09 January 2016 — Saturday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
After trading quietly for the first two hours in Hong Kong on their Friday morning, the price got sold down about six buck—and by 9:30 a.m. GMT in London, the price was down about 12 dollars. It spent the rest of the day wandering around five dollars either side of $1,100 spot.
The high and low ticks were recorded as $1,113.10 and $1,091.80 in the February contract.
Gold closed in New York yesterday at $1,104.60 spot, down $4.60 from Thursday’s close. Net volume was high once again at 169,500 contracts.
Here’s the 5-minute gold tick chart—and I thank Brad Robertson for that, as usual. There was a bit of volume in morning trading in Hong Kong around that 6 dollar sell-off, but from there, it dried up until around 5:30 a.m. Denver time on this chart, which was 12:30 p.m. in London—and 7:30 a.m. in New York. Note the monster volume spike on the low tick of the day, which came minutes after 6:30 a.m. MST on this charts, which was minutes after 8:30 a.m. EST. Once the COMEX closed at 11:30 a.m. Denver time on the chart below, volume vanished. The vertical gray line is midnight in New York—add two hours for EST—and don’t forget the ‘click to enlarge‘ feature if the folks over at wordpress.com have it working again, that is.
The silver price was manhandled pretty good by ‘da boyz’ yesterday, as they and their algorithms showed up two or three times during the Friday trading session—and it’s certainly evident where that happened on the chart below. They closed silver back below $14 spot—and also back below its 20-day moving average.
The high and low ticks were reported by the CME Group as $14.34 and $13.87 in the March contract, which is the current front month.
Silver was closed in New York yesterday at $13.925 spot, down 38 cents from Thursday. In the process, JPMorgan et al took back all of Thursday’s gains, plus a bit more. Net volume was very decent at just over 48,000 contracts.
The platinum price didn’t do much yesterday, except for about a 14 dollar down/up/down move, which landed the price back to almost unchanged, which is where it had traded most of the Friday session at, anyway. Platinum finished the Friday session at $877 spot, up 2 bucks from Thursday.
The palladium price was up five or six dollars by 1 p.m. Hong Kong time—and it had a mini version of the down/up/down price move that platinum had during the COMEX trading session on Friday as well. It closed unchanged on the day at $491 spot.
The dollar index closed late on Thursday afternoon in New York at 98.29—and it continued to rally in fits and starts until the big spike high just before the release of the job numbers at 8:30 a.m. EST. The spike took the dollar index up to the 99.18 mark, but within a few hours it had collapsed almost 70 basis points. It struggled higher until about 12:20 p.m. in New York—and then quietly sold off for the rest of the day. It closed at 98.40—up 11 basis points from it’s Thursday afternoon close.
The world’s ‘reserve currency’ is looking real shaky at the moment—and here’s the 6-month chart so you can keep up with its medium term antics.
The gold stocks opened down about 3 percent, but recovered a bit of those lows by 11:30 a.m. At that point they rolled over, with their collective lows coming just minutes before 2 p.m. At that point the gold price began to rally a little—and back above the $1,100 spot mark—and the shares followed. But they still closed down 3.02 percent.
The silver equities followed an almost identical path, complete with their low ticks coming minutes before 2 p.m. in New York when the silver price also turned upwards. But at the end of the day, Nick Laird’s Intraday Silver Sentiment Index closed down 2.34 percent.
For the week, the HUI closed higher by 6.62 percent—but the ISSI closed down by 0.91 percent.
The CME Daily Delivery Report showed that zero gold and 1 lonely silver contract was posted for delivery within the COMEX-approved depositories on Tuesday.
The CME Preliminary Report for the Friday trading session showed that gold open interest for January fell by 5 contracts, leaving 257 still open. Silver o.i. in January went down by 1 contract, leaving 81 still open.
There was another big deposit in GLD yesterday, as an authorized participant added 143,493 troy ounces. And as of 7:48 p.m. EST yesterday evening, there were no reported changes in SLV.
Of course the U.S. Mint has had nothing to report since mid-December—and won’t be reporting any sales for 2016 until late next week, or early the following week. When they do have something to say for themselves, I’ll have it here.
There was no gold activity worthy of the name at the COMEX-approved depositories on Thursday. There were two kilobars shipped out of the Manfra, Tordella & Brookes, Inc. Depository—and that was it.
It was busier in silver, of course. There was 579,357 troy ounces reported received, all of it into Canada’s Scotiabank—and 413,443 troy ounces were shipped out the door. Of the amount shipped out, there was 200,072 troy ounces shipped out of JPMorgan’s vault. The link to that action is here.
It was another quiet day over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday, as only 282 kilobars were received—and only 213 were shipped out. All of the activity was at the Brink’s, Inc. depository as usual. I shan’t bother linking these amounts.
