Gold & Silver Daily

¤ Yesterday In Gold & Silver

The gold price didn't do a lot until the London open---and things got a bit more interesting from point onward.  The activity that counted was the rally that began at 1 p.m. GMT in London, which got capped less than 20 minutes later---and minutes before the COMEX open---as gold headed above the $1,200 spot price mark with a vengeance and touched its 50-day moving average in the process.  Then the HFT boyz and their algorithms worked their magic at 11:40 a.m. EST---and within 15 minutes had the gold price down about $12.  From there it chopped quietly higher for the remainder of the the COMEX and electronic trading session, managing to close above the $1,200 spot price mark without further incident.

The low and high ticks were reported by the CME Group as $1,186.10 and $1,207.60 in the December contract.

Gold finished the Friday session at $1,202.10 spot, up $7.60 from Thursday's close.  Gross volume was way over 200,000 contracts once again, but netted out to only 155,000 contracts---which is still a huge amount.

It was more or less the same chart pattern in silver but, looking at the Kitco silver chart below, it was even more obvious that the price wanted to fly---and it took the usual judicious interference by the not-for-profit sellers to prevent that from happening.

The low and high ticks were recorded as $16.095 and $16.60 in the December contract---and intraday move of more than 3%.

Silver finished the day at $16.445 spot, up 19.5 cents from Thursday's close---and if left to its own devices, could just as easily have closed up $19.50---or more.  Gross volume was a hair under 100,000 contracts, but netted out at 46,000 contracts, which is still a chunky number.

Platinum traded pretty flat, but with a positive bias, until an hour before Zurich opened.  Then it rallied another $12 or so until it got sold down with the gold price starting just before lunch in New York---and after 1 p.m. EST, it traded ruler flat into the 5:15 p.m. close of electronic trading.  Platinum closed up $18 on the day.

The palladium chart was somewhat similar, but the rally that developed an hour before the Zurich open really had some legs until a thoughtful seller put an end to it all at 9 a.m. EST in New York.  It had another spike higher starting around 12:30 p.m.---but that got hammered flat starting at 1 p.m. in New York---and after 2 p.m. it traded flat before popping a few bucks right at the close.  Palladium closed up $22, but would have taken the $800 spot price out with ease if it had been allowed to do so.

The dollar index closed late on Thursday afternoon in New York at 87.70---and hit its 87.46 low tick around 10:30 a.m. Hong Kong time.  From there it struggled upward until minutes after the London open---and then blasted higher.  It hit its 88.37 high tick shortly after 1 p.m. in New York---and then gave up a handful of basis points going into the close, as the index finished the Friday session at 88.265---up 56 basis points from Thursday's close.

You should carefully note that the huge rally in the dollar index had no impact on what was happening in the precious metal market yesterday.

Here's the six-month US Dollar Index chart--and my previous comments that the dollar rally was very long in the tooth got blown out of the water by yesterday's action.

The gold stocks gapped up---and had some decent gains in the bag until the HFT boyz showed up in the gold market around 11:30 a.m. EST---and the HUI only finished up 0.78%.  It was was up 3% at one point.

With some obvious variations, the silver equities followed a similar path---and Nick Laird's Intraday Silver Sentiment Indicator closed up 1.04%.

The CME Daily Delivery Report showed that four gold and zero silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.

The CME Preliminary Report for the Friday trading session showed that gold's November open interest dropped by 8 contracts---and is now down to 20 contracts---minus the 4 contracts mentioned in the prior paragraph, of course.  Silver's November o.i. continues to sit there unchanged at 88 contracts.

There were no reported changes in GLD yesterday---and as of 8:33 p.m. EST yesterday evening, there were no reported changes in SLV, either.

There was a tiny sales report from the US Mint.  They sold 34,000 silver eagles---and that was all.

Month to date, the Mint has sold 49,000 troy ounces of gold eagles---11,000 one-ounce 24K gold buffaloes---and 2,669,500 silver eagles.

Over at the Comex-approved depositories on Thursday, there was no gold reported received, but a very large withdrawal of 163,324 troy ounces was made out of the Scotiabank depository---and the link to that activity is here.

In silver, there were 50,000 troy ounces deposited---and 111,580 troy ounces reported shipped out.  All of the activity was at Brink's, Inc.---and the link that action is here.

Even though I had no preconceived opinion of what might be in yesterday's Commitment of Traders Report, I was still somewhat disappointed by what the report showed.

In silver, the headline number showed that the Commercial net short position increased by 755 contracts, or 3.8 million ounces, which wasn't a lot.  The Commercial net short position now stands at 90.9 million troy ounces.  In the Managed Money category of the Disaggregated COT Report, another 2,388 short contracts (Ted Butler's 'rocket fuel' for the next rally in silver) were covered at enormous profits.  Ted says that the raptors (the Commercial traders other than the Big 8) sold about 2,600 long contracts---contracts that can't be sold to suppress the price on the next big rally, so that's a positive.

Once again the Big 8 traders on the short side used the opportunity to cover as many short positions that they could.  Ted says that they covered about 1,800 contracts worth---1,000 by JPMorgan and the balance in the '5 through 8' category.  Ted also said that JPMorgan's short position appears to be something under 7,000 contracts.  He also added that it's entirely possible that JPMorgan is no longer in the Big 4 category---and could be in the '5 through 8' category by now.

