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"Da Boyz" Drop the Hammer

 -- Published: Sunday, 17 June 2018 | Print  | Disqus 

By Ed Steer


The gold price edged quietly lower in Far East and London trading on their Fridays -- and was down about 4 dollars by the COMEX open in New York yesterday morning.  JPMorgan et al were laying in wait.  The low of the day was set right at the COMEX close -- and it crawled about five dollars or so higher until around 3 p.m. EDT in the not-so-thinly-traded after-hours market.  It didn't do much after that.


The high and low ticks in gold yesterday were recorded by the CME Group as $1,306.70 and $1,277.90 in the August contract, which was about three bucks higher than the June spot month.


Gold was closed in New York on Friday at $1,278.90 spot, down $23.00 on the day.  The gold price hadn't been closed at that low a price since the day for Christmas in 2017.  Net volume was grotesque at a bit under 470,000 contracts -- and there was another 28,000 contracts worth of roll-over/switch volume on top of that.

The silver price wandered around a few pennies either side of unchanged -- and was actually up a nickel or so by the COMEX open yesterday.  Then JPMorgan et al appeared -- and the rest, as they say, is history.  They set the low tick of the day just minutes before the COMEX close and, like gold, silver rallied a bit until 3 p.m. in after-hours trading, before flat-lining into the 5:00 p.m. EDT close.


The high and low ticks in this precious metal were reported as $17.275 and $16.46 in the July contract.


Silver was closed on Friday at $16.54 spot, down 59 cents on the day, but was down about 74 cents at its low tick.  JPMorgan et al close silver below both its 200 and 50-day moving averages yesterday.  These guys were serious!  Net volume was a record at a bit under 135,500 contracts, which is most likely a number we won't see again any time soon, unless 'da boyz' allow silver to rally without interference some day.  Roll-over/switch volume out of July and into futures months was pretty healthy as well, at a bit under 29,000 contracts.

Platinum wasn't spared, either.  It was sold a few dollars lower into the Zurich open -- and was actually up a dollar about twenty minutes before the COMEX open.  The powers-that-be set platinum's low tick shortly after 12 o'clock noon in New York.  It was allowed to rally a bit until 3 p.m. in the thinly-traded after-hours market, but half of those gains were taken back by the time the market closed at 5:00 p.m. EDT.  Platinum was closed at $885 spot, down 19 bucks from Thursday.

The palladium price chopped quietly sideways until around 2 p.m. CST on their Friday afternoon.  It began to head quietly and steadily lower from there and, like the other three precious metals, had its lights punched out starting at the COMEX open.  The low tick was set at 1 p.m. EDT -- and it touched that mark again in after-hours trading as well.  It popped a few dollars higher after that -- and was closed at $984 spot, down 17 dollars on the day.  Palladium was closed below its 200-day moving average yesterday.

The dollar index closed very late on Thursday afternoon in New York at 94.88 -- and began to tick quietly higher almost as soon as trading began at 6:00 p.m. EDT on Thursday evening.  It couldn't quite make it above the 95.00 mark -- and got a little help on a couple of occasions...once before the afternoon gold fix in Shanghai -- and the second, minutes before the London open.  The 95.13 high tick was set around 8:20 a.m. in London -- and by 9 a.m. BST it was down around the 94.80 -- and that's where it traded for the remainder of the Friday session.  The dollar index finished the day at 94.80...down 8 basis points from Thursday's close.


Like what happened in the currency markets on Thursday as well, it should be more than obvious that what happens in the currency markets Friday...which was nothing...means Zip-a-Dee-Doo-Dah to precious metal prices when JPMorgan et al are having their way with them in the COMEX futures market.

And here's the 5-year U.S. dollar index chart and nothing should be read into it except that it's pure fiction, along with every other 'price' you see in today's markets.



Not surprisingly, the gold shares gapped down at the open -- and most of the losses that mattered were in by around 11 a.m. in New York trading.  They didn't do much after that, although a buyer showed up in the last few minutes -- and closed them off their lows by a bit.  The HUI closed down 2.30 percent, but it could have been far worse.

The silver equities gapped down a bit under 2 percent at the open -- and from there they continued to chop very quietly lower right into the close, but also finished off their lows by a hair as well.  Nick Laird's Intraday Silver Sentiment/Silver 7 Index close down 2.62 percent -- and that too, could have been far worse than it was.  Click to enlarge, if necessary.

And here's the 1-year Silver 7/Silver Sentiment Index chart from Nick as well.  Click to enlarge.

Here are the usual charts from Nick that show what's been happening for the week, month-to-date -- and year-to-date.  The first one shows the changes in gold, silver, platinum and palladium for the past trading week, in both percent and dollar and cents terms, as of their Friday closes in New York - along with the changes in the HUI and the Silver 7 Index.


Here's the weekly chart -- and the tiny gains that the precious metal equities had by the close of trading on Thursday, mostly disappeared by the close of trading on Friday...and then some, in the case for gold.  Once again the silver equities outperformed their golden brethren.  Click to enlarge.

