23 April 2016 — Saturday
YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM
The gold price chopped around a bit in Far East trading on their Friday morning—and around noon HKT it began to develop a negative bias. Shortly after the COMEX open in New York, the sell-off became a bit more pronounced, with the real damage occurring starting at 11:00 a.m. EDT, which was the moment that London closed for weekend. The low tick of the day came right at the 1:30 p.m. EDT COMEX close. From that point it rallied about 6 bucks until around 3:10 p.m.—and then sold off a few dollars into the 5 p.m. close of after-hours trading.
The high and low tick were recorded as $1,254.20 and $1,228.50 in the June contract.
Gold finished the Friday session in New York at $1,232.20 spot, down $15.80 from Thursday’s close. With gold closing below its 50-day moving average, the Managed Money traders were on the run, as net volume was very heavy at just over 188,000 contracts, with almost no roll-overs at all.
Here’s the 5-minute gold tick chart courtesy of Brad Robertson once again—and it only goes up until about 2 p.m. Denver time on Friday afternoon, which was 4 p.m. in New York. There was decent volume in morning trading in the Far East—and it picked up again after midnight EDT/noon HKT as the price began to head lower but, as is always the case, the volume that really mattered occurred during the COMEX trading session, which started at 6:20 a.m. MDT on the chart below—and by noon MDT, it was back to background level. The vertical gray line is midnight in New York, noon the following day in Hong Kong—and don’t forget to add two hours for EDT.
The ‘click to enlarge‘ feature still doesn’t work with Internet Explorer, but a right mouse click with Google Chrome or the Firefox browsers should allow you to view this chart full-screen size.
The silver price rallied a dime or so by 10 a.m. HKT—and then was sold back to almost unchanged by 2 p.m. local time, but did manage to hold above the $17 spot price mark. Starting just before 9 a.m. in London, the price began to chop quietly higher. The high tick was printed at the London p.m. gold fix—and by 10:30 a.m. EDT, ‘da boyz’ and their algorithms put in an appearance, with the low tick of the day coming at 1 p.m. EDT. Like gold, it rallied until 3:10 p.m. in after-hours trading, but the moment it stuck its nose back above $17 spot, a willing seller appeared—and that was that.
The high and low ticks in this precious metal were reported by the CME Group as $17.36 and $16.855 in the May contract.
Silver was closed in New York yesterday at $16.955 spot, down 1.5 cents from Thursday. As was expected, roll-over volume was very heavy—about a third of gross volume—and even when subtracted out, the net volume was up there at 46,000 contracts. No doubt there were technical funds pitching long positions into yesterday’s price decline. And for the fourth trading session in a row, the silver price was closed within a few pennies of its previous day close—and always a few pennies below $17 spot.
The price pattern in platinum was very similar to what happened in gold and silver. The $1,032 spot high tick came a few minutes after the London p.m. gold fix—and the engineered price decline that started shortly after that, took platinum’s price down to $1,006 spot. It rebounded a bit until 3:10 p.m.—and at that juncture suffered the same fate as silver and gold. Platinum finished the Friday session at $1,009 spot, down 15 bucks from its close on Thursday.
The palladium price didn’t do much of anything during Far East and Zurich trading—and was down 4 dollars or so by the COMEX open. The ensuing rally got capped at its $616 high tick at 11 a.m. in New York, but JPMorgan et al had the price back into negative territory by the COMEX close—and after that it traded in exactly the same fashion as the other three precious metals, including the 3:10 p.m. sell-off. Palladium finished the day at $602 spot, down 3 bucks from its Thursday close.
The dollar index closed late on Thursday afternoon in New York at 94.65—and dipped to its 94.48 low just before 10:30 a.m. HKT on their Friday morning. Then it was up, up and away—with the 95.20 high tick coming at the COMEX close. It drifted a bit lower from there, but finished the Friday session higher by 47 basis points at 95.12.
The dollar ‘rally’ looked just as man-made as the engineered price declines in the precious metals.
Here’s the 6-month U.S. dollar index, so you can watch the current rescue attempt for yourself.
The gold stocks opened unchanged, dipped into the London p.m. gold fix—and the rallied to their collective highs shortly before 10:30 a.m. in New York trading. Then it all down hill into the COMEX close—and they managed to rally a bit from there—and then chopped sideways for the rest of the day. The HUI finished down 2.52 percent, but it could have been much worse.
The silver equities traded in an identical fashion, as Nick Laird’s Intraday Silver Sentiment Index closed down 2.64 percent.
For the week, the HUI closed higher by 2.09 percent—and Nick’s ISSI close up by 9.35 percent.
