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A Dollar Index 'Rally' Appeared In the Nick of Time on Monday

 -- Published: Tuesday, 10 July 2018 | Print  | Disqus 

By Ed Steer

10 July 2018 -- Tuesday


The gold price began to head quietly but unevenly higher as soon as trading began at 6:00 p.m. EDT in New York on Sunday evening.  That rally lasted until shortly after 12:30 p.m. BST in London on their Monday afternoon -- and as soon as COMEX trading began, a dollar index 'rally' commenced almost at the same moment.  Most of the sell-off was done by minutes after 1 p.m. EDT -- and although it gained a bit in early after-hours trading, it was sold down after that.


The low and high ticks in gold were reported by the CME Group as $1,255.70 and $1,266.90 in the August contract.


Gold was closed in New York on Monday at $1,257.20 spot, up $2.70 on the day.  Net volume was around 191,600 contracts -- and roll-over/switch volume was 40,500 contracts on top of that.

The price path for silver was the same -- and its high of the day came at the noon silver fix in London -- and after a brief down/up move after the COMEX open, JPMorgan et al stepped into the market in a more serious manner at, or just before, the afternoon gold fix in London.  Silver was sold lower until very shortly after London closed -- and it chopped quietly sideways for the remainder of the Monday session.


The low and high ticks in this precious metal were recorded as $16.055 and $16.26 in the September contract.


Silver was closed yesterday at $16.075 spot, up 6.5 cents from Friday's close and, like gold, miles off its high tick of the day.  Net volume was about 55,400 contracts -- and there was a hair under 6,000 contracts worth of roll-over/switch volume in this precious metal.

The platinum price traded flat until shortly after 8 a.m. China Standard Time on their Monday morning -- and then began to head quietly higher.  That lasted for about three hours -- and from that point it traded sideways until about thirty minutes after Zurich opened.  It edged higher from there until shortly after the 10:30 a.m. BST morning gold fix -- and at that juncture, it ran into 'something' at the $857 spot mark -- and it bounced off that price mark multiple times before suffering the same fate as gold and silver.  Its New York low came minutes after the COMEX close -- and it crept a few dollars higher into the 5:00 p.m. EDT close of trading from there.  Platinum finished the Monday session at $849 spot, up 7 bucks from its close on Friday and, like silver and gold, well off its high tick.

For the most part, the palladium price traded in similar fashion to platinum.  It's high tick of the day came at half-past lunchtime in Zurich -- and then the price didn't do much until minutes before the afternoon gold fix in London.  It was sold quietly lower from there until COMEX trading ended in New York -- and it didn't do a thing after that.  Palladium was closed yesterday at $954 spot, up 7 dollars as well.

The dollar index closed very late on Friday afternoon in New York at 93.96 -- and began to head quietly and unevenly lower once trading began at 5:00 p.m. EDT on Sunday afternoon.  The 93.71 low tick was placed around 12:45 p.m. in London -- and less than thirty minutes later, a 'rally' began.  The 94.22 high tick of the day was set around 1:25 p.m. EDT, which was about five minutes before the COMEX close.  It fell back to the 94.05 mark around 2 p.m. -- and chopped quietly sideways until trading ended at 5:15 p.m. EDT.  The dollar index finished the day at 94.08...up 12 whole basis points from Friday's close.


You'll excuse me for thinking this, but that dollar index rally that began in New York shortly after 8 a.m. EDT yesterday morning, mostly likely had those 'gentle hands' fingerprints all over it.

And here's the 6-month U.S. dollar index chart.



The gold shares gapped up a percent and change at the 9:30 a.m. EDT open in New York on Monday morning.  Their respective highs were in a minute or so later -- and they chopped unsteadily lower until they hit the unchanged mark a few minutes after the COMEX close.  They traded sideways until the Monday session ended at 4:00 p.m. EDT.  The HUI closed down 0.15 percent.

The silver equities followed a somewhat similar price path, but were back in the red to stay by shortly after 11 a.m. in New York trading.  They didn't do much after that for a while, but began to fade anew starting around 2 p.m. EDT.  Nick Laird's Intraday Silver Sentiment/Silver 7 Index closed lower by 0.94 percent.  Click to enlarge if necessary.

And here's Nick's 1-year Silver Sentiment/Silver7 Index chart.  Click to enlarge as well.

The CME Daily Delivery Report showed that 11 gold and 157 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday.  In gold, all that's worth reporting is that HSBC USA stopped 5 of those contracts for its own account.  In silver, there were four short/issuers in total, with the largest being International F.C. Stone, with 123 contracts out of their client account.  There were 10 short/issuers in total.  Goldman and Macquarie Futures topped the list again, stopping 56 and 27 contracts for their respective in-house/proprietary trading accounts.  In third spot came Advantage with 24 for its client account -- and in fourth place was JPMorgan with 17 contracts for its own account.  The link to yesterday's Issuers and Stoppers Report is here.


