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Short Sellers Run Rampant in the Precious Metal Stocks


 -- Published: Sunday, 12 May 2019 | Print  | Disqus 

By: Ed Steer

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM

The gold price didn't do much of anything in Far East trading on their Friday -- and the low tick of the day, such as it was, came minutes after the London open.  It chopped quietly and unevenly higher from there, with every tiny rally attempt turned back before it could get too far.  The high tick, such as it was, came at noon in New York -- and it edged unevenly lower into the 5:00 p.m. EDT close.

Once again, the low and high price ticks aren't worth looking up.

Gold was closed at $1,285.80 spot, up $2.40 on the day.  Net volume was nothing special at 206,000 contracts -- and there was a tiny bit under 36,000 contracts worth of roll-over/switch volume on top of that.


The silver price rose and fell a nickel or so in morning trading in the Far East on their Friday -- and then didn't do much of anything until after the noon silver fix was put to bed in London.  It began to head lower from there -- and there was a rather vicious down/up price spike at the 8:20 a.m. EDT COMEX open, with the subsequent rally being capped minutes before 9 a.m.   It was sold lower going into the afternoon gold fix in London -- and then crawled very quietly and unevenly higher until COMEX trading ended at 1:00 p.m. EDT.  Most of that tiny gain disappeared by the time trading ended at 5:00 p.m. in New York.

The price shenanigans at the COMEX open, only occurred in the spot month -- and the low and high ticks aren't worth looking up in this precious metal, either.

Silver was closed at $14.735 spot, up 1.5 cents from Thursday.  Net volume was very quiet at around 41,400 contracts -- and there was just under 4,600 contracts worth of roll-over/switch volume on top of that.


Platinum rallied a bunch in morning trading in the Far East, before running into 'something' -- and from about 10:35 a.m. China Standard Time onwards, it chopped very unevenly sideways until shortly before 10:30 a.m. in New York.  It rallied a bunch more from there -- and that rally appeared to get capped a few minutes after 12 o'clock noon EDT -- and it crawled sideways into the close from there.  Platinum finished the day at $863 spot, up 16 bucks from Thursday's close.


Palladium began to head higher starting at 8:00 a.m. CST on their Friday morning -- and that rally appeared to get stopped in its tracks the moment it broke back above the $1,300 spot mark just after 9 a.m. CST.  The price didn't do much of anything after that, but was sold a bit lower starting shortly after 1 p.m. in Zurich.  The low of the Friday session was set about fifteen minutes after the COMEX open in New York -- and it headed sharply higher from there until fifteen minutes before the Zurich close.  From that juncture it crept unevenly sideways until trading ended at 5:00 p.m. EDT in New York.  Platinum finished the Friday session at $1,333 spot, up 52 dollars on the day and, like platinum, would have closed considerably higher, if allowed, which it obviously wasn't.


The dollar index closed very late on Thursday afternoon in New York at 97.32 -- and then chopped  quietly but nervously sideways until some economic news or other appeared at 8:30 a.m. in New York.  The 97.13 low tick was set around 10:35 a.m. EDT -- and it edged higher until around 3:15 p.m. -- and didn't do a whole lot after that.  The dollar index finished the day at 97.32...unchanged from Thursday's close.

Once again the action in the currencies had zero to do with what was happening in the precious metals.

Here's the intraday DXY chart, courtesy of the folks at ino.com.  The 'click to enlarge' feature does not help with this chart.


And here's the 5-year U.S. dollar index chart from the stockcharts.com Internet site -- and the delta between its close...97.12...and the close on the ino.com chart above, was 20 basis points on Friday.  Click to enlarge.


The gold shares continue to get pounded into the dirt.  Although they opened unchanged once again, they were soon headed lower -- and after chopping sideways from about 10:30 a.m. EDT onward, they were sold down to their respective low ticks starting around 3:10 p.m. in New York trading.  The HUI closed down 1.95 percent.


And as bad as the price action was in the gold stocks, it was even worse in the silver equities.  The trading pattern was the same as the gold shares, but Nick Laird's Intraday Silver Sentiment/Silver 7 Index got clocked by 3.95 percent.  Click to enlarge if necessary.


And here's Nick's 1-year Silver Sentiment/Silver 7 Index chart, updated with Friday's doji -- and as you can see, the silver equities are now back below their lows of November 2018.  I didn't think that was possible.  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 except for gold, the other three precious metals are in the red, but only by the tiniest of amounts.  But its the equities, particular the silver ones, that got hammered hardest.  Click to enlarge.


The month to date chart still shows gold to be the only precious metal in positive territory, but only by the tiniest amount.  Yes, the other three precious metals are down as well, but not by amounts that I consider material.  But the performance of their related equities is brutal.  Click to enlarge.


The year-to-date chart -- and gold is still hanging in their with a slight gain and, of course, both platinum and palladium are still up on the year, despite the ongoing attempt by 'da boyz' to drive them lower.  And what can I say about their associated equities that I haven't already said.  Click to enlarge.


As I said in commentary earlier this week, the price declines we're witnessing in the precious metal shares has been out of all proportion to the declines in the underlying precious metals -- and it has been particularly egregious since the beginning of May.  I don't know if this is redemptions from precious metal mutual funds or hedge funds or not.  But checking over at the shortsqueeze.com Internet site just now, I noticed that the short positions in both First Majestic Silver and Pan American Silver shares have certainly risen by notable amounts during the two weeks ending on April 30, the last report available.  So I would suspect that aggressive and on-going short selling is the main culprit here.  The only positive thing about this is that during the next major rally, they will be rocket fuel added to the next big rally in silver -- and with the COT set-up back in what I'm sure Ted would call "wildly bullish" territory, it shouldn't be that far off...so keep the faith!



The CME Daily Delivery Report showed that 2 gold and 19 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.

In gold, the lone short/issuer was Advantage -- and the lone long/stopper was JPMorgan.  All transactions involved their respective client accounts.

