05 September 2015 — Saturday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price didn’t do a thing in Far East or early London trading on their respective Fridays, but began to develop a bit of a negative bias once the London a.m. gold fix was in. It was sold down until the 8:20 a.m. COMEX open, rallied a bit from there—and then blasted higher on the job numbers. JPMorgan et al were there ten minutes later—and by 9:20 or so had the price down to its low tick of they day. The gold price chopped slowly higher from there into the 5:15 p.m. close of electronic trading.
The high and low ticks, which occurred within about thirty-five minutes of each other, were recorded by the CME Group as $1,133.10 and $1,115.70 in the December contract.
Here’s the 5-minute gold tick chart courtesy of Brad Robertson—and you can note the total lack of volume until the COMEX open—and then the huge spike at 8:30 a.m. EDT, followed by the volume necessary to sell the gold price down to its low tick of the day. By the London close, 11:00 a.m. EDT, volume was back to nothing once again.
The vertical gray line is midnight EDT—and add two hours for EDT, as the ‘x’ axis of this chart is calibrated for Mountain Daylight Time. Don’t forget the ‘click to enlarge‘ feature.
The silver price rallied a bit in Far East trading—but “da boyz” and their algorithms showed up at 9 a.m. BST—and after that the price pattern was almost a carbon copy of what happened in gold.
The high and low ticks were reported as $14.825 and $14.475 in the December contract.
Silver closed yesterday at $14.58 spot, down 14.5 cents from Thursday. Net volume was pretty quiet at just over 24,000 contracts.
It was more or less the same chart pattern in platinum, but once it got sold down by “da boyz” after the job numbers—any rally attempt after that, no matter how tiny, got dispatched immediately. This precious metal was closed back below $1,000/ounce—and almost on its low tick of the day at $991 spot, down 13 dollars from Thursday’s close.
Palladium was the only precious metal to buck the price trend after the jobs report—and it rallied quietly up until 4 p.m. EDT. Then a not-for-profit seller spiked the price 10 bucks lower when volume was virtually non-existent, as most traders were already out the door for the long weekend, although it managed to jump back up after that—and finish the Friday session up a buck at $576 spot, just minutes before the 5:15 p.m. close.
The dollar index finished the Thursday trading session in New York at 96.41—and began to chop quietly lower from there. The 96.11 London low came minutes after 9:30 a.m. BST—and after the shenanigans at 8:30 a.m. in New York, continued to rise, with the 96.58 high tick coming minutes after 10:30 a.m. EDT. Then it fell all the way down to its 95.97 low tick minutes after 1 p.m.—and it struggled higher from there—finishing the Friday trading session at 96.25—down 16 basis points.
And, as usual, here’s the 6-month U.S. dollar chart so you can keep track of the mid-term price movements.
The gold stocks opened down—and hit their lows just before the London close—and from there they chopped and flopped around until they caught a bit of a bid starting about thirty minutes before the closing bell. The HUI cut its loses to only 0.45 percent.
The silver equities opened down a bit, but did manage to rally back to unchanged ten minutes later. But it was all down hill from there, with the low tick coming when the buyer showed up at 3:30 p.m. EDT. Nick Laird’s Intraday Silver Sentiment Index closed down 1.32 percent.
For the week, the HUI close down another 6.42 percent—and Nick’s ISSI finished lower by 8.76 percent.
The CME Daily Delivery Report showed that zero gold and 140 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday. The largest short/issuer was HSBC USA out of its in-house trading account with 138 contracts. The three largest long/stoppers were “all the usual suspects”—Canada’s Scotiabank, JPMorgan out of its in-house trading account—and Japanese bank Mizuho for its client account. The contracts involved were 65, 37 and 23 respectively. The link to yesterday’s Issuers and Stoppers Report is here.
The CME Preliminary Report for the Friday trading session is missing in action, as it still shows the final numbers from Thursday’s trading session—and I checked it last at 3:57 a.m. EDT this morning. I found this somewhat unusual—as this is the first time since I started reporting this data, that it wasn’t available.
[Update at 1:15 p.m. EDT on Sunday, September 6: They finally put up the preliminary numbers—and they showed that gold open interest in September declined by 4 contracts to 175 contracts remaining—and September silver o.i. dropped by 49 contracts leaving 853 left—minus the deliveries posted in the previous paragraph, of course.]
There was a small withdrawal from GLD yesterday, as 7,746 troy ounces were removed—and I would guess that would be a fee payment of some kind. And as of 6:58 p.m. EDT yesterday evening, there were no reported changes in SLV. But when I checked back at 3:58 a.m. EDT, I noted that an authorized participant had withdrawn 1,526,967 troy ounces. In the last five business days, there has been about 2.6 million ounces of silver withdrawn from SLV—and I just know that Ted will have something to say about this in his weekly commentary this afternoon.
There was another sales report from the U.S. Mint yesterday. They sold 9,000 troy ounces of gold eagles—and another 1,000 one-ounce 24K gold buffaloes—but no silver eagles.
Month-to-date, only four days worth, the mint has already sold 25,500 troy ounces of gold eagles—5,500 one-ounce 24K gold buffaloes—but only 245,000 silver eagles. Ted’s guess, and I agree, is that the mint is trying to build up some sort of inventory before reporting any more silver eagle sales. But looking at gold coin sales, I’d bet that virtually all of that went to Ted’s ‘big buyer[s]’.
For a change, there was a decent amount of in/out activity in gold over at the COMEX-approved depositories on Thursday. They reported receiving only 1,607 troy ounces—but did ship out 43,305 troy ounces, with virtually all of that amount coming out of Canada’s Scotiabank. The link to that activity is here.
In silver, nothing was reported received—and 346,453 troy ounces were shipped out, with the lion’s share of that coming out of Scotiabank as well, with the rest coming out of Brink’s, Inc. The link to that action is here.
