16 April 2016 — Saturday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price developed a positive bias at the open of trading at 6:00 p.m. on Thursday evening in New York—and that state of affairs was only allowed to last until 8 a.m. HKT on their Friday morning. It got sold a bit from there, with the low tick of the day coming shortly before 9 a.m. It rallied quietly back to the $1,230 spot mark around noon local time—and didn’t do much until 11:30 a.m. in New York. At that point a rally developed that appeared to go ‘no ask’ in minutes, until one of the not-for-profit sellers appeared to provide the necessary ‘liquidity’ to cap the price. There was a similar incident at noon EDT—and that got dealt with immediately as well. After that, what little volume there was disappeared—and the price chopped more or less sideways into the 5:00 p.m. EDT close.
The low and high ticks, which were barely worth my effort to look up, were recorded as $1,226.80 and $1,237.60 in the June contract.
Gold closed in New York yesterday afternoon at $1,234.10 spot, up $6.50 from Thursday. Net volume was reasonably light at a hair over 110,000 contracts.
Here’s the New York Spot Gold [Bid] chart so you can see the COMEX price activity in more detail.
The price action in silver was the same, but only up until its low tick was printed along with gold’s just before 9 a.m. HKT. From there it rallied until 8:30 a.m. in London. From that point it chopped lower, with a down/up spike centered right at the London p.m. gold fix, which was 10 a.m. EDT in New York. Once London closed an hour later, the silver price began to rally anew—and it was capped at its high tick, which came about ten minutes before the COMEX close. It got sold down about 1 percent from there, before chopping sideways from 2:15 p.m. onwards.
The low and high ticks in silver were reported by the CME Group as $16.11 and $16.395 in the May contract.
Silver finished the Friday session in New York at $16.225 spot, up 7 whole cents from its close on Thursday—and would have obviously closed materially higher if allowed to do so, which it wasn’t. Net volume was about average, whatever that means these days, at just under 35,500 contracts.
Platinum had a four hour down/up move beginning at 8 a.m. HKT—and was mostly done by noon over there. It was back to unchanged by thirty minutes before the Zurich open—and then got sold off to its $982 spot low tick of the day, which came moments before the COMEX open in New York. After rallying a bit, the seller of last resort bounced the price off its low ticks on numerous occasions. But whoever it was that was trying to bash the price, finally gave up shortly after 11 a.m. EDT—and it managed to end the day a few dollars off its low. Platinum finished the Friday session at $984 spot, down 6 bucks on the day.
The palladium price traded a few dollars either side of unchanged in Far East trading on their Friday, with the $558 low tick coming shortly after the Zurich open. It rallied a few dollars from there before chopping mostly sideways into the London p.m. gold fix. At that juncture the price developed a positive bias—and platinum was closed on its high tick of the day, which was $568 spot, up 7 dollars from Thursday’s close.
The dollar index closed late on Thursday afternoon in New York at 94.94—and chopped sideways through all of Far East trading. The high tick of the day, such as it was, came exactly at the 8:00 a.m. London open, as it printed 95.00 on the button. It began to chop lower from there—and the usual ‘gentle hands’ appeared at precisely 1:00 a.m. EDT—and the index printed its 94.51 low tick at that point. The ramp job lasted until a minute or so after 1 p.m. in New York—and it chopped quietly sideways into the close. The dollar index finished the day at 94.70—down 24 basis points from Thursday.
And here’s the 2-year U.S. dollar index chart once again—and I’m still not prepared to read anything into the ‘failure’ of the counter-trend rally to hold the 95.00 mark. However, I did duly note the fact that if the ‘gentle hands’ hadn’t appeared when they did at 1:00 p.m. EDT yesterday afternoon, it could have turned into a bloodbath in short order—and we mustn’t have that happen on the eve of an all-important IMF meeting, now must we?
The gold stocks opened in the green, before dipping to their lows of the day at the London p.m. gold fix. They then blasted back into positive territory to stay—and their high ticks came shortly after 12:30 p.m. in New York. They dipped a bit into the COMEX close—and then traded pretty flat after that. The HUI finished the Friday session up a very respectable 2.54 percent.
