04 September 2015 — Friday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price didn’t do much of anything until about 8:30 a.m. in London on their Thursday morning. At that point it began to develop a negative bias, with the low tick coming at 8:45 a.m. in New York. The subsequent rally got capped shortly before 10:30 a.m. EDT—and then got sold back down almost to its low of the day about forty-five minutes later. After that the price didn’t do much.
The high and low ticks were recorded as $1,133.80 and $1,121.00 in the December contract.
Gold closed in New York yesterday at $1,125.00 spot, down $8.70 from Wednesday’s close—and back below its 50-day moving average. Net volume, which had been comatose in Far East trading, ended the day at just over 96,000 contracts, which was pretty light.
Also it should be noted from this chart that gold rallied strongly at 8:45 a.m. EDT for the last three days in a row—and all these rallies met exact fate, although at slightly different times.
Here’s the 5-minute gold tick chart courtesy of Brad Robertson. Note the lack of volume on the sell-off that began shortly after the London open. Volume only blew out when the gold price began to rally at 8:45 a.m. EDT [6:45 a.m. Denver time on this chart] when JPMorgan et al had to step in—and by noon the volume had dropped back to next nothing once again. The vertical gray line is midnight EDT—and add two hours for EDT. Use the ‘click to enlarge‘ feature, as the chart is a bit too tiny to read without it.
Silver traded on fumes and vapours for volume in the early going as well, with the only excitement being a rally under ‘no ask’ conditions moments before the London open. But it didn’t take long for a bullion bank to show up with enough ‘liquidity’ to stop the rally cold—and then sell it off. Like gold, the low tick in silver came at 8:45 a.m. in COMEX trading and, for the third day in a row, the price blasted higher from there, only to get capped [also like gold] shortly before 10:30 a.m. EDT. “Da boyz” and their algorithms took back all those gains by 11:30 a.m.—and the price crawled higher into the close of electronic trading.
The low and high ticks in silver were reported by the CME Group as $14.55 and $14.95 in the December contract.
Silver finished the Thursday session at $14.725 spot, up 3 cents from Wednesday’s close but, like gold, would have blasted higher in an eye-watering short-covering rally of biblical proportions if allowed to so, which it obviously wasn’t. Net volume was a hair under 31,000 contracts.
Platinum got sold down a few dollars in early Far East trading, but the price really began to head south shortly after 12 noon Zurich time. The low tick, just above the $1,000 the ounce mark came at 9 a.m. in New York. Then, like gold and silver, the price blasted higher, hitting about $1,022 spot, before the spoofing and the algorithms showed up—and almost all the gains had vanished by 2 p.m. in electronic trading. The price traded sideways after that. Platinum finished the Thursday session at $1,004 spot, down an even 10 bucks from Wednesday’s close.
In most respects, the palladium price action was similar to the other three precious metals, but followed platinum the closest. It took until 3 p.m. EDT for the not-for-profit sellers to set the low tick for the day—and after that it traded sideways into the close. Palladium was closed at $575 spot, down 9 dollars on the day.
The dollar index finished the Wednesday trading session in New York at 95.97. It made it up to about 96.04 by around 8:35 a.m. in Hong Kong trading, but began to slide from there, hitting its 95.78 low just before 10 a.m. in London. It traded more or less sideways until the jobless claims number came out around 8:30 a.m. in New York. The 96.62 high tick came minutes after 11 a.m.—and by the 1:30 p.m. COMEX close, was back to around 96.30—and it traded sideways from there. The index finished the Thursday session at 96.41—up 44 basis points on the day.
And here, once again, is the 6-month U.S. dollar index to give you some perspective on its current antics.
The gold stocks opened down a percent, but were up almost 4 percent by 10:10 a.m. But once JPMorgan et al capped the price, the stocks chopped lower for the remainder of the day—and the HUI closed almost on its low tick, down 1.78 percent.
Not surprisingly, the chart pattern for the silver equities was the same—and Nick Laird’s Intraday Silver Sentiment Index did close on its low tick of the day, down 2.20 percent. That’s the second day in a row that the metal has closed a few pennies higher, but the stocks got sold off.
The CME Daily Delivery Report showed that zero gold and 53 silver contracts were posted for delivery within the COMEX-approved depositories on Monday. The short/issuer of note was ABN Amro with 51 contracts. The long/stoppers were the same as yesterday—Canada’s Scotiabank in its in-house account, JPMorgan for its in-house account—and Japanese bank Mizuho for it client account. The contracts involved were 25, 14 and 9 respectively. The link to yesterday’s Issuers and Stoppers Report is here.