While on the subject of the COMEX-approved gold kilobar depositories, here’s a chart that Nick passed around yesterday afternoon that shows the activity at the Brink’s, Inc. vault ever since it became part of the COMEX system back in March of last year. You’ll note the quiet period that we’ve been in for the last week or so, as the chart has flat-lined since Christmas. I’m not sure if that means anything or not, as there just isn’t enough history to pass judgement.
The Commitment of Traders Report for positions held at the close of COMEX trading on Tuesday was pretty much what Ted Butler said it would be.
In silver, the headline number in the Legacy COT Report showed that the Commercial traders reduced their net short position by 1,079 contracts. They did this by purchasing 531 long contracts and covering 548 short contracts. The Commercial net short position is now down to 144.0 million troy ounces. Ted said that the Big 4 traders covered about 1,100 of their short contracts—and the ‘5 through 8’ Commercial traders covered about 800 short contracts. This was counterbalanced by the small traders other than the Big 8, Ted’s raptors, selling 800 long contracts.
Ted estimates JPMorgan’s short position in silver around the 14,000 contract mark, or 70 million troy ounces, although he may have changed his mind since he discovered that the numbers in this month’s Bank Participation Report are flat-out wrong.
Under the hood in the Disaggregated COT Report, the Managed Money traders reduced their short position by 908 contracts, but also reduced their long position by 156 contracts—so the Managed Money traders didn’t contribute anything to the change in the headline number in the previous paragraph. All the material changes that mattered during the reporting week occurred in the Nonreportable/small trader category.
In gold, the changes there weren’t very large, either. The Commercial traders increased their short position by 3,940 contracts. They did this by purchasing 4,435 short contracts, but they bought 495 long contracts as well. The difference in these two numbers is the increase in the Commercial net short position, which now stands at 1.93 million troy ounces, which is an insignificant amount on an historical basis.
Ted was expecting a much bigger increase in the short position than the Legacy COT Report showed—and that increase appeared under the hood in the Disaggregated Report. There, the Managed Money traders decreased their short positions by 7,613 contracts—and they, or the nontechnical fund longs in the same category, added another 3,661 contract to their long positions. The net change was 11,274 contracts, much more in line with what Ted had estimated. There were also decent increased in the short positions in both the “Other Reportable” category—and the Nonreportable/small trader category as well. So most of the activity in gold during the week really didn’t involve the Commercial traders too much.
Of course, this COT Report is already ‘yesterday’s news’ in some respects. But with two trading days left before the cut-off for next Friday’s COT Report, its way too early to pass judgement on that fact, especially when you factor in Friday’s price action. I’ll revisit this issue in my Wednesday column next week once all that trading data is in, as speculation is useless at this juncture—and I know that Ted will have lots more to say about this in his weekly review to his paying subscribers later today.
Here’s Nick Laird’s famous “Days to Cover” chart for all the physically traded commodities on the COMEX. It shows the days of world production that it would take to cover the short positions of the Big 4 and Big 8 traders in each commodity on the chart shown below. My back-of-the-envelope calculation indicates that the two king silver shorts, JPMorgan and Canada’s Scotiabank, are net short about 140 million troy ounces of silver in the COMEX futures market—about 66 days of world silver production—and just under 40 percent of the entire short position held by the Big 8 short holder in total. That is beyond obscene and grotesque. The same can be said about the other three precious metals, especially platinum.
Before calling Ted yesterday afternoon, I went through the numbers in the new Bank Participation Report—and was alarmed at what I found there. Ted didn’t know what to make of them, because they didn’t make any sense. In the end he noticed that the numbers in the Bank Participation Report were flat-out wrong, because the total open interest numbers for each of the four precious metals shown in that report, didn’t match the total open interest numbers int the companion COT Report from which the BPR data is extracted. They should have been exactly the same, but they weren’t. I’m glad he noticed it because I would have never figured it out on my own—and that’s why he’ll always be the master, and I’ll always be the pupil.
Anyway, I’ll keep an eye on the report starting on Monday, because I’m sure that someone will complain about it—and it’s such a major blunder that the CFTC may actually update it next week. If that happens, I will report on it at that time.
Nick sent around two other charts yesterday. They show the weekly and yearly withdrawals from the Shanghai Gold Exchange. For the week ending December 31, 2015 there was 40.941 tonnes withdrawn—and for the year it was 2,593.37 tonnes. The charts below say it all. I’m sorry, but the ‘click to enlarge‘ feature still isn’t working.
I don’t have all that many stories for you today—and some of the ones I do have, I’ve been saving for today’s column for length and/or content reasons. I hope you have time in what’s left of your weekend to read the ones that interest you.
As we noted in the jobs preview, only a super strong number had any chance of prompting a market reaction, and sure enough, the just announced December print of +292,000 smashed expectations of +200K, surging from last month’s upward revised 252K, while October was revised to a massive 307,000, a net addition of 50K over the last two months.
