June 30/Silver breaks out from its last barrier of $18.50 and immediately proceeds to close in the access market at $18.78/IMF admits that Deutsche bank is the greatest risk to the financial system/Deutsche bank again retreats/Italian banks are in serious trouble as the EU meet and try to rescue this monstrosity/Boris Johnson is out of the running for UK Prime Minister /

Good evening Ladies and Gentlemen:

Gold:  $1,318.40 down $5.50    (comex closing time)

Silver 18.58  UP 22 cents

In the access market 5:15 pm

Gold: 1323.30

Silver: 18.78


Today is the last day for June gold contract. Last  night we had a fair sized 185 notices filed last night, for 18500 oz to be served upon today.  The total number of notices filed in the first 20 trading days is enormous at 15,785 for 1,578,500 oz.  (49.09 tonnes) This completes June gold

ii) in silver we had 0 notice filed for nil oz. for the June contract month.  Total number of notices served  in the 20 days: 616 for 3,080,000 oz

Thus we can safely say that the final amounts standing for gold is 1,578,500 oz for 49.09 tonnes:

For silver:  616 notices for 3,080,000 oz

And now for the July contract month

For the July gold contract month, strangely we had 0 notices served upon for 0 ounces

In silver we had 234 notices served upon for 1,170,000 oz


Today, the big news was the fact that silver broke its last resistance line at $18.50 and then it immediately shot up to $18.78.  The bankers must be terrified as they are massively short and they had no time to cover their comex short contracts.

Let us have a look at the data for today


Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 288.78 tonnes for a loss of 14 tonnes over that period


In silver, the total open interest fell by a considerable 2874 contracts down to 208,522, BUT STILL CLOSE TO AN  ALL TIME RECORD. THE OI DECLINED DESPITE THE FACT THAT  THE  PRICE OF SILVER WAS UP BY 52 CENTS with respect to YESTERDAY’S trading.In ounces, the OI is still represented by just over 1 BILLION oz i.e. 1.042 BILLION TO BE EXACT or 148% of annual global silver production (ex Russia &ex China).  The bankers are running scared as they saw the potential for the price of silver to pierce $18.50

In silver we had 0 notices served upon for NIL oz.

In gold, the total comex gold OI ROSE by a HUGE 7,769 contracts UP to 621,297 as the price of gold was UP $9.00 with YESTERDAY’S trading (at comex closing). 


With respect to our two criminal funds, the GLD and the SLV:


No changes in gold inventory./

Total gold inventory: 950.05 tonnes


No changes in silver inventory at the SLV

Inventory rests at 333.544 million oz.

First, here is an outline of what will be discussed tonight:

1. Today, we had the open interest in silver fell by 2,874 contracts down to 208,522  DESPITE THE FACT THAT THE price of silver was UP BY  52 CENTS with YESTERDAY’S trading. The gold open interest ROSE by a HUGE 7969  contracts UP to 621,297 as the price of gold ROSE by $9.00 YESTERDAY.

(report Harvey).


2 a) Gold trading overnight Europe, Goldcore

(Mark OByrne/


i)Late  WEDNESDAY night/THURSDAY morning: Shanghai closed DOWN 1.98 POINTS OR 0.07% / /Hang Sang closed UP 358.25 OR 1.75%. The Nikkei closed UP 9.09 POINTS OR 0.06% Australia’s all ordinaires  CLOSED UP 1.71% Chinese yuan (ONSHORE) closed UP at 6.6439 /Oil ROSE to 49.44 dollars per barrel for WTI and 50.91 for Brent. Stocks in Europe ALL IN THE GREEN . Offshore yuan trades  6.6635yuan to the dollar vs 6.6439 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS AS MORE USA DOLLARS LEAVES ITS SHORES



Last night the 40 yr bond yield in Japan is yielding .05%.  Now Kuroda has very little positive yielding debt to buy.  Not only that but he is running out of bonds to buy and probably by the middle of 2017, he will have zero to buy.