In this COT Report, the 'Big 4' are net short 32,018 COMEX silver contracts.  In the November Bank Participation Report, there were '11 or more' non-US banks that were net short 19,225 COMEX silver contracts---and I estimated that at a minimum, Canada's Scotiabank held 17,000 of those contract all by themselves.  This made Scotiabank the 'King Silver Short' on the COMEX by a country mile---and the only bank left in the 'Big 8' category other than JPMorgan.  JPMorgan is the only silver short in the '3 or less' US banks that held COMEX silver contracts in the November Bank Participation Report, as the remaining two banks [or perhaps only one bank] in that category are [is] net long.

Since the remaining six traders in the 'Big 8' category aren't banks, US or foreign, then that leaves the investment houses, plus maybe the BIS and the US Exchange Stabilization Fund, as the only candidates left that hold title to these six spots.  I'd bet $10 that one of them might be Morgan Stanley---but as for the others, I haven't a clue.

In gold, the Commercial net short position increased by a very chunky 20,973 contracts, or 2.10 million troy ounces.  The Commercial net short position in gold now stands at 7.10 million troy ounces.  Ted says that the traders in the 'Big 8' category went short 8,000 contracts during the reporting week---and that it appeared that JPMorgan decreased their long-side corner in the COMEX gold market by 3,000 contracts---and is now down to around 18,000 contracts.

Under the hood in the Disaggregated COT Report, it was mostly the Managed Money on the other side of the Commercial traders, as they went long to the tune of 9,088 contracts---and covered an additional 8,697 short contracts.

Most of the activity contained in this COT Report in both metals is centered around the Friday, November 14 trading day, as little happened on any of the other days during the reporting week.

Here's Nick's "Days of World Production to Cover COMEX Short Positions" chart for all physical commodities traded there and, with the exception of the semipermanent position of cocoa, all four precious metals remain pinned to the far right-hand side of this chart, as they have been for the last 15 years.

My back-of-the-envelope calculation shows that Scotiabank and JPMorgan combined are short about 55 days of world silver production---almost half of the 115 days of world silver production that the 'Big 8' are short in Friday's COT Report, which is the green bar on the far-right side of the above chart.  That leaves the six remaining traders in the 'Big 8' category short the remaining 60 days between them.

Well, the Shanghai Gold Exchange posted their activity for the week ending on Friday, November 14---and they showed a 52.260 tonne withdrawal.  Here's Nick's most excellent chart showing the change.

Since it's the weekend, I always look forward to emptying out my inbox and letting you pick through them.


¤ Critical Reads

Sell, Sell, Sell---The Central Bank Madmen Are Raging

The global financial system has come unglued. Everywhere the real world evidence points to cooling growth, faltering investment, slowing trade, vast excess industrial capacity, peak private debt, public fiscal exhaustion, currency wars, intensified politico-military conflict and an unprecedented disconnect between debt-saturated real economies and irrationally exuberant financial markets.

Yet overnight two central banks promised what amounts to more monetary heroin and, presto, the S&P 500 index jerked up to 2070. That is, the robo-traders inflated the PE multiple for S&P’s basket of US-based global companies to a nosebleed 20X their reported LTM earnings.

And those earnings surely embody a high water mark in a world where Japan is going down for the count, China’s house of cards is truly collapsing, Europe is plunging into a triple dip, and Wall Street’s spurious claim that 3% “escape velocity” has finally arrived in the US is soon to be discredited for the 5th year running. So it goes without saying that if “price discovery” actually existed in the Wall Street casino, the capitalization rate on these blatantly engineered earnings (i.e., inflated EPS owing to massive buybacks) would be decidedly less exuberant.

In truth, nothing has changed about the precarious state of the world since yesterday. Except… except the Great Bloviator at the ECB made another fatuous and undeliverable promise—this time that he would do whatever he “must to raise inflation and inflation expectations as fast as possible”; and, at nearly the same hour, the desperate comrades in Beijing administered another sharp poke in the eye to China’s savers by lowering the deposit rate to by 25 bps to 2.75%.

David Stockman goes supernova in this article that appeared on his website yesterday sometime---and today's first offering is courtesy of Roy Stephens.


Jim Rickards: Why a US Rate Hike in 2015 Is Unlikely

Jim Rickards, chief global atrategist at West Shore Funds, says the US economy is still seeing below-trend growth and remains too weak to support an interest rate increase. Jim is also on record as saying that interest rates will never rise again.

This 3:32-minute CNBC video clip was posted on their Web site at 9:20 p.m. EST on Thursday evening---and it's courtesy of Harold Jacobsen.


Doug Noland: Memories - of 2012 and 2007

At the “Core of the Core,” historic market euphoria has pushed excess in U.S. equities and corporate Credit to precarious extremes (relative to rapidly deteriorating global financial and economic fundamentals). Concerted global central bank stimulus measures have exacerbated the divergence between inflated securities prices and deflating prospects for global growth and profits. Worse yet, the redistribution of wealth that accompanies the policy-induced inflation of the “Global Financial Sphere” is worsening already alarming geopolitical tensions. Global central banking and “risk free” government debt are at risk of being discredited.

