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September 7, 2019 | Another Brazen Attack on All Four Precious Metals

"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."
07 September 2019 — Saturday


The gold price crawled a bit lower until around 11 a.m. China Standard Time on their Friday morning, but was back at the unchanged mark shortly after 1 p.m. CST.  Once the afternoon gold fix in Shanghai was put to bed around 2:15 p.m. over there, it was mostly down hill into the COMEX open — and the 8:30 a.m. jobs report in Washington.  It took off higher from there, but was capped and turned lower at 9:45 a.m. in New York….then didn’t do much of anything until 12:45 p.m.  “Da boyz’ showed up in force at that juncture — and it was sold down hard into the 1:30 p.m. EDT COMEX close.  It drifted a bit lower in after-hours trading until a minute or so after 3:30 p.m. — and the gold price didn’t do much after that.


The low and high ticks were recorded as $1,504.50 and $1,529.60 in the October contract — and $1,510.70 and $1,536.20 in December.


Gold was closed at $1,506.50 spot, down another $12.20 on the day.  Net volume was beyond Mars at around 515,000 contracts — and there was a hair under 31,000 contract worth of roll-over/switch volume in this precious metal.



Silver’s price path was directed in a similar fashion as gold’s…with some inconsequential variations.  It was bounced off the $18 spot mark on at least four occasions that one can spot on the Kitco chart below, although Kitco recorded the low spot price as $17.92.


The high and low ticks in this precious metal were reported by the CME Group as $18.89 and $18.06 in the December contract…an intraday move of over 4 percent, the second outrageous intraday move in a row.


Silver was closed on Friday at $18.22 spot, down 41.5 cents on the day.  Net volume set another new record high…the second one in as many days — and by a huge amount…just under 216,500 contracts.  Thursday’s ‘old’ record high was a bit over 189,000 contracts.  There was only 6,300 contracts worth of roll-over/switch volume on top of that.



In most respects that really mattered, the price pattern in silver was guided through the Friday session in a similar manner as both silver and gold.  Its attempt to break above unchanged during morning trading  in New York was capped as well — and its fate was also sealed at 12:45 p.m. EDT.  Platinum was closed at $948 spot, down 10 bucks on the day.



The major difference in palladium’s price path was that it was beaten lower in price for an hour and change before trading began on the COMEX in New York.  Its sharp rally after that was capped at, or just before, the afternoon gold fix in London — and the rest is just the same as the other three precious metals.



The dollar index closed very late on Thursday afternoon at 98.41 — and opened unchanged once trading commenced around 7:45 p.m. EDT in New York on Thursday evening, which was 7:45 a.m. China Standard Time on their Friday morning.  It was up a tiny handful of basis points by 10 a.m. CST — and then it began to quietly slide from that juncture until around 8:45 a.m. in London.  A ‘rally’ commenced at that point — and the 98.52 high tick was set around 12:40 p.m. BST.  It was all down hill until 9:45 a.m. in New York and then it, like the precious metals, turned on a dime and headed higher.  That choppy ‘rally’ came to an abrupt end at 4:55 p.m. in after-hours trading — and it crashed to its 98.01 low tick at the 5:30 p.m. close.  Although the DXY chart below showed it finishing the day at 98.11…it was marked up to 98.39 after the close so, officially, the dollar index finished down only 2 basis points on the day.  It will be interesting to see what it opens at on Sunday evening in New York.


It was the second day in a row where there was zero correlation between the currencies and what precious metal prices were doing.  In fact, the dollar index and the precious metals rallied together for a while shortly after the job numbers came out…at least until ‘da boyz’ appeared.


Here’s the DXY chart, courtesy of Bloomberg, as always.  Click to enlarge.



And here’s the 5-year U.S. dollar index chart, courtesy of the folks over at the Internet site.  The delta between its close…98.36…and the close on the DXY chart above, was 3 basis points on Friday.  Click to enlarge as well.



The gold stocks opened unchanged at 9:30 a.m. in New York on Friday morning — and were up over a percent about fifteen minutes later.  But when JPMorgan et al. showed up, the selling pressure was relentless for the remainder of the day — and the gold shares closed right on their lows.  The HUI closed down 3.27 percent.


The silver equities also opened unchanged — and popped one percent right away. After that they chopped quietly and unevenly sideways…mostly above unchanged, until ‘da boyz’ torpedoed all the precious metals at 12:45 p.m. EDT.  The silver stocks headed lower from there — and they also closed on their absolute low ticks of the day.  Nick Laird’s Intraday Silver Sentiment/Silver 7 Index chart closed down 2.90 percent.  Click to enlarge if necessary.



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



As I said in Friday’s column — and it’s worth repeat again here now…for every seller, there is a buyer — and it’s a given that the buyers on Friday…like the ones on Thursday…were the strongest hands of all, as John Q. Public is nowhere in sight.



Here are the usual three charts from Nick that show what’s been happening for the week, month — 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.


I’m not including the weekly chart this time, because it’s the same as the month-to-date chart.  The weekly chart will be back in its usual spot in next Saturday’s column.


Here’s the month-to-date chart, which is the same thing as the weekly chart as I just stated — and the big sell-offs in both gold and silver on Thursday and Friday took their tolls on the performance of everything over this time period.  It’s pretty ugly — and the continuing suppression of the silver price, plus the ongoing underperformance of Buenaventura, Peñoles and Hecla Mining is certainly not helping the Silver 7 Index. Click to enlarge.



Here’s the year-to-date chart — and JPMorgan et al.’s near death grip on the silver price is readily apparent in its lack-lustre price gains relative to gold — and in the underlying values of the associated stocks as well…notably the dismal year-to-date performance of the three silver stocks mentioned above.  That will certainly change at some point — and when it does, it will happen in a hurry.  Click to enlarge.



It remains to be seen if JPMorgan et al. can pull off another round of engineered price declines in both silver and gold, especially considering the current financial and monetary environment that they’re facing…along with a pending series of interest rate cuts from the Fed.  They have two days worth under their belts as of Friday’s close — and we’ll have to see what transpires next week.  But the amount of physical gold that’s disappearing into all the world’s ETFs and mutual funds continues unabated, regardless.



