down 19 basis points on the day.

080815intraday

Here’s the 6-month U.S. dollar index chart for reference purposes once again.

080815 6-month USD

The gold stocks spike up almost 4 percent at the open—and hung in there until 11 a.m. EDT—and then they began to sell off.  They managed to stay in positive territory until the tiny sell-off in the gold price that began around 2:30 p.m.—and ended about forty-five minutes later.  They slipped into the red for the rest of the day, but manged to recover most of their loses, as the HUI finished lower by 0.05 percent, which is basically unchanged.

080815HUI

The price pattern in the silver equities was very similar, but once they slid into the red on silver’s sell-off in electronic trading, they kept on going, as Nick Laird’s Intraday Silver Sentiment Index closed almost on its low, down 1.74 percent.

080815Silver 7

For the week, the HUI closed down 3.89 percent—and Nick Laird’s Intraday Silver Sentiment closed lower by another 7.56 percent.  One wonders when it will all stop.

The CME Daily Delivery Report showed that 18 gold and zero silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.  The sole short/issuer was JPMorgan out of its client account.  They also stopped 5 contracts for their client account as well.  The rest went to HSBC USA and Goldman Sachs.  I shan’t bother linking this activity.

The CME Preliminary Report for the Friday session showed that gold open interest in August declined by 195 contracts, leaving 3,643 contracts still open.  In silver, August o.i. declined by 2, leaving 31 still open.

There was a tiny withdrawal from GLD yesterday—7,699 troy ounces—and I would guess that this represents a fee payment of some kind.  And as of 10:09 p.m. EDT yesterday evening, there were no reported changes in SLV.

After two days of zero sales, the U.S. Mint finally had a sales report yesterday.  They sold 3,000 troy ounces of gold eagles—500 one-ounce 24K gold buffaloes—and another 123,000 silver eagles.  Ted said that these were really strange numbers after two monstrous sales days, followed by two zero sales days.  I mentioned the fact that the mint is probably back on rationing for both gold and silver eagles, but isn’t announcing that fact.   He thought that was entirely possible—and I look forward to what he has to say about this in his weekly commentary when it’s posted on his website this afternoon.

Month-to-date, which is only five business days, the U.S. Mint has sold 5,000 troy ounces of gold eagles—1,000 one-ounce 24K gold buffaloes—and 1,180,000 silver eagles.  As I said in my Tuesday column, it was my opinion that the 810,500 silver eagles sold on Monday, August 3, were actually sold the previous Friday on July 31, but pushed forward into August so that July wouldn’t be a record sales month.  And if that’s the case, and I believe it is, the mint has sold practically nothing so far this month because it has nothing to sell.  The sales reported yesterday were of the hand-to-mouth variety, as they probably don’t have any working inventories in anything.  We’ll see what the next sales report brings.

It was an interesting day for gold at the COMEX-approved depositories on Thursday.  They reported receiving 8,955 troy ounces—and shipped out 72,966 troy ounces, of which 2,000 kilobars came out of the JPMorgan depository.  But that wasn’t the big surprise at JPMorgan.  The real surprise was the transfer of 143,550 troy ounces from the Registered category into the Eligible category.  Normally it’s the other way around, like it was a week ago Friday, or again on Monday or Tuesday.  The link to that activity is here.

This goes entirely against what the nut-ball lunatic fringe has been braying about all week—and it will be interesting to see how they handle this, or if they’ll just ignore it.  That’s why you have to be careful of all the gold and silver bulls hit that shows up for free on the Internet.

It wasn’t a big day in silver, as nothing was received—and 281,553 troy ounces were shipped out the door, with virtually all of it coming from Scotiabank’s vault.  The link to that activity is here.

Over at the COMEX-approved gold kilobar depositories in Hong Kong, they reported receiving 321 kilobars—and shipped out 5,170 of them.  As usual, all the activity was at the Brink’s, Inc. depository.  The link to that action, in troy ounces, is here.


The Commitment of Traders Report, for positions held at the close of COMEX trading on Tuesday, showed a small improvement in gold—and a minor deterioration in silver.

In silver, the Commercial net short position increased by 1,683 contracts, or 8.42 million troy ounces.  The Commercial net short position now sits at 68.8 million troy ounces which is still, by all historical measure, a wildly bullish number, but it’s obviously not as wildly bullish as it was a week ago, or now for that matter.

Under the hood in the Disaggregated COT Report, Ted wasn’t happy to see the Managed Money traders wiggle out of 3,049 of their short positions.  This number was somewhat mitigated by the fact that these same traders sold 1,146 long contracts as well.  There was very little activity in other categories, although the small traders in the Nonreportable category did increase their short position by 426 contracts—and are only net long the metal by 5,351 contracts, which may not be a record low, but it’s certainly within spitting distance.

Passing through copper on the way to gold, I note that the Commercial traders added to their already immense long position in this metal to the tune of 7,016 contracts—and their net long position is an over-the-moon 38,650 contracts.

In gold, the Commercial net short position decreased by a smallish 446 contracts, or 44,600 troy ounces.  Barely a rounding error in the grand scheme of things, but a new record low Commercial net short position of 1.48 million troy ounces.