Here's the month-to-date chart -- and it doesn't look much different than the weekly chart.  Click to enlarge.

The year-to-date graph certainly isn't very happy looking, as 'da boyz' now have all four precious metals down on the year.  But, as has been the case right from the start, the silver equities are still outperforming the gold stocks by a goodly margin.  But that fact is not much to write home about.  Click to enlarge as well.

As to where we go from here from a price perspective in both the equities -- and their underlying precious metals, is still very much in the hands of JPMorgan et al...but mostly just JPMorgan.  What happened during the bloodbath on Friday, doesn't change that scenario at all.  But with the COMEX market structure in all four precious metals as bullish as we're ever likely to see them, the path of least resistance is higher prices.  The only thing not known is if 'da boyz' will appear as shorts sellers of both first and last resort once again.


And in the interests of full disclosure, I was a buyer yesterday...picking up more shares in a junior silver producer that I already have a position in...Endeavour Silver.

The CME Daily Delivery Report showed that 10 gold and 18 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.  In gold, there were three short/issuers -- and two long there's not much to see.  Gold deliveries have slowed down to a crawl once again.  In silver, there were four short/issuers.  R.J. O'Brien was the largest with 12 from its client account -- and of the two long/stoppers, Goldman was the biggest with 16 for its client account.  The link to yesterday's Issuers and Stoppers Report is here.


The CME Preliminary Report for the Friday trading session appeared on the CME's website about 3:30 p.m. EDT this morning -- and it showed that gold open interest in June fell by 264 contracts, leaving 281 left, minus the 10 contracts mentioned just above.  Thursday's Daily Delivery Report showed that only 10 gold contracts were actually posted for delivery on Monday, so that means that 264-10=254 gold contracts vanished from the June delivery month, most likely because the short/issuers involved had no gold backing their short positions -- and the long/stoppers didn't want to push the issue.  Silver o.i. in June declined by 74 contracts, leaving 28 still open, minus the 18 mentioned in the previous paragraph.  Thursday's Daily Delivery Report showed that 81 silver contracts were actually posted for delivery on Monday, so that means that 81-74=7 more silver contracts just got added to June.

There were no reported changes in GLD yesterday, but an authorized participant...mostly likely JPMorgan...took ownership of another 1,788,276 troy ounces of silver from SLV, in what was likely another exchange of SLV shares for physical that Ted talks of all the time.


There have been six consecutive withdrawals from SLV since May 30...totalling 7,949,232 troy ounces.  It's a pretty safe assumption to make that JPMorgan owns it all.


There was no sales report from the U.S. Mint yesterday.


Month-to-date the mint has only sold 12,500 troy ounces of gold eagles -- 5,000 one-ounce 24K gold buffaloes -- and 125,000 silver eagles.


It was another day of zero ounces in/zero ounces out for gold over at the COMEX-approved depositories on the U.S. east coast on Thursday.


It was a pretty big day in silver again, as 1,752,625 troy ounces were reported received -- and another 1,018,839 troy ounces were shipped out the door.  In the 'in' category, there were two truck loads...1,210,123 troy ounces...dropped off at CNT -- and the other truck load...542,492 troy ounces...landed on JPMorgan's doorstep.  In the 'out' category, there was one smallish truck load...545,311 troy ounces...shipped out of CNT, plus 413,747 troy ounces from Canada's Scotiabank -- plus 59,780 troy ounces from Malca-Amit USA.  The link to that activity is here.


After a pretty wild week, it was a lot quieter at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday.  They received only 1,016 of them -- and shipped out 489.  This activity was at Brink's, Inc. -- 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 a bit of a disappointment in gold, but exactly as bad in silver as Ted Butler said it would be.

In silver, the Commercial net short position blew out by a staggering 29,835 COMEX contracts, or 149.1 million troy ounces of paper silver, around 64 days of world silver production.


The arrived at that number by reducing their long position by 4,793 contracts -- and they also added an astonishing 25,042 short contracts -- and it's the sum of those two numbers that represents the change for the reporting week.


Ted said that the Big 4 traders increased their short position by about 7,900 contracts -- and the '5 through 8' large traders also increased their short position, they by approximately 8,300 contracts.  Ted's raptors, the 25-odd small Commercial traders other than the Big 8, sold 13,600 long contracts.


Under the hood in the Disaggregated COT Report, the numbers were also as bad as Ted forecast, as the Managed Money traders bought 20,103 long contracts, plus they reduced their short position by another 16,022 contracts -- and it's the sum of those two numbers...36,125 contracts...that represents their change for the reporting week.  The difference between that number -- and the Commercial net short position...6,290 contracts...was made up almost exclusively by the traders in the 'Other Reportables' category, as the 'Nonreportable'/small trader didn't do much during the reporting week.


Here's a snip from the Disaggregated COT Report so you can see these above changes for yourself.