It was more or less the same price pattern for the silver equities, so I’ll skip the play-by-play. Nick Laird’s Intraday Silver Sentiment closed higher by 3.79 percent.
And here’s the long-term Silver Sentiment Index, so you can put this year’s gains in some sort of perspective. As you can tell, we’re barely off the floor as far as silver stock prices are concerned—and have miles to go to get back to the old highs.
For the week, the HUI closed higher by 2.10 percent—and Nick’s ISSI close up by 10.89 percent. Year-to-date the gains in these two indexes are 78.2 and 79.0 percent respectively.
The CME Daily Delivery Report showed that 35 gold and 18 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday. In gold, International F.C. Stone was the short/issuer on all 35 contracts. JPMorgan stopped 11 contracts for its own account, plus 9 more for clients. In second place was Scotiabank with 10 contracts. In silver, the only short/issuer was JPMorgan out of its client account. The two long/stoppers were R.J. O’Brien and Scotiabank with 14 and 4 contracts respectively. The link to yesterday’s Issuers and Stoppers Report is here.
As a matter of interest, of the 2,317 gold contracts issued month-to-date, JPMorgan has stopped 626 contracts for its own account, plus another 558 for its client account.
The CME Preliminary Report for the Friday trading session showed that gold open interest in April dropped by 109 contracts, leaving 2,198 still open, minus the 35 contracts mentioned in the previous paragraph. Since there were 91 gold contracts were actually posted for delivery on Monday, it appears that JPMorgan allowed another 109-91=18 contract holders off the hook because they most likely didn’t have the physical gold backing their short positions. Silver o.i. fell by 44 contracts leaving 24 left—and you have to subtract the 18 contracts posted for delivery on Tuesday to get the true picture of the remaining open interest in silver.
After four withdrawals in a row, there was finally a deposit made into GLD on Friday, as an authorized participant added 181,568 troy ounces. And, for the second time this week, there was a withdrawal from SLV, as an a.p. [read JPMorgan] took out 951,424 troy ounces.
There was a smallish sales report from the U.S. Mint yesterday, as they reported selling 3,500 troy ounces of gold eagles—and 500 one-ounce 24K gold buffaloes.
Month-to-date the mint has sold 52,000 troy ounces of gold eagles—12,000 one-ounce 24K gold buffaloes—and 2,157,500 silver eagles. And as I said yesterday, gold eagle/buffalo coin sales in April are miles ahead of March’s sales already.
Year-to-date the mint has sold 300,000 troy ounces of gold eagles—72,000 one-ounce 24K gold buffaloes—and 17,000,000 troy ounces of silver eagles. Look at all those zeros! It’s obvious that the mint is pedal-to-the-metal with its weekly 1 million coin silver eagle production, as JPMorgan continues to scoop up everything that John Q. Public isn’t buying.
There wasn’t a lot of gold movement over at the COMEX-approved warehouses on Thursday, as only 4,501.000 troy ounces/140 kilobars were received—and nothing at all was shipped out. Of the amount received, 20 kilobars ended up at Manfra, Tordella & Brookes, Inc.—and the other 120 at Canada’s Scotiabank. A link to that activity is here.
And Thursday was one of those very rare days when no silver was reported either received, or shipped out.
There was a modest amount of movement over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday, as 1,475 kilobars were reported received—and 2,901 were shipped out the door for parts unknown. All of the activity was at Brink’s, Inc. as per usual—and the link to that, in troy ounces, is here.
Well, there were no positive surprises in the new Commitment of Traders Report as far as I could tell—and I looked hard. So did Ted. All we saw was a butt-ass ugly report in both gold and silver—and there’s no way to put lipstick on this pig.
In silver, the commercial net short position blew out by 12,751 contracts, or 63.8 million troy ounces of paper silver. They accomplished this by buying 817 long contracts—and they also increased their short position by 13,568 contracts—and the difference between those numbers is the net increase for the week. The commercial net short position now sits at 72,416 COMEX contracts, or 362 million troy ounces of paper silver.