As we noted in the jobs preview, only a super strong number had any chance of prompting a market reaction, and sure enough, the just announced December print of +292,000 smashed expectations of +200K, surging from last month’s upward revised 252K, while October was revised to a massive 307,000, a net addition of 50K over the last two months.
This 2-chart Zero Hedge article showed up on their Internet site yesterday morning at 8:40 a.m. EST—and it’s worth skimming. I thank Richard Saler for today’s first news item.
As we noted earlier, while the headline payrolls print blew away consensus estimates, printing above the highest expectations, there was a rather unpleasant number in the data: nominal average hourly wages actually dipped by 1 cent to $25.24.
What caused this? There are three reasons.
First: the continued surge of minimum wage jobs, as seen in the chart below, which shows that in December another 36,900 minimum wage waiters and bartenders were added to the labor force, bringing the total to a new record high of 11.3 million.
Putting this in context, here is a chart showing the relative addition of waiter, bartender jobs in 2015 vs high-paying manufacturing jobs. No comment necessary.
This 6-chart must read commentary appeared on the Zero Hedge website at 9:23 a.m. on Friday morning EST—and it’s courtesy of Richard Saler as well.
America’s labor-market juggernaut continued to roll unabated at the end of 2015.
Employers in December added 292,000 workers, exceeding the highest estimate in a Bloomberg survey, and payrolls for the previous two months were revised higher, a Labor Department report showed on Friday. The jobless rate held at 5 percent as people entering the labor force found work. At the same time, worker pay disappointed, rising less than forecast from a year earlier.
Stocks and the dollar climbed after the report showed durable strength in the job market that indicates employers were optimistic about the economy’s prospects just before the recent rout in global financial markets. Federal Reserve policy makers, who raised interest rates in December for the first time in almost a decade and signaled further moves would be gradual, are counting on tighter labor conditions to lead to a pickup in wages and inflation.
“This should calm some fears about the U.S. economy losing growth momentum,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York and a former Fed economist. It “also validates the sense that there’s no rush to tighten again because we’re not seeing much wage pressure.”
Here’s the Pollyanna look at the jobs report courtesy of the cheerleaders at Bloomberg. It put in an appearance on their Internet site at 8:30 a.m. Denver time on their Friday morning—and I thank Brad Robertson for this one.
According to Friday’s (January 8) payroll jobs numbers, almost 300,000 new jobs were created in December. Additionally, the previous two months were revised upward by 50,000 jobs. Apparently, the equity market did not believe the report, with the averages moving down today.
As I have pointed out almost monthly for what I think could be approaching two decades, the alleged job growth always takes place in non-tradable domestic services, that is, in areas that do not produce exports and have no competition from imports. This is the job profile of a Third World country.
Twelve years ago I predicted at a major Washington, D.C., conference that was nationally televised that in 20 years the United States would have a Third World economy if jobs off-shoring, which benefits only corporate executives and shareholders, continued.
Jobs off-shoring has continued, and judging by the payroll jobs reports from the U.S. government, the U.S. is already a Third World economy.
This right-on-the-money commentary from Paul was posted on his website yesterday—and it’s worth reading. I thank Roy Stephens for his first contribution to today’s column.
Moments ago, the Fed released the latest, November, consumer credit data: it was not good. Rising by just $13.95 trillion, it was a big miss to the $18.5 trillion expected, and below the $15.6 billion downward revised increase in October. In fact, three months after the historic surge in September to the highest print in the revised series, total consumer credit has tumbled to the lowest since January.
But the big problem was not in the total data, but in one of the two key component data sets.
Recall that a few days ago we noted something very disturbing for US auto makers: for all the hoopla around the auto sales number, U.S. domestic car sales had actually dropped to a 6 month low, missing estimates by the most since 2008.
What was just as disturbing was that “plans to buy an auto” had tumbled the most since January of 2013. This collapse in auto loan issuance could not have come at a worse possible time: the chart below shows that the motor vehicle inventory-to-sale ratio is now the highest since August 2008.
This very interesting and worthwhile Zero Hedge piece was posted on their website at 3:20 p.m. on Friday afternoon—and it’s the third and final offering from Richard Saler—and I thank him on you behalf.
China has become a scapegoat for U.S. stock weakness, but equities will struggle to rise this year because of the American economy, widely followed bear Marc Faber said Thursday.
“The U.S. economy is weakening and weakening much more than is perceived,” the Gloom, Boom & Doom Report publisher told CNBC‘s “Fast Money: Halftime Report.”
Stark drops in Chinese stocks triggered trading halts twice this week, fueling concerns about a slowdown there and contributing to selling around the globe. But China is not the reason U.S. stocks “are unlikely to make new highs this year,” Faber contended.
