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November 16, 2019 | Silver Equities Outperforming Year-to-Date

"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."

16 November 2019 — Saturday


The gold price was under quiet but extremely erratic selling pressure in Far East trading on the their Friday — and the low tick of the day, such as it was, came around 9:15 a.m. in London.  It crept quietly and unevenly higher until the 11 a.m. London close — and at that juncture ‘da boyz’ in New York would not allow it to go any higher — and it traded very unevenly sideways until the market closed at 5:00 p.m. EST.


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


Gold was closed on Friday afternoon in New York at $1,467.90 spot, down $3.30 on the day.  Net volume was pretty quiet at just under 212,500 contracts — and there was 39,500 contracts worth of roll-over/switch volume out of December and into future months.



Silver, like gold, was also sold unevenly lower starting at the 6:00 p.m. EST open in New York on Thursday evening — and that lasted until a few minutes before the London open.  It was then bounced off its $16.82 spot price low multiple times from there until around 12:45 a.m. GMT/7:45 a.m. in New York.  From that point onwards, ‘da boyz’ handled the silver price in a matter very similar to that of gold…also capping it at the 11 a.m. EST London close.


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


Silver was closed on Friday afternoon in New York at $16.935 spot, down 6.5 cents from Thursday.  Net volume was on the quieter side as well, at a bit under 56,500 contracts — and there was a bit under 11,000 contracts worth of roll-over/switch volume in this precious metal.



The platinum price was up a few dollars by shortly after 1:30 p.m. China Standard Time on their Friday afternoon.  A bit of selling pressure appeared at that juncture — and that lasted until shortly after 11 a.m. CET in Zurich.  A rally of some size developed at that point but, like for gold and silver, JPMorgan et al. capped the price and turned it lower starting right at the 11 a.m. EST Zurich close.  It was sold quietly lower until around 3 p.m. in the thinly-traded after-hours market — and traded flat into the 5:00 p.m. New York close from there.  Platinum finished the day at $888 spot, up 8 bucks from Thursday — and 12 dollars off its Kitco-recorded $900 spot high tick of the day.



‘Da boyz’ handled palladium in a somewhat similar manner.  Its high tick of the day…up $10…also came at 1:30 p.m. CST in Shanghai…and it was then sold lower until 10 a.m. in Zurich.  It crept quietly higher from there until the COMEX open in New York — and JPMorgan et al. really went to work.  Like platinum, palladium’s low was also set at 3 p.m. EST in the very thinly-traded after-hours market.  It ticked a few dollars higher from that juncture until trading ended at 5:00 p.m. in New York.  Palladium was closed at $1,686 spot, down 28 dollars on the day — and 63 bucks off its Kitco-recorded high tick of the day.



The dollar index closed very late on Thursday afternoon at 98.16 — and then opened down 1 basis point once trading commenced around 7:45 p.m. EST on Thursday evening, which was 8:45 a.m. China Standard Time on their Friday morning.  It crept a bit lower until 1 p.m. CST — and then rallied quietly and unevenly to its 98.23 high tick, which came at 9:18 a.m. in London.  It was all down hill from there — and the 97.96 low tick was set around 10:25 a.m. in New York.  Then, after a bit of an up/down move that lasted until around 12:40 p.m. EST, the index traded flat into the 5:30 p.m. close.  The dollar index finished the Friday session at 98.00…down 16 basis points from its close on Thursday.


That rather impressive decline in the dollar index from its high in morning trading in London — and its low in morning trading in New York, certainly wasn’t allowed to be reflected in silver and gold prices.


Here’s the DXY chart, courtesy of Bloombergas usual.  Click to enlarge.



And here’s the 5-year U.S. dollar index chart, courtesy of the good folks over at the Internet site.  The delta between its close…97.87…and the close on the DXY chart above, was 13 basis points on Friday.  Click to enlarge as well.



The gold shares gapped down a tad at the 9:30 a.m. open in New York on Friday morning — and then chopped quietly higher and back into positive territory by a bit until ‘da boyz’ capped the gold price at the 11 a.m. EST London close.  It was quietly and unevenly downhill from there — and the HUI closed lower by 1.02 percent.



It was the same price pattern in the silver equities, at least up until silver’s price was capped at the London close at 11 a.m. EST.  They sold off a bit from there until noon — and then rallied a bit until a few minutes before the 1:30 p.m. EST COMEX close.  They headed lower from there — and Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down 0.52 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.



The three usual laggards in the Silver 7 Index…Peñoles, Buenaventura and Hecla…turned in mixed results yesterday.  Peñoles closed higher by 0.56 percent…Buenaventura was down 1.34 percent — and Hecla closed lower by 0.42 percent.  First Majestic Silver was down 1.49 percent.



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.
Here’s the weekly chart — and it’s a lot happier looking this week than it was a week ago.  The only red on the chart is palladium — and that’s because of the beating ‘da boyz’ laid on it on Friday.  Click to enlarge.



Here’s the month-to-date chart.  Here’s where the outperformance of the silver equities stands out in all its stark glory.  I’ve been talking about this all week — and here’s the visible proof of that…the only green bar on the chart.  And what makes it even more incredible is how badly the underlying precious metal is performing.  I know I’ve spoken about it a fair amount, but it’s a big smack across the side of the head when you see it in graph form.  This is unprecedented — and you have to ask yourself why this so.  I know I am.  Click to enlarge.



