24 October 2015 — Saturday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price didn’t do much in the first few hours of trading in the Far East on their Friday morning. It began to chop higher starting shortly after 8 a.m. Hong Kong time, with most of that rally’s gains coming by 10 a.m. BST in London. From there it slid a bit. Then at, or just after, the London silver fix, the price took off to the upside, only to run into a seller of last resort within a few minutes. After chopping sideways for a while, “da boyz” and their algorithms showed up at 9 a.m. in New York and peeled 18 dollars off the price in just under an hour. The low of the day came at the London p.m. gold fix. It rallied back from its low until it stuck its nose above Thursday’s closing price at 3 p.m. EDT—and then got sold down for a small loss on the day.
The high and low ticks, which occurred within two hours of each other, were recorded by the CME Group as $1,179.40 and $1,158.60 in the December contract.
Gold finished the Friday session in New York at $1,164.00 spot, down $1.90 from Thursday’s close. Net volume was very decent at just over 141,000 contracts.
Here’s the 5-minute gold tick chart courtesy of Brad Robertson once again. As you can see, there was notable volume starting about two hours before the London open—midnight Denver time on this chart—and then it really picked up starting just before 5:30 a.m. MDT, which was when the gold price blasted higher shortly after the noon London silver fix. The huge volume was when JPMorgan and their HFT buddies spun their algorithms and peeled 18 dollars off the price in the last hour or so before the London p.m. gold fix. By the COMEX close—11:30 a.m. Denver time on this chart—the volume had died off to nothing. Midnight in New York is the vertical gray line, add two hours for EDT—and don’t forget the ‘click to enlarge‘ feature.
The silver price chart was similar to the gold chart, except the rally at, or just after, the noon London silver fix wasn’t as impressive, as it was halted at the $16 spot mark again. Like gold, the low came at the p.m. gold fix—and the subsequent rally made it back to just above unchanged by 11 a.m. EDT, but even that tiny gain wasn’t allowed and, like gold, it got sold down for a tiny loss on the day during the last two hours of trading in the electronic market. It’s obvious that ‘da boyz’ weren’t going to allow silver to close above $16 spot again on this rally sequence.
The high and lows ticks in this precious metal were reported as $16.10 and $15.705 in the December contract.
Silver closed on Friday at $15.81 spot, down 3 cents on the day. Net volume was huge at just over 44,000 contracts.
The platinum and palladium charts were very similar to the the gold and silver charts, as their respective rallies met with the same fates—and at the same times—and certainly by the same group of not-for-profit sellers. Like gold and silver, they were were sporting decent gains, but the HFT traders sold down platinum for a loss—and palladium’s big gain was sharply curtailed. Platinum was closed on Friday at $999 spot, down ten bucks—and palladium was closed at $692 spot, up 7 dollars from Thursday’s close. And in case you missed it, platinum’s sojourn above $1,000 spot—and palladium’s stay above $700 spot were not allowed to stand—just like silver’s foray above the $16 spot price. Here are the charts.
The dollar index closed late on Thursday afternoon in New York at 96.40—and rallied a bit until 8 a.m. Hong Kong time on their Friday morning. From there it drifted lower until its 96.15 low tick was set a few minutes after 10 a.m. in London. Then away it went to the upside, hitting its 97.20 high tick at 3:30 p.m. EDT. It sold off a bit from there, finishing the Friday session up 65 basis points at 97.05.
Here’s the 6-month U.S. dollar index chart so you can see the progress of the current counter-trend short covering rally—and it’s a beauty.
The dollar index has risen 200 basis points in less than forty-eight hours of trading—and gold and silver prices are basically unchanged. What is going on out there? I’ll have more on this in The Wrap.
The gold stocks opened in positive territory, but dipped into the red briefly as gold hit its low at the London p.m. gold fix—and if you check the HUI chart below, you’ll see that the low tick came at precisely 10:00 a.m. EDT. From there they rallied steadily, with the high tick coming in the last hour that the equity markets were open—and got sold off a bit as the day traders headed for the exits. As it was, the HUI closed up a very respectable 3.12 percent.
The silver equities followed a very similar price path—and Nick Laird’s Intraday Silver Sentiment Index closed on Friday up 1.66 percent.
For the week, the HUI closed up 1.36 percent—and Nick’s ISSI finished down 2.83 percent. Month-to-date the HUI is up 22.07 percent—and the ISSI by 14.19 percent.