The CME Daily Delivery Report for Day 6 of September deliveries showed that 14 gold and 203 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.


In gold, the two short/issuers were ADM and Advantage, with 11 and 3 contracts out of their respective client accounts.  The three long stoppers were JPMorgan, Australia’s Macquarie Futures — and Advantage.  The first two stopped 9 and 2 contracts for their respective in-house/proprietary trading accounts — and the third with 3 contracts for its client account.


In silver, of the four short/issuers in total, the three largest were International F.C. Stone, ABN Amro and Advantage, with 120, 44 and 38 contracts out of their respective client accounts.  Of the nine long/stoppers in total, JPMorgan was the biggest as always, picking 52 contracts in total…29 for its client account and 23 contracts for its own account.  The next three biggest were ABN Amro, Advantage and Macquarie Futures, with 52, 39 and 32 contracts respectively.  Macquarie Future stopped their contracts for their own account — and the other two stopped them for their respective client accounts.


The link to yesterday’s Issuers and Stoppers Report is here.


During the first six days of the September delivery month, there have been 1,640 gold contracts issued/reissued and stopped.  Ted says that is a record number of deliveries for an unscheduled delivery month in gold.  In silver, there have already been 6,989 contracts issued/reissued and stopped so far this month — and August was also a record for deliveries for an unscheduled delivery month for silver.  This is unprecedented demand — and I’m not sure what should be read into it…but something is cooking behind the scenes, there can be no doubt about that.


The CME Preliminary Report for the Friday trading session showed that gold open interest in September rose by 3 contracts, leaving 67 still around, minus the 14 mentioned a few paragraphs ago.  Thursday’s Daily Delivery Report showed that 13 gold contracts were actually posted for delivery on Monday, so that means that 3+13=16 more gold contracts were added to September.  Silver o.i. in September declined by 209 contracts, leaving 885 still open, minus the 203 mentioned a few paragraphs ago.  Thursday’s Daily Delivery Report showed that 276 silver contracts were actually posted for delivery on Monday, so that means that 276-209=67 more silver contracts were added to the September delivery month.



There were no reported changes in either GLD or SLV on Friday — and Ted mentioned on the phone yesterday afternoon that volumes in both were extremely heavy on Friday.


In the other silver ETFs, there was 483,788 troy ounces deposited in SIVR — and another 495,560 troy ounces found its way into Sprott’s PSLV.  On the withdrawal side, there was 118,352 troy ounces removed from Deutsche Bank’s XAD6 silver ETF.  In the gold ETFs, there was a net 84,410 troy ounces deposited on Friday.


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


Month-to-date…four business days…the mint has sold 2,000 troy ounces of gold eagles — 500 one ounce 24K gold buffaloes — and 11,000 silver eagles.  How pathetic is that?


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


It was certainly busier in silver, as 1,440,733 troy ounces was reported received — and zero ounces was shipped out.  In the ‘in’ category, there was one truckload…599,079 troy ounces…received at Canada’s Scotiabank.  The other truckload…598,485 troy ounces…was dropped off at CNT.  The remaining 243,168 troy ounces found a home over at Brink’s, Inc.  There was also a paper transfer over at Brink’s, Inc…as 99,499 troy ounces was transferred from the Registered category — and back into Eligible, which is rather a counterintuitive move during a big delivery month in silver.  Normally the transfer is in the other direction.  The link to all this is here.


There wasn’t much movement over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday.  Nothing was reported received — and only 115 kilobars were shipped out.  This activity was at Brink’s, Inc. — and the link to that, in troy ounces, is here.


With India and Turkey’s gold import figures now in hand, Nick was able to update the Silk Road Gold Demand chart with July’s dataDuring that month, the four major ‘silk road’ countries added 190.0 tonnes to their reserves, which wasn’t a lot.  If you look at the lower insert chart, you’ll see that gold imports/purchases by these four countries has been in slow decline going back to mid-2015.  Click to enlarge.



The Commitment of Traders Report, for positions held at the close of COMEX trading on Tuesday, September 3, showed smallish increases in the commercial net short positions in both gold and silver during the reporting week.


But as I pointed out in my Friday column, this report — and the companion Bank Participation Report…are hopelessly out of date after Thursday’s price action, plus what happened on Friday.  I’m just going to hit the highlights in both of these reports, as delving into them in depth is a total waste of my time writing it — and yours, in reading it.


In silver, the Commercial net short position only increased by 3,935 contracts, which was a big positive surprise for both Ted and myself, as Ted was expecting far worse.


They arrived at that number by reducing their long position by 5,322 contracts, but they also reduced their short position by 2,325 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 plus a bunch more, as they increased their long position by 1,897 contracts — and they reduced their short position by 3,197 contracts as well.  It’s the sum of those two numbers…5,094 contracts…that represents their change for the reporting week.


With the new Bank Participation Report in hand, Ted calculates JPMorgan’s short position at round 25,000 contracts…up 5,000 from last week’s COT Report.


The Commercial net short position in silver, as of Tuesday’s cut-off, now sits at 84,678 COMEX contracts, or 423.3 million troy ounces of paper silver.


Here’s Nick’s 3-year COT chart for silverClick to enlarge.



As I’ve already pointed out, this silver data is now irrelevant.



In gold, the commercial net short position increased by only 3,935 contracts, or 393,500 troy ounces of paper gold, which is hardly anything.


They arrived at that number by reducing their long position by 1,149 contracts — and they increased their short position by 2,786 contracts.  It’s the sum of those two numbers that represents their change for the reporting week.


In the Disaggregated COT Report, it was all Managed Money traders, plus a bit more, as they increased their long position by 6,906 contracts — and they also increased their short position by 1,996 contracts.  It’s the difference between those two numbers…4,910 contracts…that represents their change for the reporting week.