Why would I contemplate that central bank measures might be losing ability to keep the global Bubble afloat? Over recent weeks we’ve seen the concerted efforts of team Yellen, Draghi, Kuroda and the PBOC have minimal impact on the fragile “Periphery.” Even Friday, on the back of Draghi and the Chinese, crude oil gave back much of an earlier 2.6% gain to close the week up only 69 cents. The Goldman Sachs Commodities index was only slightly positive for the week near multi-year lows. Curiously, Italian CDS increased added a basis point this week. Greek CDS traded to a 13-month high Thursday. Eastern European currencies traded down again this week. Data out of Europe has been just dreadful. Ukraine looks dangerous.

The Mexican peso declined 60 bps this week, trading at the lowest level versus the dollar since the summer of 2012. Mexico succumbing to EM contagion would be a major development. Meanwhile, here at the Bubble’s “Core,” this week saw the S&P Homebuilding Index jump 3.9% and the Morgan Stanley Retail Index rise 2.1% (to a record high). Yet there were a few interesting Bloomberg headlines: “Riskiest Junk Borrowers Imperiled as Yields Jump…;” “Munis Facing First Losses of 2014 as Record Win Streak Imperiled;” “Corporate Bond Spread Versus Treasuries Widens to Most in 2014;” “Bond Record in Sight as Sales Near $4 Trillion.” Now that’s something to ponder: A record $4.0 TN of international corporate bond issuance in the face of a faltering global Bubble. Like many things these days, it brings back (bad) memories of 2007.

Doug's Credit Bubble Bulletin was posted on the Internet site late on Friday evening---and it's always a must read. I found this item on my own before reader U.D. could send it to me.


Widespread Flooding Ahead for Snowy Western New York: Officials

Warm temperatures and rain were forecast for the weekend in the city of Buffalo and western New York, bringing the threat of widespread flooding to the region bound for days by deep snow.

Areas where several feet of snow fell this week should brace for significant, widespread flooding, the National Weather Service warned on Friday.

Swept by lake effect storms, parts of western New York including Buffalo, received as much as seven feet (2 meters) of snow, an amount equal to a year's worth of accumulation for the region. Such storms occur when cold air moves across warmer Great Lake waters and can dump heavy snowfall when they hit land.

This Reuters article appeared on their Web site at 12:19 p.m. EST on Friday---and it's the second offering of the day from Roy Stephens.


Bank of England Probes Whether Staff Helped Rig Money Auctions

The Bank of England has opened a formal investigation into whether its officials knew of -- and even facilitated -- the possible manipulation of auctions designed to inject money into the credit markets to alleviate the financial crisis.

The probe, which started in the summer, has been revealed just a week after the U.K. central bank published a report that criticised its own response to the foreign exchange rigging scandal.

The rest of this Financial Times story is subscriber protected---and I found it in a GATA release yesterday.


The Siege of Julian Assange Is a Farce

The siege of Knightsbridge is a farce. For two years, an exaggerated, costly police presence around the Ecuadorean embassy in London has served no purpose other than to flaunt the power of the state. Their quarry is an Australian charged with no crime, a refugee from gross injustice whose only security is the room given him by a brave South American country. His true crime is to have initiated a wave of truth-telling in an era of lies, cynicism and war.

The persecution of Julian Assange must end. Even the British government clearly believes it must end. On October 28, the deputy foreign minister, Hugo Swire, told Parliament he would "actively welcome" the Swedish prosecutor in London and "we would do absolutely everything to facilitate that". The tone was impatient.

The Swedish prosecutor, Marianne Ny, has refused to come to London to question Assange about allegations of sexual misconduct in Stockholm in 2010 - even though Swedish law allows for it and the procedure is routine for Sweden and the U.K. The documentary evidence of a threat to Assange's life and freedom from the United States - should he leave the embassy - is overwhelming. On May 14 this year, U.S. court files revealed that a "multi subject investigation" against Assange was "active and ongoing".

This essay by John Pilger was posted on the Asia Times Web site on Monday---and I thank UK reader Tariq Khan for sending it.  For obvious reasons, it had to wait for today's column.


Dutch Had Euro-Exit Plan at Height of Crisis

Details have emerged indicating that both the Dutch and German governments were preparing emergency plans for a return to their national currencies at the height of the euro crisis.

In early 2012, a few months after the then Greek prime minister Georgios Papandreou and his Italian counterpart Silvio Berlusconi had resigned, the Dutch finance ministry prepared for a scenario in which the Netherlands could return to its former currency.

Dutch TV documentary programme Argos Medialogica reported on Tuesday (18 November), based on anonymous sources, that the ministry had an emergency plan called Florijn, a reference the original name of the guilder, the Netherlands' pre-euro coin.

Current finance minister Jeroen Dijsselbloem also confirmed the existence of the plan on Tuesday in his weekly interview with RTLZ.

This very interesting article was posted on the Internet site at 9:53 a.m. Europe time on their Friday morning---and it's another offering from Roy Stephens.


Draghi Throws ECB Door Open to Money Printing as Global Prospects Dim

European Central Bank President Mario Draghi threw the door wide open on Friday for more drastic measures to prevent the euro zone from sliding into deflation, promising to use whatever means necessary as China also acted to boost its sagging economic growth.

