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Gold—and the COT Report: Words Fail Me

 -- Published: Sunday, 8 May 2016 | Print  | Disqus 

By Ed Steer

07 May 2016 — Saturday


The gold price didn’t do much of anything in Far East and morning trading in London on their Friday, but got sold off a hair once the noon silver fix was in, in London.  The price went vertical—and was up $15 the ounce within seconds of the release of the job numbers.  It took 20,000+ contracts to cap the price at that point—and once the p.m. fix was done it chopped higher until minutes after 1 p.m. EDT.  At that point someone ramped the dollar index—and hit the ‘sell precious metals’ button—and that was it for the gold price.  It as sold lower until shortly after 2 p.m. in after-hours trading—and didn’t do much after that.

The low and high tick were reported by the CME Group as $1,276.20 and $1,289.50 in the June contract.

Gold finished the New York trading session at $1,287.70 spot, up $10.10 on the day, but was up almost double that amount before ‘da boyz’ stepped it.  Net volume was over the moon at just north of 221,000 contracts.


Here’s the 5-minute gold tick chart courtesy of Brad Robertson.  There was almost no volume to speak of until the COMEX open, which is 6:30 a.m. Denver time on the chart below, followed by the 20,000 contract volume spike on the job news.  Volume didn’t really fall off to background levels until around 12:30 p.m. MDT, which was 2:30 p.m. EDT.

The vertical gray line is midnight in New York, noon the following day in Hong Kong—and don’t forget to add two hours for EDT.  The ‘click to enlarge‘ feature makes all the difference in the world in how easy it is to read this chart.

160507 5-minute gold

The silver price chopped sideways in Far East trading—and began to crawl quietly higher shortly after trading began in London.  Like gold, the price got sold off once the silver fix was done—and the HFT traders had the price back in negative territory by the time the job numbers were issued.  Silver’s price spike at that point wasn’t allowed to get far—and from there it traded under the same influences as gold, with the only difference being that silver’s high tick came about 12:40 p.m. EDT.

The low and high tick in this precious metal was reported as $17.22 and $17.635 in the July contract.

Silver finished the Friday session at $17.435 spot, up 13 cents on the day and, like gold, had over half its gains taken away after the price was capped.  Silver’s net volume was very decent as well at just under 46,500 contracts.


Platinum rallied a bit in Far East trading, but was back to unchanged by the Zurich open—and it chopped sideways from there.  It took off on the job numbers as well, but as you can tell from the saw-tooth rally that followed, it wasn’t going up unopposed.  Once the ramp job on the dollar began minutes after 1 p.m. in New York, a goodly chunk of Friday’s gains vanished by 3 p.m. in after-hours trading, but it did rally a bit after that.  Platinum finished the week at $1,078 spot, up 16 dollars from Thursday’s close.


Palladium was up 7 bucks by the Zurich open, but that gain—plus a dollar or so more—vanished by shortly after 1 p.m. Europe time.  It chopped higher from there, with the high tick of the day coming shortly before 1 p.m. EDT—and the price didn’t do much after that.  Palladium closed higher by 9 bucks at $606 spot.


The dollar index closed late on Thursday afternoon in New York at 93.76—and chopped sideways in a pretty tight range until precisely 2 p.m. HKT on their Friday afternoon.  There was a down/up/down move in the thirty minutes following the release of the job numbers—and by shortly after 12 o’clock in New York, all was quiet.  But then a rally began [which had all the hallmarks of a ramp job] shortly after 1 p.m.—and the 93.96 high tick came at 2:30 p.m. EDT.  About 15 basis points of that rally disappeared within the following thirty minutes—and the price flat-lined into the close.  The dollar index finished the day at 93.81—up 5 whole basis points.

I would guess that ‘da boyz’ used a fair amount of firepower preventing the dollar index from crashing on the job numbers news, plus a decent amount on the ramp job mentioned above.  Only intervention on this scale could have prevented the demise of the U.S. dollar index yesterday.


And here’s the 2-year dollar index chart—and it’s obvious that the powers-that-be are at battle stations in their attempts to keep the dollar index from heading for the nether reaches of the earth.

160507 2-year USD

The gold stocks gapped up a bit more than 2 percent at the open, with their collective high ticks coming around 11:45 a.m. in New York trading.  They chopped lower from there until gold rallied in mid afternoon–and the shares popped a bit into the close.  The HUI finished the Friday trading session up 4.38 percent.


The silver equities followed almost an identical path, as Nick Laird’s Intraday Silver Sentiment Index closed higher by 4.09 percent.

160507Silver 7

For the week, the HUI closed down 3.14 percent—and the Silver 7 Index by 2.73 percent.  Year-to-date the HUI is up 103.4 percent—and the Silver 7 by 116.9 percent.

The CME Daily Delivery Report showed that zero gold and 17 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.  There were four different short/issuers—but the long/stoppers were the usual two suspects—JPMorgan and Canada’s Scotiabank with 11 and 4 contracts respectively—and all for their own accounts.

The CME Preliminary Report for the Friday trading session showed that gold open interest on Friday actually rose 18 contracts, leaving 1,441 still open.  But since 50 gold contracts are posted for delivery on Monday in Thursday’s Daily Delivery Report, there were 50+18=68 gold contracts added to open interest in order to make the numbers work.  Silver open interest dropped by 239 contract, leaving 1,072 left in the May delivery month.  The Daily Delivery Report on Thursday showed that 220 silver contracts were posted for delivery on Monday, so the long/stoppers let 239-220=19 short/issuers off the hook because they didn’t have any physical silver backing their short positions.