The CME Daily Delivery Report showed that 973 gold and 2 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday. In gold, the principal short/issuer was HSBC USA with 945 contracts—and International F.C. Stone was an ‘also ran’ with 28 contracts. The “usual suspects” were lined up as long/stoppers: JPMorgan with 325 for its own account—and 285 for its client account. Canada’s Scotiabank was in second place with 214—and International F.C. Stone was third with 113 contracts. Ted had been waiting for this HSBC USA delivery for a few days already—and here it is here. The two lonely silver contracts were scooped up by Canada’s Scotiabank. The link to yesterday’s Issuers and Stoppers Report is here—and it’s certainly worth a quick look.
So far this month HSBC USA has issued 2,780 gold contracts of the 3,645 that have been issued for April, stopping none. JPMorgan has stopped 1,065 contracts for itself—and 948 for its clients—and issued none. Canada’s Scotiabank has stopped 800 gold contracts so far this month—and issued none. And as an aside, International F.C. Stone has issued 517 gold contracts and stopped 535 of them—and all contracts involved its client account.
The CME Preliminary Report for the Friday trading session showed that gold open interest for April declined by 110 contracts, leaving 1,384 left—minus the 973 contracts mentioned above. The Daily Delivery Report from Wednesday evening showed that 171 gold contracts were posted for delivery yesterday—and since Friday’s o.i. only declined by 110 contracts, then another 171-110=61 gold contracts were added to the April delivery month yesterday. Silver open interest remained unchanged at 6 contracts for the fourth day in a row.
There were no reported changes in GLD yesterday—and as of 6:11 p.m. EDT yesterday evening, there were no reported changes in SLV, either.
There was no sales report from the U.S. Mint.
Month-to-date the mint has sold 87,500 troy ounces of gold eagles—15,000 one-ounce 24K gold buffaloes—and 3,070,000 silver eagles. Gold eagle and gold buffalo sales in April so far are more than double what they were in all of March—and its Ted’s opinion that JPMorgan was buying everything that the mint could produce—and wasn’t being sold to John Q. Public. The same can be said about silver eagles as well. And as I mentioned in yesterday’s column, the mint was 87,500 silver eagles sales off its usual 1 million coins per week pace. They’ll probably make up for it next week.
There was very little activity in gold over at the COMEX-approved depositories on Thursday, as only 643.000 troy ounces/20 kilobars were reported received—and 1,543.320 troy ounces/48 kilobars were shipped out. The in/out activity was divided up between four different depositories—and I shan’t bother linking that activity.
It was a busy day in silver, as 600,522 troy ounces were shipped in—and 1,269,579 troy ounces were shipped out. Included in the ‘out’ activity was another 600,000 troy ounce on-the-button withdrawal from JPMorgan. It was actually over that amount by 0.3 troy ounces. This is the sixth withdrawal of that exact amount [plus or minus less than 1 troy ounce] from JPM in the last month or so—and neither Ted nor I know if it means anything or not. But as I pointed out to Ted, one thing is for sure, these precise amounts didn’t happen by accident. The link to that activity is here—and it’s worth a quick look.
It was also a very busy day over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday. They reported receiving 6,411 of them—and shipped out 4,088. All of the activity was at Brink’s, Inc.—and the link to that, in troy ounces, is here.
It was black armbands for both of us when I spoke to Ted about the latest Commitment of Traders Report for positions held at the close of COMEX trading on Tuesday. He was not a happy camper, nor was I. I knew it was going to be awful in silver, which it was—and despite the fact that I was guessing/hoping for unchanged, there was also deterioration in gold as well. The Sword of Damocles that I’ve spoken off often recently, is bigger and uglier than ever—especially in silver—and I’ll start there.
In silver, the Commercial net short position blew out by another 11,668 contracts, or 58.34 million troy ounces of paper silver. They accomplished this feat by increasing their short position by another eye-watering 13,512 contracts, but they also added 1,844 contracts to their respective long position. The net of those two numbers is the change for the reporting week. The Commercial net short position in silver now stands at an over-the-moon 84,084 contracts, or over 420 million troy ounces of paper silver. Ted says that this is the largest Commercial net short position in ten years.
The Big 4 traders added about 4,200 contracts to their short positions—and Ted pegs JPMorgan’s current short position at 25,000 COMEX contracts, up 4,000 from the previous Friday report. The ‘5 through 8’ large traders added only 500 contracts or so to their collective short positions—and Ted’s raptors, the Commercial traders other than the Big 8, sold around 7,000 contracts of what’s left of their current long position. It was “all for one, and one for all“—as Ted says, quoting the ‘Three Musketeers’. Ted also pointed out in our conversation yesterday that the Big 8 hold their largest short position [currently 435.7 million troy ounces] since back in 2009—which is seven years ago.
