The COT Report Turns Gold and Silver Back to Wildly Bullish Once Again

13 June 2015 — Saturday

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM

It was a ‘nothing’ sort of day in gold on Friday. It traded flat until shortly after the London open—and then got sold down five bucks going into the morning gold fix in London—and after that it chopped around a few dollars either side of the $1,180 spot mark, before closing virtually unchanged on the day. And it was another day where the high and low price ticks aren’t worth my effort to look up.

Gold finished the Friday session in New York at $1,181.30 spot, down 70 cents from Thursday’s close. Net volume is as light as I can remember at only 76,500 contracts.

There was a more activity in silver, but not by much. The price bias was negative until a double bottom was set between 8:30 and 9:00 a.m. EDT. The silver price rallied a bit going into the London p.m. gold fix, but got sold down immediately after—and then traded flat until around 3 p.m. in electronic trading—and then the price crept higher in the 5:15 p.m. close.

The high and low ticks were reported by the CME Group as $16.005 and $15.785 in the July contract.

Silver closed on Friday at $15.955 spot, down 7 cents from Thursday’s close. Net volume was extremely light at only 28,000 contracts.

The platinum price was under light and choppy selling pressure through all of Friday—and it was closed down another 13 dollars at $1,093 spot. Palladium held in there until ‘gentle hands’ showed up in the dollar index just before noon Hong Kong time—and the same light and choppy selling pressure appeared in that metal as well. It closed at $735 spot, down 6 bucks from Thursday. Here are the charts.

The dollar index closed late on Thursday afternoon in New York at 95.10—and began to slide right from the open on Friday morning in Far East trading. ‘Gentle hands’ were at the ready just before noon to pull the index back from below the 95 level once again—and the subsequent rally, which I would guess involved a certain amount of short covering, topped out at 95.68 around 10 a.m. BST in London. At that point it reversed direction—and by the time the smoke cleared the index had hits its 95.69 low about 11:10 a.m. EDT. It rallied back above the 95 mark shortly after 3 p.m. EDT, but the ‘gentle hands’ couldn’t keep it there, as the dollar index slid below the 95 mark, closing at 94.95—down 15 basis points on the day.

Here’s the 6-month U.S. Dollar Index chart once again—and it ain’t the happiest looking thing, is it?

The gold stocks opened down, but quickly rallied into gold’s high tick just before the London p.m. gold fix. But that didn’t last—and starting shortly after 11 a.m. EDT, they slid back into negative territory for the remainder of the Friday session, but closed just off their lows. The HUI finished the day down another 0.85 percent.

The movement in the silver equities was mostly the same as in gold, but they only made it into positive territory for about 1 minute around 11:15 a.m. EDT, before heading south, never to return. But, like gold, finished just off their lows. Nick Lairds’ Intraday Silver Sentiment closed down another 1.14 percent.

The CME Daily Delivery Report showed that only 1 gold and zero silver contracts were posted for delivery within the COMEX-approved depositories on Tuesday. Nothing to see once again, as it’s been a very quiet week for deliveries.

The CME Preliminary Report for the Friday trading session showed that June open interest continues to decline as another 96 contracts vanished yesterday, leaving only 652 still around—and silver’s June o.i. dropped 1 to 27 contracts left.

There was a tiny withdrawal from GLD yesterday—only 7,732 troy ounces—and it would be my guess that this amount represented a fee payment of some kind. And as of 10:41 p.m. EDT yesterday evening, there were no reported changes in SLV.

And for the third day in a row there was no sales report from the U.S. Mint.

Month-to-date the mint has sold 24,000 troy ounces of gold eagles—6,000 one-ounce 24K gold buffaloes—and 1,625,000 silver eagles. Based on these sales, the silver/gold sales ratio works out to 54 to 1.

It was a pretty decent in/out day in gold over at the COMEX-approved depositories on Thursday, as 61,061 troy ounces were reported received—and 37,281 troy ounces were shipped out the door. Almost all the ‘in’ activity was at HSBC USA—and all of the ‘out’ activity was at Canada’s Scotiabank. The link to that action is here.