The CME Preliminary Report for the Monday trading session showed that gold open interest in July rose by 16 contracts leaving 175 still open, minus the 11 contracts mentioned just above.  Friday's Daily Delivery Report showed that 2 gold contracts were actually posted for delivery today, so that means that 16+2=18 more gold contracts were added to the July delivery month.  Silver o.i. in July dropped by 112 contracts leaving 863 contracts still around, minus the 157 contracts mentioned in the previous paragraph.  Friday's Daily Delivery Report showed that 117 silver contracts were actually posted for delivery today, so that means that 117-112=5 more silver contracts were added to July.

There was yet another withdrawal from GLD, the 13th in a row.  I'm sure that Ted would suspect that it's a conversion of GLD shares into physical metal to avoid SEC reporting requirements.  This time an authorized participant removed 47,358 troy ounces.  Things went the other way over at SLV, as an a.p. added 846,805 troy ounces.  I would suspect that JPMorgan was involved in both these transactions.


The folks over at Switzerland's Zürcher Kantonalbank updated their website with the goings-on inside their gold and silver ETFs as of the close of trading on Friday, July 6 -- and this is what they had to report.  Their gold ETF added 13,411 troy ounces during the reporting week, but their silver ETF shed 18,969 troy ounces.

There was a sales report from the U.S. Mint yesterday.  They sold 240,000 silver eagles -- and that was all.

It was all zeros in gold, both in and out, over at the COMEX-approved depositories on the U.S. east coast on Friday.


There wasn't much activity in silver, as 150,866 troy ounces were received -- and nothing was shipped out.  With the exception of one good delivery bar totalling 989 troy ounces which went into Delaware, all the rest ended up at Brink's, Inc.  The link to that is here.


When I went to check on the warehouse stocks over at the COMEX-approved gold kilobar depositories in Hong Kong on their Friday, the CME's website had suddenly gone down -- and this data is missing at the moment -- and will be added in after I get up this morning.  So if you have the interest, you can check the website version of today's column sometime after 12:30 p.m. EDT...if they're back up by then.  In the meantime, here's the link to the CME's Hong Kong data, in troy ounces, as it may be available by the time you read this.  But as of 2:11 a.m. EDT this morning, it wasn't.

The Commitment of Traders Report, for positions held at the close of COMEX trading last Tuesday showed another big improvement in the Commercial net short position in silver, but not very much in gold...but the there was a reason for that.

In silver, the Commercial net short position dropped by 10,476 contracts, or 52.4 million troy ounces of paper silver.


They arrived at that number by decreasing their long position by 520 contracts, but they also reduced their short position by a hefty 10,996 contracts -- and it's the difference between those two numbers that represents the change for the reporting week.


Ted said that the Big 4 traders only reduced their short position by around 300 contracts -- and the reason it was such a tiny amount is because the big Managed Money trader that now inhabits this category, increased their short position by a very healthy amount during the reporting week.  The '5 through 8' large traders reduced their short position by about 3,200 contracts -- and Ted raptors, the 30-odd small commercial traders other than the Big 8', increased their long position by approximately 7,000 contracts.


Under the hood in the Disaggregated COT Report, the Managed Money traders added 10,030 short contracts to their already hefty, but not-quite-record, short position -- and they also reduced their long position by 2,010 contracts as well.  Their long position is still around 30,000 contracts higher than it was at its lowest -- and it's obvious that these traders are of the 'non-blinking'/non-technical fund variety.  They're positioned for higher silver prices -- and it remains to be seen at what price they will be selling at during the next rally.  Anyway, the Managed Money traders increased their short position by 10,030 plus 2,010 equals 12,040 contracts during the reporting week.  The difference between that number -- and the Commercial net short position...1,564 contracts...was made up, as it always is, by the traders in the 'Other Reportables' and 'Nonreportable'/small trader categories.  The former category increased their net long position by 2,501 contracts -- and the latter increased their net short position by 937 contracts.


The Commercial net short position in silver is now down to 192.8 million troy ounces, another decent-sized improvement from last week's COT Report.  This week's companion Bank Participation Report showed that 27 U.S. and non-U.S. banks combined, were net short 289.1 million troy ounces of paper silver.


Ted pegs JPMorgan's short position at 27,000 contracts, or 135 million troy ounces.


Here's the 3-year COT Report for silver -- and the weekly change should be noted.  Click to enlarge.

I would suspect that unless JPMorgan et al have something nefarious in mind for the silver market...or all the non-technical fund longs now in place the Managed Money trader category decide to dump their long positions for no reason, it's a fair assumption the we've seen the lows for this move down in silver.

In gold, the commercial net short position declined by only 1,813 contracts, or 181,300 troy ounces of paper gold.  I was expecting far better but, as Ted pointed out on the phone, the real changes were in the Managed Money category, which I'll get to momentarily.


They arrived at that number by increasing their long position by 1,316 contracts -- and they reduced their short position by 497 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 only reduced their short position by around 300 contracts -- and he said that the reason that this number is so small, is almost certainly due to the fact that there's now a Managed Money trader with a short position large enough to be in the Big 4 category...just like in silver.  The traders in the '5 through 8' category reduced their short position by approximately 800 contracts -- and Ted's raptors, the 41-odd small commercial traders other than the Big 8, increased their long position by only 600 contracts during the reporting week.  I though these small traders would have been far more aggressive buyers than this...just like they were in silver.  But they obviously weren't.