There was another very decent deposit in GLD yesterday, as an authorized participant added 152,182 troy ounces.  Month-to-date there has been 972,267 troy ounces of gold added to GLD, with no withdrawals.

As of 7:50 p.m. EDT yesterday evening, there were no reported changes in SLV.  Month-to-date there was one deposit in SLV totalling 1,807,390 troy ounces.  But since the beginning of the month there have also been two withdrawals totalling 2,694,828 troy ounces.  As Ted has mentioned on many occasions recently, SLV is owed a lot of silver—and having that much withdrawn in the face of what’s owed, shows you how tight the physical market is.  One can only imagine what the silver price would be right now if the purchasers of that 2.7 million troy ounces had been forced to buy it, and then take delivery, through the COMEX futures market.  What short/issuer has that kind of silver backing their positions as the purchasers went long?  Very few, is the answer—as JPMorgan has found out many times this year, as they’ve had to back off taking delivery for that very reason on occasions too numerous to count, including the May delivery month.

There was a small sales report from the U.S. Mint yesterday.  They sold 1,000 troy ounces of gold eagles—1,000 one-ounce 24K gold buffaloes—and another 63,500 silver eagles.  Month-to-date the mint has sold 13,500 troy ounces of gold eagles—6,500 one-ounce 24K gold buffaloes—and 1,085,500 silver eagles.

There was a fair amount of movement in gold over at the COMEX-approved depositories on Thursday.  5,000.000 troy ounces/500 ten-ounce bars were deposited at Brink’s, Inc.—and 51,670 troy ounces were shipped out, with most of that from HSBC USA once again.  45 kilobars departed Canada’s Scotiabank as well. The link to that activity is here.

There was very little activity in silver.  Nothing was received—and only 30,358 troy ounces were shipped out the door to parts unknown—and all of it came out of CNT.  The link to that activity is here.

There was very decent action over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday.  Only 239 kilobars were deposited, but a very chunky 12,035 kilobars were shipped out.  All of the action was at Brink’s, Inc. as per usual—and the link to that, in troy ounces, is here.

The Commitment of Traders Report for positions held at the close of COMEX trading on Tuesday was neutral in silver, but in gold, it was at the upper end of Ted’s estimate for how ugly it was going to be.

In silver, the Commercial net short position decreased by 708 contracts, which is as close to unchanged as your likely to see.  They got to this number by covering 1,677 short contracts, but they also sold 969 long contracts as well—and the difference between those two numbers is the 708 contract short position change for the reporting week.  The Commercial net short position is still a butt-ass ugly 90,594 contracts, or 453 million troy ounces of paper silver.

The Big 4 commercial traders added an additional 400 contracts to their already grotesque short position, but the ‘5 through 8’ commercial traders covered about 100 short contracts during the reporting week—and Ted’s raptors, the commercial traders other than the Big 8, also covered around 1,000 short contracts.

Under the hood in the Disaggregated COT Report, the Managed Money traders actually decreased their net long position during the reporting week to the tune of 2,794 contracts.  They accomplished this by adding 1,187 contracts to their already monstrous long position, but they also increased their short position by 3,981 contracts.  The difference was made up by the Nonreportable/Small Trader category, as they increased their long net long position by 2,190 contracts.  The ‘Other Reportables category was mostly unchanged.

As I said at the top, there were no changes in silver worthy of the name during the reporting week.  Here’s the 3-year COT chart for silver.  CLICK to ENLARGE!

160507COT - silver

In gold, words fail me.  If this wasn’t the biggest one-week increase in the Commercial net short position in gold in the history of the COMEX, it wasn’t off that mark by much.  The Commercial net short position blew out by an absolutely stunning 54,793 contracts, or 5.48 million troy ounces.  The Commercial net short position now stand at an astonishing 29.49 million troy ounces.

During the reporting week, the commercial traders purchased a measly 199 long contracts, but added 54,992 short contracts, which was the short side of every long contract that the Managed Money traders were buying—and then some.

Ted said that the Big 4 traders added about 24,300 contracts to their short positions—and the ‘5 through 8’ traders and the raptors added around 14,800 and 15,700 contracts respectively to their short positions as well.  It was another “all for one, and one for all” week once again.

Under the hood in the Disaggregated Report, it was mostly a Managed Money affair as they added 42,366 contracts to their already sky-high long positions, plus they covered 4,479 short contracts as well, for a total change of 46,845 contracts.  The other 8,000-odd contract difference between that number and the Commercial net short position of 54,793 contracts was split up more or less evenly between the ‘Other Reportable’ and the ‘Nonreportable’/small trader categories, as they went net long about 4,000 contracts apiece.

Riddle me this, dear reader.  What would the price of gold have been at the close of COMEX trading on Tuesday if the Commercial traders hadn’t shown up to take the short side of all these long contracts placed by the above three sets of speculators?  Here’s the 3-year COT chart for gold.  CLICK to ENLARGE!

160507COT - gold

If the current short positions in gold and silver don’t scare you half to death, you obviously don’t understand the seriousness of the situation.  If we thought the COMEX market structure in gold and silver was dangerous last week, it’s in the extreme this week—and I await Ted Butler’s take on this with a sense of morbid fascination.

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

160507Days to Cover

As I say in every Saturday column—the short positions of the Big 4 and 8 traders in silver continues to redefine the meaning of the words ‘obscene’ and ‘grotesque.’  This week the Big 4 are short 147 days [almost 5 months] of world silver production—and the ‘5 through 8’ traders are short an additional 67 days of world silver production—for a total of 214 days, which is 7 months of world silver production, or 492 million troy ounces of paper silver held short by the Big 8.

