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November 12, 2018 | Gold: Back Below Its 50-Day Moving Average

"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."

10 November 2018 — Saturday


The gold price was sold quietly lower until around noon China Standard Time on their Friday.  It crawled quietly higher from there until a few minutes after the London open — and then it crawled equally quietly lower until the COMEX open.  Then the spoofing and algo spinning began — and the low tick of the day came around 12:15 p.m. in New York.  It crept a few dollars higher from there until around 2:30 p.m. in the thinly-traded after-hours market — and didn’t do much after that.


The high and low ticks were reported by the CME Group as $1,224.60 and $1,207.20 in the December contract.


Gold was closed in New York on Friday at $1,209.40 spot, down $14.10 on the day — and back below its 50-day moving average.  Surprisingly enough, net gold volume wasn’t as heavy as I was expecting…a fact I pointed out to Ted on the phone yesterday…at a hair under 266,000 contracts, but roll-over/switch volume out of December and into future months was very decent at around 58,000 contracts.



The silver price inched quietly lower until around noon CST on their Friday as well — and then didn’t do much until 2 p.m. CST — and slid quietly from that point into the COMEX open.  JPMorgan did the rest — and set silver’s low tick came at 10:45 a.m. in New York.  It was bounced off that low tick a couple of times, before crawling higher staring around 12:15 p.m. EST.  That lasted until about 3 p.m. in after-hours trading — and it didn’t do much from there into the 5:00 p.m. close of trading.


The high and low ticks were recorded as $14.425 and $14.08 in the December contract.


Silver was closed yesterday afternoon at $14.15 spot, down 27 cents from Thursday — and a goodly distance below its 50-day moving average.  Net volume was extremely heavy at a bit over 96,000 contracts — and there was a hair under 21,800  contracts worth of roll-over/switch volume in this precious metal.



Platinum was down 6 dollars by noon in Shanghai on their Friday, but made it back to the unchanged mark by shortly after the Zurich open.  It then got the JPMorgan treatment starting at the COMEX open as well — and its low tick was set shortly after the Zurich close.  It was bounced off that low multiple times from that juncture — and was closed a dollar off its low at $851 spot, down 10 bucks on the day.



Except for the odd bump higher — and the odd soft spot, palladium was handled in a similar fashion as platinum.  Its low tick came shortly before noon in New York — and it managed to rally back to the $1,100 spot mark by the COMEX close.  Palladium finished the Friday session at $1,102 spot, down 11 dollars from Thursday.



The dollar index closed very late on Thursday afternoon in New York at 96.65 — and began to creep higher as soon as trading began at 6:00 p.m. EST in New York on Thursday evening.  That lasted until 10:25 a.m. GMT in London, which probably coincided with the morning gold fix over there.  From that point it chopped quietly lower until London closed at 11:00 a.m. EDT — and then jumped up to its 97.01 high tick which came exactly one hour later at precisely noon in New York.  It gave back some of that ‘rally’s’ gains during the next forty-five minutes — and traded quietly sideways for the remainder of the Friday session.  The dollar index finished the day at 96.90…up 25 basis points from Thursday’s close.



And here’s the 5-year dollar index, just to give you a bigger picture look at the world’s ‘reserve’ currency.  The delta between its close on Friday…96.73…and the close on the intraday chart above, was 17 basis points on Friday.



The gold stocks gapped down a bit at the 9:30 open in New York on Friday morning — and then continued to sag until their respective low ticks were set at 10:30 a.m. EST.  They began to chop unevenly higher from there — and the HUI closed down only 1.60 percent.



It was the same general price path for the silver equities, but they managed to rally a bit more off their lows than the gold shares — and Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down only 1.26 percent.  Click to enlarge if necessary.



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



Despite the JPMorgan engineered price declines during the COMEX trading session on Friday, there was some obvious deep-pocket bottom-fishing going on the in precious metal shares yesterday.



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 it was another down week, taking back all of November’s gains in the process — and a bit more in some cases.  You can thank JPMorgan for the way the above graph looks this week.  Click to enlarge.



The month-to-date chart includes the five days of this past week, plus only two days from the prior week — and except for platinum and palladium prices, everything else on this chart shows about unchanged for the month of November.  Click to enlarge.



The year-to-date chart continues to be [mostly] a sea of red — and about unchanged from what it looked like at the end of October.  But it’s still clear from this chart that the silver equities are ‘outperforming’ their golden brethren, however that’s not saying much, is it?  Click to enlarge.



As I said in this space last week…it’s still JPMorgan’s world in the precious metals market– and they’ll do whatever they want, or until they’re told to step aside.