Over at the COMEX-approved gold kilobar depository in Hong Kong on their Thursday, they reported receiving a very chunky 11,361 kilobars—and shipped out ‘only’ 1,423 of them. It was a busy day—and the link to that activity, in troy ounces, is here.
The Commitment of Traders Report for positions held at the close of trading on Tuesday wasn’t really much to look at. There was a slight improvement in silver—and a smallish deterioration in gold.
In silver, the Commercial net short position declined by 1,404 contracts. They did this by selling 8,115 long contracts, but they also covered 9,519 short positions—and the difference is the improvement of 1,404 contracts. The Commercial net short position now sits at 112.8 million troy ounces.
Under the hood in the Manage Money category it was a disappointment, as they covered short positions and added to their long positions to the tune of 4,129 contracts. Ted wasn’t happy to see this. The real improvements were in the other two categories—the “Other Reportables” and the small traders in the “Nonreportable” category. Both these categories increased their respective short positions and decreased their long positions.
In gold, the Commercial net short position increased by 6,452 contracts. During the reporting week, these traders, mostly JPMorgan et al, sold 9,794 long contracts and covered 3,342 short contracts, with the difference being the deterioration of 6,452 contracts. The Commercial net short position in gold now stands at 6.91 million troy ounces. In historical terms, this is still a very bullish number, but it’s well off its low of about a month ago. The same can be said about the set-up in silver as well.
In the Managed Money category it was neutral, as they sold 6,815 longs and covered 6,798 short contracts—with the difference being 17 contract, which is immaterial. With the exception of those 17 contracts, the rest of the changes were in the “Other Reportable” and “Nonreportable” categories, as they covered 6,314 short contracts between them—and went net long another 155 contracts.
One can only imagine what the prices of gold and silver would have been if JPMorgan et al weren’t there to add ‘liquidity’ to these two markets—and capping the price in the process. But that’s why they’re there, isn’t it?
This situation applies especially to all the ‘Big 6′ commodities—and to any other COMEX-traded commodity that “da boyz” need to control the price of.
Once again here’s Nick Laird’s now-famous “Days of World Production to Cover COMEX Short Positions” of the Big 4 and Big 8 traders in the above COT Report—and it looks like it always does.
I’d forgotten the fact that there was a Bank Participation Report [BPR] coming out yesterday as well, so here’s the data on that. 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. They’re usually up to quite a bit.
In gold, 4 U.S. banks are net short 49,523 COMEX gold contracts in September’s BPR, which is up big from the August BPR when they were net short 30,350 contracts. This is the ‘liquidity’ that JPMorgan et al are providing to the COMEX futures market to ensure that the gold price didn’t blow sky high during August.
Also in gold, 20 non-U.S. banks were net short 22,824 COMEX gold contracts. That’s also a big increase from the August BPR when they were, collectively, net short only 8,178 contracts. I would guess that only one or two foreign banks, principally Canada’s Scotiabank, hold the lion’s share of those contracts—and the balance, split up more or less equally between the other 18 or 19 non-U.S. banks, are immaterial.
Here’s Nick’s chart of the Bank Participation Report for gold going back to 2000—updated with September’s data. As always, 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.
In silver, ‘3 or less’ U.S. banks are net short 18,412 COMEX contracts, which isn’t much of a change from the short position they held in the August BPR, which was 17,573 contracts. If there are three banks, they would be Citigroup, HSBC USA—and the capo di tuti capi—JPMorgan.
Also in silver, ’12 or more’ non-U.S. banks are net short 16,951 COMEX contracts in the September BPR—and the ‘king short’ in the non-U.S. bank category is Canada’s Scotiabank—and I would guess that around 80 percent of this amount is held by them. That makes the short positions of the remaining ’11 or more’ non-U.S. banks pretty much immaterial, which they are. In the August BPR these same banks were net short 16,248 COMEX contracts.
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.
In platinum, ‘3 or less’ U.S. banks are short 9,142 COMEX contracts. Notice I didn’t say ‘net’ short. That’s because every contract held by these ‘3 or less’ U.S. banks are held on the short side. This is the second month in a row they’ve held no long contracts in platinum. In the August BPR, the same U.S. banks were short 9,186 contracts—so there’s been no material change in the last month.
Also in platinum, ’15 or more’ non-U.S. banks are net short 7,100 COMEX contracts—and that’s up from the 5,377 contracts they were short in the August BPR. Like in gold and silver, it’s a very safe bet that a large chunk of the short position held by the non-U.S. banks are held by two banks at most, making the positions of the other traders immaterial.
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.
In palladium, ‘3 or less’ U.S. banks are net short 4,299 COMEX contracts, that’s up from the 3,822 contracts they held net short in the August BPR—which isn’t really a material change.
Also in palladium, ’11 or more’ non-U.S. banks are net short 849 COMEX contracts, down from the 1,009 they held short in the prior month. Compared to the positions held by “da boyz” in New York, these positions are immaterial in the extreme.
Here’s the BPR chart for palladium updated with the September 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.
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’re not at the moment.
Before heading into the stories in today’s column, here is the latest data from the Shanghai Gold Exchange as of the close of business on Friday, August 28. They reported withdrawing another 59.876 tonnes. Here’s Nick’s most excellent chart. The ‘click to enlarge‘ feature is useful here as well.
Like I’ve done all week, I’ve hacked and slashed until I got the number of stories down to a reasonable number—and I have quite a few that have been waiting for my Saturday column, so I hope you can find the time in what’s left of your weekend to read the ones that interest you.
While the knee-jerk headline scanning algos are focusing on the seasonally-adjusted headline monthly NFP increase which came in a worse than expected 173K, the presidential candidates – especially the GOP – are far more focused on another data point: the labor force participation rate, and the number of Americans not in the labor force.
