Gold & Silver Daily
 

¤ Yesterday In Gold & Silver

The gold price gained---and then lost about five bucks between the beginning of Far East on their Friday morning---and the London p.m. fix the following afternoon in London.  But once the fix was out of the way, a rally began that didn't end until about an hour before the close of electronic trading.

The low and high tick were reported as $1,257.50 and $1,285.40 in the April contract.

Gold closed yesterday in New York at $1,283.10 spot, up an even $25 on the day.  Net volume was 178,000 contracts

The silver price followed the same price pattern as gold up until the afternoon London gold fix.  But the subsequent rally got capped around 11:30 a.m. EST in New York---and after that, the price wasn't allowed to do much.

The low and high price ticks were recorded by the CME Group as $16.815 and $17.32 in the March contract.

Silver finished the Friday session at $17.225 spot, up 31 cents from Thursday---and would have obviously performed far better if the rally hadn't been cut off at the knees as the futures market was about to go "no ask."  Net volume was 52,000 contracts.

The platinum price traded flat, but on the positive side, and began to rally once Zurich opened.  What appeared to be a not-for-profit seller appeared shortly after 10 a.m. Europe time---and platinum got sold down from there into the London p.m. gold fix.  The subsequent 'rally' lasted until minutes after 2 p.m. EST---and traded flat after that.  Platinum closed at $1,238 spot, up an even 20 bucks from Thursday.

Palladium tacked ten bucks onto its price by shortly after 10 a.m. Europe time on their Friday morning---and then got turned lower, just like platinum---and by the time New York closed, it was down two bucks on the day, finishing the Friday session at $769 spot,

The dollar index closed at 94.68 late on Thursday afternoon in New York---and began to drift lower the moment that trading began in the Far East on their Friday morning.  The 94.45 low tick came shortly before lunch in London---and then rallied up to 94.90 by the London p.m. gold fix.  After that it chopped lower by a bit.  The index finished the Friday session at 94.86---and up 18 basis points from Thursday.

The trading action in the dollar index yesterday [and Thursday] should forever lay to rest the assumed connection between what the currencies are doing---and what precious metal prices are doing.  Because no matter what the dollar index did, the precious metals did their own thing.

The gold stocks started off in the red, but quickly rallied into the black once the gold price began to rise after the London p.m. fix was done for the day---and that's where they stayed for the remainder of the day, as the HUI closed almost on its high tick---and up 3.12 percent.

It was almost the same chart pattern for the silver equities, as Nick Laird's Intraday Silver Sentiment Index closed up 4.18 percent.

The CME Daily Delivery Report for "Day 2" of the February delivery month in gold, showed that only 16 gold and 5 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.  The February delivery month for gold is off to a very slow start.

The CME Daily Delivery Report for the Friday trading session showed that February open interest in gold took a big hit, just as I mentioned it would.  Open interest fell by 5,678 contracts all the way down to 2,777 contracts still open---and it will be interesting to see just how much of that amount remains when I post my Tuesday column.  Silver o.i. for February declined by 273 contracts, the amount posted for delivery on Monday, leaving 43 contracts still open.

There were no reported changes in GLD yesterday---and as of 10:01 p.m. EST yesterday evening, there were no reported changes in SLV, either.

There was another smallish sales report from the U.S. Mint to round out the month.  They sold another 130,000 silver eagles---and that was it.

For the full month, and provided there are no additional sales included on Monday, the mint sold 81,000 troy ounces of gold eagles---34,500 one-ounce 24K gold buffaloes---and  5,530,000 silver eagles.  Based on this data, the silver/gold sales ratio works out to just under 48 to 1.

Over at the COMEX-approved depositories on Thursday, only a tiny amount of gold was reported removed---192 troy ounces to be exact---and nothing was reported received.  In silver, there was 600,404 troy ounces received---and 100,011 ounces shipped out the door.  The link to the silver activity is here.

Looking at the 6-month gold and silver charts in yesterday's column, I was hoping that yesterday's Commitment of Traders Report wouldn't be too bad---unchanged at worst was my guess.

Well, I wasn't even close.  It was almost as horrific as the report on January 23.

In silver, the Commercial net short position blew out by another 5,952 contracts, or 29.8 million troy ounces.  The Commercial net short position now stands at 308 million troy ounces which, to put it in other words, is over five months of world silver production.

Under the hood in the Disaggregated COT Report, it was all Managed Money that was buying longs or selling shorts as they continued to fuel the rally---and the Commercials were taking the other side of the trade.  The Managed Money traders added 1,714 long positions---and covered 4,164 short contracts.

The Big 4 short holders in the Commercial category added another 1,500 contracts to their short positions.  Ted figures that it was mostly JPMorgan doing the honours---and pegs their net short position at 20,000 contract or 100 million troy ounces, so they're short almost a third of the entire Commercial net short position all by themselves.  He'll be able to recalibrate JPMorgan's short position to a much finer degree when the February Bank Participation Report comes out next Friday.

The 5 through 8 traders added 1,800 short contracts to their positions---and the remaining Commercial traders, Ted Butler's raptors, sold 2,600 long contracts.

In gold, the Commercial net short position ballooned by another 28,350 contracts, or 2.84 million troy ounces.  The Commercial net short position in gold is now at 20.62 million troy ounces.

In the Managed Money category in the Disaggregated COT Report, the traders there bought 17,508 long contracts---and covered 6,388 short contracts.