The CME Preliminary Report for the Thursday trading session showed that September gold o.i. dropped by 11 contracts, leaving 179 contracts still open. Silver open interest in September fell once again, this time by 339 contracts, with most of those for delivery today—and that leaves 902 contracts still open, minus the 53 mentioned in the previous paragraph.
There were no reported changes in GLD yesterday—and as of 9:06 p.m. EDT Thursday evening, there were no reported changes in SLV, either.
Since yesterday was Thursday, Joshua Gibbons, the Guru of the SLV Bar List, updated his website with the goings-on over at the iShares.com Internet site as of the close of business on Wednesday—and this is what he had to report:
“Analysis of the 02 September 2015 bar list, and comparison to the previous week’s list. 11,417,596.3 troy ounces were removed (all from Brinks London), 12,373,375.4 oz were added (all to Brinks London C), 617 bars had a serial number change.”
“It appears that 954,434.0 oz were removed, and about 11M oz were physically moved from the Brinks London vault, to the Brinks London C vault. Due to the 20M oz movement, it would be difficult to tell which bars were removed this week. This appears to be a continuation of the movement of metal started in mid-August.”
“All daily changes are reflected on the bar list, except a 858,947.4 oz withdrawal on Tuesday—and a 140,584.6 oz withdrawal on Wednesday. As of the time that the bar list was produced, it was overallocated 404.7 oz.”
The U.S. Mint had another sales report yesterday. They sold 3,500 troy ounces of gold eagles—and 1,000 one-ounce 24K gold buffaloes—and no silver eagles.
I got a very interesting e-mail from rare coin dealer Richard Nachbar on Wednesday, but for technical reasons I had to pull it from yesterday’s column, so here it is now. Attached was a chart showing the wholesale premiums [over melt] for 90% pure ‘junk’ U.S. silver coins—a term that I dislike just as much as Ted. Along with the chart came five paragraphs of commentary—and I’m posting them unedited below. By the way, the ‘click to enlarge‘ feature works well with this chart.
“Here is the latest update on my US90% SILVER COINS GRAPH, depicting an accelerating 3-year breakout from a solid 3 1/2-year base. As a reminder to your subscribers, the red line represents a price level exactly at the melt value of $1,000 face value of circulated American dimes, quarters and half dollars minted in 1964 or earlier. There are 715 troy ounces of net silver content in an average $1,000 bag. The green line represents the actual weekly wholesale dealer bid price for one of these very heavy silver coin bags expressed as a premium (or discount) to the melt value (bullion value) at the time of each weekly price snapshot.“
“For example, the spot silver price used this week was $14.41. The high, very visible national dealer buy price at that moment was “spot plus $4.00”. That means that dealers at that level were then paying $18.41 per ounce to purchase one of those bags. The math would thus be $18.41 times 715 ounces equals $13,163 wholesale bid price – a premium of 27.75%. Of course, the retail price can be set wherever a given dealer is comfortable selling, taking into account his overhead, desired profit margin, supply, demand, and apparently now also ANTICIPATED supply and demand.”
“The 1999 spike in wholesale bid premiums to nearly 40% over the silver value was due to exceptional demand generated by concerns over Y2K computer and banking issues. Notice the rapid sell-off PRIOR to the actual calendar event as those speculators unloaded their holdings en masse, driving the premium down into negative (discount) territory early in the year 2000! When discounts reach as low as 5% below the silver value – as they did early in 2000 – most of the coins being sold to dealers end up getting melted. The exceptions are when a few veteran silver investors offer to take those discounted bags off the dealers hands at a small markup, sparing the expense of shipping them off to the refinery to be melted.”
“The next giant premium spike – to just above 40% – coincided with the late 2008 financial crisis. At that time, the Comex silver price plunged to $8.80 per ounce. American physical silver buyers who either had no experience taking delivery off the Comex, or did not want to deal with that exchange, but none-the-less wanted to back up the truck and fill it up with all the silver they could locate through regular coin and bullion dealer channels, then flooded those dealers with orders for every sort of silver product on their shelves or in their vaults. The result then was that US90 silver coins, pre-1936 US silver dollars, pre-1968 Canadian silver dollars, silver Eagles, silver Maples, silver bars of all sizes, etc. was all “Hoovered” up by retail buyers willing to pay 50% premiums and above! As the Comex spot silver price recovered back into double digit territory in early 2009, the premiums receded again to small discounts below silver value.“
“What is DIFFERENT this time with the THIRD premium spike is that it has been an accelerating THREE YEAR episode! Should the Comex silver shorts succeed in taking the silver price further DOWN during the remainder of 2015 – say to $12 per ounce – then I would expect increased public demand to literally catapult wholesale premiums off this chart (above 50%, meaning that live physical silver products could be bid at above $18 per ounce). Should the silver price have ALREADY put in its long term bottom when it briefly traded below $14 just last week (and I will definitely leave THAT interpretation to more intrepid souls than me), then the USUAL premium pattern going forward here might be that as the silver price increases by several dollars over a several month period, the wholesale premiums would decrease back over that period to support at perhaps 10% over melt (spot). Keeping in mind the recent unprecedented THREE YEAR accelerating premium pattern, something entirely different may be underway here. We will have to watch this situation closely in the weeks ahead. Time will tell.” — Richard
It was another day of tiny gold movements over at the COMEX-approved depositories on Wednesday. The Delaware depository received one kilobar—and that was the only in/out movement to report.