Here’s the year-to-date chart.  It’s still all green across the board, of course — and the most notable feature is that the silver equities are now outperforming their golden brethren…compared to the performance of their underlying precious metal price increases — and that’s all because of what has happened during the last two weeks — and the proof of that is in the weekly and month-to-date charts above.  They would be doing even better than they are if it weren’t for the three perennial laggards…Peñoles, Buenaventura and Hecla.



The current round of the ‘wash, rinse, spin’ cycle by the Big 7/8 commercial traders ended on Tuesday — and there’s no way of knowing if this is the end or not.  It’s very possible that they may be resting before starting the next leg down…which means there’s more price pain to come.  You’ll find out more about that when you read my commentary on Friday’s COT Report further down.



The CME Daily Delivery Report showed that 13 gold and 6 silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday.


In gold, the sole short/issuer was Advantage — and the four long/stoppers were JPMorgan, Advantage, ADM — and Morgan Stanley…with 4, 4, 3 and 2 contracts.  All contracts, both issued and stopped, involved their respective client accounts.


In silver, the sole short/issuer was ADM.  They also stopped 5 contracts — and Advantage picked up the other one.


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


So far in November, there have been 1,562 gold contracts issued/reissued and stopped — and that number in silver is 532 contracts.


The CME Preliminary Report for the Friday trading session showed that gold open interest in November fell by 31 contracts, leaving 60 still open, minus the 13 mentioned a few paragraphs ago.  Thursday’s Daily Delivery Report showed that 44 gold contracts were actually posted for delivery on Monday, so that means that 44-31=13 more gold contracts just got added to the November delivery month.  Silver o.i. in November declined by 3 contracts, leaving 6 still around…minus the 6 mentioned in the Daily Delivery Report a few paragraphs ago.  Thursday’s Daily Delivery Report showed that 9 silver contracts were posted for delivery on Monday, so that means that 9-3=6 more silver contracts were added to November deliveries.



There were no reported changes in GLD on Friday, but an authorized participant removed 1,074,725 troy ounces of silver from SLV.


In other gold and silver ETFs on Planet Earth on Friday, there was an eye-watering amount of gold added to the UBS gold ETF on Friday [Ticker: PTUSA]…3,582,529 troy ounces/111.4 metric tonnes worth — and you’ll excuse me if I don’t believe it.  Nick Laird has some comments on this in the next paragraph…but here’s the gold and silver data from his website as it appears…net of what happened in COMEX warehouse stocks and GLD & SLV.  There was a net 3,604,493 troy ounces of gold added — and in silver there was a net 275,399 troy ounces of silver added as well.


Here’s what Nick had to say in his covering e-mail about this gold deposit at UBS…”Note the massive jump in gold. The week’s data would have been down 400,000 troy ounces, but I included UBS’s latest update.  Last week they looked like a data error — and I left the increase out.  But this week it reads true — and I have included it.  They made a massive purchase of approx 3.6m/oz.  Perhaps it is a Fat Freddy Typo.”


A purchase of that amount of gold by one entity would have blow the market sky high, so until there’s some sort of public statement on this directly from UBS, I’m not going to comment further.  But I’ll certainly be keeping in touch with Nick on this issue.



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


Month-to-date the mint has sold only 7,500 troy ounces of gold eagles — 2,500 one-ounce 24K gold buffaloes — and 230,000 silver eagles.


It’s mid-November already — and there’s still no Q3 report from the Royal Canadian Mint.


There was the tiniest possible amount of gold movement over at the COMEX-approved depositories on the U.S. east coast on Thursday.  Nothing was reported received — and there was only 32.151 troy ounces/1 kilobar [SGE kilobar weight] shipped out of Brink’s, Inc.  For obvious reasons I won’t bother linking this amount.


It was much busier in silver, as 1,699,903 troy ounces was received — and 602,361 troy ounces was shipped out.  All of this in/out activity happened over at CNT.  There was also a paper transfer of 24,535 troy ounces from the Eligible category — and into Registered over at Delaware.  I suspect that this amount is destined for delivery in November. The link to all this is here.


There was a tiny bit of activity over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday.  Nothing was reported received — and 31 were shipped out.  This happened over at Brink’s, Inc. — and I won’t bother linking this amount, either.


Obverse: Double-headed eagle with nimbus and crown
Reverse: Gate house in inscription


Hamburg, City, Reichsthaler 1582, DECRET
Origin:  Roman German Empire     Material:  Silver     Full Weight: 28.60 grams



The Commitment of Traders Report, for positions held at the close of COMEX trading on Tuesday, November 12, showed improvements in the commercial net short positions in both gold and silver…but weren’t anywhere near as much as either Ted or I were expecting in either precious metal.  And unless revised next week, we have to assume these numbers are correct.


In silver, the Commercial net short position declined by only 13,090 contracts, or 65.5 million troy ounces.  I was expecting a change of at least double that amount.


They arrived at that number by adding 5,618 long contracts — and they also reduced their short position by 7,472 contracts.  It’s the sum of those two numbers that represents their change for the reporting week.


Under the hood in the Disaggregated COT Report, the Managed Money traders made up for only a portion of that amount.  The reduced their long position by 6,020 contracts — and they added 3,541 short contracts — and it’s the sum of those two numbers…9,561 contracts…that represents their change for the reporting week.