With many fearing the euro zone could be heading for a Japanese-style lost decade of deflation and recession, Draghi's remarks were reminiscent of when he pulled the bloc back from possible disintegration in 2012 by promising to do "whatever it takes" to back the common currency.

Painting a bleak picture of the state of the 18 countries in the euro bloc, Draghi stressed that "excessively low" inflation had to be raised quickly.

In a blunt message, he said there was now no sign of improvement in the months ahead and the ECB would pump more money into the euro bloc if its current measures fell short.

This Reuters piece, filed from Frankfurt at 2:35 p.m. EST yesterday, is courtesy of West Virginia reader Elliot Simon---and it's definitely worth reading.


Poroshenko Gets Booed During Wreath-Laying at ‘Heavenly Hundred’ Memorial

On Friday activists booed Ukraine’s President Petro Poroshenko as he attended a wreath-laying ceremony at the ‘heavenly hundred’ memorial erected on Institutskaya Street in Kiev.

This Friday Ukraine celebrates the one-year anniversary of the beginning of the pro-Eurointegration protests last year that culminated in a putsch which ousted President Viktor Yanukovich. The people killed during the protests on Institutskaya Street were nicknamed “the heavenly hundred.” US Vice President Joe Biden, who is in Kiev to discuss offering assistance to Ukraine, was slated to participate in the ceremony but changed plans at the last minute. Biden is only the last in a series of US officials who went out of their way to show support for the protesters and the regime that they subsequently installed.

“Shame [on you]!”, “You’re awarding our heroes posthumously!” chanted the crowd that assembled on Friday, which included some of the relatives of the dead. One of the activists pointed out that those wounded during the February clashes at Maidan Square didn’t receive the special status that would’ve provided them with free access to the social and medical assistance they require.

Poroshenko made an attempt to calm the crowd but failed, and was forced to leave the ceremony amid the angry shouting.

This news item, filed from Moscow, appeared on the Internet site at 3:31 p.m. Moscow time yesterday afternoon---with was 7:31 a.m. EST.  I thank Roy Stephens for sending it.  The Internet site carried a similar story on Friday.  It was headlined "Ukraine’s Poroshenko heckled at anniversary of Kiev protest"---and it's courtesy of South African reader B.V.


US Congress to Pressure for Lethal Military Aid to Ukraine: Senator McCain

The newly elected U.S. Congress will pass resolutions and apply pressure to U.S. President Barack Obama to provide Ukraine with lethal military assistance, U.S. Senator John McCain told Sputnik news in a Friday interview.

"We [Congress] will be talking a lot about it. We will pass resolutions. We will put every amount of pressure we can on this recalcitrant administration," McCain said when asked about the Obama administration's ongoing refusal to provide lethal military aid to the government in Kiev.

The Senator, who is expected to assume the chairmanship of the Senate Armed Services Committee in 2015, does not know whether the efforts by Congress will be successful.

Whether the issue creates a major clash between the executive and legislative branches of the US government will "depend on whether they [the Obama administration] will see reality or not," McCain said.

This story, filed from Washington, was posted on the Internet site at 7:31 p.m. EST on Friday evening---and it's another offering from Roy Stephens.


Russia Warns US Against Supplying ‘Lethal Defensive Aid’ to Ukraine

Moscow has warned Washington a potential policy shift from supplying Kiev with “non-lethal aid” to “defensive lethal weapons”, mulled as US Vice President visits Ukraine, would be a direct violation of all international agreements.

A Russian Foreign Ministry spokesperson said that reports of possible deliveries of American “defensive weapons” to Ukraine would be viewed by Russia as a “very serious signal.”

“We heard repeated confirmations from the [US] administration, that it only supplies non-lethal aid to Ukraine. If there is a change of this policy, then we are talking about a serious destabilizing factor which could seriously affect the balance of power in the region,” Russian Foreign Ministry spokesman Aleksandr Lukashevich cautioned.

This news item was posted on the Russia Today Internet site at three minutes after midnight on Friday morning in Moscow---and I thank reader M.A. for his first contribution of the day.


John Batchelor Interviews Stephen F. Cohen on the Crisis in Ukraine

Few people in the world are more qualified to speak about the Ukraine and Russia than Stephen F. Cohen, NYU and Princeton professor Emeritus.

This 39:45-minute audio interview was posted on the Internet site on Tuesday---and for length and content reasons, had to wait for today's column.  I thank Larry Galearis for bringing it to our attention.  It's worth your while if you have the time---and interest.


Russia Signs Deal with Ukraine to Deliver Nuclear Fuel for 2015: Rosatom

Russia has signed a contract with Ukraine to deliver nuclear fuel for the country's nuclear energy plants in 2015, the head of Russian nuclear agency Rosatom said Friday.

"A contract for 2015 has been signed to deliver fuel for Ukraine's nuclear energy facilities," Sergei Kirienko said in a speech before a student assembly in Moscow.

The head of the Russian nuclear agency stressed that supplies of nuclear fuel to Ukraine had not been held up even once and shipments have been delivered to Ukraine as scheduled.