It was another big day in silver as well, because 629,129 troy ounces were reported received—and 486,170 troy ounces were shipped out the door. Of the amount received, virtually all of it disappeared into JPMorgan’s vault—and I just know that Ted Butler is going to have lots to say about that in his column early this afternoon. The link to that activity is here.

Over at the COMEX-approved gold kilobar depositories in Hong Kong on their Thursday, they reported receiving 5,081 kilobars—and shipped out 9,156 kilobars. The link to that action is here.

The Commitment of Traders Report, for positions held at the close of COMEX trading on Tuesday, was so bullish for both gold and silver, that I could hardly believe what I was seeing when I saw the numbers.

In silver, the Commercial net short position imploded by 21,628 COMEX contracts, or 108.1 million troy ounces of paper silver. The Commercial net short position is now down to 35,941 contract, or 179.7 million troy ounces. That’s not the lowest number we’ve ever had, but it’s still very impressive

Ted said that the Big 4 traders decreased their net short position by 6,600 contracts—and he assigns all of that decline to JPMorgan, which puts their current short position at around 13,000 contracts, or 65 million troy ounces. So JPMorgan is short around 75 percent of the Commercial net short position [mentioned above] all by itself.

The big surprise was that the ‘5 through 8′ traders actually increased their short position by close to 4,000 contracts during the reporting week—and Ted says that this group of traders now holds their highest short position in COMEX history. With the Big 4 going in one direction—and the ‘5 through 8′ heading in the other, Ted says that the table is now set for what could be the biggest double cross in COMEX history—and if I had to pick at patsy, it would be Canada’s Scotiabank. We’ll see.

To complete all this, the raptors, the commercial traders other than the Big 8—added 19,000 contracts to their already impressive long position.

Under the hood in the Managed Money category, the changes were even more extreme, as these technical funds sold 4,453 longs—and added an eye-watering 23,807 contracts to what is most likely close to another new record short position.

In gold, the Commercial net short position took another swan dive, as it decreased by 29,561 contracts. Ted guessed 30,000 contracts—and you can’t get better than that. The Commercial net short position now stands at 7.86 million troy ounces. Like silver, it’s not the lowest number ever, but it still falls into the wildly bullish category nonetheless.

The Big 4 short holders decreased their short position by only 2,100 contracts—and the ‘5 through 8′ shorts decreased their short position by 4,500 contracts. The raptors were the big players here, as they added an enormous 23,000 long contracts to their already large long position. It was Ted’s 3 Musketeers once again—all for one, and one for all—feeding at the Managed Money trough.

While on the subject of the Managed Money traders, they sold 4,104 long contracts and purchased 20,004 short contracts. Ted says they these traders now hold a new record short position by a whisker over the old record.

Before leaving the COT Reports behind, one of the things that I keep an eye on in the Managed Money category are what I call the ‘unblinking’ non-technical fund traders on the long side. These guys don’t trade on price signals—and what they’ve done during this last engineered price decline was add to their long positions in both gold and silver by very decent amounts. The reason I know that is because at the last lows in these metals a month ago, the Managed Money longs were holding smaller long positions then they are now. So what they’ve done is use the cover of this virtually completed engineered price decline to further increase their longs positions.

Who are these traders you ask? Well, as I’ve said before, that is the $64,000 question, isn’t it—as the margin calls on their long positions at prices such as these would have broken virtually any financial institution on Planet Earth by now, it’s a good bet that the pockets of the firms that hold these positions are infinitely deep, so that narrows it down to a couple of the biggest financial institutions on Planet Earth—and one of them isn’t JPMorgan. Think bigger, dear reader.

And here’s Nick’s excellent “Days of World Production to Cover Short Positions” of all physically traded commodities on Planet Earth. Including the improvement in JPMorgan’s short position in silver, I’d guess that they, along with Canada’s Scotiabank—which now is the undisputed KING SILVER SHORT in the COMEX futures market—are short a bit under 75 days of world silver production between them.