The CME Daily Delivery Report showed that 10 gold and 10 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.  In gold, the sole short/issuer was Advantage.  Morgan Stanley stopped 9 — and JPMorgan picked up the remaining contract.  All issuer and stopper transactions involved their respective client accounts.  In silver, Advantage was the sole short/issuer as well — and Morgan Stanley the sole long/stopper…with 9 for its in-house/proprietary trading account — and the remaining contract for its client account.  The link to yesterday’s Issuers and Stoppers Report is here.


The CME Preliminary Report for the Friday session showed that gold open interest in November rose by 10 contracts, leaving 16 still around, minus the 10 contracts mentioned just above.  I would suspect those are the same ten contracts that are out for delivery on Tuesday.  Thursday’s Daily Delivery Report showed that 1 gold contract was posted for delivery on Monday, so that means that 1+10=11 more contracts were added to the November delivery month.  Silver o.i. in November dropped by 18 contracts, leaving 13 still open, minus the 10 mentioned in the previous paragraph.  Thursday’s Daily Delivery Report showed that 28 silver contracts were posted for delivery on Monday, so that means that 28-18=10 more silver contracts just got added to November and, like for gold, those are the ones out for delivery on Tuesday.


So far in November there have been 204 gold contracts issued and stopped, but in silver that number is 1,401…which is an enormous number for a so-called non-delivery month.



There were no reported changes in either GLD or SLV yesterday.


The folks over at the Internet site updated their short position in both GLD and SLV as of the close of trading on Wednesday, October 31 — and this is what they had to report.  The short position in SLV rose from 8,321,800 shares/troy ounces, up to 9,920,500 shares/troy ounce, which was an increase of 19.2 percent over the two-week reporting period.  The short position in GLD fell from 1,529,190 troy ounces, down to 1,320,750 troy ounces, which works out to a decline of 13.6 percent over the same two-week reporting period.


There was not sales report from the U.S. Mint yesterday.


Month-to-date the mint has had only one sales report — and that was the middle of this past week, when they reported selling 6,000 troy ounces of gold eagles — 2,000 one-ounce 24K gold buffaloes — and 405,000 silver eagles.


There was no in/out activity in gold over at the COMEX-approved gold depositories on the U.S. east coast on Thursday.


Of course, silver continues to amaze, as 601,969 troy ounces was received — and another 1,344,612 troy ounces was shipped out.  In the ‘in’ category, the one truckload that was received, ended up at Brink’s, Inc.  In the ‘out’ category, one very large truckload…627,825 troy ounces…departed CNT — and another 692,098 troy ounces left Scotiabank’s vault.  The remaining 24,688 troy ounces was shipped out of Delaware.  The link to all this activity is here.


Ted mentioned the fact that this week was the second busiest week for in/out activity in silver in COMEX history, as just under 14 million troy ounces was either received or shipped out.  I expect that he’ll have a goodly amount to say about this state of affairs in his column this afternoon.


It was another fairly active day over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday.  They reported receiving 6,021 of them, but only shipped out 40.  All this activity was at Brink’s, Inc. of course — and the link to that, in troy ounces, is here.



The photo below is one of the items found in the Treasure of GuarrazarIt was an archeological find composed of twenty-six votive crowns and gold crosses that had originally been offered to the Roman Catholic Church by the Kings of the Visigoths in the seventh century in Hispania, as a gesture of the orthodoxy of their faith and their submission to the ecclesiastical hierarchy.[2] The most valuable of all is the votive crown of king Reccesuinth with its blue sapphires from Sri Lanka and pendilia. Though the treasure is now divided and much has disappeared, it represents the best surviving group of Early Medieval Christian votive offerings.
The treasure, which represents the high point of Visigothic goldsmith’s work, was dug between 1858 and 1861 in an orchard called Guarrazar, in Guadamur, very close to Toledo, Spain. The treasure was divided, with some objects going to the Musée de Cluny in Paris and the rest to the armouries of the Palacio Real in Madrid (today in the National Archaeological Museum of Spain). In 1921 and 1936, some items of the Treasure of Guarrazar were stolen and have disappeared Click to enlarge.



The Commitment of Traders Report, for positions held at the close of COMEX trading on Tuesday, was about as bad as I expected in silver, but nothing special in gold.


In silver, the Commercial net short position increased by another 9,531 contracts, or 47.7 million troy ounces of paper silver.  The reason this number is so ugly is because silver blew through — and closed above its 50-day moving average during the reporting week.
They arrived at that number by decreasing their long position by 3,620 contracts — and they also added 5,911 short contracts — and it’s the sum of those two numbers that represents the change for the reporting week.


I would suspect that JPMorgan’s short position in now large enough that they would now be included in the large ‘5 through 8’ traders category — and Citigroup’s short position in silver may be on the verge of being large enough as well.  The only other Bank in the Big 8 category would be Scotiabank — and they’re still in the Big 4 traders category I would think.  The remaining traders in the Big 8 category would most likely be of the Managed Money variety.  That would be especially true after the COMEX close yesterday.