All the action in gold was “under the hood” in the Disaggregated COT Report. On one hand, Ted wasn’t very happy with  the goings-on in the Manged Money category in this precious metal either, as they covered 6,057 of their short positions, plus they sold 2,711 longs.  Instead of the Commercial traders being on the other side of these trades, it was the “Other Reportables” and the small traders in the “Nonreportable” category.

The “Other Reportables” not only went short 2,437 contracts, they also added 4,526 contracts to their already chunky long position.   But the big news was in the “Nonreportable” small trader category as they sold 1,855 longs and went short a whopping 4,026 contracts.  These small traders are net short an eye-watering 15,080 COMEX gold contracts—a record that I doubt I will ever see broken.

Without doubt, there was some rather serious deterioration in the Commercial net short positions in all four precious metals on Friday, as JPMorgan et al were at battle stations keep prices contained in New York trading—gold under $1,100, silver under $15—and platinum under $600.  Of course they showed up at the London open as well, but had a much easier time of it there.  The only thing not known is how bad was the deterioration—and we have two business days to the cut-off for the next COT Report.

The above is certainly the Reader’s Digest version of the COT Report—and I very much look forward to hearing what Ted has to say in his weekly review later today, as he’s the real authority on all this—and his interpretation will be definitive.

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 112 days of world silver production—and the Big 8 are short 178 days of world silver production.

080815Days to Cover


Along with yesterday’s Commitment of Traders Report, came the August Bank Participation Report [BPR] for positions held in July.  And as I state every month at this time —“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.”  For this one day a month we get to see what the banking system is up to in the commodity markets in general—and the precious metals in particular.

In gold, ‘4 U.S. banks’ are net short 30,350 COMEX contracts—and that’s a decline from the 36,425 COMEX contracts they were net short in the July BPR.  In the last thirteen months, this is the fourth highest short position in gold held by these banks, so they’re still short up the wazoo despite the big engineered price decline during the last month.

Also in gold, ’18 non-U.S. banks’ are net short 8,178 COMEX contracts, which is a monstrous improvement from the 26,015 COMEX contracts they were short in the July BPR.  This is by far the lowest net short position in gold held by the non-U.S. banks since back in late 2013.  And with the exception of Scotiabank, the positions of the other 17 non-U.S. banks are mostly immaterial.

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.

080815BPR - gold

In silver, ‘3 or less’ U.S. banks are net short 17,573 COMEX contracts, which is an increase from the 15,698 contracts they held short in the July BPR.  Considering how beaten down the silver price was during the reporting month, I must admit that I was disappointed to see this deterioration.  One would have thought they would be covering short positions, not adding to them.

Also in silver, ’14 or more’ non-U.S. banks are net short 16,248 COMEX contracts, which is a decline from the 17,032 COMEX contracts they were short in the July Bank Participation Report.

Overall, the short position of the world’s banks was unchanged from June, which is a surprise considering the pounding the metal took in July.  Why did gold improve so much—and silver not?  Beats me.

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.

080815BPR - silver

In platinum, ‘3 or less’ U.S. banks were short 9,186 COMEX contracts.  Note that I didn’t say ‘net’ short—and that’s because these ‘3 or less’ U.S. banks hold no COMEX long positions in platinum at all.  So it’s obvious that these short positions are held for price management purposes only.  These August short positions are an increase from the 7,805 COMEX net short position that they held in this precious metal in the July BPR.

Also in platinum, ’14 or more’ non-U.S. banks were net short 5,377 COMEX contracts, a big improvement from the 6,922 COMEX contracts they held short in the July BPR.

But, like the silver BPR, the net change in the world’s banks in platinum was basically unchanged from the July BPR to the August BPR, as the short positions played “musical chairs” between the banks, whether U.S. or foreign.

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.

080815BPR - platinum

In palladium, ‘3 or less’ U.S. banks were net short 3,822 COMEX contracts, a slight decrease from the 4,019 COMEX contracts they held short in the July BPR.

Also in palladium, ’13 or more’ non-U.S. banks are net short 1,009 COMEX contracts, up from the 275 COMEX contracts they held short in the July BPR.  But spread out between ’13 or more’ non-U.S. banks, their short positions are immaterial in the grand scheme of things, especially when compared to the short positions held by the ‘3 or less’ U.S.. banks.

Here’s the BPR chart for palladium updated with the August 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.

080815BPR - palladium

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.


Nick Laird was kind enough to pass around the updated chart showing the gold withdrawals from the Shanghai Gold Exchange for the week ending Friday, July 31—and they reported taking out 53.336 tonnes.

080815SGE

I don’t have an unusually large number of stories for a Saturday column, but I do have a decent number that for content and/or length reasons, had to wait for today.  I hope you have enough time left in your weekend to read the ones that interest you the most.


CRITICAL READS

Full-Time Jobs in the U.S. Just Made a Comeback

Friday’s labor-market report showed that the number of full-time U.S. jobs as a share of total employment rose to 81.7 percent, the highest level since November 2008. For those worried (including not a few presidential candidates) that this economic recovery has been one that’s created only low-quality jobs, this should be really good news.