( zero hedge)


A Reuters report suggests that China is comfortable to let the yuan tumble to 6.80 as it is worried about global growth. That initially sent the yuan southbound and then POBC currency traders intervened, supporting the yuan. As the yuan depreciates, it sends a massive wave of deflation throughout the globe.

( zero hedge)


i)Amazing!! the IMF admits that the greatest risk to the global financial system is Deutsche bank with their 72 + trillion in derivatives and yes they are correct!

( zero hedge).

ii)Deutsche bank continues on its journey to reach its intrinsic value and that value is zero

( zero hedge)

iii)More trouble on the horizon as the EU and the ECB try to contemplate how to rescue Italian banks.  The thought is to increase the firepower of bailout bad bank Atlante and then seek other financiers for Atlante to bailout the ailing banks.  Now we find there is trouble again in Portugal with respect to the sovereign and its banks:

( zero hedge)

iv)Mark Carney speaks and tells the world that the UK will ease:

(Mark Carney/BOE/zero hedge)

v)The markets reaction:  down goes GILT yields and the pound tumbles:

( zero hedge)

vi)In a very surprising move, Boris Johnson, leader of the BREXIT campaign decided not to run for the leader of the Conservative party and thus he will not run for UK Prime Minister

Sterling plummets/ FTSE rises:

( zero hedge)

vii)We have been pointing out to you the increasingly shrinking pool of eligible bond debt that the ECB can purchase due to the high level of negative interest rates.  Surprisingly 57% of all German bonds are ineligible.  Now the ECB is contemplating relaxing the rules to purchase weaker graded debt..That sends the Euro southbound! and knocks Deutsche bank’s stock closer to its intrinsic value of zero.

( zero hedge)


viii)A few days ago the S & P downgraded the UK.  Then to further annoy Europe, S & P downgraded the entire EU from AA+ to AA-

( zero hedge)
ix)This is interesting: The European commission has authorized Italy to use government guarantees to create a liquidity support program for their banks. In other words the Italian government which is broke is to provide the guarantee.

There is a kicker:  and is a complete joke!


“only solvent banks would qualify for the liquidity support program, which has been authorized until the end of the year.” The problem is that with €360 billion in NPLs, every bank in Italy is insolvent, which implicitly means that they will all be found to be solvent or otherwise nobody will benefit.

courtesy zero hedge)



Mexico raises its interest rate bigger than expected by 50 basis points as they are facing huge food inflation:

( zero hedge)


Crude is about to slide southbound as China’s SPR is now close to full capacity

( zero hedge)



i)John Embry talks about the huge amount of derivatives underwritten by western banks that are in severe trouble today

( John Embry/Kingworldnews)

ii)The third biggest derivative player, Credit Suisse, raises their expectations to gold and silver due to declining physical supplies:

( zero hedge)


iii) Making the case for $12,000 gold and $360 silver to rise

(courtesy SRSRocco report/Steve St Angelo)


iv)Silver surges past the key $18.50 price level!

(courtesy zero hedge)


i)David Stockman talks about the true figures on the USA economy and how the S and P is trading at 23.7 x earnings, totally unheard of in modern financial circles. And all of the USA stimulus was meant to benefit only the elite bankers

a must read..

( David Stockman/ContraCorner)

ii)Consumer confidence for the over 55’s falters!  The jobless rate rose a modest 10,000 to 268,000

( zero hedge)

iii)Another phony report:  Chicago PMI rises to a 18th month high of 56.8 from last month’s 49.3 and about a 7 standard deviation from expectations.

( zero hedge)

iv)Seems to me that we have a shortage of good collateral as the boys try and window dress their balance sheets.

