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May 7, 2022 | Another Terrific & Bullish COT Report

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

07 May 2022 — Saturday

Yesterday in Gold, Silver, Platinum and Palladium

The gold price was sold quietly lower starting shortly after trading commenced at 6:00 p.m. EDT in New York on Thursday — and the low tick of the day was set around 9:50 a.m. China Standard Time on their Friday morning. Its ensuing rally ended minutes after 11 a.m. CST — and it crawled quietly lower until around 9:20 a.m. in London. It began to rally anew until about ten minutes before the COMEX open — and then really began to sail. That ran into the commercial traders of whatever stripe around 8:40 a.m. EDT — and it was then sold lower for the next hour. The rally from there ran into ‘something’ around 11:30 a.m. in New York — and it was then sold lower until around 4:25 p.m. in after-hours trading. It ticked a bit higher going into the 5:00 p.m. EDT close.
The low and high ticks in gold were reported by the CME Group as $1,865.00 and $1,894.00 in the June contract. The June/August price spread differential in gold at the close yesterday was $7.40…August/October was $7.50 — and October/December was $8.40 an ounce.
Gold was closed in New York on Friday afternoon at $1,883.10 spot, up $6.20 on the day. Net volume was on the quieter side at a bit over 135,000 contracts — and there was a bit under 79,500 contracts worth of roll-over/switch volume out of June and into future months…mostly into August, but with a bit into December and February of 2023 as well.
The price action in silver was identical to gold’s…including all the major price inflection points…but far more subdued overall. Both times it poked its nose above the unchanged mark in COMEX trading in New York, it was quietly sold back below that price mark.
The low and high ticks in silver were recorded as $22.11 and $22.665 in the July contract. The May/July price spread differential in silver at the close yesterday was 4.2 cents…July/September was 9.5 cents — and September/December was 17.3 cents an ounce.
Silver was closed on Friday afternoon in New York at $22.34 spot, down 13 cents from Thursday. Net volume was pretty decent at a bit over 55,000 contracts — and there was a hair over 5,000 contracts worth of roll-over/switch volume out of July and into future months…mostly September, but with a bit into December and March of 2023 as well.
Platinum began its engineered waterfall decline starting about 7:45 a.m. China Standard time on their Friday morning — and lasted for exactly two hours. From that juncture it wandered/chopped quietly sideways to a bit higher until its high tick was set around 10:25 a.m. in New York. >From that point it was sold very quietly lower until trading ended at 5:00 p.m. EDT. Platinum was closed at $956 spot, down 25 dollars on the day.
Palladium met its Waterloo starting at the Zurich open — and it was then sold unevenly lower until the low tick was set around 12:20 p.m. in New York. It jumped higher and back to its trend line about thirty or so minutes later — and didn’t do much after that. Palladium was closed at $1,972 spot, down 147 bucks from Thursday — and a new low for this engineered price move.
Based on the kitco.com spot closing prices in silver and gold posted above, the gold/silver ratio worked out to 84.3 to 1 on Friday…compared to 83.5 to 1 on Thursday.
Here’s Nick’s 1-year Silver Sentiment/Silver 7 Index chart — and I’ll point out that for whatever reason, yesterday’s high tick data point doesn’t appear on it. Click to enlarge.
The dollar index closed very late on Thursday afternoon in New York at 103.75 — and then opened lower by 17 basis points once trading commenced at 7:45 p.m. EDT on Thursday evening, which was 7:45 a.m. China Standard Time on their Friday morning. >From that point it wandered a bit unevenly higher until the high tick of the day was set at the 8:00 a.m. London open. It was then sold quietly lower until 11:50 a.m. BST — and then had a quiet but choppy up/down move that ended at 11:25 a.m. EDT. From that juncture it began to wander/chop quietly higher anew until it almost reached the unchanged mark around 3:25 p.m. in New York. From there it edged a bit lower until trading ended 5:00 p.m. EDT.
The dollar index finished the Friday trading session in New York at 103.66…down 9 basis points from its close on Thursday.
Here’s the DXY chart for Friday, thanks to marketwatch.com as usual. Click to enlarge.
And here’s the 5-year U.S. dollar index chart that shows up in this spot in every Saturday column. The delta between its close…103.69…and the close on the DXY chart above, was about 3 basis points above its indicated spot close on the DXY chart above. Click to enlarge.
As I pointed out in this space last week, this parabolic blow-off is the result of the yen and euro sinking into the abyss — and not because of any positive attributes of the U.S. dollar. The DXY is only rising by default…the cleanest dirty shirt in the laundry.
U.S. 10-Year Treasury: 3.1230%…up 0.0570 (+1.86%)…as of 02:59 p.m. EDT
Here’s the 5-year 10-year U.S. Treasury chart from the yahoo.com Internet site — and it puts the yield curve into a somewhat longer-term perspective. Click to enlarge.
With U.S. interest rates now 50 basis points higher, it remains to be seen just how soon and how fast the Fed starts rolling maturing treasuries off their books. They’ve already stated how they’re going to proceed going forward. But will they actually do what they say when the time comes?
The gold shares were sold a bit lower once trading commenced at 9:30 a.m. in New York on Friday morning — and from there they rallied back into positive territory by a bit, by 11 a.m. EDT. They then chopped sideways for two hours, but were then sold lower until around 3:35 p.m. A little bottom fishing appeared at that juncture, but the HUI still closed lower by 0.92 percent.
Computed manually, Nick Laird’s Intraday Silver Sentiment/Silver 7 Index closed down 1.49 percent. Peñoles didn’t trade yesterday, so I calculated the index based on the six silver stocks that did.
And here’s Nick’s 3-year Silver Sentiment/Silver 7 Index chart that appears in this spot every Saturday. Click to enlarge.
Coeur, SSR Mining and Wheaton Precious Metals closed down with small fractional losses, but the big pooch for the second day in a row was First Majestic Silver, as it closed down another 4.05 percent.
First Majestic has seen almost 12 percent of its market capitalization disappear in the last two trading days.
The latest silver eye candy from the reddit.com/Wallstreetsilver crowd is linked here.
Here are two of the usual three charts that show up in every weekend missive. They show the changes in gold, silver, platinum and palladium 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, which doubles as the month-to-date chart for this week only — and with the exception of platinum, it’s a sea of red for the third week in a row, courtesy of the commercial traders of whatever stripe. Their axe fell the heaviest on palladium — and that was mostly because of its engineered price decline yesterday. Click to enlarge.
Here’s the year-to-date chart — and it’s still a mixed bag. Palladium is still up, but not by much. Gold — and its associated equities are outperforming, obviously, but I’m sure that’s entirely due to the fact that the ‘da boyz’ haven’t been able to break gold below its 200-day moving average. Of course the silver stocks continue with their underperformers vs. their underlying precious metal so far this year. But if you want to see what a bottom looks like, those ugly red bars for both things silver-related, represents just that. Click to enlarge.
Of course what happens going forward continues to be in the hands of the commercial traders of whatever stripe…as they alone as you’ve already noted above, either directly or indirectly, control the prices of everything precious metals-related…until they don’t.
The CME Daily Delivery Report for Day 7 of May deliveries showed that 3 gold and zero silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday. As I mentioned a day or two ago, it’s been a really weird delivery month so far.
In gold, the sole short/issuer was Advantage — and the lone long/stopper was JPMorgan…with both transactions involving their respective client accounts.
In platinum, there were 241 contracts issued and stopped — and all were issued by Australia’s Macquarie Futures out of its client account.