Even so, the share of full-time workers remains below its peak during the last cycle of 83.2 percent in October 2007.

The pool of Americans working part-time for economic reasons — such as not being able to find a job with more hours — fell last month by 180,000 to 6.3 million. That was the lowest level since September 2008. Additionally, the number of people working part-time for non-economic reasons — going to school, taking care of family, etc. — plunged by 589,000, the biggest decline since June 2012.

This is the Bloomberg take on yesterday’s jobs numbers—and their spun to perfection I’m sure.  It appeared on their website at 7:47 a.m. Denver time on their Friday morning—and today’s first story is courtesy of Patricia Caulfield.


Americans Not In the Labor Force Rise to Record 93.8 Million, Participation Rate at 1977 Level

While the Fed is digesting what the X-13 Arima seasonally adjusted payrolls number means for the future of US interest rates, the devastation of the US labor force continues.

In what was an “modestly” unpleasant July payrolls report, yet somewhat better than June’s flagrant disappointment, the fact is that the number of Americans not in the labor force rose once again, this time by 144,000 to a record 93,770,000 million, with the result a participation rate of 62.6% which remains at a level more indicative of the September 1977 economy.

End result: with the civilian employment to population ratio flat from last month’s 59.3%, one can once again easily discren on the chart below why there will be no broad wage growth any time soon, which will merely allow the Fed to engage in its failed policies for a long, long time, or – at worst – hike by 25 bps just so it can, like BOJ in 2000 and the ECB in 2011, cut promptly thereafter and/or unleash QE4.

This 2-chart Zero Hedge take on yesterday’s jobs report put in an appearance on their website at 8:49 a.m. EDT yesterday morning—and I thank reader M.A. for sending it our way.


Apple Helps Push U.S. Watch Sales to Biggest Drop in Seven Years

U.S. watch sales fell the most in seven years in June, one of the first signs Apple Inc.’s watch is eroding demand for traditional timepieces.

Retailers sold $375 million of watches during the month, 11 percent less than in June 2014, according to data from NPD Group. The 14 percent decline in unit sales was the largest since 2008, according to Fred Levin, head of the market researcher’s luxury division.

“The Apple Watch is going to gain a significant amount of penetration,” he said Thursday in a phone interview. “The first couple of years will be difficult for watches in fashion categories.”

The market for watches that cost less than $1,000 is most at risk, as consumers in that price range have indicated they’re the most likely to buy an Apple Watch, Levin said. Sales of watches costing between $50 and $999 registered drops in June, the biggest being a 24 percent decline in timepieces from $100 to $149.99, according to NPD’s data.

This is another Bloomberg news item that’s courtesy of Patricia Caulfield.  This one appeared on their Internet site at 2:45 a.m. MDT yesterday morning.


The Dow Is Close to Reaching the Dreaded Death Cross

A six-day decline in the Dow Jones Industrial Average is wreaking havoc on the gauge’s price chart, spurring a pattern of congestion in its moving averages that is despised by momentum traders.

The 30-company gauge has lost 4.9 percent since reaching an all-time high in May. That’s brought its mean price in the past 200 days within 0.25 percent of its 50-day average, a convergence that hasn’t happened since January 2012.

The intersecting lines are taken by technical analysts as evidence of a breakdown in momentum and a sign an asset’s best days are behind it. Known in some quarters as a death cross, the formation is another sign the unrelenting gains that have lifted American stocks since 2012 are slowing.

The Dow’s recent weakness was exacerbated on Thursday by a decline in technology shares, which pushed the index down 0.7 percent. International Business Machines Corp. and Microsoft Corp. slipped more than 0.2 percent. The loss marked the Dow’s sixth straight daily decline, the longest this year and a period that has seen it slip 1.9 percent.

This is another Bloomberg article that’s courtesy of Patricia Caulfield.  This one showed up on their Internet site at 6:12 a.m. MDT yesterday morning.


Wall Street Banks Amass Treasuries Signaling Faith in Rate Cycle

Wall Street’s biggest bond dealers are amassing the most Treasuries since March last year in a sign they’re confident the Federal Reserve’s tightening cycle will proceed in an orderly fashion.

JPMorgan Chase & Co., Citigroup Inc. and the 20 other companies that trade with the Fed increased their holdings for a fourth week to a net $69 billion, in data reported Thursday. Traders see an almost 60 percent chance of the first rate increase since 2006 coming in September after a Labor Department report Friday showed U.S. employers added more than 200,000 jobs in July and wages increased.

Investors have been encouraged by Fed Chair Janet Yellen’s stated intention to raise interest rates at a gradual pace, which has been backed by the collapse in oil prices. Regulatory requirements for banks to hold more high-quality assets have also contributed to the jump in primary-dealer Treasury holdings of Treasuries, according to Barra Sheridan, a rates trader at Bank of Montreal in London.

“The rate path will be very, very, slow and gradual,” Sheridan said. Fed officials “are not going to be embarking on an aggressive tightening cycle. People don’t mind buying Treasuries at these levels because they are still attractive on a global basis.”