It was another busy day in silver, of course, as 432,487 troy ounces were reported received—and 131,513 troy ounces were shipped out. Once again, there was no activity at the JPMorgan vault—and the link to yesterday’s action is here.
For a change, there was no in/out activity of any kind over at the COMEX-approved gold kilobar depositories in Hong Kong on their Wednesday.
I don’t have all that many stories today—and I’ll happily leave the editing job up to you.
CRITICAL READS
Initial Jobless Claims Jumps Most in 2 Months – Unchanged Since End of QE3
Initial jobless claims have risen for 5 of the last 6 weeks with the last week showing a 12k rise to 282k. This is the biggest weekly rise in 2 months and raises the claims print overall to 2-month highs. Perhaps most remarkable is that initial jobless claims are now back up to unchanged since the end of QE3.
This 1-chart Zero Hedge story is definitely worth a quick look. It put in an appearance on their Internet site at 8:37 a.m. Thursday morning EDT—and today’s first news item is courtesy of reader M.A.
Total 2015 Job Cuts to Be Biggest Since 2009: Challenger, Gray & Christmas
Moments ago Challenger reported August job cuts, which at 41,186 were a 60% drop from the 115,730 reported last month (the highest since September 2011), which however was driven by a one-time mass layoffs last month in military staffing. Putting August in its correct perspective, the number was 2.9% higher than the same month a year ago, when 40,010 planned job cuts were announced.
What is troubling is that this marks the seventh month this year that the job-cut total was higher than the comparable month from 2014.
What is worse is that for all the euphoria about initial claims printing at or near record lows, the reality as measured from the bottom-up, is far different and as Challenger notes, so far in 2015 employers have announced 434,554 job cuts: that is up 31 percent from the 332,931 planned layoffs in the first eight months of 2014.
What is worst, and what reveals the true picture of the economy, is that with monthly totals averaging 54,319, 2015 job cuts are on track to exceed 650,000 for the year, which would be the highest year-end tally since 2009 (1,272,030).
This longish Zero Hedge commentary, which is worth reading if you have the time, showed up on their website at 8:06 a.m. EDT yesterday morning–and it’s the second offering in a row from reader M.A.
This jobs report is very important—and here’s why
Friday is a big day for the U.S. economy.
We will find out how many jobs America’s economy added in August and whether wages are finally growing.
But this time the news goes beyond jobs and wages—-as a big decision looms in less than two weeks for America’s central bank, the Federal Reserve. And it seems to be coming down to the wire, where the jobs report could be the deciding factor.
“It should weigh heavily on the Fed’s decision in that meeting,” says Sal Guatiere, senior economist at BMO Capital Markets. “This report takes on elevated significance.”
This news item appeared on the money.cnn.com Internet site at 5:01 p.m. Thursday afternoon EDT—and I thank Patrica Caulfield for her first contribution of the day.
Almost Half of Homes in New York and D.C. Are Now Losing Value
Almost half of single-family houses in the New York and Washington metropolitan areas are losing value, a sign that buyers’ tolerance for high prices in many large U.S. cities may be reaching a limit.
The values of 45 percent of houses in both the Washington and New York areas slumped by at least 2 percent in June from a year earlier, according to a new index created by Allan Weiss, co-founder of the Case-Shiller home price indexes. In June 2014, only 15 percent of Washington residences dropped in value, while 20 percent fell in New York. Because the index is of only single-family homes, it doesn’t include Manhattan. More properties also were in decline in Los Angeles, Chicago, Phoenix and Miami.
A steady rise in U.S. home prices since the bottom of the market combined with weak income growth has made housing less affordable, especially in big cities. Credit remains tight and demand is now being driven primarily by buyers dependent on mortgages, as foreign buyers and investors pull back from the market.