But under the hood in the Disaggregated COT, there was a bit of a surprise waiting, as the Managed Money traders made up less than half [45%] of the change in the Commercial net short position.  They sold 2,891 long contracts, plus they reduced their short position by 7,219 contracts — and it’s the difference between those two numbers…4,328 contracts…that represents their change for the reporting week.  The difference between that number — and the Commercial net short position…9,531 minus 4,329 equals 5,201 contracts, was made up as it always is, by the traders in the other two categories.  Both categories…the ‘Other Reportables’ and the ‘Nonreportable’/small trader category covered short positions like mad during the reporting week.  This was particularly true of the ‘Nonreportable’/small trader category.


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



The Commercial net short position in silver is now up to 19,291 contracts, or 96.5 million troy ounces of paper silver.


With the new Bank Participation Report in hand, Ted pegs JPMorgan’s short position at around 15,000 contracts.  In last week’s COT Report Ted calculated that they were short a bit over 10,000 contracts — and they added about 3,500 more contracts during this past reporting week, so Ted’s guesstimates all month long have been pretty much on the money.


Here’s the 3-year COT chart, courtesy of Nick Laird — and this week’s fairly chunky deterioration should be noted.  Click to enlarge.



Of course, as I mentioned in both Thursday’s and Friday’s columns, the current COT Report we have in front of us now is very much ‘yesterday’s news’ already — and that comment certainly applies even more after Friday’s COMEX close.



In gold, the commercial net short position increased as well, but only by 6,931 contracts, or 693,100 troy ounces of paper gold.  No critical moving averages were penetrated during the reporting week.


They arrived at this number by adding 8,040 long contracts, plus they increased their short position by 14,971 contracts — and it’s the difference between those two numbers that represents their change for the reporting week.


Despite the increases in the Commercial net short position in gold recently, the position changes of the Big 4 and Big ‘5 through 8’ traders are still mostly immaterial because of the contamination of that data by the large number of Managed Money traders that still inhabit this group.  Although JPMorgan’s short position is now large enough that they would now be in the Big ‘5 through 8’ category, because Ted said they added a fairly healthy number of short contracts during the reporting week.  And if they are now in that category, they’re certainly the only U.S. bank or trading house that’s there.


Under the hood in the Disaggregated COT Report, it was all Managed Money traders, plus a bit more, as they increased their long position by 2,083 contracts — and they also reduced their short position by 5,994 contracts — and it’s the sum of those two numbers…8,077 contracts…that represents their change for the reporting week.


The difference between that number — and the commercial net short position…6,931 minus 8,077 equals 1,146 contracts…and that was made up entirely by the traders in the other two categories, although each group went about it differently.  Here’s a snip from the Disaggregated COT Report for gold, so you can see this for yourself.  Click to enlarge.



The commercial net short position in gold is now up to 3.81 million troy ounces.  An increase, yes…but on an historic basis, it’s still a very bullish number.


Here’s the 3-year COT chart for gold — an as I’ve already mentioned, the change wasn’t overly material.



Of course, like for silver, ‘all of the above’ is totally out the window, especially after Friday’s engineered price decline and close back below gold’s 50-day moving average.
The surprise for Ted with this week’s COT — and companion Bank Participation Report, was that JPMorgan appeared to be the only short seller active…not only during this reporting week, but all of October as well…if I heard him correctly.  He’ll have lots to say about this in his weekly review later today.


In the other metals, the Managed Money traders increased their net long position in palladium by a scant 835 contracts.  But it’s such a tiny market [27,859 contracts of total open interest] that it doesn’t take much to move it.  In platinum, the Managed Money traders really piled in on the long side in a big way, increasing their net long position by a hair under 10,000 contracts.  The total open interest in this precious metal is only 74,364 contracts.  They did the same in copper as well, increasing their net long position by a chunky 12,385 contracts.  Total open interest in copper sits at 247,313 contracts.


So with this week’s COT Report results already irrelevant, we’re back at very-to-wildly bullish set-ups in both silver and gold once again.


But it can be generally said that we’re still on ‘care on maintenance’ in the precious metals — and basically marking time…waiting for ‘whatever’ to happen.



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. Click to enlarge.



But, like the COT Report itself, the chart above is basically irrelevant at this point as well — and for the same reason. Except for Scotiabank — and one or two U.S. banks…JPMorgan for sure — and possibly Citigroup by a whisker, if at all…the positions of the Big 4 and Big 8 traders are still mostly made up of the brain-dead/moving average-following Managed Money traders now.