Going up against them across the board for the second week in a row were the Commercial traders in all three categories---the Big 4, the 5 through 8, and the raptors went short against all comers in the Managed Money category and the other technical funds.

Ted says that JPMorgan no longer has any long position in gold worth mentioning, if it exists at all at this point in time.

With the big down day in gold on Thursday, followed by yesterday's vigorous rally, next week's COT Report is already a crap shoot as far as numbers are concerned---and we have two more trading days left to go before the cut-off.

Below is Nick Laird’s most excellent “Days of World Production to Cover Short Positions” in all physical commodities traded on the COMEX.  And what I had to say about the two biggest short holders in silver still stands—and that is that JPMorgan and most likely Canada’s Scotiabank combined, hold more than 50 percent of the COMEX short position in silver between them in the Big 8 category—and about 80 percent of the short position in the Big 4 category.

And, for the first time in about a decade, the four precious metals now occupy four consecutive spots on the very far right of this chart.  The four precious metals continue to be the most manipulated commodities on Planet Earth, with silver holding top spot---a position it has held for most of the last 30 years.

Here's one more chart courtesy of Nick Laird.  It shows the withdrawal from the Shanghai Gold Exchange for the prior week ending on Friday, January 23---and it was the second 70 plus tonne week in a row, as 70.624 tonnes were reported removed.  I have the Koos Jansen story about his in the Critical Reads section below.

It's another day when I have a lot of stories once again.  Adding to the pile are the ones that I've been saving all week for content or length reasons---and I hope you can fit them into whatever spare time you have this weekend.

 

¤ Critical Reads

The U.S. Economy in Two Pictures

The first photo is of the Shak IPO---and the second is the 2-hour "soup kitchen/depression-style" line-up for free burgers in front of the NYSE.

This tiny story, which will take 30-seconds of your time, was posted on the Zero Hedge website at 12:16 p.m. EST yesterday---and I thank Dan Lazicki for today's first news item.

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Treasury Yields Are Crashing (Again)

U.S. Treasury yields are plunging again this morning. From 4-year maturities out, yields are around 10bps lower with 30Y under 2.30%, 10Y under 1.65%, 7% under 1.5%, and 3Y under 75bps!! Since QE3 ended, 30Y bond yields are 84bps lower, 2Y 3bps lower.

This week things have escalated...and since the end of QE3, the curve has collapsed.

It's just a good job consumer sentiment is at 11-year highs or one might suspect we are heading into recession/depression.

The three charts embedded in this Zero Hedge piece from very late yesterday morning EST were sent to me by Dan Lazicki---and this is his second offering in a row in today's column.  They're worth a quick look.

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"We Can't Do This Forever," Fed Admits "Market Will Overwhelm Us"

In a somewhat stunning admission of the truth in central planning (that the Swiss just experienced first hand - and perhaps Venezuela has been experiencing for years), The Philly Fed's Charles Plosser explains the following...

"It may work out just fine, but there’s a risk to that strategy, and the risk is that we wait until the point where markets force us to raise rates and then we have to react quickly and aggressively. I believe that if we wait too long, then we run the risk of falling very far behind the curve or disrupting the economy by rapid rate increases.

The history is that monetary policy is not ultimately a very effective tool at solving real economic structural problems. It can try for a while but the problem then is that it’s only temporarily effective, and when you can’t do it anymore you get the explosion yesterday in the Swiss market.

One of the things I’ve tried to argue is look, if we believe that monetary policy is doing what we say it’s doing and depressing real interest rates and goosing the economy and we’re in some sense distorting what might be the normal market outcomes at some point, we’re going to have to stop doing it. At some point the pressure is going to be too great. The market forces are going to overwhelm us. We’re not going to be able to hold the line anymore. And then you get that rapid snap back in premiums as the market realizes that central banks can’t do this forever. And that’s going to cause volatility and disruption.

This Washington Post article was given the Zero Hedge treatment in a posting datelined 9:05 p.m. EST on Friday evening---which is a neat trick considering that Dan Lazicki sent it to me at 2:26 p.m. EST yesterday afternoon.  This is worth reading.

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Chevron Slashes 23% of Pennsylvania Workforce as U.S. Rig Count Collapses to June 2010 Lows

For the 8th week in a row (something that hasn't happened since June 2009), U.S. total rig count plunged. This week's 90 rig drop to 1,543 is the largest so far (with oil rigs down 94 to 1,223 - lowest since Jan 2013).  The total rig count is now down 20% in the last 8 weeks to the lowest since June 2010 as it tracks the 4-month lagged oil price perfectly.

This is the 2nd biggest 8-week drop in 22 years. This - rather unsurprisingly - has led Chevron to decide to cut 23% of its Pennsylvania workforce "due to activity levels." Not 'unambiguously positive' as so many in the central planning bureaus would have everyone believe.

This brief Zero Hedge article showed up on their website at 1:14 p.m. EST yesterday---and this is the fourth article in a row from Dan Lazicki.  The chart in this story is worth the trip.

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Oil surges 8 percent as U.S. rig count plunges, shorts scramble

Oil prices roared back from six-year lows on Friday, rocketing more than 8 percent as a record weekly decline in U.S. oil drilling fueled a frenzy of short-covering.

In a rally that may spur speculation that a seven-month price collapse has ended, global benchmark Brent crude shot up to more than $53 per barrel, its highest in more than three weeks in its biggest one-day gain since 2009.

The late-session surge was primed by Baker Hughes data showing the number of rigs drilling for oil in the United States fell by 94 - or 7 percent - this week. Earlier gains were fueled by reports of Islamic State militants striking at Kurdish forces southwest of the oil-rich city of Kirkuk.