The difference between that number and the Commercial net short position…13,090 minus 9,561 equals 3,529 contracts.  That difference was made up, as it must, by the traders in the other two categories, as the ‘Other Reportables’ decreased their net long position by 1,072 contracts — and the ‘Nonreportable’/small trader category reduced their net  long position by 2,457 contracts.  The sum of those two numbers is 3,529 contracts…which it must be.


So why didn’t the Managed Money traders sell in droves like they normally do?  Ted entertained the idea that maybe some of the traders in that category have wised up to the fact that they are the patsies in this price management scheme — and decided to sit tight.  Whatever the reason, they just didn’t sell in a blind panic like they normally would have.  As a result the Commercial traders weren’t able to cover much of their outstanding short position.


The Commercial net short position is now down to 309.5 million troy ounces, which is far from a bullish number.  This leaves open the possibility that more price pain lies ahead.  But as Ted pointed out on the phone yesterday, that’s only one of the possible outcomes.


But what the COT did show — and in spades, was that JPMorgan’s double cross of the other Commercial traders is still very much alive.  He estimates that JPMorgan’s short position is now down to the 5-10,000 contract range, which is down from the 20,000 contracts that Ted said that they were short in the October 25 COT Report.  He wasn’t able to calculate it for the last two weeks because of the big reporting error in the ‘Nonreportable’/small trader category that caused big distortions in those two COT Reports.  It’s only with this report, which appears to be correct, that he was able to compute it once again — and it’s fallen by at least half, if not more, since the end of October.  Once he has time to ‘sleep on it’…he may come up with a somewhat more accurate number in his weekly review later today.


But whatever number he comes up with, it’s obvious that JPMorgan is “tightening the noose” on the other Commercial traders.


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



It’s impossible to handicap where we go from here from a price perspective.   Could the Big 8 traders continue with engineered price decline that began early last week?  Sure.  However, the “can they, or will they” question is back on the table.



In gold, the commercial net short position declined by only 15,670 contracts, or 1,567,000 troy ounces ounces of paper gold.  Ted was expecting/hoping for a number about four times that size, if not a bit more.


[Considering how far the gold price was engineered lower during the last reporting week, this decline wasn’t even as large as the increase posted in the error-filled COT reports over the prior two weeks, which is amazing in and of itself.]


They arrived at the above said number by increasing their long position by 28,379 contracts, but they also added a surprising 12,709 short 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.  They reduced their long position by 23,735 contracts and, for whatever reason, also reduced their short position by 1,929 contracts — and it’s the difference between those two numbers…21,806 contracts…that represents their change for the reporting week.


The difference between that number — and the commercial net short position…21,806 minus 15,670 equals 6,136 contracts.


That difference, as it must be, was made up by the traders in the other two categories…however both went about it in radially different ways.  The ‘Other Reportables’ increased their net long position by a healthy 9,044 contracts, while the ‘Nonreportable’/small traders reduced their net long position by 2,908 contracts.  The difference between those two numbers…9,044 minus 2,908 equals those 6,136 contracts mentioned in the previous paragraph.


The commercial net short position in gold sits at a nosebleed 30.15 million troy ounces…a still wildly bearish number.  But, like in silver, it remains to be seen if we get the universally-expected price smash to the downside to correct this situation.


Like in silver, Ted’s double cross premise by JPMorgan of the other commercial traders is very much alive and going strong.  In the October 25 COT Report, the last accurate one we’ve had, Ted estimated JPMorgan’s short position in gold in the 45-50,000 contract range.  Now he says its down to 25-30,000 contracts.  That’s his back-of-the-envelope number on the phone yesterday — and he may refine it in his weekly review this afternoon once he’s really had a chance to drill down into the numbers.


Here’s Nick’s 3-year COT chart for gold, updated with the latest COT data — and you can tell, it has barely made a scratch in the over-the-moon bearish COMEX market structure.  Click to enlarge.



Where we go from here from a price perspective in gold is very much up in the air.  But looking at it through the usual conventional glasses, it looks ominous.  Only time will tell if it turns out that same old way or not.



In the other metals, the Manged Money traders in palladium decreased their net long position by by 633 COMEX contracts — and are still net long the palladium market by 12,928 contracts…50 percent of the total open interest.  Total open interest in palladium is 25,445 COMEX contracts…so you can see that it’s a very tiny and illiquid market.  And as you already know, it doesn’t take more than a handful of contracts to move the price by a significant amount.  In platinum, the Managed Money traders decreased their net long position by a hefty 5,719 contracts.  The Managed Money traders are still net long the platinum market by 20,787 COMEX contracts…a hair under 23 percent of the total open interest. But the other two categories are mega net long against JPMorgan et al. as well.  In copper, the Managed Money traders decreased their net short position in that metal by a further 3,657 COMEX contracts during the reporting week — and are net short copper by 23,125 contracts. That’s just under 10 percent of total open interest.



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 140 days of world silver production…unchanged from last week’s COT Report – and the ‘5 through 8’ large traders are short an additional 76 days of world silver production…up 5 days from last week’s COT Report – for a total of 216 days that the Big 8 are short, which is seven months of world silver production, or about 504 million troy ounces of paper silver held short by the Big 8.  [In the prior reporting week, the Big 8 were short 211 days of world silver production.]