For the current reporting week, the Big 4 traders are short 110 days of world silver production, up 6 days from what they were short in last week’s report – and the ‘5 through 8’ large traders are short an additional 48 days of world silver production, which is down 5 days from last week’s report-for a total of 158 days held short, which is a bit over five months of world silver production, or about 368.8 million troy ounces of paper silver held short by the Big 8. [In last week’s COT Report the Big 8 were short 157 days of world silver production.]


The Big 8 commercial traders are short 34.6 percent of the entire open interest in silver in the COMEX futures market, which is down a hair from the 35.1 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 around 40 percent. In gold, it’s 31.5 percent of the total COMEX open interest that the Big 8 are short, down from the 32.8 percent they were short in last week’s report — and a bit over 35 percent once the market-neutral spread trades are subtracted out.


In gold, the Big 4 are short 39 days of world gold production, which is up 2 days from what they were short last week — and the ‘5 through 8’ are short another 15 days of world production, which is down 2 days 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 unchanged from what they were short in last week’s report. Based on these numbers, the Big 4 in gold hold about 72 percent of the total short position held by the Big 8…which is up about 3 percentage point from last week’s COT Report.


And, once again, don’t forget that like in silver…a lot of the traders in the Big 4 and Big 8 categories in gold are still Managed Money traders — and not the commercial variety.


The “concentrated short position within a concentrated short position” in silver, platinum and palladium held by the Big 4 commercial traders are about 70, 72 and 74 percent respectively of the short positions held by the Big 8. Silver is up 4 percentage points from the previous week’s COT Report, platinum is up 2 percentage point from a week ago. Palladium is down 1 percentage point from last week’s COT Report.



The November 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.


In gold, 5 U.S. banks were net short 52,203 COMEX contracts in the November BPR.  In October’s Bank Participation Report [BPR], these same 5 U.S. banks were net short 22,119 contracts, so there was a big increase…30,084 contracts…during this reporting period.  I believe that Ted mentioned that virtually all of this increase came courtesy of JPMorgan.


Also in gold, 27 non-U.S. banks are net short a very smallish 8,340 COMEX gold contracts, which isn’t much per bank…308 contracts each.  In the October BPR, 27 non-U.S. banks were net short only 1,960 COMEX contracts, so the month-over-month increase is 6,380 contracts, which is not a material amount.  However, I suspect that there’s at least one large non-U.S. bank in this group [probably Scotiabank] that holds all of that amount short, plus much more, all by itself…as the 8,340 contracts is a net number.  What that means is that a goodly number of these foreign banks are now net long the COMEX futures market in gold.


The world’s banks…with the exception of JPMorgan — and maybe Citigroup, plus most likely Scotiabank…are basically gone out of the gold market.


As of this Bank Participation Report, 32 banks [both U.S. and foreign] are now net short 12.2 percent of the entire open interest in gold in the COMEX futures market, which is up a bit from the 5.2 percent they were short in the October 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 27,093 COMEX silver contracts in November’s BPR.  Of that amount, JPMorgan holds about 15,000 contracts, according to Ted.  In October’s BPR, the net short position of these U.S. banks was 16,529 contracts, so the short position of the U.S. banks is up by around 10,500 contracts from a month ago.  All of that increase is attributable to JPMorgan as well, as per Ted.


Also in silver, 21 non-U.S. banks are net short 19,563 COMEX contracts…which is down a bit from the 20,167 contracts that these same non-U.S. banks were short in the September BPR.  I would suspect that Canada’s Scotiabank still holds a goodly chunk of the short position of the non-U.S. banks.  And since that’s 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 as well.  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 November’s Bank Participation Report, 26 banks [both U.S. and foreign] are net short 21.8 percent of the entire open interest in the COMEX futures market in silver-which is down a tad from the 24.4 percent that they were net short in the October BPR – with much, much more than the lion’s share of that now held by two U.S. banks…JPMorgan plus Citigroup…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, 5 U.S. banks are net short 10,564 COMEX contracts in the November Bank Participation Report.  In the October BPR, 5 U.S. banks were net short 4,770 COMEX platinum contracts, so there’s been a big deterioration during the reporting month…5,794 contracts…since the October BPR.


Also in platinum, 17 non-U.S. banks are net short 6,910 COMEX contracts, which is up from the 3,604 contracts they were net short in the October BPR.  But compared to the short positions of the 5 U.S. banks, the short positions of the non-U.S. banks are mostly immaterial.


And as of November’s Bank Participation Report, 22 banks [both U.S. and foreign] are now net net short 23.5 percent of platinum’s total open interest in the COMEX futures market, which is a dramatic increase from the 11.5 percent they were net short in October’s BPR.
Here’s the Bank Participation Report chart for platinum — and the deterioration in the last two months is rather alarming.  Click to enlarge.