This Reuters article, filed from New York, put in an appearance on their Internet site at 4:28 p.m. EST on Friday afternoon---and once again I thank Dan Lazicki for sharing it with us.

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Seven Reasons Cheap Oil Can't Stop Renewables Now

Oil prices have fallen by more than half since July. Just five years ago, such a plunge in fossil fuels would have put the renewable-energy industry on bankruptcy watch. Today: Meh.

Here are seven reasons why humanity’s transition to cleaner energy won’t be sidetracked by cheap oil.

This very interesting Bloomberg article showed up on their website at 6:51 a.m. EST on Friday morning---and the stories from Dan just keep on coming.

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Looming Economic Collapse Scenarios facing the United States: Lessons from the Soviet Collapse

On the Global Research News Hour this week, we spend the hour discussing the looming collapse scenarios facing the United States with Russian-American engineer Dmitry Orlov.

Orlov’s perspective on collapse is informed by his extended trips to his former homeland before and during its collapse.

Orlov believes and states that the former Soviet Union was set up to be resilient in the face of collapse. This, he believes is not the case in the U.S. or Canada.

In this interview, Orlov also comments on the current situation with low oil prices, peak oil and its impact on agriculture, Russian moves in alignment with China, overtures toward the E.U., the politics of austerity, the Ukraine Civil War as Anglo-Imperialist Departure Strategy, and much more.

This hour long audio interview is embedded in this article that appeared on the globalresearch.com website on Monday---and for length reasons, had to wait for my Saturday column.  It's the first contribution of the day from Roy Stephens.  It's worth your while if you have the time.

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6 Videos That Show How Drones are Revolutionizing Architecture and Landscape Photography

Photographer Iwan Baan travels the world, living out of a suitcase and hotel rooms exclusively, in order to document architectural marvels in far-flung locales like the middle of Africa and China. For an advocate of aerial vantage points, drones are often the only way to get up in the air and show the surroundings and the context to give a sense of place within the city or environment. These are photographs and videos that would not have been possible without the remote-controlled technology, exposing new parts of the world.

Similarly, Sir Norman Foster recently narrated a drone video tour of the Hearst Tower in New York City, a polished 3-minute edit that offers a glimpse inside the normally secret building — with the permission of Hearst, of course. While the video shows architecture in an amazing (albeit officially sanctioned) new light, there are other, more subversive uses of unmanned aerial vehicles and photography that are pushing our ideas of privacy, voyeurism, the media, visual trespassing, and even ownership and political resistance. This technology is changing the way we access previously hard-to-reach places, which has potential to open up new territories and expose previously unseen sites, giving the power of producing media transparency to anyone who can fly a remote-controlled aircraft.

This very interesting article was posted on the architizer.com Internet site on Thursday, January 22---and I thank Roy Stephens for sending it my way last Saturday.  For obvious content reasons, it had to wait for today's column.

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Oil Cash Waning, Venezuelan Shelves Lie Bare

Mary Noriega heard there would be chicken.  She hated being herded “like cattle,” she said, standing for hours in a line of more than 1,500 people hoping to buy food, as soldiers with side arms checked identification cards to make sure no one tried to buy basic items more than once or twice a week.

But Ms. Noriega, a laboratory assistant with three children, said she had no choice, ticking off the inventory in her depleted refrigerator: coffee and corn flour. Things had gotten so bad, she said, that she had begun bartering with neighbors to put food on the table.

“We always knew that this year would start badly, but I think this is super bad,” Ms. Noriega said.

Venezuelans have put up with shortages and long lines for years. But as the price of oil, the country’s main export, has plunged, the situation has grown so dire that the government has sent troops to patrol huge lines snaking for blocks. Some states have barred people from waiting outside stores overnight, and government officials are posted near entrances, ready to arrest shoppers who cheat the rationing system.

This article showed up on The New York Times website on Thursday---and it's the third offering in a row from Roy Stephens.

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Cross-border workers to be paid in euros due to strong Swiss franc

As part of a bid to offset the impact of the surging Swiss franc, companies are resorting to paying employees in euros or handing heavier salary cuts to cross-border workers. But unions warns the practice could be illegal.

Labour unions attest that Graubünden-based road transport company Della Santa informed its employees through an SMS to furnish bank details of a euro account for payment of wages. The company employs around 100 people. Unions denounced the company’s policy, calling it illegal, and also warned that such practices could lead to a more permanent lowering of salary levels.

“Considering that Italy-based workers get a salary hike of 20% compared to the Swiss, we’ve decided to create new work contracts that stipulate an exchange rate of 1.22 francs to the euro,” explained company owner and director Romano Della Santa. However, he added that employees will continue to be paid family support contributions in francs.

This news item showed up on the swissinfo.ch Internet site at 12:16 p.m. Europe time yesterday afternoon---and I thank South African reader B.V. for sending it our way.

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Greece’s finance minister vows to shun officials from troika

The battle lines between Greece and its creditors were drawn in Athens as the Greek finance minister announced that the new government would refuse to engage with representatives of the country’s hated troika of lenders.

Standing his ground after talks in the capital with Jeroen Dijsselbloem, head of the eurogroup of E.U. finance ministers, Yanis Varoufakis said Greece would not pursue further negotiations with the body of technocrats that has regularly descended on the country to monitor its economy. Nor would it be rowing back on election-winning pledges by asking for an extension to its €240bn (£180bn) bailout programme. “This platform enabled us to win the confidence of the Greek people,” Varoufakis said, insisting that the logic of austerity had been repudiated by voters when the far-left Syriza party stormed to victory in Sunday’s election.