Patricia is still on this Bloomberg kick.  This news item was posted on their website at 7:30 p.m. EDT on Thursday—and updated early Friday morning.


Bill Gross: Global Economy Dangerously Close to Deflation

Bill Gross, money manager at Janus Capital Group Inc., said the global economy is “dangerously close to deflationary growth.

Once there is a “whiff of deflation, things tend to reverse and go badly,” Gross said Friday in a Bloomberg Radio interview with Tom Keene.

Gross pointed to how the CRB Commodity Index isn’t just at a cyclical low, but lower than in 2008 when Lehman Brothers Holdings Inc. went bankrupt.

The commodity markets tell a truer story of what is happening in the economy because they are subject to real-time supply and demand, Gross said. Oil, metals and crops have plunged as China’s economy has decelerated and gluts in multiple markets have further depressed prices.

Well, Bill, these low prices in the key commodities didn’t get here by themselves.  If they were allowed to trade freely, one can only imagine what commodities would be priced at.  This article put in an appearance on the newsmax.com Internet site at 11:01 a.m. EDT on Friday morning—and I thank Brad Robertson for finding it for us.


Doug Noland: Core of the Core

I have posited my case for the “Granddaddy of All Bubbles.” I believe the current “global government finance Bubble” is the finale of a historic multi-decade Bubble period. And each week I see important confirmation to the thesis that this global Bubble has been pierced. Ominous storm clouds are building in global Credit, throughout global markets, in economies, within societies and all about geopolitics. Things are turning serious, and any talk of a stock market correction completely misses the point. The entire bull thesis is coming under fire.

Even in the harshly depleted “bear camp,” I sense Bubble fatigue. In general, backdrops conducive to crisis can linger for so long that fears naturally fade as optimism and complacency take full control. In this regard, this period has been extraordinary. Our odd world of Trillions of central bank liquidity thrown at global markets sees crises dynamics move at a crawl. Over the past year, things at times seem to be playing out in super slow-mo in HD.

This was a key week from the perspective of my analytical framework. The crisis broke through to the “Core of the Core.” I would expect crisis dynamics to now speed up.

This must read commentary by Doug showed up on his creditbubblebulletin.com website late yesterday evening—and I found it all by myself.


The Big Picture with Marc Faber

In this exclusive interview with Marcopolis.net Marc Faber covers it all: from commodities and China to the outlook on inflation, the Euro and gold. According to him the global economy is not healing. To the contrary, we might find ourselves back into recession within six months or a year. In that case he expects more money printing by central banks, which eventually could lead to high inflation rates and renewed strength in commodity prices.

On the bright side, he sees great economic potential in Vietnam. Also, the Iraqi stock market has good potential now that a deal with Iran has been reached. While mining stocks are extremely depressed we might see defaults before any meaningful recovery.

This very long interview, posted in transcript form, appeared on the marcopolis.net website yesterday sometime—and I thank Ken Hurt for sending it along.


How the Panama Canal Expansion Is Redrawing the Logistics Map

The expansion of the Panama Canal will be the headline event in shipping in 2016. The $5 billion project promises to reorient the landscape of the logistics industry and alter the decision-making calculus of the shippers that the canal serves.

According to research conducted jointly by The Boston Consulting Group and C.H. Robinson, as much as 10 percent of container traffic between East Asia and the U.S. could shift from West Coast ports to East Coast ports by the year 2020 .

The scope of our analysis is largely confined to trade between the continental U.S. and East Asia, which we defined as China, Japan, South Korea, and Hong Kong. Most containerized cargo originating from Southeast Asia travels to the U.S. through the Suez Canal, and it will continue to do so after the Panama Canal expansion. The analysis was conducted on container volumes projected for the year 2020.

Small percentages translate into big numbers in container traffic on high-volume lanes between East Asia and the U.S. This trade represents more than 40 percent of containers flowing into the U.S. Rerouting 10 percent of that volume, therefore, is equivalent to building a new port roughly double the size of the ports in Savannah and Charleston.

This shift will have profound effects. The larger ports on the West Coast will experience lower growth rates, altering the competitive balance between West Coast ports and East Coast ports. (With global container flows rising, West Coast ports will still handle more containers than they do today.) It will also shape the investment and routing decisions of rail and truck carriers, magnify the trade-offs that shippers make between the cost and the speed of transportation, and potentially alter the location of distribution centers.

This short story was posted on the bcgperspectives.com Internet site way back on June 16—and I thank Frances Jacobs for finding it—and for obvious reasons, had to wait for my Saturday column.


Hollande Cancelled Mistral Deal Fearing E.U. Leaders ‘Will Attack Him’

Member of the French Senate Yves Pozzo di Borgo explained that if Hollande had allowed the construction and delivery of the two Mistral ships to Russia he would have lost the confidence of the EU leaders.

“I think the reason he didn’t sell the Mistrals is that he didn’t want to be attacked by the 28 countries,” Yves Pozzo di Borgo said.