And note the record short positions of the ‘5 through 8′ traders in silver—and compare it to the short positions of the ‘5 through 8′ traders in every other commodity on this chart. Not even close, is it? It’s obscene and grotesque any way you want to measure it.

This is as good a place as any to stick in a Ted Butler quote—and it addresses the issues shown in this chart.

“Superimposed on the recent record positioning changes on the COMEX by speculative traders in silver and gold futures contracts is the 800 pound gorilla that the regulators are trying desperately to not notice – the massive concentrated short position in COMEX silver. In the current COT report, 8 traders are net short nearly 390 million ounces of silver, 50% of annual world mine production. To say that no other commodity comes close to having such a large concentrated short position understates the matter.”

“I know I use the word “concentrated” often and it is possible my overuse of the word diminishes its meaning. But please remember the word didn’t originate with me, but with the CFTC in that concentration data is an integral component of every long form COT report. The agency publishes concentration data on all commodities because it is the front-line defense against manipulation. Simply put, there can’t be a manipulation without a concentrated position.”

“When you then contemplate the significance of the world’s most concentrated short position in terms of price, alarms and sirens should be blasting because there is no way that concentrated position could avoid manipulating the price of silver to be lower than it would be if the position didn’t exist. Therefore, the concentrated short position in silver is the cause of the low silver price and that’s why, after a drought that stretched for decades, two mining companies have finally stepped up to the plate and demanded that the CFTC address the matter.” –– Silver analyst Ted Butler: 10 June 2015

Nick Laird was kind enough to send along the updated chart for the withdrawals from the Shanghai Gold Exchange for the week ending on Friday, June 5—and during that week, they withdrew 32.965 metric tonnes.

I don’t have an overly large number of stories for you today, but the night is young—and I know that Roy Stephens is lurking about, so that might change as the evening/morning goes along. One thing I don’t have is a precious metals story—and I looked everywhere! The closest I came was the must watch Jay Taylor interview, which is the second story in the Critical Reads section.

CRITICAL READS

House Rejects Trade Bill, Rebuffing Obama’s Dramatic Appeal

Hours after President Obama made a dramatic, personal appeal for support, House Democrats on Friday thwarted his push to expand trade negotiating power — and quite likely his chance to secure a legacy-defining accord spanning the Pacific Ocean.

In a remarkable blow to a president they have backed so resolutely, House Democrats voted to end assistance to workers displaced by global trade, a program their party created and has supported for four decades. That move effectively scuttled legislation granting the president trade promotion authority — the power to negotiate trade deals that cannot be amended or filibustered by Congress.

“We want a better deal for America’s workers,” said Representative Nancy Pelosi of California, the House minority leader, who has guided the president’s agenda for two terms and was personally lobbied by Mr. Obama until the last minute.

The vote that prevented the president from obtaining trade promotional authority now imperils the more sweeping Trans-Pacific Partnership, a proposed trade agreement with 11 other nations along the Pacific Ocean that affects 40 percent of the global economy on goods ranging from running shoes to computers.

This news item was posted on The New York Times website yesterday sometime—and it’s the first offering of the day from Roy Stephens. There was also a Bloomberg story about this as well—and it’s headlined ” House Democrats Hand Obama Embarrassing Defeat on Trade Deal“—and I thank Dan Lazicki for this one.

Wall street and the FED colluding to prop up the U.S. Dollar? — Jay Taylor

Jay Taylor joins Cambridge House Live anchor Vanessa Collette to discuss gold as money, the paper and physical gold markets, interest rates, the U.S. economy, the U.S. dollar and FED policy.

