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April 6, 2019 | An Encouraging COT 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."
06 April 2019 — Saturday


The gold price didn’t do much during the first two hours of trading once it began at 6:00 p.m. EDT on Thursday evening in New York.  But then the price pressure began — and that sell-off lasted until a few minutes after 12 o’clock noon in Shanghai on their Friday.  Except for a rather violent down/up move at 8:30 a.m. in New York when the job numbers came out, it crawled unevenly higher until a few minutes before the 11 a.m. EDT London close.  At that juncture, the price was held firm at Thursday’s closing price — and moved quietly sideways from there until trading ended at 5:00 p.m. EDT.


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


Gold was closed in New York on Friday afternoon at $1,291.40 spot, down 50 cents on the day.  Net volume was somewhat elevated at a bit under 225,000 contracts — and there was a hair over 7,000 contracts worth of roll-over/switch volume in this precious metal.



The silver price started off the same as gold’s, complete with its noon CST low in Far East trading — and it rallied very unevenly from there until it poked its nose above the $15.20 spot mark shortly after 11:30 a.m. in London.  Then it had a bit of a wild ride from there, but ever lower in price — and that lasted until a few minutes after the 1:30 p.m. EDT close in New York — and it traded flat for the remainder of the day.


But despite that wild ride, the high and low ticks really aren’t worth looking up.


Silver was closed at $15.08 spot, down 5.5 cents on the day — and a penny below its 200-day moving average.  Net volume was nothing out of the ordinary at 51,600 contracts — and there was a bit over 16,600 contracts worth of roll-over/switch volume on top of that.



Platinum followed a very  similar price path as both gold and silver up until shortly after 12 o’clock noon in Shanghai.  From there it rallied quietly and without interference until shortly before 11 a.m. in Zurich trading — and back above $900 spot by a bit.  From there, the price path was very unsteadily downwards until very shortly before the Zurich close.  It then rallied a handful of dollars going into the COMEX close — and didn’t do a thing after that.  Platinum was closed at $897 spot, up 1 whole dollar.



The palladium price wandered unevenly sideways until 10 a.m. in Zurich — and then was sold down to its low of the day an hour and small change later.  It rallied from there until a few minutes before noon in New York — and then edged very quietly lower into the 5:00 p.m EDT close.  Palladium finished higher by 4 dollars at $1,351 spot.



The dollar index closed very late on Thursday afternoon in New York at 97.31 — and opened about unchanged once trading began at 7:44 p.m. EDT on Thursday evening.  It then chopped quietly sideways until about 11:55 a.m. China Standard Time on their Friday morning — and began to edge lower from there.  The 97.19 low tick of the day was set at 2:36 p.m. CST, which was twenty-four minutes before the London open.  It chopped very unevenly higher from there, with the 97.47 high tick coming at 11:18 a.m. in New York — and it faded a bit into the 5:30 p.m. EDT close.  The dollar index finished the Friday session at 97.40…up 9 basis points from its close on Thursday.


Here’s the DXY chart courtesy of the folks over at BloombergClick to enlarge.



And here’s the 6-month U.S. dollar index chart, courtesy of— and the delta between its close…96.49…and the close on the DXY chart above…was 91 basis points yesterday.  Click to enlarge as well.



The gold shares opened down a bit — and hit their respective lows at 10 a.m. EDT in New York, which was the afternoon gold fix in London.  From that juncture they edged unsteadily higher for the remainder of the Friday session — and the HUI closed down 0.37 percent.



The silver equities also opened down, but began to recover within about ten minutes or so — and actually made it into positive territory by a few minutes after 11 a.m. in New York trading.  Those tiny gains didn’t last, as they silver stocks were sold quietly and unevenly lower until the markets closed at 4:00 p.m. EDT.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down 0.38 percent.  Click to enlarge if necessary.



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



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 except for the ongoing rally in platinum, there wasn’t much change in anything, either up or down.  Click to enlarge.



Since the month-to-date chart and the weekly chart are the same for this week, I won’t bother with it.


The year-to-date chart — and with the exception of silver,  everything shows green across the board.  The Silver 7 shows up only 1.50 percent, but my booking keeping shows that it should read 2.95 percent.  Nick and I are having a discussion about this very thing as I code today’s column on WordPress.  Click to enlarge.



I suspect that we’ve seen the bottom for this move down, but there are absolutely no guarantees about anything these days.  Ted is of the firm opinion that JPMorgan is no longer short either gold or silver in the COMEX futures market.  If that’s the case, they may no longer hold short positions in the other two precious metals in the COMEX futures market, either.  All we can is “wait some more” — and see what happens.



The CME Daily Delivery Report showed that 87 gold and 60 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.


In gold, the two largest short/issuers of the five in total were Morgan Stanley with 45 contracts out of its own account — and Advantage, with 32 contracts from its client account.  There were six long/stoppers in total:  Citigroup and HSBC USA picked up 26 and 20 contract for their respective in-house/proprietary trading accounts — and Advantage and JPMorgan picked up 22 and 16 contracts for their respective client accounts.


In silver, the sole short/issuer was International F.C. Stone out of its client account — and of the three long/stoppers in total, the two largest by far were JPMorgan and Morgan Stanley with 48 and 10 contracts for their respective client accounts.


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 April declined by 33 contracts, leaving 443 left, minus the 87 mentioned a few short paragraphs ago.  Thursday’s Daily Delivery Report showed that 105 gold contracts were actually posted for delivery today, so that means that 105-33=72 more gold contracts were just added to the April delivery month.  Silver o.i. in April rose by 10 contracts, leaving 120 still open, minus the 60 contracts mentioned a few paragraphs ago.  Thursday’s Daily Delivery Report showed that zero silver contracts were posted for delivery on Monday, so that means that 10 more silver contracts just got added to April.