On Wednesday, France officially announced the cancellation of the 2011 deal on construction and delivery of the two Mistral warships to Russia.

Hollande’s decision received fierce criticism in France. Yvan Blot, adviser to former France President Nicolas Sarkozy, said that the decision was a huge blow to France’s reputation as an arms seller. Marine Le Pen, president of the National Front, the third-largest political party in France said that the country had seriously discredited itself after Hollande cancelled the deal.

Well, dear reader, I would guess that the U.S. stuck their nose into this deal as well.  This news story appeared on the sputniknews.com Internet site at 9:41 p.m. Moscow time on their Friday evening—2:41 p.m. EDT—and I thank Roy Stephens for sharing it with us.


Merkel forever? Let’s hope not

http://www.rt.com/op-edge/311656-merkel-germany-elections-us/

According to Germany’s influential news magazine Der Spiegel, Chancellor Angela Merkel has decided to run for a fourth term in power and has already started talks on who will run her campaign.

There’s been no official confirmation yet, but Merkel has already hinted that she would seek re-election.

This autumn she celebrates her 10th anniversary as chancellor, and if she is re-elected in 2017 and serves her full four-year term, she will tie with Helmut Kohl – who was also from the CDU party – as the longest-serving chancellor in the history of the Bundesrepublik.

There are no term limits for German chancellors, meaning that Merkel, who is still only 61, could even go on beyond 2021. If you’re not a fan of ‘Mutti’, then I’m afraid she could be around for quite a while yet. Which prompts the question: How is that that she has come to dominate German politics in the way that she has?

This longish, but very interesting “op-edge” piece was posted on the Russia Today website on Wednesday—and it’s been waiting for a spot in today’s column.  I thank Roy Stephens for finding it for us.


German Industrial Production Drops as Chinese Slowdown Looms

German industrial production unexpectedly decreased in June, highlighting the risks for Europe’s largest economy from weaker growth in emerging-market countries such as China.

Output, adjusted for seasonal swings and inflation, fell 1.4 percent after rising a revised 0.2 percent in May, data from the Economy Ministry in Berlin showed on Friday. The typically volatile number compares with a median estimate of a 0.3 percent gain in a Bloomberg survey. Exports fell 1 percent while imports dropped 0.5 percent.

Some manufacturers, although benefiting from cheap oil, low interest rates and a recovering euro area, have faced a drag in recent months as a result of Greece’s crisis and a slowdown in China. Even so, the Bundesbank predicts “quite robust” economic growth for this year as record employment fuels consumption.

“It remains to be seen whether the economic weak phase in China will damp German factory orders in the coming months,” said Stefan Kipar, an economist at BayernLB in Munich. For the moment, “the outlook for the German economy continues to be positive.”

This is another Bloomberg offering from Patricia Caulfield.  This one was posted on their Internet site at 12:00 p.m. on Friday afternoon MDT.


The U.S. is Destroying Europe

In Libya, Syria, Ukraine, and other countries at the periphery or edges of Europe, U.S. President Barack Obama has been pursuing a policy of destabilization, and even of bombings and other military assistance, that drives millions of refugees out of those peripheral areas and into Europe, thereby adding fuel to the far-right wing fires of anti-immigrant rejectionism, and of resultant political destabilization, throughout Europe, not only on its peripheries, but even as far away as in northern Europe.

Shamus Cooke at Off-Guardian headlines on 3 August 2015, “Obama’s ‘Safe Zone’ in Syria Intended to Turn It into New Libya,” and he reports that Obama has approved U.S. air support for Turkey’s previously unenforceable no-fly zone over Syria. The U.S. will now shoot down all of Syrian President Bashar al-Assad’s planes that are targeting the extremist-Muslim groups, including ISIS, that have taken over huge swaths of Syrian territory.

Cooke reports:

Turkey has been demanding this no-fly zone from Obama since the Syrian war started. It’s been discussed throughout the conflict and even in recent months, though the intended goal was always the Syrian government. And suddenly the no-fly zone is happening — right where Turkey always wanted it — but it’s being labeled an ‘anti-ISIS’ safe zone, instead of its proper name: ‘Anti Kurdish and anti-Syrian government’ safe zone.

This short essay appeared on the strategic-culture.org Internet site early yesterday morning—and falls into the absolute must read category for any serious student of the New Great Game.  I thank reader U.D. for passing it around.


Ukraine Takes Talks to Templeton Turf as Debt Payment Looms

Ukrainian Finance Minister Natalie Jaresko will travel to the home state of the nation’s biggest creditor on Wednesday as time runs out to reach a debt restructuring deal before a $500 million bond matures next month.

The meeting, scheduled to take place in San Francisco on Aug. 12, will be the “last chance” to reach a deal to restructure $19 billion of international debt, the Finance Ministry said in a statement on its website. Talks will be held between Jaresko and a four-member creditor committee led by San Mateo-based Franklin Templeton that owns just under half of the $19 billion of bonds Ukraine is restructuring.

The meeting comes as negotiations between the two sides faltered in the past week amid disagreements over the amount of debt relief bondholders should offer the war-ravaged nation. A high-level meeting proposed by the government to take place in London yesterday was turned down by creditors seeking more time to review the government’s latest offer.