It was under the hood in the Disaggregated COT Report, where the surprise was.  As expected, the Managed Money traders piled in on the short side to the tune of 10,660 contracts, but they also added 9,430 contracts to their long positions.  As Ted pointed out, the Managed Money traders that went short were of the brain-dead technical variety -- and the ones that went long were of the 'non-blinking/non-technical Managed Money trader category...which are two different beasts entirely.  These non-technical funds longs in gold are getting set-up for the next rally in gold, just like they're already set up for the next rally in silver.


Net/net...the short position in the Managed Money traders increased by only 10,660 minus 9,430 equals 1,230 contracts since last Tuesday's cut-off.  The difference between that number -- and the commercial net short position...a tiny 583 contracts...was made up by the traders in the other two categories, just like in silver, but  in gold they went about it in a very strange fashion.  The 'Other Reportables' went net long by 2,885 contracts -- and the 'Nonreportable'/small trader went net short by 3,468 contracts -- and the difference between those two numbers is the 583 contract just mentioned.  Here's a snip from the Disaggregated COT Report so you can see these changes with your own eyes.  Click to enlarge.

The commercial net short position in gold hasn't changed much over the reporting sitting at 9.32 million troy ounces, but it's a given that JPMorgan has decreased it short position, but that fact has been masked by the activities of the large Managed Money trader that now inhabits the Big 4 category.  This is the same as the situation that exists in silver at the moment.


And just as a point of interest here.  This week's companion Bank Participation Report showed that 33 banks, both U.S. and non-U.S., are short 9.77 million troy ounces of paper gold, which is a number larger than the commercial net short position.  I want you to think about that for a second.  What that means is that except for the Managed Money traders, who are pretty much market neutral at the moment from a COMEX futures market perspective, only the banks of the world are short against everyone else.  This is standard operating procedure in silver, but it's the first time I can remember this situation occurring in gold.  That's how wrung out this market is to the downside.


Here's the 3-year COT chart for gold -- and as you can tell there's been almost no visible changes in Nick's chart from one reporting week to the next. But the changes that mattered were out of sight in the Managed money category.  Click to enlarge.

Before moving along, it should be pointed out that the Managed Money traders in platinum set yet another new record net short position in this week's COT Report...28,654 contracts.  I seem to remember a time when they were long about that amount.  And it was the same in copper, as the commercial net short position in that metal dropped by 9,998 contracts -- and the Managed Money traders went net short 15,144 contracts.  Without doubt the numbers in copper are even more extreme after that new intraday low price that was set on Friday.


Make no mistake about it, the set-up the COMEX futures market in the metals is as wildly bullish as I can ever remember.  All the stars are aligned for a major move to the upside -- and all we're waiting for is the 'event' that will be allowed to set it off.

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 143 days of world silver production-and the '5 through 8' large traders are short an additional 80 days of world silver production-for a total of 223 days, which is something over 7 months of world silver production, or about 520.4 million troy ounces of paper silver held short by the Big 8.  [In the COT Report last week, the Big 8 were also short 231 days of world silver production.]


In the COT Report above, the Commercial net short position in silver was reported as 192.8 million troy ounces.  As mentioned in the previous paragraph, the short position of the Big 8 traders is 520.4 million troy ounces.  The short position of the Big 8 traders is larger than the total Commercial net short position by a chunky 520.4 minus 192.8 equals 327.6 million troy ounces.  The reason for the difference in those it always that Ted's raptors, the 30-odd small commercial traders other than the Big 8, are long that amount.  And if you think that's preposterous, you would be right about that.


As stated earlier, Ted estimates JPMorgan's short position at 27,000 contracts, down 3,000 contracts from last week's report, or 135 million troy ounces of paper silver.  That translates into about 58 days of world silver production.  That number represents about 26 percent of the short position of the Big 8 traders -- and a bit over 40 percent of the short position held by the Big 4 traders.  This is simply grotesque.


The Big 4 traders are short 143 days of world silver production -- and once you subtract out the 58 days that JPM is short, that leaves 85 days split up between the other three large traders...a bit over 28 days 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 something under 28 days -- and the other, more than 28 days.  But whatever those three number are, they can't add up to more than 85 days.  But don't forget that there's a Managed Money trader now in the Big 3 category -- and this certainly distorts these numbers.  I would think they would be a few days lower than 28 if the Managed Money trader wasn't there.


The four traders in the '5 through 8' category are short 80 days of world silver production in total -- and off their record high short position of two weeks ago by 9 days in total.  They're short 20 days of world silver production each, which is down two days from what each was short in last week's COT Report.  Back in mid May, these same '5 through 8' small traders were short a bit under 12 days of world silver production each.  Now they're up to 20 days short each.


The smallest of the traders in this category holds something less than 20 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 over 20 days, but under 28 days  -- and the second smallest of the Big 4...something around the 28 day mark [the average of the remaining 'Big 3' traders] of world silver production held short.  That means [another mathematical certainty] that the second largest short in the Big 4 category [Scotiabank, or maybe that Managed Money trader] only has a short position slightly larger than the average of 28 days.  JPMorgan remains, as always, the King Short, but they've reduced their short position rather dramatically in the last three weeks.


