A Pretty Ugly COT Report in Gold. Silver..

YESTERDAY in GOLD, SILVER, PLATINUM and PALLADIUM

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

The CME Daily Delivery Report showed that 43 gold and 176 silver contracts were posted for delivery within the COMEX-approved depositories on Wednesday.

Of course, after Friday's big sell-off, this data is very much "yesterday's news" -- and baring any further dramatic price changes after today's COMEX close, we'll have a more accurate picture of the current condition of silver in this coming Friday's COT Report. 

Once again, here's Nick chart showing the tight correlation between the gold price -- and what the Managed Money traders are doing...or are tricked into doing.  You don't need a degree in mathematics to see how tight is correlation is.  Click to enlarge.

Here's Nick Laird's "Days to Cover" chart updated with yesterday's COT data for positions held at the close of COMEX trading last Tuesday. It shows the days of world production that it would take to cover the short positions of the Big 4 - and Big '5 through 8' traders in each physically traded commodity on the COMEX. Click to enlarge.

 

The July Bank Participation Report [BPR] data is extracted directly from the data in yesterday's Commitment of Traders Report.  It shows the number of futures contracts, both long and short, that are held by all the U.S. and non-U.S. banks as of Tuesday's cut-off in all COMEX-traded products.  For this one day a month we get to see what the world's banks are up to in the precious metals -and they're usually up to quite a bit.

[The July Bank Participation Report covers the time period from June 4 to July 2 inclusive.]

 

CRITICAL READS 

Consumer Credit Hits All-Time High as Credit Card Debt Surges

Morgan Stanley: "We Are Putting Our Money Where Our Mouth is and Downgrading Global Stocks to Sell"

Authored by: Andrew Sheets, chief cross-asset strategist at Morgan Stanley

Over recent weeks, you've heard us discussing why we think investors should fade the optimism from the recent G20. Why we think bad data should be feared rather than cheered because it will bring more central bank easing. Why we think the market is too optimistic on 2019 earnings and is underestimating the pressure from inventories, labour costs and trade uncertainty.

The time has come to put our money where our mouth is. In light of these concerns and others, we are downgrading our allocation to global equities from equal-weight to underweight.

The most straightforward reason for this shift is simple - we project poor returns: Over the next 12 months, there is now just 1% average upside to Morgan Stanley's price targets for the S&P 500, MSCI Europe, MSCI EM and Topix Japan (including dividends and equally weighted). If we ignore those targets and estimate returns for those same regions based on current valuations, adjusting for whether returns tend to be better or worse given current economic data, the upside is very similar (3%). There comes a point for every analyst where you need to change your forecast or change your view. We're doing the latter.

Why are those return estimates so low, especially in light of possible central bank easing? Our economists, after all, are calling for the Federal Reserve to lower rates later this month, and the ECB to embark on a new round of quantitative easing.

Our concern is that the positives of easier policy will be offset by the negatives of weaker growth: We think a repeated lesson for stocks over the last 30 years has been that when easier policy collides with weaker growth, the latter usually matters more for returns. Easing has worked best when accompanied by improving data. If you don't believe us, we have some European stocks from April 2015, shortly after the ECB's first QE programme was announced, that we'd like to sell you.

That's a courageous, but correct call.  This commentary showed up on the Zero Hedge website at 5:35 a.m. on Monday morning EDT -- and it comes to us courtesy of Brad Robertson.  Another link to it is here.

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Fed Sheds $38 Billion in Treasuries and MBS in June, Dumps MBS at Record Pace, Exceeding "Cap" for First Time -- Wolf Richter

In June, the Fed shed Treasury securities at the slower pace announced in its new plan for QT, but it dumped Mortgage Backed Securities (MBS) at the fastest rate since the QE unwind started, breaching its "up to" cap for the first time. And it is experimenting with the opposite of its QE-era "Operation Twist" - Operation Untwist?