Under the hood in the Disaggregated COT Report, it was all Managed Money traders, almost to the exact contract once again, as they increased their collective long positions by 11,885 contracts. They did this by adding 7,760 long contracts, plus they covered 4,125 short contracts. The other two categories in the Disaggregated Report—the ‘Other Reportables’ and the ‘Nonreportable’/small traders, cancelled each other out, with the former piling in on the short side—and the latter jumping in on the long side.
In gold, the Commercial net short position increased by 8,334 COMEX contracts, or 833,400 troy ounces of paper gold. They arrived at this amount by selling 4,438 long contracts and decreasing their short position by 3,896 contracts, with the total of those two numbers being the net change for the week. The Commercial net short position in gold as of Tuesday’s cut-off stands at 24.01 million troy ounces.
The Big 4 traders increased their net short position by another 4,700 contracts—and the ‘5 through 8’ large traders actually covered about 1,700 short contracts during the reporting week. Ted’s raptors, the Commercial traders other than the Big 8, added around 5,300 contracts to their collective short positions.
Under the hood in the Disaggregated COT Report, the Managed Money traders only account for 3,473 contracts of the total change in the Commercial net short position. They added 6,161 contracts to their already sky-high long position, but they also added 2,688 contracts to their short position as well—and the net of those two numbers is the 3,473 contract change for the reporting week. The rest of the big changes that made up the difference came from the ‘Nonreportable’/small trader category, as they jumped in on the long side [up 1,173 contracts]—and reduced their short position by a goodly amount as well [down 4,131 contracts].
The current structure of the COT Report is alarming and dangerous in the extreme. There are only three ways out of this current set-up: 1] JPMorgan et al engineer a price decline of biblical proportions, 2] JPMorgan et al get over run by some out-of-left field/black swan existential event, or 3] COMEX default—or some combination of these three. You choose.
Of course there’s still the chance of legerdemain and double-cross well hidden within the COT Report numbers that Ted has been talking about. However, there was no sign of that in yesterday’s report, nor in the one from a week ago Friday. I’ll be interested in what Ted has to say about this in his weekly review this afternoon.
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 145 days of world silver production—and the ‘5 through 8’ traders are short 61 days of world silver production—for a total of 206 days, almost 7 months of world silver production, or 473 million troy ounces of paper silver held short by the Big 8.
Last week the short position of the Big 8 was 195 days—and since the short positions of the ‘5 through 8’ traders remained almost unchanged from the previous week, the extra 11 days of world silver production that were shorted during the reporting week ended up in the Big 4—mostly JPMorgan—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 105 days of world silver production between the two of them—and that 105 days represents around 72 percent [almost three quarters] of the length of the red bar in silver in the above chart. The other two traders in the Big 4 category are short, on average, about 20 days of world silver production apiece.
This ‘Days to Cover’ chart has looked like this in all four precious metals for at least the last twenty years. Not this extreme maybe, but the pattern is the same, with all four of the PMs pinned to the far right-hand side of the chart [cocoa is the only exception] and with silver almost always in the number one position.
I don’t have all the many stories again today, but there are a couple that I’ve been saving for today’s column for length or content reasons.
CRITICAL READS
Stunning: 20 Years of Stimulus, Nothing to Show — Jeffrey P. Snider
There was a time not all that long ago that it was great, maybe even thrilling, to be a central banker. The late 1990’s had to have been the absolute apex, but the aftermath of the Panic of 2008 resurrected some of that lost luster. Undoubtedly that was due to great confusion over what had actually occurred, and thus lost in the extremities of the time was uniform central banker ineffectiveness. Very few, it seemed, cared what had happened as concern was almost totally focused upon getting out of the mess. Since central banks were all that occupied that space, so great hope and respect was restored or augmented by default.
Like global inflation rates, it has been almost steadily downhill since – particularly after the “unforeseen” recurrence in 2011. No matter what they try, central bankers cannot get the inflation and thus the recovery (orthodox economics assigns them as linked) they promise. They are “forced” to address this obvious shortfall with only “bigger” versions of more of the same. Each time they do, they only reveal that judgments about 2008 really should have been more inclusive, intrusive, and far less deferential.
Markets that once jumped almost on command are insultingly uninterested now. Last year, the ECB added QE (PSPP) after it was claimed that the central bank had not done enough, always falling short of a full-blown QE that would surely do the trick. They did; it didn’t. Now there is, predictably, only more of it with added bells and whistles that count more as a rebranding than new thinking or actual effort that might matter. It is, as I write occasionally, still the fingers crossed strategy.