In palladium, 4 U.S. banks were net short 6,885 COMEX contracts in the November BPR, which is up a bit from the 6,018 contracts they held net short in the October BPR.


Also in palladium, 14 non-U.S. banks are net short 1,895 COMEX contracts-which is down a bit from the 2,192 COMEX contracts that these same 14 non-U.S. banks were short in the October BPR.  When you divide up the short positions of these non-U.S. banks more or less equally, they’re immaterial, just like they are in platinum…especially when you compare them to the positions held by the 4 U.S. banks.


As of this Bank Participation Report, 18 banks [U.S. and foreign] are net short 31.5 percent of the entire COMEX open interest in palladium.  In October’s BPR, the world’s banks were net short 34.8 percent of total open interest, so there’s been a smallish decrease in the concentrated short position of the banks in this precious metal.


It’s apparent that the banks can move palladium prices around even with small amounts of trading, as they are a large part of total open interest in a very tiny and illiquid market at the best of times — and also trade “all for one, and one for all”….especially the U.S. banks…JPMorgan in particular.  For that reason alone, they’re still the dominant factor in the price of palladium.


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.  Click to enlarge.



Despite the deterioration in silver and gold in the November Bank Participation Report — and in the COT Report, the set-up still remains very bullish in both gold and silver — and is even more so since the Tuesday cut-off.  But we’re still basically in ‘care and maintenance’ mode as far as I can tell, especially when one considers how carefully that silver and gold prices are being managed vis-à-vis their respective 50-day moving averages.


I don’t have all that much in the way of stories again today.


Doug Noland: Back to Fundamentals

The odds of de-risking/deleveraging dynamics attaining destabilizing momentum are mounting. Many hedge funds now have losses for the year, which forces managers to take down both risk and leverage in anticipation of year-end outflows. I believe deleveraging is now having a growing impact on marketplace liquidity around the world – and across asset classes. Yields are rising and spreads are widening throughout global fixed-income. Unstable equities markets around the globe are indicating a fragile liquidity backdrop. And this week’s $2.68 (4.3%) drop in WTI has all the appearances of a major leveraged speculating community panic liquidation (portending challenges for the – to this point – resilient junk bond market).


As another extraordinary market week came to its conclusion, the bulls “Back to Fundamentals” mantra from Wednesday was being hijacked by the bear camp. From my analytical perspective, the outcome of the midterms wasn’t going to materially alter the Bursting Global Bubble Thesis.
Global financial conditions continue to tighten. Very serious issues related to China’s faltering Bubble remain unresolved. Italy’s political, financial and economic problems won’t be disentangled anytime soon. And the midterms weren’t going to solve the more pressing issues in the U.S., certainly including inflated asset and speculative Bubbles and a Federal Reserve determined to stay on the policy normalization course.


For me, Back to Fundamentals means a return of “Periphery to Core Crisis Dynamics” – rising yields, widening Credit spreads, de-risking/deleveraging, faltering global liquidity and, to be sure, China.


Doug’s weekly Credit Bubble Bulletin is always worth reading — and this weekend’s edition appeared on his website in the very wee hours of Saturday morning EST.  Another link to it is here.


Hedge Funds Brace For A November 15 Bloodbath

A few weeks ago, we reported that even when the market was hitting all time highs ahead of the historic October bloodbath, hedge fund investors were growing increasingly nervous, and rushed to redeem $15 billion from the space in September, the largest single monthly outflow in years, bringing year-to-date net flows to flat after being stubbornly in the green for much of the year despite what has been another deplorable year for hedge funds.


This was not the first time either: over the last three years, investors had removed over $100 billion from the industry, but performance gains had offset these losses… at least until last month.


And then October came which was not only a “bloodbath across almost every strategy“, but was the worst month for hedge funds in 7 years.


Which is why just one week ago,  we warned that what may be the most underappreciated delayed risk to the market is a surge in redemption requests as LPs and investors got their monthly performance reports, showing the worst month in years, and in knee-jerk response faxing in their request to have most or all of their money pulled out now before the rout accelerated.


Today, Bloomberg picks up on this risk, with reporter Saijel Kishan writing that following the second worst month of the decade for the hedge fund industry, many are bracing for an industry D-Day: Nov. 15.


That, as Kishan explains, is the deadline for investors to put managers on notice to get some – or all – of their money at year end.


These Managed Money traders have been killed in all markets…including the precious metal markets, along with WTIC.  The day of reckoning for these funds will be brutal.   This worthwhile news item put in an appearance on the Zero Hedge website at 4:22 p.m. EST on Friday afternoon — and I thank Brad Robertson for sharing it with us.  Another link to it is here.