In the COT Report above, the Commercial net short position in silver was reported as 309 million troy ounces.  As mentioned in the previous paragraph, the short position of the Big 8 traders is 504 million troy ounces.  The short position of the Big 8 traders is larger than the total Commercial net short position by around 504-309=195 million troy ounces.


The reason for the difference in those numbers…as it always is…is that Ted’s raptors, the 36-odd small commercial traders other than the Big 8, are net long that amount.  Another way of stating this is that if you removed the Big 8 commercial traders from that category, the remaining traders in the commercial category are net long the COMEX silver market.  It’s the Big 8 against everyone else…a situation that has existed for at least a decade in all four precious metals.


As I mentioned in my COT commentary in silver above, Ted figures that JPMorgan is short around 5-10,000 COMEX silver contracts — and I’ll use the conservative number of 10,000 contracts.


10,000 COMEX contracts…is 50 million troy ounces of paper silver, which works out to around 21 days of world silver production the JPMorgan is short.


Based on this number, it appears that JPMorgan’s short position puts them at the very bottom of the Big 4 category, or at the very top of the ‘5 through 8’ large trader category…[see the next paragraph]…leaving Citigroup as the No. 1 silver short on Planet Earth.  Of course, if the number is closer to the 5,000 contract mark, that takes JPMorgan right out of the Big 8 traders category entirely.


The Big 4 traders in silver are short 140 days of world silver production in total. That’s 35 days of world silver production each, on average.  The four traders in the ‘5 through 8’ category are short around 76 days of world silver production in total, which is 19 days of world silver production each, on average.


The Big 8 commercial traders are short 45.4 percent of the entire open interest in silver in the COMEX futures market, which is up a bit from the 43.3 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 38.6 percent of the total COMEX open interest that the Big 8 are short, down a bit from the 40.8 percent they were short in last week’s report — and a bit under 45 percent, once the market-neutral spread trades are subtracted out.


In gold, the Big 4 are short 60 days of world gold production, down 3 days from last week’s COT Report.  The ‘5 through 8’ are short another 35 days of world production, unchanged from last week’s report…for a total of 95 days of world gold production held short by the Big 8…down 3 days from last week’s COT Report.  Based on these numbers, the Big 4 in gold hold about 63 percent of the total short position held by the Big 8…down 1 percentage point from last week’s report.


The “concentrated short position within a concentrated short position” in silver, platinum and palladium held by the Big 4 commercial traders are about 64, 73 and 76 percent respectively of the short positions held by the Big 8…the red and green bars on the above chart.  Silver is down 2 percentage points from last week’s COT Report…platinum is up 1 percentage point — and palladium is down 2 percentage points.


I have an average number of stories/articles for you today — and several of them are ones that I’ve been saving for my Saturday column for the usual length and/or content reasons…including a Batchelor/Cohen interview.


Q4 GDP Crashes: U.S. Economy Growing at Slowest Pace in 4 Years

Following a burst of poor U.S. economic data, including today’s disappointing retail sales and dismal industrial production, the U.S. economic surprise index has slipped back into the negative after peaking in late September.  Click to enlarge.



This slowdown in high frequency economic indicators has not been lost on strategists, and in just the past week, tracking estimates for Q4 GDP have tumbled by over 0.4% in just the past week, with both the Atlanta Fed and New York Fed now expecting a sub-0.40% GDP print in the current quarter.


U.S. GDP in Q4 is set to print at the lowest level in 4 years at around 0.35%, and would be only the fifth time in 42 quarter since the Q3 2009 exit from recession when U.S. growth has risen by less than 0.5% Q/Q.


We only bring this up to point out that the S&P500, which is printing at all time highs well above 3,100, is clearly no longer reliant on the U.S. economic outlook, even if U.S. GDP is now expected to print dangerously close to contraction due to a sharp slowdown in household spending, capex, residential investment and inventories.


So what does matter, if it’s not the market, or earnings which as we pointed out previously are not only negative for Q3 but also just turned negative for the 4th quarter according to consensus sellside estimates, suggesting a technical earnings recession awaits?


The answer: the Fed’s balance sheet, which has increased by $288 billion in the past two months, a faster rate of increase than that observed during QE3.


Just remember, it’s not QE4… it’s NOT QE, or wait, it is QE but if you call it that, confidence that the economy is recovering may disappear (especially when GDP is set to grow at 0.4%), and investors may ask what the true price of equities would be if it wasn’t for, what else, the Federal Reserve.


This 6-chart Zero Hedge news item was posted on their Internet site at 2:10 p.m. EST on Friday afternoon — and another link to it is hereGregory Mannarino‘s post market close rant for Friday is linked here.


Recession Warning: Freight Volumes Negative YoY for 11th Straight Month

The Cass Freight Index once again warns again of economic contraction.


Donald Broughton, founder of Broughton Capital and author the Cass Freight Index says the index signals contraction, possibly by the end of the year.


That’s just one one month away.


With the -5.9% decline in October, following the string of declines in May through September (ranging from -3.0% to -6.0%), we repeat our message from the previous five months: the shipments index has gone from “warning of a potential slowdown” to “signaling an economic contraction.”