This interesting real estate-related story appeared on the Bloomberg website at 6:00 a.m. Denver time yesterday morning—and I thank Richard Saler for sending it our way.
Is a Global Debt Deleveraging At Our Doorstep?
The blogosphere is rife with talk of the “death of the U.S. Dollar.”
The U.S. Dollar will eventually die, as all fiat currencies do. But the fact remains that everyone on the planet has been borrowing in U.S. Dollars for decades, or leveraging up using Dollars and that process needs to unwind.
When you borrow in U.S. Dollars you are effectively shorting the U.S. Dollar. So when leverage decreases through defaults or restructuring, the number of U.S. Dollars outstanding diminishes.
And this strengthens the U.S. Dollar.
With that in mind, it looks as though we are in the early stages of a massive, multi-year Dollar deleveraging cycle. Indeed, the greenback is now breaking out against EVERY major world currency.
This excellent commentary/infomercial from Phoenix Capital Research showed up on the Zero Hedge website at 11:08 a.m. EDT yesterday morning—and it’s definitely worth reading. I thank reader M.A. once again.
Welcome to Quantitative Tightening as $12 Trillion Reserves Fall
The great global monetary tightening of 2015 is under way, but it’s not being led by the Federal Reserve.
Even as U.S. policy makers ponder whether to raise interest rates this month, one recent source of central bank liquidity in financial markets is drying up and the loss of it partly explains August’s trading volatility.
Behind the drawdown are the foreign exchange reserves run by the central banks. Bolstered following financial crises in the late 1990s as a buffer against capital outflows and falling currencies, such hoards fell to $11.43 trillion in the first quarter from a peak of $11.98 trillion in the middle of last year, according to the International Monetary Fund.
Driving the decline is a combination of forces including the economic slowdown and recent devaluation in China, the Fed’s pending rate hike, the collapse of oil and decisions in Switzerland and Japan to cease intervening in currencies.
Each means central banks are either paring their reserves to offset an exit of capital or manage currencies, have less money flowing into their economies to salt away or no longer need to sit on as much. Whichever it is, the shrinking of reserves means much less money flowing into the financial system given authorities tended to recycle their cash piles into local currency or liquid assets such as bonds.
This Bloomberg article, with a 4:39 video clip embedded, showed up on their website at 1:44 a.m. MDT on Thursday morning—and I found it yesterday’s edition of the King Report.
Otto Pérez Molina of Guatemala Is Jailed Hours After Resigning Presidency
Just hours after tendering his resignation as president of Guatemala, Otto Pérez Molina was sent to jail to await the conclusion of a hearing examining his role in a multimillion-dollar customs fraud case that has shaken the nation and sent reverberations throughout the region.
The decision to jail Mr. Pérez Molina highlighted the seismic change sweeping through Guatemala after the corruption accusations in April, and offered a dramatic validation of a growing street demonstration movement demanding his ouster and prosecution.
For much of Guatemala’s violent history, marked by dictatorship and military repression, such a scene would have been unimaginable: a president forced to resign, then sit in open court to hear charges leveled against him and ultimately spend the night in a prison he once might have overseen as a top general.
All that in the course of a single day.
This amazing news story, filed from Guatemala City, was posted on The New York Times website yesterday sometime—and I thank Patricia C. for sending that article our way yesterday evening.
FX Traders Fear “Worst Case Scenario” For Brazil as FinMin Cancels Travel Plans, Rousseff Meets With Lula
It’s not that we want to pick on Brazil, it’s just that simply put, it’s one of the most important emerging markets in the world, which means that when depressed demand from China, plunging commodity prices, a shock devaluation from the PBoC, and the generally lackluster pace of global trade conspire to trigger an emerging market meltdown, Brazil is very likely to end up at the center of it all and sure enough, that’s exactly what’s happened.
Late last week, we noted that Brazil officially entered a recession in Q2, a quarter which also ushered in the worst stagflation in a decade and saw unemployment rise to five-year highs. Then on Monday, the government officially threw in the towel on running a primary surplus (striking a major blow to market confidence in the process) and then yesterday, we got a look at industrial production in July which missed wildly, coming in at -1.5% m/m versus consensus of -0.01%. Meanwhile, exports cratered 24%.
We could go on. And bear in mind that the budget issue is complicated by the fact that Rousseff’s political woes are making budget cuts next to impossible to pass. As Italo Lombardi, senior LatAm economist at StanChart told Bloomberg earlier this week, the admission that the country would likely miss its primary surplus target underscores the trouble “Finance Minister Joaquim Levy faces in winning congressional approval for austerity measures and pushes Brazil’s credit rating closer to junk status.” “Politics are making Levy’s life very difficult,” Lombardi added.