Ted puts JPMorgan's short position at 40,000 COMEX contracts/200 million troy ounces, up 8,000 contracts/40 million troy ounces from last week's COT Report.  This 40,000 contract figure is at, or very close to an all-time record high since JPM acquired Bear Stearns back in 2008.  The Commercial net short position, as of Tuesday's cut-off, now stands at 336.9 million troy ounces of paper silver, so JPMorgan owns a very decent chunk of that amount all by itself.


Here's Nick's 3-year COT chart for silver, updated with yesterday's data.  Click to enlarge.

Of course, after yesterday's grotesque and illegal engineered price decline, the above data means precisely nothing.  But I'm reporting on it anyway.

In gold, the commercial net short position increased by a small amount...6,240 contracts/624,000 troy ounces...of paper gold.  I had hoped for a tiny decline, but alas...


They arrived at that number by reducing their long position by 4,608 contracts, plus they added 1,632 short contracts -- and it's the sum of those two numbers that represents the change for the reporting week.


But the internal changes in the commercial category were stunning for the second week in a row.  Ted said that the Big 4 traders, read JPMorgan, reduced their short position by around 14,100 contracts -- and that's on top of the 12,100 contract reduction in last week's COT Report!  The '5 through 8' large traders increased their short position by about 8,200 contracts -- and Ted's raptors, the 38-odd small commercial traders other than the Big 8, sold off 12,100 long contracts.  Needless to say, Ted will have lots to say about all this in his weekly commentary this afternoon.


Under the hood in the Disaggregated COT Report, it was mostly Managed Money traders on the other side of the commercial selling.  They increased their long position by 4,286 contracts, plus they reduced their short position by 338 contracts -- and it's the sum of those two numbers...4,624 contracts...that represents their change for the reporting week.  It was the traders in the other two categories that made up the difference between what the Managed Money traders bought -- and the commercial traders sold, which only came to...6,240 minus 4,624 equals 1,616 contracts.  But the 'Other Reportables' increased their net long position by a goodly amount, while the 'Nonreportable'/small trader category went the other way, increasing their net short position by a fair amount.  It was a real mixed bag -- and it's a given that Ted will have something to say about that as well.


Here's a snip from the Disaggregated Report for gold, so you can see the above changes for yourself.  Click to enlarge.

The commercial net short position in gold edged up to the 14.06 million troy ounces mark, which is still in bullish territory -- and even more bullish when one considers the changes in the Big 4 traders...or should I say the Big One trader...JPMorgan.


And here's the 3-year COT chart for gold -- and it was yet another week of very minor changes.  Click to enlarge.

Of course, like for silver, the above discussion on Friday's COT Report isn't worth the paper it's printed on.  But the big difference in gold vs. silver was the change in the Big 4 category during the reporting week...the second week in a row that the 'Big 4/Big 1' have covered short positions in a huge way.  But in silver, JPMorgan went short big time.


By the time that trading ended on Friday, the COMEX futures market in all four precious metals had been transformed into an entirely different beast.  That's what happens when JPMorgan et al are stomping about without restriction -- and with the CFTC and the CME Group aiding and abetting the crime.  And as I pointed out in Friday's missive, I got the impression that they're in a bit of a panic -- and in a hurry.  I don't think it's understatement to say that they're all set up for a moon shot to the upside, if that's what the powers-that-be have in mind -- and I'll have much more on this in The Wrap.

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 '5 through 8' traders in each physically traded commodity on the COMEX.  These are the same Big 4 and '5 through 8' traders discussed in the COT Report above.  Click to enlarge.

For the current reporting week, the Big 4 traders are short 158 days of world silver production-and the '5 through 8' large traders are short an additional 79 days of world silver production-for a total of 237 days, which is a hair under 8 months of world silver production, or about 553.1 million troy ounces of paper silver held short by the Big 8.  [In the COT Report last week, the Big 8 were also short 202 days of world silver production.]  These short positions in silver by the Big 8 are the largest on record.


In the COT Report above, the Commercial net short position in silver was reported as 336.9 million troy ounces.  As mentioned in the previous paragraph, the short position of the Big 8 traders is 553.1 million troy ounces.  The short position of the Big 8 traders is larger than the total Commercial net short position by a chunky 553.1 minus 336.9 equals 216.1 million troy ounces.  The reason for the difference in those it always that Ted's raptors, the 25-odd small commercial traders other than the Big 8, are long that amount.


As stated earlier, Ted estimates JPMorgan's short position at 40,000 contracts, up 8,000 contracts from last week's report, or 200 million troy ounces of paper silver.  That translates into about 85 days of world silver production.  That number also represents 36 percent of the short position of the Big 8 traders -- and about 54 percent of the short position held by the Big 4 traders.  As I said last week about this concentrated short's simply grotesque.