This Will Be Trump’s Real Legacy — Bill Bonner

Using time as the ultimate measure of wealth, today, the top 10% are so wealthy that they can command about four times as much of the laborers’ time as they could in the 1970s.


Voters didn’t necessarily see it that way… But they felt that something wasn’t right. And they voted for Mr. Trump to do something about it. “Make America Great Again,” they pleaded.


Alas, the president did not understand the challenge and missed his opportunity to do anything about it. America could only be made great again by returning to the conservative principles that made it great in the first place – limited government, limited deficits, limited wars, and limited bureaucracy.


Instead, the president increased the deficit and diverted attention with public feuds, border walls, and trade wars.


And now, with the Democrats in control of the House… and Mr. Trump in control of the Republicans… the opportunity is gone. There will be no real reform of any sort.


Which, of course, is just what the insiders were hoping for.


This commentary Bill showed up on the Internet site early on Friday morning EST — and another link to it is here.


Italy Signals It Won’t Budge on Budget Plans in Clash With E.U.

Italy signaled it would not bow to pressure from the European Union to water down its budget for next year, with Deputy Prime Minister Luigi Di Maio dismissing the prospect of sanctions as unlikely.


Speaking to the Foreign Press Association in Rome, Di Maio of the anti-establishment Five Star Movement said he was open to dialogue but made no hint of concessions. The populist government is preparing to reply to the European Commission by next Tuesday’s deadline.


We have made commitments and we will stick to these commitments to be a credible country,” said Di Maio, adding that a citizen’s income for the poor and a lower retirement age would not be delayed. After skepticism from Brussels, he said the government is confident about a 2.4 percent deficit target for next year because of a pickup in economic growth and cuts to wasteful spending.


Separately, Finance Minister Giovanni Tria told a parliamentary hearing that the government isn’t planning to change the deficit target, and will reaffirm to the E.U. the key points of its budget plan. He said the E.U. projection of a 2.9 percent deficit next year is not justified.


The government is locked in a clash with the commission on its budget plans, accusing Brussels of botched analysis over economic forecasts. At the same time a push to deliver on at least part of election promises is sparking near-constant wrangling between Di Maio and fellow-Deputy Premier Matteo Salvini of the anti-migrant League.


This Bloomberg story appeared on their website at 3:33 a.m. Pacific Standard Time on Friday morning…6:33 a.m. in New York — and was updated about an hour later.  I thank Swedish reader Patrik Ekdahl for sending it along — and another link to it is here.


France Takes the Lead In Protecting Iran Oil Trade From U.S. Sanctions

France aims to lead the European Union (E.U.) efforts in defying U.S. sanctions on Iran, by supporting the creation of a payment mechanism to keep trade with Iran and making the euro more powerful, France’s Economy Minister Bruno Le Maire said in an interview with the Financial Times.


Europe refuses to allow the U.S. to be the trade policeman of the world,” Le Maire told FT, adding that the E.U. needs to “affirm its sovereignty” in the rift between the E.U. and the United States over the sanctions on Iran.


The E.U. has been trying to create a special purpose vehicle (SPV) that would allow the bloc to continue buying Iranian oil and keep trade in other products with Iran after the U.S. sanctions on Tehran return.


The idea behind the SPV is to have it act as a clearing house into which buyers of Iranian oil would pay, allowing the E.U. to trade oil with Iran without having to directly pay the Islamic Republic.


As the U.S. sanctions on Iran snapped back on Monday, the SPV hasn’t been operational and reports have had it that the undertaking is very complicated and politically sensitive. The bloc is also said to be struggling with the set-up, because no E.U. member is willing to host it for fear of angering the United States, the Financial Times reported recently, citing E.U. diplomats.


This story appeared on the Internet site on Wednesday — and I plucked it from a Zero Hedge article that Brad Robertson sent along.  Another link to it is here.


U.S. Declares War on ‘Troika of Tyranny’ Pushing Them Closer to Russia

The U.S. is going to extend its “combat operations” – the sanctions war aimed at reshaping the world – to Latin America. Tough new penalties are planned against the “troika of tyranny,” consisting of Venezuela, Cuba, and Nicaragua “in the very near future.” This announcement was made by National Security Adviser (NSA) John Bolton on Nov.1 – a few days before the U.S. mid-term elections – in an attempt to draw more support from Hispanic voters, especially in Florida. An executive order on sanctions against Venezuela has already been signed by President Trump, but that’s just the beginning.


It was rather symbolic that on the same day the NSA delivered his bellicose speech, the U.N. General Assembly (UNGA) voted overwhelmingly in support of a resolution calling for an end to the U.S. economic embargo against Cuba. The document did not include amendments proposed by the U.S. that would put pressure on Havana to improve its human-rights record.