Two very good friends of mine—Vanessa Collette and Jay Taylor—are featured in this 10:10 minute video that was produced at the Cambridge House Conference two weeks ago. Jay is the nicest and kindest man you could ever hope to meet—and this video falls into the absolute must watch category. Vanessa is not only super smart, but she speak Mandarin Chinese like a native, as both her parents were diplomats in China for most of her life when she was younger. No flies on her—and blonde jokes certainly don’t apply! This showed up on the youtube.com Internet site the other day.

Greenspan Dashes Recovery Hopes: “Housing Stagnation is Here to Stay”

Ten years ago this week, Alan Greenspan made his infamous comment about signs of ‘froth’ in the housing market. A decade later, CNNMoney‘s Cristina Alesci sat down with the Former Federal Reserve Chairman and got his perspective on real estate. It’s stuck in a rut, or as he puts it, “we haven’t come out of the bottom [of the housing collapse], we are in a secular stagnation.”

“Secular stagnation?” The real word is depression, Alan. This short 1:58 minute video clip was embedded in an equally tiny story posted on the Zero Hedge website at 6:20 p.m. EDT on Friday evening—and I thank Dan Lazicki for his second offering in today’s column.

Beef Prices Hit Record: Up 30% in Past Two Years

While the Fed may continue to claim inflation is non-existent, except for those “few” Americans who can’t afford a house and thus have to rent (incidentally, in New York the average rent just hit a record), inflation is all too present for those other Americans who still enjoy occasionally eating eating beef as opposed to its sawdust-inspired substitute found in various fast-food venues across the US.

According to the BLS, after a torrid 2014, in which there was a 24% surge in beef prices which central planners blamed on everything except their policies, in May the Beef and Veal price index just rose to a new all time high of 260.8, up 12.3% from a year ago, and up 30% in the past two years.

This 2-chart Zero Hedge piece from 9:12 a.m. EDT yesterday is certainly worth a look—and naturally it’s courtesy of Dan “The Man” Lazicki once again.

Federal government data breach even worse than expected?

Fortinet Senior Security Strategist Aamir Lakhani on the hacking of U.S. federal government personnel files.

This 2:55 minute video clip was posted on the foxbusiness.com Internet site at 2:55 p.m. EDT yesterday—and it’s another contribution from Dan.

SEAL Team 6: A Secret History of Quiet Killings and Blurred Lines

They have plotted deadly missions from secret bases in the badlands of Somalia. In Afghanistan, they have engaged in combat so intimate that they have emerged soaked in blood that was not their own. On clandestine raids in the dead of the night, their weapons of choice have ranged from customized carbines to primeval tomahawks.

Around the world, they have run spying stations disguised as commercial boats, posed as civilian employees of front companies and operated undercover at embassies as male-female pairs, tracking those the United States wants to kill or capture.

Those operations are part of the hidden history of the Navy’s SEAL Team 6, one of the nation’s most mythologized, most secretive and least scrutinized military organizations. Once a small group reserved for specialized but rare missions, the unit best known for killing Osama bin Laden has been transformed by more than a decade of combat into a global manhunting machine.

This very interesting, but disturbing New York Times essay, which isn’t overly long, appeared on their website last Saturday—and for obvious reasons, had to wait for today’s column. It’s worth reading if you have the time and/or the interest. I thank Roy Stephens for bringing it to our attention.

American empire imploding both at home & abroad

The crisis and chaos engulfing the Middle East and Ukraine is evidence of US imperial decline, as Washington learns the harsh lesson that no empire lasts forever.

In the wake of the Vietnam War – the end of which was marked by news footage of US personnel and a select few Vietnamese collaborators being evacuated from the roof of the US Embassy in Saigon in 1975 – the United States entered a prolonged period of decline when it came to its ability to embark on major military operations.

For all the massive destructive power in its arsenal, the Vietnamese had exposed US imperialism as a giant with feet of clay. The name given to this period of hard power retreat was the ‘Vietnam syndrome’ and lasted from 1975 to 1991, when the US and an international coalition embarked on the First Gulf War to force Iraqi troops out of Kuwait.