“It’s time to end this game,” Vitaliy Sivach, a Kiev-based bond trader at Investment Capital Ukraine, who thinks the two sides could agree to a 20 percent principal reduction, said by e-mail. “Jaresko will try to make a final offer and strike a deal. Otherwise, it’s a lose-lose outcome for everyone.”

This Bloomberg news item showed up on their Internet site at 8:47 a.m. Denver time yesterday morning—and was updated three hours later.  I thank Patricia Caulfield once again.


The Ukraine Imbroglio: John Batchelor Interviews Stephen F. Cohen

In this broadcast Batchelor and Cohen return to Ukraine, the Donbass, Crimea and NATO in another full spectrum analysis as Ukraine continues to decline and Europe at least regionally shows increasing signs of moderation in its relationship with Russia and a widening policy interest gap with Washington. We hear how politicians visiting Crimea (France) can effect the Russian sanction effort, the controversy over the Mistral ship cancellation sale between France and Russia, and finally the “Normandy Four” show increasing concerns over heightened military conflict near Mariupol in the south east. The “Four” pressured Kiev to have these forces stand down as a potential flash point for more hostilities. Cohen, correctly begins to focus on complications beginning in the western part of the country in the form of a developing political crisis between the “Right Sector” and Poroshenko that may escalate into a second civil war. Poroshenko is caught in the middle between honouring the Minsk2A, and “Right Sector” groups and seemingly Washington with its arms and troop aid that want a continuation of the civil war. Cohen points out that politically these Right Sector groups are much stronger now, and essentially are doing most of the fighting in the Donbass. They oppose the Minsk2A; Poroshenko, on the other hand would like to continue with the Minsk2A as the only way to stay president.

Last segment is a political discussion, Paul, Trump, Sanders, Clinton, and Biden as presidential candidates and how they will fare in dealing with a new Cold War with Russia. Cohen is hopeful that the political battles for president in the United States will prompt discussion between candidates – a discussion that hitherto has not happened at all.

This 39:52 minute audio interview put in an appearance on the johnbatchelorshow.com Internet site on Tuesday—and I thank both Larry Galearis and Ken Hurt for contributing to this item.


Washington’s Fifth Columns Inside Russia and China — Paul Craig Roberts

It took two decades for Russia and China to understand that “pro-democracy” and “human rights” organizations operating within their countries were subversive organizations funded by the US Department of State and a collection of private American foundations organized by Washington. The real purpose of these non-governmental organizations (NGOs) is to advance Washington’s hegemony by destabilizing the two countries capable of resisting US hegemony.

Washington’s Fifth Columns pulled off “color revolutions” in former Russian provinces, such as Georgia, the birthplace of Joseph Stalin and Ukraine, a Russian province for centuries.

When Putin was last elected, Washington was able to use its Fifth Columns to pour thousands of protesters into the streets of Russia claiming that Putin had “stolen the election.” This American propaganda had no effect on Russia, where the citizen back their president by 89%. The other 11% consists almost entirely of Russians who believe Putin is too soft toward the West’s aggression. This minority supports Putin as well. They only want him to be tougher. The actual percentage of the population that Washington has been able to turn into treasonous agents is only 2-3 percent of the population. These traitors are the “Westerners,” the “Atlantic integrationists,” who are willing for their country to be an American vassal state in exchange for money. Paid to them, of course.

But Washington’s ability to put its Fifth Columns into the streets of Moscow had an effect on insouciant Americans and Europeans. Many Westerners today believe that Putin stole his election and is intent on using his office to rebuild the Soviet Empire and to crush the West. Not that crushing the West would be a difficult thing to do. The West has pretty much already crushed itself.

This is a must read commentary by Paul, especially if you’re a serious student of the New Great Game.  I thank reader M.A. for digging it up for us.


Blows for Obama as key lawmakers come out against Iran deal

U.S. President Barack Obama’s hopes of preserving the nuclear deal between Iran and world powers were dealt a setback on Thursday when Chuck Schumer, one of the top Democrats in the U.S. Senate, said he would the oppose the agreement.

Schumer’s opposition, announced in a lengthy statement, could pave the way for more of Obama’s fellow Democrats to come out against the nuclear pact, announced on July 14, between the United States, five other world powers and Iran.

The New York senator is among the most influential Jewish lawmakers in the United States. He was the first Senate Democrat to announce his opposition to the agreement.

Another influential Jewish lawmaker, U.S. Representative Eliot Engel, the top Democrat on the House of Representatives Foreign Affairs Committee, also said on Thursday he would oppose the nuclear pact in a statement obtained by Reuters.

This Reuters new item, filed from Washington, showed up on their website at 9:23 a.m. Friday morning EDT—and once again I thank Patricia Caulfield for sending it our way.


Iraq Debt Rated Junk by Fitch on Conflict Cost, Oil Slump

Fitch Ratings issued its first rating on Iraqi debt, assigning the fifth-worst junk grade in part due to the cost of civil conflict and a global slump in oil prices.