So far this month, there have been 4,115 gold contracts issued/reissued and stopped — and that number in silver is 757.



For the fifth day in a row there was a withdrawal from GLD, as an authorized participant removed 28,330 troy ounces.  There were no reported changes in SLV.


During the first week of April there was 726,319 troy ounces/22.6 metric tonnes of gold taken out of GLD.


There was another tiny sales report from the U.S. Mint on Friday.  They sold 1,000 troy ounces of gold eagles — 1,000 one-ounce 24K gold buffaloes — 500 one-ounce platinum eagles — and 10,500 silver eagles.


Month-to-date the mint has sold 3,000 troy ounces of gold eagles — 3,000 one-ounce 24K gold buffaloes — 1,100 one-ounce platinum eagles — and 550,000 silver eagles.


And still no Q4 or 2018 financial statements from the Royal Canadian Mint.


There was no physical movement in gold over at the COMEX-approved depositories on the U.S. east coast on Thursday.  But there were paper transfers from the Eligible to the Registered category…46,615 troy ounces.  Of that amount, there was 31,907 troy ounces transferred at Canada’s Scotiabank — and the remaining 14,708 troy ounces occurred at HSBC USA.  This is probably destined for delivery in April.  I won’t bother linking this.


There was some activity in silver, as one truckload…598,468 troy ounces…was received.  That ended up at JPMorgan.  There was 635,077 troy ounces shipped out.  Of that amount, one truckload…600,256 troy ounces…departed Canada’s Scotiabank — and the remaining amount was split up between Delaware and CNT.  If you want to see those numbers for yourself, the link to all this is here.


There was a bit of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday.  They received only 30 of them — and shipped out 169.  All of this activity was at Brink’s, Inc. as per usual — and I won’t bother linking this, either.



The treasure of Kul-Oba; meaning “hill of ash” in Crimean Tatar, is an ancient archaeological site, a Scythian burial tumulus, located near Kerch in eastern Crimea, on the right side of the M25 road to Feodosiya.


Kul-Oba was the first Scythian royal barrow to be excavated in modern times. Uncovered in 1830, the stone tomb yielded a wealth of precious artifacts which drew considerable public interest to Scythian world. Of particular interest is an intricately granulated earring with two Nike figurines, now in the Hermitage Museum, St. Petersburg.


The tomb was built around 400 to 350 B.C., likely by a team of Greek masons from Panticapaeum. Its plan is almost square, measuring 4.6 by 4.2 meters (15 by 14 ft). The stepped vault stands 5.3 meters (17 ft) high. The timber ceiling seems to have been designed to imitate a Scythian wooden tent; it is decorated by a canopy with gold plaques.


The body of the king lay by the east wall on a sumptuous wooden couch. His social position was highlighted by a diadem encircling his head, surmounted by a pointed felt headgear with gold pendants. His neck was decorated by a large gold disk weighing 461 grams. Each wrist was adorned with one to three bracelets. A separate section of the couch contained other grave goods, including a phial, a whip, a knife, and a quiver — all inlaid with gold or precious stones.  Click to enlarge.


The Commitment of Traders Report, for positions held at the close of COMEX trading on Tuesday, April 2, showed big improvements in the commercial net short positions in both gold and silver, but not quite as much as Ted was hoping for…particularly in gold.
In silver, the Commercial net short position in silver fell by 12,358 COMEX contracts, or 61.8 million troy ounces.


They arrived at that number by adding 1,657 long contracts — and they reduced their short position by 10,701 contracts.  The sum of those two numbers represents their change for the reporting week.


Under the hood in the Disaggregated COT Report it was all Managed Money traders, plus a bit more.  They only reduced their long position by 374 contracts, but they added 13,656 short contracts — and it’s the sum of those two numbers…14,030 contracts…that represents their change for the reporting week. I’m sort of wondering why the only reduced their long position by that amount — and Ted may have something to say about it in his weekly commentary this afternoon.


The difference between that number — and the Commercial net short position…14,030 minus 12,358 equals only 1,672 contracts.  That difference was made up, as it always is, by the traders in the other two categories…the ‘Other Reportables’ — and the ‘Nonreportable’/small traders.  But both went about it in a very different manners.  The former by increasing their net long position by 4,136 contracts — and the latter by increasing their short position by 2,464 contracts.


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



The Commercial net short position in silver is now down to 34,358 COMEX contracts, or 171.8 million troy ounces, which is still not exactly in bullish territory.


And as Ted mentioned in his Saturday column a week ago, it’s his opinion that JPMorgan’s short position, which he pegged at around 10,000 contracts in last week’s COT Report, has now been reduced to zero.


You can read much more about the current innards of the silver market in the ‘Days to Cover‘ commentary a bit further down.


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



If one could see the COT Report as of Friday’s close, I suspect that there would be a bit more improvement in the commercial net short position, as ‘da boyz’ carved out two new intraday lows since the Tuesday afternoon cut-off.



In gold, the commercial net short position fell by a hefty 33,204 contracts, or 3.32 million troy ounces of paper gold.  Ted was hoping for 60,000 contracts.  But his estimate in gold, like for silver, was thrown off by spread trade liquidation as the April delivery month approached.


They arrived at that number by selling 21,687 long contracts, but they also reduced their short position by a chunky 54,891 contracts — and it’s the difference between those two numbers that represents their change for the reporting week.


Under the hood in the Disaggregated COT Report, it was all Managed Money traders — and almost to the contract.  They reduced their long position by 24,557 contracts, plus they added 8,812 short contracts — and it’s the sum of those two numbers…33,369 contracts…that represents their change for the reporting week.