Ted said that the Big 4 traders increased their already grotesque short position by another 3,500 contracts—and he attributes most of that amount to JPMorgan. He pegs their new short position to “at least” 21,000 contracts, up 3,000 contracts from the prior reporting week. The real heavy lifting was done by the ‘raptors’—the Commercial traders other than the Big 8—as they sold about 9,100 long contracts. The ‘5 through 8’ traders were hardly active at all, as they only added around 200 contract to their collective short positions.
Under the hood in the Disaggregated COT Report, it was all Managed Money traders—almost to the contract—as they increased their collective long positions by 12,755 contracts. They did this by adding 8,908 contracts to their long positions—and reduced their short positions by 3,847 contracts. The sum of those two number equals the net change for the week. The traders in the other two categories—the ‘Other Reportables’ and the ‘Nonreportable’/small trader category, cancelled each other out.
Here’s the 9-year COT chart for silver—and as you can see it’s very bearish looking.
In gold, The commercial net short position increased by a very chunky 24,542 contracts, or 2.45 million troy ounces. During the reporting week they purchased 4,078 long contracts, but they also added 28,957 short contracts—and the difference between those two numbers is the net change. The commercial net short position in gold stands at 23.18 million troy ounces of paper gold.
Ted said that the Big 4 traders added around 12,000 contracts their short positions—and the ‘raptors’ added 11,500 contracts to their short positions as well. As in silver, the ‘5 through 8’ traders didn’t do much, as they increased their short position by around 1,000 contracts.
Under the hood in the Disaggregated COT Report, it was a bit different than it was in silver, as the Managed Money traders only accounted for 17,876 of the change in the commercial net short position. They arrived at that figure by adding a very large 15,784 contracts to their collective long positions—and covered 2,092 contracts—with the total of those two numbers being the net Managed Money change for the week. The rest of the change came from the ‘Other Reportable’ as they added 5,531 contract to their longs on a net basis—and the Nonreportable/small trader category added the rest on the long side was well—1,135 contracts. [1,135+5,531+17,876=24,542 contracts]
And here’s the 9-year COT chart for gold—and it’s not exactly a bullish set-up, either, is it?
As I said at the outset, it was wall-to-wall ugly—and unless JPMorgan et al get over run, there’s only one way that this will all get resolved—and that’s with an engineered price decline. But as to when that might happen—and long it will take when it does happen—nobody knows.
But, as the above gold COT charts show, the Commercial net short positions in gold can stay ugly even in a bull market. The proof of that is the 3-year bull run that began in late 2008—and ran until September of 2011 when ‘da boyz’ pulled the plug on it. That pattern is not quite that clear in silver, but a special case can be made for that—and I’ll have more about that in The Wrap.
Here’s Nick Laird’s “Days to Cover” chart updated with yesterday’s COT data for positions held at the close of COMEX trading on Tuesday. It shows the days of world production that it would take to cover the short positions of the Big 4 and Big 8 traders in each physically traded commodity on the COMEX.
As I say in every Saturday column—the short positions of the Big 4 and 8 traders in silver continues to redefine the meaning of the words ‘obscene’ and ‘grotesque.’ This week the Big 4 are short 136 days of world silver production—and the ‘5 through 8’ traders are short 59 days of world silver production—for a total of 195 days, more than 6 months of world silver production, or 427 million troy ounces of paper silver held short by the Big 8.
Last week the short position of the Big 8 was 186 days—and since the short positions of the ‘5 through 8’ traders remained unchanged at 59 days week-over-week, the extra 9 days of world silver production that were shorted during the reporting week ended up in the Big 4—JPMorgan most likely—and as described in the COT Report above.
And as an aside, the two largest silver shorts on Planet Earth—JPMorgan and Canada’s Scotiabank—are short about 95 days of world silver production between the two of them—and that 95 days represents about 70 percent of the length of the red bar in silver. The other two traders in the Big 4 category are short, on average, about 21 days of world silver production apiece.
Here are two more charts courtesy of Nick Laird. They show gold and silver imports into Turkey—and they’re updated with the March data.
I don’t have all that many stories for you today—and a couple of them I’ve been saving for my Saturday column for length and/or content reasons.