Greece has lost more than a quarter of its GDP, the worst slump in modern times, as a result of consecutive waves of budget cuts and tax rises enforced at the behest of creditors. Varoufakis and the new Greek prime minister, Alexis Tsipras, who also met Dijsselbloem on Friday, are adamant that the government will deal only with individual institutions and on a minister-to-minister basis within the E.U. They have vowed to shun auditors appointed by the troika of the EU, the European Central Bank and the International Monetary Fund.

This news story showed up on theguardian.com Internet site at 6:21 p.m. GMT on Friday---and it's the second contribution in a row from reader B.V.

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Greece’s Feisty Finance Minister Tries a More Moderate Message

In the first days after the election victory of the leftist party Syriza in Greece, Yanis Varoufakis, the new finance minister, has lobbed some rhetorical grenades, referring to his country’s foreign-imposed austerity budgets as “fiscal waterboarding” and calling Greece’s international bailout deals “a toxic mistake.”

Now, faced with the need to make good on promises to negotiate debt relief for his beleaguered nation, he seems eager to send a more moderate message.

“People have described this as a Wild West showdown,” he said, sighing in frustration, “but it is not a ‘yes or no, take it or leave it’ situation.”

Settling onto a couch, Mr. Varoufakis — a self-described “accidental economist” and “erratic Marxist” — sketched out what he said was the heart of the problem: Greece’s debt is unsustainable and austerity constituted “fiscal waterboarding, where we are constantly having our head held under water."

This essay/interview put in an appearance on The New York Times website on Thursday sometime---and I thank reader Michael Cheverton for bringing it to our attention.

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The game is up. It’s time for Greece to leave the eurozone and move on

It’s time for Greece to leave the euro, default on its debt and move on. I write this with a heavy heart as the short-term consequences for ordinary Greeks could be disastrous, but there is now no other practical way out.

Syriza is serious about change and simply will not honour the country’s debts or stick to international agreements. Germany is equally serious about not accepting a debt write-off. A N24/TNS poll shows that 43pc of Germans are unwilling to negotiate debt relief or a longer loan repayment schedule with Greece. As to Brussels, the European Commission president Jean-Claude Juncker has said that “there’s no question of writing down Greek debt”. The stand-off will escalate, and escalate further. Neither side will blink, which means that a Grexit and default is now almost inevitable.

At least 77pc of Greek government debt is owned by official bodies or governments, according to Open Europe, rather than the private sector, so a massive default won’t be catastrophic for private institutions. Anybody with any sense will have seen this coming, and sold as much Greek debt as they could get away with.

Sadly, Alexis Tsipras, the new prime minister, is a delusional socialist. He doesn’t want to privatise state assets and leads a party that doesn’t accept economic reality. But even though his analytical framework is entirely wrong, some of his conclusions are actually right. The Greeks have suffered far too much in recent years, and something needs to change. The problem is that the Tsipras way will inevitably lead to disaster in the long run.

This commentary appeared on the telegraph.co.uk Internet site at 8:48 p.m. GMT on Thursday evening---and it's another offering from reader B.V.

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Is Democracy Dead In The West? — Paul Craig Roberts

We will find out the answer to the question posed in the title in the outcome of the contest between the new Greek government, formed by the political party Syriza, and the ECB and the private banks, with whose interests the EU and Washington align against Greece.

The Spartans, whose red cloaks and military prowess struck fear into the hearts of both foreign invaders and Greek opponents in the city-states, are no more. Athens itself is a ruin of its historical self. The Greeks, who were once to be contended with, who were able with 300 Spartans, supplemented with a few thousand Corinthians, Thebans, and other warriors, to stop a one hundred thousand man Persian army at Thermopylae, with the final outcome being the defeat of the Persian fleet in the Battle of Salamis and the defeat of the Persian army in the Battle of Plataea, are no more.

The Greeks of history have become a people of legend. Not even the Romans were able to conquer Persia, but little more than a handful of Greeks stopped the attempted Persian conquest of Greece.

But the Greeks, despite their glorious history, could not stop their conquest by the EU and a handful of German and Dutch banks. If the Greece of history still existed, the EU and the private banks would be cowering in fear, because the EU and the private banks have ruthlessly exploited the Greek people and represent the same threat to Greek sovereignty as Persia did.

This must read commentary on Greece by Paul showed up on his website on Thursday sometime---and it's courtesy of reader B.V.

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Merkel's Unintended Creation: Could Tsipras' Win Upset Balance of Power in Europe?

Alexis Tsipras couldn't have picked a more symbolic place to show his voters that he is a prime minister like no other Greece has seen before -- -- and that he is truly serious about standing up to the Germans.

On Monday, right after he was sworn in, he was chauffeured in his sedan to the Kesariani rifle range, a memorial to Greek resistance fighters that is revered in the country as the "altar of peace."

It was here, on the outskirts of Athens, that German occupying troops shot a total of some 600 resistance fighters -- some just before the end of the war, on May 1, 1944 -- along with roughly 200 communists from the Haidari concentration camp. The youngest victim was only 14 years old.

As Tsipras stepped out of his car and made his way through the park to the memorial stone, several hundred people crowded around him. People reached out to touch, congratulate, hug and kiss him. The few bodyguards surrounding the politician barely shielded him from the crowd. Alexis Tsipras, 40, the youngest prime minister in Greek history, also intends to be its most unusual leader -- a man of the people who is determined to fundamentally change his country.