“It has nothing to do at all with China,” he said.
Well, dear reader, unless the Fed is prepared to goose the U.S. equity markets with more QE, I’d bet that we’ve already seen the highs for the year. But I guess one should never underestimate the Plunge Protection Team. This 2:38 minute video interview with Marc was posted on the cnbc.com Internet site at 12:54 p.m. EST on Thursday afternoon—and I thank Ken Hurt for sending it our way.
This 1 hour and 3 minute documentary is an absolute must watch. 9/11 technical analysis by architectural and engineering experts, pretty much proves 9/11 was a lie, even to dyed-in-the-wool deniers.
I’ve always known that the events of 9/11 were an inside job—and this video marks it ‘Paid’. I thank Roy Stephens for sharing this youtube.com video with us. He sent it my way on Sunday—and for obvious reasons it had to wait for today’s column.
Venezuela’s new economy czar Luis Salas is tasked with controlling what is believed to be the world’s highest rate of inflation, but comes to the job with an unusual perspective: that inflation does not really exist.
President Nicolas Maduro on Wednesday tapped the 39-year-old sociologist as vice president for the economy amid soaring consumer prices and chronic product shortages, signaling a move toward orthodox socialism in the OPEC nation struggling under low oil prices.
Essays written by Salas describe scarcity and spiraling prices as the result of exploitation by businesses rather than government policy, offering an academic underpinning to the “economic war” explanation that Maduro uses to describe the current malaise of recession, runaway prices and widespread product shortages.
“Inflation does not exist in real life,” he wrote in a 2015 pamphlet called “22 Keys to Understanding the Economic War.” “When a person goes to a shop and finds that prices have gone up, they are not in the presence of ‘inflation.'”
Wow, when you read stuff like this from that country’s newest ‘economic advisor’, you know that there’s big trouble in River City. This Reuters article, filed from Caracas, showed up on their website at 1:32 p.m. on Thursday afternoon EST—and I thank West Virginia reader Elliot Simon for bringing it to our attention.
The longest recession in a century; the biggest bribery scandal in history; the most unpopular leader in living memory. These are not the sort of records Brazil was hoping to set in 2016, the year in which Rio de Janeiro hosts South America’s first-ever Olympic games. When the games were awarded to Brazil in 2009 Luiz Inácio Lula da Silva, then president and in his pomp, pointed proudly to the ease with which a booming Brazil had weathered the global financial crisis. Now Lula’s handpicked successor, Dilma Rousseff, who began her second term in January 2015, presides over an unprecedented roster of calamities.
By the end of 2016 Brazil’s economy may be 8% smaller than it was in the first quarter of 2014, when it last saw growth; GDP per person could be down by a fifth since its peak in 2010, which is not as bad as the situation in Greece, but not far off. Two ratings agencies have demoted Brazilian debt to junk status. Joaquim Levy, who was appointed as finance minister last January with a mandate to cut the deficit, quit in December. Any country where it is hard to tell the difference between the inflation rate—which has edged into double digits—and the president’s approval rating—currently 12%, having dipped into single figures—has serious problems.
This very long commentary is both very interesting and very depressing at the same time. It appeared on the economist.com website last Saturday—and it’s certainly worth reading if you have the time and/or the interest. I thank Patricia Caulfield for finding it for us—and for obvious reasons it had to wait for my Saturday column.
Five downtown office towers currently under construction will add an 3.859 million square feet to the Calgary commercial real estate market between the first quarter of this year and 2018 — and likely boost a vacancy rate nearing 20 per cent.
“It is adding inventory but they are partially leased. But those tenants are coming out of other buildings. So it is going to push up vacancy,” said Susan Thompson, research manager with Calgary Economic Development.
“I’m hearing from various experts around the city . . . they’re expecting vacancy to peak later this year — Q3ish — somewhere around 20 per cent.”
Statistics from commercial real estate firm CBRE Limited indicate there was 7.1 million square feet of vacant space in downtown Calgary out of an inventory of just over 40 million square feet in the fourth quarter of 2015 — a vacancy rate of 17.6 per cent, up from 11.8 per cent in the first quarter of 2015 and from 9.8 per cent a year ago.
This story from the Calgary Herald found a home over on the edmontonjournal.com Internet site on Thursday—and I thank Roy Stephens for sending it our way.
I’d love to be irrepressibly sunny, like our Hollywood-handsome, selfie-loving [Canadian] prime minister [Justin Trudeau]. Really, I would, pinky swear.
It’s a pain being an economy-obsessed, cranky old grump with a double chin, as opposed to the hunky heartthrob who recently graced the pages of Vogue magazine. Hey, some guys win the lottery in life, some don’t. What can I say.