CRITICAL READS
The Fed Sends a Frightening Letter to JPMorgan, Corporate Media Yawns
Yesterday the Federal Reserve released a 19-page letter that it and the FDIC had issued to Jamie Dimon, the Chairman and CEO of JPMorgan Chase, on April 12 as a result of its failure to present a credible plan for winding itself down if the bank failed. The letter carried frightening passages and large blocks of redacted material in critical areas, instilling in any careful reader a sense of panic about the U.S. financial system.
A rational observer of Wall Street’s serial hubris might have expected some key segments of this letter to make it into the business press. A mere eight years ago the United States experienced a complete meltdown of its financial system, leading to the worst economic collapse since the Great Depression. President Obama and regulators have been assuring us over these intervening eight years that things are under control as a result of the Dodd-Frank financial reform legislation. But according to the letter the Fed and FDIC issued on April 12 to JPMorgan Chase, the country’s largest bank with over $2 trillion in assets and $51 trillion in notional amounts of derivatives, things are decidedly not under control.
At the top of page 11, the Federal regulators reveal that they have “identified a deficiency” in JPMorgan’s wind-down plan which if not properly addressed could “pose serious adverse effects to the financial stability of the United States.” Why didn’t JPMorgan’s Board of Directors or its legions of lawyers catch this?
It’s important to parse the phrasing of that sentence. The Federal regulators didn’t say JPMorgan could pose a threat to its shareholders or Wall Street or the markets. It said the potential threat was to “the financial stability of the United States.”
This is the Zero Hedge spin on an article that appeared on the wallstreetonparade.com Internet site on Thursday—and it’s datelined 8:45 p.m. on Friday evening EDT, so it’s obviously been updated since it was originally posted, as ‘aurora’ passed it around at 12:48 p.m. EDT on Friday afternoon. It’s worth reading—and another link to this story is here.
Doug Noland: Pushing Desperate Measures Too Far
The basic premise is that years of central bank monetary inflation and market manipulation have nurtured a “global pool of speculative finance” of incredible dimensions. The unstable dynamic of “too much ‘money’ chasing too few real opportunities” – along with the associated “Crowded Trade” phenomenon – has made it extraordinarily difficult for active managers to compete with the indices. And as “money” continues to gravitate to passive bets on the major indices, the markets’ dysfunctional trend-following/performance-chasing dynamic becomes only more deeply entrenched (and detached from fundamentals). When markets lurch higher, irrepressible forces begin pulling everyone in.
Albeit the Germans, Japanese bankers, pension fund managers or even the general public, it’s been a frustratingly long wait for policy normalization. And just when hope was running high, the rug was pulled right out from under. Around the world many had patiently accepted the favoritism and inequity of reflationary measures. But what was supposed to be extraordinary and temporary morphed into the normal and permanent: egregious wealth redistribution.
The course of global monetary policy increasingly lacks credibility. Patience has worn thin. Frustration and anger are being brought to the boil. Sure, global markets have gained momentum. But I actually think “whatever it takes” central banking has about run its course, with momentous ramifications for global market Bubbles. Reminiscent of how I felt in 2008, global markets would be a lot better off had they taken their medicine earlier.
Doug’s weekly Credit Bubble Bulletin appeared on his website late yesterday evening Denver time—and it’s always a must read. Another link to his commentary is here.
Debtors’ Island: How Puerto Rico Became a Hedge Fund Playground
You could call it a perfect storm: a fiscal crisis converging with a deep secular economic decline. Once touted as the showcase of U.S.- led economic development, debt-strapped Puerto Rico is currently embroiled in a struggle for survival. During the mid-twentieth century, Puerto Rico grew at a rapid pace, betting on cheap labor, privileged duty-free access to the U.S. market, and tax incentives for U.S. companies. By the 1970s, however, the formula had lost steam and the government turned to ever-more crafty means to keep the economy and itself afloat by seeking new federal tax exemptions for U.S. firms, obtaining additional transfers in federal funds, increasing government employment, and issuing public debt in ever-larger amounts. By the year 2000, the government ran on ever-larger deficits. The dance came to a screeching halt in 2014, when Puerto Rico’s debt was degraded to junk status and the island was effectively shut out of the financial markets.
“We now know that the world we thought we lived in no longer exists,” says Iram Ramírez, senior international representative for the Office and Professional Employees International Union (OPEIU/AFL-CIO) in San Juan. “The country is not equipped to deal with the situation. We came to a reality check too fast,” he states.