In silver, the two short/issuers were ABN Amro and Advantage, with 15 and 4 contracts out of their respective client accounts.  As usual, JPMorgan stopped the most...11 in total...8 for clients and 3 for its own account.  In second and third places were Advantage with 5 contracts for its client account -- and Standard Charter with 2 contracts for its own account.

So far this month, there have been 189 gold contracts issued/reissued and stopped -- and that number in silver is 3,360 contracts.

Of that silver volume, JPMorgan has issued 2,552 contracts from its client account -- and stopped 2,790 contracts for its client account.  It hasn't done a thing for its own in-house/proprietary trading account so far in May.

The link to yesterday's Issuers and Stoppers Report is here.

The CME Preliminary Report for the Friday trading session showed that gold open interest in May fell by 9 contracts, leaving 119 still around, minus the 2 contracts mentioned a couple of paragraphs ago.  Thursday's Daily Delivery Report showed that 11 gold contracts were actually posted for delivery on Monday, so that means that 11-9=2 more gold contracts were added to the May delivery month.  Silver o.i. in May declined by 5 contracts, leaving 323 still open, minus the 19 contracts contracts mentioned a few paragraphs ago.  Thursday's Daily Delivery Report showed that 13 silver contracts were actually posted for delivery on Monday, so that means that 13-5=8 more silver contracts were added to May.



There was a very chunky withdrawal from GLD on Friday, as an authorized participant took out 215,662 troy ounces...almost 7 tonnes.  There were no reported changes in SLV.

Since April 1...when this latest series of engineered price declines began in gold and silver...there has been 1,690,673 troy ounces of gold removed from GLD.  In that same time period, there has been 7.28 million troy ounces of silver added to SLV.  Doesn't anyone find that rather peculiar...or is it just me?

The U.S. Mint had a tiny sales report on Friday.  They sold 500 troy ounces of gold eagles -- and 92,000 silver eagles.

Month-to-date the mint has sold 500 troy ounces of gold eagles -- and 160,000 silver eagles.  There is no retail demand.

The Royal Canadian Mint in Ottawa finally got around to publishing their 2018 Annual Reporton their website yesterday.  As usual, they're getting more secretive every year about what they're up to -- and this report is further proof of that, as they say absolutely nothing of value.  Only the charts hint at the precipitous decline in the sales of mint bullion products since JPMorgan disappeared as a buyer of silver and gold maple leafs around September of 2016.  Here's a snip from Page 23 of their 2018 Annual Report Click to enlarge.


For the second day in a row, there was no in/out movement in gold over at the COMEX-approved depositories on the U.S. east coast on Thursday.

It was a pretty busy day in silver, as 1,089,730 troy ounces were received -- and 933,345 troy ounces were shipped out.  In the 'in' category, there was one truckload...599,240 troy ounces...dropped off at CNT -- and the remaining 490,490 troy ounces found a home over at Canada's Scotiabank.  In the 'out' category, there were withdrawals from HSBC USA, Brink's, Inc. -- and CNT.  Those amounts totalled...329,124 troy ounces, 96,475 troy ounces -- and 91,494 troy ounces respectively.  But the big news was in the paper category, as 3,032,376 troy ounces was transferred from the Registered category -- and back into Eligible.  There was 2,037,484 troy ounces transferred at CNT...826,517 troy ounces at Brink's, Inc. -- and 100,021 troy ounces at HSBC USA.  I didn't talk to Ted about this, but I'm sure he would suspect that this is silver that JPMorgan has taken delivery of in May, either for itself or clients, that it has no room for in its own vault, so it's keeping it right where it currently sits.  They only did the paper transfer because Ted says that it's cheaper to store in the Eligible category, than it is in Registered.  Without doubt, he'll have something to say about this in his weekly review later today.  The link to all this action is here.

There was some activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday.  They received 1,180 kilobars -- and shipped out only 30 of them.  Except for the 180 kilobars dropped off at Loomis International, the rest of the in/out activity was at Brink's, Inc.  The link to that, in troy ounces, is here.



The Frome Hoard is a hoard of 52,503 Roman coins found in April 2010 by metal detectorist Dave Crisp near Frome in Somerset, England. The coins were contained in a ceramic pot 45 cm (18 in) in diameter, and date from A.D. 253 to 305. Most of the coins are made from debased silver or bronze. The hoard is one of the largest ever found in Britain, and is also important as it contains the largest group ever found of coins issued during the reign of Carausius, who ruled Britain independently from 286 to 293 and was the first Roman Emperor to strike coins in Britain.

The hoard was discovered on 11 April 2010 while Crisp was metal detecting in a field near Frome where he had previously found late Roman silver coins. The late Roman coins, eventually totalling 62, were probably the remnants of a scattered hoard, 111 of which had been found on the same farm in 1867. Whilst searching for more coins from the scattered hoard he received what he called a "funny signal" and on digging down about 35 cm (14 in) he found a small radiate coin, and the top of a small pot. Realising that this must be an intact coin hoard he stopped digging and filled in the hole he had made. In 22 years of detecting Crisp had never made such a significant find.

Of the 52,503 coins found, 44,245 have been identified, and the remainder are classified provisionally as "illegible" until cleaning and conservation has been completed. Of the identifiable coins, 14,788 were minted under the central Roman Empire, 28,377 were minted under the breakaway Gallic Empire, and 766 were minted under the Britannic Empire of Carausius. About 5% of the coins identified so far are from the period of Carausius, who ruled Britain from 286 to 293, and the hoard includes five silver denarii issued by Carausius, which were the only type of silver coin to be struck anywhere in the Roman Empire at that time.  Click to view, photo 2, photo 3
 


The Commitment of Traders Report, for positions held at the close of COMEX trading on Tuesday, May 7...showed a smallish decrease in the Commercial net short position in silver -- and a smallish increase in the short position in gold.