The CME Daily Delivery Report showed that 34 gold and zero silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday. For the third day in a row it was Canada’s Scotiabank as the short/issuer—and JPMorgan as the sole long/stopper for its own account. The link to yesterday’s Issuers and Stoppers Report is here.
The CME Preliminary Report for the Friday trading session showed that, not surprisingly, gold open interest fell by the 45 contracts that I mentioned in Friday’s column—and they’ll be delivered on Monday. Gold o.i. for October is down to 561 contracts, minus the 34 mentioned in the previous paragraph. Silver o.i. dropped by 1 contract to 11 still open.
There was a withdrawal from GLD yesterday, as an authorized participant took out 57,447 troy ounces. And as of 9:48 p.m. EDT yesterday evening, there were no reported changes in SLV.
In the wee hours of this morning I received an e-mail from Nick Laird stating that Source Silver‘s ETF increased by 2.4 million ounces this past week. I’ve never heard of them before, but Nick says he’s been tracking them for years, so they’ve obviously been around for a while.
There was no sales report from the U.S. Mint yesterday.
Once again there was no in/out movement in gold over at the COMEX-approved depositories on Thursday—and very little silver movement as well. Nothing was received—and only 52,390 troy ounces were taken out—and all of that came out of the Brink’s, Inc. depository.
There was very decent in/out movement over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday. There were 6,226 kilobars received—and 3,197 shipped out. All of the activity was at the Brink’s, Inc. depository—and the link to that, in troy ounces, is here.
In my Friday column I had this to say in advance of yesterday’s Commitment of Traders Report—“I would expect that we’ll see some more deterioration in the Commercial net short positions in both silver and gold, with the only question being—how much?”
In a word, it was horrific! Both Ted and I were totally blown away.
In silver, the Commercial net short position blew out by another 8,174 contracts, or 40.9 million troy ounces. The Commercial net short position now stands at an eye-watering 66,800 contracts, or 334.0 million troy ounces. I don’t know how many years you’d have to go back to find a Commercial net short position of this size, but it will be quite a few—and I’m sure that Ted will have the exact number in his weekly commentary for his paying subscribers later today.
Ted said that the Big 4 traders increased their short position by 2,300 contracts during the reporting week—and he figures that 2,000 contracts of that amount was an increase in the short position of JPMorgan, which is now up to around 25,000 contracts! The ‘5 through 8’ big Commercial traders added another 1,700 contracts to their short position—and the balance of the 8,174 contracts came from Ted’s raptors, the Commercial traders other than the Big 8, selling about 4,200 long contracts for a profit.
Under the hood in the Disaggregated COT Report, the technical traders in the Managed Money category added 4,493 contracts to their long position, plus they covered/sold 1,436 short contracts. Almost all of the rest of the changes were in the positions of the small traders in the ‘Nonreportable’ category. There wasn’t much change in the “Other Reportables” category.
In gold, the Commercial net short position change was over the moon as it increased by a stunning 44,806 contracts, one of the biggest week-over-week increases on record. That’s 4.48 million troy ounces of paper gold sold short during the five business days of the reporting period. The Commercial net short position now stands at 16.33 million troy ounces—up by one third in one week!
The Big 4 traders added 8,000 contracts to their short position—and the ‘5 through 8’ added another 15,500 contracts to theirs—and the balance of the 44,806 contracts were Ted’s raptors selling about 21,300 long positions for a profit.
Under the hood in the Managed Money category, the technical funds purchased 27,849 longs—and covered/sold 11,282 short contracts. The remaining 5,700 contracts or so of the 44,806 contract Commercial net short position were more or less evenly divided up between the ‘Other Reportable’ and ‘Nonreportable’ categories.
From its October 2 low tick to its October 15 high tick, this silver rally, if you wish to dignify it by that name, covered a price range of $1.85—from about $14.35 up to $16.20 at its high tick. During that 2-week period, the Commercial net short position blew out to an amount not seen in years—and the short position of the Big 8 traders in silver [mostly U.S. and non-U.S. banks] is at a high not seen since the middle of 2008. In gold, the rally was about 90 bucks—and we’re back to a Commercial net short position in that precious metal that we haven’t seen in years, either.
In a nutshell, the Big 8 traders sold enough COMEX paper to stop these gold and silver rallies in their tracks—and limit them to the tiny gains you see here. I’ll have more on this in The Wrap.