This rather brief essay was posted on David Stockman’s website yesterday sometime—and it’s worth reading. I thank Roy Stephens for today’s first article. Another link to this commentary is here.
How Goldman Sachs’ Vampire Squid Became a Flattened Slug
A decade ago, Goldman Sachs reported that its return on common shareholder equity had hit a dazzling 39.8 per cent. It symbolised a gilded age: back in 2006, as markets boomed, the power — and profits — of big banks seemed unstoppable.
How times change. This week, American banks unveiled downbeat results, with revenues for the biggest five tumbling 16 per cent year-on-year. But Goldman was even weaker: net income was 56 per cent lower, while return on equity, a key measure of profitability, was 6.4 per cent, below even the sector average in 2015 of 10.3 per cent.
A bank which was once so adept at sucking out profits that it was called a “vampire squid” (by Rolling Stone magazine) is thus producing returns more commonly associated with a utility. The phrase “flattened slug” might seem appropriate.
This commentary by Gillian Tett of the Financial Times yesterday, was posted in the clear on David Stockman’s website—and another link to this article is here.
Retailer Bankruptcies Are Hailing Down on the U.S. Economy
Another retailer is heading for bankruptcy. This time Aeropostale, with 800 teen-clothing stores, after three years in a row of losses. It’s “preparing to reorganize under a Chapter 11 bankruptcy, and could file as soon as this month, according to people familiar with the matter,” Bloomberg reported today.
Upon Bloomberg’s propitious report, Aeropostale shares plunged 28% to 15 cents. It has been a penny stock since last September. The New York Stock Exchange, which had threatened the company with delisting, removed the stock before 2 p.m. today, and trading of the shares has been suspended.
Bloomberg:
Aeropostale is trying to work out a loan to finance its operations during the bankruptcy process, according to the people. A deal to avert a filing or find a buyer also could still emerge, they said.
Which is what just about all collapsing retailers are valiantly trying to do. And often to no avail.
This not surprising, but very interesting story showed up on the wolfstreet.com Internet site on Thursday—and it’s courtesy of ‘aurora’ via Zero Hedge. Another link to this article is here.
Schlumberger CEO Sees `Full-Scale Cash Crisis‘ in Oil Sector
Schlumberger Ltd. cut more jobs in the first quarter as the world’s largest provider of oilfield services sees the industry in an unprecedented downturn.
The global headcount dropped to 93,000 at the end of the first quarter with the reduction, Joao Felix, a spokesman for the company, said by e-mail. The company let go about 8,000 people in the quarter, and reclassified about 5,500 contractors as permanent workers, Chairman and Chief Executive Officer Paal Kibsgaard said Friday in a conference call with analysts and investors. One-third of Schlumberger’s workforce, or roughly 42,000, has now been cleaved off since the worst crude-market crash in a generation began in mid-2014.
“The decline in global activity and the rate of activity disruption reached unprecedented levels as the industry displayed clear signs of operating in a full-scale cash crisis,” Kibsgaard said in a statement announcing first-quarter earnings Thursday. “This environment is expected to continue deteriorating over the coming quarter given the magnitude and erratic nature of the disruptions in activity.”
This Bloomberg news story put in an appearance on their Internet site at 2:40 p.m. Denver time on Thursday afternoon, but was updated on Friday morning MDT. It’s the second offering of the day from Roy Stephens—and it’s worth reading if you have the interest. Another link to this article is here.
Cameco suspends Rabbit Lake operations due to ‘depressed’ market conditions for uranium
An oversupply of uranium around the world, caused in part by the shutdown of nuclear facilities in Japan, has resulted in Cameco suspending its Rabbit Lake uranium operation in northern Saskatchewan.
The company announced late Thursday that 500 jobs will be lost at the non-union mine and about 85 at its U.S. operations, including employees and long-term contractors.
Company CEO Tim Gitzel said the mine was old and small — compared to the company’s two large mines in the province, which each produce as much as 9.7 million kilograms of uranium a year, Rabbit Lake only produced about 1.8 million pounds.
This CP story, filed from Saskatoon, Saskatchewan on Friday morning, was picked up by the ca.finance.yahoo.com Internet site—and it’s the second story in a row that’s worth reading if you have the interest. Another link to this news item is here.
The United States of Insolvency — James Grant
This much I have learned about debt after 40 years of writing and study: It is better not to incur it. Once it is incurred, it is better to pay it off. America, we have a problem.
We owe more than we can easily repay. We spend too much and borrow too much. Worse, we promise too much. We conjure dollar bills by the trillions–pull them right out of thin air. I won’t insist that this can’t go on, because it has. I only say that it will eventually stop.