The Big 4 traders are short 158 days of world silver production -- and once you subtract out the 85 days that JPM is short, that leaves 73 days split up between the other three large traders...24 days [and a bit] each.  And since those contracts are obviously not split up evenly between them, it's a certainty that one of these traders has a short position under 24 days -- and the other, more than 24 days by a decent amount.  But whatever those three number are, they can't add up to more than 73 days.


The four traders in the '5 through 8' category are short 79 days of world silver production in total, which is around 19.75 days of world silver production each, which is up huge from the 15.25 days that each was short in last week's COT Report.  The smallest of the traders in this category holds something less than 19.75 days -- and the largest, something more than that amount.  So it's a mathematical certainty that the smallest of the Big 4 traders holds a short position of a bit over 20 days -- and the second smallest of the Big 4...something around the 24 day mark [the average of the remaining 'Big 3' traders] of world silver production held short.  That leaves the Big 2 traders in the Big 4 category standing out like the proverbial sore thumbs they are...JPMorgan in first spot with 85 days, with Scotiabank well down in second spot.  JPMorgan remains, as always, the King Short.


The Big 8 commercial traders are short 48.0 percent of the entire open interest in silver in the COMEX futures market, which is up a bit from the 44.5 percent that they were short in last week's COT Report.  And once whatever market-neutral spread trades are subtracted out, that percentage would be something over 50 percent.  In gold, it's now 45.4 percent of the total COMEX open interest that the Big 8 are short, down a bit from the 46.5 percent they were short in last week's report -- and about 50 percent once the market-neutral spread trades are subtracted out.


In gold, the Big 4 are short 49 days of world gold production, which is down 5 days from what they were short last week -- and the '5 through 8' are short another 22 days of world production, which is up 3 days from what they were short the prior week, for a total of 71 days of world gold production held short by the Big 8 -- which is down 2 days from what they were short in last week's report.  Based on these numbers, the Big 4 in gold hold about 69 percent of the total short position held by the Big 8...which is down 5 percentage points from last week's COT Report.


The "concentrated short position within a concentrated short position" in silver, platinum and palladium held by the Big 4 commercial traders are about 66, 65 and 80 percent respectively of the short positions held by the Big 8.  Silver is down about 4 percentage points from the previous week's COT Report, platinum is up 2 percentage points from a week ago -- and palladium is up 1 percentage point from last week's report -- and almost back at its record 81 percent high.


Of course, like the COT Report that preceded it, this 'Days to Cover' commentary is all ancient history as well, but it shows how extreme things were as of last Tuesday's cut-off.  And one can only speculate in horror at what a COT Report would have looked like at the close of COMEX trading on either Wednesday or Thursday, before 'da boyz' showed up in the COMEX futures market in New York on Friday morning.

Turkey, Abdul Hamid II., 1876-1909, 250 Kurush Year 1293/32 = 1906   Full weight: 17.91 grams


I don't have all that many stories for you today, but I am including a couple that I'd been saving for today's column for the usual length and/or content reasons.


Here is the Stunning Reason Why Treasury Yields Blew Out in April

As Trade Wars began, the rest of the world dumped more Treasuries in April than in any month since January 2016...


But the biggest selling culprit was not "good friend" China who saw a small $5.799bn reduction in its Treasury holdings in April...


And while "Great ally" Japan did dump Treasuries for the 8th month in the last 9 to it lowest holdings since Oct 2011...


It was Vladimir Putin that decided to puke the most U.S. Treasuries out of Russia ever, liquidating half, or $47.4 billion, of its U.S. Treasuries in one month, to its lowest holdings since March 2008!


One can't help but wonder - as the Yuan-denominated oil futures were launched, trade wars were threatened, and as more sanctions were unleashed on Russia -- if this wasn't a dress-rehearsal, carefully coordinated with Beijing to field test what would happen if/when China starts to really liquidate.


This very worthwhile chart-filled commentary put in an appearance on the Zero Hedge website at 4:23 p.m. on Friday afternoon EDT -- and another link to it is here.

Trump's Not Like Ike -- Bill Bonner

So you'd think that if you were serious about making America great again, you'd want to emulate Ike Eisenhower rather than George W. Bush or Barack Obama.


You'd want to end wars, not start them. You'd want to balance the federal budget, not run the biggest deficits in history. You'd want to reduce federal spending and cut the Pentagon budget, not increase them. You'd want less government, not more - and less debt, too, not more of it.


That is, you'd want to do the exact opposite of the Bush and Obama administrations.


But when we look out on the comic splendor of the USA in 2018, we see neither Dwight Eisenhower reincarnated in the White House nor a William McChesney Martin redux at the Fed.


Instead, what we see is what Eisenhower warned us against on January 17, 1961 during the president's farewell address:


As we peer into society's future, we - you and I, and our government - must avoid the impulse to live only for today, plundering for our own ease and convenience the precious resources of tomorrow. We cannot mortgage the material assets of our grandchildren without risking the loss also of their political and spiritual heritage. We want democracy to survive for all generations to come, not to become the insolvent phantom of tomorrow.