We are witnessing a similar period of US imperial decline now with regard to Washington’s inability to stage large-scale military operations. It arrived as a consequence of the failed occupations of Afghanistan and Iraq, both of which achieved nothing except the eruption of terrorism and extremism across the region, and by extension the world.

This very excellent and well-written Op-Edge piece falls into the absolute must read category for any serious student of the New Great Game. It was posted on the Russia Today website at 3:38 p.m. Moscow time on their Friday afternoon, which was 8:38 a.m. EDT in Washington. It’s the second story in a row from Roy Stephens, for which I thank him.

Iceland is not Greece: The country’s president explains why

The home of Ólafur Ragnar Grímsson, Iceland’s president since 1996, sits on a surreal, dreamlike peninsula about a 20-minute drive from outside central Reyjkavik.

As far as head-of-state lodging goes, Bessastaðir is relatively modest: a Lego-like collection of buildings that has also served as a farm and secondary school. Even on a recent gray, rainy afternoon, the view from the road leading to its front door still offered a stunning panorama of the coastline that hugs the city of 200,000, two-thirds of Iceland’s entire population.

Driving up to Grímsson’s home (yes, one can more or less just drive up and ring the doorbell), it’s hard to believe that seven years ago, Iceland was on the brink of destruction. Then, its currency, the krona, had fallen by more than a third. Debt loads among businesses and residents surged, and by 2008 external debt was more than seven times Iceland’s GDP. While the U.S. stock market heated up pre-2007, Iceland’s seemingly was on steroids and more than quadrupled. During Grímsson’s presidency, largely a ceremonial role, Iceland had essentially become a defunct hedge fund and the country’s collapse, the Economist said, was “the biggest, relative to the size of an economy, that any country has ever suffered.”

This interesting commentary, filed from Reykjavik, showed up on the politico.eu Internet site at 5:32 p.m. CET on Thursday afternoon, which was 11:32 a.m. in Washington—and it had to wait for my Saturday column. Once again I thank Roy Stephens for digging it up.

Is Deutsche Bank the Next Lehman?

Looking back at the Lehman Brothers collapse of 2008, it’s amazing how quickly it all happened. In hindsight there were a few early-warning signs, but the true scale of the disaster publicly unfolded only in the final moments before it became apparent that Lehman was doomed.

First, we must state the obvious: If Deutsche Bank is the next Lehman, we will not know until events are moving at an uncontrollable and accelerating speed. The nature of all fractional-reserve banks — who are by definition bankrupt at all times – is to project an aura of stability until that illusion has already begun to implode.

By the time we are aware of a crisis – if one is in the offing — it will already be a roaring blaze by the time it is known publicly. It is by now well-established that truth is the first casualty of all banking crises. There will be little in the way of early warnings. To that end, we begin connecting the dots…

This must read Zero Hedge piece, which they borrowed from the NotQuant.com Internet site, appeared at 5:45 p.m. EDT yesterday afternoon—and I thank reader M.A. for finding it for us.

Germany drops probe into U.S. spying on Merkel

Germany’s top public prosecutor closed a year-long investigation into the suspected tapping of Chancellor Angela Merkel’s cell phone by U.S. spies, saying there was a lack of evidence that would stand up in court.

Dropping its probe in a case that had caused strains between Germany and the United States, the prosecutor said it could not find evidence backing allegations from former National Security Agency contractor Edward Snowden that Merkel’s phone was bugged.

“The accusations made would not stand up in court with the means available for criminal proceedings,” the federal prosecutors office in Karlsruhe said in a statement.

You have to wonder if that’s the real reason or not. But I would bet that it really would be a hard case to prove in court. But, having said that, you could bet your last nickel that the American government did exactly what they’re accused of. This Reuters story, filed from Berlin, put in an appearance on their website at 7:03 a.m. EDT on Friday morning—and I thank West Virginia reader Elliot Simon for sharing it with us.