The difference between that number…33,369 minus 33,204 equals only 165 contracts…but, like in silver, the ‘Other Reportables’ and the ‘Nonreportable’/small traders went about it in wildly different fashions.  The former increased their net long position by 7,987 contracts — and the latter by reducing their net long position by 7,822 contracts.  [7,987-7,822=165 contracts]


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



The commercial net short position in gold is now down to 11.82 million troy ounces.
Ted is of the opinion that JPMorgan had no short position in gold going into this reporting week — and might actually be long gold by a bit in the COMEX futures market now.


Here’s the 3-year COT chart for gold, updated with this week’s data.  Click to enlarge.



As for silver, if we could see a COT Report as of the close of COMEX trading on Friday, there would certainly be a bit more improvement in the commercial net short position in gold.


In the other metals, it wasn’t business as usual in palladium this past week, as volume blew out about nine times what it was last week, as the Managed Money traders reduced their net long position by 2,122 contracts — and it was almost all commercial traders reducing their net short position.  Total open interest in palladium dropped down to 23,841 down 3,744 contracts from the previous week.  It’s a very tiny market.  In platinum, the Managed Money traders stood pat during the reporting week.  All the trading was in the other two categories.  The Managed Money traders are still net long the market by about 10,100 contracts.  Total open interest in this precious metal is 68,064 contracts, down 4,009 contracts from last week’s report.  In copper, the Managed Money traders increased their net long position by 5,105 COMEX contracts — and are now only net short the COMEX futures market in copper by around 3,500 contracts.



Here’s Nick Laird’s “Days to Cover” chart updated with yesterday’s COT data for positions held at the close of COMEX trading this past 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.



For the current reporting week, the Big 4 traders are short 110 days of world silver production, which is down 12 days from last week’s report – and the ‘5 through 8’ large traders are short an additional 60 days of world silver production, down 1 day from last week’s report – for a total of 170 days that the Big 8 are short, which is a bit under 6 months of world silver production, or about 396.8 million troy ounces of paper silver held short by the Big 8.  [In the prior week’s COT Report, the Big 8 were short 183 days of world silver production.]


In the COT Report above, the Commercial net short position in silver was reported as 171.8 million troy ounces.  As mentioned in the previous paragraph, the short position of the Big 8 traders is 396.8 million troy ounces.  The short position of the Big 8 traders is larger than the total Commercial net short position by a chunky 396.8 minus 171.8 equals 225.0 million troy ounces.
The reason for the difference in those numbers…as it always is…is that Ted’s raptors, the 33-odd small commercial traders other than the Big 8, are net long that amount.


JPMorgan has no short position in the COMEX futures market — and the Big 4 traders now in that category are short, on average, about…110 divided by 4 equals…27.5 days of world silver production each.


The four traders in the ‘5 through 8’ category are short 60 days of world silver production in total, which is 15 days of world silver production each.


The Big 8 commercial traders are short 39.7 percent of the entire open interest in silver in the COMEX futures market, down significantly from the 44.3 percent they were short in last week’s report.  And once whatever market-neutral spread trades are subtracted out, that percentage would be very close to the 45 percent mark.  In gold, it’s now 37.7 percent of the total COMEX open interest that the Big 8 are short, up a tiny amount from the 36.9 percent they were short in last week’s report — and something over 40 percent once the market-neutral spread trades are subtracted out.


In gold, the Big 4 are short 38 days of world gold production, down 7 days from the 45 days they were short in last week’s COT Report.  The ‘5 through 8’ are short another 20 days of world production, unchanged from what they were short last week…for a total of 58 days of world gold production held short by the Big 8…down 7 days from last week’s COT Report.  Based on these numbers, the Big 4 in gold hold about 66 percent of the total short position held by the Big 8…down 3 percentage points from last week’s COT Report.


The “concentrated short position within a concentrated short position” in silver, platinum and palladium held by the Big 4 commercial traders are about 65, 69 and 79 percent respectively of the short positions held by the Big 8.  Silver is down 2 percentage point from a week ago, platinum is unchanged from last week — and palladium is up 2 percentage points.



The April Bank Participation Report [BPR] data is extracted directly from the data in yesterday’s Commitment of Traders Report.  It shows the number of 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 in all COMEX-traded products.  For this one day a month we get to see what the world’s banks are up to in the precious metals -and they’re usually up to quite a bit.  The April Bank Participation Report covers all of March.


In gold, 5 U.S. banks were net short 45,742 COMEX contracts in the April BPR.  In March’s Bank Participation Report [BPR] these same 5 U.S. banks were net short 61,228 contracts, so there was a big drop of 15,476 contracts from a month ago.


Ted said on the phone yesterday that JPMorgan has most likely eliminated their entire short position in gold over the last two month.


Also in gold, 28 non-U.S. banks are net short 57,734 COMEX gold contracts, which is a bit over two thousand contracts per bank.  In the March’s BPR, 29 non-U.S. banks were net short 54,200 COMEX contracts…so the month-over-month increase is up a bit…3,534 contracts.  However, as I always say at this point, I suspect that there’s at least two large non-U.S. bank in this group, including Scotiabank, that holds a fairly hefty [and increasing] short position in gold.


At the low back in the August BPR [for July] these same non-U.S. banks held a net short position in gold of only 1,960 contacts — and have continued to increase their net short position every single month for the last six month…as they now are short 57,734 COMEX contracts.  That’s a big increase.


As of this Bank Participation Report, 33 banks [both U.S. and foreign] are net short 23.5 percent of the entire open interest in gold in the COMEX futures market, which is down a bit from the 24.5 percent they were short in the March 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, 4 U.S. banks are net short 20,016 COMEX silver contracts in April’s BPR.  In March’s BPR, the net short position of 5 U.S. banks was 31,643 contracts, so the short position of the U.S. banks is down a substantial 11,627 contracts from March BPR.