We acknowledge that: all of these negative percentages were against tough comparisons (some extremely tough), and the Cass Shipments Index has gone negative before without being followed by a negative GDP. However, demand is weaker across almost all modes of transportation, both domestically and internationally.


This very long chart-filled commentary by Mish was posted on the Internet site on Thursday sometime — and I plucked it from an article on the Zero Hedge website on Friday morning EST.  Another link to it is here.


Most of the Rich Aren’t Corrupt — Bill Bonner

Impeachment! Trade war! Inequality!


Amid all the noise and distractions, we almost missed the important news: The U.S. is going broke…


WASHINGTON (AP) – The federal government, which ended the 2019 budget year with its largest deficit in seven years, began the new budget year with a deficit in October that was 33.8% bigger than a year ago as spending hit a record.
Over the last 12 months, as a percent of GDP, the U.S. borrowed more than any other major developed nation.


But we’ll come back to this slo-mo financial catastrophe on Monday. Today, let’s finish gawking at the rich…


Bill’s daily commentary appeared on his website very early on Friday morning EST — and another link to it is here.


Jim Grant: The Fed Has Done over $3 Trillion of Repos in Just Two Months

Grant’s Interest Rate Observer founder and editor, Jim Grant, recently spoke with CNBC‘s Rick Santelli about the radical transformation in monetary policy that has occurred in the last two months, which very few people seem to fully appreciate. Namely, the Fed has embarked on one of the most aggressive monetary policy re-accommodation regimes in history. Point-in-fact, Mr. Grant notes that the Fed has done upwards of $3 trillion in repos in barely two months. While it is important to note that most repos expire after just one day and must be redone everyday to maintain the same level of liquidity, $3 trillion, nonetheless, represents a historic liquidity injection. As we noted here, the Fed’s balance sheet is growing at the fastest pace since the depths of the Financial Crisis.


This brief 4:30 minute video clip was, unfortunately, interrupted at the end, but it’s definitely worth watching anyway.  This video, along with a full transcript, was posted on Internet site on Friday sometime — and I thank Brad Robertson for pointing it out.  Another link to it is here.


Fed’s Powell Says Forensic Work Ongoing on Liquidity Crisis; This Chart Shows Why He’s Worried


Yesterday, for the second day in a row, the Chairman of the Federal Reserve, Jerome Powell, gave testimony and took questions before a Congressional Committee. On Wednesday it was the Joint Economic Committee; yesterday it was the House Budget Committee. On both days, only one member of the Committee dared to ask a question about the hundreds of billions of dollars the Fed is hurling at Wall Street each week in repo loans.


The crisis in the repo loan market, where financial institutions make overnight loans to each other, began on September 17 when the interest rate spiked from the typical range of 2 percent to 10 percent. For the first time since the financial crisis, the Federal Reserve had to step in with lots of cash to ease the liquidity stresses. The Fed has continued to offer that cash every business day since that time and is now supplementing its overnight loans, which can run as high as $120 billion per day, with $35 billion in 14-day term loans twice a week. In total, the Fed is offering $670 billion each week in revolving loans to securities firms it will not name for a crisis it cannot define.


It’s seems to be only Republicans from Texas who have the guts to confront the issue when Powell appears before Congress. On Wednesday it was Congressman Kenny Marchant who questioned Powell on the issue; yesterday it was Congressman Bill Flores, another Republican from Texas, who raised the subject. Here’s how the exchange went yesterday:


This commentary is worth your while…if you have the interest that is.  It put in an appearance on the Internet site on Friday sometime — and I plucked it from a GATA dispatch.  Another link to it is here.


Bolivia’s new government expels Cuban officials, recalls its diplomatic staff from Venezuela

The Washington-recognized interim government which just ascended to power via U.S.-backed military coup in Bolivia is already shifting the nation’s foreign policy into alignment with the U.S.-centralized empire, severing important ties with two governments which have resisted absorption into the imperial blob.


Bolivia’s caretaker government isn’t wasting any time overhauling its foreign policy, announcing Friday that it will expel hundreds of Cuban officials and break ties with longtime ally Venezuela,” The Miami Herald reports. “In a series of statements, Bolivia’s new foreign minister, Karen Longaric, told local media that about 725 Cubans – including doctors and medical staff – would begin leaving Bolivia on Friday.”


In that same interview she also said she’d be recalling Bolivia’s diplomatic staff from Venezuela,” Miami Herald adds. “Later, asked if she would maintain ties with Venezuelan leader Nicolás Maduro, she said, ‘Of course we’ll break diplomatic relations with the Maduro government.’


Of course they will.


This news comes as no surprise to anyone who’s been paying attention. U.S. foreign policy is essentially an endless war on disobedience, in which governments that refuse to bow to U.S. interests are toppled by any means necessary and replaced by governments who will.


The Empire marches on.  It appeared on the Internet site late on Friday night — and I thank Roy Stephens for pointing it out.  Another link to it is here.


Why is Ukraine corrupt? “Forget it Jake. It’s Chinatown” — John Batchelor Interviews Stephen F. Cohen

Part 1:   This week John Batchelor and Stephen F. Cohen discuss the Ukraine situation with a view to explain what the United States considers as a strategic gain to bring Ukraine into NATO, and how Ukraine’s history of political and economic corruption has contributed to this relationship with the United States. John Batchelor in his introduction only makes passing reference to Ukrainegate and Adam Schiff’s effort to use this domestically in the United States against Trump. The real reason, the professor explains, is strategic, and it is the Washington/European “NATO faction” that supports this effort.  Putin came to power and vastly reduced the control of Russia’s oligarchs in Russia and built an entirely new Russia. This never happened in Ukraine and the oligarchs continued to control the country. But many Russians do consider Ukrainians as Russians (by family connection) so do many Ukrainians.