Besides, it makes more sense to be sunny than sombre, at least tactically speaking. It’s easier for people to like you. And now that the cheerleader-in-chief — “In Canada, better is always possible!” — has replaced that dour other guy, being sunny is no longer viewed as naive. Instead, it’s seen as a mark of virtue.
Thing is, I’m having a tough time adopting the new guy’s huggy, feel-good optimism. I just don’t see all that much to be upbeat about right now. For starters, the economy sucks, as the Dauphin must realize, even if he’s not eager to admit it.
This well written article rips Canada’s new Prime Minister a new one—and if you have the interest, it’s worth your while. It was posted on the edmontonjournal.com Internet site on Wednesday—and I thank Roy Stephens for his second offering in a row.
Robert Fico said on Thursday that Slovakia would fight against immigration from Muslim countries to prevent attacks like last year’s shootings in Paris and large-scale assaults of women in Germany, which took place on New Year’s Eve.
“We don’t want something like what happened in Germany taking place in Slovakia,” Fico said, adding that the country must “prevent [its] women from being molested in public places.”
According to reports by local German newspaper Kölner Stadt-Anzeiger and an online preview of investigations by Sunday paper Welt am Sonntag, Cologne authorities have identified some of the perpetrators in the attacks as been Syrian asylum seekers.
In light of the attacks, Fico told reporters that Bratislava would “never make a voluntary decision that would lead to the formation of a unified Muslim community in Slovakia….Multi-culturalism is a fiction. Once you let migrants in, you can face such problems,” Fico said.
This story appeared on the dw.com Internet site on Thursday sometime—and it’s something I found in yesterday’s edition of the King Report.
As had become inevitable, Ukraine at the end of the year defaulted on the $3 billion bond held by Russia.
As discussed previously, the Ukrainian default became inevitable following Ukraine’s failure to achieve better terms from its private creditors.
As was also inevitable, Russia has responded to Ukraine’s default by bringing legal proceedings against Ukraine in London.
In this article I will discuss briefly the legal claim Russia is bringing against Ukraine, before turning to an article on the subject by the U.S. economist Michael Hudson, which has attracted a lot of attention.
This commentary by Alexander Mercouris appeared on the russia-insider.com Internet site on Thursday sometime—and it’s an absolute must read in my opinion, as it touches on some key issues that go to “the very root of modern international commercial and banking law.” It’s the first offering of two in a row from Larry Galearis.
Both Batchelor and Cohen see 2016 so far as an expanding Cold War2 in the M.E. and increasing instabilities in Ukraine – the latter remaining a flash point as the country declines both economically and politically. In the M.E. a truculent Washington still refuses to cooperate with Russia against ISIS in Syria (even refusing to share strategic intelligence) even as the Pentagon advocates a supporting role in Syria and for the Assad regime. Meanwhile tensions mount between Iran and Saudi Arabia as Russia slowly beats back ISIS in Iraq, and the Iraqis exploit these gains in their country. In Washington the war party is incensed about Russian successes and ratchet up their vilification campaign against Putin, Assad, and Iran in the American press. The American people of course hear nothing about Russian successes in the M.E.
The latest Gallop Poll about conditions in Ukraine are also a focus. Although they involve only Kiev’s Ukraine and not the Donbass the revelations about those people’s confidence in their government, their living standards, and hopes for the future show a war weariness regardless of their attitudes towards Russia. And unhelpfully the IMF’s (usual) policy of austerity, if implemented by the Kiev government, will surely hasten the declines for all the people. Much of this is also linked to the gangster-like controls of the oligarchs in government and economic sectors (and Gallop Poll data) favour the likelihood of a government failure ahead with new elections. Cohen considers that Right Sector would likely form the next government. That a Nazi style government in Ukraine could hold a failed state of multicultural ethnicity together is laughable, and Cohen is quite clear that the process of division beginning with the Donbass rebels two years ago would likely continue on similar ethnic grounds with neighbouring states incorporating parts of Ukraine according to their ethnic characters. It is, however, less clear how Washington could stage more military adventures in that kind of environment, an environment that to be sure Putin was counting on for an outcome, and one that he was careful not to hasten over these past two years. If Washington wants its Ukrainian “colony” it is going to have to foot ALL of the expenses for the whole country in order to accomplish this. One can assume Putin knows this too even as Washington may be oblivious.
This weekly audio commentary runs for a hair under 40 minutes—and is always a must listen for me—and I will be doing precisely that sometime this weekend. It was posted on the audioboom.com Internet site on Tuesday—and I thank Larry Galearis for the link—and the above executive summary.
The tale of a mysterious mound of Iraqi cash seized at the [Canada/U.S.] border, and the oddball cast that’s fighting for it
At the busy Ambassador Bridge linking Detroit to Windsor, the continent’s most heavily travelled crossing, a Canadian border agent greeted three men in a GMC Yukon Denali with the usual recital of questions.
