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August 11, 2018 | A Great COT Report — and An Awesome Bank Participation Report

"Ed wrote the daily precious metal commentary for Casey Research starting in 2008. His stand-alone column became their most highly-rated blog [either free or paid] almost from the outset—and remained that way until he started his own subscription-based website in June of 2015."

11 August 2018 — Saturday


The gold price traded flat until shortly after 12:30 p.m. China Standard Time on their Friday afternoon.  It took a bit of a header at that point, helped along by a sudden ‘rally’ in the dollar index.  The sell-off ended at the 2:15 p.m. CST afternoon gold fix in Shanghai — and it began to chop quietly higher from there until another dollar index ‘rally’ began shortly after the afternoon gold fix in London.  It was sold lower into the COMEX close from there — and didn’t do much after that.


The low and high ticks certainly aren’t worth looking up.


Gold was closed in New York on Friday at $1,211.20 spot, down 90 cents on the day.  Net volume in October and December was monstrous at a bit over 330,000 contracts — and roll-over/switch volume was a bit over 5,000 contracts on top of that.  One has to wonder what that was all about.



Silver’s price path was very similar to gold’s, right up to and including the 2:15 p.m. CST afternoon gold fix in Shanghai.  Its rally after that was rather anemic — and that ended at the 11 a.m. EDT London close.  It was sold lower into the COMEX close from there — and didn’t do a lot after that.


The high and low ticks in this precious metal are barely worth looking up.  They were recorded by the CME Group as $16.465 and $16.29 in the September contract.


Silver finished the Friday session in New York at $17.275 spot, down 14.5 cents from Thursday’s close.  Net volume was pretty impressive as well, at around 67,800 contracts — and roll-over/switch volume was a hair over 16,000 contracts.  That’s a lot.



The platinum price didn’t do much yesterday — and the only noticeable action was the up/down move during the COMEX trading session.  From its Zurich close high tick, it was sold lower into the COMEX close — and traded flat for the rest of the Friday session.  Platinum was closed at $826 spot, down 5 bucks on the day.



Palladium also had a bit of a sell-off on the dollar index rally going into the afternoon gold fix in Shanghai.  It chopped unsteadily higher from there until it appeared that the price was capped a few minutes after 9 a.m. in New York.  Then, starting very late on Friday morning in New York, it was sold a small handful of dollars lower into the COMEX close — and traded flat after that.  Palladium finished the Friday session at $904 spot, up 2 dollars from Thursday’s close.



The dollar index closed very late on Thursday afternoon in New York at 95.61 — and bounced a few basis points higher once trading began at 6:00 p.m. EDT a few minutes later on Thursday evening.  It edged quietly lower until around 12:25 p.m. China Standard Time on their Thursday afternoon.  It began to ‘rally’ from that point, but really took off at 1 p.m. CST.  Most of the gains that mattered were in by the 2:15 p.m. afternoon gold fix in Shanghai.  From that point it chopped sideways until a few minutes before 1 p.m. BST/8 a.m. EDT.  Another ‘rally’ began at that juncture — and the 96.45 high tick was printed minutes before the 1:30 p.m. EDT COMEX close.  It sank quietly lower into the 5:00 p.m. close from there — and the dollar index finished the Friday session at 96.33…up 72 basis points from Thursday’s close.


It was the second day in a row where a major ‘rally’ in the dollar index occurred, or was manufactured — and both had very little impact on precious metal prices.  Which isn’t surprising, considering how monstrously oversold they are.



And here’s the 6-month U.S. dollar index chart.



The gold shares opened unchanged — and then jumped up a bit from there, before rallying to their respective highs, which came a minute or so before 11 a.m. in New York trading.  That was very close to gold’s high tick of the day –and from there the gold stocks headed lower and back into negative territory.  They jumped back above unchanged by a bit around 2:45 p.m. EDT — and then chopped quietly sideways for what was left of the Friday trading session.  The HUI closed exactly unchanged on the day.



The silver shares were up a percent and change within a few minutes of the open in New York at 9:30 a.m. EDT yesterday morning.  That was their high ticks of the day — and they headed unevenly lower until minutes after 12 o’clock noon in New York.  After that, they chopped quietly sideways for the remainder of the day.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down 0.74 percent.  Click to enlarge.



And here’s Nick’s 1-year Silver Sentiment/Silver 7 Index.  Click to enlarge as well.



Here are the usual charts from Nick that show what’s been happening for the week, month-to-date — and year-to-date.  The first one shows the changes in gold, silver, platinum and palladium for the past trading week, in both percent and dollar and cents terms, as of their Friday closes in New York – along with the changes in the HUI and the Silver 7 Index.


Here’s the weekly chart — and although it’s a sea of red, the losses for the week are not overly large.  But, once again, it was the gold stocks that got hit the worst.  Click to enlarge.



The month-to-date chart chart doesn’t look much different than than than the weekly chart above, however some consolation should be taken in the fact that the losses aren’t overly large.  Click to enlarge.



The year-to-date graph is also red across the board — and on a year-to-date basis, the silver equities are obviously doing better than their golden brethren.  But that, as I’ve stated before, is pretty cold comfort.  As I said last week in this space, it’s hard to believe that this situation will change for the better, but it will — and in a hurry when it does.  Click to enlarge as well.



As I said last Saturday — and the Saturday before, the above three charts are the very definition of “blood running in the streets” — and a time to put your money down.  As Warren Buffett said…”I am fearful when others are brave — and brave when others are fearful“…or words to that effect.