I don’t know the date, but I believe that I know the reason. It will stop when the world loses confidence in the dollars we owe. Come that moment of truth, the nation will resemble Chicago, a once prosperous polity now trying to persuade its once trusting creditors that it is actually solvent.
This essay by Jim showed up in Time magazine back on April 14. Roy Stephens sent it to me on Monday, but for length reasons, I kept it for Saturday’s column. It’s a must read—and another link to this article is here.
Albert Edwards Finally Blows Up: “I’m Not Really Sure How Much More of This I Can Take“
Earlier this week we described the personal come to non-GAAP Jesus moment of trading commentator Richard Breslow, who confessed in no uncertain terms that he has had it with endless central banking intervention: “a portfolio built to only withstand stress thanks to central bank intervention is one destined to blow-up spectacularly. The embedded flaw in this new logic is that central banks give investors perfect foresight. And nothing can go wrong… You don’t need to be a Taleb or Mandelbrot to calculate that we have been having once in a hundred year events on a regular basis for the last thirty years.”
Today it is another famous skeptic, SocGen’s Albert Edwards who has had enough and says he feels “utterly depressed” because he has not “one scintilla of doubt that these central bankers will destroy the enfeebled world economy with their clumsy interventions and that political chaos will be the ugly result. The only people who will benefit are not investors, but anarchists who will embrace with delight the resulting chaos these policies will bring!”
As he openly warns his readers :
“I have long recognised my own contrariness (or is it bloody-mindedness) and hopefully put it to good use in my chosen profession. If you want the consensus bull-market cheer-leading nonsense, readers know it is amply available elsewhere.“
This commentary appeared on the Zero Hedge website at 8:17 p.m. on Friday evening EDT—and another link to this article is here. I found it on the Sharps Pixley website of all places.
This is Why West Turns a Blind Eye to Saudis’ Misdeeds in Yemen
Saudi Arabia is planning to build a canal that will connect the Persian Gulf and the Arabian Sea bypassing the Strait of Hormuz controlled by the Iranians. Since the canal would pass the Shia territories in Yemen, Riyadh needs to take the country under full military control, Craig Murray notes.
Regardless of vocal opposition from the E.U. Parliament and major human rights groups, the U.S. government plans to continue high-tech weapons deliveries to Saudi Arabia which uses it against defenseless Yemeni civilians, Craig Murray, human rights activist, author and former British Ambassador to Uzbekistan, writes on his blog.
Embarrassingly for London, “U.K. special forces are operating inside Yemen in support of the onslaught,” he notes.
“Yemen of course has very little oil of its own,” the author remarks.
A 950 kilometer canal, you say? Somebody is smokin’ way too much whacky tobacco over there. Good luck to them. This very interesting story/fantasy was posted on the sputniknews.com Internet site at 9:16 p.m. Moscow time on their Thursday evening—and subsequently revised about sixteen hours later. I thank U.K. reader Tariq Khan for sharing it with us—and another link to this news item is here.
Doug Noland: More on China
The world has changed profoundly since 2007. For one, total Chinese bank assets have inflated from about $7.0 TN to over $30 TN. Annual growth in Chinese system Credit growth (“total social financing”) expanded from about $900 billion in 2007 to 2015’s $2.35 TN. Momentous changes have rewritten central banking doctrine. Not even seriously contemplated in 2007, QE (ECB and BOJ) will add close to another $2.0 TN to global liquidity in 2016. Central banks will also push short-term rates (and bond yields!) further into negative territory this year, a policy course that would have seemed totally absurd in 2007. Prior to 2008, no one would have dared imagine today’s “whatever it takes” central banking.
It’s an incredible confluence. Building on it’s historic $1.0 TN during Q1, China could surpass $3.0 TN of 2016 system Credit growth. For perspective, Chinese Credit growth will likely expand at least 50% more than in the U.S. this year. Such unprecedented Credit growth in the face of a stock market collapse, sinking corporate profits and rapidly intensifying Credit deterioration is simply astounding. It’s definitely a testament to the brute power of “whatever it takes” Chinese state-directed finance and investment. Combining Chinese communist leadership with “whatever it takes” global central bankers (with no constraints on their “money” printing operations) creates a backdrop for financial folly unrivaled in history.
And that’s what makes the current environment so dangerous. From my perspective, things continue to unfold in the worst-case scenario. Beijing has lost control of what has evolved into complex Credit, market and economic systems. Global central bankers have lost control of speculative market dynamics – not to mention inflation dynamics. And it’s not as if current predicaments are inconspicuous. So investors, speculators and investment managers around the world are forced to plug their noses and play the game.