In silver, the Commercial net short position declined by 4,701 contracts, or 23.5 million troy ounces.

They arrived at that number by adding 1,894 long contracts -- and they reduced their short position by 2,807 contracts.  It's the sum of those two numbers that represents their change for the reporting week.

Under the hood in the Disaggregated COT Report, the Managed Money traders did very little, increasing their short position on a net basis by only 401 contracts.  They reported adding 3,951 long contracts, but also increased their short position by 4,352 contracts -- and it's the difference between those two numbers which represents their change for the reporting week.

I suspect, but could be wrong, that a large portion of the Managed Money traders that added to their long positions during the reporting week were of the value investing variety -- and the Managed Money traders that went short were of the brain-dead/moving average-following type.  That is my explanation for such a bifurcated change in the position of the Managed Money traders.

The difference between what the Managed Money traders did -- and the Commercial net short position...4,701 minus 401 equals 4,300 contracts, was made up by the traders in the other two categories, as both decreased their net long positions during the reporting week.

The other very notable feature of the Disaggregated Report was that the traders in the 'Producer/Merchant' category...read JPMorgan...decreased their short position by a net 5,464 contracts during the reporting week.

Here's the snip from the Disaggregated COT Report so you can see these changes for yourself.  Click to enlarge.


The Commercial net short position in silver is now down to 83.3 million troy ounces which, although not a record low number, is still extremely bullish.

According to Friday's Bank Participation Report, four U.S. banks hold a gross long position of 5,096 COMEX contracts in silver -- and it's a given that every contract of that amount is held by JPMorgan.  I'll have more about this in my commentary on this month's Bank Participation Report further down.

Here is the 3-year COT chart for silver from Nick Laird, updated with this week's data point -- and the change should be noted.  Click to enlarge.


We're still loaded for a rally of some magnitude in silver -- and how high it goes and how long it takes still remains in the hands of JPMorgan...as they are the short sellers of last resort...although they have been short sellers of first resort when necessary.   As Ted says, what they do or don't do when that rally begins, is all that matters.



In gold, the commercial net short position increased by 8,047 contracts, or 804,700 troy ounces of paper gold.

They arrived at that number by decreasing their long position by 5,210 contracts -- and they also increased their short position by 2,837 contracts.  It's the sum of those two numbers that represents their change for the reporting week.

Under the hood in the Disaggregated COT Report it was all Managed Money traders -- and a bit more, as they followed their Pavlovian instincts as expected of them.  They increased their net long position by 9,471 contracts, which was bigger than the increase in the commercial net short position by...9,471 minus 8,047 equals 1,424 contracts.

And, as always, it was the traders in the 'Other Reportables' and 'Nonreportable'/small trader categories that made up that tiny difference, as both groups decreased their net long positions by a bit.

The big surprise was in the 'Producer/Merchant/JPMorgan' category where, despite the fact that the commercial net short position rose by 8,047 contracts during the reporting week, these traders...read JPMorgan...actually went net long during the reporting week to the tune of 3,023 contracts.  It was the traders in the 'Swap Dealer' category that did all the heavy lifting on the commercial side, as they increased their net short position by a chunky 11,070 contracts during the reporting week.

The commercial net short position in gold is now up to 9.64 million troy ounces.

Friday's Bank Participation Report shows that five U.S. banks hold a gross long position of 6,833 COMEX contracts in gold and, like in silver, it's pretty much a given that it's all held by JPMorgan -- and I'll have more to say on this further down, as will Ted in his weekly review later today.
Here's Nick's 3-year COT chart for gold, updated with Friday's data.  Click to enlarge.


The set-up in the COMEX futures market in gold, is still bullish -- and made more so by the fact that JPMorgan is net long both precious metals.  The only fly-in-the-ointment for me is that gold's 200-day moving average still sits there...unbroken to the downside -- and I'm still wondering if 'da boyz' have that in their sights.

In the other metals, the Manged Money traders in palladium decreased their net long position in this precious metal by 660 contracts, which is the same amount that they increased it by in the prior week.  The Managed Money traders are net long the palladium market by 9,282 contracts.  Total open interest in palladium is 21,485 COMEX contracts, down 1,200 contracts from the previous week.  It's a very tiny market.  In platinum, the Managed Money traders decreased their net long position by 4,097 contracts.  The Managed Money traders are still net long the platinum market by a fairly hefty 17,762 contracts.  Total open interest is 74,901 contracts.  With copper down big-time during the reporting week, the Managed Money traders increased their net short position in that metal by a further 16,884 contracts during the reporting week -- and are now net short the COMEX futures market by a whopping 27,156 contracts.  They're even more short now, as copper was closed below its 200-day moving average for the last three days in a row since the Tuesday cut-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 this past 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. Click to enlarge.


For the current reporting week, the Big 4 traders are short 101 days of world silver production, which is unchanged from last week's report - and the '5 through 8' large traders are short an additional 61 days of world silver production, up 2 days from last week's report - for a total of 162 days that the Big 8 are short, which is a bit over 5 months of world silver production, or about 378.1 million troy ounces of paper silver held short by the Big 8.  [In the prior week's COT Report, the Big 8 were short 160 days of world silver production.]

In the COT Report above, the Commercial net short position in silver was reported as 83.3 million troy ounces.  As mentioned in the previous paragraph, the short position of the Big 8 traders is 378.1 million troy ounces.  The short position of the Big 8 traders is larger than the total Commercial net short position by a chunky 378.1 minus 83.3 equals 294.8 million troy ounces.

The reason for the difference in those numbers...as it always is...Ted's raptors, the 34-odd small commercial traders other than the Big 8, are net long that amount.  How ridiculous is that, you ask?  Very ridiculous, dear reader.

As I mentioned in my COT commentary in silver above, JPMorgan was long the COMEX futures market in silver by 5,096 contracts as per yesterday's Bank Participation Report.