The commercial net short position in gold is back up to 33.77 million troy ounces…wildly bearish on its face.


Here’s Nick’s 3-year COT chart for gold — and it hasn’t changed much over the last two weeks, even though the price has risen a lot during that period.  Click to enlarge.



Like with the COT Report for silver, this report for gold is ancient history as well.


In the other metals, the Manged Money traders in palladium increased their net long by a further 1,059 contracts — and as I mentioned last week, there are never big position changes in palladium.  The Managed Money traders are now net long the palladium market by 11,825 contracts…about 58 percent of the total open interest, which is grotesque.  Total open interest in palladium is 20,518 COMEX contracts.  In platinum, the Managed Money traders increased their net long position by by an as expected very chunky 13,134 contracts during the reporting week.  The Managed Money traders are now net long the platinum market by 20,607 COMEX contracts…23 percent of the total open interest, a huge increase from last week.  The traders in the other two categories are net long platinum big time as well.  In copper, the Managed Money traders increased their net short position in that metal by a tiny 393 COMEX contracts during the reporting week — and are now net short the COMEX futures market by a eye-watering 70,914 contracts, or 1.77 billion pounds of the stuff…a hair under their record short position from a month ago. That’s 27 percent of total open interest…a huge percentage.



Here’s Nick Laird’s “Days to Cover” chart updated with the 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.



For the current reporting week, the Big 4 traders are short 145 days of world silver production, which is down 3 days from last week’s report – and the ‘5 through 8’ large traders are short an additional 73 days of world silver production, up 3 days from last week’s report – for a total of 218 days that the Big 8 are short, which is a bit over seven months of world silver production, or about 508 million troy ounces of paper silver held short by the Big 8. [In the prior week’s COT Report, the Big 8 were also short 218 days of world silver production.]


In the COT Report above, the Commercial net short position in silver was reported as 423 million troy ounces.  As mentioned in the previous paragraph, the short position of the Big 8 traders is 508 million troy ounces.  The short position of the Big 8 traders is larger than the total Commercial net short position by 508 minus 423 equals 85 million troy ounces.


The reason for the difference in those numbers…as it always is…is that Ted’s raptors, the 30-odd small commercial traders other than the Big 8, are net long that amount.


As I mentioned in my COT commentary in silver above, Ted figures that JPMorgan is short around 25,000 COMEX silver contracts…up 5,000 from the prior week’s COT Report.


25,000 COMEX contracts is 125 million troy ounces of paper silver, which works out to around 53 days of world silver production, up from the 45 days they were short in last week’s COT Report.  As of Tuesday’s cut-off, JPMorgan was by far the biggest silver short on the COMEX futures market.  Citigroup is in second place — and not that far behind.


The Big 4 traders in silver are short, on average, about…146 divided by 4 equals…36.5 days of world silver production each.  The four traders in the ‘5 through 8’ category are short 72 days of world silver production in total, which is 18 days of world silver production each, on average.


The Big 8 commercial traders are short 45.2 percent of the entire open interest in silver in the COMEX futures market, which is a bit of an increase from the 42.4 percent they were short in last week’s report.  And once whatever market-neutral spread trades are subtracted out, that percentage would be a bit over the 50 percent mark.  In gold, it’s now 42.9 percent of the total COMEX open interest that the Big 8 are short, up a hair from the 42.0 percent they were short in last week’s report — and something approaching 50 percent, once the market-neutral spread trades are subtracted out.


In gold, the Big 4 are short 63 days of world gold production, up 2 days from what they were short in last week’s COT Report.  The ‘5 through 8’ are short another 32 days of world production, unchanged from what they were short last week…for a total of 95 days of world gold production held short by the Big 8…up 2 days from last week’s report.  Based on these numbers, the Big 4 in gold hold about 66 percent of the total short position held by the Big 8…up 1 percentage point 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 67, 73 and 76 percent respectively of the short positions held by the Big 8.  Silver is down 1 percentage point from a week ago, platinum is up 4 percentage points from last week — and palladium is up 1 percentage points from a week ago.


All the data above is also ancient history because of the price action on Thursday and Friday, but it does put a stake in the ground for the highs before the engineered price decline began.



The September 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 September Bank Participation Report covers the time period from August 7 to September 3 inclusive.]


In gold, 5 U.S. banks are net short 105,713 COMEX contracts in the September’s BPR.  In August’s Bank Participation Report [BPR] these same 5 U.S. banks were net short 82,387 contracts, so there was a sharp increase of 23,326 COMEX contracts from a month ago.
JPMorgan, Citigroup and HSBC USA would hold the lion’s share of this short position.  But as to who other two U.S. banks might be that are short in this BPR, I haven’t a clue, but it’s a given that their short positions would not be material.


Also in gold, 30 non-U.S. banks are net short 114,958 COMEX gold contracts.  In the August’s BPR, 29 non-U.S. banks were net short 132,469 COMEX contracts…so the month-over-month change shows a reduction of 17,511 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, one of which would include Scotiabank.  It’s certainly possible that it could be the BIS in the No. 1 spot.  But regardless of who this second non-U.S. bank is, the short positions in gold held by the remaining 28 non-U.S. banks are immaterial.


At the low back in the August 2018 BPR [for July]…these same non-U.S. banks held a net short position in gold of only 1,960 contacts!


As of this Bank Participation Report, 35 banks [both U.S. and foreign] are net short 34.8 percent of the entire open interest in gold in the COMEX futures market, which is down a bit from the 35.8 percent they were short in the August BPR. This is rather amazing considering how much the gold price rose during this BPR reporting period…August.  But it does point out clearly that this price management scheme is centered around the U.S. bullion banks…and quite likely the BIS.


Here’s Nick’s BPR chart 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 37,706 COMEX contracts in September’s BPR.  In August’s BPR, the net short position of 4 U.S. banks was 32,314 contracts, so the short position of the U.S. banks is up another 5,392 contracts month-over-month — and most assuredly that increase comes courtesy of JPMorgan.  Ted says that of that September number, JPMorgan is short about 25,000 contracts of that amount.