Amen to that, dear reader!  This longish, but very worthwhile commentary by Bill showed up on the Internet site early on Friday morning EDT -- and another link to it is here.

Workers Flee -- and Thieves Loot Venezuela's Reeling Oil Giant

Thousands of workers are fleeing Venezuela's state-owned oil company, abandoning once-coveted jobs made worthless by the worst inflation in the world. And now the hemorrhaging is threatening the nation's chances of overcoming its long economic collapse.


Desperate oil workers and criminals are also stripping the oil company of vital equipment, vehicles, pumps and copper wiring, carrying off whatever they can to make money. The double drain - of people and hardware - is further crippling a company that has been teetering for years yet remains the country's most important source of income.


The timing could not be worse for Venezuela's increasingly authoritarian president, Nicolás Maduro, who was re-elected last month in a vote that has been widely condemned by leaders across the hemisphere.


Prominent opposition politicians were either barred from competing in the election, imprisoned or in exile.

But while Mr. Maduro has firm control over the country, Venezuela is on its knees economically, buckled by hyperinflation and a history of mismanagement. Widespread hunger, political strife, devastating shortages of medicine and an exodus of well over a million people in recent years have turned this country, once the economic envy of many of its neighbors, into a crisis that is spilling over international borders.


This longish, but very worthwhile photo-essay appeared on The New York Times website on Thursday -- and my thanks go out to Patricia Caulfield for bringing it to our attention.  Another link to it is here.

Massive Argentine Peso Plunge Deepens Emerging Market Sell-Off

The brutal tumble of Argentina's peso added to the list of concerns over the ability of developing economies to defend their currencies as the era of cheap money wanes. Emerging-market assets extended losses a day after the Federal Reserve's more hawkish signals.


A measure of currencies in developing nations slid to the lowest since December, while the MSCI Emerging Markets Index sank -- led by industrial and technology companies. The Argentine peso slumped more than 6 percent on reports of changes at the country's central bank and after truck drivers began a strike. The Brazilian real dropped a fourth day as the impact of a massive sale of foreign-exchange swaps was short lived.


Developing-nation assets took a beating as signals of a slightly more aggressive pace of Fed hikes added to concern over further currency depreciation in developing economies. Meanwhile, the European Central Bank said a rate increase won't come until the summer of 2019, though it announced it would end stimulus in December, setting the euro area up for an exit from years of heavy monetary support.


"The market knows the central bank [of Brazil] allows itself to get deeply behind the curve, and is merely acting rationally by selling the real and shorting bonds," said James Gulbrandsen, a Rio de Janeiro-based money manager who helps oversee $3.5 billion of assets at NCH Capital. "This is economics 101. If you suppress prices, you create market distortions and arbitrage. And the market always wins."


This brief Bloomberg article put in an appearance on their website at 1:32 p.m. Denver time on Thursday afternoon -- and was updated about ninety minutes later.  I thank Patrik Ekdahl for this story -- and another link to it is here.  Wolf Richter had a few things to say about the Argentinian peso crisis in a story headlined "Seems Impossible, but Argentina's Peso Was Able to Collapse even Further Despite $50 Billion IMF Bailout" -- and I thank Richard Saler for sending it our way.  It's worth reading.

Can the E.U. become a partner for Russia? -- The Saker

The re-nomination (albeit somewhat reshuffled) of the "economic block" of the Medvedev government has elicited many explanations, some better than others.  Today I want to look at one specific hypothesis which can be summed up like this: Putin decided against purging the (unpopular) "economic block" from the Russian government because he wanted to present the E.U. with "known faces" and partners E.U. politicians would trust.  Right now, with Trump's insane behavior openly alienating most European leaders, this is the perfect time to add a Russian "pull" to the U.S. "push" and help bring the E.U. closer to Russia.  By re-appointing Russian "liberals" (that is a euphemism for WTO/WB/IMF/etc types) Putin made Russia look as attractive to the E.U. as possible.  In fact, the huge success of the Saint Petersburg summit and the Parliamentary Forum is proof that this strategy is working.


This hypothesis is predicated on one crucial assumption: that the E.U., under the right conditions, could become a partner for Russia.


But is that assumption warranted?  I personally don't believe that it is, and I will try to lay out the reasons for my skepticism:


First, there is no "E.U.", at least not in political terms.  More crucially, there is no "E.U. foreign policy".  Yes, there are E.U. member states, who have political leaders, there is a big business community in the E.U. and there are many E.U. organizations, but as such, the "E.U." does not exist, especially not in terms of foreign policy.  The best proof of that is how clueless the so-called "E.U." has been in the Ukraine, then with the anti-Russian sanctions, in dealing with an invasion of illegal immigrants, and now with Trump.  At best, the E.U. can be considered a U.S. protectorate/colony, with some subjects "more equal than others" (say, the U.K. versus Greece).  Most (all?) E.U. member states are abjectly obedient to the USA, and this is no surprise considering that even the so-called "E.U. leader" or "E.U. heavyweight" - Germany - only has very limited sovereignty.  The E.U. leaders are nothing but a comprador elite which doesn't give a damn about the opinions and interests of the people of Europe.  The undeniable fact is that the so-called "E.U. foreign policy" has gone against the vital interests of the people of Europe for decades and that phenomenon is only getting worse.