Did they have any firearms? Were they bringing in currency worth $10,000 or more?
“No, no, nothing like that,” the driver answered, according to notes made by members of the Canada Border Services Agency. Unconvinced, the agent told him to pull over for a search.
An inspection of the car would turn up two handguns and some ammunition, but when CBSA agent Celine El-Tayar opened the back door on the driver’s side of the SUV, she faced a wall of banker’s boxes. She tugged on one. It was unexpectedly heavy. Lifting the lid, she saw wads of money.
Box after box — 24 in all — were similarly stuffed with bound wads of currency, each bill featuring the cursive swoops of Arabic lettering.
Over the next several hours, border agents and RCMP officers counted and photographed more than eight billion Iraqi dinars, at the time worth about $7.4 million.
This very long, but very interesting story put in an appearance on the nationalpost.com Internet site on January 1—and it’s another offering from Roy Stephens—and another item that had to wait for today’s column.
John C. Calhoun, the 19th century American politician and one time Vice President, once said: “The interval between the decay of the old and the formation and establishment of the new constitutes a period of transition which must always necessarily be one of uncertainty, confusion, error, and wild and fierce fanaticism.”
We are currently in just such an era as we transition from the American/Western dominated world to the next. Last year I described China’s various moves to seize control of the world economy and that process is continuing: exemplified during 2015 by the mad rush to join the Asian Infrastructure Investment Bank in defiance of the USA. We are also seeing massive and dangerous political instability in the Middle East, which seems to be completely misunderstood by Western governments.
There is no sign of real recovery in the world economy. Growth is anemic everywhere. In my view the “growth” in the USA is primarily the bringing forward of demand by effectively zero interest rates. Why wait two years for that new Corvette when it costs you nothing to buy it now? Sure, the U.S. raised rates by 25 basis points but this is negligible in the overall economy. The world stock markets are being led lower by China so it finally looks as though the correction is happening.
Here in Dubai the close of 2015 and the opening of 2016 has been marked by the destruction of the Address Downtown Hotel and by the execution of 47 people in the Kingdom of Saudi Arabia. Many of those 47 will not be missed but the execution of Sheikh Nimr al-Nimr, a Shia religious leader, has led to the trashing of the Saudi embassy in Tehran and the cessation of diplomatic relations between the Kingdom and Iran. This further divides and destabilizes the region when, above all, we need unity to face Daesh.
This interesting and informative commentary appeared on Lawrie Williams website yesterday—and it’s certainly worth reading if you have the interest.
This video interview was on the Canadian Broadcast Corporation TV network on Thursday. The interview with Jim begins just after the 1:30 minute mark, but it may be advisable to listen the preamble before listening to what Jim has to say. The interview lasts about 6 minutes. I thank Harold Jacobsen for sharing it with us.
It’s being called the worst start for global securities markets ever. The Shanghai Composite was down a quick 10% this week. Japan’s Nikkei sank 7.0%. Hong Kong’s financial index dropped 8.7%. Germany’s (investor “darling”) DAX equities index was slammed for 8.3%. Here at home, the S&P fell a relatively moderate 6.0%. Biotechs sank 10%. Gloomily, the financials (banks and broker/dealers) were down almost double-digits. The small caps were hit for 8%. The Nasdaq100 fell 7%. “FANG” was defanged.
Credit spreads widened across the board. With “money” flowing out of bond funds, even top-tier bonds are now feeling the effects. Investment-grade spreads widened this week to a three-year high. It was another tough week for high-risk corporate debt.
It was an ominous beginning to what is poised to be a most tumultuous year. Market participants are quickly coming to appreciate that China does in fact matter. Few understand why. Most – from billionaires to fund managers to retail investors – will “Do Nothing.” This has worked just fine in the past – repeatedly. Not understanding and not doing anything will be detriments going forward.
This must read commentary by Doug appeared on his Credit Bubble Bulletin website very late on Friday evening MST.
Back in June 2013, when Deutsche Bank opened a gold vault in Singapore which could hold up to 200 metric tons, the German bank was euphoric about the prospects for storing physical gold: “Gold has traditionally been stored in London, Zurich and New York, but there is a serious shift in dynamics going on as the global financial crisis continues to evolve,” Mark Smallwood, Deutsche Asset & Wealth Management’s head of wealth planning in the Asia-Pacific region, told The Wall Street Journal.
Mark was correct and thanks to the ongoing decline in gold prices, Chinese and Indian demand for the metal, the physical metal that is, not its various paper manifestations, has risen to record levels. Alas, one thing Mark did not know is that in early 2014, a German regulator would reveal that “precious metals manipulation was worse than the Libor scandal” and as a result the largest German bank (and largest bank in the world by notional derivative exposure) – which has been probed and found guilty for rigging virtually every market, including gold – would quietly liquidate its entire physical precious metals trading group.