As in gold, the three biggest short holders in silver of the five U.S. banks in total, would be JPMorgan, Citigroup and HSBC USA.  Whoever the remaining two U.S. bank may be, their short positions, like the short positions of the two smallest U.S. banks in gold, would be immaterial in the grand scheme of things.


Also in silver, 23 non-U.S. banks are net short 41,450 COMEX contracts in the September BPR…which is down from the 43,142 contracts that 23 non-U.S. banks were short in the August BPR.  I would suspect that Canada’s Scotiabank [and maybe one other, the BIS perhaps] holds a goodly chunk of the short position of these non-U.S. banks.  I believe that a number of the remaining 21 non-U.S. banks may actually net long the COMEX futures market in silver.  But even if they aren’t, the remaining short positions divided up between these other 21 non-U.S. banks are immaterial – and have always been so.  This is a JPMorgan-run operation…end of story.


As of September’s Bank Participation Report, 28 banks [both U.S. and foreign] are net short 35.1 percent of the entire open interest in the COMEX futures market in silver-which is up a bit from the 31.6 percent that they were net short in the August BPR – with much, much more than the lion’s share of that held by JPMorgan, Citigroup, HSBC USA, Scotiabank — and maybe one other non-U.S. bank, which I suspect may be the BIS.


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 20,670 COMEX contracts in the September Bank Participation Report.  In the August BPR, these same banks were net short 15,202 COMEX contracts…so there’s been another increase month-over-month…5,468 contracts worth.
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 worse since then.


Also in platinum, 19 non-U.S. banks are net short 16,647 COMEX contracts in the September BPR, which is up another 19 percent from the 14,013 COMEX contracts that these same 19 non-U.S. banks were net short in the August BPR.  [Note: Back at the July 2018 low, these same non-U.S. banks were net short only 1,192 COMEX contracts.]


It’s obvious that these banks, both U.S. and foreign, have been going short against the Managed Money trader during this big rally in platinum…which may have ended on Wednesday.


And as of September’s Bank Participation Report, 24 banks [both U.S. and foreign] are net short 42.1 percent of platinum’s total open interest in the COMEX futures market, which is up a very decent amount from the 38.7 percent they were net short in August’s BPR.
Here’s the Bank Participation Report chart for platinumClick to enlarge.



In palladium, 4 U.S. banks are net short 6,682 COMEX contracts in the September BPR, which is up a tiny amount from the 6,539 contracts that these same 4 U.S. banks held net short in the August BPR.


Also in palladium, 13 non-U.S. banks are net short 1,965 COMEX contracts-which is up a bit from the 1,576 COMEX contracts that 15 non-U.S. banks were short in the August BPR.


But when you divide up the short positions of these non-U.S. banks more or less equally, they’re completely immaterial…especially when compared to the positions held by the 4 U.S. banks.


As of this Bank Participation Report, 17 banks [both U.S. and foreign] are net short 42.1 percent of the entire COMEX open interest in palladium.  In August’s BPR, the world’s banks were net short 33.8 percent of total open interest…a big increase from a month ago.


Here’s the palladium BPR chart.  And as I point out every month, you should note that the U.S. banks were almost nowhere to be seen in the COMEX futures market in this precious metal until the middle of 2007-and they became the predominant and controlling factor by the end of Q1 of 2013 — and are even more so today.  Click to enlarge.



Of course all the above data belongs in the scrap heap along with the COT data from this week as well.  But as I said in Friday’s commentary, I was going to report on it regardless.


It remains to be seen if the price action on both Thursday and Friday is the beginning of another ‘wash, rinse, spin…repeat’ cycle this time around…as JPMorgan et al. are facing some rather serious and long-term headwinds…not only in the currencies, but in foreign bank and ETF gold purchases.  These headwinds are becoming ever more pronounced with each passing week.


However, it’s obvious that JPMorgan is still the short seller of last resort — and sometimes first resort as well, in order to keep a lid on precious metal prices.


But, as always, they are in a position to stick it to the rest of the short holders in both silver and gold if they so choose — and whether they will they or they won’t, remains to be seen.  I also get the impression that the engineered price decline that began on Thursday did not involve JPMorgan.  It was one or all of the other Big 7 commercial shorts.  But as Ted pointed out on the phone yesterday, JPMorgan was certainly in the thick of it covering every short contract they could — and going long hand over fist at the same time.


I have a decent number of stories/articles for you today, including a few that I’ve been saving for my Saturday column for length and/or content reasons.


Looks Like a Stagflation Report“: August Private Payrolls Miss Huge, But Hourly Earnings Jump

In our preview of the August jobs report we warned that while census hiring was a potential positive wildcard to today’s print, it was the seasonals that were a major negative risk, with August jobs missing consensus in 8 of the past 10 annual prints.  Click to enlarge.



Well, make that 9 of the past 11 and even with census hiring, because moments ago the BLS reported that in August, a total of just 130K payrolls were added, with hiring for census accounting for 25,000 of the total, sharply below the 160k expected. Oddly, the picture presented by the Household Survey was vastly different, with the number of employed workers surging by 590K, to 157.878 million as the labor force soared by 571K, suggesting the U.S. has a way to go before hitting full employment.


On a year-over-year basis, the rate of growth payroll growth was just 1.4%, the lowest since August 2011.


However, it was the private payroll subset that was especially disappointing with the 96K print far below the 150K expected, and far below last month’s downward revised 131K. Worse, on a YTD basis, the number of private jobs created in 2019 is the worst going back at least 6 years.  Click to enlarge.



Additionally, as Bloomberg notes the one-month diffusion index, which shows the breadth of hiring, slumped to 53.5 in August for private employers. “That’s the weakest since May 2016 and not a good sign for the job market.”


This Zero Hedge story put in an appearance on their website at 8:40 a.m. on Friday morning EDT — and it comes to us courtesy of Brad Robertson.  Another link to it is here.  There was also another ZH story on this issue headlined “Where the August Jobs Were: Who is Hiring and Who Isn’t…and the Retail Apocalypse” — and that’s from Brad as well.