Here, they will have some serious ammo, because according to the BLS, the main reason why the unemployment rate tumbled to the lowest since April 2008 is because another 261,000 Americans dropped out of the labor force, as a result pushing the total number of U.S. potential workers who are not in the labor force, to a record 94 million, an increase of 1.8 million in the past year, and a whopping 14.9 million since the start of the second great depression in December 2007 while only 4 million new jobs have been created.
And since there are still those confused why wages so stubbornly refuse to rise, here is our favorite labor-related chart, showing the annual increase in average hourly wages superimposed next to the US civilian employment-to-population ratio, which remains solidly below 60%, and has barely risen since the great financial crisis.
This brief 2-chart Zero Hedge story put in an appearance on their Internet site at 9:56 a.m. on Friday morning EDT—and today’s first offering is from reader M.A. It’s worth your while.
August Payrolls Miss, Rise Only 173K, Even as Prior Revised Higher; Hourly Earnings Rise More Than Expected
The “most important and anticipated payrolls number ever”, or at least since the last payroll number, is out and it is a doozy at only 173K, it is a huge miss to the 217K expected (and almost in line with LaVorgna’s forecast). This was the worst monthly payrolls number since March, and the second lowest number in 19 months. However, the curious twist is that the July and June NFPs were both revised higher to 245K, making the net revision up 44K.
The Household survey calculated the increase in employed workers an almost equal 196K, rising to 149,036,000, which doesn’t tip the scale in either direction.
The unemployment rate dropped to just 5.1%, below the 5.2% expected, and well below July’s 5.3%, further boosting the Fed’s case that labor slack is evaporating.
And while the headline NFP would be enough to assure no September rate hike, it was the average hourly earnings which jumped 0.3%, above the 0.2% consensus, and above July’s 0.2% that may be the indication that September is still on the table after all. On an annual basis, the average hourly wages rose 2.2%, but the average weekly wages posted a 2.5% increase, the best since February.
This longish 4-chart Zero Hedge article showed up on their website at 8:35 a.m. EDT yesterday morning–and it’s also courtesy of reader M.A.
U.S. stock indexes dropped more than 1 percent on Friday after a mixed August jobs report did little to quell investor uncertainty about whether the Federal Reserve will increase interest rates this month.
Trepidation about the first U.S. rate hike in almost a decade added to worries among investors already on edge about a stumbling Chinese economy and a recent market sell-off.
“Markets are confused. It was an okay jobs report, but there’s worry about China going into the weekend,” said John Augustine, chief investment officer, Huntington Trust in Columbus, Ohio.
This Reuters article appeared on their website at 6:12 p.m. EDT, but it’s an update from an earlier story that bore the headline “Wall St. ends down after mixed jobs data“—and it’s obviously been rewritten since the market closed yesterday. I thank Patricia Caulfield for her first contribution to today’s column.
The “flight to safety” into bonds many expected when U.S. stocks slumped last week never took off, making big losers out of prominent fund managers and further confusing investors at a volatile time in the market.
Stocks plunged in the second half of August, largely on fears of China’s worsening economy, but U.S. Treasury yields did not see the kind of safety bid that many were expecting and has been typical in times of stock-market stress in the past.
Strategists link the lack of a move to bonds to a number of events: Hawkish rhetoric from Fed officials even as the equity market stumbled; a bout of selling by hedge funds that had expected a rally in the bond market that they didn’t get; and bond sales by central banks in China and other emerging market economies trying to protect their currencies from depreciating.
Reduced appetite from overseas, along with the outlook for the Fed, will be crucial in coming weeks if equities fall again and bonds don’t respond. The Fed decision on September 17 could mark the first rate increase in almost a decade, and uncertainty surrounding that decision is likely to keep many in the bond market on the sidelines.
I’m sure they’re keeping precious metal prices suppressed so that the there’s no rush into them as a safe haven. I’ll have much more on this in The Wrap. This is another Reuters article, this one filed from New York—and it was posted on their website at 6:41 a.m. EDT yesterday morning—and it’s courtesy of Richard Saler.
U.S. auto sales, due Tuesday, are set for their biggest year-over-year drop since the financial crisis. But this isn’t a reason to panic.
Neither stock-market jitters nor interest rates are at fault. Instead, blame Grover Cleveland. The former U.S. president decided to commemorate Labor Day on the first Monday in September rather than May 1, like most other countries. This year, that pushed the celebration to Sept. 7. And since Americans commemorate workers’ rights by grilling meat and buying cars, the latter has been pushed into another month and will flatter September sales figures, according to Edmunds.com. (Earlier Labor Day weekends are lumped into August by the industry).
But while that is merely a calendar blip, there is an actual reason to be concerned about the trajectory of new-car sales. Analysts at Edmunds.com estimate that around 28% of new vehicles this year will be leased—a near-record pace.
Once a lease is finished, the vehicles tend to be three years old, dealer-certified and in good enough shape to compete with new vehicles. Counting this year’s forecast, the past three years will have seen a total of 13.4 million vehicles leased. That compares with just seven million in the three years ended in 2011.
I saw this news item in the King Report a couple of days ago, but couldn’t use it because it was subscriber protected. But now it’s posted in the clear over at David Stockman’s website—and it’s worth reading. I thank Roy Stephens for sending it along.
DOT, DOT, DOT, DASH, DASH, DASH, DOT, DOT, DOT is being screamed by the Social Security Trustees and no one is listening. For those not familiar with Morse Code, that signals “Save our [Souls]”.
In a recent article “The USS Social Security is sinking fast” I highlighted the conclusion from the 2015 Social Security and Medicare Trustees Report
“Social Security’s Disability Insurance (DI) Trust Fund now faces an urgent threat (emphasis mine) of reserve depletion, requiring prompt corrective action by lawmakers if sudden reductions or interruptions in benefit payments are to be avoided. Beyond DI, Social Security as a whole as well as Medicare cannot sustain projected long-run program costs under currently scheduled financing.”
