NOTE: With the U.S. markets closed on Monday, I probably won`t have a column on Tuesday...unless the precious metal markets blow sky-high during Far East and London trading in the interim.
Friday turned out to be a 'nothing' sort of day in all markets on Planet Earth...and both tiny rallies in gold got sold off the moment that they hinted that they might encroach on the $1,400 spot price mark. Gold close at $1,386.30 spot...down $5.20 on the day. Net volume was only 94,000 contracts, which was very light.
It was pretty much the same story in silver...and the metal finished the Friday session at $22.24...down 24 cents from Thursday's close. With gross volume only 31,000 contracts, I wouldn't read much into the price action.
The dollar index closed at 83.75 on Thursday...and after a tiny rally attempt that didn't make it over the 84.00 mark in Far East trading, it chopped lower into the New York close...finishing on Friday at 83.64...down 11 basis points. Nothing to see here.
The gold shares rallied slightly into positive territory for a few hours yesterday morning...before sinking back into the red by noon in New York...and headed gently lower from there...with the HUI closing down 1.34%.
This silver shares had a similar chart pattern...and Nick Laird's Intraday Silver Sentiment Index closed down a smallish 0.26%.
(Click on image to enlarge)
Here's the same chart, except on a longer time scale, so you can see where we are at over the long term.
(Click on image to enlarge)
The CME's Daily Delivery Report showed that and amazing 1,000 gold contracts were posted for delivery on Tuesday. JPMorgan Chase [out of its client account] was the only short/issuer...and the only two stoppers were Barclays with 749 contracts...and Canada's Bank of Nova Scotia with 251 contracts. I'd guess that only one trade was involved in this delivery. In silver there was only 1 contract issued...and that was it. The link to yesterday's Issuers and Stoppers Report is here.
There was another withdrawal from GLD yesterday. This time it was 77,344 troy ounces...and there were no reported changes in SLV.
There was no sales report from the U.S. Mint once again.
Over at the Comex-approved depositories on Thursday, they reported receiving 1,551,187 troy ounces of silver...and shipped 163,800 troy ounces out the door. The link to that activity is here.
In gold these depositories reported receiving 96,146 troy ounces...and shipped out 64 troy ounces...two kilobars. Here`s the link to that activity
The Commitment of Traders Report was not what I was expecting/hoping...and I don't know what to make of the numbers. The Commercial net short position in silver only declined by about 6.5 million ounces...and is now down to 59.63 million ounces. Reader EWF told me that "The silver commercials hold their lowest net short position since September 10, 2001...and Ted Butler's silver raptors hold their largest net long position in the history of the data." I must admit that I was expecting more, but maybe when we're this close to the bottom of the barrel, there aren't that many longs left to liquidate...and very few tech funds are prepared to go short at these prices. Besides which, the precious metals markets are very illiquid...and it doesn't take too many contracts to move prices at these levels.
There was virtually no change in the Commercial net short position in gold, despite the price decline during the reporting week. Reader EWF commented that..."The gold commercials hold their lowest net short position since November 18, 2008.``
I know that Ted was expecting quite a bit more than this...as was I. Is it possible that the bullion banks didn't report everything in a timely manner? Certainly. But at these bottom-of-the-barrel readings we're at in the COT Reports, it's difficult to tell. Maybe next week report will clarify the situation...unless of course we have a major 'price event' between now and then.
Except for some minor declines in platinum and palladium, nothing much has changed in the concentration data...and Nick Laird's "Days to Cover Short Positions" chart looks almost the same as did a week ago...and here it is.
(Click on image to enlarge)
But despite my disappointment at the numbers, we're still loaded for a moon shot in all four precious metals...especially if JPMorgan et al stand aside and let it rip.
Here's your "cute quota" for the day...
I've tried to keep the stories down to as few as possible...and I was only partially successful.
The Justice Department acknowledged late Friday that Attorney General Eric Holder was on board with a search warrant to obtain the personal emails of a Fox News reporter, as media and civil liberties groups continued to raise concerns about the case.
Following prior reports indicating that Holder had likely signed off on the search warrant, the Justice Department acknowledged Holder's involvement and defended the decision. It insisted the call to seek these files -- in the course of an investigation into a leak allegedly made by State Department contractor Stephen Jin-Woo Kim -- was legal.