The Big 4 traders now in that category are short, on average, about...101 divided by 4 equals...25.25 days of world silver production each.

The four traders in the '5 through 8' category are short 61 days of world silver production in total, which is 15.25 days of world silver production each.

Ted's of the opinion [at least he was two weeks ago] that there are most likely three Managed Money traders with short positions large enough in the COMEX futures market to inhabit the Big 8 category now.  I didn't ask him yesterday, but I doubt that this situation has changed materially since then.

The Big 8 commercial traders are short 37.9 percent of the entire open interest in silver in the COMEX futures market, which is virtually unchanged from the 38.0 percent they were short in last week's report.  And once whatever market-neutral spread trades are subtracted out, that percentage would be a bit under the 45 percent mark.  In gold, it's now 36.5 percent of the total COMEX open interest that the Big 8 are short, down a bit from the 37.9 percent they were short in last week's report -- and something a bit over 40 percent once the market-neutral spread trades are subtracted out.

In gold, the Big 4 are short 33 days of world gold production,unchanged  from what they were short in last week's COT Report.  The '5 through 8' are short another 24 days of world production, also unchanged from what they were short last week...for a total of 57 days of world gold production held short by the Big 8.  Based on these numbers, the Big 4 in gold hold only 57 percent of the total short position held by the Big 8...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 62, 75 and 83 percent respectively of the short positions held by the Big 8.  Silver is down 1 percentage point from a week ago, platinum is unchanged from last week -- and palladium is also unchanged -- and still at a record high!

If you look at the above 'Days to Cover' chart, you can see these percentages for yourself between the red and the green bars for each precious metal.



The May Bank Participation Report [BPR] data is extracted directly from the data in yesterday's Commitment of Traders Report.  It shows the number of 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 in all COMEX-traded products.  For this one day a month we get to see what the world's banks are up to in the precious metals -and they're usually up to quite a bit.  The May Bank Participation Report covers almost all of April, plus the first five trading days in May, as the cut-off for this report was on Tuesday the 7th.

In gold, 5 U.S. banks are net short 27,281 COMEX contracts in the May BPR.  In April's Bank Participation Report [BPR] these same 5 U.S. banks were net short 45,742 contracts, so there was a huge drop of 18,461 contracts from a month ago.  It's the second consecutive month where the short positions of the U.S. banks has declined by this sort of number.

This is the smallest short position held by the U.S. banks since August of 2018.

As I mentioned in my COT commentary above, this BPR in gold shows a gross long position of 6,833 contracts held by these five U.S. banks -- and it's a virtual certainty that JPMorgan holds that entire amount.  So they are obviously not one of the five U.S. banks that are short the COMEX futures market in gold.  So, who is?  I put Citigroup at the very top of that list by a wide margin, followed by HSBC USA and Goldman.  As for the who the other two might be, I have no clue.  But I suspect that their short positions would not be material.

Also in gold, 28 non-U.S. banks are net short 55,851 COMEX gold contracts, which is a hair under two thousand contracts per bank.  In the April's BPR, these same 28 non-U.S. banks were net short 57,734 COMEX contracts...so the month-over-month change is down by a bit...1,883 contracts.

However, as I always say at this point, I suspect that there's at least two large non-U.S. bank in this group, including Scotiabank, that holds a fairly hefty short position in gold.  That means that the short position in gold held by the remaining 26 non-U.S. banks are immaterial.

At the low back in the August 2018 BPR [for July] these same non-U.S. banks held a net short position in gold of only 1,960 contacts! -- and the May 2019 BPR was the first month where these non-U.S. banks have shown a month-over-month decrease.  So they're still short big time -- and almost a record short position to boot.

As of this Bank Participation Report, 33 banks [both U.S. and foreign] are net short 18.5 percent of the entire open interest in gold in the COMEX futures market, which is down a very decent amount from the 23.5 percent they were short in the April 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, 4 U.S. banks are net short 9,642 COMEX silver contracts in May's BPR.  In April's BPR, the net short position of these same 4 U.S. banks was 20,016 contracts, so the short position of the U.S. banks is down a substantial 11,627 contracts from March BPR which, like for gold, was the second month in a row of big declines in the short positions held by these U.S. banks.

To give you an idea of how low this short position for these 4 U.S. banks is, this is the smallest net short position held by these banks since November 2014 -- and the second smallest U.S. bank short position on record going back to 2011!

Since Ted figures that JPMorgan is not short any of that amount -- and is in fact long the COMEX futures market in silver by 5,096 contracts...as per this Bank Participation Report.  Then it becomes pretty obvious that Citigroup and HSBC USA now hold the lion's share of the remaining short position of these four U.S. banks.  And whoever the other two banks may be, their short positions, like the short positions of the two smallest banks in gold, are immaterial as well.

Also in silver, 22 non-U.S. banks are net short 28,005 COMEX contracts...which is up a bit from the 27,626 contracts that 24 non-U.S. banks were short in the April BPR.  I would suspect that Canada's Scotiabank [and maybe one other] still holds a goodly chunk of the short position of these non-U.S. banks.  I believe that a number of the remaining 20 non-U.S. banks may actually net long the COMEX futures market in silver.  But even if they aren't, the remaining short positions divided up between these other 20 non-U.S. banks are immaterial - and have always been so.

As of May's Bank Participation Report, 26 banks [both U.S. and foreign] are net short 18.9 percent of the entire open interest in the COMEX futures market in silver-which is down a bit from the 23.9 percent that they were net short in the April BPR - with much, much more than the lion's share of that held by Citigroup, HSBC USA, Scotiabank -- and maybe one other non-U.S. bank.

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, 5 U.S. banks are net short 17,112 COMEX contracts in the May Bank Participation Report.  In the April BPR, these same banks were net short 10,710 COMEX contracts...so there's been a whopping increase of 6,402 contracts [60 percent] month-over-month.  [At the 'low' back in July of 2018, these same five U.S. banks were actually net long the platinum market by 2,573 contracts.] That's quite a change for the worst since then.