This longish -- and probably worthwhile commentary by the Saker, which I must admit I haven't read yet...but will this weekend, showed up on internet site on Friday sometime.  I thank Larry Galearis for pointing it out.  Another link to it is here.

South African Rand Slides to 6-Month Low as South Africa Unveils 'Affirmative Action' Mining Charter

Seemingly not satisfied with 'enabling' the  violent deaths of hundreds of white farmers with their policy of redistribution (confiscation) of white-owned farm-land to poorer black farmers, South Africa's still-newly-minted government has decided to apply the same cleansing of the "original sin," to the nation's resource mining operations.


As Ramaphosa previously noted, he wants to see "the return of the land to the people from whom it was taken... to heal the divisions of the past," and published a draft of its new Mining Charter on Friday for public comment before finalizing the set of rules aimed at distributing the industry's wealth more widely.


As Bloomberg reports, Mineral Resources Minister Gwede Mantashe has held months of talks with companies, unions and mining communities on an update to the regulations after a version published last year by his predecessor prompted legal challenges from the industry.


South Africa has the world's biggest reserves of platinum, and its mineral deposits also include gold, manganese, iron-ore, coal, chrome and zinc. Anglo American Plc, Glencore Plc and South32 Ltd. are among companies operating in the country, and the new Mining Charter is aimed at distributing South Africa's mineral wealth more widely.


This article was posted on the Zero Hedge website at 5:05 p.m. on Friday afternoon EDT -- and another link to it is here.

U.S. and China Expand Trade War as Beijing Matches Trump's Tariffs

The Trump administration on Friday escalated a trade war between the world's two largest economies, moving ahead with tariffs on $50 billion of Chinese goods and provoking an immediate tit-for-tat response from Beijing.


The president is battling on a global front, taking aim at allies and adversaries alike. The United States has levied global tariffs on metal imports that include those from Europe, Canada and Mexico, while threatening to tear up North American Free Trade Agreement.


These countries are fighting back, drawing up retaliatory measures that go after products in Mr. Trump's political base. China's response was swift on Friday, focusing on $50 billion worth of American goods including beef, poultry, tobacco and cars.


The trade actions could ripple through the global economy, fracturing supply chains and costing jobs at American companies that will be forced to absorb higher prices. Although the United States economy is especially strong, the tariffs are expected drive up prices for American consumers as well as for businesses that depend on China for parts.


Things could get worse if the United States and China ratchet up their actions. Mr. Trump has already promised more tariffs in response to China's retaliation. China, in turn, is likely to back away from an agreement to buy $70 billion worth of American agricultural and energy products - a deal that was conditional on the United States lifting its threat of tariffs.


This news item appeared on The New York Times website on Friday sometime -- and it comes to us courtesy of Roy Stephens.  Another link to it is here.  There was a parallel story to this on the Bloomberg Internet site -- and it's headlined "Trade War's Battle Lines Drawn as U.S., China Set Tariff Lists" -- and I thank Swedish reader Patrik Ekdahl for sharing that one with us.  That Bloomberg piece is now on its third headline...the first read:  "Trump's China Tariffs Met With Retaliation Threats From Beijing"...the second: "Trump Targets $50 billion in China Goods, Vows More If Needed".

China Strikes Back -- Retaliates With $50 Billion Tariffs on U.S. Goods

Update: As China refines its retaliatory tariffs, it clarified Friday afternoon in New York that tariffs on U.S. soybeans will begin July 6, while tariffs on U.S. crude oil, natural gas, coal and some refined oil products will begin at a later date.  U.S. aircraft are not on the tariff list.

* * *
Just as China promised, they have responded "immediately" to President Trump's "very big tariffs" and just unveiled $50 billion in tariffs against U.S. goods including soybeans, light aircraft, orange juice, whiskey and beef, starting July 6th.


The response from China signaled a rapid escalation of the dispute. China will impose tariffs with "equal scale, equal intensity" on imports from the U.S. and all of the country's earlier trade commitments are now off the table, the Commerce Ministry said in a statement on its website late Friday.


This is exactly what Goldman Sachs was worried about:

"We expect a minimal effect on growth and consumer price inflation from the tariffs, if implemented, but the announcement raises the odds that additional restrictions will be proposed over coming months."


Things are about to get a lot more expensive...


The Zero Hedge spin on all this was posted on their Internet site at 1:40 p.m. EDT on Friday afternoon -- and another link to it is here.

Gazprom mulls gas pipeline through North Korea

Talks about a gas transmission corridor through the Korean Peninsula have been in the works for the better part of a decade.