And with another excellent COT Report, plus an incredible Bank Participation Report yesterday, the above sea of red is what bottoms are made of — and they’re ugly, with this last swing for the fences by JPMorgan being the worst I’ve very seen in the eighteen years I’ve been watching the precious metal market.  With the current configuration in the COMEX futures market, it’s doubtful that JPMorgan will appear as shorts sellers of either first and/or last resort once the next serious moving average-breaking rally is allowed to begin.


So keep up the faith, dear reader, as better days are coming — and soon I suspect.



The CME Daily Delivery Report showed that 3 gold and 10 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.  In gold, Advantage issued — and JPMorgan stopped.  Both transactions involved their respective client accounts.  In silver, Advantage issued all 10 contracts — and there were no stand-outs amongst the five long/stoppers involved.  Goldman, JPMorgan and Macquarie Futures picked up a few each…Macquarie for its own account.  The link to yesterday’s Issuers and Stoppers Report is here.


The CME Preliminary Report for the Friday trading session showed that gold open interest in August declined by 57 contracts, leaving 749 still open, minus the 3 gold contracts mentioned just above.  Thursday’s Daily Delivery Report showed that only 29 gold contracts were posted for delivery today, so that means that 57-29=28 more gold contracts vanished from the August delivery month.  Silver o.i. in August dropped by 128 contracts, leaving 153 still around, minus the 10 silver contracts mentioned in the previous paragraph.  Tuesday’s Daily Delivery Report showed that 140 silver contracts were actually posted for delivery on Monday, so that means that 140-128=12 more silver contracts were added to August.


So far this month, there have been 1,709 gold contracts issued and stopped — and that number in silver is 774 contracts.



There were no reported changes in GLD on Friday.  But there was another withdrawal from SLV, as an authorized participant took out 1,222,587 troy ounces.  And, like the almost 2 million ounces of silver withdrawn on Tuesday, I suspect that this was one of Ted’s patented conversion of SLV shares for physical metal by JPMorgan in order to avoid SEC reporting requirements.


There was no sales report from the the U.S. Mint on Friday.


So far this month the mint has sold 6,500 troy ounces of gold eagles — 9,500 one-ounce 24K gold buffaloes — and 265,000 silver eagles.  And as I commented earlier this week, it’s my opinion that none of these sales ended up in the hands of John Q. Public.


Another all zeros day for gold over at the COMEX-approved depositories on the U.S. east coast on Thursday.


The only activity in silver on Thursday was over at Brink’s, Inc.  They reported receiving one small truck load…596,183 troy ounces…and they also shipped out 2,993 troy ounces.  The link to that is here.


There was a bit of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday.  They only received 155 of them — and shipped out 460.  This activity was at Brink’s, Inc. — and the link to that, in troy ounces, is here.



Here are two charts that Nick Laird passed around very late last night Mountain Daylight Time.  The first shows the monthly withdrawals from the Shanghai Gold Exchange updated with July’s data.  During that month they took out 137.4 tonnes.   Click to enlarge.



The second chart shows the year-to-date withdrawals from the SGE at Month 7…July…going back to and including 2008.  Click to enlarge as well.



The Commitment of Traders Report, for positions held at the close of COMEX trading on Tuesday, showed a further improvements in the commercial net short positions in both silver and gold, with the biggest improvement coming in gold for the second week in a row.


In silver, the Commercial net short position improved by another 2,031 contracts, or 10.2 million troy ounces of paper silver.


They arrived at this number by increasing their long position by 1,956 contracts — and they also reduced their short position by 75 contracts — and it’s the sum of those two numbers that represents the change for the reporting week.


Ted said that the Big 4 traders actually increased their short position by about 300 contracts during the reporting week.  But as Ted pointed out on the phone yesterday, this is entirely due to the fact that there’s at least one big Managed Money trader in the Big 4 category — and they were certainly the cause of that increase.  The ‘5 through 8’ large traders reduced their short position by around 100 contracts — and it was Ted’s raptors, the 35-odd small commercial traders other than the Big 8 that did most of the trading, as they increased their long position by a further 2,200 contracts…approximately.  I think Ted mentioned that this was a new record long position for these small Commercial traders.  But if it’s not, it’s not far off it.


Under the hood in the Disaggregated COT Report, it was all Managed Money traders and then some, as they increased their short position by a further 5,293 contracts, plus they reduced their long position by 743 contracts — and it’s the sum of those two numbers…6,036 contracts…that represents their change for the reporting week.  [The Managed Money traders sit at another new record gross short position…81,445 contracts…which is 174 days of world silver production.]  The difference between what the Managed Money traders sold — and what the Commercial traders bought…6,036 minus 2,031 equals 4,005 contracts, was made up entirely by the traders in the ‘Other Reportables’ category.  That group went long in spades, plus they covered 370 short contracts as well.  The traders in the ‘Nonreportable’/small trader category actually increased their net short position by 508 contracts — and the traders in the ‘Other Reportables’ category were more than happy to take the long side of those trades.


Here’s a snip from the Disaggregated COT Report for silver, so you can see these above numbers for yourself.  Click to enlarge.



The Commercial net short position in silver is down to 110.6 million troy ounces.  And with the shiny new Bank Participation Report in hand, Ted didn’t have to updated JPMorgan’s short position at all — and he still pegs it at 20,000 contracts, or 100 million troy ounces…which add up to just about 90 percent of the entire Commercial net short position in silver.  How grotesque is that, you ask?


Here’s the 3-year COT chart for silver — and this week’s change should be noted.  Click to enlarge.



It’s hard to imagine that the structure of the COMEX futures market in silver could get any more ‘white hot’ bullish that this.  It it does, it’s not going to be by much unless JPMorgan can get the non-technical Managed Money traders to dump any or all of their almost-record long position.  I think the chances of that at this stage of the game are somewhere between slim and none — and Slim’s out of town at the moment.