Iraq has a long-term foreign currency issuer default rating of B-, with a stable outlook, Fitch said in a statement Friday. That puts it with Cyprus and Jamaica and two levels above Greece and Ukraine, data compiled by Bloomberg show.

“Political risk and insecurity are among the highest faced by any sovereign rated by Fitch,” the company said in the statement. “Iraq’s fiscal position has deteriorated rapidly since 2013 and Fitch forecasts a double-digit fiscal deficit for 2015, owing to lower oil prices, higher military spending and costs associated with civil conflict.”

This is another Bloomberg article from Patricia Caulfield.  This one appeared on their Internet site at 6:13 a.m. MDT yesterday morning.


The Taliban post-Mullah Omar – The Guardian briefing

Mullah Mohammad Omar had run the Taliban since its founding more than two decades ago. He was an extreme recluse, communicating mostly by letter, and there had been regular rumours of his death circulating for years.

But last week the Afghan government stunned the world, and many of the Taliban’s own men, by announcing that Omar was not just dead, but had been officially running his movement from beyond the grave for more than two years.

After initially denying the claim, the Taliban moved quickly to announce a new leader, Mullah Akhtar Mansoor, a founding member of the movement.

Mansoor knew Omar and Osama bin Laden personally, but has a reputation as a relative moderate and vigorous proponent of peace talks with the Afghan government, raising hopes that his leadership could bring real progress towards ending more than a decade of war.

This very interesting story put in an appearance on The Guardian‘s website on Thursday afternoon BST—and I thank Patricia for her final offering of the day.


The Sprott Money News Weekly Wrap: With Eric Sprott

Listen to Eric share his views on the economy, the increase of debt in foreign currencies, and the ongoing tightness in the gold and silver markets.

This 11:50 minute audio interview with host Geoffrey Rutherford, was posted on the sprottmoney.com Internet site on Friday sometime.


World’s best opal to be displayed at South Australian museum

A 2.4 inch opal named the Virgin Rainbow will be the centerpiece of a museum exhibit opening next month in the South Australian Museum.

The Virgin Rainbow was discovered in 2003 by opal miner John Dunstan and his partner Steve Zagar near Coober Pedy.

The stone is small, just 63.3 mm in length and from 13.3 mm. The complete crystallization is what makes the piece unique with “. . . brilliant medium to large rolling flash pattern featuring all spectral colours from orange through to violet,” according to Chatelaine’s Antiques.

Museum director Brian Oldman gushed when describing the stone, which is valued at over $1 million.

This short, but very interesting article was posted on the mining.com website on Thursday—and if you’re not interested in the article, the picture itself is definitely worth the trip.  I thank reader M.A. for his final contribution to today’s column.


History Always RepeatsGold Protects From Capital Controls and Devaluations

An article on Bloomberg comparing the gold market in the late 1970s – dramatically peaking in 1980 – to that of recent years has suggested that “gold could soon get very boring” and a “repeat of that trend would leave gold at around $1,000 an ounce in 2035.”

We have long noted the importance of focusing on gold as a diversification and therefore not focusing solely on gold’s price. Price predictions are foolhardy at the best of times and when we occasionally venture into that space, we are always cautious and give caveats.

What is odd about this call for gold to fall nearly 10% in dollar terms in the next 20 years is that it is completely devoid of any kind of all important historical, geopolitical, macroeconomic or indeed monetary context.

So too it completely ignores the supply demand fundamentals in the physical gold market and the huge demand for gold coins and bars today that is leading to bottlenecks, delays and rising premiums.

This commentary by Mark O’Byrne was posted on the goldcore.com Internet site yesterday—and I thank Roy Stephens for bringing it to our attention.


If gold is just a ‘pet rock,’ why are central banks so secretive about it?

In the “About Clearing” section of its Internet site, London Precious Metals Clearing Ltd. says:

“The six London bullion clearing members each maintain confidential secure vaulting facilities within central London locations, using either their own premises or those of a secure storage agent, which are used to process and store precious metals (mostly gold and silver), for both the member and those clients who require custodial storage (including some central banks). …

“[T]hese vaulting facilities enable the depositories to process large physical transactions with a high degree of confidentiality (essential given the sensitivity many governments and central banks place on gold transactions); also, these vaults provide the potential of some modest income from client storage requirements.

“There are close ties between the vault operations and the precious metal trading and sales team on physical movements, particularly when scheduling consignment stock deliveries, but also where key government or central bank physical transactions are being undertaken, which require sensitive and confidential handling, and often involve taking high-security precautions.”

This commentary by Chris Powell, along with several embedded links, appeared on the gata.org Internet site yesterday—and it’s definitely worth reading.


The PHOTOS and the FUNNIES080815Dog

080815Dog and Sheep080815Comic-Con080815Hillary 5


THE WRAP

What separates silver from every other industrial commodity is that it is also a basic investment asset. Silver has a long history and a certain future as a basic investment asset and that cannot be said of any other consumable commodity. Corn, copper, crude oil nor any other consumable commodity can be considered investment assets. Of all commodities, silver is the only one with true dual demand – regular utilitarian commodity demand plus investment demand. I understand that silver’s highly unique dual demand profile is overshadowed at times like now by prices brought low by manipulation, but that’s not permanent.
 