The Grecian Kabuki Theatre: 5 Stories

1. Finance Minister Schäuble and Merkel Tussle Over Grexit: spiegel.de 2. E.U. Prepares for Worst as Greece Drives Finances to Brink: Bloomberg 3. Grexit Contagion Uncontained – European Peripheral Bond Risk is Soaring: Zero Hedge 4. Greek Stocks, Bank Bonds Battered as Deal Hope Fades: Zero Hedge 5. Macedonia Central Bank Blocks Greek Bank Withdrawals “In Case of Grexit”: Zero Hedge

Two of the above stories are from Roy Stephens—and three are from Dan Lazicki.

The Ukraine Imbroglio: John Batchelor Interviews Stephen F. Cohen

Batchelor and Cohen discuss what happened to the Kerry peace initiative in Kiev – and the shifting power initiatives are ripped away from the moderates (Kerry) in Washington to those of the “war party”. More worrisome is that the latest statements from Obama show some indication that he is siding with the latter group. What John Batchelor and Stephen F. Cohen discuss in this broadcast is a huge new powder keg in the Ukraine Crisis.

The powder keg is Transnistria, and seems to be a set up by the Obama administration to back Putin into a corner. At the end of May, Kiev, you may recall, refused air transit privileges for Russian planes to supply its troops. A “Berlin Airlift” scenario is being considered in Moscow to supply the 1500 odd troops that are posted there in this Russian Protectorate. Saakashvili, the new Washington via Kiev choice for governor in the Ukrainian border province of Odessa is a war monger who hates Russians – and was responsible (with Washington) for the Georgian War with Russia. So there is now a huge flash point for war with Russia again building here. If Kiev manages to shoot down Russian planes that are supplying these troop contingents – or rotating troops out – we will have Kiev finally in a shooting war with Russia. And that means Washington will have an excuse to engage directly against Russia. How long this is just a proxy war may be very short. If this scenario comes to pass, we should all consider that the WW3 military phase has begun. The possible scenarios for disaster here are also discussed in very worrisome detail in this podcast.

Quite frankly, right now we are at the cusp of finding out if Washington really wants a war with Russia or not. It would seem an obvious statement that if a country like the United States really wants to go to war, it will go to war. And the pattern for the past 15 years (at least) is for Washington to do this repeatedly and by any means necessary.

This 39:41 minute audio interview with Mr. Cohen appeared on the johnbatchelorshow.com Internet site on Tuesday—and I thank both Larry Galearis and Ken Hurt for contributing to this story. It’s worth listening to if you have the time and/or the interest.

Karelia: The unknown hotspot of the new Cold War

Russia has tightened its grip from its North Western region of Republic of Karelia in 2015. After being a remote area of negligible strategic importance, Karelia’s growth in importance has been noticed by geopolitical observers in both Russia and the West. Final conclusions drawn about the means to be conducted in the region determine Karelia’s status as either opportunity or threat for Russian Federation. Even more importantly, it reveals a great deal of the amount of self-confidence and strength of Russia. Does future Russia tend to rely more on hard discipline in avoiding all potentially risky influence from abroad? Or does it aim to benefit from soft power dimension provided by Karelia’s unique cultural features creating cross-border links between east and west?

Nikolai Patrushev, Head of the Security Council of the Russian Federation, aligned stance of his country to a social situation in the Republic of Karelia with a speech held on 19 March in Petrozavodsk. According to Patrushev, there had been “an activation of nationalist and revanchist social-political organizations in Finland” in recent months. Patrushev fears that the Finnish nationalist associations are acting under the guise of human rights organisations and begin to have “serious ideological influence” on the population of the region. He had noted already on 17 December 2014 that Karelia is Russia’s most important outpost in the Northwest.