In gold, the commercial net short position improved by another very impressive number…22,309 contracts, or 2.23 million troy ounces of paper gold.


They arrived at that number by increasing their long position by 8,949 contracts, plus they reduced their short position by a further 13,360 contracts — and it’s the sum of those two numbers that represents the change for the reporting week.


Ted said that the Big 4 traders actually increased their short position by approximately 500 contracts and, like in silver, there’s at least one Managed Money short in the Big 4 category now — and it was their trading activity that accounted for it.  The big ‘5 through 8’ traders reduced their short position by about 3,200 contracts during the reporting week.  But it was Ted’s raptors, the 46-odd small commercial traders other than the Big 8, that were the prime movers, as they add 19,600 long contracts — and they’re at another record high long position.


Under the hood in the Disaggregated COT Report, it was all Managed Money traders, plus a bit more, as they reduced their long position by 4,731 contracts, plus they increased their short position by 18,857 contracts.  It’s the sum of those two numbers…23,588 contracts…that represents their change for the reporting week.  The difference between that number — and the commercial net short…23,588 minus 22,309 equals 1,279 contracts.  Those contracts were divided up between the traders in the other two categories…the ‘Other Reportables’ — and the ‘Nonreportable’/small traders.  Here’s the snip from the Disaggregated Report for gold, so you can see the above changes for yourself.  Click to enlarge.



The commercial net short position in gold is now down to a very tiny 2.56 million troy ounces — and Ted says that JPMorgan has most likely eliminated its entire short position in gold in the COMEX futures market.  I’ll have more on that in my discussion on the monthly Bank Participation Report a little further down.


Here is 3-year COT chart updated with the improvements from the last reporting week.  Click to enlarge.



And thing about this record low short position is, as I’ve already pointed out, that JPMorgan is long gone — and Ted’s double cross of the other commercial traders in gold is now “locked and loaded”.  And as much as that double cross applies in gold, it also applies in silver as well…but even more so.


In other precious metals, the Managed Money long position in palladium decreased again last week, to its smallest amount in history, only 1,707 contracts net…8,811 long minus 7,104 shorts.  I would suspect that those long contracts are held by the non-blinking/non-technical Managed Money traders — and are therefore in the strongest of hands.  The short position in platinum held by the brain-dead, moving average-following Managed Money traders stands at 44,665 contracts, a record high — and the long position held in that precious metal…18,680 contracts…is in the strongest of hands as well.  In copper, the brain-dead Managed Money traders went further on the short side — and the commercial traders went net long during the reporting week.  The Bank Participation Report now shows that 17 U.S. and non-U.S. banks are now net long the copper market by a tiny amount.  They were short the copper market by an equally tiny amount a month ago.


The set up in the COMEX futures market in all four precious metals, plus copper and, to a certain extent…WTIC…is now so off-the-charts “white hot” bullish that I’ve become almost numb to it.  And, as Ted Butler has pointed out on numerous occasions, this situation did not come about accidentally.  This was completely deliberate — and mostly hand-crafted by JPMorgan, as they exited their short positions in gold, platinum and palladium — and are out of silver as much as they can possibly be.  But the internal structure of the COMEX futures market in silver is now structured so that no entities are going to be adding to longs or going short by much — and if they can’t/won’t do that, JPMorgan can’t cover further.  So they are stuck with a 20,000 contract short position that they’ll end up covering by selling 100 million troy ounces of their silver stash — and will only make obscene profits on the piddling 650 million troy ounces they have left.


Finally, as Ted pointed out on the phone yesterday, these COT Reports are becoming more meaningless all the time, as the Big 8 traders, which were all commercial traders/bullion banks at one time, have now been infiltrated and contaminated by a not-insignificant handful of Managed Money traders whose short positions are now so large, that they fall into the commercial category.  This certainly skews the numbers — and the commercial net short positions in all four precious metal would undoubtedly be noticeably smaller if these Managed Money traders were not there.  Keeping that in mind, I suspect that the commercial net short position in gold no longer exists — and is now a tiny net long position.



Here’s Nick Laird’s “Days to Cover” chart updated with yesterday’s COT data for positions held at the close of COMEX trading on Tuesday.  It shows the days of world production that it would take to cover the short positions of the Big 4 – and Big ‘5 through 8’ traders in each physically traded commodity on the COMEX.  These are the same Big 4 and ‘5 through 8’ traders discussed in the COT Report above.  Click to enlarge.


For the current reporting week, the Big 4 traders are short 132 days of world silver production-and the ‘5 through 8’ large traders are short an additional 68 days of world silver production-for a total of 200 days, which is a bit under 7 months of world silver production, or about 466.8 million troy ounces of paper silver held short by the Big 8.  [In the COT Report last week, the Big 8 were short 200 days of world silver production as well.]


In the COT Report above, the Commercial net short position in silver was reported as 110.6 million troy ounces.  As mentioned in the previous paragraph, the short position of the Big 8 traders is 466.8 million troy ounces.  The short position of the Big 8 traders is larger than the total Commercial net short position by a chunky 466.8 minus 110.6 equals 356.2 million troy ounces.  The reason for the difference in those numbers…as it always is…is that Ted’s raptors, the 35-odd small commercial traders other than the Big 8, are long that amount.  You couldn’t make this stuff up.


As stated earlier, Ted estimates JPMorgan’s short position at 20,000 contracts, unchanged from last week’s report, or 100 million troy ounces of paper silver.  That translates into about 43 days of world silver production.  That number represents about 22 percent of the short position of the Big 8 traders — and about 33 percent of the short position held by the Big 4 traders.