Doug Noland: $150 Billion Global Corporate Bond Binge

It’s difficult to envisage a more manic bond market environment – at home or abroad. In Europe, it’s tulip mania reincarnated, with a third of European investment-grade bonds now trading with negative yields. Draghi had best not disappoint the markets next Thursday. And when he comes through, markets will raise the stakes even higher for next month. From the Financial Times (Robert Smith): “JPMorgan’s analysts say September is shaping up to be the ‘first issuance window where negative yielding bonds are a common feature, rather than an occasional oddity’. ‘In our view, investors still have cash to deploy, and few other alternatives to buy,’ they say.


In theory, it would be prudent to push hard for less Washington monopolization of mortgage Credit. But at this point, the idea of “privatizing” Fannie and Freddie would simply be a return to the disastrous system of privatizing profits while nationalizing risk. There is simply no mechanism to effectively privatize this risk, as markets will invariably recognize these bigger than ever colossal institutions as much too big to fail.


Confident in the Washington backstop, GSE securities will continue to trade with meager risk premiums. This distortion creates extraordinarily attractive profit opportunities for equity investors clamoring for a so-called “privatization.” As before, cheap financing costs and the gross under-reserving for future losses would create the illusion of sound and highly profitable institutions. These “private” companies would surely reward investors with strong earnings growth and dividends, ensuring a hopelessly insufficient capital base for the downside of the cycle.


The Trump administration punted. Yet I would prefer to see these institutions remain under the Treasury umbrella rather than be part of some sham “privatization.” The administration should, however, at the very minimum demand a moratorium on expansion. It would take years, but Fannie and Freddie exposures could be meaningfully reduced. I won’t hold my breath. Cheap mortgage Credit has been a staple for U.S. economic and financial systems now going on three decades. One of many historic market distortions that these days passes as normal and sustainable.


Doug Noland’s weekly commentary was posted on his Internet site very early on Saturday morning EDT — and another link to it is here.


David Stockman on an Unprecedented Collapse of the Global Financial System

Here we are in month 121 of the longest business expansion in history-albeit the weakest one. The unemployment rate is at 3.7%, and they’ve already thrown in the towel and have cut the rates. This morning the federal funds rate is 2.12%.


They’ve got no room left to go. Now, people say they could go negative. They will not go negative in the United States. If they actually tried to drive interest rates in the short end of the market into negative territory-and finally crush whatever life is left in the savers and retirees of America-people would be descending on Washington with pitchforks and torches. So that won’t happen.


So, they basically have this huge balance sheet in conjunction with the other central banks of the world. Collectively, they have driven bond yields to rock bottom. I would say we’re now in the mother of all bond bubbles in history.


They’ve practically destroyed the bond market in terms of any meaningful price discovery and any meaningful economic content of the yields. You have $16 trillion of investment-grade sovereign debt trading at negative yields. You have even the entire US yield curve as the only bond market left with a positive number in front of the yield, and now we’re under 2%. They’re close to destroying the bond market completely.


So, if they try to go big time with a new round of QE, that will blow up the bond market. There’s no doubt about it.


I think that will be a calamity and will generate an unprecedented collapse of the entire global financial system.


David is never at a loss for words — and this Q&A between David and Doug Casey was posted on the Internet site on Friday sometime — and another link to it is hereGregory Mannarino‘s post market-closing rant on Friday is linked here.


Is the Fed Preparing to Topple the U.S. Dollar? — F. William Engdahl

The about-to-retire head of the very special Bank of England, Mark Carney, delivered a remarkable speech at the recent annual meeting of central bankers and finance elites at Jackson Hole Wyoming on August 23. The 23-page address to fellow central bankers and financial insiders is clearly a major signal of where the Powers That Be who run world central banks plan to take the world.


Carney addresses obvious flaws with the post-1944 dollar reserve system, noting that, “…a destabilising asymmetry at the heart of the IMFS (International Monetary and Financial System) is growing. While the world economy is being reordered, the US dollar remains as important as when Bretton Woods collapsed.” He states bluntly, “…In the longer term, we need to change the game…Risks are building, and they are structural.” What he then goes on to outline is a remarkably detailed blueprint for global central bank transformation of the dollar order, a revolutionary shift.


Carney discusses the fact that China as the world leading trading nation is the obvious candidate to replace the dollar as leading reserve, however, he notes, “…for the Renminbi to become a truly global currency, much more is required. Moreover, history teaches that the transition to a new global reserve currency may not proceed smoothly.” He indicates that means it often needs wars or depressions, as he cites the role of World War I forcing out sterling in favor of the U.S. dollar. What Carney finds more immediate is a new IMF-based monetary system to replace the dominant role of the dollar. Carney declares, “While the rise of the Renminbi may over time provide a second best solution to the current problems with the IMFS, first best would be to build a multipolar system. The main advantage of a multipolar IMFS is diversification… ” He adds, “… When change comes, it shouldn’t be to swap one currency hegemon for another. Any unipolar system is unsuited to a multi-polar world“… In other words he says, “Sorry, Beijing, you must wait.”


The Bank of England Governor proposes in effect that the IMF, with its multi-currency Special Drawing Rights (SDR), a basket of five currencies-dollar, Pound, Yen, Euro and now Renminbi-should play the central role creating a new monetary system: “The IMF should play a central role in informing both domestic and cross border policies. … Pooling resources at the IMF, and thereby distributing the costs across all 189 member countries…” For that to work he proposes raising the IMF SDR funds triple to $3 trillions as the core of a new monetary system.


This very worthwhile commentary from William appeared on the Internet site last weekend — and I thank Jim Gullo for sending it our way.  Another link to it is here.


Major University Study Finds “Fire Did Not Bring Down Tower 7 On 9/11

On September 11, 2001, at 5:20 PM, the 47-story World Trade Center Building 7 collapsed into its footprint, falling more than 100 feet at the rate of gravity for 2.5 seconds of its seven-second destruction.