"The Department takes seriously the First Amendment right to freedom of the press," the department said in a written statement, provided late Friday at the start of the holiday weekend. "In recognition of this, the Department took great care in deciding that a search warrant was necessary in the Kim matter, vetting the decision at the highest levels of the Department, including discussions with the Attorney General.
This amazing article was posted on the foxnews.com Internet site yesterday evening...and I also note that The Huffington Post has called for Holder's resignation. That's good advice...and let's hope he doesn't take too long to come to that conclusion himself. I thank Marshall Angeles for sending today's first story.
Mike O'Rourke of JonesTrading wales on the various Fed Heads and the Bank of Japan for having created a ridiculous situation where the entire market is just obsessed with every utterance from central bank chiefs, sucking away the oxygen from the real issues that should actually be driving markets. He writes in this evening's note that the events of the last two days are damning...
Losing Credibility: Earlier this month we highlighted comments Chairman Bernanke made a decade ago ... “I worry about the effects on the long-run stability and efficiency of our financial system if the Fed attempts to substitute its judgments for those of the market. Such a regime would only increase the unhealthy tendency of investors to pay more attention to rumors about policymakers' attitudes than to the economic fundamentals that by rights should determine the allocation of capital.” The events of the past two days (both here and in Japan) confirm this is the environment we are in. The situation has become so ridiculous that San Francisco Fed President John Williams had to assure the market that the Fed could increase purchases if the economy has weakened once tapering commenced. This stems from the Bullard application of QE - using QE in the same manner as the Fed Funds rate. Although the FOMC has adopted it, the Fed Chairman has done an awful job of communicating it. In any event, it is pathetic if the Fed needs to promise the next round of additional easing before the current easing has even slowed. It gives the impression that markets would simply be happier with a centrally planned economy. The reason that none of the FOMC members can give any inkling of when tapering will start is because they can’t quantify the benefits of it. In other words, they don’t know the effects of what they are doing, they just know they need to keep doing it.
Ain't it the truth! You've just read the entire must read article that was posted on the businessinsider.com Internet site on Thursday evening...and it's a news item that I found in yesterday's edition of the King Report.
Oh what a tangled web central bankers weave when they practice to deceive… Last night's panic in Tokyo, where the Nikkei dropped a stomach churning 7 per cent, demonstrates just how difficult it's going to be for the world's central banks to exit their loose money policies.
It's not even as if Ben Bernanke, chairman of the Fed, said he was planning to exit; in fact, initially he said the reverse in testimony to Congress. It was only in the Q & A, and in minutes to the last meeting of the Fed's Open Markets Committee, that a clear bias emerged to slow the pace of asset purchases "in the next few meetings", so long as the economic data was strong enough.
What the subsequent violent gyrations in markets indicate is that any hint of applying the brakes risks generating a fresh financial crisis, which in turn would render the economic recovery still born. Both financial markets and the real economy have become addicted to "quantitative easing", such that they can't do without it.
This commentary in The Telegraph by Jeremy Warner on Wednesday is also well worth reading...and another article I found in yesterday's King Report.
Kudos to Kyle Bass at Hayman Advisers for warning that the Bank of Japan would lose control of its ¥70 trillion bond buying blitz. The spike in the 10-year yield to 1pc on Thursday was certainly shocking to behold.
His point is that the BoJ faces a “rational investor paradox”. The authorities are trying to drive up the inflation to 2pc and therefore to devalue Japanese government bonds (JGBs), so why on earth would you want to own them?
“If JGB investors begin to believe that Abenomics will be successful, they will ‘rationally’ sell JGBs to buy foreign bonds or equities,” he told Bloomberg.
He says the scramble to sell has “overwhelmed” buying by the BoJ. Governor Kuroda will now have double down with a huge increase in the scale of QE.
Ambrose Evans-Pritchard doesn't stop at just reporting the news in this story posted on The Telegraph's website yesterday...he turns it into an editorial at the end. This must read blog from yesterday is courtesy of Roy Stephens.
It’s no surprise that investors/speculators in U.S. equities are determined to stick with the bullish thesis and disregard more global macro issues (it’s worked to this point!). Yet this unfolding Kuroda Gambit drama could prove too significant to ignore. The perception holds that the Fed’s $85bn will ensure ample bull market liquidity for at least the next several months.