Total assets at the Fed fell by $34 billion in June, as of the balance sheet for the week ended July 3, released Friday afternoon. This includes $15 billion in Treasury securities and a record $23 billion in MBS, for a total of $38 billion, less some other balance-sheet activities unrelated to the QE unwind. This trimmed its total assets to $3.813 trillion, the lowest since September 2013. Since the beginning of the "balance sheet normalization" era, the Fed has shed $648 billion. Since peak-QE in January 2015, it has shed $687 billion:

The Fed doesn't sell its Treasury holdings outright. But when securities mature, the US Treasury Department pays them off, and the Fed then doesn't reinvest this money in new securities. Instead, it destroys this money in the reverse manner in which it created it during QE. But the Fed has announced caps - the "up to" amounts. If the amount of Treasuries that mature in a given month exceed the cap, the Fed reinvests the overage in new Treasuries. Under the Fed's new regime, the maximum amount of Treasury securities allowed to roll off when they mature was $15 billion in June. And that's what happened.

This 3-chart commentary from Wolf appeared on his Internet site on Saturday sometime --- and I thank Richard Saler for pointing it out.  Another link to it is here.

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Wall Street Dons a 'Tinfoil Hat' to Ponder U.S. Currency Intervention

A growing chorus of Wall Street foreign-exchange analysts is writing about the risk that U.S. President Donald Trump may move beyond words in his quest for a weaker dollar.

From ING to Canadian Imperial Bank of Commerce, more analysts in recent weeks have been openly contemplating the wild-card notion that the administration could intervene to cheapen the dollar. The research comes as Trump has intensified criticism of both the Federal Reserve and other countries' currency practices. The U.S. leader tweeted last week that Europe and China are playing a "big currency manipulation game," and called on the U.S. to "MATCH, or continue being the dummies."

This article showed up on the Bloomberg website at 12:27 PDT on Monday -- and was updated about thirty minutes later.  I found it in a GATA dispatch early yesterday evening -- and another link to it is here.

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The Debate Over the Fed Begins -- Editorial

It can't be entirely a coincidence that the first move by a major newspaper against the confirmation of Judy Shelton as a governor of the Federal Reserve should come from the Washington Post. It is, after all, the only newspaper in America to have been launched to glory by, in Eugene Meyer, a just-retired chairman of our central bank. Yet the Post gets into none of that history in its editorial this morning in respect of Ms. Shelton. It's not hard to see why.

The Post's beef against Ms. Shelton is not that she lacks for credentials. It calls her academic credentials "strong" and acknowledges that she has held public positions in what we would call two non-political agencies, the National Endowment for Democracy, which she chaired, and the European Bank for Reconstruction and Development, to which she is currently America's representative. What the Post objects to, for starters, is that she's had an "eminently political career."

It faults her for having advised the presidential campaigns of Senator Bob Dole, Ben Carson, and President Trump. Yet such Fed chairmen as G. William Miller and Alan Greenspan also advised presidential candidates (respectively, Hubert Humphrey and Richard Nixon). The Post also faults Ms. Shelton for writing op-eds. It must be the first time the publisher of one of journalism's most distinguished op-ed pages has sought to disqualify a nominee for public service for having written for op-ed pages.

On the one hand, the Post complains about Ms. Shelton flip-flopping on interest rates, depending on the administration. On the other hand, it suggests that the "great cause of her career" has been the gold standard. It says she sees it as a "restraint on central bank currency manipulations" while opponents - "correctly," the Post avers - see it as an "arbitrary limitation on liquidity that almost strangled the world economy to death in the 1930s."

This editorial put in an appearance on The New York Sun's website on Sunday -- and I found it embedded in a GATA dispatch -- and another link to it is here.

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Why the U.S.-Puppet-'President' of Venezuela is Toast

Even the corporate media are losing enthusiasm for the US government's ploy to replace the democratically elected President Nicolás Maduro of Venezuela with the U.S.-anointed security asset Juan Guaidó. Reuters reports in a July 1 article, "Disappointed Venezuelans lose patience with Guaidó as Maduro hangs on," that the U.S.-backed "military uprising" has "unraveled." A critical reading of the article explains why.