The link to yesterday’s Issuers and Stoppers Report is here.
Month-to-date for May deliveries shows that 1,912 gold contracts have been issued/reissued and stopped — and in silver that number is 3,620 COMEX contracts. In platinum, it’s 539 contracts — and in palladium, 3 contracts.
Of those 3,620 silver contracts issued and stopped so far in May, JPMorgan has picked up 91 percent of them for their client account.
The CME Preliminary Report for the Friday trading session showed that gold open interest in May fell by 220 COMEX contracts, leaving 736 still around, minus the 3 contracts mentioned a few paragraphs ago. Thursday’s Daily Delivery Report showed that 425 gold contracts were actually posted for delivery on Monday, so that means that 425-220=205 more gold contracts just got added to May deliveries. Silver o.i. in May dropped by 876 COMEX contracts, leaving 2,006 contracts still open. Thursday’s Daily Delivery Report showed that 782 contracts were actually posted for delivery on Monday, so that means that 876-782=94 silver contracts vanished from the May delivery month.
Total gold open interest at the close on Friday cratered by 18,789 COMEX contracts — and total silver o.i. fell by only 397 COMEX contracts…with both numbers subject to some revision by the time the final figures are posted on the CME’s website later on Monday morning CDT.
There was another withdrawal from GLD yesterday, as an authorized participant removed 95,882 troy ounces of gold — and there were no reported changes in SLV.
In other gold and silver ETFs and mutual funds on Planet Earth on Friday, net of any changes in COMEX, GLD & SLV inventories, there was a net 157,590 troy ounces of gold removed — and the absolute lion’s share of that was the 126,021 troy ounces that was taken out of UBS/PTUSA. But a net 386,904 troy ounces of silver was added.
The U.S. Mint finally had a sales report for May. They sold 42,500 troy ounces of gold eagles — 16,500 one-ounce 24K gold buffaloes — but only 425,000 silver eagles.
Finally — and at last, the Royal Canadian Mint has seen fit to post its 2021 Annual Report on its website.
For the 2021 calendar year, the mint sold/produced 1,470,500 troy ounces of gold maple leafs…up 49.6 percent from 982,800 they sold/produced in 2020. They also sold 37,698,500 silver maple leafs, up 27.7 percent from the 29,502,700 they sold in 2020.
In their rather sparse notes that followed, they had this to say…”Net revenue from the Bullion Products and Services business increased 42% to $3.2 billion in 2021 from $2.3 billion in 2020. The increase in revenue was mainly attributable to an increase in global market demand and a planned pivot to focus on gold resulting in a 50% increase in gold bullion product volumes and a 28% increase in silver bullion product volumes, as well as increased precious metal market prices and a return to full production capacity compared to modified production capacity in the prior year due to the pandemic.”
The link to their 2021 Annual Report is here — and the above info is posted on page 32.
And just as a point of interest — and based upon their above-reported sales, the gold/silver sales ratio at the RCM worked out to just under 26 to 1 during 2021.
It was a very quiet day in gold over at the COMEX-approved depositories on the U.S. east coast on Thursday. Nothing was reported received — and only 2,103 troy ounces was shipped out.
In the ‘out’ category, the largest amount was the 1,125.285 troy ounces/35 kilobars that departed the International Depository Services of Delaware — and the remaining 978 troy ounces left HSBC USA.
There was a tiny amount of paper activity, as 5,797 troy ounces was transferred — and all of it was from the Registered category and back into Eligible…5,507 troy ounces at Manfra, Tordella & Brookes, Inc. — and the remaining 289.359 troy ounces/9 kilobars made that same trip over at Brink’s, Inc.
The link to that, in troy ounces, is here.
The manic in/out activity in silver continues without let-up, as 2,425,689 troy ounces was reported received — and 771,935 troy ounces was shipped out.
The largest ‘in’ amount for the second day in a row were the three truckloads…1,772,082 troy ounces…that was dropped off at JPMorgan. That makes six truckloads in the last two business days for them. The remaining 429,912 and 223,693 troy ounces, found new homes over at Delaware and Brink’s, Inc. respectively.
The biggest ‘out’ amount was the one truckload…600,063 troy ounces…that left JPMorgan — and next was the 150,673 troy ounces that departed Manfra, Tordella & Brookes, Inc. The remaining 20,247 and 950 troy ounces/one good delivery bar, were shipped out of HSBC USA and Brink’s, Inc. respectively.
There was no paper activity — and the link to Thursday’s COMEX silver action is here.
And there was no in/out activity in the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday.
Here are the usual two 20-year charts that show up in this space on Saturday. They show the total amount of physical gold and silver held in all know depositories, ETFs and mutual funds as of the close of business on Friday.
During the week just past, there was a net 351,000 troy ounces of gold removed — but a net 2,908,000 troy ounces of silver was added. Click to enlarge.
The big drop in gold was mostly withdrawals from GLD during this past week — and the increase in silver was across the board, as a net 800,000 troy ounces was added to SLV during the week, plus their were net increases in the COMEX warehouses… mostly JPMorgan. The other silver ETFs and mutual funds also had net additions during the reporting week as well.
The physical shortage in silver on a both wholesale and retail level continues — and retail silver demand is still very strong as far as I can tell. Delivery times from the various sovereign and private mints is still many weeks for just about every product imaginable.
The Commitment of Traders Report, for positions held at the close of COMEX trading on Tuesday showed the expected and hoped for big improvements in the commercial net short positions in both gold and silver.
In silver, the Commercial net short position declined by a further 9,466 COMEX contracts, or 47.3 million troy ounces.
They arrived at that number by increasing their long position by a piddling 8 contracts, but covered 9,458 short contracts — and it’s the sum of those two numbers that represents their change for the reporting week.
Under the hood in the Disaggregated COT Report, it was the Managed Money and Nonreportable/small traders that did all the selling last week…the former category decreased their net long position by 11,208 COMEX contracts…increasing their gross short position by 7,211 contracts in the process. The latter category decreased their net long position by 2,128 COMEX contracts.
But the Other Reportables, were big buyers during the reporting week, as they increased their net long position by 3,870 COMEX contracts.
Doing the math: 11,208 plus 2,128 minus 3,870 equals 9,466 COMEX contracts, the change in the Commercial net short position.
The Commercial net short position in silver now sits at 196.6 million troy ounces…down 47.3 million troy ounces from the 243.9 million troy ounces that they were short in last Friday’s COT Report…which is obviously the headline number change mentioned further up.
The Big 8 are short 347.0 million troy ounces in this week’s COT Report, down 13.9 million troy ounces from the 360.9 million troy ounces they were short in last Friday’s COT Report.
The headline change in the Commercial net short position above showed an decrease of 47.3 million troy ounces. So Ted’s raptors, the small commercial traders other than the Big 8 shorts did most of the buying during the reporting week once again…as they increased their long position by a further 47.3-13.9=33.4 million troy ounces…6,680 COMEX contracts. [They did a bit over 70% of commercial buying during the reporting week]
It was their buying of long positions that had the mathematical effect of decreasing the commercial net short position by the amount that it did.
Always remember that despite their small size, Ted’s raptors are still commercial traders in the commercial category.
The Big 8 are short 347.0/196.6 equals about 177 percent of the Commercial net short position in silver, up big from the 148 percent they were short in last week’s COT Report — and all because of those long contracts purchased by Ted’s raptors. That makes the short position of the Big 8 even more conspicuous.