The Big 4 traders are short 132 days of world silver production — and once you subtract out the 43 days that JPM is short, that leaves 89 days split up between the other three large traders…a bit over 29.5 days each…virtually unchanged from last week’s report.  And since those contracts are obviously not split up evenly between them, it’s a certainty that one of these traders has a short position something under 29.5 days — and the other, more than 29.5 days.  But whatever those three number are, they can’t add up to more than 89 days.  But it should be pointed out once again that this Managed Money trader in the Big 4 category certainly distorts these figures.  I would think they would be a few days lower than 29 days if the Managed Money trader wasn’t there.


The four traders in the ‘5 through 8’ category are short 68 days of world silver production in total….down 1 day from last week’s COT Report.  They’re short, on average, 17 days of world silver production each, which is down 0.25 days from what each was short in last week’s COT Report.


The smallest of the traders in this category holds something less than 17 days — and the largest, something more than that amount…but neither number by a lot.  So it’s a mathematical certainty that the smallest of the Big 4 traders holds a short position of something over 17 days, but a decent amount under 29.5 days  — and the second smallest of the Big 4…something around the 29.5 day mark [the average of the remaining ‘Big 3’ traders] of world silver production held short.  That means [another mathematical certainty] that the second largest short in the Big 4 category [Scotiabank or maybe that Managed Money trader] has a short position larger than the average of 29.5 days…but certainly quite a bit less than JPMorgan’s 43 days of world silver production short position they hold in the #1 short spot.


JPMorgan remains, as always, the King Short, but dramatically thinned down from where they were two or three months ago.  Unless they pull off even more illegal stuff, this looks like the end of the line for them.  They’re stuck with this.


The Big 8 commercial traders are short 39.7 percent of the entire open interest in silver in the COMEX futures market, which is down a bit from the 41.2 percent that they were short in last week’s COT Report.  And once whatever market-neutral spread trades are subtracted out, that percentage would be something approaching 45 percent.  In gold, it’s now 33.8 percent of the total COMEX open interest that the Big 8 are short, down a bit from the 34.9 percent they were short in last week’s report — and something under 40 percent once the market-neutral spread trades are subtracted out.


In gold, the Big 4 are short 34 days of world gold production, which is unchanged from what they were short last week — and the ‘5 through 8’ are short another 20 days of world production, which is down 1 day from what they were short the prior week, for a total of 54 days of world gold production held short by the Big 8 — which is down 1 day from what they were short in last week’s report.  Based on these numbers, the Big 4 in gold hold about 63 percent of the total short position held by the Big 8…which is up 1 percentage point from last week’s COT Report.  Like in silver, there’s at least one, if not two, Managed Money traders in the Big 8 category — and that certainly skews the numbers to the high side by a number of days of world gold production.


The “concentrated short position within a concentrated short position” in silver, platinum and palladium held by the Big 4 commercial traders are about 66, 61 and 69 percent respectively of the short positions held by the Big 8.  Silver is unchanged from the previous week’s COT Report, platinum is unchanged from a week ago — and palladium is also unchanged from last week’s COT Report.


The double cross trap is set for the other commercial traders in both gold and silver — and if we could get a peek at the numbers, I suspect that JPMorgan is out of their platinum and palladium short positions as well.  The remaining Big 7 commercial traders, along with the brain-dead Managed Money traders, are all teed up — and about to be driven down the fairway.


But as for the exact time…only JPMorgan knows that, but when that day does arrive, you won’t have to ask whether “this is it” or not, as it will be self-evident.



The August Bank Participation Report [BPR] data is extracted directly from the above Commitment of Traders Report.  It shows the COMEX futures contracts, both long and short, that are held by all the U.S. and non-U.S. banks as of Tuesday’s cut-off.  For this one day a month we get to see what the world’s banks are up to in the COMEX futures market, especially in the precious metals-and they’re usually up to quite a bit.  They certainly were this past month!


In gold, 5 U.S. banks were net short 22,961 COMEX contracts in the August BPR.  In July’s Bank Participation Report [BPR], 5 U.S. banks were net short 59,878 contracts, so there’s been an eye-watering 36,917 contract decline over during this reporting period.  Back in February’s BPR in gold, these same 5 U.S. banks were net short 114,008 contracts.  That’s a drop of 91,000 contracts, or 9.1 million troy ounces in six months.  That’s JPMorgan getting out of Dodge.


Also in gold, 28 non-U.S. banks are net short 24,895 COMEX gold contracts, which isn’t much per bank…less than a thousand contracts each on average.  In the July BPR, 28 non-U.S. banks were net short 37,779 COMEX contracts, so the month-over-month decline is a very chunky 12,884 contracts.  I suspect that there’s at least one large non-U.S. bank in this group that might hold a third of this short position all by itself — and the remaining contracts, divided up between the remaining 27 non-U.S. banks, would be immaterial.  I would suspect that Scotiabank is the guilty party.


And as I pointed out in the COT Report above, the 33 banks in this Bank Participation Report hold a short position only very slightly larger than the entire commercial net short position in gold.  On it’s face, this is beyond wildly bullish because, on a net basis, the world’s banks are basically gone out of the gold market, with a net short position of only 47,856 contracts/4.79 million troy ounces, as of the close of COMEX trading on Tuesday.


As of this Bank Participation Report, 33 banks [both U.S. and foreign] are now net short only 10.2 percent of the entire open interest in gold in the COMEX futures market, which is down huge from the 19.8 percent they were short in the July BPR.


Here’s Nick’s chart of the Bank Participation Report for gold going back to 2000.  Charts #4 and #5 are the key ones here.  Note the blow-out in the short positions of the non-U.S. banks [the blue bars in chart #4] when Scotiabank’s COMEX short position was outed by the CFTC in October of 2012.  Click to enlarge.