Reuters correctly notes that "the 35-year old (Guaidó) had risen to prominence three months before," though a little more background information would have been helpful. For instance, Guaidó was unknown to 81% of Venezuelans a little more than a week before he got a telephone call from U.S. Vice President Pence telling him to declare himself interim president of Venezuela, which Guaidó dutifully did the following morning at a street rally flanked with U.S. and Israeli flags. A member of a marginal far-right Venezuelan political party, Guaidó was not even in the top leadership of his own grouplet.

Reuters continues that after Maduro took office, he "has overseen an economic collapse that has left swaths of the once-wealthy country without reliable access to power, water, food, and medicines." Not mentioned by Reuters is the economic war being waged against Venezuela by the US and its allies that has employed unilateral coercive measures - sanctions - responsible for taking the lives of some 40,000 people.

This illegal collective punishment of the Venezuelan people by the U.S. government has diverted legitimate funds of the Venezuelan government. Reuters obliquely mentions "Guaidó has gained control of some of the Venezuelan assets in the United States." In fact, the U.S. government seized those assets, which would have gone to preventing the "economic collapse" that Reuterssupposedly laments.

Reuters reports: "The opposition's momentum has slowed since the April 30 uprising. Attendance at Guaidó's public rallies has dropped and the opposition has held no major protests since then." Reuters hints why Guaidó's fortunes are eclipsing: "the opposition says it is...seeking to build a grassroots organization." That is, the U.S. surrogate does not have a meaningful grassroots presence.

This fairly long commentary appeared on the counterpunch.org Internet site last Friday -- and I pulled it from a Zero Hedge article that was posted there on Monday evening.  Another link to it is here.

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Deutsche Bank CEO Slashes 18,000 Jobs in $8.3 Billion Revamp

Deutsche Bank AG unveiled a radical overhaul that will see the lender exit its equities business, post a €2.8 billion ($3.1 billion) second-quarter loss and cut the workforce by a fifth to reverse a slide in profitability.

Chief Executive Officer Christian Sewing will shelve the dividend this year and next and take restructuring charges of 7.4 billion euros through 2022 to pay for an overhaul that shrinks the German lender's once-mighty investment bank along with its global footprint and key fixed-income business.

Deutsche Bank shares were down 0.7% in Frankfurt trading as of 12:35 p.m. after climbing as much as 4.4% earlier. The lender's riskiest bonds also reversed earlier gains, with perpetual notes down about 0.5 euro cents to around 90 cents on the dollar and notes callable in 2022 down 0.4 cents. Analysts said that while the restructuring was broader than expected, the newly announced targets will be tough to achieve.

The scale of the revamp underscores the failure of Sewing and his recent predecessors to solve the fundamental problem: costs were too high and revenue too low. After government-brokered merger talks with Commerzbank AG collapsed in April, the CEO had few alternatives to bolster market confidence. His plan was approved by the board at a meeting Sunday.

This news item was posted on the bloomberg.com Internet site at 7:44 a.m. PDT on Sunday morning -- and was updated about twenty hours later.  I thank Swedish reader Patrik Ekdahl for bringing it to our attention -- and another link to it is here.

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Turkey's Erdogan Draws the Line on Rates After Shock Central Bank Ouster

Hours after unexpectedly forcing out the central bank's governor, Turkish President Recep Tayyip Erdogan made clear that he expects both the successor and the rest of the establishment to toe the government's line on monetary policy.

The decision to dismiss Murat Cetinkaya, whose four-year term was due to end in 2020, was announced in the early hours on Saturday following a pause in interest rates that lasted for over nine months. Deputy Governor Murat Uysal was named as a replacement. Investors weren't impressed -- the lira slid more than 3% in early Asian trading before paring losses.