Despite calls for the evidence to be preserved, New York City officials had the building’s debris removed and destroyed in the ensuing weeks and months, preventing a proper forensic investigation from ever taking place. Seven years later, federal investigators concluded that WTC 7 was the first steel-framed high-rise ever to have collapsed solely as a result of normal office fires.


Today, we at Architects & Engineers for 9/11 Truth are pleased to partner with the University of Alaska Fairbanks (UAF) in releasing the draft report of a four-year computer modeling study of WTC 7’s collapse conducted by researchers in the university’s Department of Civil and Environmental Engineering. The UAF WTC 7 report concludes that the collapse of WTC 7 on 9/11 was caused not by fire but rather by the near-simultaneous failure of every column in the building.


[F]or the first time since 9/11 the federal government is taking steps to hear evidence that explosives may have been used to destroy the world trade centers.


The Lawyers’ Committee for 9/11 Inquiry successfully submitted a petition to the federal government demanding that the U.S. Attorney present to a Special Grand Jury extensive evidence of yet-to-be-prosecuted federal crimes relating to the destruction of three World Trade Center Towers on 9/11 (WTC1, WTC2 and WTC7).


After waiting months for the reply, the U.S. Attorney responded in a letter, noting that they will comply with the law.


Finally, after nearly two decades of ridicule, dismissal, and outright intolerance of information contrary to the “official story” of what happened on 9/11, the public may finally learn the truth of what happened and who was behind it.


I doubt that the Deep State will ever allow the truth to come out, as they haven’t allowed it with either Kennedy or Pearl Harbor yet, but it’s certainly worth a try. This very worthwhile article put in an appearance on the Zero Hedge website at 9:10 a.m. EDT on Friday morning — and I thank Brad Robertson for sharing it with us.  Another link to it is here.


Brexit Drama Reaches Its Final Act — Tom Luongo

It’s been a wild week in Westminster as U.K. Prime Minister Boris Johnson and Opposition Leader Jeremy Corbyn made dubious history. Johnson became the first Prime Minister in history to lose his first four votes in Parliament and Corbyn became the first Opposition Leader to turn down a general election.


If you think the Brits have lost their minds over Brexit, you would be wrong. Everyone involved is acting with complete rationality, playing the cards they are dealt.


These political machinations may seem obtuse but they will have enormous effects on the economic futures of the U.K. and the EU. Investors need to understand what is really happening to position themselves properly.


Johnson had no clear mandate to govern and is only Prime Minister because Corbyn refused to call a general election when he had the chance back in June. He didn’t do this because while he may be a pathetic Marxist, he’s not a complete fool.


The European election results were clear to everyone that if a General Election occurred, Nigel Farage’s Brexit Party and the Conservatives would command an unassailable majority in the House of Commons and Brexit on British terms would commence.


That dynamic is still in play today, and that’s why Corbyn’s Labour Party abstained from Johnson’s call for a General Election.


If you’re into politics in the U.K…this commentary by Tom Luongo is worth reading.  It was posted on the Internet site on Friday sometime — and it comes to us courtesy of Judy Sturgis.  Another link to it is here.


Draghi Seen Overriding Opposition With QE as Gloom Deepens

Mario Draghi is expected to go big in a final stimulus push as European Central Bank president, overriding protests from among his ranks that tools such as bond purchases aren’t yet needed.
More than 80% of economists surveyed by Bloomberg predict officials will announce more quantitative easing next week. They see the ECB’s deposit rate being reduced by 10 basis points to a record-low minus 0.5% in September, and expect a second cut of the same magnitude in December.


Draghi, who leaves his post in October and is set to be replaced by outgoing IMF chief Christine Lagarde, argued in July before the ECB’s summer break that the “outlook is getting worse and worse.” Since committing to reviewing a swathe of policy options, indicators haven’t signaled that a turning point is in sight. Yet some decision makers have argued that an aggressive package isn’t warranted, pushing back against market expectations they say have gone too far.


By easing, the ECB would join a wave of policy-loosening by central banks as the global economy cools because of protectionism and geopolitical tensions. The U.S. Federal Reserve might follow a week later with its second rate cut of the year, and the Swiss National Bank is seen as likely to reduce its key rate further below zero if the ECB acts.


This Bloomberg news item showed up on their Internet site at 9:00 p.m. PDT on Thursday evening — and was updated about sixteen hours later.  I thank Swedish reader Patrik Ekdahl for pointing it out — and another link to it is here.


Maersk Halts Asia-Europe Loop Amid Global Slowdown

Growth in the world continues to collapse into late summer, so much so that Maersk and Mediterranean Shipping Company (MSC) had to “temporarily suspend” their AE2/Swan Asia to North Europe loop until mid-November, removing 20,000 twenty-foot equivalent unit (TEU) a week from trade, reported The LoadstarClick to enlarge.



Collapsing demand and plunging shipping container rates have led to pain for carriers who sail their vessels along the route. This is the second time Maersk and MSC have suspended the circuit, and the last time this happened was last fall.


Maersk and MSC said it’s working hard to “balance its network to match reduced market demand for the upcoming [Chinese factory shutdown] Golden Week” — and “help us to match capacity with the expected weaker demand for shipping services” from Asia to Europe.


Maersk and MSC said the service would resume “in line with demand pickup,” suggesting the suspension could be extended into 1H20 as global trade isn’t expected to pick up for the next six to eight months.


Maersk and MSC adopted a similar strategy last year, suspending AE2/Swan Asia to North Europe loop from September to December, this was right around the time when stock markets across the world crashed from October to December, on fears the world economy was slowing. It just so happens that the global synchronized slowdown is much worse this year, likely the world has entered a manufacturing/trade recession in late summer 2019.


This interesting article, at least for me it was, showed up on the Zero Hedge Internet site at 4:15 a.m. EDT on Friday morning — and it’s another offering from Brad Robertson.  Another link to it is here.