Here’s Nick’s famous “Days of World Production to Cover COMEX Short Positions” in all the physical commodities that are traded on the COMEX. The short position of the Big 8 Commercial traders in silver is at a record high in the current era—and silver is selling for less than its primary cost of production.
The ‘Big 4’ traders are short 135 days of world silver production—and the ‘5 through 8’ traders are short an additional 66 days of world silver production. So the ‘Big 8’ are short 201 days of world silver production—almost seven months.
And just as a point of interest, of the 201 days of world silver production held short by the Big 8 traders—60 days of that amount represents JPMorgan’s 25,000 contract short position—and almost half of the short position held by the Big 4 traders. You couldn’t make this stuff up!
And here is the chart showing the weekly withdrawal from the Shanghai Gold Exchange as of the close of trading on Friday, October 16. This week the magic number was 53.415 tonnes—and here’s Nick’s excellent chart. I have a story about this in The Wrap.
I don’t have a lot of stories for a Saturday column—and I hope you can find the time to read the ones that interest you the most.
CRITICAL READS
December Rate Hike Looms: Despite Job Cuts, Survey Collapses, U.S. Manufacturing PMI Surges to May Highs
Having stabilized at 2-year lows in September, October’s preliminary U.S. Manufacturing PMI printed 54.0 (smashing expectations of a small drop to 52.7). Despite collapse regional Fed surveys, and widespread job cuts across the manufacturing sector, Markit claims U.S. Manufacturing is the strongest since May. Both output and new orders surged as input costs fell, as Markit notes, despite cycle high inventory levels, today’s data “indicated a robust and accelerated expansion of production levels across the manufacturing sector.” December rate-hike odds are rising…
“However, worries about the dollar’s strength, export weakness and the recent downturn in the energy sector mean that business optimism and employment gains remain weaker than seen earlier in the year.”
Well with great data like this and markets exuberant – there’s going to be plenty more strong dollar to worry about soon.
This Zero Hedge article appeared on their website at 9:52 a.m. EDT on Friday morning.
Global stocks soar on surprise China rate cut
Stock markets worldwide soared on Friday after China cut interest rates for the fourth time this year and several large-cap U.S. technology companies reported better-than-expected quarterly results.
Shares across Asia, Europe and the Americas climbed, having already been boosted by Thursday’s message from ECB chief Mario Draghi that the central bank was ready to adjust “the size, composition and duration” of its quantitative easing program.
Wall Street rallied, with the S&P 500 gaining 1 percent to reach its highest since Aug. 20, which marked the beginning of a sell-off initially sparked by weak data out of China.
Technology shares led the way, thanks to gains in Alphabet, Amazon and Microsoft, after the three companies reported earnings results. The former two hit record highs, while Microsoft rose to a 15-year high.
This Reuters story, filed from New York, showed up on their Internet site at 4:40 p.m. EDT on Friday afternoon. It was obviously updated since it was first filed, as Patricia Caulfield sent it to me at 10:40 a.m. EDT yesterday morning.
The Central Bankers’ Death Wish — David Stockman
This is getting just plain ridiculous. The robo-traders were raging to the tune of 300 Dow points Thursday after Mario Draghi confirmed that he actually is a complete monetary lunatic. And now that the People Printing Press of China has followed suit overnight, they are piling on for more.
In fact, Europe is stranded in economic stagnation because statist dirigisme and the massive crush of welfare state taxation and finance have ground enterprise and productivity to a halt. But Draghi says it’s all China’s fault, and that he will fix their dereliction with even more monetary madness:
In a news conference, Mr. Draghi stressed the “downside risks” to both economic growth and inflation arising from slowing growth in China and other large developing economies, as well as weak commodity prices.
These are the words of a slow-witted man who was born yesterday. That is, they evince an economic model that says every single year, month and day of prior history is irrelevant; and that regardless of how we got to the present moment the answer is always more heavy-handed central bank intrusion in the financial system in order to achieve an utterly bogus 2% inflation target.
This longish commentary [and their always longish] by David showed up on his Internet site yesterday sometime—and I thank Roy Stephens for sharing it with us.
Doug Noland: Hobson’s Choice
More than two months have passed since the August “flash crash.” Fragilities illuminated during that bout of market turmoil still reverberate. Sure, global markets have rallied back strongly. Bullish news, analysis and sentiment have followed suit, as they do. The poor bears have again been bullied into submission, as the punchy bulls have somehow become further emboldened. The optimists are even more deeply convinced of U.S., Chinese and global resilience (the 2008 crisis “100-year flood” thesis). Fears of China, EM and global tumult were way overblown, they now contend. As anticipated, global officials remain in full control. All is rosy again, except for the fact that global central bankers behave as if they’re utterly terrified of something.