This is a prelude to a massive escalation in U.S. foreign policy, which will include the formation of alliances, in addition to the active confrontation of those who dare to pursue policies believed to be anti-U.S. “Under this administration, we will no longer appease dictators and despots near our shores,” Bolton stated, adding, “The troika of tyranny in this hemisphere — Cuba, Venezuela and Nicaragua – has finally met its match.” Sounds like a declaration of war. Brazil, Colombia, Argentina, Chile, and Peru are probably some of the nations the U.S. is eyeing for a potential alliance.


Bolton’s “troika” includes only countries ruled by governments that are openly “red” or Communist.  The list of nations unfriendly to the U.S. is much longer and includes Bolivia, Ecuador, Dominica, Grenada, Uruguay, and some other states ruled by leftist governments. Andrés Obrador, the president-elect of Mexico, takes office on Dec. 1. The Mexican leader represents the country’s left wing and looks like a tough nut to crack. Outright pressure may not be helpful in this particular case.


This rather disturbing, but not surprising article was posted on the Internet site on Wednesday — and it comes to us courtesy of Larry Galearis.  Another link to it is here.


Unprecedented “Desperation” Lending Directive Sends Chinese Stocks Reeling

On November 8, China shocked markets with its latest targeted stimulus in the form of an “unprecedented” lending directive ordering large banks to issue loans to private companies to at least one-third of new corporate lending, said Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission. The announcement sparked a new round of investor concerns about what is being unsaid about China’s opaque, private enterprises, raising prospects of a fresh spike in bad assets.


Guo’s comments were the latest attempt by authorities to try to improve funding access for China’s non-state companies, which have been struggling to get bank loans in the aftermath of China’s crackdown on shadow lending. More importantly, it was the first time financial regulators had given targets on private lending, confirmation that earlier efforts hadn’t sparked the necessary credit activity.


More importantly, this is the first time China set formal goals for private lending, a step it refrained from even during the financial crisis of 2008 according to Bloomberg. The stimulus package it implemented at the time swelled bad debt levels, which now threaten to swallow any new money poured into private companies. Non-state firms defaulted on 67.4 billion yuan ($9.7 billion) of local bonds this year, 4.2 times that of 2017, while the overall Chinese market is headed for a year of record defaults in 2018.


This news item showed up on the Zero Hedge website at 8:27 a.m. EDT on Friday morning — and it’s the final offering of the day from Brad Robertson.  Another link to it is here.


South African Gold Output Plunges 19 Percent…Most Since 2015 in September

Output retreated 19 percent from a year earlier, Pretoria-based Statistics South Africa said in a statement Thursday. Overall mining output fell 1.8 percent, while production of platinum-group metals increased 7.2 percent, it said.


Producers in South Africa, which operate some of the world’s deepest and most labor intensive mines, have been forced to reduce output and cut thousands of jobs as they struggle to contain operating costs. The continent’s most-industrialized economy fell into its first recession in almost a decade in the second quarter.


Sixty-nine workers have died in South African mines so far this year, with the nation’s gold mines accounting for more than half of the fatalities, Mineral Resources Minister Gwede Mantashe said last month.


This tiny Bloomberg story put in an appearance on their Internet site at 1:43 p.m. Pacific Standard Time on Thursday morning — and another link to it is here.


Chinese gold demand may be slipping, but only just — Lawrie Williams

The latest figures for Shanghai Gold Exchange (SGE) monthly gold withdrawals are in (for October) and they show a marginal downturn from those for the same month a year earlier.  But then October can be an anomalous month given the week long Golden Week holiday at the beginning of the month during which time the SGE is closed for business so perhaps not too much should be read into the latest data.


Withdrawals for the year to date are still marginally up on a year earlier, so we will have to wait for November’s figures (usually a strong month) to see if there is any specific trend downwards yet.  A Table showing the monthly gold withdrawals data year to date, with comparative figures for the prior two years, is shown below…


At the moment China is still on track for another 2,000 tonne plus gold withdrawals year, but if full year demand slips a little we shouldn’t be too surprised.  Gold imports from Switzerland and Hong Kong – the two principal published sources for China’s direct gold imports, both appear to be slipping a little and the U.S.-imposed tariffs will be having some adverse impacts on China’s domestic economy which may be leading to a reduction  in disposable income among the gold-buying public..  The country’s own gold production is reported to be slipping too as tighter environmental controls are being implemented leading to reduced production, and even closures, at some of the country’s own gold mines.


This brief, but worthwhile 1-chart gold-related article from Lawrie was posted on the Sharps Pixley website on Thursday sometime — and another link to it is here.