In September, Ukraine gave the green light to its nuclear power plants to receive supplies of upgraded nuclear fuel from the U.S. company Westinghouse, a move criticized by Rosatom as a political one.

Well, I sure hope the Russian company is getting paid up front for this, as I wouldn't want to extend a nickel's worth of credit to Ukraine right now.  This article appeared on the Web site at 2:24 p.m. Moscow time on their Friday afternoon, which was 6:24 a.m. EST.  It's courtesy of reader M.A., for which I thank him.


Pepe Escobar: Washington Plays Russian Roulette

These are bleak times. I've been in serious conversation with some deep sources and interlocutors - those who know but don't need to show off, privileging discretion. They are all deeply worried. This is what one of them, a New York strategic planner, sent me:

The propaganda attack against Putin equating him with Hitler is so extreme that you have to think that the Russians cannot believe their ears and cannot trust the United States anymore under any circumstances.

I cannot believe how we could have gotten ourselves into this situation to protect the looters in the Ukraine that Putin would have rid the Ukraine of, and even had the gall to place in a leadership role one of the worst of the thieves. But that is history. What is certain is that MAD [mutually assured destruction] is not a deterrent today when both sides believe the other will use nuclear weapons once they have the advantage and that the side that gains a decisive advantage will use them. MAD is now over.

That may sound somewhat extreme - but it's a perfectly logical extension, further on down the road, of what the Russian president intimated in his already legendary interview with Germany's ARD in Vladivostok last week: the West is provoking Russia into a new Cold War.

This absolute must-read commentary by Pepe was posted on the Asia Times Web site yesterday sometime---and the first person through the door with this essay was reader M.A.


Serbia Won’t Join Anti-Russian Sanctions Club Despite EU Pressure - Nikolic

Serbia is not planning to impose sanctions on Russia, said its President Tomislav Nikolic after meeting E.U. Commissioner Johannes Hahn. The latter said the EU expects Serbia to bring its policy in line with the European one if it seeks to enter the union.

Nikolic said that Serbia is not planning to introduce sanctions at the moment, though admitting the country is seeking E.U. membership which implies an obligation to pursue common policies, including foreign.

"What I heard from Hahn is the same what you have heard from him: Serbia is not an E.U. member and it can be independent in pursuing its foreign policy; but E.U. membership would have implied a commitment to pursue a common foreign policy," the President said at a media conference after talks with Hahn, E.U. Commissioner for Enlargement and Good-Neighbourly Relations visiting Belgrade on Thursday.

This is a follow-up story to the one I posted about this subject in yesterday's column.  It appeared on the Russia Today Web site at 7:40 p.m. Thursday evening Moscow time---and I thank reader M.A. for digging it up for us.


In a Shift, Obama Extends US Role in Afghan Combat

President Obama decided in recent weeks to authorize a more expansive mission for the military in Afghanistan in 2015 than originally planned, a move that ensures American troops will have a direct role in fighting in the war-ravaged country for at least another year.

Mr. Obama’s order allows American forces to carry out missions against the Taliban and other militant groups threatening American troops or the Afghan government, a broader mission than the president described to the public earlier this year, according to several administration, military and congressional officials with knowledge of the decision. The new authorization also allows American jets, bombers and drones to support Afghan troops on combat missions.

In an announcement in the White House Rose Garden in May, Mr. Obama said that the American military would have no combat role in Afghanistan next year, and that the missions for the 9,800 troops remaining in the country would be limited to training Afghan forces and to hunting the “remnants of Al Qaeda.”

The decision to change that mission was the result of a lengthy and heated debate that laid bare the tension inside the Obama administration between two often-competing imperatives: the promise Mr. Obama made to end the war in Afghanistan, versus the demands of the Pentagon that American troops be able to successfully fulfill their remaining missions in the country.

Since this story appeared on the New York Times Web site, I'm not sure how much of this is real---and how much is made up---so if you decide to read it, do so with an open mind.  I thank Roy Stephens for sending it to me late yesterday evening.


Russia and China: Akin to Porcupines Mating

That was how the slow and careful rapprochement between Russia and China has been described by Eric Margolis, one of my favorite geopolitical writers.

US shenanigans in Eastern Europe and the East China Sea—fomenting so-called colored revolutions in Ukraine and Georgia (both on Russia’s periphery) and egging on China’s neighbors to make aggressive territorial claims—have pushed the Russian bear and Chinese dragon together. In May, the two uneasy neighbors reached a de facto alliance represented by a 20-year, $400 billion deal for Russia to supply China with natural gas.

A Russia/China alliance shifts the Earth’s geopolitical axis. Historians may look back at the energy deal as the moment the post-Cold War era and the US’s singular position came to an end. The Russia/China team is now a consequential economic and military counterweight to the US. It will operate as an attractant for every country and every faction that for any reason resents the US’s giant footprint in world affairs.

This short, but worthwhile commentary appeared on the International Man Web site the other day.


Futures Soar on Surprise Chinese Rate Cut

Moments ago, as traditionally is the case, the Chinese central bank caught the world by surprise and cut rates, notably the deposit rate by 25 bps and the lending rate by 40 while allowing banks to offer interest of 1.2 times the benchmark rate.