And it should be pointed out here that in the COT Report above, the Commercial net short position in silver is 453 million troy ounces.  So the Big 8 hold a short position larger than the net position—and by a goodly amount.  That’s how grotesque, twisted, obscene—and dangerous—this COT situation in silver has become—and gold’s not far behind.

And as an aside, the two largest silver shorts on Planet Earth—JPMorgan and Canada’s Scotiabank—are short about 106 days of world silver production between the two of them—and that 106 days represents around 72 percent [almost three quarters] of the length of the red bar in silver in the above chart.  The other two traders in the Big 4 category are short, on average, about 21 days of world silver production apiece.

This ‘Days to Cover’ chart has looked like this in all four precious metals for at least the last twenty years.  Not this extreme maybe, but the pattern is the same, with all four of the PMs pinned to the far right-hand side of the chart [cocoa is the only exception] and with silver always in the number one position.

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

In gold, 4 U.S. banks are net short 107,646 COMEX gold contracts in the May BPR.  In April’s Bank Participation Report [BPR], that number was ‘only’ 77,109 contracts, so they’ve increased their collective short positions by a monstrous 30,537 contracts during the reporting period.  Three of the four banks would include JPMorgan, Citigroup—and HSBC USA.  As for who the fourth bank might be—I haven’t a clue, although Goldman Sachs comes to mind for most, as one of them.  But if they are in that group, my guess is that they would most likely be long gold.

Also in gold, 18 non-U.S. banks are now net short 87,606 COMEX gold contracts.  In the April BPR they were net short ‘only’ 71,112 COMEX contracts, so the month-over-month deterioration is pretty big, as they added almost 16,000 contracts to their collective short positions.  But as I’ve stated for years, it’s reasonable to assume that a goodly amount of this short position in gold held by the non-U.S. banks is owned by Canada’s Scotiabank.

As of this Bank Participation Report, the world’s banks are net short 34.5 percent of the entire open interest in gold in the COMEX futures market.

Here’s Nick’s chart of the Bank Participation Report for gold going back to 2000.  Charts #4 and #5 are the key ones here.  Note the blow-out in the short positions of the non-U.S. banks [the blue bars in chart #4] when Scotiabank’s COMEX gold positions [both long and short] were outed in October of 2012.  CLICK to ENLARGE is a must here!

160507BPR - gold

In silver, 5 U.S. banks are net short 24,803 COMEX silver contracts—and it was Ted’s back-of-the-envelope calculation from yesterday that JPMorgan holds virtually all of that net short position on its own—and maybe a bit more.  That makes it almost a mathematical certainty that the other 4 U.S. banks are net long the COMEX futures market in silver.  The short position of these five U.S. banks was 17,892 contracts in the April BPR, so there’s been about a 7,000 contract increase in the net short positions of the U.S. banks since then—and JPMorgan is carrying all of that increase.

Also in silver, 14 non-U.S. banks are net short 37,611 COMEX contracts—and that’s an increase of about 7,700 contracts that these non-U.S. banks held short in the April BPR.  I’m still prepared to bet big money that Canada’s Scotiabank is the proud owner of a goodly chunk of this short position—and about the same amount as JPMorgan is net short at the moment, around 25,000 contracts, if not more by now.  That most likely means that some of the remaining 13 non-U.S. banks are net long the COMEX silver market.

As of this Bank Participation Report, the world’s banks are net short 31.5 percent of the entire open interest in the COMEX futures market in silver—and the lion’s share of that is held by Canada’s Scotiabank and JPMorgan.

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

160507BPR - silver

In platinum, 5 U.S. banks are net short 10,189 COMEX contracts—but their long position [in total] is a laughable 28 contracts!  In the April BPR, these same banks were short 7,692 COMEX platinum contracts, so they’ve increased their short position by a decent amount—around 2,500 contracts, almost a third in one month.

I’d guess that JPMorgan holds the lion’s share of that 10,189 contract net short position.

Also in platinum, 18 non-U.S. banks are net short 12,783 COMEX contracts, a huge increase from the 8,643 contracts they held short in April, which is a 48 percent increase month-over-month.

If there is a large player in platinum among the non-U.S. banks, I wouldn’t know which one it is.  However I’m sure there’s at least one big one in this group.  The reason I say that is because before mid-2009 when the U.S. banks showed up, the non-U.S. banks were always net long the platinum market by a bit—see the chart below—and now they’re net short.  The remaining 17 non-U.S. banks divided into whatever contracts are left, isn’t a lot, unless they’re all operating in collusion—which I doubt.  But from the numbers it’s easy to see that the platinum price management scheme is an American show as well, with one big non-U.S. bank involved.  Scotiabank perhaps?

And as of this Bank Participation Report, the world’s banks are net short 35.8 percent of the entire open interest in platinum in the COMEX futures marketCLICK to ENLARGE is a must here!

160507BPR - platinum

In palladium, 4 U.S. banks were net short 2,762 COMEX contracts in the May BPR, which is up 425 contracts from the 2,337 they held net short in the April BPR.

Also in palladium, 15 non-U.S. banks are net short 2,692 palladium contracts—which is certainly an increase from the 2,330 contracts that these same banks were short in the April BPR.  But even with that increase, their short positions, divided up more or less equally, are immaterial, just like they are in platinum.

For the fourth month in a row it should be noted—and it’s obvious in the chart below—that the banks, both U.S. and foreign, appear to be heading for the exits in the palladium market, as their net short positions haven’t been this low since back in mid 2009.

But, having said all that, as of this Bank Participation Report, the world’s banks are net short 24.0 percent of the entire COMEX open interest in palladium.