Since Ted figures that JPMorgan is not short any of that amount, then it’s pretty obvious that Citigroup now holds the lion’s share of the remaining short position of these four U.S. banks — and HSBC USA, the rest.


Also in silver, 24 non-U.S. banks are net short 27,626 COMEX contracts…which is down a bit from the 29,118 contracts that these same non-U.S. banks were short in the March BPR.  I would suspect that Canada’s Scotiabank [and maybe one other] still holds a goodly chunk of the short position of these non-U.S. banks.  I believe that a number of the remaining 22 non-U.S. banks are actually net long the COMEX futures market in silver.  But even if they aren’t, the remaining short positions divided up between these other 22 non-U.S. banks are immaterial – and have always been so.


As of April’s Bank Participation Report, 28 banks [both U.S. and foreign] are net short 23.9 percent of the entire open interest in the COMEX futures market in silver-which is down quite a bit from the 31.9 percent that they were net short in the March BPR – with much, much more than the lion’s share of that held by Citigroup, Scotiabank — and maybe one other non-U.S. bank.


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 10,710 COMEX contracts in the April Bank Participation Report.  In the March BPR, these same banks were net short 11,866 COMEX contracts…so there’s been a slight decrease of 1,156 contracts month-over-month.  [At the ‘low’ back in July of 2018, these same five U.S. banks were actually net long the platinum market by 2,573 contracts.] That’s quite a change for the worst since then.


Also in platinum, 15 non-U.S. banks are net short 10,069 COMEX contracts, which is up a bit from the 9,392 COMEX contracts they were net short in the March BPR.  [Note: Back at the July 2018 low, these same non-U.S. banks were net short only 1,192 COMEX contracts.]


And as of April’s Bank Participation Report, 20 banks [both U.S. and foreign] are net short 30.5 percent of platinum’s total open interest in the COMEX futures market, which is up a bit from the 27.4 percent they were net short in March’s BPR.


Here’s the Bank Participation Report chart for platinum.  Click to enlarge.



In palladium, ‘3 or less’ U.S. banks were net short 6,389 COMEX contracts in the April BPR, which is down from the 7,964 contracts they held net short in the March BPR.


Also in palladium, ’12 or more’ non-U.S. banks are net short 885 COMEX contracts-which is down from the 1,005 COMEX contracts that these same ’12 or less’ non-U.S. banks were short in the March BPR.  That’s the lowest short position that the non-U.S. banks have held since June 2016.


When you divide up the short positions of these non-U.S. banks more or less equally, they’re completely immaterial…especially when you compare them to the positions held by the ‘3 or less’ U.S. banks.


As of this Bank Participation Report, 15 banks [U.S. and foreign] are net short 30.5 percent of the entire COMEX open interest in palladium.  In March’s BPR, the world’s banks were net short 33.9 percent of total open interest, so there’s been a bit of a decrease in the short position of the banks in this precious metal over the last month.


Please remember that this is a very tiny market — and it doesn’t take too many contracts to move it.


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.



So, with JPMorgan out of their short positions in both silver and gold — and maybe the other two precious metals as well, they’ve left the rest of the world’s banks [plus the other short holders] in some peril if precious metal prices are allowed to rise.


And it should be mentioned that along with JPMorgan being free and clear in the COMEX futures market in silver and gold, Ted figures they’re sitting on 20 million ounces of physical gold, plus around 850 million troy ounces of silver as well.


I have an average number of stories for you today, including a few that I’ve been saving for my Saturday column for length and/or content reasons — and some if it’s pretty heavy-duty reading.


March Payrolls Surge by 196,000…But Wage Growth Disappoints

Expectations that the February cold weather”outlier” print would normalize in March were confirmed, when moments ago the BLS reported that the U.S. added 196K payrolls in March, higher than the 177K expected, while February payrolls were revised modestly higher to 33K from 20K.


The change in total non-farm payroll employment for January was revised up from +311,000 to +312,000, and the change for February was revised up from +20,000 to +33,000. With these revisions, employment gains in January and February combined were 14,000 more than previously reported. Employment  growth averaged 180,000 per month in the first quarter of 2019, compared with 223,000 per month in 2018.


As we previewed earlier, winter weather was said to lower job growth in February by around 100k, much of which itself reflected payback from the relatively mild weather in December and January.


Commenting on the March report, Bloomberg’s economist Wliza Winger writes that “The March rebound in payrolls is consistent with previous episodes that followed much weaker-than-expected prints. Since the unemployment rate fell below 7% in late 2013, there have been five instances (not counting last month) in which the hiring rate dipped below 100,000. The average payroll print in the following month was 250,000, and there was only one instance where it was below 200,000.”


While the headline payrolls report coming in better than expected, and snapping back from February’s cold weather, there was some unexpected weakness in manufacturing jobs, which dipped by 6K in March, their first drop since July 2017.


This chart-filled story was posted on the Zero Hedge website at 8:52 a.m. on Friday morning EDT — and it’s the first of several offerings from Brad Robertson. Another link to it is here.


U.S. Consumer Credit Storms Above $4 Trillion, as Credit Card Debt Hits New All-Time High

After a few months of wild swings in mid 2018, in February US consumer credit continued to normalize, rising by $15.2 billion, slightly below the $17 billion expected, following January’s $17.7 billion increase. The continued increase in borrowings saw total credit storm above $4 trillion, and hit a new all time high of $4.045 trillion on the back of a America’s ongoing love affair with auto and student loans, and of course credit cards. That said, as shown in the chart below, there has been a decisive slowdown in total monthly consumer credit creation, which has shrunk notably from $26 billion last July to just over $15 billion in February.