This happens as many analysts had been calling for more easing from China for months to help stabilize the faltering economy, but also happens a day after as Bloomberg reported, "Distressed Debt in China? Ain’t Seen Nothing, DAC Says." Basically well over a year after promising deleveraging reforms and a lower trend line growth rate, one which would not see incremental monetary stimulus, Xi Jinping threw in the towel and joined Japan and Europe in aggressively pursuing greener pastures.

It also means that, as expected, China is now clearly paying attention to Japan's unprecedented currency destruction and as Albert Edwards noted a few weeks ago, now that China has finally broken the seal, it is only a matter of time before China also devalues its currency outright.

This Zero Hedge article from early Friday morning EST is definitely worth your while---and I thank reader M.A. for his final contribution to today's column.


China Building South China Sea Island Big Enough for Airstrip: Report

Satellite images show China is building an island on a reef in the disputed Spratly Islands large enough to accommodate what could be its first offshore airstrip in the South China Sea, a leading defense publication said on Friday.

The construction has stoked concern that China may be converting disputed territory in the mineral-rich archipelago into military installations, adding to tensions waters also claimed by Taiwan, Malaysia, the Philippines, Vietnam and Brunei.

IHS Jane's said images it had obtained showed the Chinese-built island on the Fiery Cross Reef to be at least 3,000 meters (1.9 miles) long and 200-300 meters (660-980 ft) wide, which it noted is "large enough to construct a runway and apron."

The building work flies in the face of U.S. calls for a freeze in provocative activity in the South China Sea, one of Asia's biggest security issues. Concern is growing about an escalation in disputes even as claimants work to establish a code of conduct to resolve them.

This Reuters article, filed from Washington, showed up on their Web site at 3:20 p.m. EST on Friday---and it's the final contribution of the day from Roy Stephens---and I thank him on your behalf.


The Fall of the Roman Republic

In 133 B.C., Rome was a democracy.  Little more than a hundred years later it was governed by an emperor. This imperial system has become, for us, a by-word for autocracy and the arbitrary exercise of power.

At the end of the second century B.C. the Roman people was sovereign. True, rich aristocrats dominated politics. In order to become one of the annually elected 'magistrates' (who in Rome were concerned with all aspects of government, not merely the law) a man had to be very rich.

Even the system of voting was weighted to give more influence to the votes of the wealthy. Yet ultimate power lay with the Roman people. Mass assemblies elected the magistrates, made the laws and took major state decisions. Rome prided itself on being a 'free republic' and centuries later was the political model for the founding fathers of the United States.

By 14 A.D., when the first emperor Augustus died, popular elections had all but disappeared. Power was located not in the old republican assembly place of the forum, but in the imperial palace. The assumption was that Augustus's heirs would inherit his rule over the Roman world - and so they did.

This was nothing short of a revolution, brought about through a century of constant civil strife, and sometimes open warfare. This ended when Augustus - 'Octavian' as he was then called - finally defeated his last remaining rivals Mark Antony and Cleopatra in 31 B.C. and established himself on the throne. Why did this revolution happen?

This very interesting history lesson from 2,000 years ago when laid over what's happening in the U.S., is pretty stark.  It's posted on the Internet site---and I lifted it from yesterday's edition of the King Report.  Another history lesson for the same period is also one that I also borrowed from yesterday's King Report and it's linked here.  In some respects, it's a better story than the one I've posted above.


'Immoral but Not Illegal': Metal Warehousing Games in the Spotlight

Complex deals employed by Goldman Sachs' metals storage unit to build vast stockpiles and then maintain queues test the spirit of the London Metal Exchange operating code, shocking many traders and confirming others' suspicions.

But the intricate transactions that saw Metro International Trade Services shell out millions of dollars to customers to join exit queues to bolster rental income was within the rules, according to two senior warehousing executives and two veteran traders.

An explosive U.S. Senate report released on Wednesday revealed the "imaginative" methods used to lure millions of tons of aluminum into Detroit, Metro's headquarters, and then keep it there over the past four years.

You know that if either G.S. or JPM is involved, it's "immoral, but not illegal"---and in some cases its both.  The disturbing must-read article appeared on the Reuters Web site at 4:23 a.m. EST on Friday morning---and I found it on the Internet site.


Citing Risks, Fed May Limit Wall Street Role in Commodities

The Federal Reserve may curtail Wall Street commodity businesses after lawmakers said banks' role in energy, power, and metals markets spurred unfair trading advantages and could threaten financial stability.

At a Senate hearing today, Fed Governor Daniel Tarullo said curbs under consideration include ownership limits, restricting how much revenue can be derived from commodities, and requiring Wall Street firms to boost capital. He said the new rules, to be proposed early next year, could restrict banks from investing in oil tankers, coal mines, and other businesses involved in physical commodities.

"We are focusing on the risk to safety and soundness presented by specific activities and on whether those risks can be appropriately and adequately mitigated," Tarullo said at the hearing held by the Senate Permanent Subcommittee on Investigations.

This Bloomberg news item, filed from Washington, was posted on their Web site at 10:40 a.m. Denver time yesterday morning---and I found it embedded in a GATA release.