Here’s the 3-year COT chart for silver, courtesy of Nick Laird as always — and the big change should be noted. Click to enlarge.
Silver is now firmly back in very bullish territory — and as Ted mentioned on the phone yesterday, there has likely been a bit more improvement since the Tuesday cut-off.
But I will certain mention at this juncture that as bullish as the set-up is for silver in the COMEX futures market — and it is bullish, the set up is not quite as bullish as we’ve seen at other lows for silver in the past. What that means going forward, I don’t know…but thought I’d point it out.
But that’s mostly because of the long buying by Ted’s raptors, although he said that the Big 4 reduced their short position by a bunch — and the Big ‘5 through 8’ did nothing.
Ted is still of the opinion that there’s a ‘whale’ in the Swap Dealer category that holds a long position of around 15,000 contracts. That trader has held that position for at least six months. He felt that they may have reducing that long position a bit during the past reporting week.
Ted said some time ago that he thought that it would take a price of around $23 the ounce to do a proper clean-out — and we’ve certainly exceeded that by a goodly amount.
However, the question has to be asked, like I’ve asked before…are the Big 8 commercial traders ever going to be able to cover their short positions with Ted’s raptors, the small commercial traders other than the Big 8, being such aggressive buyers? They’ve been running the precious metal price show for a very long time now — and that has continued unabated right up until the present day.
But it should not be forgotten that the Big 4/8 shorts do step in as short sellers of last resort when it appears that silver’s price is about to break out to the upside in a big way — and it remains to be seen if they step in again on the next — and inevitable rally.
Couple this very bullish COT Report with what else is going on in the silver market at all levels — and the set-up for silver price rally for the ages is back on the launch pad once again.
In gold, the commercial net short position decreased by a further 17,442 COMEX contracts, or 1.74 million troy ounces.
They arrived at that number by increasing their long position by 3,249 COMEX contracts — and also covered 14,193 short 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 decreased their net long position by 13,270 COMEX contracts — and the Other Reportables were big sellers as well, reducing their net long position by 5,586 contracts. The Nonreportable/small traders went in the other direction, increasing their net long position by 1,414 COMEX contracts.
And it should not be forgotten, as Ted has pointed out, that the commercial traders can only buy what these above non-commercial and small traders are willing to sell.
Doing the math: 13,270 plus 5,586 minus 1,414 equals 17,442 COMEX contracts, the change in the commercial net short position.
The commercial net short position in gold now sits at 23.19 million troy ounces, down 1.74 million troy ounces from the 24.93 million troy ounces they were short in last Friday’s COT Report…which is obviously the change in the headline number further up.
The short position of the Big 8 traders is now 25.89 million troy ounces, downonly 0.83 million troy ounces from the 24.93 million troy ounces they were short in last week’s COT Report.
But the headline change in the commercial net short position showed a decrease of 1.74 million troy ounces, which means that Ted’s raptors, the small commercial traders other than the Big 8, did a decent chunk of the buying during the reporting week once again, by 1.74-0.83=0.91 million troy ounces/9,100 COMEX contracts to make up the difference — and that’s what they did. Their buying made up a bit more than 52 percent of the change in the commercial net short position.
The buying of long contracts/covering short positions by the raptors had the mathematical effect of decreasing the commercial net short position by that amount — and was of no help to the Big 4/8 shorts…as that gave them less contracts to buy.
As in silver, don’t forget that despite their small size, Ted’s raptors are still commercial traders in the commercial category.
From the above numbers, the Big 8 traders are short 25.89/23.19 equals about 112 percent of the commercial net short position in gold…up about 5 percentage points from the approximately 107 percent they were short in last Friday’s COT Report.
This means that Ted’s raptors, the small commercial traders other than the Big 8, are now net long the COMEX futures market by about 27,000 COMEX contracts…divided up between the 40+ traders that are currently in the gross long category in gold.
Here’s Nick Laird’s 3-year COT chart for gold, updated with Friday’s data — and its improvement should be noted as well. Click to enlarge.
Ted’s gold ‘whale’ in the Other Reportables category…which he believes is John Paulson…is still there — and is now down around the 15,000 COMEX contract mark…from a high of about 40,000 a couple of months ago. He’s not sure whether that decline was because he took delivery of a big chunk of that, or whether he just reduced his paper position in the COMEX futures market. Perhaps it was a combination of both.
The gold market, from a COMEX futures market perspective, has now gone from bearish to a slightly bullish configuration after this week’s COT Report.
But Ted is still of the opinion that it would take an engineered price decline in gold down to about $1,800 to clean out all the longs that have been added in the last couple of months — and whether or not that is even possible in the current monetary, financial, political and military environment remains to be seen.
Gold is still below its 50-day moving average — and sitting right on its 100-day..but its 200-day moving average still remains unbroken to the downside, which is a considerable distance below its current price. And as I’ve said repeatedly, whether that mark proves to be a ‘bridge too far’ remains to be seen as well.
So we wait some more.
In the other metals, the Managed Money traders in palladium increased their net short position by a further 118 COMEX contracts — and are net short palladium by 701 contracts. The commercial traders in palladium are all net long now. More about this in the Bank Participation Report below. In platinum, the Managed Money traders decreased their net short position during the reporting week, but only by 1,753 COMEX contracts worth — and are still net short the COMEX futures market by a 10,667 COMEX contracts. Platinum continues to be a bifurcated market in the commercial category, with the Producer/Merchants mega net short — and the Swap Dealers mega net long. In copper, the Managed Money traders decreased their net long position by a further 11,651 COMEX contracts — and are now net short copper by 10,074 COMEX contracts at the moment…about 252 million pounds of the stuff. This is the first time in many a moon that the Managed Money have been net short copper, which is very bullish.
And just as a note here…in copper, the world’s banks are net long this industrial commodity by 9 percent of the total open interest — and if I’m reading yesterday’s Bank Participation Report correctly, the banks are short a bit over 21 percent of the total open interest in WTIC.
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, May 3. 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.
I consider this to be the most important chart that shows up in the COT series — and it always deserves a moment of your time. Click to enlarge.
In this week’s ‘Days to Cover’ chart, the Big 4 traders are short about 112 days of world silver production, down about 6 days from last week’s COT Report. The ‘5 through 8’ large traders are short an additional 50 days of world silver production, unchanged from last Friday’s report…which Ted pointed out on the phone yesterday…for a total of about 162 days that the Big 8 are short — down 6 days from last week’s COT Report.
That 162 days that the Big 8 are short, represents just about five and a half months of world silver production, or 347.0 million troy ounces of paper silver held short by the Big 8 commercial traders.
In the COT Report above, the Commercial net short position in silver was reported by the CFTC at 196.6 million troy ounces. As mentioned in the previous paragraph, the short position of the Big 4/8 traders is 347.0 million troy ounces. So the short position of the Big 4/8 traders is larger than the Commercial net short position by 347.0-196.6=150.4 million troy ounces…up 33.4 million troy ounces from last week’s COT Report…6,680 COMEX contracts…the number of long contracts purchased by Ted’s raptors during the past reporting week.
The reason for the difference in those numbers is that Ted’s raptors, the small commercial traders other than the Big 8, are net long silver by that amount…150.4 million troy ounces/30,080 COMEX contracts.
As per the first paragraph above, the Big 4 traders in silver are short around 112 days of world silver production in total. That’s 28 days of world silver production each, on average…down 1.5 days from last Friday’s report. The traders in the ‘5 through 8’ category are short 50 days of world silver production in total…about 12.5 days of world silver production each on average — and unchanged from last week’s COT Report.