They conclude that the fund will run dry around 2034 and participants could face cuts of 20% or more. David Stockman and others take the report apart, referring to “fuzzy math” and conclude that it is more likely to go belly up in 2026, with cuts around 33%.
Let’s not quibble over when the final day will come, or which Trust Fund will go broke first. All that rhetoric does is to divert attention from the real problem which has disaster written all over it. The trustees are broadcasting a signal for help and nothing is being done!
This commentary by my good friend Dennis Miller showed up on his milleronthemoney.com Internet site on Thursday—and I thought it worth your while.
America’s descent into totalitarian violence is accelerating. Like the Bush regime, the Obama regime has a penchant for rewarding Justice (sic) Department officials who trample all over the U.S. Constitution. Last year America’s First Black President nominated David Barron to be a judge on the First U.S. Circuit Court of Appeals in Boston.
Barron is responsible for the Justice (sic) Department memo that gave the legal OK for Obama to murder a U.S. citizen with a missile fired from a drone.
The execution took place without charges presented to a court, trial, and conviction. The target was a religious man whose sermons were believed by the paranoid Obama regime to encourage jihadism.
Apparently, it never occurred to Obama or the Justice (sic) Department that Washington’s mass murder and displacement of millions of Muslims in seven countries was all that was needed to encourage jihadism. Sermons would be redundant and would comprise little else but moral outrage after years of mass murder by Washington in pursuit of hegemony in the Middle East.
Always controversial, but never far off the mark, this commentary by Paul showed up on the sputniknews.com Internet site on Wednesday—and had to wait for a spot in Saturday’s column. It’s a must read, especially for all patriotic Americans. I thank U.K. reader Tariq Khan for pointing it out.
Bonds of Brazilian mall operator General Shopping Brasil SA slumped to the lowest since they were issued in March 2012 amid speculation the company will miss a coupon payment later this month.
Its $150 million of perpetual subordinated notes declined 18 percent to 30.7 cents on the dollar as of 2:19 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
“Looks like investors do not believe the company will pay its next coupon and instead will accrue that to the principal owed to creditors,” Carlos Gribel, the head of fixed income at Andbanc Brokerage, said from Miami.
Fitch Ratings said in a report last month that the Sao Paulo-based mall operator is among Brazilian companies most at risk as the local currency posts the world’s biggest losses this year. General Shopping is vulnerable because of its high level of indebtedness in foreign currency and a lack of revenue in dollars. The real fell Friday 2.7 percent to trade at 3.8445 per dollar, a 12-year low.
This Bloomberg story appeared on their Internet site at 11:28 a.m. Denver time yesterday morning—and it’s the second contribution of the day from Richard Saler.
The struggle among European leaders to develop a coherent response to the spiraling migrant crisis intensified on Thursday as fresh calls for a blocwide plan were met with recriminations about the Continent being swamped with Muslims.
Even as wrenching photographs of a drowned 3-year-old Syrian boy riveted world attention and galvanized public demands for action, the leaders’ first fumbling efforts seemed only to highlight Europe’s divisions, as they bickered over who should take responsibility for the migrants rather than unifying around a new policy.
The chaos was searingly illustrated by a daylong standoff in Budapest and its outskirts, where hundreds of migrants crammed into trains they thought were bound for Austria and, only to be herded into camps.
This longish essay, with lots of photos, showed up on The New York Times website on Thursday sometime—and it’s the second offering of the day from Patricia Caulfield.
Arresting images of desperation on the West’s doorstep have brought Syria, for the moment, back to worldwide attention: refugees cramming into train stations and climbing border fences; drowned Syrian toddlers washing up on beaches, a girl in polka dots, a boy in tiny shoes.
It was never any secret that a rising tide of Syrian refugees would sooner or later burst the seams of the Middle East and head for Europe. Yet little was done in Western capitals to stop or mitigate the slow-motion disaster that was befalling Syrian civilians.
“The migrant crisis in Europe is essentially self-inflicted,” said Lina Khatib, a research associate at the University of London and until recently the head of the Carnegie Middle East Center in Beirut. “Had European countries sought serious solutions to political conflicts like the one in, and dedicated enough time and resources to humanitarian assistance abroad, Europe would not be in this position today.”
This second longish commentary on the refugee situation put in an appearance on The New York Times website sometime yesterday—and I thank Patricia Caulfield for sending this one as well.
Eastern European leaders have rejected calls from Berlin, Paris, and Brussels for a concerted and binding policy of sharing refugees across the EU, setting the scene for a bruising 10 days of battles over how Europe responds to its worst post-war migration emergency.
The prime ministers of Poland, Hungary, the Czech Republic and Slovakia met in Prague on Friday and set themselves robustly against pressure, mainly from Berlin, for sharing the refugee burden on a mandatory basis.
Eastern European countries are expected to offer to take in more people from those arriving in Greece, Italy and Hungary, but they rejected proposals that would make the distribution of refugees compulsory and permanent.
“Any proposal leading to introduction of mandatory and permanent quota for solidarity measures would be unacceptable,” the four government leaders said. Sharing the European burden could only be “voluntary “so that each member state may build on its experience, best practices and available resources”.
This refugee story appeared on theguardian.com Internet site at 5:43 p.m. BST yesterday afternoon, which was 12:43 p.m. in New York—EDT plus 5 hours. I thank Patricia for this story as well.
The backdrop for the Ukraine Crisis this week is NATO in the headlines with its Black Sea exercise “ Sea Breeze”, a drill by eleven nations. (Another exercise is planned in October in the Baltic States called “Trident Juncture 2015” both on land and sea all across the Russian frontier). Also there is increasing tensions surround a Council of Nations discussion over Russia’s sovereignty of waters in her arctic – now being called the “Ice Curtain”. The pressure is still on Russia from NATO and Washington.