Also in platinum, 20 non-U.S. banks are net short 11,487 COMEX contracts in the May BPR, which is up a bit [14 percent] from the 10,069 COMEX contracts they were net short in the April BPR.  [Note: Back at the July 2018 low, these same non-U.S. banks were net short only 1,192 COMEX contracts.]

It's obvious that the banks have been aggressively shorting platinum during the last month to prevent it from rising like the palladium price, which it would have done quite handily if allowed to trade in a free market, which it just as obviously wasn't.

And as of May's Bank Participation Report, 25 banks [both U.S. and foreign] are net short 38.2 percent of platinum's total open interest in the COMEX futures market, which is a big jump up from the 30.5 percent they were net short in April's BPR.

Here's the Bank Participation Report chart for platinum -- and the big rise in the world bank's short position is more than obvious.  Click to enlarge.


In palladium, 4 U.S. banks are net short 7,298 COMEX contracts in the May BPR, which is up a bit [14 percent] from the 6,389 contracts that '3 or less' U.S. banks held net short in the April BPR.

Also in palladium, 15 non-U.S. banks are net short 687 COMEX contracts-which is down from the 885 COMEX contracts that '12 or less' non-U.S. banks were short in the April BPR.  That's the lowest short position that the non-U.S. banks have held since March 2016.
When you divide up the short positions of these non-U.S. banks more or less equally, they're completely immaterial...especially when you compare them to the positions held by the 4 U.S. banks.

As of this Bank Participation Report, 19 banks [U.S. and foreign] are net short 37.1 percent of the entire COMEX open interest in palladium.  In April's BPR, the world's banks were net short 30.5 percent of total open interest, so there's been an increase in the short position of the banks in this precious metal over the last month...all of it courtesy of the those 4 U.S. banks.

And just as a point of interest, these 4 U.S. banks hold over 91 percent of the total short positions held in palladium by all the worlds' banks combined.

Please remember that this is a very tiny market -- and it doesn't take too many contracts to move it.

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 -- and are even more so today.  Click to enlarge.


So, with JPMorgan out of their short positions in both silver and gold, they've left the rest of the world's banks [plus the other short holders] in even more peril than they were a month ago when the April Bank Participation Report came out.

And it should be mentioned that along with JPMorgan being free and clear in the COMEX futures market in silver and gold -- and now long those markets, Ted figures they're sitting on 20 million ounces of physical gold, plus around 850 million troy ounces of silver as well.

Are they set to reap massive rewards on a rise in precious metal prices that they allow to happen?  You betcha.  In the process, they've pulled off Ted's perfect double cross...leaving all others holding the short position bag.  Will they actually pull the trigger on this finally and at last -- and if so...when?  I don't know for sure, but if it does, you won't need me or anyone else to tell you that fact, as it will be...as Ted always says..."evident in the price."

I have an average number of stories for you today, including a couple that had to wait for my Saturday missive because of length and/or content reasons.

CRITICAL READS  

The Only Real Way to "Fix" Capitalism -- Bill Bonner

World stock markets are already down more than $2 trillion - supposedly on "trade war worries."

And now, Friday has come. Tariffs have gone up. $200 billion worth of Chinese imports now face levies of 25%, up from 10%.

And the trade negotiations with China continue. Foreign markets are selling off a bit more, but not catastrophically.

These negotiations are a big waste of time, from an economic point of view. But they seem to have helped Donald Trump's approval ratings. There's nothing like a war - even a loopy trade war - to rally the masses.

What won't help his ratings is a big, premature market sell-off. Trump wants to blame the coming recession/bear market on the Fed. He can't afford to trigger it now...

This commentary from Bill was posted on the bonnerandpartners.com Internet site early on Friday morning EDT -- and another link to it is here.


Doug Noland: Deal or No Deal

Why would Beijing return a 150-page draft with "systematic edits" that they surely knew would risk blowing up months of negotiations? "Liu last week told Lighthizer and Mnuchin that they needed to trust China to fulfill its pledges through administrative and regulatory changes... Both Mnuchin and Lighthizer considered that unacceptable, given China's history of failing to fulfill reform pledges."

The U.S. was demanding that China change existing laws to incorporate trade concessions along with agreeing to "an enforcement regime more like those used for punitive economic sanctions - such as those imposed on North Korea or Iran - than a typical trade deal."

China views U.S. demands to change laws as an infringement of national sovereignty. And I can imagine Chinese officials have utter disdain for a U.S.-dictated "enforcement regime." Xi and Putin's private talks - and close personal relationship - surely coalesce around their mutual revulsion to U.S. hegemony including its aggressive command of international organizations and authority over punitive economic sanctions. The U.S. was pushing vehemently for concessions the Chinese likely considered red line issues. Beijing made the calculated decision to push back. Have increasingly contentious U.S. military excursions in the Taiwan Strait and South China Sea been a factor? Less than a trust-building exercise. Huawei? How much is Maduro on the hook to the Chinese? Kim Jong Un (aka "Rocketman") up to his old tricks mere coincidence?

That so many things are coming to head is no coincidence. Late-stage historic global Bubble. The rise of insecurity, populism in the U.S., President Trump and the Chinese as a popular (can't lose) political target. The rise of Chinese economic might, financial power, technological prowess, global influence and rapidly expanding military capabilities. The multi-decade global Bubble has caused unprecedented wealth inequality, uncertainty and fragility - within and between nations. And an increasingly disenchanted U.S. middle-class has manifested into a country deeply divided economically, socially and politically - more distrustful of its institutions and seeking scapegoats.