Later, potentially as a further explanatory step to Patrushev’s statement, Russia’s Ministry of Interior Affairs started investigations about accusations claiming that a Petrozavodsk based NGO, Nuori Karjala (Young Karelia, Молодая Карелия), which aims to preserve and promote Karelian, Vepsian and Finnish indigenous cultures and languages in the region, has acted in a manner characteristic to a foreign agent. According to Russian law, a foreign agent is an organisation, which receive funding from abroad and act politically. Nuori Karjala is accused on the grounds that it organised a visit of the youth organisation of the Finns Party (Perussuomalaiset Nuoret) to the Republic of Karelia in cooperation with the regional parliament of Karelia. The Finns is a populist, Eurosceptic and Nato critical party, which currently makes part of the coalition government of Finland, in which they hold Foreign and Defence Minister positions. Moreover, Nuori Karjala is accused because it received a grant from the United Nations in 2013.

This article appeared on thesaker.is Internet site back on Tuesday—and is another story that had to wait for today’s column. It is, of course, courtesy of Roy Stephens.

We are the propagandists: The real story about how The New York Times and the White House has turned truth in the Ukraine on its head

A couple of weeks ago, this column guardedly suggested that John Kerry’s day-long talks in Sochi with Vladimir Putin and his foreign minister, Sergei Lavrov, looked like a break in the clouds on numerous questions, primarily the Ukraine crisis. I saw no evidence that President Obama’s secretary of state had suddenly developed a sensible, post-imperium foreign strategy consonant with a new era. It was force of circumstance. It was the 21st century doing its work.

This work will get done, cleanly and peaceably or otherwise.

Sochi, an unexpected development, suggested the prospect of cleanliness and peace. But events since suggest that otherwise is more likely to prove the case. It is hard to say because it is hard to see, but our policy cliques may be gradually wading into very deep water in Ukraine.

Ever since the 2001 attacks on New York and Washington, reality itself has come to seem up for grabs. Karl Rove, a diabolically competent political infighter but of no discernible intellectual weight, may have been prescient when he told us to forget our pedestrian notions of reality—real live reality. Empires create their own, he said, and we’re an empire now.

This interesting essay certainly falls into the must read category for any serious student of the New Great Game—and it was posted on the salon.com Internet site back on June 3. Roy sent it to me on Sunday, but it obviously had to wait for my Saturday missive.

A Net Assessment of the Middle East — George Friedman

The term “Middle East” has become enormously elastic. The name originated with the British Foreign Office in the 19th century. The British divided the region into the Near East, the area closest to the United Kingdom and most of North Africa; the Far East, which was east of British India; and the Middle East, which was between British India and the Near East. It was a useful model for organizing the British Foreign Office and important for the region as well, since the British — and to a lesser extent the French — defined not only the names of the region but also the states that emerged in the Near and Far East.

Today, the term Middle East, to the extent that it means anything, refers to the Muslim-dominated countries west of Afghanistan and along the North African shore. With the exception of Turkey and Iran, the region is predominantly Arab and predominantly Muslim. Within this region, the British created political entities that were modeled on European nation-states. The British shaped the Arabian Peninsula, which had been inhabited by tribes forming complex coalitions, into Saudi Arabia, a state based on one of these tribes, the Sauds. The British also created Iraq and crafted Egypt into a united monarchy. Quite independent of the British, Turkey and Iran shaped themselves into secular nation-states.

This defined the two fault lines of the Middle East. The first was between European secularism and Islam. The Cold War, when the Soviets involved themselves deeply in the region, accelerated the formation of this fault line. One part of the region was secular, socialist and built around the military. Another part, particularly focused on the Arabian Peninsula, was Islamist, traditionalist and royalist. The latter was pro-Western in general, and the former — particularly the Arab parts — was pro-Soviet. It was more complex than this, of course, but this distinction gives us a reasonable framework.

I haven’t read this yet, but it’s on my list for the weekend sometime. This 4-page essay showed up on the forbes.com Internet site yesterday afternoon EDT—and I thank reader M.A. for his second contribution to today’s column.

Sprott Money Weekly Wrap Up

Listen to this week’s special guest John Embry share his thoughts on the status of the U.S. economy, foreign currency volatility, Greece’s impasse with the IMF, and the build up of open interest silver on the Comex.