We have some indications of a turn to peace in the Donbass this week, an “intermission” at least, and it is heartening to see the beleaguered children of the Donbass return to their schools on September 1st. The shelling has all but ceased and all is quiet on the Eastern Front. At least coincidentally, this may be due to the Merkel, Holland, and Poroshenko meeting in Berlin last week and demanding a stop to hostilities. This was followed by vice president Biden phoning the Ukrainian president to encourage him to do the very opposite. Perhaps in reaction, Merkel and Holland contacted Putin by phone and discussed adherence with Minsk2A. They also agreed that a September 1’st ceasefire be implemented and this seems to have happened.
But three days ago the hostilities in Ukraine have moved west, as there has been a riot with fatalities in Kiev during a right sector rally/protest against any negotiations with the Donbass rebels. Three police have been killed and many other people injured. The politics are becoming very complicated with three major right sector groups threatening the government of Kiev, and professor Stephen F. Cohen discusses the politics between all the players. He is not confident that the right sector will ever accept a peace option. Nor does he trust Washington’s presence as a peaceful player. He speculates that the right sector may want control of government in Kiev before it continues a military campaign in the East. But for the time being we have intermission. Cohen, however, speculates that a right sector coup may end Washington’s effort to support the war against the Donbass rebels – although not its presence, its increasing physical presence in Ukraine.
This 39:46 minute audio interview was posted on the johnbatchelorshow.com Internet site on Tuesday—and I thank Larry Galearis for sharing it with us.
The bloodbath was merciless.
In 1842, 16,500 British soldiers and civilians withdrew from Kabul, Afghanistan. Only one would survive.
It was the most humiliating military disaster in British history. The death toll sealed Afghanistan’s reputation as “the graveyard of empires.”
It was the desire for control of Central Asia that sucked the British Army into its Afghan disaster.
For most of the 1800s, the U.K. and Russia pushed for power and influence in Central Asia in a competition known as “the Great Game.”
Here’s an absolute must read for you, especially for any serious student of the New Great Game. This excellent commentary/infomercial appeared on the internationalman.com Internet site on Wednesday—and for both content and length reasons, had to wait for today’s column. I thank International Man senior editor Nick Giambruno for bringing it to my attention—and now to yours.
When in trouble, shoot the messenger. This time-honoured approach to dealing with unwelcome news was much in evidence in China this week when nearly 200 people were rounded up and criminally charged with spreading “false” rumours about the stock market and the economy, or otherwise profiting from their travails.
One luckless financial journalist was ritually paraded on state TV, tearfully confessing his “crimes”. Meanwhile, the head of the Chinese desk of one London-based hedge fund group was summoned to a “meeting” with regulators, and hasn’t been heard of since. Her Chinese husband says “she’s gone on holiday”. We can only hope it is not to the re-indoctrination of the asbestos mines. Despite the massive progress of recent decades, old habits die hard.
China was meant to have embraced free market reform, yet these latest actions suggest an altogether different approach. Roughly summarised, it amounts to: “Reform good, but woe betide the free market if it doesn’t do what the high command wants it to.” When the stock market was going up, the Chinese authorities were perfectly happy to tolerate what to virtually all Western observers looked like a dangerously speculative bubble, vaingloriously believing it to be a fair reflection of the wondrous successes of the Chinese economy.
This commentary by Jeremy Warner put in an appearance on the telegraph.co.uk Internet site at 7:30 p.m. BST on their Thursday evening—and once again I thank Richard Saler for sending it our way. It’s certainly worth reading.
Things were already bad enough for emerging markets going into August. Persistently low commodity prices, slumping demand from China, depressed global trade, and a “diminutive” septuagenarian waving around a loaded rate hike pistol in the Eccles Building had served to put an enormous amount of pressure on the world’s emerging economies.
And then, the unthinkable happened.
No longer able to watch from the sidelines as the export-driven economy continued to buckle from the pain of the dollar peg, China devalued the yuan. What happened next was nothing short of a bloodbath. The carnage is documented below.
This short Zero Hedge new item, with two excellent charts, is definitely worth a minute of your time—and I thank Richard Saler for his second contribution in a row—and his final offering in today’s column.
James Rickards: “The System is Highly Unstable—If Confidence is Lost, it Can Melt Down Very Quickly”
During a time of increasing uncertainty in global financial markets, James G. Rickards, best-selling author and advisor to US Department of Defense and Intelligence Communities, was kind enough to share a few comments.
When asked about People’s Bank of China’s recently announced gold reserve holdings numbers, James noted that, “I’ve been [to] China and [spoke] to secure logistics people, that [told me] gold is being brought in completely off the books…over land using People’s Liberation Army assets…coming in from Kazakhstan, maybe Russia.”
“[So] I’m not saying the People’s Bank of China is lying about their gold [holdings]…But whether to ignore how much gold [affiliates hold] off the books is the question…I think it’s reasonable to estimate at least 3000 tons…[but] there’s reason to think it could be [much] more.”
James also shared a recent conversation with former Federal Reserve Chairman Paul Volcker, in which Mr. Volker explained he “was one of the people in the room [at Camp David]” when the decision was made to close the gold window.
This 32:20 minute video interview [complete with transcript] with host Tekoa Da Silva, was posted on the sprottglobal.com Internet site yesterday—and it’s definitely worth your time.
Jim Rickards: Will Currency Wars Reorder the World?
Our guest this weekend is Jim Rickards, the author of the ‘New York Times‘ bestseller ‘The Death of Money‘ and a well-known expert in geopolitics and global capital.
Jim and Jeff discuss the unfolding drama at the Fed, which can’t decide when—if ever—QE will come to an end. They also discuss possible endgame scenarios for liquidating unprecedented amounts of sovereign, commercial, and household debt; whether coming monetary shocks will present the IMF with an opportunity to demand a global currency reset, and who wins and loses when the game of musical chairs stops. This is a must-hear interview for anyone interested in currency wars, central banks, and the unholy politics behind it all.