The way I see it, underlying system fragility has become so acute that central bankers are convinced that they must now forcefully (“shock and awe,” “beat expectations,” etc.) react to any fledgling market “risk off” dynamic. Risk aversion and de-leveraging must not gather momentum. If fragilities are not thwarted early, they could easily unfold into something difficult to control. Such an outcome would risk a break in market confidence that central banks have everything well under control – faith that is now fully embedded in the pricing and structure for tens of Trillions of securities and hundreds of Trillions of associated derivatives – everywhere. With options at this point limited, the so-called “risk management” approach dictates that central banks err on the side of using their limited armaments forcibly and preemptively.
With today’s extraordinary global backdrop in mind, I’m this week noting a few definitions of “Hobson’s Choice”.
Doug’s weekly Credit Bubble Bulletin showed up on his website in the wee hours of the morning EDT—and this edition certainly falls into the absolute must read category.
$6.5 Billion in Energy Write-downs and We’re Just Getting Started
The oil and gas industry’s earnings season is barely under way, and already there’s been $6.5 billion in write-downs.
On Thursday, Freeport-McMoRan Inc. reported a $3.7 billion charge for the third quarter, while Southwestern Energy Co. — which has a market value of $4.5 billion — recorded $2.8 billion. And that’s just the beginning. Barclays Plc estimated in an Oct. 21 analysis that there could be $20 billion in charges among just six companies. Southwestern’s write-down was double Barclays’ forecast.
“We also received many scars in the past tough times, and we’ll have many more before the cycle is finished,” said Steven Mueller, Southwestern chief executive officer, during a conference call with analysts on Friday.
Oil prices have tumbled 44 percent in the past year, and natural gas is down 35 percent, making the write-offs a foregone conclusion from an accounting standpoint. The companies use an accounting method that requires them to recognize a charge when estimates of future cash flow from their properties falls below what the companies spent buying and developing the acreage. The predictions of future cash flow have fallen along with prices.
This Bloomberg article put in an appearance on their Internet site at 6:00 p.m. Denver time on Thursday evening—and was updated about 17 hours later at 10:41 a.m. Denver time. I thank Patricia Caulfield for this news item as well.
Struggling to Get a Handle on the Flavorful Neutrino
It was 20 years ago that Art McDonald and I stopped at a Tim Hortons near Sudbury, Ontario, for coffee and doughnuts on our way to his job at the neutrino mine. Donning hard hats, we crowded into a rattling elevator cage and descended 6,800 feet to an underground laboratory that reminded me of the one in “The Andromeda Strain.”
The Sudbury Neutrino Observatory sat at the end of a long corridor at the bottom of a working nickel mine. In the tunnels above us miners dug and blasted through granite. Dr. McDonald was after a far less substantial ore.
Neutrinos are said to pass through Earth almost as easily as through empty space. During the flight, theorists believed, neutrinos were capable of changing their identity. Dr. McDonald’s job was to catch them in the act. It was six more years before he succeeded. Earlier this month he won a share of a Nobel Prize, a climax to a long and perplexing tale.
This very interesting article appeared on The New York Times website on Monday. Patricia C. sent it to me on Wednesday—and for content reasons, had to wait for Saturday’s column.
Eurozone crosses Rubicon as Portugal’s anti-euro Left banned from power
Portugal has entered dangerous political waters. For the first time since the creation of Europe’s monetary union, a member state has taken the explicit step of forbidding eurosceptic parties from taking office on the grounds of national interest.
Anibal Cavaco Silva, Portugal’s constitutional president, has refused to appoint a Left-wing coalition government even though it secured an absolute majority in the Portuguese parliament and won a mandate to smash the austerity regime bequeathed by the EU-IMF Troika.
He deemed it too risky to let the Left Bloc or the Communists come close to power, insisting that conservatives should soldier on as a minority in order to satisfy Brussels and appease foreign financial markets.
Democracy must take second place to the higher imperative of euro rules and membership.
This news item from The Telegraph on Friday afternoon BST received the Ambrose Evans-Pritchard treatment—and I thank Roy Stephens for sharing it with us.