Sprott Money Weekly Wrap-Up with Eric Sprott

Eric talks about the Surge in Asian Investment Gold Demand, the Positive Movement in Physical Gold Demand Around the World, and the Possible Impact of the Swiss Referendum on the Physical Gold Market.

This 9:32-minute audio interview conducted by Jeff Rutherford was posted on the Internet site on Friday.


Financial Times' Gillian Tett Notes Greenspan's Renewed Endorsement of Gold

A decade ago, when Alan Greenspan was chairman of the mighty Federal Reserve, he was infamous for delivering ambiguous, Delphic speeches that nobody could understand. No longer. I recently had a chance to interview Greenspan, 88, at the Council on Foreign Relations, regarding an updated version of his latest book.

These days the retired Greenspan speaks so clearly that some of his words are still ricocheting around the blogosphere. For what he revealed on the CFR platform was that he harbours considerable doubts about whether recent Western monetary policy experiments have actually helped economic growth. He also fears that such experiments have been so wild that it will be very hard to exit from these policies in the future -- in the U.S. or anywhere else -- without sparking huge market volatility.

Indeed, Greenspan is so worried about future turbulence that he apparently sympathises with investors (and central banks) who are stocking up on gold.

Unfortunately, unless you're plugged into the Financial Times website, which is free if you only read a couple of articles a month, the balance of this story is subscriber protected.  There's nothing new in here, of course, as what Greenspan said at the Council on Foreign Relations is already well known---and I certainly covered it in this column.  What is interesting is that Gillian Tett, who is as Establishment as you can get, wrote this in the Financial Times of London on Friday.  So, from that perspective, it's a big deal---and wouldn't have shown up there without the approval of the senior editor.  This is another gold-related news item that I found at the Web site yesterday---and the actual FT headline reads "Gold: Worth Its Weight?"


Ronan Manly: Swiss Gold Vote Likely Tighter Than Polls Suggest

GoldCore analyst and GATA consultant Ronan Manly provides a detailed analysis of the opinion polls that seem to be moving against the Swiss Gold Initiative, and he raises a compelling question: While the Swiss National Bank complains that the initiative would severely limit its monetary policy options, the initiative gives the bank five years for compliance, so just how long does the bank intend to chain the Swiss franc to a depreciating euro?

Manly's commentary is headlined "Swiss Gold Vote Likely Tighter than Polls Suggest"---and it's posted at the Internet site.  It's on the longish side, dear reader, but definitely worth reading if you have the time---and/or the interest.  I thank Chris Powell for wordsmithing "all of the above."


Sprott's Thoughts: Paul Wilson, CEO, World Platinum Investment Council

Paul Wilson recently took up the role of Chief Executive Officer at the newly created World Platinum Investment Council (WPIC). The Council was launched by a group of six platinum producers in South Africa, in order to further develop the global market for platinum investment.

Readers may know that our affiliate Sprott Asset Management LP manages one of the largest above-ground stockpiles of platinum in the world, in the form of the Sprott Platinum and Palladium Trust (NYSE: SPPP).

What will the World Platinum Investment Council do? Their CEO Paul Wilson was kind enough to call me up and tell me what it’s all about.

This very interesting 'interview' appeared on the Internet site yesterday---and it was  'conducted' by Henry Bonner.  Of course the obvious reason that platinum prices are not rising is because its price is being managed like the other three precious metals.  I read this commentary---and that crucial fact is nowhere to be found.  Either the question was never asked, or the information wasn't volunteered.  How typical.


MMTC-PAMP India Awaiting Government Nod for Gold Metal Scheme

In a move which will it hopes will in some way help resolve India’s 'insatiable appetite’ for gold and the attendant problems with the high current account deficit (CAD), MMTC-PAMP, a 27:73 per cent joint venture between India’s largest bullion importer MMTC and Swiss PAMP SA, is ready with its gold metal account scheme to mobilize gold from small consumers who account for a bulk of gold demand.

The minimum deposit will be around 50 grams of gold and that will address more than 90 per cent of gold consumers in India, Rajesh Khosla, managing director, MMTC-PAMP India told this correspondent.

The scheme would help small retail gold consumers, deposit their gold, melt it and earn interest on it and accrue gold instead of rupees in the account at the time of maturity. On the implementation of the scheme, Mr. Khosla said the Reserve Bank of India (RBI) would submit its views in early December after which the government would take a call on the scheme.

Well, 'scheme' is the operative word in this story---as Manitoba reader U.M. carefully pointed out when she sent me this article yesterday.  Filed from Mumbai, it was posted on Internet site at 7:53 p.m. IST on their Friday evening.


Indian Central Bank Cautious on Response to Gold Import Surge

The Reserve Bank of India, grappling with a surge in gold imports last month, could support some restrictions for trading houses but two senior policymakers involved in the bank's decision-making said officials were also wary of overreacting. 

A senior finance ministry source told Reuters on Tuesday the country would soon announce measures set to center on import restrictions for private trading house that were eased earlier this year. Private jewellery exporters account for the bulk of demand for gold.

But the country has yet to announce any steps, and the two policymakers said on Friday there was no agreement yet. "No decision has yet been taken on curbing gold imports," said one of the policy makers, who declined to be named.

This Reuters article, also filed from Mumbai, showed up on their Web site at 7:51 p.m. IST on their Friday evening---and it's another gold-related story I found on the Internet site.