Jim has had a busy week. This 24-minute youtube.com Skype audio clip was posted there yesterday by the good folks over at the mises.org Internet site—and it’s a must listen as well. I thank Ken Hurt for sending it to me early yesterday evening MDT.
Crowded Trade Dynamics ensure that a rush for the exits has folks getting trampled. Previous relationships break down and time-tested strategies flail. “Genius” fails. When the Crowd decides it wants out, the market turns bereft of buyers willing and able to take the other side of the trade. And the longer the previous success of a trade, theme or strategy the larger The Crowd – and the more destabilizing The Unwind. Previous performance and track records will offer little predictive value. Models (i.e. “risk parity” and VAR!) will now work to deceive and confound.
Today, a Crowd of “money” is rushing to exit EM. The Crowd seeks to vacate a faltering Chinese Bubble. “Money” wants out of Crowded global leveraged “carry trades.” In summary, the global government finance Bubble has been pierced with profound consequences. Of course there will be aggressive policy responses. I just fear we’ve reached The Unwind phase where throwing more liquidity at the problem only exacerbates instability. Sure, the ECB and BOJ could increase QE – in the process only further stoking king dollar at the expense of faltering energy, commodities, EM and China. And the Fed could restart it program of buying U.S. securities. Bolstering U.S. markets could also come at the expense of faltering Bubbles around the globe.
It has been amazing to witness the expansion of Credit default swap (CDS) markets to all crevices of international finance. To see China’s “shadow banking” assets balloon to $5 Trillion has been nothing short of astonishing. Then there is the explosion of largely unregulated Credit insurance throughout Chinese debt markets – and EM generally. I find it incredible that Brazil’s central bank would write $100 billion of currency swaps (offering buyers protection against devaluation). Throughout it all, there’s been an overriding certitude that policymakers will retain control. Unwavering faith in concerted QE infinity, as necessary. The fallacy of liquid and continuous markets persisted so much longer than I ever imagined.
Doug’s Friday Credit Bubble Bulletin showed up on his website very late last night MDT—and it’s always a must read.
Snowden’s Great Escape is a breathtaking account of the NSA’s frantic search for Edward Snowden and the striking plan that enabled his remarkable disappearing act.
In addition to Snowden, other notable figures who have been interviewed for the doc include Bolivian president Evo Morales, former NSA director Michael Hayden, former German justice minister Sabine Leutheusser-Schnarrenberger, WikiLeaks co-founder Julian Assange and his adviser Sarah Harrison, Guardian correspondent Ewen MacAskill, Hong Kong lawmaker Regina Ip, and journalist Glenn Greenwald and his Hong Kong lawyer Robert Tibbo.
The film takes the form of a fast-paced documentary thriller, and focuses on Snowden’s escape from Hong Kong to Moscow after leaking a cache of secret NSA documents to journalist Greenwald and filmmaker Poitras.
If you can’t go out to the movies this weekend, here’s one for you here. Watching this absolutely riveting 58:12 minute movie/documentary is like eating cashews or macadamia nuts—once you start, you just can’t quit. I thank Roy Stephens for bringing it to my attention yesterday. It was posted on the tvo.org website on Thursday.
The El Niño that’s changing weather across the globe is now the strongest since the record event almost two decades ago.
Sea temperature anomalies in the central Pacific Ocean are now at their highest since 1997–98, Australia’s Bureau of Meteorology said in a fortnightly update on its website. The values are still below the peak observed in the period, it said.
Forecasters in the U.S. predict the El Niño may be the strongest in records going back to 1950. It has already brought torrential rains to parts of South America and dryness to Southeast Asia. The Philippines plans to boost rice imports to prepare for potential shortages, while Rabobank International warned that the weather event is a key risk to Australian wheat crops.
“Most of the eight international climate models surveyed by the bureau indicate there is likely to be some further warming of central Pacific Ocean during the coming months,” the Australian forecaster said. “About half the models indicate the event may begin to plateau during spring to early summer”—and in Australia, spring starts in September and summer begins in December.
This brief Bloomberg news item, with a 1:55 minute video clip embedded, was posted on their website on Tuesday—and it’s been waiting for a spot in my Saturday column.
A labor strike at one of South Africa’s top gold producers is still more likely than not even after companies, unions and the government signed a pact this week to address job losses, according to consultant Eurasia Group.
There’s a 55 percent chance that workers will strike at at least one of the largest producers, down from odds of 65 percent before the agreement, New York-based Eurasia analysts Mark Rosenberg and Lily Ghebrai wrote in a note Thursday. They said any strike would probably last one to two weeks compared with two to four weeks previously expected.
Workers are demanding better pay while producers have been contending with higher costs as bullion prices trade near a five-year low. The government, mining companies and groups including the National Union of Mineworkers on Monday adopted a 10-point plan to curb as many as 19,000 job losses in the industry. Gold wage negotiations broke down last month and the sides will start a conciliation process on Sept. 14. That may lead to a strike if no resolution is found.
“The pact does reduce the risk of a NUM-led stoppage in gold or coal,” the analysts wrote. Still, it “is a weak agreement that is unlikely to halt coming retrenchments in the sector or resolve structural instability in the labor market,” they said.
This Bloomberg story found a home over at the mineweb.com Internet site at 11:20 a.m. London time yesterday morning—and it’s the final contribution of the day from Patricia Caulfield, for which I thank her.
Investors suffered financial losses in recent weeks as stocks globally came under pressure in August and had their worst month in the last three years.
In one of the most volatile trading periods since the global financial crisis, August saw a massive $5.7 trillion erased from the value of stocks worldwide. No major stock market was left unscathed and the risk of financial and economic contagion became evident again.