Revolving credit increased by $3.0 billion, an increase from January’s $2.6 billion, rising to $1.061 trillion, a new all time high in total credit card debt outstanding.  Click to enlarge.



There was a small decline in the monthly increase in non-revolving credit, i.e. student and auto loans, which jumped by $12.2 billion, down from the $15.1 billion increase in January, and bringing the non-revolving total also to a new all time high of $2.984 trillion.


And while February’s continued rebound in credit card use may assuage some concerns about the sharp slowdown in spending in the end of 2018 and start of 2019, and the subsequent plunge in retail sales, as the household savings rate surged by the most in years, one place where there were no surprises, was in the total amount of student and auto loans: here as expected, both numbers hit fresh all time highs, with a record $1.569 trillion in student loans outstanding, an impressive increase of $10.3 billion in the quarter, while auto debt also hit a new all time high of $1.154 trillion, an increase of $8.4 billion in the quarter.


In short, whether they want to or not, Americans continue to drown even deeper in debt, and enjoying every minute of it.


This brief 4-chart Zero Hedge article put in an appearance on their Internet site at 4:45 p.m. on Friday afternoon EDT — and another link to it is here.


Trump says Fed should cut rates and stop shrinking balance sheet

President Donald Trump called on the Federal Reserve to open the monetary floodgates to turn the world’s largest economy into a “rocket ship.”


I personally think the Fed should drop rates. I think they really slowed us down. There’s no inflation. I would say in terms of quantitative tightening, it should actually now be quantitative easing,” he told reporters as he departed the White House on Friday. “You would see a rocket ship. Despite that, we’re doing very well.”


The request for Fed assistance to boost growth came just after a Labor Department report showed another healthy sign for the durability of an expansion that may become the longest on record by midyear. The jobless rate held near a 49-year low and employers added more workers than economists forecast in March. The report showed little sign of wage inflation.


Trump is breaking with longstanding Republican criticism of the Fed’s large balance sheet, and embracing a loose monetary policy that in effect helps finance the nation’s debt load. He repeatedly criticized the Fed under President Barack Obama for holding down interest rates and the use of quantitative easing, which at the time was an effort to lower long-term borrowing costs by buying Treasury bonds and mortgage securities.


Wow!  This Bloomberg article was posted on their website at 7:05 a.m. Pacific Daylight Time on Friday morning — and was updated about two hours later.  I found it on the Internet site yesterday — and another link to it is here.


Fed’s QE Unwind Reaches $535 Billion, Balance Sheet Drops to $3.94 Trillion, Old Autopilot Still Engaged — Wolf Richter

In March, the Fed shed $34 billion in assets, according to the Fed’s balance sheet for the week ended April 3, released this afternoon. This reduced the assets on its balance sheet to $3,936 billion, the lowest since December 2013. Since the beginning of the “balance sheet normalization” process, the Fed has shed $535 billion. Since peak-balance sheet in January 2015, it has shed $581 billion:



Last month, the Fed outlined its new plan for its balance sheet. The autopilot of the balance sheet runoff will be tweaked starting in May. A totally new regime will start in October. There are all kinds of changes in this new plan, primarily, that the runoff of Treasury securities will stop at the end of the September, and that the Fed wants to entirely get rid of its mortgage-backed securities (MBS), including by selling them outright, to replace them with shorter-dated Treasury securities. This strategy will finally begin to address a massive maturity-sinkhole that the Fed has carved out for itself and slipped into ever deeper. More on that in a moment.


According to the Fed’s old plan, which is still in effect, the QE-unwind autopilot is set on shedding “up to” $30 billion in Treasuries and “up to” $20 billion in MBS a month for a total of “up to” $50 billion a month, depending on the amounts of bonds that mature that month.


This rather technically thick 4-chart commentary from Wolf appeared on the Internet site on Thursday sometime — and I thank Richard Saler for pointing it out.  Another link to it is here.


Doug Noland: Faux Statesmanship

Central banks aren’t fully to blame, but it’s an awfully good place to start. Three decades of “activist” monetary management has left a horrible legacy. The Institute for International Finance reported this week that global debt ended 2018 at a record $243 TN. This debt mountain simply would not have been possible without “activist” central banking. Despite a lengthening list of risks, global stocks have powered higher in 2019 to near all-time highs. A relentless speculative Bubble has only been possible because of central bank policies.


I’m not all that interested in Dalio’s “solutions.” In my book, he missed what was an exceptional opportunity for statesmanship. Bridgewater’s investors were the priority and have been rewarded handsomely. Pro-central bank “activism” has been the right call for compounding wealth for the past decade (or three). But no amount of ingenuity will resolve the historic predicament the world finds itself in today. Markets are broken, global imbalances the most extreme ever, and structural impairment unprecedented – and worsening, all of them.


Most regrettably, the type of structural reform required will only arise from a severe crisis. The Fed and global central bankers have been reflating Bubbles for more than three decades. Highly speculative global markets at this point completely disregard risk. And with borrowing costs incredibly low, what government (OK, Germany) is going to impose some spending discipline and operate on a fiscally responsible trajectory? At this point, finance is hopelessly unsound – and, importantly, hopelessly destructive on an unprecedented global basis.


I fear for the next downturn.


Doug’s must read weekly commentary was posted on his website in the very wee hours of Saturday morning — and another link to it is here.


Venezuela, a New Syria

A few days ago, an Ilyushin IL-62M liner carried over a hundred Russian soldiers and officers to Caracas. Symbolically, they made a stopover in Syria, as if saying that Venezuela is the next country after Syria to be saved from ruin and dismemberment. The military mission was led by the Head of General Staff, General Tonkoshkurov (“Thin-Skinned”, a name that would thrill Vladimir Nabokov).