The Big 8 traders are short 50.4 percent of the entire open interest in silver in the COMEX futures market, which is up a bit from the 49.6 percent they were short in the last COT report — and that’s because of a huge drop in silver o.i. because of spread trade liquidation during the reporting week. And once whatever market-neutral spread trades are subtracted out, that percentage would certainly be over the 55 percent mark. In gold, it’s 46.2 percent of the total COMEX open interest that the Big 8 are short, down a bit from the 47.9 percent they were short in last Friday’s COT Report — and a tiny bit over the 50 percent mark once their market-neutral spread trades are subtracted out.
In gold, the Big 4 are short 56 days of world gold production, down 3 days from last Friday’s COT Report. The ‘5 through 8’ are short 31 days of world production, unchanged from last week…for a total of 87 days of world gold production held short by the Big 8 — and obviously down 3 days from last Friday’s COT Report. Based on these numbers, the Big 4 in gold hold about 64 percent of the total short position held by the Big 8…down about 2 percentage points from last Friday’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 69, 79 and 75 percent respectively of the short positions held by the Big 8…the red and green bars on the above chart. Silver is down about 1 percent from last week…platinum is up about 4 percentage points from a week ago — and palladium is unchanged week-over-week.
The status quo remains unchanged. The Big 4/8 traders are sitting there like a lump — and very firmly stuck on the short side in both gold and silver — although they did improve that situation during the reporting week in both silver and gold…but only the Big 4 in each. It was almost all a raptor affair once again…especially in silver — and it’s been that way for a very long time now.
As I keep pointing out — and will mention again, the Big 4/8 shorts will never be able to extricate themselves fully from the short side, if that was ever their intent…particularly the Big 4. At some point they’re going to have eat the lion’s share of the short positions that they currently hold. The only way that they can do that is to go into the market and buy longs…or deliver physical metal, but only if the long holders are in a position to accept delivery. Ted says that a lot of them aren’t.
So unless the powers-that-be at the CFTC and CME Group have something nefarious up their sleeves, or they’re bailed out by the likes of the Exchange Stabilization Fund, the U.S. Treasury or the Fed, their potential loses can only be imagined…think LME nickel times 20 or more, according to Ted. But I very much doubt that it will be allowed to happen, especially for the ‘too big to fail’ bullion banks in the Big 4 category.
As I’ve said before, what happened on the LME involving the nickel market will most likely be a template for what will occur over at the CME Group at some point, as they rush to protect the big shorts on any runaway price activity to the upside, as that’s their primary function.
But as of this moment, there are no upside daily limits as to how high gold and silver prices can rise in the COMEX futures market.
However, the circumstances in silver have been altered by an unimaginable [and monstrously bullish] amount by Ted’s discovery of the approximately 1 billion troy ounce physical short position in silver that Bank of America appears to hold in the OTC market…along with the big increase in Goldman’s derivatives position in silver in that market, as shown in the latest OCC Report for Q4/2021…which Ted figures is a long position.
He has also come to the conclusion that BofA is short about 30 million troy ounces of gold in the OTC market as well.
The situation regarding the Big 4/8 shorts in silver, gold [and platinum] continues to be far beyond obscene, twisted and grotesque — and as Ted correctly points out ad nauseam, its resolution will be the sole determinant of precious metal prices going forward.
As always, nothing else matters.
The May Bank Participation Report [BPR] data is extracted directly from 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. They’re usually up to quite a bit — and they certainly were this past month.
[The May Bank Participation Report covers the time period from April 6 to May 3 inclusive.]
In gold, 5 U.S. banks are net short 61,016 COMEX contracts in the May BPR. In April’s Bank Participation Report [BPR] these same 5 U.S. banks were net short 71,460 contracts, so there was a decrease of 10,444 COMEX contracts month-over-month. This is the first monthly decrease reported during the past five.
Citigroup, HSBC USA, Bank of America and Morgan Stanley would most likely be the U.S. banks that are short this amount of gold. I still have my usual suspicions about the Exchange Stabilization Fund, although if they’re involved, they are most likely just backstopping these banks.
Also in gold, 24 non-U.S. banks are net short 70,187 COMEX gold contracts. In April’s BPR, 25 non-U.S. banks were net short 75,145 contracts…so the month-over-month change shows a decrease of 4,958 COMEX contracts.
At the low back in the August 2018 BPR…these same non-U.S. banks held a net short position in gold of only 1,960 contacts — and they’ve been back on the short side in an enormous way ever since.
I suspect that there’s at least three large banks in this group, HSBC, Barclays and Deutsche Bank. I still harbour suspicions about Scotiabank/Scotia Capital, Dutch Bank ABN Amro, French bank BNP Paribas, plus Australia’s Macquarie Futures. Other than that small handful, the short positions in gold held by the vast majority of non-U.S. banks are immaterial and, like in silver, have always been so.
As of this Bank Participation Report, 29 banks [both U.S. and foreign] are net short 23.5 percent of the entire open interest in gold in the COMEX futures market, which is down a bit from the 26.2 percent that 30 banks were net short in the April BPR.
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 27,634 COMEX contracts in May’s BPR. In April’s BPR, the net short position of these same 5 U.S. banks was 35,475 contracts, which is down 7,841 COMEX contracts month-over-month. This is the least that the U.S. banks have been this net short since last June.
The biggest short holders in silver of the five U.S. banks in total, would be Citigroup, HSBC USA, Bank of America, Morgan Stanley…and maybe Goldman Sachs…but not JPMorgan according to Ted. And, like in gold, I have my suspicions about the Exchange Stabilization Fund’s role in all this…although, also like in gold, not directly.
Also in silver, 20 non-U.S. banks are net short 20,882 COMEX contracts in the May BPR…which is down a tiny amount from the 21,002 contracts that 20 non-U.S. banks were short in the April BPR.
I would suspect that HSBC and Barclays holds a goodly chunk of the short position of these non-U.S. banks…plus some by Canada’s Scotiabank/Scotia Capital still. I’m not sure about Deutsche Bank… but now suspect Australia’s Macquarie Futures. I’m also of the opinion that a number of the remaining non-U.S. banks may actually be net long the COMEX futures market in silver. But even if they aren’t, the remaining short positions divided up between these other 15 or so non-U.S. banks are immaterial — and have always been so.
As of May’s Bank Participation Report, 25 banks [both U.S. and foreign] are net short 35.2 percent of the entire open interest in the COMEX futures market in silver— down a bit from the 38.0 percent that 24 banks were net short in the April BPR. And much, much more than the lion’s share of that is held by Citigroup, HSBC, Bank of America, Barclays — and Scotiabank — and possibly one other non-U.S. bank…all of which are card-carrying members of the Big 8 shorts.
I’ll point out here that Goldman Sachs, up until late last year, had no derivatives in the COMEX futures market in any of the four precious metals. But they did show up in the last two OCC Reports. Now they have a $4.8 billion position, mostly in silver — and as I pointed out a bit further up, Ted thinks they’re long the market.
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. But, according to Ted, as of March 2020…they’re out of their short positions, not only in silver, but the other three precious metals as well. Click to enlarge.
In platinum, 5 U.S. banks are net short 14,678 COMEX contracts in the May Bank Participation Report, which is down 3,441 contracts from the 18,119 COMEX contracts that these same 5 U.S. banks were short in the April BPR.