By the way, there is very little wiggle room in all of these above numbers -- and are 95+ percent accurate.


It certainly appears, as Ted pointed out in his latest essay, "The Perfect Double Cross", that the trap is being set for the other commercial traders in gold -- and it now appears, that with yet another COT Report under our belts, the Big 7 Commercial traders in silver seem destined to suffer the same fate at the hands of the 'Big 1' Commercial trader, as a silver trap looks ready to be sprung by JPMorgan as well.


The Big 8 commercial traders are short 50.7 percent of the entire open interest in silver in the COMEX futures market, which is up a bit from the 49.3 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 close to 55 percent, if not a bit more.  In gold, it's now 35.4 percent of the total COMEX open interest that the Big 8 are short, which is down a bit from the 37.6 percent they were short in last week's report -- and a bit over 40 percent once the market-neutral spread trades are subtracted out.


In gold, the Big 4 are short 41 days of world gold production, which is unchanged from what they were short last week -- and the '5 through 8' are short another 20 days of world production, which is also unchanged from what they were short the prior week, for a total of 61 days of world gold production held short by the Big 8 -- which is obviously unchanged from what they were short in last week's report.  Based on these numbers, the Big 4 in gold hold about 67 percent of the total short position held by the Big 8...which is also unchanged 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 64, 62 and 75 percent respectively of the short positions held by the Big 8.  Silver is up 2 percentage points from the previous week's COT Report, platinum is down 2 percentage point from a week ago -- and palladium is unchanged from last week's report.

The July Bank Participation Report [BPR] data is extracted directly from the above Commitment of Traders 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, 5 U.S. banks were net short 59,878 COMEX contracts in the July BPR.  In June's Bank Participation Report [BPR], 5 U.S. banks were net short 82,853 contracts, so there's been a huge 22,975 contract decline over during this reporting period.  Four of the five U.S. banks would certainly include JPMorgan, HSBC USA, Citigroup -- and Goldman.  Whoever the fifth bank may be, their positions wouldn't be at all material.


Also in gold, 28 non-U.S. banks are net short 37,779 COMEX gold contracts, which isn't much per bank.  In the June BPR, 28 non-U.S. banks were net short 49,935 COMEX contracts, so the month-over-month decline is very decent at 12,156 contracts.  I suspect that there's at least one large non-U.S. bank in this group that might hold a third of this short position all by itself -- and the remaining contracts, divided up between the remaining 27 non-U.S. banks, would be immaterial.  I would suspect that Scotiabank is the guilty party.


And as I pointed out in the COT Report above, the 33 banks in this Bank Participation Report hold a short position slightly larger than the entire commercial net short position in gold.  On it's face, this is wildly bullish, because it's been a very long time since we've been in this situation.


As of this Bank Participation Report, 33 banks [both U.S. and foreign] are net short 19.8 percent of the entire open interest in gold in the COMEX futures market, which is down big from the 29.5 percent they were short in the June BPR.


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 short position was outed by the CFTC in October of 2012.  Click to enlarge.

In silver, 5 U.S. banks are net short 35,085 COMEX silver contracts in July's BPR - and Ted figures that JPMorgan is the proud owner of 27,000 contracts of that amount.  In June's BPR, the net short position of these U.S. banks was 34,201 contracts, so the short position of the U.S. banks is up a smallish 884 contracts from a month ago.


Also in silver, 22 non-U.S. banks are net short 22,731 COMEX contracts...which is up a bit from the 20,799 contracts that these same non-U.S. banks were short in the June BPR.  I would suspect that Canada's Scotiabank still holds a goodly chunk of the short position by the non-U.S. banks.  And since that is probably the case, it certainly means that a number of the remaining 21 non-U.S. banks are actually net long the COMEX futures market in silver.  But even if they aren't, the remaining short positions divided up between these other 21 non-U.S. banks are immaterial - and have always been so.


As of July's Bank Participation Report, 27 banks [both U.S. and foreign] are net short 28.1 percent of the entire open interest in the COMEX futures market in silver-which is up from the 26.0 percent that they were net short in the June BPR - with much, much more than the lion's share of that held by JPMorgan and Scotiabank.


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.

In platinum, 4 U.S. banks are net short 2,643 COMEX contracts in the July Bank Participation Report.  In the June BPR, 4 U.S. banks were net short 4,373 COMEX platinum contracts, so there's been a whopping decrease for the second month in a row [39.5 percent] in the short position of the U.S. banks in question during the last reporting month.


I suspect that, like in silver and palladium, JPMorgan holds virtually all of the platinum short position by itself.


Also in platinum, 14 non-U.S. banks are net short 3,170 COMEX contracts, which is down 21.2 percent from the 4,025 contracts they were net short in the May BPR.


As you can tell from the number of banks and number of contracts involved in the U.S. vs. non-U.S. categories...this price management scheme in platinum is an entirely "Made in America" show as well.