Puerto Rico’s economy has been contracting for almost a decade: Gross National Product (GNP) declined by an aggregate of 13 percent between fiscal years 2006 and 2014, gross fixed domestic investment decreased 24.5 percent, and bank assets plummeted by a whopping 41.8 percent. If no measures are taken, the government’s projected financing gap could reach $63.4 billion by 2025, a crushing burden considering the shrinking economy and the government’s inability to access the financial markets. In theory, to achieve overall structural balance in fiscal year 2016, Puerto Rico’s government would need to reduce its expenses by up to 4.9 percent of the island’s GNP, a gargantuan task for a society that has relied for decades on the government for employment, investment, contracts, purchases, and tax exemptions.
This longish, but very interesting essay showed up on the truth-out.org Internet site last Saturday—and for length reasons, it had to wait for today’s column. I thank Patricia Caulfield for bringing it to our attention. Another link to this article is here.
Greece sells country’s largest port to China
China has described a deal to sell Greece’s biggest port to Chinese shipping group COSCO as a “win-win” for both countries.
Under the deal between Greece’s privatization fund HRADF and China COSCO Shipping Corporation, the Chinese investors will pay 280.5 million euros($319.79 million) to HRADF for the initial acquisition of a 51 per cent stake, while it will pay another 88 million euros within five years for the remaining 16 per cent, provided it has implemented the agreed investments in the port.
The agreement was signed on Friday by HRADF chief Stergios Pitsiorlas and COSCO Hong Kong CFO Feng Jinhua in the presence of Greek Prime Minister Alexis Tsipras, China COSCO Shipping Chairman Xu Lirong and Chinese Ambassador to Greece Zou Xiaoli.
COSCO chief Xu said the strategic benefits provided by China’s Belt and Road Initiative will help Piraeus Port become the Mediterranean’s largest container transit port.
This news item appeared on thebricspost.com Internet site last Saturday—and I thank Brad Robertson for bringing it to our attention. Another link to this story is here.
The Ukraine, Russia, Syria Imbroglio: John Batchelor interviews Stephen F. Cohen
Events this week serve to remind us that Ukraine is very much still the epicentre of the New Cold War. Batchelor lists the fall of Ukraine’s Prime Minister, Yatsenyuk, a death threat to President Poroshenko by a Right Sector sympathizing member in the Rada, while in Europe, a Dutch referendum sunders the chances for Ukraine ever becoming a member of the E.U. But this week even more disasters are enveloping Poroshenko’s presidency. Saakashvili, “imported” governor of Odessa Oblast, threatened to resign and also, according to Cohen (as seen on facebook), “take measures into his own hands” if Poroshenko does not address reforms for corruption in government. This is pure sedition, Cohen points out. (And this writer finds it is most curious behaviour for “Washington’s man” in Ukraine to heap more instability on the Kiev government.) Cohen, speculates that Saakasvili has personal designs on the presidency. The Panama papers scandal hi-light all these problems. The IMF will not bail out the government because of them, and Poroshenko is facing a potential loss of support by Washington and Europe. Cohen feels that a failure of this government would complete the failure for the whole country. Cohen begins an extensive discussion about how that government declined over the years due to its own ineptness, corruption and a hate based civil war against its own people –“the worst seen in Europe since the Second World War”.
Somewhat more worrisome is the news of U.S. troops, elements of the California National Guard and air components, going to Ukraine. Officially this is a cooperative program between governments called the U.S. European Command State Partnership Program (SPP), and is one of 65 such programs worldwide. The Ukrainian relationship began in 1993. The danger in this New Cold War environment is that infrastructure sharing, and training with different weaponry between these two military groups allows a quick reaction force ability to be deployed to Ukraine. This can easily be expanded into a “Vietnam scenario”, and this American military presence in Ukraine may be that reality in process. On the face of it the U.S. sending units of its military to Ukraine for training does not make sense when the national army of Ukraine is in drastic decline – essentially in step with the economy there; it does not want to fight and has a serious desertion rate. But does Washington have a plan? There appears to be so much chaos that on the surface this only seems to be another Washington failure.