The overall bullish take on marketplace liquidity could prove too complacent if things begin to unwind in Tokyo. And by unwind I mean that Japan bond market fragility forces a change of tack by the Kuroda BOJ. A spike in yields could prove highly destabilizing, with a bond and stock market crash not out of the question. Or perhaps the BOJ will work out an agreement with major Japanese institutions to ensure their support for low yields. The BOJ may need institutions to fall in line and stop selling bonds and the yen. Such an understanding might support a stronger yen, with less liquidity seeking higher yields overseas.
It would appear that there are now viable scenarios that are potentially problematic for the leveraged players - and for the Financial Euphoria that erupted around the globe. Perhaps an overdue bout of de-risking and de-leveraging actually commenced this week. At the minimum, the markets were reminded that there is as well a downside to all this central bank dependency and Bubble-inducing liquidity.
Doug's Friday commentary over at the prudentbear.com Internet site is a must read for me every week...and his tome from yesterday is no exception. I thank reader U.D. for sending it.
In what may be the most important story of the day, or maybe year, for a world in chains, and by making wanton asset rehypothecation a thing of the past, permitted only with express prior permission, which obviously will never come: who in their right mind would allow a bank to repledge an asset which may be lost as part of the counterparty carnage should said bank pull a Lehman. The result of this, should it be taken to completion, would be pervasive liquidations as countless collateral chain margin calls spread, counterparty risk soars all over again, and as the scramble to obtain the true underlying assets finally begins.
Here's the Bloomberg headline that tells all..."E.U. Weighs Curbs on Banks’ Use of Client Assets as Collateral".
In other words, just as we have been warning for the past four years, Europe may pull the switch on its own electric chair. Read Kyle Bass' own thoughts on the matter: Presenting Kyle Bass' Analysis On Shortening Collateral Chains; Or The Gradual Evisceration Of Shadow Banking from December of 2012.
This amazing story was posted on the Zero Hedge website yesterday...and it's courtesy of West Virginia reader Elliot Simon. It's definitely worth your time if you have it.
City firms – most notably the hedge fund, insurance and commodities sectors – are sick of the “unending blizzard” of regulation coming out of Brussels, says Mr Farage, who claims traditional City Conservative supporters are switching allegiance to UKIP.
“Slowly but surely, donors who would have traditionally supported the Tories are now holding talks with us,” Mr Farage told The Daily Telegraph. “We are asking [City leaders] to help in any way we can.”
The most recent business convert to UKIP is Andy Brough, the star fund manager at Schroders, who is understood to have joined Mr Farage’s party after growing weary with the coalition Government and European attacks on the City.
Mr Farage also has the support of the influential hedge fund manager Crispin Odey, whose former father-in-law is News Corp chairman Rupert Murdoch.
No surprises here, as Nigel's is such a straight shooter, that the public is begining to understand that he'll be true to his word. This article was posted on the telegraph.co.uk Internet site yesterday afternoon BST...and I thank Roy Stephens for his second offering in today's column.
International Monetary Fund Managing Director Christine Lagarde averted being charged by a Paris court investigating her decision to allow arbitration that benefited a supporter of former President Nicolas Sarkozy.
After two days of questioning, the court named Lagarde -- who was French finance minister under Sarkozy -- a material witness in the case. The status, while not precluding charges later, shouldn’t hurt her ability to stay at the IMF helm, said Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics in Washington.
This news item was posted on the Bloomberg website yesterday afternoon MDT...and I thank U.A.E. reader Laurent-Patrick Gally for sharing it with us.
Unrest in Stockholm’s suburbs continued for a fourth night as rioters showed their anger over a police shooting a week ago by setting fire to cars and buildings and pelting emergency workers with stones.
As many as 30 cars burned in the Swedish capital’s southern suburbs, while 11 were set alight in the Husby area, north of the city centre, where the violence broke out four days ago, police spokesman Kjell Lindgren said by phone today. Police detained one person, a 16-year-old girl suspected of preparing an act of arson.
That followed eight arrests since Tuesday. “While the situation has become better in Husby, where a lot of local people have become engaged to calm things down, the situation has intensified on the southern side of the city,” Mr Lindgren said.
Riots in the middle of socialist utopia? It's hard to believe, I know...and you can read all about it on the irishtimes.com Internet site. It's also the third and final story that I stole from yesterday's edition of the King Report.
When ill health and political gridlock forced Shinzo Abe to quit after one dismal year as Japan's prime minister, his pride was dented and his self-confidence battered.