But to give you some idea how fast the banks are existing their short positions in platinum, in February's BPR...20 banks were net short 29,406 COMEX platinum contracts.  In July's report, this one, 18 banks have a combined short position of only 5,813 contracts.  That's serious short covering, dear reader.


And as of July's Bank Participation Report, 18 banks [both U.S. and foreign] were net short only 6.9 percent of the entire open interest in platinum in the COMEX futures market, which is down substantially from the 10.0 percent they were collectively net short in the June BPR.


Here's the Bank Participation Report chart for platinum -- and it's obvious that they're getting out of Dodge.  Click to enlarge.

In palladium, 4 U.S. banks were net short 6,662 COMEX contracts in the July BPR, which is down 18.3 percent from the 8,157 contracts they held net short in the June BPR.


Also in palladium, 15 non-U.S. banks are net short 1,842 COMEX contracts-which is down 394 contracts from the 2,236 COMEX contracts that 14 non-U.S. banks were short in the June BPR.  When you divide up the short positions of these non-U.S. banks more or less equally, they're also immaterial...especially when you compare them to the positions held by the 4 U.S. banks.


But, having said all that, as of this Bank Participation Report, 19 banks are net short 38.7 percent of the entire COMEX open interest in palladium.  In June's BPR, the world's banks were net short 47.3 percent of total open interest, so there's been a huge decline in the concentrated short position of the banks in this precious metal.


It's also apparent that 'da boyz' are heading for the exits in palladium as well.


Here's the palladium BPR chart.  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.  I would still be prepared to bet big money that, like platinum and silver, JPMorgan holds the vast majority of the U.S. banks' short position in this precious metal as well.  Click to enlarge.

As I say every month at this time, there's a maximum of four U.S. banks-JPMorgan, HSBC USA, Goldman and maybe Citigroup, along with Canada's Scotiabank...which is no longer as active in the precious metal market as they once were...that are the tallest hogs at the precious metal price management trough.


But it's only really JPMorgan that matters.


JPMorgan is still the largest silver short holder on Planet Earth in the COMEX futures market -- and despite all the latest news about them exiting precious metals trading, Scotiabank's short position in silver [and most likely gold] is still a very respectable amount.

Bavaria, Maximilian II. Emanuel, 1679-1726, Max d'or 1715

Origin:  Roman German Empire     Material:  Gold     Full Weight: 6.51 grams


I have an average number of stories for you today.


Consumer Credit Explodes Higher as Credit Card Debt Hits New All Time High

After a sharp slowdown in the growth of U.S. consumer credit in the last month of 2017 and in the first 4 months of 2018, in May, consumer credit exploded higher, soaring from $10.3BN in April to $24.6BN in May, smashing expectations of a $12BN monthly increase.


This was the biggest beat of recently subdued expectations going back all the way to July 2011.


Looking at the components of the spike, some $14.8BN came from non-revolving, or student and auto loans, well above last month's $9.2BN and the highest number going back to November 2017, pushing total non-revolving credit to a record $2.858 trillion.


But it was revolving credit that impressed, soaring by $9.8 billion, the biggest monthly increase since November, and one of the highest monthly increases on record.


This 4-chart Zero Hedge article was posted on their Internet site at 3:18 p.m. EDT on Monday afternoon.  I thank Brad Robertson for sharing it with us -- and another link to it is here.

"[Stock] Markets Are Crazy" - Gundlach, Minerd Warn: This Is Anything But Goldilocks

Dow Jones Futures are up almost 400 points from the post-trade-war lows, NASDAQ is up even more on a relative basis, and 'safe-haven' FANG stocks are soaring as investors embrace the trade war...


There's just one thing - nothing else agrees with this riskless, goldilocks environment, and DoubleLine's Jeff Gundlach points out the ugly reality to those willing to listen...


One quick glance at the gaping divergence between lower yields (and collapsing yield curve) and soaring stocks tells you something is amiss (and we know which way this normally resolves in the short term)...which is what Guggenheim's Scott Minerd is worried about...


And judging from the yield curve, growth is anything but the thing to buy right now...


This brief, but worthwhile 4-chart news item appeared on the Zero Hedge website at 8:25 a.m. on Monday morning EDT -- and it's the second offering in a row from Brad Robertson.  Another link to it is here.

Update on the Fed's QE Unwind -- Wolf Richter

With QE, the Fed created money to buy securities and pump up asset prices; now it sheds securities to destroy this money.


Here's what the Fed's QE unwind - or the balance sheet normalization, as it calls it - is all about: it reverses over an unknown span of years a large part of what QE had done over the span of five-and-a-half years. During QE, whose stated purpose was the "wealth effect," the Fed amassed $3.4 trillion in Treasury securities and mortgage-backed securities (MBS). Just as the Fed spent a year tapering QE to zero, it is now spending a year ramping up the QE unwind.


Total assets on the Fed's balance sheet for the week ending July 4 dropped by $29.4 billion over the past four weeks. This brought the total drop since October, when the QE unwind began, to $171 billion. At $4,289 billion, total assets are now at the lowest level since April 16, 2014, during the middle of the "taper."