Here’s the BPR chart for it.  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.  But as I mentioned in the previous paragraph, their footprint is pretty small now.  However, I would still be prepared to bet big money that, like platinum, JPMorgan holds the vast majority of the U.S. banks’ remaining short position in this precious metal as well.

160507BPR - palladium

As I say every month at this time, the three U.S. banks—JPMorgan, Citigroup, HSBC USA—along with Canada’s Scotiabank— are the tallest hogs at the price management trough.  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!

JPMorgan and Canada’s Scotiabank still remain the two largest silver short holders on Planet Earth in the COMEX futures market.

Here’s a chart that Nick Laird passed around yesterday evening.  It shows the withdrawals from the Shanghai Gold Exchange for April.  In his covering e-mail, Nick had this to say—“SGE withdrawals were 171.395 tonnes for the month of April, which though down on 2015 but the same as for 2013 and 2014


I have an average number of stories for you today, plus a couple that I’d been saving for today’s column for length and/or content reasons.


There have been no goods-producing jobs for three months in a row

These are not the best of times for the shrinking share of American workers who still make goods instead of providing services.

The number of goods-producing jobs in fields such as manufacturing and energy fell by 3,000 in April and failed to show a net increase for a third month in a row. The last time that happened was in late 2009 and early 2010 as the U.S. started digging out from the Great Recession.

In April, services in industries such as retail, health care and finance accounted for more than 100% of net job growth. The economy added 160,000 jobs last month.

Companies that drill for oil and natural gas or mine for coal and other metals have cut almost 200,000 jobs since the fall of 2014. Energy firms have reduced payrolls for 18 straight months, as plunging oil prices hurt prices and production.

This news item put in an appearance on the Internet site at 12:36 p.m. on Friday afternoon EDT—and I thank Scott Linn for today’s first story.  Another link to it is here.

Since 2014 the U.S. Has Added 450,000 Waiters and Bartenders, and No Manufacturing Workers

With Obama yet again on TV, taking credit for the Fed’s reflation of the stock market as somehow indicative of an economic “recovery” (“fiction peddlers” not allowed in the crowd), here is another way of showing the unprecedented transformation in the U.S. labor pool: since December 2014, the U.S. has added just under 450,000 waiters and bartenders, and no manufacturing workers.

And here is the longer-term picture, going back to the start of the crisis in December 2007: please do not “peddle fiction” upon seeing this chart.

This brief must read 2-chart Zero Hedge story was posted on their Internet site at 12:24 p.m. yesterday—and I thank ‘aurora’ for passing it around.

Investors flee high yield; Euro banks back in spotlight

In this week’s credit wrap, investors have started to dump high yield bonds again, European financials come (back) under pressure and U.K. inflation linked gilt returns turn negative.

  • HY bond ETFs have seen $1.55bn of outflows in May, the biggest monthly outflow since June
  • Markit iTraxx Europe Senior Financials index has widened 11bps this week, back over 100bps
  • Markit iBoxx Sterling Inflation-Linked Index returned -2.46% in April, as Brexit fears waned

This 2-chart news item appeared on the Internet site yesterday sometime—and it’s courtesy of Richard Saler.  Another link to this story is here.

Investors lose $24 billion a year on negative-yielding bonds

Bonds issued by governments around the world that yield less than zero result in investors losses of about $24 billion a year, according to Fitch Ratings.

The rise of bonds, where lenders are essentially paying borrowers to take their money, is expected to have broad repercussions on financial institutions’ profits and keep demand for U.S. Treasurys high, said Robert Grossman, managing director of the macro credit research unit at Fitch, in a report.

As of April 25, so-called negative-yield bonds totaled $9.9 trillion, which comprises $6.8 trillion in long-term bonds and $3.1 trillion in short-term debt, according to Fitch.

Japan accounts for 66% of negative yielding debt world-wide.

This story appeared on the Internet site at 8:00 a.m. EDT Friday morning—and it’s the second contribution of the day from Scott Linn.  Another link to this news item is here.

Jim Grant: Central Bankers Have Lost Their Marbles, Government Debt Is a Short

April 15 comes and goes but the federal debt stays and grows. The secrets of its life force are the topics at hand— that and some guesswork about how the upsurge in financial leverage, private and public alike, may bear on the value of the dollar and on the course of monetary affairs. Skipping down to the bottom line, we judge that the government’s money is a short sale.

Diminishing returns is the essential problem of the debt: Past a certain level of encumbrance, a marginal dollar of borrowing loses its punch. There’s a moral dimension to the problem as well. There would be less debt if people were more angelic. Non-angels, the taxpayers underpay, the bureaucrats over-remit and everyone averts his gaze from the looming titanic cost of future medical entitlements. Topping it all is 21st-century monetary policy, which fosters the credit formation that leads to the debt dead end. The debt dead end may, in fact, be upon us now. A monetary dead end could follow.

Thus, the thought processes of Janet Yellen’s predecessor. Reading him, we are struck, as ever, by his clinical detachment. Does the deployment of helicopter money not entail some meaningful risk of the loss of confidence in a currency that is, after all, undefined, uncollateralized and infinitely replicable at exactly zero cost? Might trust be shattered by the visible act of infusing the government with invisible monetary pixels and by the subsequent exchange of those images for real goods and services? The former Fed chairman seems not to consider the question— certainly, he doesn’t address it.

To us, it is the great question. Pondering it, as we say, we are bearish on the money of overextended governments. We are bullish on the alternatives enumerated in the Periodic table. It would be nice to know when the rest of the world will come around to the gold-friendly view that central bankers have lost their marbles. We have no such timetable. The road to confetti is long and winding.