This longish essay appeared on the German website spiegel.de at 8:31 p.m. Europe time on their Friday evening, which was 2:31 p.m. in New York.  It's definitely worth reading---and I thank Roy Stephens for finding it for us.

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George Friedman: The New Drivers of Europe's Geopolitics

For the past two weeks, I have focused on the growing fragmentation of Europe. Two weeks ago, the murders in Paris prompted me to write about the fault line between Europe and the Islamic world. Last week, I wrote about the nationalism that is rising in individual European countries after the European Central Bank was forced to allow national banks to participate in quantitative easing so European nations wouldn't be forced to bear the debt of other nations. I am focusing on fragmentation partly because it is happening before our eyes, partly because Stratfor has been forecasting this for a long time and partly because my new book on the fragmentation of Europe — Flashpoints: The Emerging Crisis in Europe — is being released today.

This is the week to speak of the political and social fragmentation within European nations and its impact on Europe as a whole. The coalition of the Radical Left party, known as Syriza, has scored a major victory in Greece. Now the party is forming a ruling coalition and overwhelming the traditional mainstream parties. It is drawing along other left-wing and right-wing parties that are united only in their resistance to the E.U.'s insistence that austerity is the solution to the ongoing economic crisis that began in 2008.

The story is well known. The financial crisis of 2008, which began as a mortgage default issue in the United States, created a sovereign debt crisis in Europe. Some European countries were unable to make payment on bonds, and this threatened the European banking system. There had to be some sort of state intervention, but there was a fundamental disagreement about what problem had to be solved. Broadly speaking, there were two narratives.

This very interesting commentary is worth reading if you have the time---and/or the interest.  It appeared on the stratfor.com Internet site on Wednesday---and was awaiting a spot in today's column.  I thank Dan Lazicki for sending it our way.

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Stratfor Chief's "Ukraine: The Most Blatant Coup in History" Interview Translated in Full

KOMMERSANT: What is the goal of U.S. policy as far as Ukraine is concerned?

GEORGE FRIEDMAN: For all of the last 100 years Americans have pursued a very consistent foreign policy. Its main goal: to not allow any state to amass too much power in Europe. First, the United States sought to prevent Germany from dominating Europe, then it sought to prevent the USSR from strengthening its influence.

The essence of this policy is as follows: to maintain as long as possible a balance of power in Europe, helping the weaker party, and if the balance is about to be significantly disrupted -- to intervene at the last moment. And so, in the case of the First World War, the United States intervened only after the abdication of Nicholas II in 1917, to prevent Germany from gaining ground. And during WWII, the U.S. opened a second front only very late (in June 1944), after it became clear that the Russians were prevailing over the Germans.

What is more, the most dangerous potential alliance, from the perspective of the United States, was considered to be an alliance between Russia and Germany. This would be an alliance of German technology and capital with Russian natural and human resources.

KOMMERSANT: Today, who in your opinion is the United States trying to restrain?

GEORGE FRIEDMAN: Today the U.S. is seeking to block the emergence of a whole range of potential regional hegemons: Serbia, Iran, Iraq. At the same time, the U.S. authorities take advantage of diversionary attacks. For example, in a battle, when the enemy is on the verge of achieving victory, you hit him in the side get him off balance. U.S. does not seek to "defeat" Serbia, Iran or Iraq, but they need to create chaos there, to prevent them from getting too strong.

If I had to put my marker down on one story in today's column that tops the absolutely, positively must read category---this would be it.  It appeared on the russia-insider.com Internet site on Tuesday, January 20---and my thanks go out to Brad Robertson for bringing it to my attention, and now to yours.

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John Batchelor interviews Stephen F. Cohen about the Ukraine imbroglio

"We are at a serious turning point."

This is almost too depressing to discuss. Washington support for Ukraine continues on several fronts. Washington, Kiev, and NATO all seem comfortable with supporting each other about everything from re-writing Russia's history in WW2 to looking positively on NATO military support for Kiev against the Eastern rebels and Russia. Poroshenko has even vowed to retake the Crimea once the Donbass is dealt with effectively by a NATO bolstered Kiev military.

Cohen firmly states that the understanding in Russia and to any thinking person is effectively the escalation of a civil war in Ukraine to a proxy war with Russia and the West. Again he emphasizes that all this is going on virtually no press treatment or discussion in the United States. This effectively means that Washington will be going to war without its own population ever being really aware of any real facts behind the conflict. Was the average German citizen in pre-war Germany any better informed?

Of additional interest, the Russian economy was discussed; the repercussions of what would happen if Russia was denied access to the SWIFT system were looked at in detail. Cohen has looked into this in similar detail as Paul Craig Roberts and other notables (China would help if necessary) but with the caveat that should Russia be isolated financially, it would be seen as an act of war and that a Russian response could involve confiscation of Western assets with Russia. Again we are reminded that although Russia is hurting, it is far from out for the count and its blow back efforts would hurt the West severely. From my perspective Putin is trying to avoid war with Washington that shows every sign of having war as a goal or is simply too incompetent to deal with the situation. Cohen states that Obama apparently has passed the baton to V.P. Biden and wonders why?

This 39:55 minute audio interview appeared on the johnbatchelorshow.com Internet site on Tuesday, January 27---and I thank Larry Galearis for sharing it with us.