Russia could be collaborating with Seoul on the construction of a natural gas pipeline through North Korean territory, a Gazprom official said Friday.


South Korean officials hinted earlier this year that a thaw in tensions on the Korean Peninsula could open the door to the construction of a Russian gas pipeline through countries divided by the 38th Parallel.


Vitaly Markelov, the deputy CEO at Gazrpom, told reporters Friday the recent diplomatic events in Singapore could make it easier to move forward.


"To date, the political situation has been somewhat different, and the South Korean side has asked Gazprom to resume the project, and a series of talks has been held on this issue, and these talks are continuing," he was quoted by Russia news agency Tass as saying.


This UPI item was posted on their Internet site at 9:49 a.m. EDT on Friday morning -- and it's the second offering of the day from Roy Stephens.  Another link to it is here.

Some of the 'Most Systemically Important Banks' in the World Are Tumbling

Since the Federal Reserve hiked rates, "big" U.S. banks have dramatically underperformed "small" U.S. banks, continuing a trend that has been going on since February...


But it's broader than that this "big" bank blow-up is global.


The stock prices of 16 of the most 'Systemically Important Financial Institutions' (SIFIs) in the world are now in bear market territory (down by 20% or more from their recent highs in dollar terms); and as the FT reports, this has caused Ian Hartnett, chief investment strategist at London-based Absolute Strategy Research, to issue  his first "Black Swan" alert since 2009.


As the FT goes on to note, what many of the harder-hit Sifi banks have in common, said Mr Harnett, was a heavy dependence on U.S.-dollar funding, putting them at risk of a squeeze if U.S. rates continue to rise and the dollar continues to strengthen. Banks in Canada, Australia and Sweden, in particular, came through the last crisis in relatively good shape, thanks largely to their exposures to China and a strong commodities market. But in the years since then, the banks had overextended, he said, trying to support rapid asset growth with wholesale funding, rather than traditional deposits.


Finally, Hartnett noted bullish remarks from Jamie Dimon on CNBC last week, when the JPMorgan chief celebrated strong consumer and business sentiment and said he could find no "real potholes" in the outlook.


"The good news does not last for ever," he said. "Those kind of comments are usually just before things start heading down."


Sooner or later, Powell is gonna get the tap on the shoulder from his real bosses and judging by the collapse of many of the SIFIs, it's soon.


This 5-chart Zero Hedge new story is certainly worth a minute of your time.  I keep a close eye on the BKX - KBW Bank Index -- and it certainly reflects what's being spoken of in this article.  It showed up on the ZH website at 12:45 p.m. EDT yesterday afternoon -- and another link to it is here.

Doug Noland: The Great Fallacy

The past few Fed chairs were keen to use forward guidance as part of their strategies to manipulate market expectations, prices and economic outcomes. Powell, in what would be a major departure, appears to want the Fed out of the guidance and manipulation business. It's an uncertain world, and financial markets must be reacquainted with the capitalistic principle of markets standing on their own. He appreciates the extraordinary uncertainty in the economic, market, policy, and geopolitical backdrops. Powell views the economy as strong and ongoing monetary policy normalization as appropriate. Of course, there are downside risks. But in contrast to Draghi, Powell shows little predilection to dangle the carrot of monetary stimulus and liquidity backstops in front of a craving marketplace.


With his background in finance, I'll assume the Chairman appreciates the speculative nature of current market dynamics. He is well aware of the powerful role the Greenspan/Bernanke/Yellen puts have played within the financial markets. Cognizant of market distortions, Powell would rather the markets not revel in the certitude of a Fed ready and willing to sprint immediately to the markets' defense. On the surface, adjustments in the Powell Fed's rate and communications policies appear less than far-reaching. But on the critical issue of the Federal Reserve's approach to market-pandering policy guidance and market-bolstering liquidity backstops, I believe Powell is breaking with the progressively radical policy course that unfolded under Drs. Greenspan, Bernanke and Yellen.


Over in Frankfurt, Mario Draghi is having a devil of a time shedding "whatever it takes." He stated the ECB's intention to end QE at the end of the year. This is, however, "subject to incoming data confirming the Governing Council's medium-term inflation outlook." Markets hear Draghi discussing an exit, while seeing ECB forward guidance as virtually ensuring ongoing liquidity operations. Viewing unfolding developments in EM, Italy, the European periphery and vulnerable global markets more generally, markets see fragilities that create a high likelihood of future "whatever it takes" QE measures.


The pressing issue for global markets goes far beyond widening interest-rate differentials. Markets anticipate a future with the Draghi ECB eager to expand QE and, across the pond, the Powell Fed reluctant to redeploy QE - in a world increasingly vulnerable to a globally systemic market liquidity event.


Doug's weekly Credit Bubble Bulletin is always a must read for me.  Today's edition was posted on his Internet site in the wee hours of Saturday morning EDT -- and another link to it is here.

I didn't find a single precious metal-related story that I thought worth posting, which certainly doesn't speak well of the so-called analysts that write the stuff.