This 7:09 minute audio interview with host Geoff Rutherford showed up on the sprottmoney.com Internet site late yesterday evening.

The PHOTOS and the FUNNIES

The 6 frames-per-second feature on my camera is custom designed for photographing birds in flight—and I have lots of fun with birds that are landing, as it happens so quickly that the human eye just can’t stop the action. A crow, whether it be in mating plumage or not, is not an exciting bird to watch or photograph. But that all changes as they come in to land. These photos were taken 1/6 of a second apart, so you can see how quickly the landing event unfolds.

THE WRAP

The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists. — Ernest Hemingway, “Notes on the Next War,” Esquire, September 1935

Today’s pop ‘blast from the past’ is one that I’ve posted before. I ended of my last column at Casey Research with one of my two most favourite songs of all time—and I thought I’d post the other favourite to start things off in this new venture. Like I said, I’ve posted it before, but I’m sure you’ll have no trouble listening to it again—and it needs no introduction at all. The link is new.

Today’s classical ‘blast from the past’ is certainly one of my top five most favourite violin concertos—and I know I’ve posted it at least once in the last eight years, but it’s been a very long time, so I thought—what the heck! This is a piece that took about twenty years or more to grow on me, but once it did, I was a fan for life. It’s Edward Elgar’s violin concerto in B minor Op. 61. It was premiered in London in 1910, with Fritz Kreisler as soloist.

In this performance we have Nigel Kennedy doing the honours. I met Nigel when I was on the board of directors when he played for the Edmonton Symphony Orchestra when he was just a kid. I think was 16 years old—and already had an international reputation as an enfante terrible—and his conduct during his visit lived up to his advance billing. But could he play! His performance of The 4 Seasons is considered to be definitive—and I shan’t argue. He’s mellowed a lot since, but you’d never know looking at him in this video. It’s a long work, but it’s never long enough for me—and the link is here.

All in all it was another ‘nothing’ sort of day in the precious metals, but the last two trading days in silver took the metal to new lows—and as bullish as silver was at the Tuesday cut-off for yesterday’s COT Report, it’s even more wildly bullish now. “Da Boyz” set a new low in palladium for this move down as well. In gold and platinum, the tiny gains on Wednesday were entirely reversed, or more, with the price action on Thursday and Friday.

Based on that, it’s not a stretch to think that we’re more or less locked and loaded for a moon shot to the upside once again. But, as is always the case, how high and how fast is entirely up to JPMorgan et al—and we know what happened in a similar situation in mid-May, as the rallies in all four precious metals were all over in three or four trading days, as the powers-that-be stepped in front of them and killed them stone-cold dead.

Will that happen this time around? Beats me.

There’s still a chance that ‘da boyz’ could hit the precious metal rallies one more time for a final washout to the downside, especially in silver, as the Commercial net short position is good, but it’s not close to being a record low. But at this point in the game it would be the equivalent of picking up nickels in front of steamrollers—and they know it, as the law of diminishing returns is close at hand at these price/contract levels.

I’m more than interested in what Ted has to say about the current set-up after today’s COT Report. I talked to him yesterday—and he was very excited about the current situation. I’ll steal what I can for next Tuesday’s report.

Here are the 6-month charts for all four precious metals as of the close of trading yesterday—and I’ve also included copper, as this is another metal that ‘da boyz’ manage for fun, profit and price management purposed as well.

It’s safe to say that the current economic, financial and monetary system is long-past its expiry date—and at this juncture it’s only a matter of what fate awaits us. And as Earnest Hemingway so clearly points out, the end isn’t going to be pretty.

With the launch of this new website, it’s been one heck of a week for me—and I must admit that I’ve pretty much had it, as it’s already 5 a.m. where I live.

So I’m done for the day—and the week—and I’ll see you here on Tuesday.

Ed

Ed Steer’s Daily Analysis of the Gold and Silver Markets can be accessed at http://www.edsteergoldandsilver.com/