Deal or No Deal, this week had me pondering the next crisis. It will, after all, be the first international market crisis in an era of competing global powers. Do the rivals come together or seek advantage at the other's expense? I grimaced some months back when President Trump began using his Twitter account to troll the struggling Chinese markets and economy. And in this age of the strongman head of state, where will this leave central bankers when things turn dicey? Has the era of putting a select group of like-minded global central bankers in a room and empowering them to orchestrate a strategy to reliquefy the world run its course?

This very worthwhile weekly commentary from Doug showed up on his website in the very wee hours of Saturday morning -- and another link to it is here.


Trump's Vanity Will Destroy the Global Economy -- Tom Luongo

Last year I asked the question "Will Trump torch the global economy on the bonfire of his vanity?"

A year later we have the answer. It's a resounding, "Yes."

I wrote after Trump pulled out of the JCPOA:

"Donald Trump wants regime change in Iran. His cancellation of the JCPOA was a decision born of his myopia. He has surrounded himself with people who reinforce his view and manipulate him via his vanity.

And the price of implementing his current plan will be a global debt crisis which no one will escape."

Today Trump has pushed this plan to its extreme. He's fomented a trade war with China and threatened sanctions on anyone doing any business will Iran outside its border, now including all strategic metals.

He's threatened Lebanon with extinction and Iraq as well. His foreign policy mouthpieces are making pronouncements and twisting arms.

And none of this for the United States. He's doing this for the basest of reasons. His ego. And, for him, that means doing everything to support his upcoming "Deal of the Century" between the Palestinian authorities and Israel. That it is the first step towards peace in the Middle East.

But it isn't.

This very worthwhile commentary/opinion piece showed up on Tom's website on Thursday sometime -- and I thank Brad Robertson for pointing it out.  Another link to it is here.


Are All the World's Problems Ours? -- Patrick Buchanan

In 2003, George W. Bush took us to war to liberate Iraq from the despotism of Saddam Hussein and convert that nation into a beacon of freedom and prosperity in the Middle East.

Tuesday, Mike Pompeo flew clandestinely into Baghdad, met with the prime minister and flew out in four hours. The visit was kept secret, to prevent an attack on the Americans or the secretary of state.

Query: How successful was Operation Iraqi Freedom, which cost 4,500 U.S. lives, 40,000 wounded and $1 trillion, if, 15 years after our victory, our secretary of state must, for his own security, sneak into the Iraqi capital?

Topic of discussion between Pompeo and the prime minister:  In the event of a U.S. war with Iran, Iraqis would ensure the protection of the 5,000 U.S. troops in country, from the scores of thousands of Iranian-trained and Iranian-armed Shiite militia.

That prospect, of war between the U.S. and Iran, had been raised by Pompeo and John Bolton on Sunday, when the USS Abraham Lincoln carrier task force and a squadron of U.S. bombers were ordered into the Middle East after we received reports Iran was about to attack U.S. forces.

The attack did not happen. But on Thursday, Tehran gave 60 days' notice that if it does not get relief from severe U.S. sanctions, it may walk out of the nuclear deal it signed in 2015 and start enriching uranium again to a level closer to weapons grade.

The countdown to a June confrontation with Iran has begun.

This very interesting and worthwhile commentary from Pat put in an appearance on his Internet site on Friday sometime -- and I 'borrowed' it from a Zero Hedge story late yesterday morning EDT.  Another link to it is here.


Why I'm Pro-Detente with Russia - Paul Jay interviews Stephen Cohen

I realized it wasn't the Soviet Union that was the great danger, it was the potential of nuclear war, and it's still the case today -- says Stephen Cohen on 'Reality Asserts Itself' with Paul Jay.

This 21-minute video interview is a must watch in my opinion.  I thank Larry Galearis for sending it along on Tuesday, but I thought it best to wait to post it in my Saturday missive.  It showed up on therealnews.com Internet site on Monday.


Pompeo to Meet With Putin, Lavrov During Russia Visit

Secretary of State Mike Pompeo will meet with Russian President Vladimir Putin and Foreign Minister Sergey Lavrov during a trip to Russia next week, according to the U.S. State Department.

They are set to discuss the "the full range of bilateral and multilateral challenges" while meeting in the southern city of Sochi on May 14.

This will be the second Lavrov-Pompeo meeting this month - the first being May 6 talks in Finland which lasted an hour and paved the way for next week's sit-down, according to Russia's top diplomat.

On May 3, President Trump and Putin had a 90-minute telephone conversation during which Trump says they discussed special counsel Robert Mueller's investigation into Russian meddling in the 2016 U.S. election.

"We discussed, he sort of smiled when he said something to the effect that it started off as a mountain and it ended up being a mouse, but he knew that, because he knew there was no collusion whatsoever, so pretty much that's what it was," said Trump after the call.

This very brief news item appeared on the Zero Hedge website at 8:49 a.m. on Friday morning EDT -- and it's from Brad Robertson as well.  Another link to it is here.


Mr. Pompeo Goes to Sochi and Moscow -- Adrei Martyanov

OK, U.S. Secretary of the State Pompeo will travel to Russia to, quoting AFP:

"The top U.S. diplomat will meet Putin on Tuesday in the Black Sea resort of Sochi to "discuss the full range of bilateral and multilateral challenges," the State Department said."

It is, of course, a positive development, once one considers alternatives, but as Russian media report (in Russian), while Iran, Venezuela and other hot issues are on the agenda, it is the issue of arms control which Washington is most interested in. Obviously State Department paints this seemingly noble effort with a broad brush, talking about multi-lateral negotiations (well, China, it's you)--this is all fine and dandy, who would argue against that. Except, two teeny-weeny issues:

1. China's Intermediate Range missiles--that means reach of any U.S. base around China, Diego Garcia included, and that is a big no-no for the U.S. in a scenario of China's containment, but...

2. By far the most important issue for the U.S. are those mysterious weapons nasty Russkies invented to prevent peaceful triumphant spread of democracy--those weapons will be discussed. Of course, to no avail.