The PHOTOS and the FUNNIES  

Taking photos on a cloudy day presents its own challenges, particularly lighting and colour temperature.  The three shots of that double-crested cormorant in Friday's column were a challenge to get 'right' -- and this pair of lesser scaups was no different.  Click to enlarge for both.


Today's pop 'blast from the past' dates from 1972 -- and I remember spinning this 45 rpm recording on CHAR-FM in Alert, N.W.T. back in my 'hippy' days...46 years ago.  It was a classic then -- and still is now -- and the link is here.


Today's classical 'blast from the past' is one I've posted before, but it's many years, so it's time for a revisit.  It's J.S. Bach's Toccata & Fugue in D-minor, BWV 565.  A teenage prodigy from the Netherlands, Ger van Hoef does the honours at the keyboards -- and as is typical for a manual organ of this vintage, he has a couple of other organists pulling stops for him.  Like Ravel's Bolero in last week's 'blast from the past' no YouTube video can do this work justice -- and if you are ever presented with the opportunity of seeing this live, don't pass it up.  The link to this performance is here.

In a show of raw brute power, JPMorgan et al did the dirty in the COMEX futures market yesterday.  And as occurred during the Thursday trading session, what the currencies were doing, or not doing at the time, played absolutely no roll in the engineered price smashes in all four precious metals on Friday.  'Da boyz' were out there for one reason -- and one reason only -- and that was to cover as many of their short positions as possible as quickly as possible.

Along with the enormous trading volumes, came the liquidity necessary for them to bring both gold and silver back into wildly bullish territory.  The futures market set-up in gold was already pretty decent -- and now it's off-the-charts bullish.  And please don't forget that the Big 4 traders had already covered over 26,000 short contracts in gold as shown in the last two COT Reports ending at the cut-off on Tuesday.  One can only imagine what the short position of the Big 4 JPMorgan...would be if we could see a COT Report as of the 5:00 p.m. close of trading on Friday.

Silver was blasted below -- and closed below both its 200-day and 50-day moving averages yesterday -- and it nearly goes without saying that Managed Money traders were selling longs and going short in record quantities -- and JPMorgan et al were taking the other sides of those trades hand over fist -- but in direct competition with traders in the 'Other Reportables' category.  Are we back at Ted's "white-hot bullish" structure of a few months back, you ask?  I don't know, but it doesn't really matter, as JPMorgan is the big short -- and they have more than enough physical silver to cover whatever remains of their short position.  These stone-cold crooks could care less about the other 'Big 7' traders.

The Managed Money traders had close to a record short position in platinum even before the price smash yesterday, so its a certainty that their short position is back at a new record high.

As for palladium, the COMEX futures market in that precious metal is so tiny, it may not matter.  But if you remember from last Saturday's Bank Participation Report, the banks of the world, led by the New York banks...specifically JPMorgan...are short more than 40 percent of the entire open interest in that precious metal.  The price decline yesterday took palladium back below its 200-day moving average -- and touched its 50-day moving average before closing off it by a hair, so I'd assume that 'da boyz' made inroads into their short positions in palladium as well.

Here are the 6-month charts for all four precious metals, plus copper and WTIC -- and as you can tell, these engineered price declines appeared in all of the 'Big 6' commodities.  The 'click to enlarge' feature helps a bit with the first four.



So much for the so-called 'summer doldrums' they've been anything but this year so far -- and the summer solstice is still five days away.


But as I survey the carnage from yesterday, I have to wonder why the powers-that-be were so "in your face" about it -- and on a Friday.  There had to be some sort of urgency for them to pull off such a blatant act in front of the entire precious metals community -- and the gold-accumulating countries -- that are now totally wise to their game.


What is that they know that we don't?


I have some thoughts -- and they may fall into the wild-ass speculation category.  But then again, maybe not.  With this budding trade war with China and Europe, along with all the other problems in the economic and financial world that Doug Noland spelled out above, precious metal prices may become "weaponized" as time goes along --- and not too much time at that.


Only the deep state players would know that this might be coming -- and they appear to be clearing the decks for that eventuality.


Now would be a perfect time for that to occur, as it can all be blamed on China, or maybe Russia...or whoever or whatever they think they can pin it on.


I was intrigued by the fact that Russia sold half of its U.S. Treasury holdings in April, which is a story that appeared late in the afternoon yesterday on Zero Hedge -- and is the lead story in the Critical Reads section above.


There's also that Chinese yuan/crude oil conversion into gold that was set up some months ago in Shanghai.  That conversion has never been tested...yet.  I think that the moment that it is, would be "game, set and match" for the gold price management scheme.


So many 'black swans' out there -- and it would only take one.  When that occurs -- and with all eyes on the FIFA World Cup now underway in Russia -- the 'summer doldrums' would be history.


So we wait some more.


That's all I have for the day -- and the week -- and I await the New York open on Sunday evening with great interest.


See you on Tuesday.




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