There are growing concerns internationally that in the event of another Wall Street or global stock market crash and a new systemic crisis – a Eurozone debt crisis or another Lehman Brothers collapse – there could be enforced bank closures or extended bank holidays in the EU and U.S. as seen in Greece recently.
In this scenario, deposit boxes and vaults in U.S. banks and financial institutions could be sealed and gold confiscated again.
This interesting commentary by Mark showed up on the goldcore.com Internet site yesterday morning BST—and it’s worth the read.
Gold sales at the Perth Mint plummeted in August from a nine-month high in the previous month as prices recovered from a 5-1/2-year low.
Sales of gold coins and minted bars fell to 33,390 ounces in August from 51,088 ounces in July, according to data from Perth Mint.
Silver coin sales dropped to 707,656 ounces in August from 746,700 ounces in the previous month.
The Perth Mint runs the only gold refinery in Australia, the world’s second-biggest gold producer after China.
The above four paragraphs is all there is to this tiny story filed from Perth at 1:07 p.m. India Standard Time on their Friday afternoon. It was posted on the bullionstreet.com Internet site. The photo is worth a quick look.
Palladium’s price drop to five-year lows has tarnished its reputation as the beacon of the precious metals sector, underscoring easy availability of metal to the market even after years of deficit.
Above-ground stocks of palladium, chiefly used in emissions-curbing auto catalysts, are known to be plentiful and could return to the market quickly if disillusionment with price performance prompts investor liquidation.
Softening demand may trigger end-user selling.
While many commodities are suffering from falling investment, palladium’s reversal has been particularly stark given its previous stellar outperformance. When gold and platinum prices slid in the last two years, palladium powered to 13-year highs above $900 an ounce.
As outlined in the Bank Participation Report, the price is 100 percent controlled by the interplay between JPMorgan et al and the Managed Money traders. All the rest is bulls hit—including just about everything that’s in this longish Reuters piece that was filed from London yesterday. I found this on the Sharps Pixley website last night.
In 2014 the conventional conduits of bullion flows to China, from all around the world first to Hong Kong and then to the mainland, have been replaced by direct exports. For example, the U.K. is exporting bullion directly to China since April 2014 – as I reported at the time. The result of the rearrangement in these gold flows is that Hong Kong’s export to the mainland has lost its accuracy as an indicator for China’s gold hunger. In a few posts we’ll have a look at trade data from several gold exporting nations and trading hubs to grasp how much gold China is importing this year.
Starting April last year, U.K. shipments of gold directly to China have been going up. In June 2015 the U.K. net exported a record 32.4 tonnes of gold to China, up 6.5 % m/m, up 116 % y/y.
Let’s see if we can learn some more from the U.K.’s trade data. Remarkably, the U.K. became a net importer of gold in June with 2 tonnes net imported. Falling total exports and rising total imports caused this. Concluding, although China imported a record monthly tonnage from the U.K. in June, the Brits did not suffer a net outflow because of concurrent strong imports into London. U.K. total gold import in June was 49.3 tonnes, compared to a gold net export to China at 32.4 tonnes.
This short commentary, with two charts embedded, appeared on the bullionstar.com Internet site yesterday—and it’s worth a look. I found it posted on the gata.org website.
The PHOTOS and the FUNNIES
The first photo is one that reader M.A. took in his ‘backyard’ yesterday afternoon. It’s mummy and daddy wild turkeys with this year’s brood in tow. The photo isn’t all that great—and the colour palette is way out of whack and my attempts to fix weren’t successful. But the subject material made it worth posting. I cropped it a bit.
The U.S. Mint has been pumping out prodigious amounts of Silver Eagles over the course of the past 29 years, over 350 million, including more than 200 million over the past 5 years. There has to be more Silver Eagles in existence (depending on how many JPMorgan may have melted) than any other silver form of retail silver produced over the past 5 years. Yet, this is the first form that goes into shortage and whose premiums seem to lead the way. If there are so many Silver Eagles in existence, why doesn’t that prevent a shortage from developing in this form of retail silver?
Just like there seems to be plenty of Silver Eagles in existence, there appears to be plenty of 1000 oz bars around, some 1.3 billion oz in total (1.3 million bars in all). The catch is that just because it exists, doesn’t mean it’s available for sale at current prices. Because not enough of the 350 million Silver Eagles were available for sale, a shortage erupted. Likewise, when not enough 1,000 oz bars are available for sale, a wholesale shortage will erupt. And the same reason not enough Silver Eagles were available will apply to there not being enough 1,000 oz bars available at some point – the price was too low. In the case of Silver Eagles, prices are adjusted higher in the form of premium increases. In the case of 1,000 oz bars, it must be the price of silver itself to adjust upward, as this is the core form of silver upon which premiums of everything else are derived.
The main lesson from the explosion in price volatility in crude oil and not in silver, it seems to me, is that there is some great and unique price force at play in silver over these past 4.5 years. Remarkably, everything I look at, including the discussion above on the signs of developing wholesale tightness, revolves around my core belief that JPMorgan has amassed a massive amount of physical silver. This is the one thing that ties everything else together. The reason silver has been down in price for the last 4.5 years is because that is in synch with JPMorgan buying silver at the cheapest price possible. — Silver analyst Ted Butler: 02 September 2015
Today’s pop ‘blast from the past’ is black and white video clip from 1964 that I found on the youtube.com Internet site. I was 16 years old back then—now I’m 66. Where the hell has all that time gone? Neither the band, nor the tune, need any introduction—and the link is here.
Today’s classical ‘blast from the past’ is an in-concert performance of Felix Mendelssohn Bartholdy‘s overture to William Shakespeare’s A Midsummer Night’s Dream, Op. 21. This 1997 recording is by the Gewandhausorchester Leipzig, with Kurt Masur conducting—and the link is here.