This very long commentary by Mr. Grant was posted on the Zero Hedge website yesterday sometime—and I found it on David Stockman’s Internet site last evening.  I will be reading this in what’s left of the weekend.  Another link to this very long essay is here.

Trumped! Why It Happened And What Comes Next, Part 2 (The Peace Deal) — David Stockman

When it comes to the economic future, a Trump presidency could bring either a shitstorm or salvation. Regrettably, the odds of the former are immensely the higher.

That’s because Trump is a welcome, but extremely unguided missile. On the one hand, his great virtue is that he is a superb salesman and showman who has captured the GOP nomination and has a serious shot at the White House with absolutely no help whatsoever from the Washington/Wall Street establishment.

So unlike any other candidate in recent memory, he owns his own talking points; is not saddled with a stable of credentialed advisors schooled in three decades of policy error and failure; and has the chutzpah to trust his own instincts——many of which, especially on foreign policy, are exactly the rebuke that Imperial Washington and its legions of parasites and racketeers so richly deserve.

This worthwhile commentary by David showed up on his website on Friday sometime—and it’s another article that I’ll be reading this weekend.  Another link to it is here.

The Oligarchy is Tottering – Trump Tramples the Neocons’ “False Song of Globalism”

The reaction to GOP front-runner Donald Trump’s much-awaited foreign policy speech from the Washington elites was all-too-predictable: they sneered and snickered that he had mispronounced “Tanzania.” The more substantive criticisms weren’t much better: perpetual warmonger Lindsey Graham, whose presidential bid garnered zero percent in the polls, tweeted “Trump’s FP speech not conservative. It’s isolationism surrounded by disconnected thought, demonstrates lack of understanding threats we face.” For Graham, anything less than starting World War III is “isolationism” – a view that gives us some insight into why his presidential campaign was the biggest flop since the “new” Coke. This is the party line of neoconservatives who have long dominated Republican foreign policy orthodoxy, to the GOP’s detriment. Neocon character assassin Jamie Kirchick, writing in the European edition of Politico, put a new gloss on it by claiming to detect a Vast Kremlin Conspiracy as the animating spirit behind the Trump campaign.

Which just goes to show that having Roy Cohn as your role model can lead one down some pretty slimy rabbit holes. I guess that’s why the editors of Politico put Kirchick’s smear piece in the European edition, where hardly anyone will read it, saving a more reasonable analysis by Jacob Heilbrunn for the US version. (Although, to be sure, a piece by neocon-friendly Michael Crowley limns the same McCarthyite theme in Politico’s magazine.)

Heilbrunn is the editor of The National Interest, publication of the Nixon Center, which has been a sanctuary for the outnumbered – but now rising – “realist” school of foreign policy analysts. The Trump speech was sponsored by TNI, and Heilbrunn gave a very interesting if somewhat defensive explanation for the motives behind their invitation to Trump, succinctly summarizing its significance:

His speech did not deviate from the themes he has already enunciated and it showed that he is willing to go very far indeed. Nothing like this has been heard from a Republican foreign policy candidate in decades. Trump doesn’t want to modify the party’s foreign policy stands. He’s out to destroy them.

This longish commentary by Justin Raimondo of fame, was picked up by Zero Hedge a week ago Friday—and it’s the second offering of the day from ‘aurora’.  Another link to this essay is here.

The Next “Advance Auction on Stolen Goods” — Doug Casey

It appears there are two candidates running from the left wing of the Demopublican Party (Hillary and Bernie), and two and a half from the right wing (Trump, Cruz, and Kasich). Note: The media identifies the Lefties by their first names, a friendly and personal thing, unlike the Righties.

I find it distasteful discussing current political figures. But since somebody new is going to be president come November, it makes sense to figure out who that might be, in order to insulate yourself as much as possible from the damage they’ll do.

Let me start by saying that this is not just the most entertaining election I’ve ever witnessed. But after the 1860 election, which Lincoln won with 40% of the popular vote (the remainder split between Stephen Douglas and two other candidates), I suspect it will also be the most divisive, hostile, and critical to the future of the country. Ever.

Why do I say that? Because the U.S. hasn’t been this unstable since the unpleasantness of 1861–1865.

Doug’s at the top of his game in this rant that was posted on the Internet site yesterday.  Another link to Doug’s commentary is here.

The Number Of Americans Renouncing Citizenship Just Keeps Going Up

Today the IRS published the latest figures on renunciation, showing that yet another 1,158 Americans have renounced their citizenship in the first quarter of 2016.

While this may not be setting a record for a single quarter, the trend is quite clear.

This 1-chart Zero Hedge article put in an appearance on their Internet site very late on Thursday evening EDT—and I thank Jim Gullo for finding it for us.  The chart is worth a quick look.

Warnings mount on world’s corporate debt, China crisis — Ambrose Evans-Pritchard

Corporate debt has reached extreme levels across much of the world and now far exceeds the pre-Lehman financial bubble by a host of measures, the global banking watchdog has warned in a deeply-disturbing report.

As the credit cycle ages, following years of record-setting bond issuance, there are growing concerns about signs of stress in corporate balance sheets,” said the Institute of International Finance in Washington.

The body flagged a double threat: a five-fold rise in company debt to $25 trillion in emerging markets over the past decade; and record junk bond issuance in U.S. and Europe, along with shockingly-irresponsible levels of U.S. borrowing to buy back shares and pay dividends.

The warning came as the Hong Kong Monetary Authority aired its own grim concerns that the global system is dangerously over-stretched after years of easy money, with Asia’s entire financial edifice potentially in danger.

This must read commentary by AE-P showed up on the Internet site at 2:49 p.m. BST on their Friday afternoon, which was 9:49 a.m. in Washington—EDT plus 5 hours.  I thank Roy Stephens for this one—and another link to this article is here.