During a closed meeting after the decree came out, Erdogan told lawmakers from his ruling party that politicians and bureaucrats all need to get behind his conviction that higher interest rates cause inflation, according to an official who was present. He also threatened consequences for anyone who defies the government's economic policies, the official said.

Erdogan's office of communication didn't respond to calls and text messages seeking comment.

"By abruptly dismissing Cetinkaya, Erdogan reminded everyone who is in charge of monetary policy," said Piotr Matys, a London-based strategist at Rabobank.

This story showed up on the Bloomberg website at 7:34 a.m. on Sunday morning Pacific Daylight Time [PDT] -- and it's the second offering of the day from Patrik Ekdahl.  Another link to it is here.  A companion story from Bloomberg on this issue is headlined "Turkey Assets Fall as Traders Fret Over Central Bank Credibility" -- and that's from Patrik as well.

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BP Oil Tanker Shelters in Persian Gulf on Fear of Iran Retaliation

An oil tanker run by BP Plc is being kept inside the Persian Gulf in fear it could be seized by Iran in a tit-for-tat response to the arrest by Gibraltar last week of a vessel hauling the Islamic Republic's crude.

The British Heritage, able to haul about 1 million barrels of oil, was sailing toward Iraq's Basrah terminal in the south of country when it made an abrupt u-turn on July 6. It's now off Saudi Arabia's coast and a person with knowledge of the matter says BP's concern is that it could become a target if Iran seeks to retaliate for the seizure near Gibraltar -- by British Royal Marines -- of the tanker Grace 1 on July 4.

BP's decision shows how rising tensions between Iran and the west are having an impact on the oil tanker industry that's vital to the global trade in crude. Tehran's foreign ministry said the arrest of Grace 1 was an act of piracy and a former leader of Iran's Revolutionary Guard said on Twitter the Islamic Republic should take a British tanker in response. The U.S. accused Iran of recent attacks on tankers just outside the Persian Gulf.

No surprises here.  This news story was posted on the bloomberg.com Internet site at 2:58 a.m. PDT on Monday morning -- and was updated two and a half hours later.  I extracted it from a Zero Hedge article that Brad Robertson sent our way.  Another link to it is here.

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Poland joins Hungary with Huge Gold Purchase and Repatriation

With a variety of the world's central banks going on a gold buying spree in recent years such as Russia and China, there has unsurprisingly been no shortage of news-flow in this area for the world's financial media to comment on. But even in such an environment of abundant sovereign gold purchases, a number of buying bombshells have stood out for their intensity and 'shock and awe' abruptness. Particularly from nations which on the surface might seem like unlikely gold buyers.

One of these was the announcement last October by Hungary's central bank, that after 32 years of holding unchanged gold reserves, it had rapidly increased it's monetary gold holdings by 1,000% or 10 fold, from 3.10 tonnes to 31.5 tonnes, and also repatriated (brought home) this entire holding from London to Budapest, away from the clutches of the Bank of England. At the time we asked:

"With almost all of Poland's gold held at the Bank of England, a relevant question now is how long before Poland also sees fit to repatriate its gold in physical form away from the fractionally-backed LBMA controlled gold trading centre of London. "

The answer to this question was, not long at all. For to the Hungarian bombshell we can now add Hungary's neighbor and closest political ally Poland, which has just in it's own way shocked the gold market and the European Union by announcing that during the first half of 2019 it has already bought 100 tonnes of monetary gold at the Bank of England, bringing it's gold reserves to 228.6 tonnes (all stored at the Bank of England), and now plans to repatriate almost half of it's strategic gold reserves (or at least 100 tonnes) back to the National Bank of Poland (NBP) vaults in Warsaw.

It should be obvious that all the world's central banks are wise to the Anglo/American price management scheme in the precious metals market -- and have been for years...even though they won't breath a word of that fact in public.  It just been recently that some of them have done something about it.  More will follow -- and soon.  This commentary from Ronan Manly  appeared on the bullionstar.com Internet site on Sunday sometime -- and I found it on the gata.orgInternet site.  Another link to it is here.