One thing, however, was intact: his commitment to a controversial conservative agenda centered on rewriting Japan's constitution. Conservatives see the 1947 pacifist charter, never once altered, as embodying a liberal social order imposed by the U.S. Occupation after Japan's defeat in World War Two.
"What worries me most now is that because of my resigning, the conservative ideals that the Abe administration raised will fade," Abe wrote in the magazine Bungei Shunju after abruptly quitting in September 2007. "From now on, I want to sacrifice myself as one lawmaker to make true conservatism take root in Japan."
Less than six years after his humiliating departure, Abe, 58, is back in office for a rare second term. He is riding a wave of popularity spurred mainly by voters' hopes that his prescription for fixing the economy will end two decades of stagnation. The policy, known as "Abenomics", is a mix of monetary easing, stimulative spending and growth-inducing steps including deregulation in sectors such as energy.
This longish Reuters report was filed from Tokyo...and posted on their Internet site just before midnight on Thursday EDT. It's a must read...and it's particularly a must read for all students of the New Great Game. I thank Elliot Simon for bringing this most excellent essay to my attention...and now to yours.
1. James Grant [#1]: "Monetary System Won't Last...and Gold Bullish". 2. Egon von Greyerz: "Suppliers and Bank Clients Denied Gold as Shortage Intensifies". 3. James Grant [#2]: "Here is What Jim Really Thinks".
As I often remind investors, gold buyers are a diverse group, but generally fall into one of two categories. Most of the attention gets focused on those who purchase out of fear of damaging government policies (i.e., the Fear Trade).
The more important demand for gold, in my opinion, comes from the enduring Love Trade, as countries like China and India buy the precious metal out of love and tradition.
Looking at a breakdown of gold demand from the World Gold Council (WGC) through March 31, 2013, the main source of weakness was the Fear Trade, as demand for gold ETFs and similar gold products plunged in the first quarter. However, the Love Trade scooped up jewelry and bars and coins, with the tonnage in each category growing 12 and 10 percent, respectively, on a year-over-year basis.
You can visually see the strength of the Love Trade below in the year-over-year change in total consumer demand in tons for gold jewelry, bars and coins. Indian demand grew the most, increasing 27 percent compared to the previous year.
Demand for jewelry, bars and coins in the greater China area increased 20 percent, as “seasonal strength in China, related to Chinese New Year purchasing, exceeded all previous peaks, marking a new record quarterly high,” says the WGC. Even U.S. residents had a love for gold, with demand growing 22 percent over the previous year.
This commentary by Frank was posted on his Internet site yesterday...and I thank Elliot Simon for sending it along.
Chile's environmental regulator has stopped construction and imposed sanctions on Barrick Gold Corp.'s $8.5 billion Pascua-Lama project, citing "serious violations" of its environmental permit.
The $16 million fine is the maximum allowable under Chilean law. It was applied Friday because the world's largest gold mining company acknowledged that it failed to keep its promises to build systems for containing contaminated water.
This 2-paragraph AP story was posted on the foxnews.com Internet site...and I thank Casey Research's "Nick G" for passing it along.
After gold trade was liberalised and nominated agencies were allowed to import gold, smuggling of the commodity had declined for about 14 years.
After more than 100 tons of smuggled gold reached India last year, that figure is likely to increase by at least 40 percent this year, according to Thomson Reuters GFMS.
The high import duty on gold, local taxes and restrictions on imports are leading to a rise in smuggling of the commodity into the country, world's largest gold consumer.
This news item was filed from New Delhi...and posted on the bullionstreet.com Internet site late yesterday morning IST. I thank Marshall Angeles for sending it.
“The more gold a country has, the more sovereignty it will have if there’s a cataclysm with the dollar, the euro, the pound or any other reserve currency.” — Evgeny Fedorov, Russian lawmaker, United Russia Party
Among the countries that still make their gold production available to world markets, four of the top seven are in long-term decline — the United States, South Africa, Australia and Canada, some would say precipitously. Three enjoy rising production — China, Russia and Peru. Among the declining states, South Africa suffered the worst cutbacks, down 52% from production in 2000. U.S. production is down 39% over the same period; Canada is down 38% and Australia, 24%.
Russia’s gold production is an important piece of the overall supply puzzle in terms of both production and reserves. Few people know (or remember) that in 1980, Russia was the second largest global gold producer at 21% of the total global output (258 metric tonnes) South Africa was number one at 55% of the total global output (675 metric tonnes). With respect to future gold production, Russia is a sleeping giant that could leap-frog the United States and Australia soon.