‘Don’t you dare, exclaimed John Bolton, meddle in the Western Hemisphere! Hands off Venezuela! It is our back yard!’ The Russians didn’t buy it. Some time ago they tried to object to the U.S. tanks being positioned in Estonia, a brief drive from St. Petersburg, and all they’ve got was preaching that sovereignty means sovereignty, and Estonia does not have to ask for Russian permission to receive American military assistance. Now they repeated this American sermon verbatim to John Bolton and his boss. Get out of Syria first, they added.


This is a new level in the Russian-American relations, or should we say confrontation. For a very long time, the Russians convinced themselves that their liking for the United States was mutual, or at least would be returned one day. However, this stage is over, the scales fell off their eyes and they finally realised America’s implacable enmity. ‘These Russians are really dumb if it dawned on them only now‘, you’d murmur. It is enough to read comments to The New York Times piece regarding Mueller’s exoneration of Trump to learn that hatred to Russia is a staple diet of American elites, on a par with love to Israel. That’s where we are.


Of course since the Russia troops landed in Venezuela, they’ve been joined by Chinese troops as well.  This commentary, which I’ve been saving for today’s column, appeared on the Internet site on Tuesday — and I thank Roy Stephens for sharing it with us.  Another link to it is here.


Editorial: Angela Merkel is asking the right question about Brexit…and it scuppers everything

The House of Commons being a washout – literally, via a mysterious leak from (rather than to) the press gallery – attention has turned once again to the Irish border issue, the most intractable of the many obstacles to Brexit.


Angela Merkel arrived in Dublin to ask what the Irish prime minister, Leo Varadkar, described as “reasonable questions” about what might happen under a no-deal Brexit.


The chancellor of Germany has pledged prevent no deal “to the very last hour” but she is still curious, in a prudent, practical sort of way, about the European Union’s new external border with a non-member state (Britain) in the event of a hard Brexit.


Indeed, her reasonable questions could also be posed about the border between Northern Ireland (the U.K.) and Ireland (the E.U.) after the transition period, that is if a withdrawal agreement is ever ratified.


When the transition period runs out, and if there are no other technological solutions to the problem, then the U.K. and E.U. will have to share a customs union indefinitely – something that one or other or both sides might find intolerable eventually. If so, then the question of the border will arise once again.


Hmmm…”reasonable questions” indeed.  This editorial commentary put in an appearance on the Internet site recently I would think, but there’s no dateline.  I thank George Whyte for bringing it to our attention on Thursday — and it’s another article that I though should wait for the weekend.  Another link to it is here.


A few initial thoughts about the first round of the Ukrainian Presidential election (UPDATED) — The Saker

The first round of the Presidential election in the Ukraine took place on April Fool’s Day and it could be tempting to dismiss it all like a big farce which, of course, it was, but, we should not overlook the fact that some very interesting and important events have just taken place.  I won’t discuss them all right now, there will be plenty of time for that in the future. For now I will only focus on those elements of a much bigger picture which seem most critical to me.  These elements are:


By “Nazis” I primarily mean their main figurehead – Petro Poroshenko (the rest of the “minor Nazis” did so poorly that they don’t matter anymore).  Think of it: in spite of his immense wealth (he outspent everybody else and even spent more that twice what the next big spender – Tymoshenko – doled out for each vote), in spite of his immense “administrative resource” (that is the Russian expression for the ability to use the power of the state for your personal benefit), in spite of his “victory” with the Tomos, in spite of triggering the Kerch bridge incident, in spite of breaking all the remaining treaties with Russia, in spite of his control of the media and in spite of the (now admittedly lukewarm) support of the West, Poroshenko suffered a crushing defeat.


Look at the only two regions Petro Poroshenko (i.e. the Nazis) actually won (in blue) and see how nicely they overlap with the rough historical contours of the Galicia region.  But Poroshenko managed to even lose part of that to Iulia Tymoshenko!  Bottom line: except for a minority of rabid hardcore Nazis in Galicia, the rest of the Ukraine hates the Poroshenko Ukronazi regime.  We always knew that, but now we have the proof.


This very long, no-holds-barred-bare-knuckles commentary from the Saker showed up on the Internet site on Wednesday — and was another article that I though best to leave for today’s column.  I thank Larry Galearis for sending it along — and another link to it is here.


The Bank of Japan Bought ¥5.6 Trillion in Stocks Last Year

In recent years, thanks to central bank intervention in virtually every asset class, writing about capital markets in the context of some valuation or fundamental analysis framework has become a laughable, surreal, and self-defeating exercise, and here is a perfect example why.


For one reason or another, overseas investors dumped the most Japanese stocks in 31 years in the fiscal year ended Sunday, according to official market data: specifically, market participants abroad unloaded about 5.63 trillion yen ($50 billion) worth of shares on a net basis, the Tokyo Stock Exchange reported Thursday, for a second straight year of net selling and the highest sell-off since 1987.


And yet this barely caused a ripple in asset prices for one simple reason: the Bank of Japan’s asset purchases absorbed all the bleeding, exposing the central bank’s outsize role in the market. Indeed, as the Nikkei adds, this near-record liquidation was matched nearly yen for yen by the BOJ’s pumping of money into the economy through asset purchases, with the central bank buying 5.65 trillion yen worth of equity!


In light of such prevailing bearishness among foreign investors, one would think the Nikkei got clobbered, and yet the broadest Japanese index is now above where it was this time last year. Why? Because in its attempt to preserve confidence and avoid what could be a potentially devastating asset selloff in a world in which stock markets are the leading indicators for regional and global economies, the BOJ stepped up its purchases of Japanese stocks through ETFs. A first among central banks, the program began in 2010 when the Nikkei Stock Average was trading below 10,000 points. The central bank’s stated objective then was “to lower the risk premium, and the purchasing volume stood at 450 billion yen.”