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China's Gold Hoard Swells Again in June

Central banks are going after gold in 2019, boosting holdings as economic growth slows, trade, and geopolitical tensions rise, and some authorities seek to diversify their reserves away from the dollar.

The People's Bank of China said today it raised reserves for a seventh month in June, adding 10.3 tons, following the inflow of almost 74 tons in the six months through May. Last week Poland said it more than doubled its gold assets over this year and last, becoming the top holder in central Europe.

"Aside from its attempt to diversify its holdings of dollars, owning more gold reserves is also an important strategy in China's rise as a superpower," Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore, said in an email. Additions are likely to continue in coming months, according to Lee.

As I've point out every month when this sort of story appears, China is now officially adding to its reserves, physical gold that was purchased mostly likely years ago.  But, without doubt, it's certainly still buying gold in the open market, plus whatever it mines every year -- and that will be recorded as official reserves when it suits them.  I suspect that they hold many multiples of what they are officially acknowledging...about 1,900 tonnes.  This Bloomberg article showed up on their website at 11:12 p.m. PDT on Sunday night -- and was updated about five hours later.  I found it on the gata.org Internet site -- and another link to it is here.

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2019 H1 China gold demand lowest for five years

China has been recognised as the world's largest consumer of gold for around the past seven years, but while the latest figures still confirm the nation as the world's No. 1, 2019 demand looks to have been the lowest for around five years.  Indeed if the country's buying slump continues, 2019 may prove to be the first sub 2,000 tonne total gold demand year, based on SGE gold withdrawal figures, since 2016.

June Shanghai Gold Exchange gold withdrawal data certainly seem to confirm a downturn in Chinese gold demand so far this year.  This should not really be too surprising given the apparent effects of President Trump's tariff impositions on Chinese imports to the U.S.  This latest data may well give some advantage to the U.S. in its recently resurrected trade talks with China given that it appears the U.S. President's tactics may be beginning to have an effect on the Chinese economy, and on disposable incomes within the Middle Kingdom.  But whether this is likely to be sufficient to stimulate concessions from the Chinese to meet U.S. demands is rather less certain.  There is face-saving on both sides to take into account in such negotiations and saving face is perhaps more important in Asian cultures than in the West!

We have been consistent over the past few years in equating Shanghai Gold Exchange gold withdrawal data with the country's overall total gold demand - a sometimes controversial view.  This data is much closer to the known levels of China's own domestic gold production plus known and unknown gold imports plus an allowance for scrap conversion than are other estimates of Chinese gold consumption. These latter seem to ignore gold imported by the financial sector and restrict demand estimates to industrial demand (including jewellery and artefacts) and investment.  These cumulative figures appear to fall hugely short of known Chinese gold flows.

At the half-year point, withdrawals are over 23% down on the 2018 six months figure and over 30% down on 2017.  It should also be noted that both the 2017 and 2018 full year gold withdrawal figures ended up well short of those for the record 2015 year when full year SGE total gold withdrawals came to nearly 2,600 tonnes.

This commentary from Lawrie put in an appearance on the Sharps Pixley website early on Monday morning BST -- and another link to it is here.

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Central bank gold purchases up 73% so far this year, says WGC

Net gold purchases by central banks totalled 35.8 t in May, 27% lower month-on-month, but net purchases in the year to date, at 247.3 t, are 73% higher year-on-year, the World Gold Council (WGC) reports.

WGC market intelligence director Alistair Hewitt on Monday pointed out that central banks in several emerging markets, including Russia, China, Turkey and Kazakhstan, continued to dominate buying, with those banks being "the four biggest buyers so far" this year.

Kazakhstan's central bank has bought in excess of 25 t of gold over the last six years, peaking last year at 50.6 t. To date this year, the bank has bought 20.5 t of gold.

To date this year, China has bought 63.8 t of gold, while Turkey's central bank, which started buying gold outright in May 2017, bought about 49.3 t of gold, so far this year.