It was another day where JPMorgan et al made sure that the precious metals were no safe haven once again—and they had the perfect backdrop for doing the dirty, the monthly job report. They put it to good use.
Here are the 6-month charts for the Big 6 commodities once again. Without exception, they are all back below their respective 50-day moving averages as of yesterday’s close.
It’s fairly safe to assume that the powers-that-be are terrified of a run from paper assets and into hard assets at this point in time. This is doubly concerning now that the flight from the equity markets isn’t being matched by a corresponding rush into the world’s bond markets, which have always been perceived as a ‘safe/alternate haven’ when equities are heading into the toilet—as per the Bloomberg story in the Critical Reads section further up. Combine that with “The Unwind” that Doug Noland presents in today’s missive—and you have all the necessary ingredients for a major bull market not only in the precious metals, but in the entire commodities complex, as they will all be dragged higher as well. That particularly applies to copper and crude oil, the other two members of the Big 6 commodities group that JPMorgan et al have an iron grip on at the moment.
When I read Peter Warburton classic treatise back in 2001—I had no idea that I would be looking at just such a scenario today. The essay was entitled “The debasement of World Currency: It’s inflation, but not as we know it“—and the three most famous paragraphs from it, encapsulate the underlying struggle between Williams Jennings Bryan’s “Money Trusts”—and the producer classes in all nations of the world. The world has now become a place where the prudent have been sacrificed on the altar of the wanton. The Anglo/American domination of the world’s resource-producing countries lives on—all aided and abetted by the CME Group, the CFTC—and the LBMA, as the COMEX futures market has become the instrument of enslavement.
Here, for the umpteenth time, are what I consider to be the three most important paragraphs that have ever been written on the price management scheme in commodities—and they were presented in the public domain long before anyone had a complete grasp of this monster that the world faced. And as you read this, don’t forget that it was written almost 15 years ago, long before derivatives and algorithms were a serious force in the COMEX futures market.
Central banks are engaged in a desperate battle on two fronts
What we see at present is a battle between the central banks and the collapse of the financial system fought on two fronts. On one front, the central banks preside over the creation of additional liquidity for the financial system in order to hold back the tide of debt defaults that would otherwise occur. On the other, they incite investment banks and other willing parties to bet against a rise in the prices of gold, oil, base metals, soft commodities or anything else that might be deemed an indicator of inherent value. Their objective is to deprive the independent observer of any reliable benchmark against which to measure the eroding value, not only of the US dollar, but of all fiat currencies. Equally, they seek to deny the investor the opportunity to hedge against the fragility of the financial system by switching into a freely traded market for non-financial assets.
It is important to recognize that the central banks have found the battle on the second front much easier to fight than the first. Last November I estimated the size of the gross stock of global debt instruments at $90 trillion for mid-2000. How much capital would it take to control the combined gold, oil, and commodity markets? Probably, no more than $200 billion, using derivatives. Moreover, it is not necessary for the central banks to fight the battle themselves, although central bank gold sales and gold leasing have certainly contributed to the cause. Most of the world’s large investment banks have over-traded their capital [bases] so flagrantly that if the central banks were to lose the fight on the first front, then the stock of the investment banks would be worthless. Because their fate is intertwined with that of the central banks, investment banks are willing participants in the battle against rising gold, oil, and commodity prices.
Central banks, and particularly the U.S. Federal Reserve, are deploying their heavy artillery in the battle against a systemic collapse. This has been their primary concern for at least seven years. Their immediate objectives are to prevent the private sector bond market from closing its doors to new or refinancing borrowers and to forestall a technical break in the Dow Jones Industrials. Keeping the bond markets open is absolutely vital at a time when corporate profitability is on the ropes. Keeping the equity index on an even keel is essential to protect the wealth of the household sector and to maintain the expectation of future gains. For as long as these objectives can be achieved, the value of the U.S. dollar can also be stabilized in relation to other currencies, despite the extraordinary imbalances in external trade.
Well, we’re now at the end of the road—and as the financial system begins to unravel world wide, the powers-that-be are at battle stations 24/7 in an attempt to channel money flows away from the investment sector that would prove lethal to them.
In the end, these attempts will fail, of course—and it’s my opinion that all the antics we’ve seen in all four precious metals over that last three or four years, are in preparation for that event. JPMorgan is the ultimate insider bank—and they’re the Fed’s bank for a reason—and are acting accordingly.
Jim Rickards, amongst others, has already alluded to the fact that some sort of financial reset is in the cards—and his comments in the two interviews in today’s column that it may come before the IMF, World Bank, or BIS is prepared, is a very real scenario going forward.
As he said in the headline to today’s column, once confidence is lost, then all bets are off.
And as Alan Greenspan said in the last two paragraphs of his classic essay “Gold and Economic Freedom“—
“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.”
“This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”
And in the two sentences I’ve bolded above, it doesn’t just have to be gold. It can as Alan said, be silver or copper—or any commodity. Right now the battle is being fought in the Big 6 commodities, as the banks can’t be everywhere. But these six commodities are they key commodities—and if you can control those, the rest of the commodity complex will fall into line—and so they have.
Charles “Chuck” Colson, President Nixon’s general counsel of Watergate fame, had a plaque in his office with the famous Douglas MacArthur quote that reads as follows—“If you’ve got them by the balls, their hearts and minds will follow.”
That’s where the ‘4 or less’ U.S. bullion banks, plus Canada’s Scotiabank, have got all the nations that are hewers of wood and drawers of water on Planet Earth right now.
And as I’ve said before, the Russians and Chinese know all this—and when push really becomes shove, and it will at some point—it wouldn’t surprise me in the slightest if they played the gold card, or its equivalent—and freed the world of this Anglo/American imperialism/colonialism once and for all.
I don’t know what day that’s going to be, dear reader, but it is coming.
I’m done for the day—and the week—and I’ll see you here on Tuesday.