The Chinatown quote refers to the fact that corruption remains in Ukraine – as it does in the American movie, Chinatown. And for Stephen Cohen the question is why is NATO in Ukraine at all? The answer is a continuance of President Obama’s policy to wield NATO against Russia. But Trump and past U.S. administrations do not understand Ukrainian history. The president of Ukraine, Zelensky, was elected to bring peace and end corruption, but Zelensky is not a Putin. Cohen concludes that presently there is a great risk of the U.S. starting a war with Russia, and it is a failure of Washington that it misses the hugely obvious risks. Washington also misses the fact that Ukrainians may not welcome NATO membership. This reality, one could conclude, was confirmed by Zelensky’s 70% support election win.


Part 2:  The second of the podcasts discusses what Washington considers the strategic importance of Ukraine. Stephen Cohen compares the real strategic importance of Canada and Mexico to the United States with Ukraine and Russia, and questions why Americans cannot see how a Russian presence in Canada or Mexico would not be the same for Russians seeing U.S. and NATO forces in Ukraine? “Why the lack of wisdom?” Batchelor also questions: “Why the military aid and why the belief in Washington that embraces  the expectation that Russia will invade Kiev’s Ukraine?” And “why did Obama refuse (under considerable pressure) to send military aid?”  Cohen adds that this aid was again promised by Trump even when it was Zelensky’s position to avoid war with Russia and there were already copious arms already there. The dogma in the U.S. is about restraining Russian aggression (Crimea and support for the Donbass)- all of which, says Cohen, “undermines the status quo“. Professor Cohen’s conclusion is that this new $400 million of arms for Ukraine is just a continuation of the NATO faction to wrest Ukraine away from Russia and under Washington’s control and “it is folly“. These machinations are about Russia not Ukraine, and the people behind these policies have no idea of what they are doing.


In the final segment John Batchelor asks what Zelensky wants for Ukraine – given his election victory? The professor’s answer is that this is unanswerable in such a divided country. Much of the east is Russian oriented, and the west area is much less so. Under the Minsk Accords, for example, there would be local elections in the Donbass and these provinces would be allowed to rejoin Ukraine but with local autonomy. This was Zelensky’s main platform for peace. But the political problem includes that  Putin still refuses to take the Donbass into Russia. This is not satisfactory for many Russians and many in the Donbass. (And ignored by Washington. L.) And in conclusion Stephen Cohen reaffirms that NATO taking in Ukraine would violate a “Putin red line”.




It was also stated in the podcast that Ukraine and the presence of NATO there was one of Putin’s “red lines”. It would seem that the “red line”concept may need more refinement, that perhaps it is not the presence of American conventional arms and limited personnel in Ukraine that is critical for Putin, or not just Ukraine in NATO that is critical. The country as a “colony” should be concern enough and likely is for both Washington and the Kremlin. At present NATO forces and a minor sale of arms are not a strategic threat to Russia, and that Ukraine as an “associate member” of NATO is not very meaningful. This may change dramatically should Trump or any president decide to put short ranged nuclear weapons in Ukraine and along Russia’s southern border and Crimea, and start significant arms and troop movements to that country. The situation is largely a stalemate at present, and probably largely due to Trump’s lack of support, or dare I say opposition?


Also worrisome it is clear that the belligerent foreign policy of Washington (and Trump) is visibly in escalation with a vastly upgraded effort against sovereign states, both against both friends and hostiles around the world. This is very evident in its efforts against Venezuela, the blatant occupation of Syrian oil fields; near war conditions with Iran, and regime changes accomplished in Brazil, Bolivia, Ecuador and ongoing efforts in Hong Kong and possibly even Chile. As the Empire weakens and Washington becomes increasingly unstable, seemingly the bellicose foreign policy abuses expand to compensate. Ukraine remains a major flash point.


This 2-part audio interview…with each being about 20 minutes long…showed up on the Internet site on Tuesday — and for obvious reasons had to wait for today’s column.  I thank Larry Galearis for his always excellent executive summary, followed by his own comments — and it’s certainly worth your time, if you have it — and the interest as well.  The link to Part 1 is in the headline — and here.  The link to Part 2 is here.


The Independent Ukraine’s painful journey through the five stages of grief — The Saker

In my July 25th article “Zelenskii’s dilemma” I pointed out the fundamental asymmetry of the Ukrainian power configuration following Zelenskii’s crushing victory over Poroshenko: while a vast majority of the Ukrainian people clearly voted to stop the war and restore some kind of peace to the Ukraine, the real levers of power in the post-Maidan Banderastan are all held by all sorts of very powerful, if also small, minority groups including:
  1. The various “oligarchs” (Kolomoiskii, Akhmetov, etc.) and/or mobsters
  2. Arsen Avakov’s internal security forces including some “legalized” Nazi death squads
  3. The various non-official Nazi deathsquads (Parubii)
  4. The various western intelligence agencies who run various groups inside the Ukraine
  5. The various western financial/political sponsors who run various groups inside the Ukraine
  6. The so-called “Sorosites” (соросята) i.e. Soros and Soros-like sponsored political figures
  7. The many folks who want to milk the Ukraine down to the last drop of Ukrainian blood and then run
These various groups all acted in unison, at least originally, during and after the Euromaidan.  This has now dramatically changed and these groups are now all fighting each other.  This is what always happens when things begin to turn south and the remaining loot shrinks with every passing day.