So difficult in fact, that he may now resign and that, according to at least one trader, would be the worst scenario possible.
This longish commentary showed up on the Zero Hedge Internet site at 6:24 p.m. yesterday evening—and it’s the fourth contribution of the day from reader M.A.
Bad timing: how Canada’s prime minister walked into his own electoral trap
Here’s a tip. If you’re running a hard-right government with a tyrannical sense of mission, don’t pass a law mandating US-style fixed-date elections. For you are Father Time’s plaything. It will bat you like a cat toy.
The Canadian prime minister, Stephen Harper, passed just such a law and so was forced to call an autumn election. And on Tuesday, Canada entered a recession, the only G7 nation to do so.
Harper had placed his tender hopes in the rough hands of the planet-poisoning Alberta tar sands. Oil prices collapsed. Canada’s economy is now based on cheap oil and job fear. The two main opposition parties are pumped, and it’s voting time!
Well, dear reader, as a staunch conservative all my life, I’ve voted for him in the past, but he’s totally sold out to the U.S. government since the last election. I don’t know what I’m going to do this time, as the two opposition parties—and their respective leaders—are so unpalatable, that I’ll probably stay home. But I know that large numbers of Canadian voters are just itching to vote him out of office. This short news item appeared on The Guardian‘s website at noon yesterday BST, which was 7 a.m. EDT. I thank “Roger in La La Land” for sending it our way.
Supervisors should not tell whole truth about bank health, Bundesbank economist warns
Banking supervisors should withhold some information when they publish stress test results to prevent both bank runs and excessive risk taking by lenders, according to a paper co-authored by a Bundesbank economist.
European banking authorities are due to carry out a fresh round of stress tests next year as they try to restore investor and depositor confidence in the continent’s banks after the financial crisis.
The paper, presented at a conference in Mannheim last week but yet to be published in its current form, says stress tests should be used to influence depositor behaviour and warns against giving too much away.
If depositors know from the watchdog that banks are in trouble, they will withdraw their cash, threatening lenders’ survival and causing the panic the supervisor is trying to avoid, the paper said.
For this reason, the authors say, the amount of information disclosed by supervisors should decrease the more vulnerable the banking sector is expected to be.
Wow! You couldn’t make this stuff up. This Reuters article put in an appearance on their website at 11:07 a.m. EDT on Tuesday—and I found it on the gata.org Internet site in the wee hours of this morning.
Draghi Unveils Revamped QE Program as ECB Downgrades Outlook
Mario Draghi unveiled a revamp of quantitative easing and signaled officials might expand stimulus if the rout in financial markets continues to weigh on growth and inflation.
The European Central Bank president said in Frankfurt on Thursday that the Governing Council raised the share of bonds the ECB can buy to 33 percent of each issue from 25 percent, and that policy makers are ready to make more adjustments to ensure the full implementation of the 1.1 trillion-euro ($1.2 trillion) program. A weaker global outlook prompted an across-the-board reduction of the institution’s growth and consumer-price forecasts through 2017. The euro slid to a two-week low.
The reset of the ECB’s stimulus program after a six-month review gives officials more flexibility as they prepare to continue bond purchases until at least September 2016. Weaker commodity prices, slowing trade and volatility in global equities have fueled speculation that more stimulus is on the way.
“The issue limit by itself isn’t particularly significant, but the signal it sends is,” said James Nixon, head of forecasting for EMEA at Oxford Economics Ltd. in London. “It’s a clear signal to the market that they’re ready to do more. If the economy weakens further and inflation doesn’t come back as expected they’ll definitely extend the QE.”
More money out of thing air. This Bloomberg article appeared on their website at 6:55 a.m. MDT on Thursday morning—and it’s the second offering of the day from Patricia Caulfield.
Turkey Arrests Journalists, Sets Up Terrorist “Tip Line” As Currency Plunges, Violence Escalates
Of course one of the main drivers of the market’s declining confidence in Turkey is the political turmoil that’s gripped the country since June when AKP lost its parliamentary majority for the first time in over a decade throwing President Recep Tayyip Erdogan’s plan to transform the country’s political system into an executive presidency into doubt. Not one to give up easily (especially when it comes to consolidating his power), Erdogan proceeded to launch an ad hoc military offensive against the PKK in an attempt to undermine support for the pro-Kurdish HDP ahead of new elections. Now, with elections set for November, the witch hunt has officially kicked into high gear.