In silver, 5 U.S. banks are net short 28,122 COMEX silver contracts in July’s BPR – and Ted figures that JPMorgan is the proud owner of 20,000 contracts of that amount.  In July’s BPR, the net short position of these U.S. banks was 35,085 contracts, so the short position of the U.S. banks is down 6,963 contracts from a month ago.  All of that decrease should be attributed to JPMorgan.


Also in silver, 21 non-U.S. banks are net short 21,569 COMEX contracts…which is down a bit from the 22,731 contracts that these same non-U.S. banks were short in the July BPR.  I would suspect that Canada’s Scotiabank still holds a goodly chunk of the short position by the non-U.S. banks.  And since that is probably the case, it certainly means that a number of the remaining 20 non-U.S. banks might actually be net long the COMEX futures market in silver.  But even if they aren’t, the remaining short positions divided up between these other 20 non-U.S. banks are immaterial – and have always been so.


As of August’s Bank Participation Report, 26 banks [both U.S. and foreign] are net short 21.1 percent of the entire open interest in the COMEX futures market in silver-which is down a decent amount from the 28.1 percent that they were net short in the July BPR – with much, much more than the lion’s share of that held by JPMorgan and Scotiabank.


Here’s the BPR chart for silver.  Note in Chart #4 the blow-out in the non-U.S. bank short position [blue bars] in October of 2012 when Scotiabank was brought in from the cold.  Also note August 2008 when JPMorgan took over the silver short position of Bear Stearns-the red bars.  It’s very noticeable in Chart #4-and really stands out like the proverbial sore thumb it is in chart #5.  Click to enlarge.



In platinum, 4 U.S. banks are net short a tiny 622 COMEX contracts in the August Bank Participation Report.  In the July BPR, 4 U.S. banks were net short 2,643 COMEX platinum contracts, so there’s been a whopping decrease for the third month in a row [76.5 percent] in the short position of the U.S. banks in question during the last reporting month.


Any remaining short position held by any U.S. bank, including JPMorgan, is obviously not material.


Also in platinum, 16 non-U.S. banks are net short 2,861 COMEX contracts, which is down 9.7 percent from the 3,170 contracts they were net short in the July BPR.


And to give you some idea how fast the banks are existing their short positions in platinum, in February’s BPR…20 U.S. and non-U.S. banks were net short 29,406 COMEX platinum contracts.  In August’s report, this one, 20 banks have a combined short position of only 3,483 contracts.  That’s serious short covering, dear reader.


And as of August’s Bank Participation Report, 20 banks [both U.S. and foreign] were net short only 4.4 percent of the entire open interest in platinum in the COMEX futures market, which is down substantially [36.9 percent] from the 6.9 percent they were collectively net short in the July BPR.


Here’s the Bank Participation Report chart for platinum — and it’s obvious that they’re no longer a factor.  Click to enlarge.



In palladium, 4 U.S. banks were net short 3,146 COMEX contracts in the August BPR, which is down a whopping  52.8 percent from the 6,662 contracts they held net short in the July BPR.


Also in palladium, 12 non-U.S. banks are net short 1,666 COMEX contracts-which is down 176 contracts from the 1,842 COMEX contracts that these 12 non-U.S. banks were short in the July BPR.  When you divide up the short positions of these non-U.S. banks more or less equally, they’re also immaterial…especially when you compare them to the positions held by the 4 U.S. banks.  The short positions in palladium held by the U.S. banks are pretty much immaterial as well.


But, having said all that, as of this Bank Participation Report, 16 banks [U.S. and foreign] are net short 20.9 percent of the entire COMEX open interest in palladium.  In July’s BPR, the world’s banks were net short 38.7 percent of total open interest, so there’s been a huge decline in the concentrated short position of the banks in this precious metal.


It’s also apparent that ‘da boyz’ are heading for the exits in palladium as well.  And to give you an idea of just how fast they’re been moving this year, the short position of the world’s banks in palladium was 18,683 contracts in total back in January of this year.  Compare that with the 4,812 contracts they are short as of August’s Bank Participation Report.


Here’s the palladium BPR chart.  You should note that the U.S. banks were almost nowhere to be seen in the COMEX futures market in this metal until the middle of 2007-and they became the predominant and controlling factor by the end of Q1 of 2013. That has changed completely over the last six months.  Click to enlarge.



Along with today’s Commitment of Traders Report, the above data in the August Bank Participation Report proves beyond all doubt that the U.S. bullion banks…read JPMorgan…have been covering their short positions in all four precious metals at a furious pace for the last six months.  That process has accelerated in the last two months — and for all intents and purposes [expect for JPMorgan’s 20,000 contract short position in silver — and Scotiabank’s big short position in silver as well] there are no material short positions held by any of the U.S. or non-U.S. banks in any precious metal.


And since that’s obviously the case, I can certainly understand why Ted said in his weekly commentary on Saturday, August 4…”The new COT report issued yesterday does nothing to diminish my expectations for a price explosion at any time” — and why he’s “so bullish that I can hardly contain myself.


If he felt that way a week ago, one wonders how he’ll phrase it in his weekly commentary today.  With today’s COT and BPR data in hand, you should be feeling the same way as well, dear reader.  I know that I am.


All we’re waiting for is CME CEO Terry Duffy’s “event” that will set it off.



Brunswick-Lüneburg, line Wolfenbüttel, Augustus the Younger, 1635-1666,
Reichsthaler 1643, Zellerfeld 7th Bell Thaler
Origin: Roman German Empire     Mint: Zellerfeld     Material: Silver     Full Weight: 28.88 grams


I have very few stories for you today — and they include a couple that I’ve been saving for Saturday’s column for both length and content reasons.