Somnolent Europe, Russia, and China — Paul Craig Roberts

On September 19, 2000, going on 16 years ago, Ambrose Evans-Pritchard of the London Telegraph reported: “Declassified American government documents show that the U.S. intelligence community ran a campaign in the Fifties and Sixties to build momentum for a united Europe. It funded and directed the European federalist movement.

The documents confirm suspicions voiced at the time that America was working aggressively behind the scenes to push Britain into a European state. One memorandum, dated July 26, 1950, gives instructions for a campaign to promote a fully fledged European parliament. It is signed by Gen. William J. Donovan, head of the American wartime Office of Strategic Services, precursor of the CIA.

The documents show that the European Union was a creature of the CIA.

As I have previously written, Washington believes that it is easier to control one government, the E.U., than to control many separate European governments. As Washington has a long term investment in orchestrating the European Union, Washington is totally opposed to any country exiting the arrangement. That is why President Obama recently went to London to tell his lapdog, the British Prime Minister, that there could be no British exit.

This commentary by Paul is certainly worth reading—and it was posted on his Internet site on Thursday sometime—and I thank “Mac P.” for pointing it out.  Another link to this article is here.

The Ukraine, Syria, NATO, Russia Imbroglio: John Batchelor Interviews Stephen F. Cohen

Cohen begins his remarks saying that two weeks ago he was guardedly optimistic about the NCW thawing but now considers conditions worse again. The discussions this week encompass the major battle going on in Syria over the city of Aleppo, new NATO troop deployments in Europe, political changes in Ukraine, and political pressure on Putin to change his foreign policy with Washington. . In Syria Turkey has closed the border trapping the refugees from Aleppo in the war zone, and Washington’s neocons do not want to support Russia or the Syrian Army, and that point to Cohen means the neocons do not mind seeing ISIS in Damascus. The fighting in Syria is very fierce with reports of hospitals being attacked by Syrian air forces.

The focus is also in Europe there is news that four battalions of troops, some 4000 personal, are to be deployed in the Baltic States along the Russian border. Russia considers this a violation of the NATO Russia Founding Act, an agreement to limit troops in Europe to those numbers commensurate with security only. Also covered is the Donald Cook (destroyer) incident in the Baltic Sea on April 13th; these events to Russians look like preparation for a NATO invasion of Russia.

Meanwhile Ukraine now has a new Prime Minister, Volodymyr Groysman, who was former Speaker of the Rada. Has this stabilized Poroshenko’s government? It has not, and Cohen lists various weaknesses not least of which is that he will surely be unacceptable to Right Sector elements. But he is Poroshenko’s choice and now all the failures of the Rada too will rest on his shoulders. Another complication for the Minsk2 Accords, notes Cohen, is that recently U.N. Ambassador Samantha Powers, has arbitrarily re-written them in a statement to the U.N. Security Council to include the demand that Russia gives back Crimea to Ukraine. Batchelor dismisses this as Powers being “intransigent” but in reality it means that Minsk2 will never see compliance and completion because it is Washington’s policy decision that it fails – and failure can be orchestrated through miscreant behavior by Kiev. Batchelor raises the premise that a lot of these NATO provocation games are like a geostrategic “games of chicken”, but Cohen worries that there is a group within NATO (Washington) that is actively seeking war with Russia. From my point of view all is the same (including machinations by Samantha Powers at the U.N. level) that both of these views would be valid and that the war party would be using the other group to further the march to war. It is all a party of fools and useful fools step dancing their collective way off a cliff.

And as a counter reaction there are groups within the Kremlin that are dissatisfied with Putin’s foreign policy and how he is handling the economy; they want a “mobilization” of everything, the economy and the military to meet the growing threat from the West – and for Putin to take a harder line with Russian foreign policy in dealing with it. This discussion is now very public in Russia and represents growing pressure on Putin to change tactics. This is the important discussion in this podcast as it shows that there are groups that are getting very angry with Washington and its hostility, dishonesty and incompetence, and who decidedly do not consider Western states as anything resembling “partners”.

This was posted in Friday’s column because it was a slow news day, but as I said at the time, I’d be posting it today’s column in any case—and here it is.  I thank Ken Hurt for sending the link—but that big THANK YOU is always reserved for Larry Galearis for the above executive summary.  This 40-minute audio interview showed up on the Internet site on Tuesday—and another link to this interview is here.  It’s a must listen for any serious student of the New Great Game.

Former U.S. Diplomats Decry the U.S.-Backed Saudi War in Yemen

Saudi Arabia and the other Arab states that form the Gulf Cooperation Council (GCC) have been brutally bombing Yemen for more than a year, hoping to drive Houthi rebels out of the capital they overran in 2014 and restore Saudi-backed President Abdu Rabbu Mansour Hadi.

The United States has forcefully backed the Saudi-led war. In addition to sharing intelligence, the U.S. has sold tens of billions of dollars in munitions to the Saudis since the war began. The kingdom has used U.S.-produced aircraft, laser-guided bombs, and internationally-banned cluster bombs to target and destroy schools, markets, power plants, and a hospital, resulting in thousands of civilian deaths.

Despite all that, U.S. officials have done little to explain this support, have failed to explain the U.S. interests in the campaign, and have made scant mention of the humanitarian toll. In the absence of an official response, The Intercept raised those concerns with half a dozen former senior diplomatic officials, including U.S. ambassadors to Yemen and Saudi Arabia.

But rather than defend or explain the U.S. involvement, most of the former diplomats we interviewed said that the war harms U.S. interests.