Other central banks that have increased their gold purchases since 2016 include Uzbekistan, Serbia, the Kyrgyz Republic, India, Hungary, Greece, Egypt, Colombia and Belarus.

This brief news item, was posted on the miningweekly.com Internet site on Monday -- and it's another article that I lifted from the Sharps Pixley website.  Another link to it is here.

 

The WRAP

"No nation could preserve its freedom in the midst of continual warfare." -- James Madison

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Only platinum was allowed to close in positive territory on Monday.  The two primary precious metals...silver and gold...ran into initial price resistance in early morning trading in London -- and then JPMorgan et al did the rest during the COMEX trading session in New York.

 

The barely worth mentioning activity in the currencies certainly had very little to do with precious metal prices yesterday.  Yesterday's price action was a purely paper affair in the GLOBEX/COMEX futures market.

 

Here are the 6-month charts for the Big 6 commodities -- and there's not a lot to see.  Click to enlarge.

 

 

And as I type this paragraph, the London open is less than a minute away -- and I see that the gold price was sold down a bit in the first few hours of trading once it began at 6:00 p.m. EDT on Monday evening in New York -- and it has been chopping quietly and unevenly sideways since -- and is currently lower by $1.40 an ounce. Silver has managed to edge a bit higher since its low in early morning trading in the Far East -- and is up 4 cents at the moment. Platinum and palladium have been under some selling pressure as well, with the former down 5 bucks -- and the latter off its Shanghai low, but also down 5 dollars as Zurich opens.

 

Net HFT gold volume is already very decent at a bit over 54,000 contracts -- and there's 3,034 contracts worth of roll-over/switch volume out of August and into future months. Net HFT silver volume is nothing special at 8,400 contracts -- and there's a teeny tiny 68 contracts worth of roll-over/switch volume in that precious metal.

 

The dollar index opened unchanged once trading commenced at 7:45 p.m. EDT on Monday evening in New York, which was 7:45 a.m. China Standard Time on their Tuesday morning. It chopped very unevenly sideways until around 12:50 p.m. CST -- and then began to edge a bit higher -- and back above the unchanged mark by a bit. Its current high, such as it is, came very close to the 2:15 p.m. CST afternoon gold fix in Shanghai. It's off that by a bit now -- and up 6 basis points as of 7:45 a.m. in London...8:45 a.m. in Zurich.

 

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Today, at the close of COMEX trading, is the cut-off for this Friday's Commitment of Traders Report -- and I'll wait until tomorrow's column before I express an opinion as to what it may contain.  But there should be big improvements in both...particularly in silver.

 

When Ted and I were in conversation yesterday, he wasn't sure if JPMorgan et al were going to go 'Full Monty' on  the precious metals this time or not...or even if they were capable of doing it.  It's  a chip shot in silver below its last moving average of importance.  But in gold it's big dollars for both the 200 and 50-day moving averages.

 

So we wait some more.

 

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And as I post today's missive on the website at 4:02 a.m. EDT, I note that all four precious metals have been sold lower as the first hour of London and Zurich trading draws to a close.  Gold is down $2.50 the ounce at the moment -- and silver is now down a penny.  Platinum is down 7 bucks...but 'da boyz' hammered palladium lower by 20 dollars as they continue their attempts to run the Managed Money traders out of their huge long position.

Gross gold volume is around 69,500 contracts -- and minus roll-over/switch volume, net HFT silver volume is a bit under 63,000 contracts.  Net HFT silver volume is about 10,500 contracts now -- and there's still only a tiny 93 contracts worth of roll-over/switch volume on top of that.

The dollar index has been chopping very quietly sideways during the last hour -- and is up 7 basis points as of 8:45 a.m. BST in London/8:45 a.m. CEST in Zurich.

 

That's it for today, which is more than enough -- and I'll see you here tomorrow.

 

Ed

https://edsteergoldsilver.com

09 July 2019 -- Tuesday