I will point out here that this is the second month of the last five that these 5 U.S. banks have decreased their collective short positions in platinum…the Big 8 shorts No. 2 problem child after silver.
At the ‘low’ back in July of 2018, these U.S. banks were actually net long the platinum market by 2,573 contracts. So they have a very long way to go to get back to just market neutral in platinum…if they ever intend to, that is.
Also in platinum, 16 non-U.S. banks are now net long 1,490 COMEX contracts in the May BPR, which is down big from the 2,233 contracts that 14 non-U.S. banks were net short in the April BPR…a huge change!
[Note: Back at the July 2018 low, these same non-U.S. banks were net short 1,192 COMEX contracts in platinum, so they’ve now blown past that mark in this Bank Participation Report.]
And as of May’s Bank Participation Report, 21 banks [both U.S. and foreign] are net short only 19.9 percent of platinum’s total open interest in the COMEX futures market, which is down huge from the 33.3 percent that 19 banks were net short in April’s BPR.
But it’s the U.S. banks that are on the short hook big time — and the real price managers. They have little chance of delivering into their short positions, although a very large number of platinum contracts have already been delivered during the last year and change…including the April and May of this year. But that fact, like in both silver and gold, has made no difference whatsoever to their short positions. The situation for them [the U.S. banks] in this precious metal is as almost as equally dire in the COMEX futures market as it is with the other two precious metals…silver and gold…particularly the former.
The reason that they’ll never improve their short positions in a big way is the same reason as in gold and silver…the Managed Money traders flatly refuse to go short big time like they used to in the past — although they are currently net short a bit over 10,500 COMEX contracts at the moment.
Here’s the Bank Participation Report chart for platinum. Click to enlarge.
In palladium, 4 U.S. banks are now back to being net long 312 COMEX contracts, compared to the 318 contracts that they were net short in April’s BPR.
Also in palladium, 8 non-U.S. banks are net long 390 COMEX contracts in the May BPR, up from the 6 non-U.S. banks that were net long 281 contracts in May.
Except in February’s Bank Participation Report, these non-U.S. banks have been net long palladium by a bit for the last two years.
And as I’ve been commenting for almost forever now, the COMEX futures market in palladium is a market in name only, because it’s so illiquid and thinly-traded. Its total open interest at Tuesday’s cut-off was only 7,638 contracts…compared to 66,545 contracts of total open interest in platinum…137,692 contracts in silver — and 560,441 COMEX contracts in gold.
The only reason that there’s a futures market at all in palladium, is so that the Big 8 traders can control its price. That’s all there is, there ain’t no more.
As of this Bank Participation Report, 12 banks [both U.S. and foreign] are now net long 9.2 percent of the entire COMEX open interest in palladium… compared to the 0.6 percent of total open interest that 10 banks were net short in April’s BPR.
And because of the small numbers of contracts involved, along with a tiny open interest, these numbers are pretty much meaningless.
But, having said that, for the last two years in a row, the world’s banks have not been involved in the palladium market in a material way. And with them now net long, it’s all hedge funds and commodity trading houses that are left on the short side.
Here’s the palladium BPR chart. Although the world’s banks are now net long at the moment, it remains to be seen if they return as big short sellers again at some point like they’ve done in the past. Click to enlarge.
Excluding palladium for obvious reasons — and now platinum in the non U.S. bank category…only a small handful of the world’s banks, most likely four or so in total — and mostly U.S-based, except for HSBC, Barclays and maybe Deutsche Bank… continue to have meaningful short positions in the precious metals. It’s a near certainty that they run this price management scheme from within their own in-house/proprietary trading desks…although it’s a given that some of their their clients are short these metals as well.
The futures positions in silver and gold that JPMorgan holds are immaterial — and have been since March of 2020…according to Ted Butler. And what net positions they might hold, would certainly be on the long side of the market. It’s the new 7+1 shorts et al. that are on the hook in everything precious metals-related.
And as has been the case for years now, the short positions held by the Big 4/8 traders/banks is the only thing that matters…especially the short positions of the Big 4 — and how it is ultimately resolved [as Ted said earlier] will be the sole determinant of precious metal prices going forward.
The Big 8 shorts, along with Ted’s raptors…the small commercial traders other than the Big 8 commercial shorts…continue to have an iron grip on their respective prices — and nothing has changed in that regard over the last month…at least what can be seen on the surface. They continue to be the cork in the precious metal price bottle.
That situation will persist until they either voluntarily give it up…or are told to step aside, as it now appears that there’s no chance that they will ever get overrun. If that possibility had ever existed in reality, it would have happened already. However, considering the current state of affairs in the world today — and the physical shortage in silver, I suppose one shouldn’t rule it out entirely.
I have a large number of stories articles and videos for you today…quite a number of which I’ve been saving for today’s column for length and/or content reasons.
CRITICAL READS
The U.S. economy added slightly more jobs than expected in April amid an increasingly tight labor market and despite surging inflation and fears of a growth slowdown, the Bureau of Labor Statistics reported Friday.
Non-farm payrolls grew by 428,000 for the month, a bit above the Dow Jones estimate of 400,000. The unemployment rate was 3.6%, slightly higher than the estimate for 3.5%. The April total was identical to the downwardly revised count for March.
There also was some better news on the inflation front: Average hourly earnings continued to grow, but at a 0.3% level for the month that was a bit below the 0.4% estimate. On a year-over-year basis, earnings were up 5.5%, about the same as in March but still below the pace of inflation.
An alternative measure of unemployment that includes discouraged workers and those holding part-time jobs for economic reasons, sometimes referred to as the “real” unemployment rate, edged higher to 7%.
“The job market continues to plow forward, buoyed by strong employer demand. After just over two years of the pandemic, the job market is remaining resilient and on track for a return to pre-pandemic levels this summer,” said Daniel Zhao, senior economist at jobs review site Glassdoor. “However, the job market is showing some signs of cooling as it turns the corner and the recovery enters a new phase.”
This CNBC news item appeared on their website at 8:31 a.m. EDT on Friday morning — and I thank Swedish reader Patrik Ekdahl for today’s first story. Another link to it is here. The Zero Hedge spin on this…”April Payrolls Rise More Than Expected But Wage Growth Slows and Participation Rate Drops“…comes courtesy of Brad Robertson.
While it is traditionally viewed as a B-grade indicator, the March consumer credit report from the Federal Reserve was an absolute shocked and confirmed what we have been saying for month: any excess savings accumulated by the US middle class are long gone, and in their place Americans have unleashed a credit-card fueled spending spree.
Here are the shocking numbers: in March, one month after the February print already came in more than double the $18 billion expected, consumer credit exploded to an absolutely blowout $52.435 billion, again more than double the expected $25 billion print, and the highest on record! Click to enlarge.
And while non-revolving credit (student and car loans) rose by a relatively pedestrian $21.1 billion (which was still the 6th highest on record)…the real stunner was revolving, or credit card debt, which more than doubled from the already elevated February print of $14.2 billion to a stunning $31.4 billion, the highest print on record… just in time for those credit card APR to starting moving higher, first slowly and then very fast.
While this unprecedented rush to buy everything on credit at a time when there were no notable Hallmark holidays should not come as much of a surprise, after all we have repeatedly shown that for the middle class any “excess savings” are now gone, long gone…
This brief, but very worthwhile 4-chart Zero Hedge article was posted on their website at 3:54 p.m. EDT on Friday afternoon — and I thank Brad Robertson for his first offering of the day. Another link to it is here.