This 40-minute audio interview put in an appearance on the audioboom.com Internet site on Tuesday—and I thank Ken Hurt for the link but, as always, the big kudos go out to Larry Galearis for the above executive summary. It’s a must listen for any serious student of the New Great Game.
I’m on the [U.S.] Kill List: This is what it feels like to be hunted by drones
I am in the strange position of knowing that I am on the ‘Kill List’. I know this because I have been told, and I know because I have been targeted for death over and over again. Four times missiles have been fired at me. I am extraordinarily fortunate to be alive.
I don’t want to end up a “Bugsplat” – the ugly word that is used for what remains of a human being after being blown up by a Hellfire missile fired from a Predator drone. More importantly, I don’t want my family to become victims, or even to live with the droning engines overhead, knowing that at any moment they could be vaporized.
I am in England this week because I decided that if Westerners wanted to kill me without bothering to come to speak with me first, perhaps I should come to speak to them instead. I’ll tell my story so that you can judge for yourselves whether I am the kind of person you want to be murdered.
This extraordinary article put in an appearance on the independent.co.uk Internet site on Tuesday—and for content reasons, had to wait for today’s column. I thank U.K. reader Tariq Khan for sharing it with us—and it’s certainly worth reading if you have the interest. Another link to this story is here.
China may have $1.3 trillion of risky loans, IMF report shows
China may have $1.3 trillion loans extended to borrowers who don’t have sufficient income to cover interest payments, with potential losses equivalent to 7 percent of the country’s gross domestic product, according to the International Monetary Fund.
Loans “potentially at risk” would amount to 15.5 percent of total commercial lending, the IMF said in its latest Global Financial Stability Report. That compares with the 5.5 percent problem loan ratio reported by China’s banking regulator after including nonperforming and special-mention loans.
The true amount of bad debt sitting on the books of China’s banks is at the center of a debate about whether the country will continue as a locomotive of global growth or sink into decades of stagnation like Japan after its credit bubble burst. Hayman Capital Management’s Kyle Bass in January flagged a $3.5 trillion potential loan loss for China banks, though analysts from China International Capital Corp. and Macquarie Securities Ltd. have said that estimate overstates the real situation.
This news item showed up on the Bloomberg Internet site at 8:47 p.m. Denver time on Thursday evening—and I found it embedded in a GATA release that Chris Powell filed from Singapore. Another link to this article is here.
China’s economy grows at weakest pace in seven years
Chinese growth has slowed to its weakest pace in seven years, as analysts warn that the world’s second largest economy has become increasingly reliant on debt to keep growing.
Official figures showed that China’s economic output rose by 6.7pc in the first quarter of the year, compared with a 6.8pc increase in the final three months of last year.
A spokesman for the National Bureau of Statistics (NBS), which compiled the data, said that the growth rate was “better than expected” and that the economy showed “a turn to stabilisation”.
The pace of quarterly growth was the weakest reported since the financial crisis in 2009. It came as fears have grown about China’s growth prospects, and the possibility of a sudden slowdown in activity, or a so-called “hard landing”.
This news item was posted on the telegraph.co.uk Internet site at 7:55 a.m. BST on their Friday morning, which was 2:55 a.m. in New York—EDT plus 5 hours. I thank Roy Stephens for pointing it out. Another link to this article is here.
The Bank of Japan Already Owns Over Half of All ETFs: It Wants to Own More
Less than six months after we pointed out that the BoJ owns 52% of the entire Japanese ETF market, Reuters reports that the Kuroda’s Peter Pan fairy tale, a.k.a. the Bank of Japan, is thinking about buying even more. The BoJ is said to be currently buying $30 billion of ETF’s a year under its current policy, however since the Nikkei is down over 10% this year, that figure is apparently not enough to keep the market propped up.
“Increasing ETF buying in huge amounts, combined with a modest increase in bond buying and an interest rate cut, could be the only way left to surprise markets,” said a former BoJ executive who retains close contact with incumbent policymakers.
The reason for the BoJ’s desperation shift to monopolizing the equity market next is that as we have warned since 2014, it is running out of bonds to purchase: “the BoJ’s huge bond purchases are also drying up market liquidity, which further limits the scope for a large increase.”