This worthwhile read was posted on the usagold.com Internet site yesterday.
I ran into Jay at the Pan Pacific hotel yesterday...and he mentioned that he'd done this interview with Ted and Jim Cook earlier in the week. I told him that I would be interested in posting it, so his good wife Teresa was kind enough to e-mail the audio interview...and here it is posted on the voiceamerica.com Internet site. I've had no chance to listen to it, but I would think that it's a must listen. The interview begins around the 1:45 minute mark.
A subscriber recently commented that the Oligarchs who rule Russia only wish they got to run things as efficiently as how JPMorgan and the big banks control our financial markets, particularly in the trading of precious metals. Based upon the last few days, it’s hard to argue with that. On Sunday evening shortly after 6 PM, the price of silver was taken down 10% within a few minutes on an insignificant number of contracts (1,600), evoking memories of the infamous 13% ($6) decline on the May 1 Sunday evening of 2011. If the Russian criminals oversaw silver trading and not the CME Group and the CFTC they could not possibly have rigged prices more corruptly.
What makes the silver (and gold) manipulation the perfect crime are a number of elements; short term price control through High Frequency Trading, compliant regulators and the fact that most victims don’t even realize they are being had, as the sellers are mostly just reacting to the deliberately-set lower prices. It’s hard to end an ongoing crime in progress when so many don’t realize it is in progress. Worse, there are still some who profess that there is no manipulation underway. And for the few who do realize what’s really going on, what can you do about it when the regulators are in bed with the manipulators? Perhaps the options are limited, but that’s not the same as non-existent.
This commentary by Ted falls into the absolute must read category...and it was posted on the silverseek.com Internet site yesterday...and I thank Elliot Simon for pointing it out...and for his last contribution to today's column.
We got a small, if bitter, taste of gold’s “Zero Hour” in the second half of April.
Either that, or the world’s largest banks engineered a take down of gold for the purpose of staving off Zero Hour… for now.
As you’ll recall from these pages in March, “Zero Hour” is the name we give to the moment when the price of real, physical gold in your hand starts to break away from the quoted price on the commodities exchanges.
This commentary by Addison was posted on The Daily Reckoning website yesterday...and is well worth reading. I thank Roy Stephens for today's last story...and his final offering in today's column.
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The issue which has swept down the centuries...and which will have to be fought sooner or later...is the people vs. the banks. - Lord Acton, Historian...1834 - 1902
Today's pop 'blast from the past' popped into my head a couple of days ago...and I just can't get rid of it. I'm hoping that by posting it here, that I hit 'delete' button in my brain as well. I was eight years old when this Johnny Mathis tune came out in 1956...and it's a classic. To give you some idea of its age, it was originally released as a 78 r.p.m. single, as the vinyl 45 r.p.m. record had yet to be invented, as the use of plastic for anything was in its infancy. Turn up your speakers and then click here.
Today`s classical `blast from the past` is a Beethoven piano classic...his Appassionata Sonata No. 23 in F minor, Op. 57...which is the mother of all piano sonatas. This performance is in the very safe (and incomparable) hands of Maurizio (Mario) Pollini. The three videos are posted on the youtube.com Internet site...1st movement...2nd movement...3rd movement. Enjoy.
I wouldn`t read a whole heck of a lot into yesterday`s price action, as all the crooks headed for the Hamptons early for the Memorial Day long weekend. That`s why there was little price action...and even less volume.
Of course I wasn`t happy about the Commitment of Traders Report, so I`ll just have to stew in my own juices until the one comes out on May 31st. But as I mentioned further up, the price action in the interim may negate everything, so I`ll have to wait and see.
Here`s Nick Laird`s ``Total PMs Pool`` chart update with this week`s data...
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As you are probably already beginning to suspect, the endless money printing is now starting to suffer some serious blow back, as Japan has now discovered...and it`s only a short segue into the other currencies and bond markets. And as James Grant said in his KWN commentary further up...the world`s financial and monetary system as we know it today, is on it`s last legs...and the warning signs of that were flashing `red alert` this past week.
Let`s just hope that we`re all ready for whatever comes next.
And as I said at the top of this column, unless the gold market blows up on Monday, I won`t have a column on Tuesday because the U.S. markets are closed...and I`ll see you on Wednesday.