Earlier this week, in a move dubbed “unsubstantiated, outrageous and bizarre” by Amnesty International, Turkey arrested three Vice News journalists (two British citizens and an Iraqi) for allegedly “engaging in terror activity” on behalf of ISIS. This is of course just the latest example of Ankara using the NATO-backed ISIS offensive as an excuse to eradicate pro-Kurdish sentiment. According to The New York Times (and according to common sense) the reporters’ only real “crime” was “covering the conflict between Kurdish separatists and the Turkish state.” The British journalists were reportedly released on Thursday while Mohammed Ismael Rasool (the Iraqi) was not.
But the media crackdown didn’t stop there. On Tuesday, Turkish police raided Koza-Ipek Media which, as AFP notes, “owns the Turkish dailies Bugun and Millet, the television channels stations Bugun TV and Kanalturk and the website BGNNews.com and is close to Erdogan’s political rival, the U.S.-based Muslim cleric Fethullah Gulen.”
“I’m worried that operations targeting the media will create great concern across the world about the state of democracy in Turkey,” Turkey’s new E.U. affairs minister and HDP member Ali Haydar Konca said.
Indeed. Perhaps even more alarming were reports that Ankara will now set up a terrorist tip hotline, complete with monetary awards. “Turkey to reward informants on tips about ‘terrorists'”, Bloomberg reported on Monday, citing Gazette.
This longish and very disturbing commentary was posted on the Zero Hedge website at 7:15 p.m. EDT on Thursday evening—and it’s the final offering of the day from reader M.A.—and I thank him on your behalf.
Does Obama’s Iran deal victory mark a turning point in U.S./Israeli relations?
The moment America finally made its peace with Iran and rewrote the rules of its political relationship with Israel came suddenly, even to those who have been urging both upheavals for the longest.
Inside the Washington headquarters of J-Street – a liberal Jewish American lobby group that has countered Israeli government critics by campaigning vociferously for the Iranian nuclear deal – news that enough US senators now supported it too flashed across an almost empty office.
Though the walls of the headquarters are lined with painstaking “whip counts” of where members of Congress stand on issues related to Israel, voting on the controversial deal to contain Iran’s nuclear programme was not due to begin until Congress returns after Labor Day, and, like much of Washington, several of J-Street’s top officials were still away travelling when an announcement from Maryland Democrat Barbara Mikulski dramatically ensured there were enough votes for the White House to withstand any motion of disapproval and allow the international deal to proceed.
This very interesting article. filed from Washington, put in an appearance on theguardian.com Internet site at 1:48 p.m. BST yesterday afternoon, which was 8:48 a.m. EDT. It’s another contribution from Patricia Caulfield.
Our Radical Islamic BFF, Saudi Arabia — Thomas L. Friedman
The Washington Post ran a story last week about some 200 retired generals and admirals who sent a letter to Congress “urging lawmakers to reject the Iran nuclear agreement, which they say threatens national security.” There are legitimate arguments for and against this deal, but there was one argument expressed in this story that was so dangerously wrongheaded about the real threats to America from the Middle East, it needs to be called out.
That argument was from Lt. Gen. Thomas McInerney, the retired former vice commander of U.S. Air Forces in Europe, who said of the nuclear accord: “What I don’t like about this is, the number one leading radical Islamic group in the world is the Iranians. They are purveyors of radical Islam throughout the region and throughout the world. And we are going to enable them to get nuclear weapons.”
Sorry, General, but the title greatest “purveyors of radical Islam” does not belong to the Iranians. Not even close. That belongs to our putative ally Saudi Arabia.
Of course what Mr. Friedman fails to point out is that the House of Saud has only survived this long because the U.S. government has kept it in power for the last 40+ years. That has allowed them to get away with “bloody murder”—and they’ve used their U.S. cover to do pretty much what they want. This opinion piece by Thomas showed up on The New York Times website on Wednesday—and it’s definitely worth reading, keeping what I said in the first sentence firmly in mind while you do. I thank Patricia Caulfield for this story as well.
IMF: China, Tumbling Commodity Prices Threaten World Economy
China’s slowdown, volatile financial markets and tumbling raw-materials prices have raised the risks to economic growth around the world, the International Monetary Fund reported.
In an assessment of threats published as top finance ministers and central bankers meet this week in Turkey, the IMF warned that the problems could lead to “a much weaker outlook” for global growth.
It urged wealthy countries to continue easy-money policies and “growth friendly” tax and spending programs. Some emerging-market countries, meanwhile, should let their currencies fall substantially to support their exporters and economic growth, while also enacting reforms to make their economies more efficient, it added.