U.S. Spending on Interest Hits All Time High as Budget Deficit Soars to $684 Billion

The U.S.’ spending problem is starting to become a major issue.


According to the latest Monthly Treasury Statement, in June, the U.S. collected $225BN in tax receipts – consisting of $110BN in individual income tax, $91BN in social security and payroll tax, $4BN in corporate tax and $20BN in other taxes and duties- a drop of 2.9% from the $232BN collected last July and a reversal from the recent increasing trend…… and in July, the 12 month trailing receipt total was barely higher compared to a year ago, up just 0.4% Y/Y after rising as much as 3.1% at the end of 2017.


This resulted in a July budget deficit of $77 billion, in line with expectations, and a signification deterioration from the $43 billion recorded in July of 2017.


The July deficit brought the cumulative 2018F budget deficit to over $684BN during the first 10 month of the fiscal year, up 28% over the past year.


This is the highest 12 month cumulative deficit since May 2013; as a reminder the deficit is expect to increase further amid the tax and spending measures, and rise above $1 trillion as soon as next year.


But while out of control government spending is clearly a concern, an even bigger problem is what happens to not only the U.S. debt, which recently hit $21.3 trillion, but to the interest on that debt, in a time of rising interest rates.


As the following chart shows, U.S. government Interest Payments are already rising rapidly, and just hit an all time high of $538 billion in Q2 2018.


This  multi-chart news item was posted on the Zero Hedge website at 3:01 p.m. EDT on Friday afternoon — and I thank Brad Robertson for sending it our way.  Another link to it is here.


Americans’ Real Wage Growth Slumps Most in 6 Years

And just like that, a million hopeful voices cried out in horror…

Real average hourly earnings shrank by the most since 2012 in July…
For years hope has been soaring that household income will rise any minute now… and despite two years of disappointment, they remain optimistic…


But unemployment is so low? Full-employment? Wage pressure? Hmm, maybe that dismal participation rate is more important that we thought…


Just keep believing America!!


This brief, but worthwhile 3-chart Zero Hedge article appeared on their website at 10:55 a.m. EDT on Friday morning — and it’s the second contribution in a row from Brad Robertson.  Another link to it is here.


Paul Craig Roberts Rages: “Elites Are Shutting Down the Truth-Tellers

Economic expert and journalist Dr. Paul Craig Roberts says the ideas of the elite are awful, and they want to suppress free speech to get their policies instituted. Dr. Roberts explains,
The agendas of the elite are hidden. They are not something the American people would support. The elite are fearful that their cover stories are so thin that if truth can be shown on their agendas, they will be discredited. They will lose their abilities to impose their agendas. So, they are closing down truth tellers in order to maintain control over explanations. Alex Jones is a threat to the elites’ control over the explanations…

They are sending the message that says get on board with the official explanations or we terminate you.”
Dr. Roberts goes on to ask, “Why is this possible?
“It is possible because the antitrust laws of the United States have not been enforced. These are all monopolies. Monopoly is against the law. It’s against the Sherman Antitrust Act, but they don’t enforce it because they’re so powerful. They just prevent the law being enforced. Plus, they have the neo-liberal economists saying that today you have to be a monopoly to compete globally…

It’s a lie, but it’s a cover for having just a few people controlling information.”
This Paul Craig Roberts interview with host Greg Hunter is embedded in this article from Zero Hedge on Wednesday — and for content reasons, had to wait for today’s column.  I thank Jim Gullo for sending it along.  Another link to it is here.  In a parallel story from the Internet site comes this 3-part commentary.  The first is headlined “The war to destroy Alex Jones, Part One” — and the links to Part 2&3 are embedded.  I thank Roy Stephens for that one.


[Note: I met Alex at a Casey Research conference — and when he doesn’t have a microphone or TV camera shoved in his face, he seemed like a rather soft-spoken earnest sort of guy.  But his persona changes in a heartbeat the moment he goes ‘on air’.]


The Eurozone’s “Doom Loop” Re-Grips Italian Banks

In June, as the ECB cut back on its purchases of Italian government bonds, Italian commercial banks added to their holdings, continuing a trend that began in May, analysts at Dutch bank ABN report. Total holdings in June rose by €17 billion to €381 billion. That came on the heels of a €28 billion surge in May, which was the single largest month of Italian bank purchases of Italian bonds in history, according to Deutsche Bank.


For the first time in a long time, Italian banks’ purchases of Italian bonds dwarfed those of the Eurosystem (the ECB and the national central banks of Eurozone countries), which in May and June bought a comparatively paltry €3.6 billion and €4 billion of multiyear Treasury bonds (BTPs) respectively, though the average maturity of its cumulative purchases was higher at just under 8 years. This happened as pressure on Italian government bonds rose following the unexpected formation of an anti-EU coalition government. In the space of two months the yields on 10-year bonds surged from 1.8% to 3.1%, and are now just below 3%.


It’s a big jump by today’s standards but still far lower than the 7.56% the Italian government was paying in November 2011, during the peak of the Eurozone debt crisis. Nonetheless, a two-year trend appears to be in the process of reversing.


By March this year, the Bank of Italy, on behalf of the ECB, had bought up over €350 billion of BTPs. At one point the scale of its holdings even overtook those of Italian banks, which had been shedding BTPs since mid-2016, making the central bank the second-largest holder of Italian bonds after insurance companies, pension funds and other financials. But now, Italian banks are once again buying BTPs hand over fist.


This article was posted on the Internet site on Thursday sometime — and I thank Richard Saler for pointing it out.  Another link to it is here.