Russia once trusted the U.S., in [the] 1990s. We all know how it all played out, for Russia. So, do not expect Russia to be so utterly stupid as to even negotiate any latest weapon systems many of which...drum roll...are "ambivalent". You know, exactly as the United States proclaims its "no first use" ambivalence supported by the vague justifications for the use of nuclear weapons, as the saying goes--two can play the game. Then, of course, nobody in Russia takes Trump (or his Pompeo envoy) seriously anymore. Trump is militarist and his overtures to Russia, from the inception, have nothing to do with desire to reach stable and just geopolitical equilibrium but a desire to "triangulate" and enroll Russia in U.S., most likely, last stand against China. People in Kremlin can calculate and do operate within reality-based paradigm, a feature everyone of any significance in Moscow knows is missing from current American outlook on herself and the world outside Washington D.C.

Well, dear reader, this very brief commentary from Andrei is definitely worth reading -- and I thank Larry Galearis for sending it along on Friday evening.  Another link to this very worthwhilearticle is here.


China Car Sales Tank 16.6% in April, Falling For a Record 11 Months in a Row

No country has better exemplified the global automobile recession than China. Sales for the world's largest auto market continue to deteriorate, with the latest report confirming that passenger vehicle sales in China tanked yet again - this time dropping 16.6% year-over-year to 1.54 million units, following a 12% decline in March and an 18.5% slide in February. In addition, April SUV sales fell 14.7% to 642,220 units.  Click to enlarge.



The last time retail auto sales were up in China was all the way back in May 2018, meaning sales have declined for a record 11 months in a row.

The country's slowing economy and continued trade tensions with the United States are weighing on consumer sentiment among its 1.4 billion people. Additionally, changes in tax policies and import tariffs have also acted as a headwind for car demand. Cars were the only consumer product category in China that shrank the first two months of 2019.

This chart-filled Zero Hedge article was posted on their website at 10:25 p.m. on Friday evening -- and another link to it is here.


The Reason Renewables Can't Power Modern Civilization is Because They Were Never Meant To

Over the last decade, journalists have held up Germany's renewables energy transition, the Energiewende, as an environmental model for the world.

"Many poor countries, once intent on building coal-fired power plants to bring electricity to their people, are discussing whether they might leapfrog the fossil age and build clean grids from the outset," thanks to the Energiewende, wrote a New York Times reporter in 2014.

With Germany as inspiration, the United Nations and World Bank poured billions into renewables like wind, solar, and hydro in developing nations like Kenya.

But then, last year, Germany was forced to acknowledge that it had to delay its phase-out of coal, and would not meet its 2020 greenhouse gas reduction commitments. It announced plans to bulldoze an ancient church and forest in order to get at the coal underneath it.

After renewables investors and advocates, including Al Gore and Greenpeace, criticized Germany, journalists came to the country's defense. "Germany has fallen short of its emission targets in part because its targets were so ambitious," one of them argued last summer.

"If the rest of the world made just half Germany's effort, the future for our planet would look less bleak," she wrote. "So Germany, don't give up. And also: Thank you."

But Germany didn't just fall short of its climate targets. Its emissions have flat-lined since 2009.

This very interesting -- and very worthwhile article appeared on the forbes.com Internet site on Monday -- and for content reasons, I though it best to wait for today's column.  I thank Roy Stephens for pointing it out -- and another link to it is here.


Rediscovering the Value of Honest Money:  Bob McTeer...Federal Reserve Bank of Dallas

It seems you can hardly pick up a paper or turn on the news these days without seeing something about all the efforts on Capitol Hill to redefine the way Congress and the president carry out their fiscal responsibilities. The balanced budget amendment. A line-item veto.
Legislation to limit unfunded federal mandates. When you stop and think about it, you have to wonder how things got so bad in the first place.

Traditionally, Americans have expected prudence in government spending. The government and public took it for granted that budgets should be balanced, except, perhaps, in major emergencies or extraordinary circumstances, such as war or depression. But once Keynes convinced us that the budget was a legitimate policy tool to be manipulated to fine-tune the economy, the moral commitment to a balanced budget withered away. I would argue that much the same thing has happened to our resolve against inflation.

The advantages of price stability, or a stable value of the dollar, are many and varied. Price stability is a worthy goal in itself, and it also offers the best financial environment for achieving other important national goals, such as maximum output and employment growth. Since many of the advantages of price stability are self-evident, I am somewhat perplexed as to why the constituency for it seems so weak among the business community and the public. One gets the impression that most people are content with 3-percent inflation, even though the rule of 72 says that prices will double every 24 years with 3-percent inflation.

For much of our history, sound money was imposed externally by our commitment to gold convertibility, directly or indirectly. Going off the gold standard in the early 1970s may have been the smart thing to do under the circumstances; it may even have been the only alternative at the time. I must admit, however, that our experience with price stability since then has not been as good as it was before.

This astonishing 'Volume 1, Number 1' commentary from the Federal Reserve Bank of Dallas dates from 1996.  John Lawton Jeffcoat III, who sent me this article, had this to say about it..."That first newsletter... all of it, but especially the last article on page four by Sirico, is spectacularly self-indicting, and I am just bewildered as to why the Fed would publish something so honest and revealing and admitting of their tremendous moral failings for behaving as they do.  Yet it is not published apologetically or repentantly... but unashamedly as if to say, "We are fully aware of the depth of our evil, as explained here by our associates, and we will continue down this path anyway.""  This 4-page article is still posted on the dallasfed.org Internet site -- and it's definitely worth reading if you have the time -- and another link to it is here.


South African Gold Output Extends Biggest Drop in a Decade

South African gold production shrank for an 18th straight month in March, extending the longest run of contractions since the financial crisis.

Output of the precious metal dropped 18% from a year earlier compared with a 21% decline in February, Pretoria-based Statistics South Africa said in a statement Thursday. Production contracted for 29 months through January 2009.  Click to enlarge.