U.S. Army Major (Ret.): We Are Living in the Wreckage of the War on Terror

It has taken me years to tell these stories. The emotional and moral wounds of the Afghan War have just felt too recent, too raw. After all, I could hardly write a thing down about my Iraq War experience for nearly ten years, when, by accident, I churned out a book on the subject. Now, as the American war in Afghanistan – hopefully – winds to something approaching a close, it’s finally time to impart some tales of the madness. In this new, recurring, semi-regular series, the reader won’t find many worn out sagas of heroism, brotherhood, and love of country. Not that this author doesn’t have such stories, of course. But one can find those sorts of tales in countless books and numerous trite, platitudinal Hollywood yarns.


With that in mind, I propose to tell a number of very different sorts of stories – profiles, so to speak, in absurdity. That’s what war is, at root, an exercise in absurdity, and America’s hopeless post-9/11 wars are stranger than most. My own 18-year long quest to find some meaning in all the combat, to protect my troops from danger, push back against the madness, and dissent from within the army proved Kafkaesque in the extreme.


American soldiers fight and die at the whims of career-obsessed officers as much they do so at the behest of king and country. Sometimes its their own leaders – as much as the ostensible “enemy” – that tries to get them killed. The plentiful sociopaths running these wars at the upper and even middle-management levels are often far less concerned with long-term, meaningful “victory” in places like Afghanistan, than in crafting – on the backs of their soldiers sacrifices – the illusion of progress, just enough measurable “success” in their one year tour to warrant a stellar evaluation and, thus, the next promotion. Not all leaders are like this. I, for one, once worked for a man for whom I – and all my peers – would run through walls for, a (then) colonel that loved his hundreds of soldiers like they were his own children. But he was the exception that proved the rule.


The madness, irrationality, and absurdity of my colonel was nothing less than a microcosm of America’s entire hopeless adventure in Afghanistan. The war was never rational, winnable, or meaningful. It was from the first, and will end as, an exercise in futility. It was, and is, one grand patrol to my own unnecessary outpost, undertaken at the wrong time and place. It was a collection of sociopaths and imbeciles – both Afghan and American – tilting at windmills and ultimately dying for nothing at all. Yet the young men in the proverbial trenches never flinched, never refused. They did their absurd duty because they were acculturated to the military system, and because they were embarrassed not to.


After all, lower caters to higher…


This depressing, but not at all surprising first-hand account from a member of the U.S. armed forces stationed in Afghanistan, was taken from the Internet site — and it appeared on Zero Hedge at five minutes to midnight on Friday night EDT.  Another link to it is here.


China Cuts Required Reserve Ratio Releasing $126BN in Liquidity; Yuan Surges

As had been widely previewed in China’s official financial press in recent days, on Friday the PBOC announced it would cut the required reserve ratio (RRR) for all banks by 0.5% effective Sept. 16 (and by 1% for some city commercial banks, to take effect in two steps on Oct. 15 and Nov. 15), releasing 900 billion yuan ($126 billion) of liquidity in the PBOC’s first broad and targeted RRR cut since 2015, helping to offset the tightening impact of upcoming tax payments.


While today’s rate cut – which was expected following the State Council meeting and ahead of the Oct.1 National Day Chinese holiday – was more than the previous cuts in January and May, which released 800 billion yuan and 280 billion yuan, respectively, the PBOC stated that “China won’t adopt flood-like monetary stimulus” and that they will continue “prudent” monetary policy to “keep liquidity at (a) reasonably ample level” and will “strengthen the counter-cyclical adjustment” which is basically gibberish for it will do whatever it sees appropriate.  Click to enlarge.



With the Chinese economy slowing drastically in recent months, with various economic indicators at multi-decade lows, the RRR cut was aimed at supporting demand by funneling credit to small firms and echoes the earlier cuts this year. Indeed, as Bloomberg notes, China’s economy softened substantially in August after poor results in July, and will likely deteriorate further in the remainder of the year. Trade tension between China and the U.S. expanded onto the financial front recently after China allowed the currency to decline below 7 a dollar, prompting the U.S. to name it a currency manipulator.


This news item put in an appearance on the Zero Hedge website at 7:02 a.m. on Friday morning EDT — and it’s yet another contribution from Brad Robertson.  Another link to it is here.


Greenspan: Rising Gold Price Shows Investors Want Hard Assets That Will Increase in Value

During a CNBC interview, former Federal Reserve Chairman Alan Greenspan said gold prices are surging because investors are looking for hard assets that they know will have value in 20 or 30 years.


Gold is up more than 21% on the year and is trading at levels not seen since 2013.


During the interview, Greenspan focused on an interesting fundamental he thinks is driving both the bond and gold markets – the aging population. He said there has been a shift in time preferences as people recognize they will likely live longer and they will need to finance those longer lives. This, he says, is increasing the demand for hard assets like gold.


One of the reasons that the gold price is rising as fast as it is … that’s telling us essentially that people are hard resources which they know are going to have a value 20 years from now, or 30 years from now as they age, and they want to make sure they have the resources to keep themselves in place. That is a clearly fundamental force that is driving this.”


Historically, gold has served as an inflation hedge and a wealth preserver. It makes sense that investors concerned about maintaining their savings well into the future would turn to gold. This is especially true given the likelihood of increasing inflation as the Federal Reserve continues to try to prop up the economy with low interest rates and quantitative easing.


This article from the Internet site was picked up by Zero Hedge at 12:14 p.m. on Friday afternoon EDT — and I thank Brad Robertson for sending it our way.  Another link to it is here.


Continuing along the dirt/gravel road high above Adams Lake…the first photo shows the road, which was very decent for being out in the middle of nowhere, but I wouldn’t want to be on it if it had been pouring rain for a few days.  The second photo is looking down the southern arm of the lake, where it flows into the world famous Adams River.  Once back in civilization about 30 kilometers later, we dropped into the Talking Rock Gold Course for a bite to eat…our second visit there.  The course is situated on Little Shuswap Lake.  The town of Chase, B.C. is on the tiny peninsula of land in the center of Photo 3 — and that’s where the South Thompson River begins its journey to Kamloops and, ultimately empties into the Fraser River at LyttonClick to enlarge for all.