Whether Zelenskii ever had a chance to use the strong mandate he received from the people to take the real power back from these groups or not is now a moot point: It did not happen and the first weeks of Zelenskii’s presidency clearly showed that Zelenskii was, indeed, in “free fall”: instead of becoming a “Ukrainian Putin” Zelenskii became a “Ukrainian Trump” – a weak and, frankly, clueless leader, completely outside his normal element, whose only “policy” towards all the various extremist minorities was to try to appease them, then appease them some more, and then even more than that.  As a result, a lot of Ukrainians are already speaking about “Ze” being little more than a “Poroshenko 2.0”.  More importantly, pretty much everybody is frustrated and even angry at Zelenskii whose popularity is steadily declining.


This very long and involved article, which I must admit that I haven’t had time to read, appeared on Internet site on Thursday — and obviously had to wait for today’s column.  I thank Larry Galearis for pointing it out — and another link to it is here.


Russia says BRICS nations favour idea of common payment system

Brazil, Russia, India, China and South Africa, a group of major emerging economies known as BRICS, back the idea of developing a common payment system, a Russian official said on Thursday.


Russia and its BRICS peers have been looking for ways to decrease their dependence on the U.S. dollar and have advocated using their national currencies in mutual trade.


Kirill Dmitriev, the head of the Russian Direct Investment Fund (RDIF), said “increasing non-market risks of the global payment infrastructure” was behind the plan to integrate the group’s national payment systems.


An efficient BRICS payment system can encourage payments in national currencies and ensure sustainable payments and investments among our countries, which make up over 20% of the global inflow of foreign direct investment,” Dmitriev, a member of the BRICS Business Council, told reporters.


Dmitriev said the five BRICS nations had also discussed creating a common cryptocurrency for mutual payments as the grouping was reducing the share of payments in the U.S. dollar.
The share of the dollar in Russian foreign trade payments has fallen to 50% from 92% over the past few years, while the rouble’s share has risen to 14% from 3%, he said.


This Reuters story, filed from Moscow, was posted on their Internet site in the wee hours of Thursday morning EST — and I found it on the Internet site.  Another link to it is here.


Doug Noland: China Update

As I have written in the past, trade war escalation is a potential catalyst for near-term Chinese financial and economic instability. Yet, from the perspective of historic Credit and economic Bubbles, a trade truce would have only marginal impact on underlying fundamentals. I hold the view Chinese Credit is heading toward an inevitable crisis of confidence – with or without a trade pact. China’s Bubbles have inflated dangerously since 2016’s brush with Crisis Dynamics.
In the near-term, China is facing a crisis of confidence in its small bank sector, rapidly rising corporate defaults and an increasingly fragile mortgage finance Bubble. Meanwhile, odds are rising of a run on the Hong Kong dollar with an attendant crisis of confidence in Hong Kong as an international financial hub. Recalling the nineties, the breaking of currency pegs can be exceedingly disruptive.


China remains the marginal source of both global finance and economic growth. Despite all the hoopla of record high U.S. stock prices, the risk of global instability is rising. Again, I don’t want to read too much into October’s abrupt lending slowdown. Yet is does have the potential to be the beginning of something important. China – along with the world more generally – has never been as vulnerable to a sudden Credit slowdown. Bubbles don’t function well in reverse.


November 15 – Reuters (Marc Jones): “Global debt is on course to end 2019 at a record high of more than $255 trillion, the Institute of International Finance estimated on Friday – nearly $32,500 for each of the 7.7 billion people on planet. The amount, which is also more than three times the world’s annual economic output, has been driven by a $7.5 trillion surge in the first half of the year that shows no signs of slowing. Around 60% of that jump came from the United States and China. Government debt alone is set to top $70 trillion this year, as will overall debt (government, corporate and financial sector) of emerging-market countries. ‘With few signs of slowdown in the pace of debt accumulation, we estimate that global debt will surpass $255 trillion this year,’ the IIF said…


Curious, isn’t it, that the world’s two great Credit engines are currently both requiring extraordinary central bank liquidity injections…


Doug’s weekly commentary put in an appearance on his website very early on Saturday morning EDT — and another link to it is here.


Asia Gold-Indian sellers charge first premiums in 5-1/2 months as demand firms

Physical gold demand climbed in India this week, with sellers charging premiums for the first time in five-and-a-half months as jewellers took advantage of a price dip and lower imports squeezed supply.


Dealers charged a premium of up to $1.50 an ounce over official domestic prices this week, compared with discounts of up to $2 an ounce last week. The domestic price includes a 12.5% import tax and 3% sales tax.


Anticipating a correction in prices, jewellers were not buying for the last few months. Now they have to buy (to restock) after Diwali sales,” said a Mumbai-based dealer with a bullion-importing bank.


India’s gold imports in October fell a third from a year earlier, dropping a fourth straight month.