Thus far, Chinese officials have been determined to carefully manage China’s pegged currency regime. Yet current Credit and market dynamics are inconsistent with a stable currency. I would furthermore argue that breakneck Credit growth in the face of rapidly deteriorating underlying fundamentals is a proven recipe for a crisis of confidence. Global markets are in the midst of a destabilizing adjustment to China’s resurgent booms in Credit and speculation. This ensures real havoc when global markets are confronted with a Chinese Credit and/or currency dislocation.
As Doug so carefully points out, the world’s economic, financial and monetary systems have long since floated off the rails. Doing “whatever it takes” has now become the Ebola virus of the world’s central banks. The end, when it comes, will be frightening. Doug’s Credit Bubble Bulletin was posted on his website just after midnight EDT this morning—and certainly falls into the must read category. Another link to his commentary is here.
BoJ Officials Are Said to Eye Possible Negative Rate on Loans
Having adopted a negative interest rate on some excess reserves to penalize financial institutions for leaving money idle, the Bank of Japan may consider helping them lend by offering a negative rate on some loans, according to people familiar with talks at the BoJ.
Such a discussion could happen in conjunction with any decision to make a deeper cut to the current negative rate on reserves, said the people, who asked not to be named as the matter is private. The BoJ’s Stimulating Bank Lending Facility, which now offers loans at zero percent interest, would be the most likely vehicle for this option, they said.
The officials said that adding this to the central bank’s arsenal could have a positive impact on the economy, but would also raise questions about giving subsidies to commercial lenders. Financial institutions, who already feel penalized by the existing negative rate, could face demands from borrowers to cut their lending margins further, said the people.
This is all so absurd. Where does it all end, one wonders? This fascinating Bloomberg article appeared on their website at 10:30 p.m. Denver time on Friday evening—was updated about four hours later. It’s courtesy of Richard Saler—and another link to this news story is here.
All Japan Sovereigns Yield Below 0.3% as 40-Year Hits Record Low
Japan’s 40-year bond yield fell to a record low, meaning all the nation’s sovereign bonds yield less than 0.3 percent as investors rush for securities with positive income.
The yield on the 1.4 percent government note maturing in March 2055 fell to 0.29 percent in Tokyo Wednesday from 0.415 percent on Friday when the bond had last traded, according to Japan Bond Trading Co. The decline spread to other longer-dated maturities, pushing 30- and 20-year yields to record lows of 0.285 percent and 0.245 percent respectively. Japan’s two-year yield also reached a record minus 0.265 percent.
Bond-buying operations for these zones by the Bank of Japan are also tightening market conditions as negative rates have pushed investors seeking positive yields into longer-dated debt. Yields on bonds with maturities as long as 10 years have gone negative since the BoJ announced in January that it would start charging lenders on some of their excess reserves held with the central bank. Governor Haruhiko Kuroda told lawmakers Wednesday he doesn’t think quantitative and qualitative easing is reaching its limit. The BoJ is due to announce its next policy decision on April 28.
Wow! Who the heck would lend a demographically and financially bankrupt nation any money at any interest rate, let alone at an annual interest rate of 0.29 percent over 40 years? Population projections from a 2005 survey shows that Japan’s population will decline from 127 million to a hair under 90 million by 2055. Please help me out here in a world gone stark raving mad. This Bloomberg new item, also courtesy of Richard Saler, was posted on their Internet site at 7:02 p.m. MDT on Tuesday evening—and updated in the wee hours of Wednesday morning. Another link to this story is here. The 2:42 minute embedded video clip is certainly worth watching.
New U.S. $20 bill will replace Andrew Jackson with activist Harriet Tubman
Anti-slavery crusader Harriet Tubman will become the first African-American to be featured on the face of U.S. paper currency when she replaces President Andrew Jackson in the top spot on the U.S. $20 bill, the U.S. Treasury Department announced on Wednesday.
She will also be the first woman on U.S. paper currency in more than a century.
The redesigned U.S. $20 bill will move Jackson to the back of the bill alongside an image of the White House, Treasury officials said.
A new U.S. $10 bill will keep founding father Alexander Hamilton on the front, while adding images of five women, all leaders of the women’s suffrage movement, to the back.
I had several readers send me this story, both from Zero Hedge—and I thought it was a joke, so I deleted them. Well, it wasn’t, as I found out when I read yesterday’s edition of the King Report. I dug up this iteration on The Sydney Morning Herald website. Another link to this news item is here.
Russian government news agency mocks West’s gold market rigging
The world news Internet site Sputnik News this week published an unsigned commentary about gold market manipulation by Western investment banks and the Federal Reserve, citing Deutsche Bank’s confession to the scheme.