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Russia Retreats From Ruble Defense in Surprise Interest-Rate Cut

Russia unexpectedly backed away from its efforts to prop up the ruble, cutting interest rates just weeks after taking them to an 11-year high and signaling policy makers are now focused on mitigating an economic slump that threatens to destabilize the financial system.

The central bank lowered its benchmark rate to 15 percent from 17 percent, spurring a wave of ruble selling that drove it down as much as 4 percent against the dollar to levels not seen since panic swept across Moscow’s financial markets last month. The interest-rate cut surprised all but one of the 32 economists surveyed by Bloomberg.

Central bank Governor Elvira Nabiullina has come under pressure from officials and business leaders, including billionaire Oleg Deripaska, who’ve warned that the economy will grind to a halt and undermine banks unless rates come down. The central bank had raised the benchmark rate six times last year, including a 6.5-point increase in December that was the biggest since 1998, to defend the ruble and tame inflation stoked by international sanctions related to the Ukraine conflict.

This Bloomberg news item, co-filed from Moscow and London, appeared on their website at 3:32 a.m. Denver time yesterday morning, which was 1:32 p.m. Moscow time on their Friday afternoon.  It's definitely worth reading if you have the time---and I thank West Virginia reader Elliot Simon for his lone contribution to today's column.

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Doug Noland: Dangerous Games of Chicken

It’s difficult to imagine more challenging analysis.  The global nature of the current Credit Bubble creates dynamics and complexities dissimilar to previous Bubble cycles.  There are extraordinary uncertainties – in hyper-speculative global markets, in experimental policy making, in unsettled societies and unstable geopolitics.  Never have market perceptions mattered as much.  And never before has global activist monetary management so impacted market sentiment and prices – well, at least going back to the late-twenties.

I have written that I am these days more worried than in 2007, and back then I was quite apprehensive.  And while today’s global risks dwarf those of 2007, complacency and faith in central bankers have become so deeply embedded in securities and derivative prices.  Never has there been such extreme divergence between inflating securities markets and deflating future prospects.  As an analyst of Bubbles, I contend with the inevitable “chicken little” issue.

This week offered important confirmation of my global macro thesis.  Greece, a eurozone member, has a democratically elected radical party now controlling parliament and a leftist government led by a charismatic radical prime minister.  A deeply disillusioned people have spoken, and they’re fed up with Greek affairs being dictated from Brussels and Berlin.  Post-Bubble dislocation and ongoing policy-induced wealth redistribution finally reached the breaking point.  Sunday’s Greek election has left wing, right wing, anti-euro and anti-establishment parties throughout Europe further emboldened.  Greece is now moving rapidly toward a conflict with the EU, with potentially profound consequences for global markets.  The “Game of Chicken” has officially commenced.

Because the credit bubble has now enveloped the whole planet, I thought it best that I insert Doug's weekly Credit Bubble Bulletin at this point in the Critical Reads section.  Although somewhat on the longish side, it always falls into the absolute must read category---and always for very good reason, especially in the circumstances we find ourselves in today.  So please find the time to digest this sometime between now and when my Tuesday column appears.  It was posted on his creditbubblebulletin.blogspot.ca Internet site late on Friday evening---and I found it all by myself!

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Sprott Money Weekly Wrap Up

Listen to Eric Sprott share his thoughts on the ongoing volatility in currency markets, the truth behind recent U.S. economic data and the state of all economies, and Thursday’s raid on silver.

This 7:39 minute audio interview with Eric was conducted by sprottmoney.com's Geoff Rutherford---and it was posted on their website yesterday.

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Gold supply to continue in surplus this year – GFMS

The latest update of the annual study by GFMS of world gold supply and demand makes for some interesting reading, and correspondingly interesting interpretations of the figures by the media. Mineweb has reported one such analysis suggesting that India has re-overtaken China as the World No. 1 gold consumer and some figures published within the report suggest that this may be the case – but this may well depend on what the interpretation of consumption actually is. The GFMS report suggests that Indian jewellery fabrication at 690 tonnes overtook that of China during the year, but appears to make no such bald statement that total Chinese demand fell back below that of India, although there are figures within the report which suggest this could be the case.

The GFMS report does note also, however, that Shanghai Gold Exchange (physical gold) withdrawals came in at just over 2,100 tonnes for the year and if this has not been ‘consumed’ one has to wonder where it is all going.  Indeed even published figures on gold exports from Hong Kong, plus GFMS estimates on China’s own gold output come to a total of over 1200 tonnes alone and we have demonstrated here that Hong Kong is losing its place as being a proxy for total Chinese gold imports.

This was shown by noting the published data from the USGS that 32% of U.S. gold exports in October went to mainland China directly rather than via Hong Kong – a pattern which started in September.  We are pretty certain that a good proportion of other export flows – notably from Switzerland – are also going direct to the mainland rather than in total via Hong Kong. The latter thus remains a very important import route for China’s gold but no longer quite as important as it used to be. Again overall this suggest that Chinese consumption may be considerably higher than the GFMS report appears to suggest.

Lawrie carves GFMS a new one, but in much too gentle a fashion to suit me.  Maybe he's one of those proper English gentleman who won't say what he really thinks.  Any report from GFMS, CPM Group, the World Gold Council---and The Silver Institute, should be read with your bulls hit meter on its high gain setting.  They are all anti-precious metal organizations.  Lawrie's commentary, filed from London, is certainly worth your while---and it was posted on the mineweb.com Internet site at 3:23 p.m. GMT on their Friday afternoon.  I thank reader U.M. for another contribution to today's column.