Which meant that Deutsche Bank’s Singapore gold vault, was about to be sold.
But while the sale of DB’s Singapore gold vault was to be expected with China’s ravenous appetite for warehousing physical gold around the Pacific Rim, what may have escape popular attention is that Deutsche Bank’s even more massive, and even newer, gold vault in London was also “on the block” as of December 2014 when we reported that Deutsche Bank is “open to offers for its London-based gold vault following the closure of its physical precious metals business.” As Reuters noted: “If the right offer came along, then the bank would sell the London vault,” one source close to the situation said.
This amazing story is datelined at 7:54 p.m. Friday evening EST on the Zero Hedge website—and I found it on the Sharps Pixley website. And it has obviously been edited since it was first posted, as I got wind of it at 1:30 p.m. EST yesterday afternoon. It’s a must read for sure.
This morning’s announcement from the Shanghai Gold Exchange of the full year figure for gold withdrawals out of the Exchange for calendar 2015 show that a huge new record of 2,596.4 tonnes was taken out – 19% higher than the previous record of 2,182 tonnes recorded in 2013. This is just short of the 2,600 tonnes we had been estimating. In the four days of trading in the final week of the year 40.94 tonnes were withdrawn, suggesting around 50 tonnes for the full 5-day week including Jan 1st – which is pretty much on par with other recent weekly withdrawal figures despite any minor disruption from the big Christian Christmas holiday period which has little, but possibly some, impact on Chinese domestic trade. This time of year does seem to see strong gold withdrawal levels from the SGE in the buildup to the Chinese New Year – a traditional time of gift giving in the Middle Kingdom of which gold ornaments and jewellery tend to figure strongly. This year the Chinese New Year falls on February 8th.
While the Chinese central bank – the People’s Bank of china (PBoC) – seems to equate SGE withdrawals to total Chinese demand, Western analysts tend to suggest that the actual figures are considerably lower and come up with various reasons for the possible discrepancy. Indeed their consumption estimates may well prove to be around 1,500 tonnes lower than those the SGE withdrawals figure might suggest.
As we have noted before, a significant proportion of the difference is down to how the analysts estimate ‘consumption’. Demand categories such as gold used in financial transactions tends to be ignored by the analysts, yet this is still gold flowing into China and in terms of gold movement from West to East remains hugely relevant.
This worthwhile commentary by Lawrie showed up on the Sharps Pixley website yesterday—and Patricia Caulfield was the first reader through the door with this gold-related story.
A few weeks ago I got an e-mail from one of my favourite City old hands Peter Bennett of Walker Crips. This century has so far offered only three “major investment gimmes” (things it is perfectly obvious you must do), he says. Those were to sell ahead of the two big crashes and to buy Japan when the Nikkei hit 8,500 (and was stupidly cheap). But number four may be just ahead of us. It is gold mining shares.
I can hear tittering at the back — particularly as regular readers will know that I have a long-term soft spot for gold. But hear me out. The gold miners have performed abysmally over the past four years. They have underperformed all other sectors and most other commodity stocks. And they have underperformed emerging markets as badly as they did even in their worst days of the late 1990s.
On average they are down about 75 per cent, something that takes them almost back to their lows of the last century and about as far as anything ever goes (the NASDAQ was unusually awful in falling 78 per cent).
This is clearly partly to do with the fall in the price of gold in the last four years. But there’s more to it than that: look back over the last decade and you will see that the while the miners have more than halved, the gold price itself has doubled. The problem? Not the gold price, but, as investment strategist Edward Chancellor succinctly puts it, the fact that most gold mining firms are run by “blithering idiots.”
This longish gold-related news item appeared on the Financial Times of London website yesterday—and I found it embedded in a GATA release. The above headline was courtesy of Chris Powell, but the actual headline reads “Golden Opportunity? The Capital Cycle Is Turning”
The PHOTOS and the FUNNIES
Simply put, by having accumulated 400 million oz of silver, it is impossible for JPMorgan to get its pants pulled down in a silver short covering panic. That’s because JPMorgan is no longer net short in silver—and hasn’t been for several years. Yes, of course, JPMorgan may be short on the COMEX—and may or may not be the single biggest short futures holder currently; but by virtue of its much larger physical long position, the bank has been decidedly net long overall in silver. As such, any dramatic move higher in the price of silver will greatly benefit JPM, not pull its pants down.
The math is simple – if you own 400 million ounces of physical silver and are short the equivalent of 60 million ounces (12,000 COMEX contracts), you are net long to the tune of 340 million oz. That means you can’t possibly lose if prices move higher and will make $340 million for every dollar silver moves higher. You will lose $60 million gross on your COMEX short position for each dollar of higher prices, but will make $400 million gross or $340 million net. Net is what matters.