This 3-chart Zero Hedge news item put in an appearance on their website at 8:55 a.m. on Friday morning EDT—and I thank Richard Saler for sending it along. Another link to this story is here.
Silver Price Manipulation Class Action Brought on Behalf of Canadian Investors
A class action lawsuit seeking $1 billion in damages on behalf of Canadian investors was launched today in the Ontario Superior Court of Justice.
The class action alleges that the defendants, including The Bank of Nova Scotia, conspired to manipulate prices in the silver market under the guise of the benchmark fixing process, known as the London Silver Fixing, for a fifteen-year period.
It is further alleged that the defendants manipulated the bid-ask spreads of silver market instruments throughout the trading day in order to enhance their profits at the expense of the class. This alleged conduct affected not only those investors who bought and sold physical silver, but those who bought and sold silver-related financial instruments.
Law enforcement and regulatory authorities in the United States, Switzerland, and the United Kingdom have active investigations into the defendants’ conduct in the precious metals market.
This short silver-related business story showed up on the newswire.ca Internet site yesterday—and I thank David Caron for pointing it out. All we can do is wish them well, because Scotiabank is probably the biggest silver short holder in the COMEX futures market at the moment—and their short position in gold is scarey as hell as well. Another link to this article is here—and it’s worth skimming.
Chris Powell: Cowardice of press, miners, financial industry sustains gold market rigging
I’m here again this year to update you on the surreptitious manipulation of the gold market by central banks and to explain how this surreptitious manipulation now extends to all major markets around the world.
This is remarkable not in fact but only in degree.
For central banks long have rigged the gold market, usually suppressing gold prices to protect their own currencies and government bonds against a potentially competitive world reserve currency. Central banks used to do this market rigging in the open, through mechanisms like the London Gold Pool in the 1960s, but they lost too much of their gold reserves that way. Now they do their market rigging surreptitiously using derivatives and high-frequency trading, activities underwritten by the leasing and swapping of gold by central banks. In this way central banks have created a vast, imaginary supply of the monetary metal, a supply of “paper gold” for price suppression.
The above three paragraphs are from the beginning of the speech that GATA secretary/treasurer Chris Powell gave at the Mining Investment Asia Conference in Singapore on Thursday. It was filed on the gata.org Internet site yesterday. There are lots of embedded links—and it’s well worth you while if you have the time. Another link to his presentation is here.
John Dizard: Gold is overpriced—and well worth it
Gold has been having one of its moments since the beginning of the year; the dollar price is up over 15 per cent, compared with 1.9 per cent for the S&P 500. At these levels, the metal is overpriced and well worth it.
By “overpriced” I mean that market sentiment is measurably too bullish.
Perhaps, though, Mr. Market is on to something. In the olden days, when Deutsche Bank was a cornerstone of German stability, you could count on the dealers on its gold desk, along with their friends working for the other big banks, to step in and make sure that the market was liquid and continuous.
On Thursday, though, Deutsche sent a letter to a federal judge in New York agreeing to settle a lawsuit that accused it of conspiring with other big banks to manipulate the gold and silver markets. As part of the settlement, Deutsche agreed to provide “valuable monetary consideration to be paid into a settlement fund” as well as “co-operation in pursuing claims against the remaining defendants.” Those defendants include Scotiabank, Barclays, HSBC, and Société Générale.
This cannot make it easy for the remaining members of the Old Boys Club to have a friendly conference call about reducing the magnitude of swings and roundabouts in the bullion price.
Wow! I love it when John talks dirty like this—and to hear him go on about this is a 180 degree about face for a man who wrote disparagingly about gold for more than a decade. This Financial Times article appeared on their website on Friday sometime—and it’s posted in the clear in its entirety on the gata.org Internet site. It’s a must read for sure. Another link to this story is here.
The PHOTOS and the FUNNIES
The first photo is of a roadrunner—and in the flesh they don’t look much like the cartoon character we saw so much of in your youth. The second is a coyote—and how could I not include one without the other! The Acme cartoon, which had been sitting on my desktop for last couple of day, fits it nicely as well.