E.U. takes member states to court over ‘bail-in’ laws to protect taxpayers
The European Commission is taking legal action against member states including the Netherlands and Luxembourg, after they failed to implement rules protecting European taxpayers from funding billions in bank rescues.
Six countries will be referred to the European Court of Justice (ECJ) for their continued failure to transpose the E.U.’s “bail-in” laws into national legislation, the European Commission said on Thursday.
The referral comes after the Commission issued a warning against Poland, the Netherlands, Luxembourg, Sweden, Romania and the Czech Republic for their non-compliance earlier this year.
The rules – known as the Bank Recovery and Resolution Directive (BRRD) – are designed to stop citizens from ever having to foot the bill for saving banks from going bust, preventing a re-run of events that imperiled Spain and Ireland in the wake of the financial crisis.
This story was posted on the telegraph.co.uk Internet site at 6:30 p.m. BST on Thursday evening—and it’s the third offering of the day from Patricia Caulfield.
The Ukraine Imbroglio: John Batchelor Interviews Stephen F. Cohen
This week’s program is structured by a recent article by Henry Kissinger in The Wall Street Journal, and essentially leaves Washington with the “existential question of whether America is part of the solution (to ISIS) or part of the problem”. There is a fascinating comparison of this world view, that aided the polarized world of the Nixon years, with the “modern” aspirations of “the New World Order” or Empire goals for Washington. According to Cohen, Kissinger, in effect, is calling for more the Putin geopolitical approach because a unipolar power centre cannot possibly deal with the complexities of the current globe, and these complexities due to the changing dynamics of economics, climate change, and politics are growing. In general terms Kissinger, Putin and Cohen are blaming Washington for all the chaos in Ukraine, the M.E. and Europe because a belief in a unipolar world, is simply misguided hubris.
The two pundits go on to show how Putin is now being seen in the E.U. as the rescuer for Europe and not an adversary. This is all due to the refugee crisis. Putin, the realist, even sent a delegation of top ministers to Washington to ask Obama to join a coalition against ISIS and this was refused. Europeans are watching this (lack of) reaction, are facing huge problems from their refugee crisis, political backlash with a rise of right wing opposition to their national governments, and rising hostilities toward the United States. Cohen also correctly sees this trend as a danger to NATO. Putin, meanwhile comments (somewhat out of character) about “mush for brains” in Washington. Given what the stakes are for Washington, Europe, the M.E. and Russia, Putin is absolutely correct.
This 39:45 minute audio interview showed up on the johnbatchelorshow.com Internet site on Tuesday—and I thank Larry Galearis for the link—and the above ‘executive summary’.
How the west broke Libya and returned it to the hatred of the past
What exactly was toppled in Libya with the overthrow of Muammar Gadaffi? A dictator, or a working power structure? It was utterly predictable that military intervention would be a fiasco. Sadly the lessons of the Iraq war did not alert NATO leaders to the disastrous consequences of their punitive mission.
Western military strategists had, of course, identified the nerve centres they would need to target to bring down their enemy. They made detailed appraisals of Gaddafi’s defensive strongholds, his air bases, listening stations, electronic warfare and communications networks, tank regiments, ground troops, planning and command centres, logistics hubs, key infrastructure and administration. Everything.
But they failed to take account of the most essential consideration: the nature of the Arab-Berber world. And it’s this monumental oversight that holds the key to Libya’s current’s chaos, along with the chaos that has been tearing the Iraqi people apart for over a decade.
You cannot simply launch an attack on a country without any knowledge of the mindset or character of its inhabitants. You can destroy every tank and combat aircraft in its arsenal, wipe out its entire strategic networks, but if you don’t know what kind of people you’re dealing with, you are merely opening a Pandora’s box, and every idle peace operation embarked on later is doomed only to throw fuel on the fire.
This commentary put in an appearance on theguardian.com Internet site on Thursday evening BST—and it’s another contribution from Patricia Caulfield.
Putin strengthens Assad’s hands ahead of Syria peace talks — M.K. Bhadrakumar
The sudden, unexpected meeting between Russian President Vladimir Putin and Syrian President Bashar Al-Assad in Moscow late Tuesday focused on the diplomatic push to kick-start a political process, according to prominent Russian experts here.
As a top Russian diplomat, Ambassador Alexander Aksenyonok (who was involved in the negotiations over the Dayton accord) said, Moscow is keen on a political settlement in Syria “as early as possible – which is also our exit strategy”.