While perhaps not nearly as dramatic, the BOJ’s now constant intervention and participation in capital markets means that any feedback loops between assets prices and input signals is now forever lost, and means that management teams no longer can appreciate if any given executive decision is ultimately good or bad as the market’s ability to reward and punish has been muted (at least until the BOJ loses control), and as such every corporate decision, no matter how disastrous for the company, its employees, shareholders and peer companies, is seen as beneficial, yet it most likely merely masks the seeds of the enterprise’s own demise.


And while global capital markets are now delighted by the recent U-turn in monetary tightening, it just makes the eventual moment of reckoning that much more painful. Which is why for all those who are currently allocating capital to what can only be called a “market” in some comical context, our advice is simple: have an “exit” plan for precisely that moment when exiting will be made illegal, and Ludwig von Mises will be proven right once again.


This longish, but worthwhile commentary showed up on the Zero Hedge website at 3:20 p.m. on Friday afternoon EDT — and is another contribution from Brad Robertson.  Another link to it is here.


Central bank decides Russia needs still more gold after all

The Central Bank of Russia (CBR) is flip-flopping over the need to build up gross international reserves (GIR) to $500bn. In the latest statements the bank said it is necessary to “increase FX and gold reserves even more” from the current  highs, given the “persisting sanction risks and current economic structure,” deputy head of the CBR Sergey Shvetsov told the press on April 3.


The volume of FX/gold reserves reached $487bn as of March 22 – bring reserves back to the same level they were before the sanctions regime started following Russia’s annexation of the Crimea in 2014 – increasing by $4.6bn week-on-week on positive currency revaluation, and FX purchases off the market.


However, Shvetsov did not provide any guidance on the target amount of reserves, saying that it was better to wait for quarterly or annual reports of the CBR. However, separately CBR governor Elvira Nabiullina has said in the past the CBR has an informal goal to get reserves back above $500bn.


Russia’s reserves reached an all time high of $597.5 billion on August 8, 2008 just before the global financial meltdown and when oil prices soared to over $150 per barrel, before falling to a post-crisis low of $356bn in April 2015.


This short 2-chart news item, which is actually headlined “Russia’s CBR flip-flops on need to build up reserves to $500bn“, was something I borrowed from a GATA dispatch that I received late on Thursday evening — and another link to it is here.


It Begins: Former U.N. Under-Secretary-General Calls For One World Currency

This year, the world commemorates the anniversaries of two key events in the development of the global monetary system. The first is the creation of the International Monetary Fund at the Bretton Woods conference 75 years ago. The second is the advent, 50 years ago, of the Special Drawing Right (SDR), the IMF’s global reserve asset.


When it introduced the SDR, the Fund hoped to make it “the principal reserve asset in the international monetary system.” This remains an unfulfilled ambition; indeed, the SDR is one of the most underused instruments of international cooperation. Nonetheless, better late than never: turning the SDR into a true global currency would yield several benefits for the world’s economy and monetary system.


The SDR has a number of basic advantages, not least that the IMF can use it as an instrument of international monetary policy in a global economic crisis. In 2009, for example, the IMF issued $250 billion in SDRs to help combat the downturn, following a proposal by the G20.


The best alternative would be to turn the IMF into an institution fully financed and managed in its own global currency – a proposal made several decades ago by Jacques Polak, then the Fund’s leading economist. One simple option would be to consider the SDRs that countries hold but have not used as “deposits” at the IMF, which the Fund can use to finance its lending to countries. This would require a change in the Articles of Agreement, because SDRs currently are not held in regular IMF accounts.


This extremely important article showed up on the Zero Hedge website at 11:10 p.m. EDT on Friday night — and it’s definitely worth reading.  Another link to it is here.


Gold Manipulation update: April 2009 — Chris Powell

Most of us come to this conference to discover what mining assets are worth financially. Most people go to financial conferences generally to discover what various assets are worth.
For almost 20 years my organization, the Gold Anti-Trust Action Committee, has documented why mining assets particularly and other assets generally can not be valued accurately or even valued at all without first taking into account the largely surreptitious intervention in the markets by governments and central banks, surreptitious intervention that lately has become almost comprehensive.


Government intervention against the price of gold is not mere “conspiracy theory” but an old story fully documented in government’s own archives. It is official policy going back to the United States government’s enactment of the Gold Reserve Act of 1934, which created the U.S. government’s Exchange Stabilization Fund. This policy of gold price suppression continued through the London Gold Pool of the 1960s, a coordinated scheme of gold reserve dishoarding by the U.S. government and seven allied governments to hold the international gold price at $35 per ounce.


The objective of these interventions always has been to defend government currencies and bonds against competition from gold as a currency and store of value. But by the early 1970s the governments participating in gold price suppression had lost too much of their gold reserves to continue suppressing the gold price by dishoarding in the open. So they began operating against gold mostly in secret, through gold leasing, swapping, and futures market manipulation, usually shorting the futures through the large investment banks that trade the monetary metals and execute other market interventions for governments.


This is the presentation that GATA’s secretary treasurer Chris Powell gave at two different mining conferences in the Far East during the last ten days….the first in Singapore — and the second in Hong Kong.  It’s linked-filled — and there are also 12 charts included as well — and the PDF file that contains them is at the top of the presentation.  It has been sitting in my in-box since Tuesday — and for length reasons, I though it best to save it for Saturday, when you may have time over the weekend to go through it all.  It’s certainly worth your while — and another link to it is here.