The WRAP
“The truth is incontrovertible, malice may attack it, ignorance may deride it, but in the end; there it is.” — Winston Churchill
Today’s pop ‘blast from the past’ is from the disco days of the late 1970s—which seems like a lifetime ago now—and neither the tune, nor the rock group, needs any introduction all. And on a sad note, Barry Gibb is the only surviving member of the three brothers. Where has the time gone? The link is here.
Today’s classical ‘blast from the past’ is somewhat more ancient, of course. It’s Rachmaninov’s Rhapsody on a Theme of Paganani Op. 43 which he composed in at his home in Switzerland in July and August 1934. I’ve posted it before, but it’s bee a while. British concert pianist Stephen Hough introduces the work—and then performs it at the Proms in 2013 along with the BBC Symphony Orchestra. It’s wonderful—and the link is here.
I must admit that I’m mostly a spectator in what is going on in the precious metal market at the moment. Although the COT Report continues to be negative as can be, particularly in gold, there’s no guarantee that when we do get an engineered price decline, it will be as bad as expected.
Only silver is remotely close to being overbought—and with gold sitting right on its 50-day moving average, it doesn’t feel like the stars are aligned for a reverse in prices any time soon.
As I’ve said before, if the powers-that-be wish it, they could drive prices lower in a short, sharp correction that would allow the Big 8 traders to harvest the Managed Money longs—ring the cash register—and cover a large part of their short positions in a matter of a few days, rather than two or three month ‘slicing the salami’ procedure that is their usual modus operandi.
Since this is my Saturday column, here are the 6-month charts for the Big 6+1 commodities—and as I’ve said on too many occasions, if JPMorgan et al can keep the prices of these key commodities under wraps, then the rest of the commodities complex will tag along.
One thing that Ted Butler mentioned in his weekend review last week, is something that I’d forgotten completely about. I’ve spoken of them before—and that’s what I call the unblinking non-technical funds longs that inhabit the Managed Money category in the Disaggregated COT Report. I’ve always wondered who those traders were—and what their intentions might be—and whether or not they could be related to ‘da boyz’—but at arm’s length, so to speak. Their long position is somewhat north of 50,000 contracts—and as Ted pointed out, whoever these trader are, they’ve been building up this long position staring in 2014—and that was regardless of whether prices were rising or falling.
These traders are not likely to sell on lower prices—and may in fact add to their long positions if such an event were to occur. As of yesterday’s COT Report, the Managed Money long position was just under 70,000 contracts, so it suggests that long liquidation may not be that great on any engineered price decline. It’s also entirely possible that these unblinking longs have been adding to their positions during this year’s rally, but because we haven’t had a sell-off, there’s no way of knowing how big their long positions are at this point.
They’re sitting in the bushes, but who are they—and what are they up to? Someday we’ll find out. But whoever they may be, they must have pretty deep pockets to meet some of the margin calls they’ve experienced over the last two years, because I’m sure they’re in the red in their overall positions, as the silver price is certainly lower now than it was two years ago.
In line with what I said in Wednesday’s column about my stock portfolio—and in the interests of full disclosure—I added a new precious metal stock to my portfolio just before the markets closed yesterday—and that was First Mining Finance Corp—ticker symbol FF on the TSX Venture Exchange. This is NOT a recommendation to buy the stock, as I’m not an investment advisor, so if you’re going to consider investing in it, do your own due diligence.
And as I sign off on today’s column, I’m sort of wondering what kind of financial or monetary rabbit the world’s central banks are going to pull of their collective hats on Sunday. If it’s more of the same old, same old, then it’s only a matter of time—and not too much time at that—before the run on all fiat currencies will begin in earnest, as the only safe harbour will be gold and silver.
However, that may be their plan, because that in turn, will drive all commodity prices higher. Inflation will result—and then it remains to be seen if they can control inflation to the upside, once they let that particular genie out of the bottle. So they should be careful what they wish for, because if that is their plan, they may end up getting far more than inflation than they want.
And with John Dizard putting his gold marker down in his article in the Financial Times yesterday, the open of trading in the precious metal markets on Sunday evening in New York, could prove interesting.
That’s all I have for the day—and the week—and I’ll see you here on Tuesday.
Ed
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