What is permanent is the equation that any eruption of investment demand in silver will be supplied by the amount of metal that exists and the amount that is made available to the market. By definition, the amounts are very different and this is true in every commodity, not just silver. Every ounce of existing silver inventory is owned by someone and the owners of that inventory will determine at what price their inventory is available for sale. Just because a sudden investment rush might develop for silver does it mean that there will be a commensurate increase in the supply of metal made available.  In fact, when an investment rush has developed in the past for silver (or any investment asset), usually holders of existing inventory get more reluctant to sell for the very same reason that propels the buyers –  the expectation of still higher prices to come.
 
Additionally, silver is highly unique in that one form of existing inventory dominates like no other, namely, the inventory in the form of 1,000 oz bars. No other commodity, including gold, has this particular characteristic. Virtually, the entirety of world investment and industrial inventory is in the form of 1,000 oz bars, including all ETF and exchange holdings. As and when a physical shortage develops in silver, it will be in the form of 1,000 oz bars. This the form that both industrial users and fabricators will rush to buy, as well as institutional and other large investors. I’m hard pressed to think of another commodity where inventories are so rigidly defined by form.Silver analyst Ted Butler: 05 August 2015


Today’s pop ‘blast from the past’ dates back to 1971—and I remember spinning this 45rpm record at CHAR-FM up at Alert, N.W.T.—now Iqaluit.  Where the hell has all that intervening time gone???  The link is here.

Today’s classical ‘blast from the past’ is Beethoven’s signature piano concerto, the “Emperor Concerto”—which he composed between 1809 and 1811 in Vienna.  I heard Anton Kuerti performing it on CBC-FM the other day—and thought it worth posting.  This performance is by the incomparable Daniel Barenboim with Denmark’s Royal Orchestra accompanying.  Michael Schønvandt conducts.  The link is here.


I must admit that I was was less than happy with the obvious price management in all four precious metals.  It began at the London open—and was really on display starting at the release of the jobs report yesterday.  The lines in the sand at $1,100 gold, $15 silver—and $600 palladium were obvious to anyone.

Without doubt—and as I mention in my COT discussion further up—there was certainly deterioration in the Commercial net short positions in all these metals.  The only question is, to what extent?  I hate to pass early judgement on these budding precious metal rallies, but they have already developed all the hallmarks of the “same old, same old.”

Here are the 6-month charts for the Big 6 commodities yesterday—and only WTIC set a new low for this move down.080815 6-month gold

080815 6-month silver080815 6-month platinum080815 6-month palladium080815 6-month copper080815 6-month WTIC

In yesterday’s column I changed the moving averages from the 50 and 200-day to the 10 and 13-day for both gold and silver charts—and today I’ve made that change in all of the Big 6, so you can see what the technical funds in the Managed Money category are looking at.  Ted Butler says that these are the short-term moving averages that some Managed Money funds use to begin covering at—and if that’s the case, both gold and silver broke above—and closed above—their respective 10 and 13-day moving averages on Friday.  It was these funds that were heading for the exits in New York trading yesterday—and JPMorgan et al were there to provide whatever ‘liquidity’ necessary to satisfy their requirements and cap the price in the process.  That’s what happened yesterday—and I’m somewhat fearful that it’s a harbinger of things to come as these ‘rallies’ unfold, or allowed to unfold.

We’ll see.

I’m very much in the Doug Noland camp on the macro picture of world economic and financial events.  His quote from his Friday commentary pretty much sums up my feelings about things at the moment—“I have posited my case for the “Granddaddy of All Bubbles.” I believe the current “global government finance Bubble” is the finale of a historic multi-decade Bubble period. And each week I see important confirmation to the thesis that this global Bubble has been pierced. Ominous storm clouds are building in global Credit, throughout global markets, in economies, within societies and all about geopolitics. Things are turning serious, and any talk of a stock market correction completely misses the point. The entire bull thesis is coming under fire.“…”This was a key week from the perspective of my analytical framework. The crisis broke through to the “Core of the Core.” I would expect crisis dynamics to now speed up.

As for what may play out in the precious metal sphere as these dynamics unfold, is unknown at this moment. Despite the obvious deterioration in these markets after Friday’s trading action, we’re still pretty much locked and loaded for an upside move of some size.  But it’s equally as obvious that the powers-that-be have the Big 6 commodities on a very short leash—and they weren’t allowed to go anywhere yesterday, or any other day this week, even though all the signs were they that they really wanted to fly.

It’s now come to the point of not when they will release them, but if they release them.  And if they release them, one has to wonder under what circumstances that will be allowed to occur.  Based on the flotilla of black swans out there, it won’t be a happy day—and very much in the category of “be careful what you wish for.”

And on that cheery note, I’m done for the day—and the week—and I’m off to bed.

Enjoy what’s left of your weekend—and I’ll see you on Tuesday sometime.

Ed

http://www.edsteergoldandsilver.com/

 


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