While most mainstream financial news organizations in the West are studiously suppressing the Deutsche Bank story, the remarkable thing about the Sputnik News commentary is that the news organization is owned and operated by the Russian government itself, the successor to the RIA Novosti and Voice of Russia news organizations.
The government of Russia knows all about the Western central bank policy of gold price suppression. But while this policy can be reported in Russia and China, it remains a prohibited subject in the supposedly free Western press.
The Sputnik News commentary is headlined “‘Gold-Fix Cartel’: How Western Banks Were Caught With Pants Down“. The link to that story, along with links to others, is embedded in this GATA release from yesterday—and it’s definitely worth your while. Another link to this article is here.
Eric Hunsader to Chris Martenson: “Market rigging is getting worse”
http://www.peakprosperity.com/podcast/97873/eric-hunsader-financial-system-absolutely-positively-rigged
Eric Scott Hunsader, founder of the market data firm Nanex in Winnetka, Illinois, and the scourge of market manipulation in the United States, including gold market manipulation, is interviewed by Peak Prosperity’s Chris Martenson and describes how market rigging is worse than you think.
The interview, headlined “Eric Hunsader: The Financial System is ‘Absolutely, Positively Rigged,’ and the Abuses are Getting Worse, Not Better,” is available as both audio and a transcript at the peakprosperity.com Internet site.
This 36:13 minute audio interview from Monday, appeared on the gata.org Internet site on Tuesday—but for length reasons, had to wait for today’s column. Another link to this interview is here—and it’s a must listen in my opinion.
Ted Butler: Fighting Back
I believe the concentrated short position, and silver manipulation, has been allowed to continue to exist due to a quirk in commodity law. That quirk, or catch, was that commodity law prohibits the regulators from publicly releasing the identity of the largest traders in any commodity. That’s why the CFTC only identifies the largest traders in every commodity as the “4 or less” and “8 or less” largest traders. This regulation was enacted many decades ago for the well-intended purpose of protecting the identity of large traders to prevent them being put in a compromised trading position.
While the original intent of this identity protection may have been valid, that same law was never intended to protect and shield the identity of those engaged in manipulation, I believe that’s what this regulation has morphed into. After all, the primary intent of commodity law is to prevent manipulation, which is exactly as it should be. Over time, there has been a movement towards more transparency as a desired objective of modern markets. Protecting the identity of large traders in commodity futures markets is at odds with the transparency we encourage in all other financial markets.
I believe the CFTC and the COMEX have used this archaic identity-protecting regulation to protect the silver manipulators, just as they have protected the manipulators by their failure in not acknowledging the concentrated short position. In my opinion, the regulators want to avoid disclosure and debate precisely because they can’t legitimately defend the concentration.
This sounds like Ted talking about yesterday’s COT Report—and if that’s what crossed your mind, you would be wrong. This was an essay he wrote on the Internet back on August 21, 2007—and if you get the impression that not much has changed since then, except for the fact that Ted wasn’t aware that Bear Stearns was the other big silver short at the time, you would be right about that. Here he takes on Canada’s Scotiabank—a firm that I rail against every Saturday without fail. It’s a must read for sure to give you some historical perspective—and why I came to the conclusion that Scotiabank, along with JPMorgan, are the two biggest short holders in the COMEX silver market. Another link to Ted’s essay is here.
SGE gold fixes toeing the line — Lawrie Williams
Despite the big fluctuations in the gold price in the west yesterday, the new Shanghai Gold Exchange (SGE) benchmark gold price in Chinese Yuan seems to be pretty well toeing the line as it becomes established. Today’s Chinese am and pm fixes in yuan were CNY261.32 and CNY260.41 – equivalent in US Dollars at the current CNY:USD parity at the time of writing of 6.4879 to around $1,253 and $1,248. This certainly doesn’t differ from the spot price at those times by any significant extent, so those who were hoping perhaps that the SGE’s ‘fixings’ might create big ‘arbitrageable’ differences between West and East or in any way suggest a big disparity between Chinese and New York/London prices, have so far been disappointed. These markets are very much global and are proving to be so.
At the moment, the Chinese have nothing to gain by distorting the precious metals markets, but longer term this situation could change. There are various theories about the true size of Chinese gold reserves and what the nation may be hiding in various unreported accounts, but the general consensus from listening to presentations from Chinese officials and academics, which are presumably sanctioned by higher authorities, is that China is planning to build its gold reserves until they are larger than those of the USA’s 8,133.5 tonnes. At a figure reported to the IMF of only around 1,800 tonnes (including the latest announced purchases) there would still seem to be an awful long way to go to achieve this. At the current announced rate of between around 10 and 15 tonnes a month it would take 35 years to achieve this – even at the higher monthly rate, so logic suggests that if the Chinese are realistically aiming to exceed U.S. gold reserves, they are almost certain to be starting from a much higher level than currently reported.