Turkey Financial Crisis Erupts, Stoking Concerns of Contagion

Turkey entered a full-blown financial meltdown on Friday, sending tremors through global markets, after President Recep Tayyip Erdogan declared his refusal to bow to U.S. political demands and market pressures.


The unraveling was swift, highlighting the fragility of Turkey’s economy after years of a growth-at-all-costs policy bias that left its companies saddled with hundreds of billions of dollars in foreign debt. The lira plunged as much as 17 percent on Friday alone, bringing its loss for the year to 42 percent and raising the specter of contagion into Europe and across other emerging markets.


While the trigger was U.S. sanctions for Turkey’s imprisonment of an American pastor, many investors say the $900 billion economy was already headed toward a cliff, and only needed a push. The sell-off represented a vote of no-confidence in a new system of government that handed Erdogan unrivaled authority, essentially paralyzing the bureaucracy in Ankara.


This is a textbook currency crisis that’s morphing into a debt and liquidity crisis due to policy mistakes,” said Win Thin, a strategist at Brown Brothers Harriman & Co. in New York. “The way things are going, markets need to be prepared for a hard landing in the economy, corporate defaults on foreign currency debt, and possible bank failures.”


This Bloomberg news item showed up on their Internet site at 2:46 a.m. Denver time on Friday morning — and was updated about ten hours later.  I thank Swedish reader Patrik Ekdahl for bringing it to our attention — and another link to it is here.  There were related Zero Hedge stories on this.  The first is headlined “Why Turkey is Doomed in Two Charts” — and the second…”It’s a F**king Bloodbath” – Emerging Markets Collapse as Turkey Tantrum Spread” — and both are courtesy of Richard Saler.


Trump OKs stiffer tariffs on Turkish metals as lira plummets

President Donald Trump announced tariff increases on Turkish metals as tensions between Turkey and the United States escalated.


Trump said Friday on Twitter that he authorized a new 20 percent tariff on aluminum and 50 percent tariff on steel from Turkey. It came as a Turkish delegation returned from the United States, reporting no progress on negotiations involving a U.S. pastor imprisoned in Turkey.


Andrew Brunson has been in Turkish custody since 2016, when he was arrested on charges of terrorism and support of a group held responsible for an attempted coup of Turkish President Recep Tayyip Erdogan. U.S. President Donald Trump introduced a round of sanctions on Aug. 1, preventing the Turkish justice an interior ministries from doing business with U.S. businesses. Trump also threatened additional “large sanctions” against Turkey, a NATO ally, for Brunson’s detention.
Prior to Trump’s announcement, the Turkish lira fell to its lowest point ever against the U.S. dollar on Friday. Reacting to geopolitical concerns, the Dow Jones industrial Average fell 138 points by 11:50 am.


This UPI story appeared on their website at 11:59 a.m. on Friday morning EDT — and I thank Roy Stephens for sending it along.  Another link to it is here.


Doug Noland: Turkey (Nudged Over the Cliff)

When I began posting the CBB almost twenty years ago, my focus was on “money” and Credit and the U.S. boom. I didn’t anticipate geopolitical developments would some day play a role in my analysis. But I also never contemplated a global Bubble of today’s dimensions and characteristics.


I never imagined how an explosion of government debt and central bank Credit would be used so recklessly to inflate intertwined Bubbles spanning the globe. Never did I contemplate how this new age global “system” – already highly unstable two decades ago – would be nurtured, backstopped and resuscitated into today’s monstrosity. I never could have envisioned how the U.S. would run huge Current Account Deficits for another 20 years and still maintain such command over a dollar-based global financial apparatus. Who would have believed a global financial arms race was even possible – amidst such escalating animosity and hostility?


This is a strange period. It’s strange here at home – in society, in politics and in the markets. It is strange globally. The unprecedented nature of what we see at home, abroad and in the markets provides a lot of leeway with interpretation and analysis. Somehow, there’s a dominant contingent that believes the U.S. is on the right course – that the economic boom will accelerate, markets will, as they always do, continue to rise. The future is bright, all the polarization and social angst notwithstanding. Markets offer unassailable confirmation.


It would be great if the optimists were right. But this was a week that corroborated a much darker interpretation of developments. A decade of unrelenting easy “money” and booming finance has masked a metastasis of festering issues – financial, economic, social and geopolitical. And we’re now only a more general bursting of the global financial Bubble away from having to simultaneously face a bevy of very serious issues. As they tend to do, developments can seem to move at glacial pace – and then, rather suddenly, they can be more akin to lava.


Doug’s weekly Credit Bubble Bulletin always falls into the must read category for me — and this week’s commentary is certainly no exception.  Another link to it is here.


Back to the ‘Big Island’…Hawai’i…for a bit.  The activity level at fissure 8 has fallen off to nothing in the last several days — and these photos certainly show that.  Whether it stays that way is a big unknown.  Click to enlarge for both.
This last photo, from August 7, provides a stunning view of Halema’uma’u — and the collapsed area within the caldera. Prevailing trade winds have blown much of the ash emitted during earlier explosions to the southwest (left), where thin layers of light-colored volcanic ash now blanket the landscape. Plumes of smoke rising from the flank of Mauna Loa were from a brush fire that continues burning today. Mauna Kea is visible on the upper right horizon.  This photo, plus the two above, come to us courtesy of the U.S. Geological Survey.  Click to enlarge.