When a managed economy begins to fail, the only direction is to manage it more and more.  It’s how ‘democratic socialism’ leads to repression.” – Garry Kasparov

Today’s pop ‘blast from the past’ is one I’ve feature before, but it’s been ages, so here it is again. They weren’t exactly one-hit wonders, but this tune was their most famous.  It made it to No. 8 on Billboard’s Year-End 100 Singles of 1967.  The link is here.
Today’s classical ‘blast from the past’ is one I’ve also featured before and, like the pop ‘blast from past’…it’s been a while.  Spanish virtuoso violinist Pablo de Sarasate had a lot of virtuoso violin piece dedicated to him — and I’ve featured several of them over the last month.  But he did write one of his own…Zigeunerweisen (Gypsy Airs), Op. 20…for violin and orchestra, which he composed in 1878 — and was premiered the same year in Leipzig, Germany.  It’s a breathless encore piece that thrills every crowd.  Here’s the incredibly gifted and luscious Sarah Chang doing the honours — and the link is here.

Yesterday’s price action in all the precious metals was something I’d never seen before — and the word ‘unprecedented’ comes to mind.  The engineered price declines into the jobs numbers did not turn out according to Hoyle moments after that — and the Big 8 commercial traders…with or without JPMorgan in attendance… had to step in even before the afternoon gold fix in London to prevent them from soaring to the upside.  Then ‘da boyz’ stepped in at precisely 12:45 p.m. in COMEX trading in the early afternoon.  And it wasn’t just gold and silver they were after, as all four precious metals got sold sharply lower at that instant.  This looked like desperate moves by desperate men.  I’m just speculating here, but those waterfall declines certain had all the hallmarks of a spoofing operation.
Looking at the Friday’s Preliminary Report yesterday evening, there was very little change in open interest in either silver or gold but, as I’ve learned the hard way via Ted Butler, those numbers can be deceiving.
With two record-setting volume days in silver, with gold volumes not that far behind, there was something going on out of sight that we probably won’t be privy to until next Friday’s COT Report.  I know that Ted will have a lot to say about this, amongst other things, in his weekly review to his paying subscribers this afternoon — and I’m eagerly looking forward to reading his latest.
Setting that aside for the moment, it’s impossible to tell how far along we are on this current ‘wash, rinse, spin…repeat’ cycle that we’re all too familiar with.  It was hard to get a hint from yesterday’s price action, as it was totally out of line with any other such engineered price decline.  All we can do is wait some more — and I doubt that we’ll have to wait for long.
Here are the 6-month charts for all four precious metals, plus copper and WTIC — and the changes in the four precious metals should be noted.  Click to enlarge.
I’ll turn 71 years young next month — and never in my lifetime have I witnessed a financial world that has floated so far off the rails as the one we’re living through now.  The ‘everything bubble’ is growing larger and more dangerous by the week — and to say that it will end badly is understating the situation.
It is, as Doug Noland so succinctly put it in his commentary in the Critical Reads section above…”tulip mania reincarnated in Europe.”
There is no price discovery in anything any more and, as Chris Powell said back in 2008…which is now 11 years ago…”there are no markets anymore, only interventions“.  Gary Kasperov’s quote above is a more modern version of that…”When a managed economy begins to fail, the only direction is to manage it more and more.  It’s how ‘democratic socialism’ leads to repression.”
It’s impossible to put today’s economic, financial and monetary situation in some sort of human context, because there is nobody alive today that has lived through such times as existed in 1929 before the crash.  Our generation is flying by the seat of its pants, hoping that the algorithms, market interventions — and the world’s central banks can keep this up indefinitely.
But anyone of a certain vintage, including this writer, knows perfectly well that a brick wall lies somewhere in our future.  The two commentaries that appeared on the Internet during the last week or so…one by Bank of England governor Mark Carney from Jackson Hole discussing a new currency regime no longer based on the U.S. dollar — and former president of the New York Fed, Bill Dudley comments that “There’s even an argument that the election itself falls within the Fed’s purview. If the goal of monetary policy is to achieve the best long-term economic outcome, then Fed officials should consider how their decisions will affect the political outcome in 2020.”  These are thinly disguised messages that big changes are coming.
These two straws in the wind, along with JPMorgan plus others scooping up all the physical gold and silver they can get their hands on, are indications that some sort of paradigm shift is headed our way.  The only thing that is not know is the timing.
But it draws closer at an ever-accelerating rate, with all interest rates world wide now zero-bound, or worse within the next six months or less.  No fractional reserve banking system can survive this — and the resulting inflation/hyperinflation of various world currencies is not far off.  Not even the almighty U.S. dollar will escape this monetary black hole that it is now in orbit around.  It will be a race to see what blows up first…the bond market, world currencies…or the various and sundry stock markets.  There is no escape now that the spiral downward has begun…none.
But as I and lots of others have said over the last year or so, this out of control financial and monetary system based on the U.S. dollar, is certainly on its last legs.  And as I keep repeating just about every week now, when this whole ‘Everything Bubble’ final does find its theoretical pin, it will come by design, rather than circumstance.
Despite the rather horrid setbacks in the precious metals — and their associated equities these last few days, the fact that Alan Greenspan, still a gold standard-bearer on the inside, would come out and say what he did on Friday, is the final straw in the wind that makes me content with my “all in” position in the precious metals.
And in the face of what’s coming down the pipe in the next six months, it’s a certainty that the price management scheme that currently exists in the all four precious metals will come to an abrupt end sometime in the next six months.
Ted is of the opinion — and I’m certainly not disagreeing with him this time, that this engineered price decline will be the last one before we blast higher, so I’m more than prepared to bear the pain in the short term.
Because, as the ancient Persian adage goes…”This too, shall pass.”
I’m done for the day — and the week — and I’ll see you here on Tuesday.

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September 7th, 2019

Posted In: Ed Steer's Gold and Silver Digest

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