From all accounts, the meeting in Moscow on Tuesday took place in an exceptionally warm, friendly atmosphere and Assad had come at short notice at Putin’s invitation. The two leaders held delegation-level talks as well as a restricted meeting.
The official transcript by the Kremlin quoted Putin as saying to Assad, “On the question of a settlement in Syria, our position is that positive results in military operations will lay the base for then working out a long-term settlement based on a political process that involves all political forces, ethnic and religious groups”.
This commentary by career Indian diplomat M.K. Bhadrakumar appeared on the Asia Times website on Thursday sometime—and I thank U.K. reader Tariq Khan for finding it for us. It’s certainly worth reading if you’re a serious student of the New Great Game.
Iran and Saudi Arabia ramp up hostile rhetoric to new levels
The propaganda war between Iran and Saudi Arabia, bitter rivals on opposite sides of the Middle East’s biggest current crises, is hotting up, with near daily exchanges and insults between ministers and state media outlets.
In the past week alone senior figures from both countries have cast diplomatic niceties to the desert winds and attacked each other publicly. Adel al-Jubeir, the Saudi foreign minister, said on Monday that Iran was “occupying Arab lands” in Syria – where it supports Bashar al-Assad. Hossein Amir-Abdollahian, Iran’s deputy foreign minister, retorted that the Saudis were in no position to complain as they were “occupying” Yemen – where Tehran backs the Houthi rebels.
Iran ramped up its anti-Saudi rhetoric after the recent hajj tragedy in Mecca but it went on the offensive at the start of the Saudi-led campaign in Yemen in March, with a Revolutionary Guard commander predicting the “collapse of the House of Saud … in the footsteps of Zionist Israel”.
Saudi-affiliated media began highlighting the situation in Ahwaz (Khuzestan or Arabistan), in south-western Iran, where Arabic-speaking citizens complain of discrimination, a subject clearly calculated to raise hackles in Tehran.
This disturbing and alarming story was posted on theguardian.com Internet site at 9:02 a.m. BST on their Friday morning, which was 4:02 a.m. in Washington—EDT plus 5 hours. And I thank Patricia Caulfield for her final offering in today’s column.
China cuts rates again as growth engine stalls
China’s central bank cut interest rates on Friday for the sixth time in less than a year, and it again lowered the amount of cash that banks must hold as reserves in a bid to jump start growth in its stuttering economy.
Monetary policy easing in the world’s second-largest economy is at its most aggressive since the 2008/09 financial crisis, as growth looks set to slip to a 25-year-low this year of under 7 percent.
Yet underscoring China’s drive to deepen financial reforms, which many believe are necessary to invigorate the economy, the People’s Bank of China (PBOC) said it was freeing the interest rate market by scrapping a ceiling on deposit rates.
The change, which Beijing had promised to deliver for months, will in theory allow banks to price loans according to their risk, and remove a distortion to the price of credit that analysts say fuels wasteful investment in China.
This Reuters article, filed from Beijing, appeared on their website at 9:52 a.m. on Friday morning EDT—and it’s courtesy of Brad Robertson.
IMF Said to Give China Strong Signs of Reserve-Currency Nod
International Monetary Fund representatives have told China that the yuan is likely to join the fund’s basket of reserve currencies soon, according to Chinese officials with knowledge of the matter, a move that may make more countries comfortable using the unit or including it in their foreign-exchange holdings.
The IMF has given Chinese officials strong signals in meetings that the yuan is likely to win inclusion in the current review of the Special Drawing Rights, the fund’s unit of account, said three people who asked not to be identified because the talks were private. Chinese officials are so confident of winning approval that they have begun preparing statements to celebrate the decision, according to two people.
The Washington-based lender is reviewing the composition of the basket, with staff members due to present their recommendation to the fund’s executive board for a vote as soon as next month as part of a process scheduled for every five years. The board rejected including the currency following the last review, in 2010, concluding that the yuan didn’t meet the test of being “freely usable.”
Winning the IMF’s endorsement would validate efforts by President Xi Jinping to push through policies aimed at making the world’s second-biggest economy more market oriented, boosting China’s prestige as it prepares to host Group of 20 gatherings next year. At least $1 trillion of global reserves will convert to Chinese assets if the yuan joins the IMF’s reserve basket, according to Standard Chartered Plc and AXA Investment Managers.