This 3-chart commentary from Wolf put in an appearance on the Internet site last Friday -- and I thank Richard Saler for pointing it out.  Another link to it is here.

The Coming of the Roman Tax Collectors -- Jeff Thomas

The Decline and Fall of the Roman Empire has been written about many times over the last two millennia, most notably in Edward Gibbon's six-volume set of books of the same name.


However, one significant aspect to the decline began in the fourth century that has received little attention from those who have written on the overall subject.


At that time, an exodus occurred amongst the farmers and merchants. They abandoned the "centre of all commerce" and moved to the north, to live amongst the barbarians. At first, only a relative few departed, but, over the ensuing decades, ever-larger numbers departed Rome, until much of the class of people that actually created and traded in goods had left Rome, making its economy unsustainable.


Essentially, this is the way events unfolded:


First, as the central government became more wasteful, it increasingly relied upon "bread and circuses," or entitlements and public entertainment to placate the people. As the cost for these increased, taxes had to be raised on the productive members of society to pay the bill. This amount eventually became insufficient, as the number of recipients grew. Additionally, the government debased the currency by steadily removing silver from the denarius and replacing it with copper. But this solution was ineffectual, as it only served to create inflation, so more had to be done.


This very worthwhile commentary by Jeff appeared on the Internet site on Monday sometime -- and another link to it is here.

U.K. Foreign Secretary Boris Johnson resigns amid cabinet squabbling over Brexit

Boris Johnson has resigned as U.K. foreign secretary, Downing Street has confirmed. It represents yet another blow to the government of Theresa May, who is pushing for a soft Brexit plan that has angered many Conservatives.


"This afternoon, the prime minister accepted the resignation of Boris Johnson as foreign secretary. His replacement will be announced shortly. The prime minister thanks Boris for his work," Downing Street said in a statement.


The resignation comes after it was previously reported that he referred to selling May's Brexit plan as "polishing a turd."


Johnson's resignation also follows that of Brexit Secretary David Davis and his No. 2 at the Department for Exiting the E.U., Steve Baker. Rumors began swirling earlier on Monday that Johnson would be leaving his post, as he was holed up in his residence with his closest advisers, missing a scheduled appearance at the West Balkans summit. There were also reports that he missed a Cobra meeting about the Wiltshire 'Novichok' poisoning.


May's soft Brexit plan has led to a chaotic situation within the government, as her road map is a far cry from what pro-Brexit campaigners such as Johnson had initially pushed for.


This news item showed up on the Internet site at 2:03 p.m. Moscow time on their Monday afternoon, which was 7:30 a.m. in Washington -- EDT plus 7 hours.  I thank Patrik Ekdahl for pointing it out -- and another link to it is here.

'Pay Up You NATO Deadbeats or Else!' -- Eric Margolis

`We are the schmucks' thundered President Donald Trump, using a favorite New York City Yiddish term for penis. The object of Trump's wrath at his Make America Great Again' rally in Great Falls, Montana was the craven, stingy European members of NATO, only 16 of 22 members are on budget for their U.S.-commanded military spending. Trump wants them to spend much more.


Trump and his fellow neocons want NATO to serve as a sort of U.S. foreign legion in Third World wars in Africa and Asia. NATO was formed as the North Atlantic Treaty Organization to defend western Europe, not to fight in Afghanistan and who knows where else?


Equally bad, according to Trump, is that the U.S. runs a whopping trade deficit with the European Union which is busy shipping high-end cars and fine wines to the U.S. The wicked foreigners don't buy enough American bourbon, corn -- and terribly abused pigs.


Trump is quite right that America's NATO allies, particularly Germany and Canada, don't spend enough on defense. Germany is reported to have less than twenty operational tanks. Canada's armed forces appear to be smaller than the New York City police department.


But the Europeans ask, 'defense against whom?' The Soviet Union was a huge threat back in the Cold War when the mighty Red Army had 55,000 tanks pointed West. Today, Russia's land and navel power has evaporated. Russia has perhaps 5,500 main battle tanks in active service and a similar number in storage, a far cry from its armored juggernaut of the Cold War.


"Defense against whom?"...precisely dear reader.  This worthwhile commentary by Eric was posted on the Internet site on Saturdays sometime -- and I thank Larry Galearis for sending it our way.  Another link to it is here.

Italy will not buy F-35s anymore, mulls walking out of existing contracts - Defense Minister

The anti-establishment Italian government's defense minister has said that the country won't purchase any more Lockheed Martin F-35 fighter jets from the U.S. and will review the existing order for 90 planes.


Elisabetta Trenta, the country's new minister of defense from the Eurosceptic Five Star Movement, has ruled out new contracts with the U.S. for the purchase of F-35 stealth fighter jets, adding that the order for 60 F-35A and 30 F-35B jets, which Italy concluded in 2012, might be placed under review.


"We won't buy any more F-35s," Trenta said in an interview with Italian broadcaster La7's Omnibus program on Friday.


"We are assessing what to do regarding the contracts already in place," she added, noting that while her party has always been a vocal critic of the program, she said that scrapping it altogether may "cost us more than maintaining it."