We’ve been reading SEC filings for more than 35 years. We have to sadly say that the 10-Q that Goldman Sachs filed with the SEC on May 2, for the quarter ending March 31, 2022, shocks even our well-documented assessment of Wall Street as a crime syndicate. Goldman Sachs has listed pretty much everything the firm does as a target of an ongoing investigation, notwithstanding that the company and a subsidiary were criminally charged by the U.S. Department of Justice in the looting and bribery scandal known as 1MDB in October 2020, admitted to the charges, and had to pay over $2.9 billion. The good news is that Goldman Sachs’ Dark Pools are one of the areas it lists as being under a probe.
Dark Pools (also benignly called Alternative Trading Systems or ATS) are effectively unregulated stock exchanges being run by the same megabanks on Wall Street that blew up the U.S. financial system in 2008 and received the largest taxpayer bailout in U.S. history. The radical right in the U.S. Congress apparently believes that unbridled greed and outrageously reckless conduct that craters America’s economy deserves to be rewarded with less regulatory oversight, thus Dark Pools have not been shut down.
Not only are Goldman Sachs, JPMorgan, UBS, Morgan Stanley, Merrill Lynch, and numerous others, allowed to trade hundreds of New York Stock Exchange and NASDAQ listed stocks in their own Dark Pools, but they are also allowed to trade their own bank’s stock in their own Dark Pools. We have asked the SEC for years now how it is legal for a bank to trade its own stock – possibly making a two-sided market in that stock because some of these firms own more than one Dark Pool. We’ve yet to receive an answer. (Dare we hope that this is finally being seriously investigated by Gary Gensler’s SEC?)
This commentary from Pam and Russ Martens showed up on the wallstreetonparade.com Internet site on Friday morning EDT — and I thank Brad Robertson for sending it our way. Another link to it is here.
Here is the combined balance sheet for the four most important central banks in the world: the Fed, the European Central Bank (ECB), the Bank of Japan (BOJ) and the People’s Bank of China (PBOC).
On the eve of the great financial crisis in 2007, their combined balance sheets stood at just $5 trillion. Today the figure is $31.5 trillion.
Need we say more? Click to enlarge.
The red line in the chart below shows the recent parabolic rise of the inflation rate in the eurozone. By contrast, the blue dotted line represents the ECB’s wisdom from just three months ago about where inflation was headed, while the solid blue line reflects its current wishful thinking. To wit, that inflation will be back in the sacred 2.00% box by next year.
We’d say, “Good luck with that!”
For want of doubt, here’s the recent inflation explosion in the sober Dutch economy.
At 11.7% in the recent month, the Y/Y rate has just plain gone vertical. And that doesn’t yet include the full effect of NATO’s madcap Sanctions War against the world’s largest commodity producer, Russia.
Still, what did these cats expect after running the printing presses like there was no tomorrow for the better part of two decades?
As shown below, the ECB’s balance sheet first crossed the €1.0 trillion mark in October 2005 but now stands at €8.7 trillion.
This chart-filled commentary from David was posted on the internationalman.com Internet site on Friday morning — and another link to it is here.
Donald Trump has been well relegated to the sidelines of America’s political debate, but the TDS (Trump Derangement Syndrome) lives on, more virulent than ever. The latter is what’s behind Washington’s descent into the current mindless Ukraine war fever—an outbreak of irrationality that makes even the post-9/11 hysteria seem like an orderly discourse.
At the center of this madness, of course, is Vladimir Putin, the Devil Incarnate. Prior to February 24th he had attained that designation in Imperial Washington not just because of his rough methods of governance in Russia or small time military forays in the 2008 South Ossetia/Georgia dispute or in putting down alleged terrorists in Chechnya, but because according to the RussiaGate hoax he had thrown the election to Donald Trump in 2016, thereby shockingly interrupting the rule of the bipartisan duopoly.
Accordingly, for the next four years the apparatus of official Washington–including the MSM in cahoots with the national security state—did not cease in its vilification of Putin via the running RussiaGate Hoax, the phony Mueller investigation, the rogue impeachment proceedings and the nonstop MSM linkage of Trump’s unwelcome presence in the Oval Office with the nefarious doings of Vlad Putin.
At length, the TDS got so virulent and all-consuming inside the beltway that the resulting enmity toward Donald Trump became coterminous with the demonization of Putin. Consequently, when Trump got ushered off the stage (barely) by the American electorate in November 2020, Washington’s war on the Donald simply got re-focused with fevered intensity on Putin. In the target practice galleries of Washington politics, Vlad became the Donald’s avatar.
Needless to say, with the politicians in both parties foaming at the mouth against Putin, the Deep State and military-industrial complex had a field day hyping Russia into a national security threat that was not remotely justified, but which did massively distort policy.
This commentary from David was posted on the lewrockwell.com Internet site on Wednesday, but I saved it for today for length reasons. Another link to it is here. Stockman has yet another commentary, this one from Zero Hedge yesterday headlined “The Fed is Not Fixing the Problem” — and I thank Brad Robertson for that one.
The chasm between Eurasia and the Western defence groupings (NATO, Five-eyes, AUKUS etc.) is widening rapidly. While media commentary focuses on the visible side of the conflict in Ukraine, the economic and financial aspects are what really matter.
There is an increasing inevitability about it all. China has been riding the inflationist Western tiger for the last forty years and now that it sees the dollar’s debasement accelerating wonders how to get off. Russia perhaps is more advanced in its plans to do without dollars and other Western currencies, hastened by sanctions. Meanwhile, the West is increasingly vulnerable with no apparent alternative to the dollar’s hegemony.
By imposing sanctions on Russia, the West has effectively lined up its geopolitical opponents into a common cause against an American dollar-dominated faction.
Russia happens to be the world’s largest exporters of energy, commodities, and raw materials. And China is the supplier of semi-manufactured and consumer goods to the world. The consequences of the West’s sanctions ignore this vital point.
In this article, we look at the current state of the world’s financial system and assess where it is headed. It summarises the condition of each of the major actors: the West, China, and Russia, and the increasing urgency for the latter two powers to distance themselves from the West’s impending currency, banking, and financial asset crisis.
We can begin to see how the financial war will play out.
The very long commentary from Alasdair showed up on the goldmoney.com Internet site on Thursday — and for length reasons, had to wait for my Saturday column. I dug it out of a GATA dispatch — and another link to it is here.
In ancient Mesopotamia, it was called a Jubilee. When debts at interest grew too high to be repaid, the slate was wiped clean. Debts were forgiven, the debtors’ prisons were opened, and the serfs returned to work their plots of land. This could be done because the king was the representative of the gods who were said to own the land, and thus was the creditor to whom the debts were owed. The same policy was advocated in the Book of Leviticus, though it is unclear to what extent this biblical Jubilee was implemented.
That sort of across-the-board debt forgiveness can’t be done today because most of the creditors are private lenders. Banks, landlords and pension fund investors would go bankrupt if their contractual rights to repayment were simply wiped out. But we do have a serious debt problem, and it is largely structural. Governments have delegated the power to create money to private banks, which create most of the circulating money supply as debt at interest. They create the principal but not the interest, so more money must be repaid than was created in the original loan. Debt thus grows faster than the money supply, as seen in the chart from WorkableEconomics.com below. Debt grows until it cannot be repaid, when the board is cleared by some form of market crash such as the 2008 financial crisis, typically widening the wealth gap on the way down.