Here are the next three photos in the sequence that I took at the Sun Peaks ski resort just outside of Kamloops on March 2 of this year.  The first two photos were taken from the same spot…the first looking downhill — and the second, up the same ski run.  The third photo is one of the general area.  Click to enlarge for all.


There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” — Ludwig von Mises, Human Action

Today’s pop ‘blast from the past’ dates from 1975 — and is a rock classic, one which I haven’t heard on the radio for years now.  It’s a tune by an English-American rock musician, who used a “talk box” to produce the unusual guitar effects in the song — and for that reason it’s instantly recognizable.  The link is here.
Today’s classical ‘blast from the past’ is somewhat more ancient and was composed by Mozart in less than a month…July 1788.  It’s his Symphony No. 40 in G minor, KV. 550.  It is sometimes referred to as the “Great G minor symphony”, to distinguish it from the “Little G minor symphony”, No. 25.
Nikolaus Harnoncourt [the conductor of today’s selected performance] conjectured that Mozart composed the three symphonies [39, 40 and 41] as a unified work, pointing, among other things, to the fact that the Symphony No. 40, as the middle work, has no introduction (unlike No. 39) and does not have a finale of the scale of No. 41.
But, dear reader, regardless of all of the above, you’ll recognize it before the orchestra gets to the end of the second bar– and the link is here.

It appeared to be yet another sort of ‘care and maintenance’ day — and the sharp sell-offs in both silver and gold on the 8:30 a.m. EDT jobs report were met by a hoard of buyers.  But on the other hand, the price was firmly controlled on their respective top ends — and as you’ll note on the 6-month charts below, gold and silver’s closing prices have been kept on a very short leash for the last six trading days.  This is particularly true of silver, which has been carefully closed below its 200-day moving average on all six days.
What this means, or what it portends for the future, is unknown.  I’m just pointing out what I can see.
And as far as the current structure of gold and silver in the COMEX futures market, the lack of a short position by JPMorgan in both metals is duly noted.  But I seem to remember that we were in this position before in July of last year if I’m not mistaken — and nothing happened then.  We’ll just just have wait and see if it’s “different this time.
I’ll be very interested in what Ted has to say about all this in his weekly review that will be posted on his website this afternoon.
Here are the 6-month charts for the Big 6 commodities — and what I spoke of just above, should be duly noted.  Click to enlarge for all.
So now what — and where to from here?
As Tyler Durden…a.k.a. Daniel Ivandjiiski…so succinctly put it in the first paragraph of the article headlined “The Bank of Japan Bought ¥5.6 Trillion in Stocks Last Year” in today’s Critical Reads section:
In recent years, thanks to central bank intervention in virtually every asset class, writing about capital markets in the context of some valuation or fundamental analysis framework has become a laughable, surreal, and self-defeating exercise…
And then there’s this comment from Bill King in the Friday edition of his King Report…”This daily manipulation and verbal intervention nonsense is what passes for high finance these days.  Makes you proud to be part of the industry!
And as GATA’s Chris Powell said back in April of 2008…eleven years ago to the month…”There are no markets anymore…only interventions.”
Then there was Doug Noland’s comments from last Saturday
What conventional analysts fancy as “Goldilocks,” I view as acute Monetary Disorder and resulting distorted and dysfunctional markets. For a decade now, coordinated rate and QE policy has nurtured a globalized liquidity and speculation market dynamic. Securities markets have come to be dominated by an unprecedented global pool of speculative, trend-following and performance-chasing finance. The extraordinary central bank-orchestrated market backdrop has over years incentivized the disregard of risk, in the process spurring the move to ETF and passive management – along with a proliferation of leverage and derivatives strategies.”
An in this morning’s missive he states: “…no amount of ingenuity will resolve the historic predicament the world finds itself in today. Markets are broken, global imbalances the most extreme ever, and structural impairment unprecedented – and worsening, all of them….At this point, finance is hopelessly unsound – and, importantly, hopelessly destructive on an unprecedented global basis…I fear the next downturn.”
The world we are living in is an all-encompassing monetary, financial and economic hallucination…all propped up by massive money printing, along with 24/7 interventions in all markets that matter. It’s all the bubbles that the world has ever know over the centuries…Mississippi Company, South Sea, Tulip Mania…sprinkled with a dash of 1929 — and all rolled into one.
At least those bubbles were mostly contained to specific countries.  But the one we’re living in now [as Doug Noland so succinctly points out] is global in scale — and when it pops…not if…the whole world will go down with it.  There will be no survivors, with the exception of maybe Russia…the only country with its financial and monetary affairs in good order.
It’s no great stretch of anyone’s imagination to figure out how the rest of the world will fare…especially China, Japan — and the U.S.
It’s a near certainty that the Fed will eventually cave to the White House at some point this year — and with the economies of the world slowly sinking into recession, if not already there, it’s hard to tell how an interest rate cut or more Q.E. from the U.S. will be received by the world’s financial markets.  But it will shine a hard light on the fact that despite how “great” things are said to be in the U.S. economy…the actual situation is the exact opposite of that.
We’re already long past the point where this monetary easing is doing any good to the underlying economies of countries world-wide…including the U.S.  All it has been doing for the last couple of generations is blow up the biggest financial bubble that Planet Earth has ever seen — and run debt up to levels that will never be repaid…ever!
I don’t know for sure, nor does anyone else, how long it will be before the upcoming implosion gets underway in earnest.
But the future is crystal clear in one key respect — and it’s not nirvana.  It will be more like Zimbabwe.
I’m done for the day — and the week — and I’ll see you here on Tuesday.

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April 6th, 2019

Posted In: Ed Steer's Gold and Silver Digest

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