The Chinese economic slowdown, though long anticipated, “appears to have larger-than-previously-envisaged” repercussions in other countries, the IMF said. China’s troubles have sent the prices of raw materials such as oil and copper into a freefall, pinching Brazil, Russia and other commodity exporters.
As you already know, with JPMorgan et al controlling the prices of the Big 6 commodities with an iron fist, it matters not what China does or doesn’t do. This AP story showed up on the newsmax.com Internet site just after midnight EDT on Thursday morning—and I thank Brad Robertson for sharing it with us.
Foreigners Flee Japan Stocks at Fastest Pace Since at Least 2004
Global investors are pulling money out of Japan’s equity market at the fastest pace since at least 2004, according to Mizuho Securities Co.
Foreigners last week sold a net ¥1.85 trillion ($15.4 billion) of Japanese stocks and equity index futures, the biggest combined outflow since Mizuho began tracking the data more than a decade ago, said Yutaka Miura, a Tokyo-based senior technical analyst at the brokerage. Investors are fleeing amid concern about China’s economic outlook and the prospect of higher interest rates in the U.S., he said.
“This is a result of investors dumping global risk assets,” said Miura. “Japanese stocks have performed well since the start of the year, so similar to what’s happening in Europe, we’re seeing people take profits.”
The Topix index is down 13 percent from its Aug. 10 high, paring its 2015 advance to 4.8 percent. The nation’s shares are among the world’s worst performers since China unexpectedly devalued the yuan last month, roiling markets worldwide and intensifying concern about the outlook for Japan’s biggest trading partner.
This Bloomberg article showed up on their Internet site at 3:20 a.m. Denver time on their Thursday morning—and it’s the final offering of the day from Patricia Caulfield.
Suddenly the Bank of Japan Has An Unexpected Problem on Its Hands
Back in October of 2014, when we explained what the BOJ’s “shocking” QE expansion really meant, we showed a chart that showed the key aspect of Japan’s shock and awe monetization: Kuroda is now monetizing 100% of gross bond issuance.
We cited Takuji Okubo, chief economist at Japan Macro Advisors in Tokyo, who said that at the scale of its current debt monetization, the BOJ could end up owning half of the JGB market by as early as in 2018. He added that “The BOJ is basically declaring that Japan will need to fix its long-term problems by 2018, or risk becoming a failed nation.”
We are almost one year after this forecast (and a little over two years left before 2018), and not only is Japan’s economy not improving, but it just posted a negative GDP print for the second quarter, suggesting unless there is a remarkable comeback, Japan may suffer its fifth recession since 2007.
All of this was, or should have been, widely known.
This very interesting Zero Hedge commentary appeared on their website at 10:41 a.m. yesterday morning EDT—and it’s the second contribution of the day from Richard Saler.
Korea Reserves Fall for Second Month in Sign of Won Intervention
South Korea’s foreign-exchange reserves dropped for a second month in August, a sign the central bank likely intervened to stem a slide in the won.
The reserves fell $2.88 billion to $367.94 billion, after a July drop of $3.93 billion that marked the biggest decline in three years, central bank data showed Thursday. The won sank last month to its weakest level since October 2011 as China’s surprise devaluation of the yuan dimmed the outlook for exports, weakening emerging-market currencies across Asia, and a military standoff between North and South Korea heightened tensions on the peninsula.
“We can presume from the decrease in reserves that the authorities have sold dollars in the market,” said
Jeon Seung Ji, a currency analyst at Samsung Futures Inc. in Seoul. “The government’s will to adjust the pace of drop is shown in the reserves, and the moves in Asian currencies will be in focus for some time.”
This Bloomberg news item, put in an appearance on their website at 12:54 a.m. MDT yesterday morning—and it’s the third and final contribution from Richard Saler.
Marc Faber: There Is No Safe Asset Anymore, so Buy Gold and Precious Metal Stocks
Gloom, Boom & Doom Report Editor Marc Faber discusses market volatility and his investment ideas. He speaks on “Market Makers.”
This 10:48 minute video interview showed up on the bloomberg.com Internet site at 6:42 a.m. MDT on Wednesday morning—and I thank Ken Hurt for finding it for us.
How China Will Blow Up Australia — Mike Maloney
Join Mike Maloney as he discusses data on the dangerous situation Australia now finds itself in, especially in regards to China and exports.
This 7:11 minute video clip with Mike appeared on the youtube.com Internet site yesterday—and it’s certainly worth watching if you have the time.