“You may recall that JPMorgan issued from its house account more than 4,000 gold deliveries in the June delivery month, the bulk of the 6,900 total deliveries issued that month. Since I contend that JPMorgan has been on a short covering spree in COMEX gold since May, to the point of double crossing other commercials in the process, it is natural to ask why in the world would JPM issue and give away physical gold if it is so involved in covering gold short positions. I explained in June that JPM was issuing physical gold deliveries in order to enable it to buy back many times more in gold futures short positions, so let me update the figures today.”
“In total, JPMorgan has issued and “lost” 5,300 gold contracts via physical delivery between the June and August contracts to date, an amount equal to 530,000 gold oz. At the same time, JPMorgan has bought back close to 90,000 contracts of COMEX gold futures short contracts, an amount equivalent to 9 million oz. In essence, JPM has sacrificed and ‘lost’ 530,000 physical ounces of gold in order to buy back 17 times more in the form of covering existing short futures contracts. It is a trade-off JPMorgan would make all day every day. It is nothing short of market (and criminal) brilliance.”
“The reason JPMorgan “donated” 530,000 oz of physical gold is that it needed to keep the gold physical market from acting up and flashing signs of severe tightness, while it proceeded to buy back 9 million oz of futures short contracts. The buyback of gold futures contracts by JPM took two forms; first the bank rigged prices lower in induce record technical fund selling, while at the same time temporarily rigging prices higher to induce other commercials (the raptors) to sell, thereby double crossing them. JPM even added to silver short positions in the interim to keep the overall scam going. These crooks at JPMorgan are in a league of their own.” — Silver analyst Ted Butler: 04 August 2018

Today’s pop ‘blast from the past’ dates from 1972…forty-six years ago…wow!  I was twenty-four years old — and up in Alert, N.W.T. when this song came out.  It was one of Elton John’s biggest hits — and the link to it is here.  And here is another big hit of his from a year later.   Where the hell has all that time gone???
Today’s classical ‘blast from the past’ is one I’ve feature before, but it’s been many years, so it’s certainly time for a revisit.  It’s Johannes Brahms’ violin concerto in D major, Op.77 which he composed back in 1878.  It’s not my all-time favourite, but it’s certainly in my Top 5.  Featured here is the incredibly gifted Hilary Hahn as soloist, with the Frankfurt Radio Symphony Orchestra.  Paavo Järvi conducts — and the link is here.  The recording volume is on the low side, so you’ll have to turn it up a bit.

Although not a lot happened from a price perspective in the precious metals on Friday, the monstrous volumes in both gold and silver…particularly gold…certainly raised my eyebrows a notch or two — and I’m not entirely sure what to make of that.  But it’s a certainty that Ted will have something to say about it in his weekly review later today.  The change in open interest in Friday’s Preliminary Report showed that total open interest in gold only rose by 5,475 contracts.  But I’ve learned from Ted over the years that it can prove dangerous to rely on those numbers.  Total open interest in silver increased by only 282 contracts yesterday.
But setting that aside for the moment, it’s what showed up in yesterday’s Commitment of Traders Report — and particularly in the Bank Participation Report that is top-of-mind for me.  Not only are COMEX futures set up for moon shots in the four precious metals, plus copper…it was the fact that JPMorgan has exited stage left in gold — and probably the other precious metals as well.  That certainly what it looks like when you delve into the innards of yesterday’s Bank Participation Report posted above.  Ted has mentioned this a few times in the last week or so that JPMorgan is entirely out of its short position in gold — and that report certainly confirms it.
Yes, the banks still hold big net short positions in gold and silver, particularly the foreign banks, but each of these individual banks [with the exception of Canada’s Scotiabank] holds very small short positions in all four precious metals, certainly less than 1,000 contracts in gold on average, well under 1,000 contracts each in silver — and a few hundred contracts at most in platinum and palladium.  They won’t be in harm’s way by much when things do blow up.
But with JPMorgan out of the picture across the board, Ted’s double cross of the other banks — and the other large commercial traders, appears to be complete.
Now we’re just waiting for the “event” that’s allowed to set this ablaze.
Here are the 6-month charts for all four precious metals, plus copper and WTIC — and there’s not a lot to see.  The ‘click to enlarge‘ feature helps a bit with the first four.
Of course there are no shortage of black swans out there, as the U.S. is at economic, financial and monetary war with Europe, China, Russia, Iran — and now Turkey…plus a few others.  The word of law and trade set up over the last hundred or so years, is now out the window.  This is a war of the keyboards in the world’s financial markets.   The U.S. deep state doesn’t have to send in the troops, the aircraft or the cruise missiles, as they’re driving these countries into the dirt via electronic means.
Push has really become shove now, as the remaining countries of the world that will not bow down to U.S. hegemony are being put through the proverbial wringer by other means — and at some point these nations will strike back in one form or another, using whatever tools they have at their disposal.
I suspect, as I’ve said before, that the price management scheme in commodities in general — and the precious metal in particular, will be a casualty of all this.  It has also occurred to me that this trade/economic/financial war that the U.S. has precipitated, was designed specifically to trigger the end of the price suppression scheme in the precious metals.
If that speculation turns out to be correct, it will certainly will be easy for the U.S. to pin the blame on anyone, or all of these countries — and not on the CME Group where it really belongs.  JPMorgan will walk away smelling like a rose, along with obscene profits to boot.  They can just sit there and watch the shorts burn in hell, as it’s a given that they haven’t been in this big of a rush to get out of their short positions for no reason.
As I said in this space last week, Jamie Dimon is about as blue-blood deep state that you can find — and as Ted Butler has pointed out on a number of occasions, JPMorgan tells the U.S. government what to do…not the other away around.
So here we sit in this “white hot” bullish state, waiting for heaven only knows what to happen.  As I’ve said countless times over the years, when this price management scheme finally breaths it last, it won’t be happening in a news vacuum.
My only fear is what the “event” might be that fills it.
So we wait some more.
I’m done for the day — and the week — and I’ll see you here on Tuesday.

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August 11th, 2018

Posted In: Ed Steer's Gold and Silver Digest

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