¤ The Funnies

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

In the 1990s, gold loans, despite their inherent wackiness and fraud, blossomed into a market involving upwards of 150 million oz, or two to three years of world mine production. What enabled gold loans to grow to such enormous levels was that Wall Street (the bullion banks, like JPMorgan) were able to convince the world’s gold miners to participate in the ill-fated scheme - to the miners eventual regret. In the end, two gold miners, Barrick and AngloGold, cost shareholders more than $10 billion each by falling for the gold loan/forward selling scam. More than one gold miner went bankrupt as a result of gold loans/forward sales.

The way the cockeyed scheme worked was like this – the Wall Street banks convinced central banks to physically release great amounts of gold (sitting fallow in CB vaults for eons) to the banks in return for a below market interest rate. The Wall Street banks then sold the gold on the open market (depressing prices) and lent the money to gold miners for expansion and capital projects, with the banks receiving fees and interest rate differentials galore. The miners agreed to pay back physical gold as their mine production increased. It all sounded great on paper (and worked that way for years) until gold prices went up. Then, it became increasingly clear that the gold miners had been tricked into establishing a giant short position in gold that nearly destroyed them.

Gold loans are fraudulent through and through, because the real owners don’t get the proceeds when the sale is made and the collateral ends up with an unrelated third party who has no obligation to return the metal. But because they appeared to work for a while, otherwise intelligent people overlooked the obvious fraud and collected the benefits while they were available. Today, those tracking gold loans report the amounts of these loans outstanding are down 95% from levels at the peak around the year 2000. For me, I can’t figure out how even 5% of these loans could still be in existence. - Silver analyst Ted Butler: 19 November 2014

Today's pop 'blasts from the past' are by a group that was part of the American pop scene back in the mid-to-late 1960s.  They didn't last long, but their two hits are classics.  It's a group called The Left Banke---and their two biggest hits are linked here and here; and unfortunately, I remember them like it was yesterday, except 'yesterday' was almost 50 years ago.  Where the %$*& has the time gone, I wonder?  It reminds me of the old saying that goes like this---"Life is like a roll of toilet paper.  The closer to the end you get, the faster it goes."  Ain't that the truth.

Today's classical 'blast from the past' is a virtuoso piece for violin and orchestra that was composed by Camille Saint-Saëns back in 1863 for Spanish violin virtuoso Pablo de Sarasate.  It's the Introduction and Rondo Capriccioso in A minor, Op. 28---a show piece of the first order of magnitude.  This performance  features the gifted Dutch violinist Janine Jansen---whom I just love to pieces!  It was recorded at an outdoor concert with the Berlin Philharmonic in the summer of 2006---all under the direction of Estonian-born conductor Maestro Neeme Järvi.  The link is here.

Friday was another day where the HFT traders and their algorithms were active in both gold and silver, as their footprints were obvious by the price action.  All the precious metals wanted to rally, but weren't allowed to.  Also note that the gold price touched its 50-day moving average moments before the Comex open, but got sold down the moment it happened---and then got sold down some more going into the New York lunch hour.  But the gold price managed to crawl back above the $1,200 spot price mark---and was allowed to close there.

As I said in yesterday's column, the last week going into the options and futures expiry for the December contract could be interesting---and that's proving to be the case.

Here are the six-month charts for all four precious metals.

Despite the deterioration in the Commercial net short positions in both gold and silver recently, the setups in both still remain very bullish---and the fact that the 'Big 8' shorts in silver are still attempting to reduce their positions in this metal, is a sign that [hopefully] this is all going to end sooner rather that later.

"Later" for me means sometime before the end of the year---but that will only occur if the powers-that-be want it to happen.

But as I and many others have said over the years, the gold card is the only card that the world's central bankers, along with the IMF, have left to play if they want to create an inflationary environment.  But will they play it---and if so, when?

So we wait some more.

With all monetary caution scattered in the wind with announcements out of China and Europe yesterday, it's obvious that the world's central banks have now moved "all in" in this global monetary experiment that will only end in tears at some point.  Only the timing of the ultimate denouement is unknown.

As Doug Noland stated in his Credit Bubble Bulletin commentary yesterday evening:

The stage had been set for very serious problems. When the 2007/2008 down cycle’s contagion eventually arrived at the “Core,” key intermediation processes faltered – leaving a highly inflated system extremely vulnerable to a crisis of confidence and Credit collapse. Importantly, when it comes to Bubbles, the sooner they come to an end the better. Systemic risk grows exponentially, a harsh reality that central bankers refuse to acknowledge.

The scope of today’s “global government finance Bubble” dwarfs the 2007’s mortgage finance Bubble. There’s a lot more to lose in this international Bubble and so much more to worry about. Instead of “subprime,” today’s “Periphery” includes tens of Trillions of vulnerable debt encompassing many countries and billions of people. Instead of U.S. prime mortgages and corporate debt, today’s “Core” includes central bank Credit and the greatest securities Bubble the world has ever experienced.

From the 1986 horror film The Fly comes the quote "Be afraid. Be very afraid."

And along with the Ukraine/Russia debacle, that's probably good advice at this point in history.

See you on Tuesday.

Ed Steer