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New Greek government opposes Canadian company's gold mine

Greece's new left-wing government will cancel plans to sell the state natural gas utility and is firmly opposed to a Canadian-run gold mine that is among the biggest foreign investment projects in the country, the energy minister told Reuters.

The comments on Friday by Panagiotis Lafazanis, who represents the more radical wing of the ruling Syriza party, further reinforces early signs that the government is sticking to campaign pledges that have chilled investment and unnerved financial markets.

The Skouries gold mine operated by Vancouver-based Eldorado Gold Corp. in northern Greece was the flagship project of the last government's foreign investment drive and considered a test case that would reveal whether Greece could protect foreign investors despite local opposition.

"We are absolutely against it and we will examine our next moves on it," Lafazanis, a 63-year-old former Communist, told Reuters at his new ministerial office. He declined to say if the government would try to block the project from going ahead.

This was a surprise---and I'll be more than interested in how this shakes out in the weeks and months ahead.  Foreign investment in a country such as Greece is hard to come by in the current political and business environment---and he should be kissing their mining boots, giving them thanks that they're there at all.  But what is obviously lost on this guy is the fact that it's really a money mine.  I found this Reuters story, filed from Athens yesterday, on the gata.org Internet site.

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India's NCDEX plans to introduce India gold futures contract

National Commodities and Derivative Exchange (NCDEX) is planning a contract in the gold futures segment that includes delivery of gold refined by Indian companies. The contract has already received regulatory approval.

Earlier, NCDEX, primarily an exchange for agro commodities, had tried to introduce new gold contracts to expand its share in the non-agro commodities segment. It had introduced a gold hedging contract that reflected international gold prices alone.

Initially, two contracts will be launched in the futures segment — for 100g and one kg. While due-diligence of refiners is underway, chartered accountancy firm MM Chitalia has been appointed for financial due-diligence. Feedback from customers in this regard has been received.

This brief news item, filed from Mumbai, showed up on the business-standard.com Internet site at 10:53 p.m. IST on their Friday evening---and I thank Manitoba reader U.M. for her final contribution to today's column.

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Foreign Producers Struggle as China Scraps Rare Earth Export Quotas

On December 31, 2014, China’s Ministry of Commerce announced that it had scrapped the quotas restricting exports of rare earth minerals and would replace them with a system of export licenses. The change follows China’s unsuccessful appeal of the World Trade Organization’s (WTO’s) March 2014 ruling that found the quotas were designed to benefit domestic firms and encourage foreign investment.

The export quotas had been in place since 2000 and raised shortage concerns in importers. In 2010, China’s drastic lowering of the quota triggered a sharp increase in the price of rare earth minerals, causing the U.S., the European Union and Japan to formally lodge a trade complaint in the WTO in March 2012.

Rare earth elements are the 17 minerals used to make hi-tech products such as hybrid cars, weapons, and mobile phones. China is the world’s biggest producer of rare earth elements and met 97 percent of global demand from 2005 to 2010.

China is also the world’s largest consumer of rare earth materials, with the country’s downstream industry consuming 70 percent of global production. Permissive climate regulations in China compared with Western jurisdictions mean that China is a leader in rare earth processing. For example, U.S.-based Molycorp sends its rare earth minerals to be processed in China because of strict environmental regulations in its home country.

This interesting news item put in an appearance on the asiabriefing.com Internet site back on January 19---and I thank John Archer for sliding it into my in-box late last night.

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BOOM: SGE Withdrawals Week 3, 2015: 71 tonnes!

As I wrote last time on data from the Shanghai Gold Exchange (SGE), in week 2 of 2015 withdrawals from the vaults of the SGE (that equals Chinese wholesale demand) came in extremely high at 70 tonnes; the third highest amount ever. In week 3 (January 19 – 23), though, the Chinese withdrew even more at 71 tonnes, up 0.89 % w/w, and a new third highest amount ever. Year to date 202 tonnes have been withdrawn from the SGE vaults, up 15 % y/y. Like last week, this was happening while the price of gold was rising sharply, staggering numbers.

It’s still a mystery why mainstream media are not tracking weekly SGE withdrawals. I’ve read all over the news that Russia’s central bank has added 152 tonnes of gold in total to its reserves in 2014. In perspective, this is approximately the same amount of gold China has imported in the first three weeks of 2015.

This must read gold-related story appeared on the Singapore website bullionstar.com yesterday---and the first person through the door with it was Dan Lazicki.

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The IMF’s Gold Depositories – Part 1, The Legal Background

The International Monetary Fund (IMF) is the world’s third largest official sector holder of gold behind the United States and Germany. According to the Fund’s web site, as at October 2014 “the IMF holds around 90.5 million ounces (2,814.1 metric tons) of gold at designated depositories.

The IMF’s gold holdings were accumulated between 1946 and the late 1970s via Members’ initial quota subscriptions to the Fund, various quota increases, and through a number of additional methods where a Member either sold gold to the Fund or transferred gold to the Fund as part of a repayment obligation. Likewise, gold sometimes flowed in the other direction back to Members, in payment for a Member’s currency, during the 1970s gold restitutions, and via other sales to Members.

With renewed interest in central bank and official gold holdings at international storage locations, it is worth examining what exactly the IMF means by designated depositories and which specific depositories its gold was deposited into.

This absolute must read commentary by Ronan Manly appeared on the bullionstar.com Internet site on Friday---and I thank Dan Lazicki for his final offering in today's column.