To make matters even more interesting, should JPMorgan aggressively move to buy back its COMEX silver futures short position, that will both reduce its gross short position and increase its overall net long position, while turbocharging the price higher to its own benefit. I’ve referred to JPMorgan’s accumulation of physical silver as the perfect crime, and this makes it even more perfect.
Neither the CFTC nor the CME will say boo if JPMorgan moves to buy back its COMEX silver short position to the upside. Aside from the regulators not saying anything to JPM in any circumstance as a matter of course, there is nothing for them to say about any entity buying back a previously shorted futures contract (or selling a previously purchased futures position). The CFTC regulates futures contracts, not physical holdings. The CFTC, most likely, isn’t remotely aware that JPMorgan even holds physical silver (away from what I write), and is in no position, at this point, to say or do anything should JPMorgan move to buy back its remaining COMEX silver futures short position. Even though JPM would drive the price of silver even higher if it did cover its shorts. I couldn’t make this up if I tried. — Silver analyst Ted Butler: 08 January 2016
Today’s pop ‘blast from the past’ dates back to 1968—and at that time I was working as a meteorological technician at the National Research Council’s rocket range in Churchill, Manitoba—which was one of the most interesting jobs I ever had. This song was at the top of the charts back then—and CBC‘s own Peter Mansbridge was spinning 45s like this one on Churchill’s only radio station [CHFC] way back then. Where the hell have the years gone? The link is here—and feel free to sing along, as it’s a timeless classic—and everyone knows the words.
Today’s classical ‘blast from the past’ is one I’ve posted before, but it’s been a while. It’s the only composition by French composter Jules Massenet that’s still performed on a regular basis. The Méditation from the opera Thaïs is considered to be one of the greatest encore pieces for violin ever written. It was already so popular at the time of the opera’s premiere at the Opéra Garnier in Paris on 16 March 1894, that it already existed in eight different transcriptions. There isn’t a dry eye in the concert hall when this piece is over. Here’s Sarah Chang to rip your heart out. The link is here.
Well, the expected smash-down at the release of the job numbers never transpired. But, having said that, it wasn’t a good day for either gold or silver—or their respective equities. I’d guess that these rallies that began at the beginning of the week are already over, as it can be safely assumed that their was massive deterioration in the Commercial net short positions in both metals since the Tuesday cut-off, but some of the damage in silver may have been reversed with yesterday’s engineered price decline in that precious metal.
Ted pointed out that the rally in gold that began in earnest on Monday, was basically over by the end of trading on Thursday, after a gain of about $50 the ounce—and in silver, the same rally garnered about a 60 cent rally from the low to the high. The Commercials traders on one side—and the Managed Money traders on the other side—have created a Frankenstein market that is totally divorced from supply/demand fundamentals—and is getting worse as the years pass. I know that Ted has some ground-breaking revelations that I’m not going to breath a word of until he says it’s OK—and that won’t be until Tuesday’s column at the earliest—and hopefully it will be in the public domain by then.
Of course the Managed Money traders are still sitting on enough short positions that their buying could trigger another rally—and that could happen, but the odds of that now are getting pretty slender.
Here are the 6-month charts for the Big 6+1 commodities. They’re shown with their respective 20 and 50-day moving averages.
Talking about Frankenstein markets, the world’s equity markets are also in that category, although not to the same extent. Here’s a chart that Nick Laird passed around earlier this week—and it had to wait for a spot in today’s column.
Don’t forget that the low ticks on this chart were printed when the Plunge Protection Team showed up and set a bottom, as if left to their own devices, the equity markets would have continued lower both in 2003 and again in 2009. And it also shouldn’t be forgotten that the equity markets have been ‘saved’ each time, ever since the crash of 1987—and as GATA’s Chris Powell stated back in April 2008—“There are no markets anymore, only interventions.“
The powers-that-be are at battle stations once again, especially the President’s Working Group on Financial Markets in the U.S. Although the jobs numbers were trumpeted from the rooftops by the whore press in New York and Washington yesterday, the stock markets weren’t buying the bulls hit—and the dollar index, after a quick up-tick minutes before the job news, got sold off for the remainder of the Friday session.
The day will come when even they won’t be able to turn the tide, as the rot and corruption inside the world’s economic, financial and monetary system is so firmly embedded, that nothing will be able to save it at some point.
Let’s hope that whatever financial preparations we’ve made over the past few years will be enough, because as this twenty-first century Tower of Babel finally comes crashing down, it’s at times such as that when governments, particularly the U.S. government, will resort to whatever tyranny they deem necessary to save themselves. And it’s a given that the average citizen will get crushed if they’re not prepared. A current passport—and gold and silver held abroad, or at least outside of the banking system, will be de rigueur at that point.
How did it come to this?
I’m done for the day—and the week.
Enjoy what’s left of your weekend—and I’ll see you on Tuesday.