Well, Jim Rickards called this one right on the money. This Bloomberg article appeared on their Internet site at 8:49 a.m. Denver time on Friday morning—and it’s something I found on Doug Noland’s website when I went to check to see if his latest Credit Bubble Bulletin was up yet—and as of 1:30 a.m. EDT this morning, it wasn’t. But this story is definitely worth reading.
China’s New Silver Road: The Movies
I received this link from read reader U.D. a week ago—and for obvious length and content reasons, it had to wait for today’s column.
What we have here is a serialized documentary on China’s new silk road project. When I first received the link last Saturday, there were only two episodes posted, but when I went to stick it into today’s column, that number had risen to three. I will definitely be watching the third one today, as I’ve already watched the other two.
Each one is 45 minutes long—and definitely worth your time if you have the interest. If you know nothing about China, you are about to get an education. So top up your coffee, or blow the froth off a cold one—and get started.
Another flubbed interview with a central banker, thanks to the Financial Times
Daniela Cambone of Kitco News isn’t the only purported journalist who has flubbed her opportunity to question a central banker. The venerable columnist of the Financial Times, Martin Wolf, does the same today with his interview over lunch with former Federal Reserve Chairman Ben Bernanke.
Wolf plugs Bernanke’s new book but in what must have been at least an hour with the former Fed chairman never poses a troublesome question, a question Bernanke doesn’t want to answer, like questions about the Fed’s secret interventions in markets and its resistance to freedom-of-information requests for documents.
So much for journalism. Bernanke’s grilled halibut was tougher than Wolf.
Of course if Wolf was ever suspected of wanting to ask tough questions, Bernanke would never have accepted the invitation to lunch.
This short commentary by Chris Powell about a Financial Times story from yesterday was posted on the gata.org Internet site yesterday—but if you want to read the FT story itself, you’ll need a subscription.
Another 53.4 tonnes of gold withdrawn from the Shanghai Gold Exchange — Lawrie Williams
We are continuing to monitor Shanghai Gold Exchange withdrawals following the Golden Week holiday and they do seem to be a little down from their peak, but still remain at an impressive 53.4 tonnes delivered in the week ending October 16th – week 40 – the first full week after the holiday. The year to date figure is a fraction short of 2,062 tonnes.
Looking at past years, demand does tend to fall off by a little at this time, but then picks up again as the year-end nears and stocks are built up ahead of the Chinese New Year buying spree. Next year the Chinese New Year – a Monkey year under the Chinese zodiac – falls on Monday February 8th, suggesting strong gold demand in December and January In Chinese astrology, the Monkey is a symbol of health and wealth and those born under the influence of this sign are said to be intelligent, quick-witted and adventurous.
Already the UK’s Royal Mint and Australia’s Perth Mint, in expectation of Chinese gold coin demand, have announced limited edition ‘Monkey’ gold coin mintings aimed at Chinese gift givers.
On the figures to date, we stand by our prediction that Shanghai Gold exchange withdrawals for the full 2015 year will likely reach 2,600 tonnes or more – a huge new record, probably over 400 tonnes more that the previous record year of 2012 when 2,181 tonnes were withdrawn from the Exchange. The year to date figure will probably already surpass last year’s full year total of 2,102 tonnes by the time next week’s SGE figures are announced – and last year was the second highest year ever for SGE withdrawals. Chinese demand, as represented by SGE withdrawals thus remains enormous.
This must read commentary by Lawrie appeared on his website yesterday morning—and I found it on the Sharps Pixley website.
The PHOTOS and the FUNNIES
The WRAP
Most people can’t quite understand how anyone can sell something not owned, as it is not something that occurs in daily life. This is a prime reason, I would contend, that the silver manipulation has persisted as long as it has. And for the sake of this discussion, I’ll try to be as clear and simple as possible and not get into my specific debate on short selling in SLV (or GLD), which can be quite complex.
There are two distinct price impacts from excessive short selling – first, the price is artificially depressed as the selling occurs. It matters not whether someone owns the asset or not, or has borrowed the asset first before selling or not – excessive selling will drive a price lower. The emphasis here is on excessive short selling. After the price of an asset or security is driven lower by excessive short selling, any rush to buyback excessive short sales can drive prices sharply higher. However, it doesn’t always follow that excessive short selling in a security must be bought back, as sometimes a company can go bankrupt and, effectively, eliminate the requirement to buyback short sales.