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¤ The Funnies

I finally got around to downloading the photos of my vacation in Arizona---and here are a couple of photos I took of a Curve-billed thrasher while I was having lunch at the Desert Botanical Garden in Phoenix.  It's a pretty decent-sized bird, although rather nondescript as far as colouring goes.  But since I'd never see one, or heard of them before, it was fair game.  I took about 25 photos in total---and kept three of them.











Drilling Intersects 102 Meters of 1.97 gpt Gold at Columbus Gold’s Paul Isnard Gold Project; Drilling Confirms Depth Extension of Gold Mineralization

Columbus Gold Corporation (CGT: TSX-V) (“Columbus Gold”) is pleased to announce results of the initial five (5) core drill holes at its Paul Isnard gold project in French Guiana. The holes confirm depth extension of gold mineralization below shallow holes drilled on the 43-101 compliant 1.9 million ounce Montagne d’Or inferred gold deposit at Paul Isnard in the 1990’s and support the current program of resource expansion through offsetting open-ended gold mineralization indicated by the earlier holes.

Robert Giustra, CEO of Columbus Gold, commented: “These drill results validate Columbus Gold’s approach to adding ounces with a lower-risk drilling program designed to infill and to extend the mineralized zones to 200 m vertical depth from surface; a depth amenable to open pit mining.”

Fourteen (14) holes have been completed (assays pending) by Columbus Gold in the current program and drilling is progressing at the rate of about 3,000 meters per month with one drill-rig on a 24 hour basis. Columbus Gold plans to accelerate the current program by engaging a second drill-rig as soon as one can be obtained.

Please visit our website for more information about the project.

 

¤ The Wrap

It’s not entirely clear what will happen in the near term, but the financial markets are already pushed to extremes by central-bank induced speculation. With speculators massively short the now-steeply-depressed euro and yen, with equity margin debt still near record levels in a market valued at more than double its pre-bubble norms on historically reliable measures, and with several major European banks running at gross leverage ratios comparable to those of Bear Stearns and Lehman before the 2008 crisis, we're seeing an abundance of what we call "leveraged mismatches" - a preponderance one-way bets, using borrowed money, that permeates the entire financial system. With market internals and credit spreads behaving badly, while Treasury yields, oil and industrial commodity prices slide in a manner consistent with abrupt weakening in global economic activity, we can hardly bear to watch. - John P. Hussman, 26 January 2015

I was a happy camper to see the precious metal price charts when I powered up my computer late yesterday morning---and even happier to see their associated equities up even more than they had lost on Thursday.  On top of that, these price moves occurred on a Friday---and the last trading day of the month to boot.  I must admit that I was expecting the worst.  I'll take all of that as a good omen, at least for the moment.

But always front and center for me is the butt-ass ugly Commercial net short position in both silver and gold that currently exists in the COMEX futures market in both these metals.  Since "da boyz" have never been over run, I must admit that I'm always mentally at "battle stations" when the current short positions are over the moon like they are now.

Of course---and as Ted Butler has mentioned many times over the years---the day may come when what's happening in the COT Report will mean nothing in the grand scheme of things.  And with all the black swans out there, that day could be approaching---or not.

How much more downside potential in both gold and silver is now dependent almost entirely on whether JPMorgan et al can entice the Managed Money traders show in the Disaggregated COT Report to not only puke up what's left of their fast-dwindling long positions, but they must also be able to coax these same traders onto the short side in a big way as well.  That---and that alone Ted said---will determine how low the Big 8 Commercial traders can engineer the respective prices of these two precious metals.

So we wait some more.

Once again, here are the 6-month charts for the Big 6 commodities and, with only palladium being the exception, they all rallied smartly yesterday.  And whether this is a harbinger of things to come in a world where paper assets and currencies are looking increasingly risky, is hard to say at the moment.  But when that change does manifest itself, as it certainly will at some point, it will be in these six commodities---and especially gold and silver---where it will show up first.

I forgot all about my two "blasts from the past" until I was running Spellcheck in preparation for sending today's column out the door.  It's already 5:30 a.m. EST---and I'm just not up to writing anything to go with my selections on such short notice.  So the link to the pop "blast from the past" is here---and the classical "blast from the past" is here.  I'll do better next week.

As things stand today, I see an almost hopeless future ahead in no matter which arena I look---economic, financial, monetary or political---and it's all rooted in the fact that our entire planet is now confronted with a failed financial and economic experiment in fiat paper money that is now on its very last legs.

The powers that be in the world's central banks are more than terrified of what now appears to be a world-wide deflationary spiral that no amount of money-out-of-thin-air will ever fix---and whether it can all by saved by the IMF's Special Drawing Rights backed by some sort of gold component, is open to debate.

I know Jim Rickards has been going on about this for a very long time---and expended a lot of ink on it his last book "The Death of Money: The Coming Collapse of the International Monetary System".  But if this new monetary system is, in fact, in our future---there hasn't been a peep about it in the main stream press---and I've been looking hard.

Jim also mentioned the fact that the world's current and financial economic system won't make it past the next couple of years---and he said that about a year ago, so time is running out.  So his "chaos" theory may end being the only game in town until the IMF gets its act together, if it ever does.  Because if they're currently working on it, it's certainly the best kept secret on Planet Earth at the moment---which it would have to be, I suppose.

And commensurate with any new monetary system, it's pretty much a given that gold and silver will be repriced to fit their newly appointed rolls as money par excellence.

That's all I have for today---and it's more than enough.

Go Patriots!!!

See you on Tuesday.

Ed Steer