Demand in Hong Kong is steady as spot prices fell, but that is being offset by the protests as people are not shopping – not only jewellery, but anything for that matter,” said Peter Fung, head of dealing at Wing Fung Precious Metals.


This gold-related news item, co-filed from Bengaluru and Mumbai, showed up on the Reuters Internet site at 5:27 a.m. EST on Friday morning — and it’s something that I picked up off the Sharps Pixley website.  Another link to it is here.


We were still on the bench/plateau a couple of kilometers north of Ashcroft on July 14 — and just about to leave, when this CN freight train pulled in.  I didn’t realize it at the time, but it was the same train that I’d photographed about an hour earlier just north of Spences Bridge in the Thompson River canyon — and it had finally made it to Ashcroft. The second shot was just to the left of the first one…showing the same train blasting through the CN siding — and on towards Kamloops.  The last photo was taken from off the bench/plateau — and looking back at it.  That large horse that appeared in a photo in one of my columns earlier this week is the black smudge in the absolute dead center of this shot — and the very steep road up to the bench/plateau…from the intersection of Rattlesnake and Kozy Roads…is in the center/left of the shot.  It’s far steeper than it looks in this photo…about a 15 percent grade.  But we’ve been on worse since.  Click to enlarge.


Powell lecturing Congress on deficits is like a crack cocaine dealer telling his street junkies that they have bad spending habits.” — Robert Herdman…a comment posted on Gregory Mannarino’s video channel on Thursday

Today’s pop ‘blast from the past’ is the last of the 1-hit wonders from the 1970s.  The band was formed by a group of four American expats in Paris in 1970 — and their ‘Greatest Hit’ was released in 1972.  I can’t remember the last time I heard this on the radio.  The link is here.  There’s a surprising number of bass covers to this — and the link to one of them is here.
Today’s classical ‘blast from the past’ is somewhat older, of course — and this Wolfgang Amadeus Mozart double concerto for flute and harp dates from 1778…composed when he was 22 years young.  I’ve never featured it before.  The second movement is the most popular — and I’ve heard it live as a ‘stand alone’ number — including once in rehearsal.
Here’s Zubin Mehta conducting select parts of the Israel Philharmonic Orchestra…with Julia Rovinksy on harp — and Guy Eshed as flutist.  The link is here.

With little volume in either silver or gold yesterday, ‘da boyz’ had no trouble keeping these two metals in line.  It looked like another ‘care and maintenance’ sort of day to me.  Platinum got a little too frisky for them — and they stepped in at the 11 a.m. EST Zurich close — and that was that.  And despite the fact that it wanted to rally, palladium got taken out behind the proverbial wood shed.  Copper closed back above its 50-day moving average by a hair — and WTIC finally managed to break above its 200-day moving average…albeit by only a small amount.
I’m still pondering yesterday’s COT Report — and the surprising and the disappointingly small decreases in the commercial net short position in both.  The fact that JPMorgan’s potential double cross of the other commercial traders brings some comfort, but the huge short positions in gold and silver in the COMEX futures market is the only negative in an otherwise wildly bullish environment. We’re still no further along the road to a resolution of this situation.
However, despite that sword of Damocles, some very real comfort can be taken from the performance of the silver equities during the past couple of weeks.  Despite the engineered price decline in gold and silver, there have been ‘strong hands’ buying up all the silver shares being offered for sale.  There has been in the gold stocks as well, but not nearly as robust during the first four days of the engineered price decline that began back on Tuesday, November 5.  This past week they did better.
Here are the 6-month charts for the Big 6 commodities — and the changes I mentioned above should be noted.  Click to enlarge.
The only thing keeping the equity markets aloft is the rampant injection of money into the U.S. financial system and Wall Street by the Federal Reserve, with the equity markets closing at new record highs virtually every day.
Underneath all that, the real economy in the U.S. continues to sink into the mire.  The only change from this time last week are the signs that this state of affairs is accelerating to the downside.  The rest of the world is slowly sinking as well — and at some point reality with catch up with fantasy on Wall Street, along with the other bourses around the world.  That’s in the future somewhere — and until that event occurs, or is precipitated, it’s “party on, dude like 1929” in the U.S. equity markets.
But in this ‘Everything Bubble’ that exists planet wide, when trouble shows up in some area of the world that no amount of paper will fix…then confidence, already hanging by a thread everywhere you care to look, will go with it.  Then look out below.
I keep harping on this subject every Saturday, but the absolute truth of the matter is that the current economic, financial and monetary system is unfixable — and the world’s central banks know that all too well.  But they’re going to run them into the ground anyway.  As I’ve said before, along with others, it has obviously been a situation of “print…or die” for quite some time now, but with the start of the Fed’s repo program in September, it has now morphed into something far more serious — and most likely terminal.  It’s QE forever — and all they’re doing now is delaying the inevitable.
I don’t even want to think about what happens after that.
And regardless of whether there’s more pain to come in precious metal prices or not, the activity in the precious metal shares, particularly the silver equities, certainly indicates that the insider ‘strong hands’ know that the next rally is going to be one for the record books.
For that reason, I’m still quite comfortable in my position of being “all in”.
I’m done for the day — and the week — and I’ll see you here on Tuesday.

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November 16th, 2019

Posted In: Ed Steer's Gold and Silver Digest

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