The fact that the cancellation of the bulk deal and the resulting "strong financial penalties" might cost the Italian budget a hefty sum is one of the main reservations that is holding the government back, she explained.


This is the second story from the Russia Today website courtesy of Patrik Ekdahl.  This one put in an appearance there at 1:45 a.m. Moscow time on their Saturday morning, which was 6:45 p.m. in Washington on their Friday evening EDT.  Another link to it is here.

E.U.'s Big Three agree to establish dollar-less trade with Iran -- Lavrov

Major European countries party to nuclear negotiations with Iran - France, Germany and the U.K. - have agreed to maintain trade with Tehran independent from the U.S. dollar, said Russia's Foreign Minister Sergey Lavrov.


European companies are under increasing pressure from Washington to cut business ties with Tehran. Since the majority of transactions are currently conducted using the U.S. dollar, firms working in Iran face potential U.S. penalties.


According to Lavrov, the decision particularly concerns small and medium-sized companies. He explained that the participants in the Iranian deal have agreed to work out measures to protect the countries' businesses from US sanctions.


"Everyone agrees that this [U.S. sanctions - Ed.] is an absolutely illegal and unacceptable policy, but, of course, this can hardly be changed and there will be enough struggle in trade, economic and political spheres," the minister said.


Last week, E.U. lawmakers gave approval for the European Investment Bank (EIB) to do business in Iran in an attempt to save the 2015 nuclear deal.


This news item appeared on the Internet site at 10:13 a.m. on Monday morning Moscow time, which was 3:13 a.m. in Washington -- EDT plus 7 hours.  I thank George Whyte for passing it along -- and another link to it is here.

Turkish authorities sack more than 18,000 state employees

The Official Gazette said 18,632 people had been sacked including 8,998 police officers in the emergency decree over suspected links to terror organisations and groups that "act against national security".


Some 3,077 army soldiers were also dismissed as well as 1,949 air force personnel and 1,126 from the naval forces.


Another 1,052 civil servants from the justice ministry and linked institutions have been fired as well as 649 from the gendarmerie and 192 from the coast guard.


Authorities also sacked 199 academics, according to the new decree, while 148 state employees from the military and ministries were reinstated.


Turkey has been under a state of emergency since the July 2016 attempted overthrow of President Recep Tayyip Erdogan.


Turkish media dubbed the decree as the "last" with officials indicating the state of emergency could end as early as Monday.


This story put in an appearance on the Internet site on Sunday sometime -- and it comes to us courtesy of Roy Stephens.  Another link to it is here.

Eagle-meets-Bear and the Syria tug-of-war -- Pepe Escobar

Trump and Putin are likely to discuss the tricky situation in southern Syria when they meet; while the U.S. president says he wants U.S. forces back home, the CIA, Pentagon and Israel may be happier to see them stay so the war-torn state remains unstable.


Ahead of the Eagle-meets-Bear Trump-Putin summit on July 16 in Helsinki, Syria-centered spin has gone into overdrive. Unknown sources have leaked what is billed as President Trump's alleged Syria deal discussed with Jordan's King Abdullah.


Trump would "allow" Damascus, supported by Russian air power, to regain its territory along the borders of Jordan, Israel and Iraq. In return, President Putin and Bashar al-Assad would agree to establish an extended demilitarized zone (DMZ) along these same borders, off-limits to any Iranian forces.


That would set the scene for Trump's already announced desire to extract U.S. forces out of Syria before October and the U.S. mid-term elections. The president would be able to declare the proverbial "Mission Accomplished" in defeating Daesh or Islamic State.


The CIA and the Pentagon are not exactly enthusiastic with Trump's alleged Syria gambit, to say the least. For assorted neocons and powerful factions of the industrial-military-surveillance complex, "Assad must go" Syria simply cannot be traded off.


And yet there's nothing to trade. Syria cannot be "offered" to Russia because Russia is already the major player in deciding what happens in Syria, not only militarily but via the ongoing Astana format alongside Iran and Turkey. No wonder the alleged Trump "deal" was duly dismissed by the Kremlin.


This commentary by Pepe was posted on the Asia Times website back on July 5 -- and I thank U.K. reader Tariq Khan for bringing it to our attention.  Another link to it is here.

North Korea sanctions not lifted until 'verified denuclearization' - Pompeo

U.S. Secretary of State Mike Pompeo said that sanctions on North Korea will remain until verified denuclearization. He urged the North to follow the 'Vietnam path' after Pyongyang accused the U.S. of making "gangster-like" demands.


"North Korea reaffirmed its commitment to complete denuclearization," Pompeo said at the trilateral news conference in Tokyo, where he was joined by Japanese and South Korean officials. The U.S. secretary of state was on a two-day visit to Pyongyang for high-level talks with Kim Yong-chol, vice chairman of North Korea's ruling Workers' Party Central Committee.


The North also backed its earlier promises "to destroy its missile engine test site," according to Pompeo. Both U.S. and North Korean officials discussed what full denuclearization would mean at the high-level talks, he said. "There will be a verification connected to the complete denuclearization."


However, Pompeo noted that punitive sanctions, which have been imposed on Pyongyang since 2008, will remain in place until "final, fully verified denuclearization."