This story appeared on Internet site yesterday—and I thank Patricia Caulfield for pointing it out.  It’s certainly another must read for any serious student of the New Great Game.  Another link to this article is here.

India shows China the way to deal with bad debt

India could teach China a thing or two about dealing with bad debt. Banks in the world’s two most populous countries have lent hundreds of billions of dollars to politically connected companies that are now in trouble. Yet while Indian authorities are at last pushing lenders to come clean, their counterparts in Beijing seem intent on ignoring the full extent of the problem. It is a rare example of India showing its larger neighbour the way.

Most corporate lending in both nations resides on the balance sheets of banks, the majority of which are government-owned. Larger-than-life Indian tycoons like Vijay Mallya and vast Chinese state-owned enterprises such as Bohai Steel have historically used strong political connections to help them borrow. That helps explain why lenders have continued extending credit even after companies run into trouble. The absence of a functioning bankruptcy process also discourages banks from calling in overdue loans.

These structural shortcomings have left behind mountains of bad debt. The Reserve Bank of India (RBI) estimated earlier this year that 14.1 percent of all the country’s bank loans were doubtful. By contrast, just 1.7 percent of Chinese loans at the end of 2015 were officially classified as non-performing. But that figure has little credibility. Researchers from the International Monetary Fund last month estimated that at least 15.5 percent of bank loans to Chinese companies are at risk of not being repaid.

This opinion piece by Reuters columnist Peter Thal Larsen showed up on their Internet site yesterday—and I thank Richard Saler for sending it along.  Another link to this article is here.

Worst.Month.Ever….Hong Kong Retail Sales Collapse In March

A spending survey done by MasterCard shows that March retail sales in Hong Kong declined at the worst rate in the history of the survey. According to the latest MasterCard SpendingPulse Hong Kong Report, “Overall retail sales in Hong Kong contracted 18.5% year-on-year, reflecting the deepest decline since 2014.

Only grocery outperformed overall retail sales in March, while clothing and jewellery sales dropped by more than total retail sales. After the dismal March, Q1 retail sales declined 11.7% when compared to the same period in 2015. “The early Easter holiday did nothing to stimulate spending as consumer confidence remains subdued.” said Sarah Quinlan, Senior VP of market insights for MasterCard advisors. “Overall our outlook for Hong Kong retail sales remains weak as the slowdown in spending from Mainland China continues to negatively impact the Hong Kong retail economy.” Quinlan added.

A slowdown in tourist spending from Mainland China is certainly no surprise, as it was only a matter of time before the massive amount of job losses made its way through the economy, something which should get worse in the future as China addresses the economic slowdown and its massive overcapacity issue.

The above three paragraphs are all there is to this short news item that was posted on the Zero Hedge website at 8:30 p.m. EDT last night—and ‘David in California’ for pointing it out.

Doug Noland — Inflection Point for Emerging Markets

As I have written repeatedly, I believe the global Bubble has been pierced. My view is that the world is in the initial stages of what will be a protracted bear market (at best), interrupted sporadically by policy-induced short squeezes, bouts of speculative excess and irrepressible bullishness.

The Mexican peso fell a brutal 4.0% this week to the low since early March. Those levered in higher-yielding Mexican (or other EM) debt suffered a rough week. Tuesday trading saw the peso sink 2.5%, “its biggest drop since November 2011.” Brazil’s real dropped 1.9%, the “worst week since November.” Brazilian stocks sank 4.1%.  The Colombian peso fell 3.8%.

It was a global phenomenon. The South African rand sank 4.6%, as debt worries return. The Russian ruble declined 2.2%, the “worst week since February.” Russian stocks dropped 2.6%. In emerging Asia, the Korean won declined 2.7%, the Malaysian ringgit fell 2.6%, the Indonesia rupiah declined 1.3% and the Singapore dollar fell 1.3%.

There were more Credit rumblings this week in China, along with serious cracks in the Chinese commodities Bubble. I continue to believe that the unfolding Chinese Credit crisis is the root cause of dysfunctional global financial markets. Waning confidence in Chinese finance, policy-making and economic structure will now (again) weigh on EM. The weakening dollar and attendant commodities rally had recently helped underpin the bullish EM recovery story. This week it appeared that markets began coming to grips with the reality that it’s going to take a lot more than a weaker dollar to support such highly indebted and maladjusted EM economies (and financial sectors) as confidence in the world of finance and the global economy wane.

Doug’s weekly Credit Bubble Bulletin is always a must read for me—and this one is no exception.  I found it on his website just after midnight MDT this morning.  Another link to this must read commentary is here.

Jim Rickards: The New Case for Gold

Thirty-five years ago, Ron Paul and Lewis Lehrman published ‘The Case for Gold‘, their minority report from Reagan’s gold commission. Today, Jim Rickards has written ‘The New Case for Gold‘, an uncompromising call for using gold as money and reestablishing a gold standard for central banks.

In this wide-ranging interview, Jeff Deist of the Mises Institute and Jim Rickards discuss gold in the context of current geopolitics—and enduring myths about monetary growth. While the “anti-gold reflex” is strong among older generation monetary economists in the west, a new gold-friendly order is emerging in Asia. Jeff and Jim even discuss whether Hillary will be indicted, leading to a Joe Biden/Elizabeth Warren ticket. This is a fascinating interview that you won’t want to miss.

This 29:40 minute audio interview put in an appearance on the Internet site yesterday—and I must admit that I haven’t had the time to listen to it.  I thank Ken Hurt for bringing it to our attention.  Another link to this audio interview is here.