Today’s award-winning photo, bestowed by the Natural History Museum in London, comes to us courtesy of Australian photographer David Gallan — and it’s entitled “Home of the Quoll”.
It took David three years to locate this quoll – and another six months to take this photograph. He set up a camera trap where a fallen log bridged a stream, foregoing flash to minimise disturbance, then placed a scent bait to pause any passing quolls. His perseverance paid off when this hunting female scampered into view.

These shy creatures are ferocious predators. Almost a metre long from nose to tail, quolls can slice meat off the reptiles, birds and mammals they hunt with their strong teeth and muscles. Like all quoll species, the spotted-tailed quoll is threatened by habitat loss due to industrial logging and competition with introduced speciesClick to enlarge.


Today’s pop ‘blast from the past’ is one that I stumbled across when I was looking for something else.  It dates from 1972.  It’s from English pop musician Daniel Boone —  a.k.a Peter Lee Stirling.  He was a ‘one-hit wonder’ back in 1972 — and this tune peaked at #15 on The Billboard Hot 100 in the U.S. that year.  I remember spinning this ’45 on CHAR Radio in Alert, N.W.T. way back then —  I can’t recall having heard it since.  The link is here…but the video that goes with it is pretty cheesy.
Today’s classical ‘blast from the past’ is a composition by Pyotr Ilyich Tchaikovsky from 1875-76. Despite its initial failure, Swan Lake is now one of the most popular of all ballets.  I’m not about to post all the music…just the waltz, which you’ve most likely heard in one iteration or another in your life.  I’ve posted it before, but it’s been a very long time.  It runs for 7:20 minutes — and the link is here.

One would think that the “hot” PPI [Producer Price Index] number yesterday morning, which signals higher inflation ahead, would have sent the gold price soaring.  Under free market conditions, it certainly would have.  But with JPMorgan running rampant in the COMEX futures market, they engineered the gold price back below its 50-day moving average instead.  Even the sharp decline in South African gold production year-over-year would have made a difference as well at one point in time, but in managed markets, supply and demand mean nothing.
Here are the 6-month charts for all four precious metals, plus copper and WTIC — and the declines in all six commodities should be noted.  Copper is back below its 50-day moving average by a hair — and WTIC continues to get beaten into the dirt.  The ‘click to enlarge‘ feature only helps with the four precious metal charts.
Next week we have the November FOMC meeting — and even though a rate hike isn’t expected, what is expected is that the Fed will telegraph once again that they intend to raise rates at the December meeting.  Trump won’t be amused once again.
For that reason, I expect that there will be continued price pressure on the precious metals, at least until the white smoke goes up the proverbial chimney over at the Fed at 2:00 p.m. EST on Wednesday afternoon.  After that, who knows.
I’m sure that Jamie Dimon isn’t shaking in his boots over the DoJ conviction of one of their former precious metal traders, or not, but it’s a given that he knew the investigation was happening — and that a conviction was coming. It certainly hands-down proves that the culture at the bank, at least in this area, is rotten to the core — and provides complete vindication for Ted Butler.
But as he pointed out in his article in the public domain on Thursday, he won’t feel totally vindicated until the real crime is uncovered…”the ongoing fraud of prices being set by paper positioning on the COMEX and elsewhere between the nitwit managed money traders and the corrupt commercials, led by JPMorgan. It is nothing short of infuriating that the regulators – and I include the Department of Justice here – can’t or won’t see that spoofing, as bad as it is, is only an enabling tool to a much larger crime.”
And if he finds that infuriating, there’s also this.  Every precious metal mining company in the world knows exactly what’s going on — and haven’t done a thing about it since it first became public knowledge when Ted started writing about this issue on the Internet twenty years ago.  Even their so-called associations…the WGC and The Silver Institute…that purport to represent them, run screaming whenever the subject is broached.  You have to wonder what they talk about at their meetings in order to avoid the 800 lb. JPMorgan/CME Group gorilla sitting in the middle of the room…which only gets bigger and smellier with each passing week now.
It’s obvious the their fiduciary responsibility to the real owners of the company…us stockholders, is not top of mind for them, or their respective legal councils.
But as I’ve stated before, even with the unhappy COT Report on Friday…which is already very much “yesterday’s news”…the set-up in the COMEX futures market is still in the wildly bullish camp…both in silver and in gold.  And it has become even more so since Tuesday’s cut-off.
We are, as I’ve also said on too many occasions to recount, on ‘care and maintenance’ as far as gold and silver prices are concerned — and have been since the middle of August.  But what the trigger will be for JPMorgan to get their foot off their respective prices, remains to be seen.
No price management scheme lasts forever — and this one won’t, either.  But, like you, it can’t end soon enough to suit me.
I’m done for the day — and the week — and I’ll see you here on Tuesday.

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November 12th, 2018

Posted In: Ed Steer's Gold and Silver Digest

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