The top U.S. official also shrugged off Pyongyang's accusation of Washington's "gangster-like" demands on denuclearization, remarking that if he paid attention to every media report, he'd "go nuts." On Saturday, Pyongyang lambasted Washington, accusing it of seeking unilateral and forced denuclearization from North Korea.


This news story showed up on the Internet site at 8:33 a.m. Moscow time on their Sunday morning -- and it was updated about twenty-six hours later, which was 3:12 a.m. on Monday morning in Washington.  It's the second contribution of the day from Larry Galearis -- and another link to it is here.

$200 million treasure hoard found in National Park in Costa Rica

Who doesn't love stories of ancient buried treasure? Two park rangers in Costa Rica were patrolling a national park after a recent storm when they uncovered five wooden chests, among other treasures.  This find is one of the most extensive in modern times. The treasure consisted of gold and silver coins, ingots, jewelry, candlesticks and religious items.  Historians believe that the entire collection is worth about 200 million dollars.


The national park is located on Cocos Island which is near the Pacific Ocean off the shore of Costa Rica.  The area has long been known for its history of possible buried treasure; mostly legends until recently.  Since the 1970s there has been a law in place forbidding treasure hunting.


The specialists found that there are 89,000 coins and artifacts.  There were also 36 crosses, three chalices, and two life-sized gold statues of Mary holding the baby Jesus.


One legend was that of Pirate Captain Bennett Graham, who supposedly buried almost 350 tons of gold stolen from Spanish galleons in the 18th century.  Another pirate was a Portuguese captain named Benito Bonito, who supposedly buried treasure in the area in the 19th century.


This very interesting precious metal-related news story put in an appearance on the Internet site on Saturday -- and I thank Dave Larsen for pointing it out.  Another link to it is here.

The PHOTOS and the FUNNIES  

Today's 'critter' is the demoiselle crane.  It's a species of crane found in central Eurasia, ranging from the Black Sea to Mongolia and North Eastern China. There is also a small breeding population in Turkey. These cranes are migratory birds. Birds from western Eurasia will spend the winter in Africa whilst the birds from Asia, Mongolia and China will spend the winter in the Indian subcontinent.   They're rather attractive as well.  Click to enlarge.






It was most fortunate that the 'rally' in the dollar index showed up when it did, or there's no telling how high precious metal prices would have gone if it hadn't.  It's obvious that JPMorgan et al used that 'rally' to sell them lower.  It's a given that the precious metal equities would have also closed in positive territory as well if the rallies in the underlying metals had been allowed to continue.


But with the low volumes of summer, it's very easy for anyone with an agenda to move precious metal prices around -- and 'da boyz' certainly were in fine form yesterday during the New York trading session.


Here are the 6-month charts for the Big 6 commodities -- and there's not much to see.  The 'click to enlarge' feature helps a bit with the first four.






And as I type this paragraph, the London open is less than ten minutes away -- and I note that the gold price was up about 2 bucks by 11 a.m. China Standard Time on their Tuesday morning, but was rolled over at that point.  It was tapped a bit lower at, or just before, the 2:15 p.m. CST afternoon gold fix in Shanghai.  It's now off that low by a bit -- and down 60 cents an ounce at the moment.  'Da boyz' took silver on a similar price ride -- and it's down only 2 cents now.  Ditto for platinum, except it got smacked at 1 p.m. CST over there -- and it's now down only 1 dollar.  Palladium got the same treatment as platinum -- and it's down 6 bucks, but was down 10 at its low tick, which came at exactly 2:00 p.m. CST.


Net HFT gold volume is coming up on 55,000 contracts -- and there's a hair over 4,000 contracts worth of roll-over/switch volume on top of that.  Net HFT silver volume is around 11,400 contracts -- and there's only 84 contracts worth of roll-over/switch volume in this precious metal.


The dollar index edged a bit lower once trading began at 6:00 p.m. EDT in New York yesterday evening.  It was turned higher a few minutes after 9 a.m. CST on their Tuesday morning, just as it was about to break below the 94.00 mark -- and hit its current 94.23 high tick a few minutes before the afternoon gold fix in Shanghai.  It has slid a bit since -- and is up only 6 basis points as London opens.


Today, at the close of COMEX trading, is the cut-off for this Friday's Commitment of Traders Report -- and I'll wait until tomorrow's missive before venture a guess as to what that report might show.


And as I post today's efforts on the website at 4:02 a.m. EDT, I see that the gold price was turned quietly lower almost the moment that London opened -- and it's now down $1.10 the ounce.  It was the same for silver -- and it's down 4 cents now.  Platinum and palladium are lower as well, with the former down 5 dollars -- and the latter by 8.


Gross gold volume is coming up on 74,500 contracts -- and net of roll-over/switch volume, net HFT gold volume is a bit over 78,500 contracts.  Net HFT silver volume is a bit over 14,200 contracts -- and there's still only 87 contracts worth of roll-over/switch volume on top of that.


The dollar index has been trading mostly sideways since the London open -- and is up 7 basis points.


That's all I have for today, which is more than enough -- and I'll see you here tomorrow.



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