Today the remedy for an unsustainable debt buildup is called a “reset.” Far short of a Jubilee, such resets are necessary every few decades. Acceptance of a currency is based on trust, and a “currency reset” changes the backing of the currency to restore that trust when it has failed. In the 20th century, major currency resets occurred in 1913, when the Federal Reserve was instituted following a major banking crisis; in 1933 following another catastrophic banking crisis, when the dollar was taken off the gold standard domestically and deposits were federally insured; in 1944, at the Bretton Woods Conference concluding World War II, when the U.S. dollar backed by gold was made the reserve currency for global trade; and in 1974, when the US finalized a deal with the OPEC countries to sell their oil only in U.S. dollars, effectively “backing” the dollar with oil after Richard Nixon took the dollar off the gold standard internationally in 1971. Central bank manipulations are also a form of reset, intended to restore faith in the currency or the banks; e.g. when Federal Reserve Chairman Paul Volcker raised the interest rate on fed funds to 20% in 1980, and when the Fed bailed out Wall Street banks following the Great Financial Crisis of 2008-09 with quantitative easing.
But quantitative easing did not fix the debt buildup, which today has again reached unsustainable levels. According to Truth in Accounting, as of March 2022 the US federal government has a cumulative debt burden of $133.38 trillion, including unfunded Social Security and Medicare promises; and some countries are in even worse shape. Former investment banker Leslie Manookian stated in grand jury testimony that European countries have 44 trillion euros in unfunded pensions, and there is no source of funds to meet these obligations. There is virtually no European bond market, due to negative interest rates. The only alternative is to default. The concern is that when people realize that the social security and pension systems they have paid into for their entire working lives are bankrupt, they will take to the streets and chaos will reign.
Hence the need for another reset. Private creditors, however, want a reset that leaves them in control. Today a new sort of reset is setting off alarm bells, one that goes far beyond restoring the stability of the currency. The “Great Reset” being driven forward by the World Economic Forum would lock the world into a form of technocratic feudalism.
This longish but worthwhile commentary is Part 1 of a 2-part essay that put in an appearance on the scheerpost.com Internet site on Wednesday — and it comes to us courtesy of George Whyte. Another link to it is here.
The Global Bubble, several decades in the making, is in the process of bursting. A new cycle is emerging, replete with extraordinary uncertainties. Acute instability has become a permanent feature, at least through the cycle transition phase. These are not statements made to be provocative, but rather to offer an analytical framework that might help us better comprehend such a complex and increasingly alarming world.
Powell referred to “financial conditions” 17 times during his relatively short press conference. “Nimble” made it only once, in the Chair’s opening statement. The S&P500 rallied 3.5% during and immediately following Powell’s press conference, with the Nasdaq100 surging 4.5%. Taking 75 bps hikes off the table was the spark, but the general tenor of the press conference was much less hawkish than markets had feared. A Financial Times headline succinctly captured its essence: “Investors Detect Dovish Undertones to Powell’s Campaign Against Inflation.”
Powell’s neutral rate comments (“current estimates on the Committee are sort of 2 to 3%”), while open to interpretation, suggest a more measured tightening cycle than markets anticipate. There was reference to inflation-restraining reductions in fiscal and monetary stimulus, along with continued focus on eventual supply chain normalization.
Mainly, nervous markets were comforted by the focus on “financial conditions.” The Fed’s hawkish tightening cycle is on a Collision Course with faltering Bubbles, De-risking/Deleveraging Dynamics and serious liquidity issues. Powell faced an extraordinary challenge in conveying to the public and Washington politicians the Fed’s focus and commitment to reining in inflation, while signaling to the markets that he is appropriately focused on unfolding market instability. From this perspective, Powell’s preparation and performance were masterful.
Powell spurred a big equities market reversal. Bonds mustered a gain, though the unenthusiastic four bps decline (to 2.94%) in 10-year Treasury yields was portentous. Yields were up 16 bps to 3.10% by mid-day Thursday. It was Bloomberg with the day’s apt headline: “Stocks Stumble as Traders Fret About Fed’s Quagmire.” After rallying 3.0% Wednesday, the S&P500 fell 3.6% in Thursday’s rout. With big tech in the crosshairs, the Nasdaq100 sank 5.0% Thursday, more than reversing Wednesday’s 3.4% recovery. It was the type of volatility one might expect prior to an accident.
Importantly, De-risking/Deleveraging Dynamics attained critical momentum. Investment-grade CDS rose five bps (largest one-day gain since June 2020) Thursday to 83 bps, the high since May 2020. High-yields CDS surged 30 to 460 bps, the largest one-day increase in almost two years and the high since July 2020. Bank CDS jumped to the highest levels since April 2020 pandemic instability. JPMorgan CDS gained three to 90 bps, BofA five to 93 bps, Citigroup four to 109 bps, and Goldman Sachs four to 108 bps.
Thursday’s instability was a global phenomenon. European Bank (subordinate debt) CDS traded above 200 bps for the first time since May 2020. European high-yield (“crossover”) CDS surged 19 bps, the first session trading above 450 bps, also back to May 2020.
European bank stocks (STOXX 600) dropped 3.8% this week (down 12.3% y-t-d), with Italian banks slammed 5.3% (23.2%). Ominously, European bonds are being crushed, even while the ECB has yet to lift rates above zero. Moreover, the prospect for Europe’s dreaded bond/bank “doom loop” (vulnerable banks levered in sinking bond portfolios) has become only more troubling with the war in Ukraine taking a chunk out of precious European bank capital (while elevating stagflation and geopolitical risks).
Highly levered European “periphery” bond markets were hit by major liquidations this week. Italian yields spiked 36 bps (6-wk gain 104bps) to 3.14%, the high since December 2018. Greek 10-year bond yields surged another 23 bps (6-wk gain 90bps) to a (excluding the March 2020 spike to 3.67%) three-year high 3.56%. Moreover, susceptible Spain and Portugal joined the bond rout. Spanish yields jumped 26 bps (2.24%) and Portuguese yields surged 25 bps (2.27%) – both ending the week with yields near seven-year highs.
There are today similarities to previous serious “risk off” episodes that almost brought down the global financial system. There are key differences: Global Bubbles are today much grander and interconnected; the world’s financial and economic structures are splintering; inflation has become a serious global issue; and the Fed and global central bank community’s liquidity backstop is problematic like never before.
Doug’s weekly commentary is on the longer side this week, but certainly worthwhile — and another link to it is here.
The CEOs of several European blue chip companies have told CNBC that they see a significant recession coming down the pike in Europe.
The continent is particularly vulnerable to the fallout from the Russia-Ukraine war, associated economic sanctions and energy supply concerns, and economists have been downgrading growth forecasts for the euro zone in recent weeks.
The euro zone faces concurrent economic shocks from the war in Ukraine and a surge in food and energy prices exacerbated by the conflict, along with a supply shock arising from China’s zero-Covid policy. That has prompted concerns about “stagflation” — an environment of low economic growth and high inflation — and eventual recession.
This article, filed from London, showed up on the cnbc.com Internet site at 3:12 a.m. EDT on Friday morning — and I thank Patrik Ekdahl for sending it our way.  Another link to it is here. Gregory Mannarino’s post market close rant for Friday is linked here — and is Brad Robertson’s final contribution to today’s column.
Eight years after Canada sold off its last remaining gold reserves, economists say the precious metal has little use in the modern global economy.
“The only justification for keeping gold reserves in the central banks is if they thought one day they were gonna go back to the gold standard,” said Ian Lee, an associate professor at Carleton University’s Sprott School of Business.