The London Gold Market

The structure and management of the new LBMA Gold Price is still controlled by the same banks that controlled the old gold fixing process and ICE Benchmark Administration has cooperated in stifling market transparency. There is no transparency from the Bank of England as to which central banks and bullion banks are engaged in gold lending, and there is little if anything published about the London gold lending market, full stop.

The entire London gold market is still opaque. Since the London gold market is the world’s largest gold market, this opacity is not healthy for efficient markets or price discovery. Behind the scenes, the Bank of England takes a keen interest in the London gold market, and has a very close relationship with the bullion banks through the LPMCL clearing system and through the gold lending market. In fact, the Bank of England, along with the Financial Conduct Authority even sits on the LBMA Management Committee.

With the Bank of England and the LBMA bullion banks in such powerful positions within the London gold market, nearly everything that happens in the London market is an outcome that has been orchestrated and planned by these entities, and needs to be seen as such.

In other words, they’re rigging the gold market in total secrecy.  I haven’t read the whole thing—just the introduction and the conclusion—part of which is quoted above.  It’s certainly on the longish side, but I’ll be reading it this weekend.  It was posted on the Internet site yesterday—and I thank Scott Otey for sharing it with us.  Another link to this commentary is here.

Top World Silver Producers: Countries, Companies and Mines — Lawrence Williams

London’s precious metals consultancy Thomson Reuters GFMS, in conjunction with Washington DC based The Silver Institute has released the 2016 edition of its annual World Silver Survey and it is perhaps less negative on the ‘second’ precious metal than hitherto suggesting that silver fundamentals are improving.  Indeed it comments that in 2015, the silver market saw record demand, with the jewelry, coin and bar, and photo-voltaic sectors posting new highs, helping to boost total silver demand to 1.17 billion ounces.  Meanwhile overall silver supply to the market was lower, led by a continued weakness in silver scrap sales, although new mined production showed an increase of around 2%.  Last year’s supply and demand scenario, the consultancy reports,  led to the third successive annual silver market deficit, reaching 129.8 million ounces over the year, more than 60% larger than in 2014 and the third largest on record.

As usual the report itself, and its appendices, are packed with charts and data looking at most aspects of silver supply and demand, and the global market for the metal.  Always of particular interest to analysts are the listings of the Top 20 silver producing nations and of the companies and mines which produce this metal.  For the most part silver supply in both cases is a byproduct from base metals and gold mining activities, and even the primary silver producers will be mining associated gold and base metals helping contribute substantially to their revenues and profits.

This must read silver-related story by Lawrie showed up on the Sharps Pixley website yesterday—and I found on their website just after midnight Denver time.  Another link to this article is here.


Pelicans in Edmonton?  You betcha!  It may be a strange place to find them but the American white pelican is a common bird in North America if you just know where to look.  I’ve seen lots of them—and I took these photos just east of Edmonton in the bedroom community/city of Sherwood Park.  They were fishing in a slough right in the middle of an up-scale residential neighbourhood.  They’re huge birds.  The ‘click to enlarge‘ feature works wonders here—and it’s worth your time.

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Today’s pop ‘blast from the past’ is from the 1960s—1968 to be precise—and it was one of the two big hits of the British rock group, The Zombies.  If you’re of a certain vintage, you’ll remember it well.  The link is here.

Today’s classical ‘blast from the past’ is so well known, that it almost needs no introduction.  I’ll be the most surprised person in the world if you haven’t heard this in some iteration during your lifetime, even if its only via Bugs Bunny!  It’s the overture to The Barber of Seville composed by Gioachino Antonio Rossini—and was premiered on 20 February 1816 at the Teatro Argentina in Rome.  The link is here.

Although I was happy to see the precious metals rally on the job news, there should be no doubt in your mind that JPMorgan et al were standing right there to prevent prices from blowing sky high, which is precisely what they would have done if ‘da boyz’ hadn’t be waiting with all the ‘liquidity’ necessary, as they went short against all comers once again.

And as bad as the Commitment of Traders Report was in gold as of the Tuesday cut-off, I’d guess it’s probably much worse after yesterday’s price performance—and that’s despite the fact that gold closed marginally lower on both Wednesday and Thursday.

Since this is my Saturday column, I’m including the 6-month charts for the Big 6+1 commodities.  All four precious metal look very vulnerable, as does the U.S. dollar index.

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Although I was happy to see the precious metal equities do well, they would be the ‘go to’ investment if the powers-that-be weren’t sitting on the underlying precious metals.  My continuing comments about world equity markets being a “smouldering ruin in five business days” still stands—and all the power and all the money in the world is trying to prevent the inevitable.  This financial crisis has been building since the Fed and the U.S. Treasury stepped in front of the crash of 1987—but now the situation is totally beyond their control.

Here’s another chart from Nick that he passed around late last night—and there’s no way that the free markets will be denied at some point.  CLICK to ENLARGE!

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There’s no point in me piling on what other commentators in the Critical Reads section have already said.  But in closing, I’ll quote Jim Grant from a piece that appeared above—“We are bullish on the alternatives enumerated in the Periodic table. It would be nice to know when the rest of the world will come around to the gold-friendly view that central bankers have lost their marbles. We have no such timetable. The road to confetti is long and winding.

Long and winding it may be, but all roads have an end at some point—and from where I’m sitting, it’s in plain sight.

But not to be forgotten in all of this, are the wildly bearish readings in yesterday’s Commitment of Traders Report.  They are, as I’ve said before, the proverbial Sword of Damocles overhanging everything.  And how this situation is resolved will determine whether precious metal prices are driven lower at some point, or explode to the upside without that correction first.  In the grand scheme of things, nothing else matters.

That’s all I have for the day—and the week—and I’ll see you here on Tuesday.



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