Silver hugely underperforming gold despite “astonishing” Indian demand — Lawrie Williams
While gold saw something of a pick-up from its July lows, silver has lagged behind, belying its reputation for acting like gold on steroids. The gold:silver ratio – which many silver investors follow closely – has thus been getting close to the 80 mark, and hit the highest level for seven years on August 26. Many will consider this way too high and will be betting on it coming back down, but at the moment sentiment seems to be against this and it may well continue to stay in the 70s for the foreseeable future according to analysts.
What seems to be surprising regarding silver’s underperformance of gold of late is that by all accounts silver demand has been really strong. According to precious metals consultancy Metals Focus, in its latest Precious Metals Weekly, recent data emerging from the U.S. and India, the two biggest physical investment markets for silver, appear to confirm the strength of retail investment demand in each country.
But silver investors are nothing but firm in their belief in the metal. The volume of silver held in the largest silver ETFs has remained consistently high, while the gold ETFs have seen something of a sell-off, although only at a fraction of the levels of 2013 when an estimated total of close on 880 tonnes of gold was liquidated from gold ETFs during the year.
Like his story about palladium that I posted in yesterday’s column, Lawrie doesn’t address the issue of the 1,000 kilogram gorilla in the silver living room—and that’s the monstrous and grotesque short position held by the Big 8 traders in the COMEX futures market. As long as you keep that oversight/shortcoming in mind, the story is certainly worth reading—and it was posted on the sharpspixley.com Internet site yesterday.
The PHOTOS and the FUNNIES
The WRAP
The backdrop of recurring shortages of retail silver and the increasing signs of wholesale tightness, coupled with the extremely depressed price, strongly suggest we are fast approaching the physical tipping point of a wholesale physical shortage. I would have thought it would have arrived by now (since it did first appear in April 2011), but notwithstanding the unexpected delay, it still appears set to occur.
One point I may not have stressed enough recently is that when a physical shortage hits the wholesale silver market, there will be an immediate effect on the price of silver. Just like there is no way to hide a retail silver shortage, there will be no way to cover up a wholesale shortage once it occurs. With retail forms of silver, the shortage is seen in rapidly escalating premiums and delivery delays, not in the wholesale price of silver, but in retail forms. The growing retail premiums are premiums to the price of 1,000 bars; in an actual wholesale shortage it won’t be a question of premiums, but of the price and availability of 1,000 oz bars. As and when investors and users of 1,000 oz bars experience what retail investors are experiencing in most forms of retail silver, the jig is up as that can’t be hidden.
We’re not there yet, but appear to be close; at least that’s what the growing signs of tightness in wholesale silver point to. And just like the recurring retail shortages in silver, when the wholesale shortage hits, it will come like a thief in the night, suddenly and without much warning (unless you are studying the clues beforehand). That’s because the same backdrop that allowed the retail shortage to develop is the same in 1,000 oz bars, namely, a remarkably small amount of available silver set against what could appear to be plenty of silver. — Silver analyst Ted Butler: 02 September 2015
It was another day where the rallies at the beginning of COMEX trading in New York were not only stopped cold in their tracks, but all the gains [or more, in the cases of platinum and palladium] were reversed. “Da boyz” weren’t taking any prisoners—and kept all the exit doors locked tight again.
I noted earlier that gold was closed back below its 50-day moving average again yesterday, as was platinum, but the former event certainly wasn’t accompanied by much volume. Here are the 6-month charts for the ‘Big 6’ precious metals once again.
And as I type this paragraph, the London open is less that ten minutes away—and the only excitement is that silver is up 8 cents. Volumes in both gold and silver are fumes and vapours once again, as China is closed until Monday. The dollar index has barely moved since the COMEX session ended in New York at 1:30 p.m. EDT yesterday—and is currently down 9 basis points.
Today we get the latest Commitment of Traders Report for positions held at the close of COMEX trading on Tuesday. This is what Ted had to say about it in his Wednesday missive—“As far as this Friday’s COT report, I have no firm expectations in gold or silver, but will be quite surprised if we don’t see significant managed money buying in crude oil, particularly in the form of short covering.”
We also get the job numbers at 8:30 a.m. EDT—and as I said in yesterday’s column, I expect that will move the gold and silver price, with the only unknowns being in which direction, and by how much.
I’m off to bed early as there’s nothing happening. And as I post this on the website at 3:25 a.m. EDT, all four precious metals are basically unchanged from thirty minutes ago. Net gold volume is around 6,800 contracts—and silver’s net volume is a whopping 2,200 contracts. The dollar index is down 13 basis points.
See you on Saturday.
Ed
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