This 3-paragraph commentary from Lawrie put in an appearance on the Sharps Pixley website sometime yesterday—and another link to his commentary is here.
The PHOTOS and the FUNNIES
The pond was pretty busy last Saturday, with lots of courting, preening, bathing, wing-beating—and just general hanging around by the various waterfowl. I had the camera set up for ‘birds in flight’ at the time—and pulled this photo out of a 9-photo sequence as a Canada goose gave its wings a good stretch. It took a shutter speed of 1/8,000 of a second to freeze the wings. Normally I don’t give these birds, or the magpie below it, a second glance—but there was nothing else going on at the moment—and here they are.
The WRAP
Today’s pop ‘blast from the past’ honours Prince, who died on Thursday. I was never a fan of his music, or him. Maybe I’m just too old. But one thing about him that should be recognized, is that he was a musical genius in own right—and one of the greatest guitar players that ever lived. I’ve featured him twice in this column—and both times it was the same tune—as he, along with other guitar giants, cover George Harrison’s “While My Guitar Gently Weeps“. George’s son Dhani is also part of the group—and he looks just like his dad. The link is here. Enjoy!
While on the subject of geniuses, here’s another one. It’s violin virtuoso Sarah Chang tearing up the track with Pablo Sarasate’s Carmen Fantasy Op. 25. It’s a violin fantasy on themes from the opera Carmen by Georges Bizet, which Sarasate composed in 1882. It is one of the most challenging and technically demanding pieces for the violin. It’s a piece with five short movements that are played concurrently with no breaks. She’s amazing. The link is here.
I must admit that I’m not sure where we go from here as far as prices are concerned. But Ted’s comments about the Commercial net short position in silver being the highest in 10 years—and on top of that, the largest Big 8 short position in 7 years—gives me the horrors.
How and when this will resolve itself is still not known, but as I outlined in my closing comments on the COT Report, there are only three ways, or a combination of those ways, that this will all end. Two of three have never happened—and the only outcome with an absolutely unblemished history, is an engineered price decline.
As to how much, just looking at the moving averages below, I’d guess $2.50 in silver and $100+ in gold—depending on over what time period it happens—and where the 50-day moving averages are at the time. And, for the first time in a long time, the 200-day moving averages may come into play him. If that turns out to be the case, then it’s going to be a long summer. Or it could turn out to be a short time if it’s executed quickly.
But the true situation is that I don’t know for sure, nor does anyone else. Can they possibly pull that sort of thing off in the current financial/monetary environment when everybody is now on to them? All I can use is the past as prologue. Things may turn out differently this time—and if that’s the case, be careful what you wish for, as it would be truly uncharted legal territory as well.
Since it’s my Saturday column, I’m including the 6-month chart for the Big 6+1 commodities—and you can look at the four precious metal graphs and form your own conclusions. As you may notice, the gold price really hasn’t done much of anything since mid February—and only silver is badly overbought. To put it another way, gold has not been allowed to rally—and that’s why the Commercial net short position is the size that it is, because JPMorgan et al are going short against all comers—and killing the rallies. Looking at silver’s chart and it’s screamingly ugly Commercial net short position, it’s easy to imagine a very large 3-digit silver price if JPMorgan and Scotiabank’s net short positions vanished off the face of the earth.
But make no mistake about it, dear reader, the world’s central bankers are now at battle stations 24/7—and the efforts to keep investors from fleeing from paper assets to hard assets is on in earnest. There is nothing in the Critical Reads section above that doesn’t spell out—chapter and verse—that the end is in sight, as the powers-that-be pull out all the stops to prevent their now world-wide paper Frankenstein from imploding.
But implode it will, because it must. As Thomas Jefferson was quoted as saying—“Paper is poverty, it is but the ghost of money, not money itself.” And as Jim Rickards said in his latest book, the rush is on for all the physical gold in the world—and silver too.
I’ve been saying for years “that if the powers-that-be weren’t propping up everything that wanted to crash and burn—and weren’t keep their thumbs on the price of everything that wanted to explode to the outer edges of the known universe, the world’s economic, financial and monetary system would be a smouldering ruin within five business days.”
That event is certainly within sight at this juncture—and at that point it’s reasonable to assume that the Golden Rule will come into play—as “he who has the gold, will make the rules” and, without doubt, silver will tag along for the ride—and as I’ve also said before, it will become the new gold.
That’s all I have for the day—and the week—and I’ll see you here on Tuesday.
Ed
The post <a rel="nofollow" href="http://www.edsteergoldands