Key Insights:
  • South Africa used to be the world's top producer of the metal but deeper ore bodies, labor strife, high costs and policy uncertainty have crimped output.
  • A strike by members of the Association of Mineworkers and Construction Union that started in November and ended in mid-April has slashed output at the South African operations of Sibanye Gold Ltd., the biggest producer of the metal from local mines.
  • Total mining output declined 1.1% from a year earlier, compared with a revised contraction of 8.1% in February.
  • The country is the world's biggest platinum producer. Output of platinum-group metals, which include palladium, fell for the first time in seven months, shrinking 0.5%.
The information and chart posted above is all there is to this Bloomberg article which showed up on their Internet site at 2:41 a.m. PDT [Pacific Daylight Time] on Thursday.  It's something I found on Sharps Pixley yesterday morning -- and another link to the hard copy is here.

The WRAP

Today's pop 'blast from the past' dates from 1978 -- and was this "British glam rock band's" last international big hit -- and what a hit it was.  Bass player Steve Priest, standing to the left of lead singer Brian Connolly, is amazing to watch -- and the link to the youtube.com video is here.  If you're into 'bass covers'...a less glamorous version of Priest's bass guitar abilities is linked here.

Today's classical 'blast from the past' is classical in some ways, but it is somewhat contemporary in others.  The Sorcerer's Apprentice (French: L'apprenti sorcier) is a symphonic poem by the French composer Paul Dukas, completed in 1897. Subtitled "Scherzo after a ballad by Goethe", the piece was based on Johann Wolfgang von Goethe's 1797 poem of the same name. By far the most performed and recorded of Dukas's works, its notable appearance in the Walt Disney 1940 animated film Fantasia, has led to the piece becoming widely known to audiences outside the classical concert hall.  Here's the original orchestral version as performed by the Russian Philharmonic/Moscow Symphony Orchestra -- and it's linked here.



Gold and silver prices were obviously on a very short leash on Friday -- and although platinum and palladium showed definite signs of life, their respective prices weren't allowed to get too far out of line.

And I've already discussed the sorry state of the precious metal mining equities in the first part of today's column.  It's most disheartening to know that despite the pain their shareholders are going through, the mining executives in all these companies that we own stock in, won't do a thing to help us or their industry, even though they all know full well what's happening -- and who's doing it.  But that's why the World Gold Council and Silver Institute exist...to ensure that their members never lift a finger, or a quivering voice on our, or their own behalf.

The gold price continues to be held close under both its 50 and 100-day moving averages, as you can see on the 6-month chart below -- and silver is well below any moving average that matters.  Platinum traded above its 50-day moving average on an intraday basis on Friday, but was not allowed to close above it.  The palladium price was halted safely below its 100-day moving average.

The 6-month charts below for both gold and platinum are plotted with their respective 50 and 100-day moving averages, the other four charts have the normal 50 and 200-day moving average traces.  Click to enlarge for all.


It was obvious that the equity markets were going to have a bad day on Friday, even before trading began in New York yesterday morning.  They opened down -- and continued that way until 'something' turned them around -- and from down a whole bunch, the Dow Jones was muscled higher and actually finished in positive territory.  A 550 point intraday move.

Of course this would have not been possible without the intervention of the Plunge Protection Team in New York.  Equally busy has been the Chinese equivalent of the U.S. PPT...the Chinese National Team.  And it's no secret that the Bank of Japan has been actively buying up Japanese equities for years now in order to prop up their equity markets.

What this means is that the equity markets in these countries would fall to their intrinsic values if not continually propped up.  It's no coincidence that all three of these countries are drowning in sea of debt that can never be repaid, at least not at the 'value' of their respective currencies today.

These are all Frankenstein economies in every sense of the word.  Unless continuous power is fed to them, they will not stand up, or walk and talk on their own.

I noted that Uber is off to a bad start or, as the folks over at Barron's neatly put it yesterday..."Uber Starts in Reverse".  I try not think about Tesla at all -- and then there's the FANG stocks.  With a 'T' and 'U' to add now, it's only a matter of time before a new acronym that includes them will spring up.  These are all business models based on fantasy -- and are just masquerading as going concerns.  But the band plays on anyway.  Meanwhile, the real economy continues to slowly sink into the mire.

All the while the lunatics in the White House asylum continue to trash international law in a similar manner in which they have already trampled the U.S. Constitution into the dirt.  If you haven't read that very brief piece in the Critical Reads section headlined "Mr. Pompeo Goes to Sochi and Moscow"...the time to read it is now, before you read any further.

And with Bolton's carrier and bomber task forces now in the Middle East "postured and ready to defend U.S. forces and interests in the region" -- and on the lookout for any aggressive acts from "Iran or its proxies"...what could possible go wrong?  And as I mentioned in my column the other day -- and in an e-mail exchange with George Whyte just now..."purely defensive of course...but the slightest provocation, then look out.  And if they don't get one, because Iran has already stated that "We have been very clear that we have no interest in escalation"...then then the "U.S., or its proxies"...will produce one themselves."

These are very dangerous times -- and as I stated in an Internet interview on Wednesday, if there's going to be big trouble anywhere, it will start in the Middle East, courtesy of the U.S. deep state.

That's why I speculated in my column on Friday that maybe the precious metals have been on 'care and maintenance' waiting for this event [or another just like it] to manifest itself, so they can finally take their foot off precious metal prices -- and the rest of the commodity complex at the same time.  Then the central banks will get all the inflation they could possible want.

Jamie Dimon, a "silver-plated" card-carrying member of the deep state if there ever was one, has himself and his firm in position to profit handsomely from it -- and most likely all his other friends in the deep state as well.

How did it come to this...if it does, that is.

I'm done for the day -- and the week -- and I'll see you here on Tuesday.

Ed
 


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