During the first few months of the pandemic, purchases of gold and silver soared in the U.S. and Canada, as people looked for ways to keep their finances secure amid economic uncertainty. That trend has barely slowed, with Swiss shipments of gold to the United States recently surging to their highest levels since May of 2020.
But the Canadian government has not taken part in the scramble for precious metals. In fact, back in 2016, the department of finance sold off its last remaining gold reserves, obtaining $35 million in exchange for selling 21,851 ounces of gold coins.
Canada is now the only G7 nation that does not hold at least 100 tonnes of gold in its official reserves. Other countries that hold zero gold reserves include Nicaragua, Costa Rica, Azerbaijan, Armenia and Cameroon.
“The government has a long-standing policy of diversifying its portfolio by selling physical commodities (such as gold) and instead investing in financial assets that are easily tradable and that have deep markets of buyers and sellers,” a finance department spokesperson said at the time.
Lee said he doesn’t see “any real logic” in Canada holding gold, since no country is on the gold standard anymore. Lee said many countries went off the gold standard because it ended up making the Great Depression worse, as the rigidity of gold “reduced the capacity and flexibility of the central bank to intervene.”
What unadulterated bulls hit this is. This story appeared on the westernstandard.news Internet site on April 27 — and was updated on this past Tuesday. It was supposed to be in last Saturday’s column, but got ‘lost’ in my in-box. I thank Brad Robertson for pointing it out — and another link to it is here. Twenty years ago I wrote a long article on this topic headlined “When Irish Eyes Are Smiling: The Story of Canada’s Gold?” The link to it still exists, but most of the internal links I used in it are long since dead — and my writing style back then was certainly not up to the standards that I demand of myself these days, so I’ll pass on posting it. But if you really, really want to read it, contact me and I’ll send it to you privately.
The Photos and the Funnies
The first photo, taken on June 20 — and looking north down the Thompson River Valley was the last one I took before we hit the top of the plateau about five minutes later. It’s hard to believe that 1,000 meters of altitude could make such a difference in climate and vegetation, but it does. The last three photos are testament to that. Click to enlarge.
The WRAP
“Understand this…things are now in motion that cannot be undone.” — Gandalf the White
Today’s pop ‘blast from the past’ is one I’ve posted before, but certainly not recently. It was a monster hit in my hippy days in Toronto in 1967. It hasn’t aged a bit — and is still beloved to this day. Here’s the now late Gary Brooker, founder and lead singer, at the keyboard along with some of the original members of the group…accompanied by the Danish National Concert Orchestra. The link is here.
Today’s classical ‘blast from the past’ is one of the Big 3 piano sonatas that Beethoven composed in his early thirties at the turn of the 19th century. It’s his Piano Sonata No. 14 in C-sharp minor, marked Quasi una fantasia, Op. 27, No. 2.
It was completed in 1801 and dedicated in 1802 to his pupil Countess Giulietta Guicciardi — and its popular name, Moonlight Sonata, goes back to a critic’s remark after Beethoven’s death.
Here’s Ukrainian-born pianist Valentina Lisitsa serving up just right — and the link is here.
Gold was kept on a very short leash yesterday — and the rally attempts during the COMEX trading session in New York — and the GLOBEX trading session in morning trading in the Far East, were all turned lower. It traded a handful of dollars either side of its 100-day moving average — and closed above it by a couple of dollars.
But in silver, its spike low in the Far East set a new intraday low move by a penny or two for its engineered move down. But even at its close, its still about $1.45 below its 200-day moving average — and $2.40 below its 50-day. This is a travesty of free and fair markets.
Platinum was sold lower for the second day in a row, but palladium was smoked — and closed at a price not seen since back in the latter part of January. Why the long knives were out for it, is a bit of mystery, as the bullion banks, both in the U.S. and overseas, are now net long the thinly traded and illiquid palladium market…if you read the Bank Participation Report commentary on it further up.
Copper was closed lower for the second day in a row — and as I pointed out in the COT discussion further up, the Managed Money traders are not net short copper for the first time in ages, which is a sure sign that a rally is in the cards for it. It was closed down 2 cents on the day at $4.27/pound.
Natural gas [chart included] got walloped pretty good yesterday, down 74 cents/8.43%…closing at $8.04/1,000 cubic feet. WTIC had a small gain, closing higher by $1.51 at $109.77/barrel.
Here are the 6-month charts for the Big 6+1 commodities, thanks to stockcharts.com as always — and it should be noted as to how oversold both silver and copper are at the moment. Click to enlarge.
The only fly in the precious metal ointment at the moment continues to be gold, as the commercial traders of whatever stripe have failed so far in their attempts to blow it below its 200-day moving average which, as I pointed out further up, is the only reason the HUI is outperforming the Silver 7 Index year-to-date.
Can they, or will they, considering everything else going on in the world these days? Who knows, but it’s looking less likely with each passing day.
In a nutshell yesterday’s Bank Participation Report shows that the U.S. banks are mega net short gold, silver and platinum — and net long a bit in palladium. On the other hand, the non-U.S. banks are mega net short only gold and silver and, surprisingly enough, are now net long platinum…plus they’re long palladium by a bit as well.
These handful of banks…three or four at most…that are mega net short the above three precious metals — are certainly card-carrying members of the Big 4 short category. The other members of the Big 8 would be banks with much smaller short positions, plus hedge funds and commodity trading firms of one type or another. But all of them would be relegated to the Big ‘5 through 8’ category…or lower.
For the second week in a row I’m not going to bother trying to delve into what’s going on in the world today. Doug Noland called it a “quagmire” in his commentary in the Critical Reads section. It’s that, plus much more of course, as he’s only looking at the financial side of things, which are always only one event away from total melt-down.
Of course the “Everything Bubble” has already been pierced — and the inevitable collapse awaits at some point when the deep state/new world order crowd see fit.
Raising interest rates, plus running off the Fed’s balance sheet into a budding recession, is a recipe for disaster. But it appears that the Fed et al. are going to keep doing both until something snaps in the markets and the economy. It already has, as I just pointed out — and it remains to be seen how swiftly the final end comes.
Gregory Mannarino’s comment that the end will first manifest itself in the debt market, with the stock market crash coming shortly after that — and his point about watching the yield on the 10-year treasury is good advice. For that reason, I’ve been posting that data point in my column for about a year now.
The consensus is that all the money fleeing treasuries and Wall Street will be looking for a new home — and that place of domicile is said to be commodities. It’s a consensus I agree with.
I’m also of the opinion that this latest round of engineered price declines in the precious metals and other commodities…including copper, is in preparation for just that event. When it occurs — and from whatever quarter it comes, it will bring an abrupt end to the price management scheme in commodities in general — and the precious metals in particular.
This event, in and of itself will constitute a ‘Great Reset’ of some type — and it then remains to be seen if the New World Order crowd step in with their plan for the screaming masses that will be begging to be ‘saved’.
Time will tell, of course. But as I and others have stated countless times over the years, this financial and monetary Ponzi scheme that was foisted on us 50 years ago, has now come to the end of its useful life. The powers-that-be are more than aware of that — and are now getting set for the kill shot.
From what direction this will come remains to be seen…but this proxy war in the Ukraine is ripe with possibilities of false flag operation of some type. But in whatever form this final denouement manifests itself, the world will never be the same after that.
I’m still “all in” — and quite happy to be so…although it’s been a painful ride for the last couple of years.
But this too shall pass.
See you here on Tuesday.
Ed

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