That’s not a concern in silver or any other real asset, as such assets can’t declare bankruptcy. Furthermore, all short sales on futures contracts that allow and require physical delivery, such as COMEX silver futures contracts, must be closed out at some point, either by actual delivery or by repurchasing an offsetting futures contract to close out the previously shorted contract.
I know that the vast majority (97% or more) of all short sales in commodity futures contracts, as well as corresponding long positions, are closed out by offsetting positions, or can be “rolled over” or extended far into the future. But that has nothing to do with the right and obligation of a contract holder to make or take physical delivery should he or she so decide. To my mind, that’s why they are called contracts. Anyone suggesting that there is some way the COMEX silver shorts can insist on some type of “cash settlement” if an existing long contract holder demands physical delivery and can afford to pay for the delivery, is flat out wrong. Such a refusal or inability to deliver would result in a contract default and the likely closing of the COMEX. — Silver analyst Ted Butler: 21 October 2015
Today’s pop ‘blast from the past’ is one that I’ve posted a number of times over the last eight years or so, but I haven’t done it this year, so here it is again. It’s instantly recognizable as one of the great songs of the 1960 era—and is the signature song of Procol Harum. I’ve heard it live and in concerto with the Edmonton Symphony Orchestra on two different occasions—and it was awesome. Here they are with the Danish Symphony Orchestra—and the orchestral introduction in this version is the best I’ve ever heard. The link is here. Enjoy!
Today’s classical ‘blast from the past’ is one I haven’t posted before. It’s Camille Saint-Saëns Symphony No. 3 in C minor, Op. 78—the “Organ” symphony—which he composed in 1886. This performance is conducted by Paavo Järvi, but the orchestra isn’t named. Like Ravel’s Bolero, which I featured last week I believe, no recording can do this work justice, it has to be experienced live, as the fully dynamics of a pipe organ can’t reproduced by any stereo system I’ve heard, including mine. However, this youtube.com HD recording isn’t bad—and the link is here.
I’ve watched the last two days of price action in the precious metals with absolute amazement. In the face of the biggest 2-day up-move in the U.S. dollar that I can remember, the precious metal prices remained virtually unchanged—and they only remained that way because JPMorgan et al were hammering the living crap out of them every time they even hinted that they wanted to blast off to the outer edges of the known universe.
Under ‘normal’ circumstances, a dollar move of that magnitude would have given the powers-that-be license to engineer a price decline of biblical proportions in the COMEX futures market. It never happened—and you have to ask yourself why that was so.
Tied together with the move in the dollar index over the last two days was the word of more QE from Draghi on Thursday—and the ‘surprise’ interest rate cute in China yesterday. And as Doug Noland so eloquently put it in his Credit Bubble Bulletin headlined “Hobson’s Choice” of earlier this morning—“So what’s at risk today from much more egregious monetary experimentation? With runaway Bubbles at risk, or faltering around the globe, central bankers are left with a choice of pushing ever forward with monetary inflation and market manipulation – or coming clean. Clearly they believe they have no choice at all.”
It’s obvious that the central banks of the world are standing their ground as best they can. But the problem lies in the fact that the ground is shifting beneath their feet at an ever increasing rate—and it’s only a matter of time before a ‘fat tail’ monetary accident puts an end to it all. This is Jim Rickards’ book “The Death of Money: The Coming Collapse of the International Monetary System” being played out in real time on our computer screens—and the IMF and BIS know it.
But will these two organizations, plus the major central banks of the world, have the SDR up and running before the collapse comes? Jim thinks not—and looking at the events of the last twenty-fours, I have to agree.
Here in the precious metal universe, we are now staring at one of the ugliest Commitment of Traders Report in memory—and how it will turn out this time is unknown. The usual outcome is what I stated three paragraphs ago, but since “da boyz” have had their hands full just trying to keep precious metal prices from blowing sky high, the thought of actually slamming their prices lower was probably a bridge too far. At least that’s what it looked like over the last few days.
But with the world’s economic, financial and monetary systems circling the drain ever faster, selling the precious metals short without limit, smacks of desperation. Along with a ‘fat tail’ financial event, looms the possibility that JPMorgan et al could get over run at some point. If it does happen, it will be—as Ted Butler says—the first time. But as the saying goes—“there’s a first time for everything”—and I would hazard a guess that the powers-that-be in the world are running out of wiggle room real fast.
It’s a disaster waiting to happen—and at this point it’s not a matter of ‘if’—but ‘when’.
See you on Tuesday.
Ed
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