(courtesy zero hedge)

Let us head over to the comex:

The total gold comex open interest ROSE to an OI level of 621,297 for a GOOD SIZED GAIN of 7,769 contracts AS  THE PRICE OF GOLD ROSE $9.00 with respect to YESTERDAY’S TRADING. We are now in the non active month is July and on first day notice we saw it’s OI FALL by a TINY SIZED 128 contracts DOWN to 4644. In ounces,the total standing is 464,400 oz OR 14.44 TONNES . No doubt that this again will scare our bankers as somebody big is continually standing for the gold metal.The next big active contract month is August and here the OI ROSE by 4103 contracts UP to 433,767. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was FAIR at 173,820. The confirmed volume  yesterday (which includes the volume during regular business hours + access market sales the previous day was  good at 193,358 contracts. The comex is not in backwardation.

Today, strangely we had 0 notices filed for nil oz in gold despite the high amount of gold ounces standing for delivery.


And now for the wild silver comex results. Total silver OI FELL by A CONSIDERABLE 2874 contracts from 211,396, down to208,522.  We are still close to the new all time record high for silver open interest set on June 24.     The front active delivery month is July and here the OI fell BY 10,834 contracts down to 2,957. Thus the total number of silver ounces standing in this active month is 14,785,000 OZ. Then next non active month of August saw it’s OI RISE by 15 contracts up to 367. The next big active month is September and here the OI rose by 7724 contracts up to 153,422.   The volume on the comex today (just comex) came in at 36,511 which IS weak. The confirmed volume YESTERDAY (comex + globex) was HUGE at  121,832. Silver is not in backwardation . London is in backwardation for several months.
We had 234 notices filed for 1,170,000 oz. in silver

JULY contract month:

INITIAL standings for JULY


June 30.
Withdrawals from Dealers Inventory in oz   nil OZ
Withdrawals from Customer Inventory in oz  nil  NIL


Deposits to the Dealer Inventory in oz NIL
Deposits to the Customer Inventory, in oz   2155.22 OZ


No of oz served (contracts) today 0 notices 

nil oz

No of oz to be served (notices) 4644 contracts

464400 oz

Total monthly oz gold served (contracts) so far this month 0 contracts (nil oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   1400.01 OZ
Total accumulative withdrawal of gold from the Customer inventory this month  259,318.2 OZ

Today we had 0 dealer DEPOSIT

total dealer deposit:  NIL   0z

Today we had 0 dealer withdrawals:

total dealer withdrawals:  nil oz

Today we had 1 customer deposits:

i)INTO DELAWARE:  2155.22 OZ

Total customer deposits; 2155.22   OZ

Today we had 0 customer withdrawal:


total customer withdrawals:  NIL oz

Today we had 3 adjustments:

i) Out of BRINKS:  589.35 oz were transferred out of the DEALER and into the CUSTOMER BRINKS. (A PROBABLE SETTLEMENT)

ii) Out of MANFRA:  79.474.80 oz were transferred out of the DEALER and into the CUSTOMER (WILL DEEM THIS AS A SETTLEMENT:  2472 KILOBARS)

the total weight is 2.490 tonnes and this is deemed a settlement.

Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 0 contracts of which 0 notices was stopped (received) by JPMorgan dealer and 0 notices was stopped (received)  by JPMorgan customer account. 
To calculate the initial total number of gold ounces standing for the JULY contract month, we take the total number of notices filed so far for the month (0) x 100 oz  or NIL oz , to which we  add the difference between the open interest for the front month of JULY (4644 CONTRACTS) minus the number of notices served upon today (0) x 100 oz   x 100 oz per contract equals 464,400 oz, the number of ounces standing in this active month. 
Thus the INITIAL standings for gold for the JULY. contract month:
No of notices served so far (0) x 100 oz  or ounces + {OI for the front month (4644) minus the number of  notices served upon today (0) x 100 oz which equals 464400 oz standing in this   active delivery month of JULY (14.444 tonnes).
Since the comex allows GLD shares to be used for settling, it may take quite a while for the physical gold to enter the comex vaults.  So far I have seen little evidence of any settling of contracts but I will continue to monitor it for you. 
We now have partial evidence of gold settling for last months deliveries We now have 6.889 TONNES FOR MAY + 49.09 TONNES FOR JUNE +  14.444 TONNES FOR JULY + 12.3917 tonnes (April) +2.2311 tonnes (March) + 7.99 (total Feb)- .940 (probable delivery on March 1) tonnes -.0434 tonnes (March 11,12,17,18) + March 31: 1.2470 and then  April 1,2: – .0006 tonnes  and last week April 16 .3203 and April 22 .(0009 tonnes) + april 29  .205 tonnes + May 5:  3.799 and May 6: 1.607 tonnes – MAY 12  .0003- May 18: 1.5635 tonnes-May 19/   2.535 tonnes-May 27 .0185 – .024 TONNES MAY 31 -jUNE 4: .5044 ; june 10 -.0008 / June 22:0.48 tonnes /June 23: 0489 tonnes, June 24..018; june 29 .036 tonnes; JUNE 30 2.49 TONNES = 62.109 tonnes still standing against 71.664 tonnes available.
 Total dealer inventor 1,919,236.233 tonnes or 59.69 tonnes
Total gold inventory (dealer and customer) =9,284,412.141 or 288.85 tonnes 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 288.85 tonnes for a loss of 14 tonnes over that period. 
JPMorgan has only 25.70 tonnes of gold total (both dealer and customer)
JPMorgan now has only .900 tonnes left in its dealer account.



And now for silver

JULY INITIAL standings


 June 30.2016

Withdrawals from Dealers Inventory NIL


Withdrawals from Customer Inventory  600,733.420oz


Deposits to the Dealer Inventory NIL
Deposits to the Customer Inventory  600,733.420  oz



No of oz served today (contracts) 234 CONTRACTS 

(1,170,000 OZ)

No of oz to be served (notices) 2723 contracts

(13,615,000 oz)

Total monthly oz silver served (contracts) 234 contracts (1,170,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month 602,110.12 oz
Total accumulative withdrawal  of silver from the Customer inventory this month  25,624,500.1 oz

today we had 0 deposit into the dealer account

total dealer deposit:NIL oz

we had 0 dealer withdrawal:


total dealer withdrawals:  NIL oz

we had 2 customer deposits:

i) Into CNT: 5246.98 OZ

ii) Into Scotia:  595,686.440 oz


Total customer deposits: 600,733.420 oz

We had 2 customer withdrawals

i) Out of CNT: 22,222.066 oz

ii) Out of SCOTIA: 600,215.45  OZ


total customer withdrawals:  622,437.512  oz



 we had 1 adjustment

i)  Out of CNT:

862,570.770 oz leaves the customer and enters the dealer of CNT

The total number of notices filed today for the JULY contract month is represented by 234 contracts for 1,170,000 oz. To calculate the number of silver ounces that will stand for delivery in JULY., we take the total number of notices filed for the month so far at (234) x 5,000 oz  = 1,170,000 oz to which we add the difference between the open interest for the front month of JULY (2957) and the number of notices served upon today (234) x 5000 oz equals the number of ounces standing 
Thus the initial standings for silver for the JULY contract month:  234 (notices served so far)x 5000 oz +{2957 OI for front month of JULY ) -number of notices served upon today (234)x 5000 oz  equals  14,785,000  of silver standing for the JULY contract month.
Total dealer silver:  23.572 million (close to record low inventory  
Total number of dealer and customer silver:   151.451 million oz
The total open interest on silver is NOW NEAR its all time high with the record of 218,979 being set June 24.2016.  The registered silver (dealer silver) is NOW NEAR  multi year lows as silver is being drawn out at both dealer and customer levels and heading to China and other destinations. The shear movement of silver into and out of the vaults signify that something is going on in silver.
And now the Gold inventory at the GLD
JUNE 30/no change in gold inventory /inventory rests tonight at 950.05 tonnes
June 29/ a good sized deposit of 2.67 tonnes/inventory rests at 950.05 tonnes
June 28/ a huge deposit of 13.067 tonnes into inventory/new inventory rests so far at 947.38 tonnes.  This was a paper addition
June 27/a huge deposit of 18.415 tonnes into the GLD inventory/the new inventory rests at 934.313 tonnes.  The addition was a paper addition and not physical
june 24./strange!! no additions to gold with its huge 58 dollar advance??
june 23/no change in gold inventory tonight/rests at 915.90 tonnese
June 22/with gold down badly again, we had another huge deposit of 3.57 tonnes into the GLD/Inventory rests at 915.90 tonnes
June 21/ with gold down badly, we had a huge deposit of 3.56 tonnes into the GLD/Inventory rests at 912.33 tonnes
June 20/we had one deposit of .890 tonnes of gold into the GLD inventory/Inventory.
rests at 908.77 tonnes.
June 17./we had two huge deposits: last night: 1.782 tonnes and this afternoon: 5.3480 tonnes/Inventory rests at 907.88 tonnes
JUNE 16/no changes in GLD/Inventory rests at 900.75 tonnes.
June 15/the farce continues:  another paper deposit of 2.08 tonnes into the GLD/Inventory rests at 900.75 tonnes. Wait until you see tomorrow’s level!!
June 10/a huge “paper” deposit of 6.54 tonnes of gold into the GLD/Inventory rests at 893.92 tonnes
JUNE 9. a huge deposit of 6.23 tonnes of gold into the GLD/Inventory rests at 887.38 tones
June 8/no change in inventory at the GLD/Inventory rests at 881.15 tonnes
june 7/ a tiny withdrawal of .29 tonnes of inventory/probably to pay for fees/Inventory rests at 881.15 tonnes
June 30/ Inventory rests tonight at 950.05 tonnes


Now the SLV Inventory
JUNE 30/no changes in silver inventory/inventory rests at 333.544 million oz
June 29/ a small deposit of 760,000 oz/Inventory rests tonight at 333.544 million oz/
June 28/no change in silver inventory/rests tonight at 332.784 million oz
June 27/ a small deposit of 570,000 oz in the SLV inventory/Inventory rests at 332.784 million oz
June 24/This makes no sense!! 855,000 oz of silver leaves the SLV headed straight to Shanghai/Inventory rests at 332.214 million oz
June 23/ no change in silver inventory/rests tonight at 333.069 million oz
June 22.2016/no change in inventory at the SLV/Inventory rests at 333.069 million oz/
June 21/ we had another 2.67 million oz of silver withdrawn from the SLV.  This no doubt is real silver leaving and heading straight to China/Inventory at 333.069 million oz
June 20/we had another 2.852 million oz of silver withdrawn from the SLV. Again this is probably real silver leaving and heading straight to China. Inventory rests at 334.495
June 17/a monstrous 5.418 million oz of silver withdrawn from the SLV.  This may be some real silver and thus it is heading for China which is massively importing silver/inventory rests at 337.347 million oz
JUNE 16./no changes in silver inventory/rests tonight at 342.765 million oz
June 15and the dfarce continues for the SLV/we had a massive 2.376 million oz of a paper deposit into the SLV/Inventory rests at 342.765 million oz
June 10/no change in silver inventory at the SLV/Inventory rests at 338.725 million oz
JUNE 9/no change in silver inventory at the SLV/Inventory rests at 338.725 million oz.
June 8/no change in silver inventory at the SLV/Inventory rests at 338.725 million oz
June 30.2016: Inventory 333.544 million oz

NPV for Sprott and Central Fund of Canada

I will pick up Sprott’s NAV later tonight

1. Central Fund of Canada: traded at Negative 2.9 percent to NAV usa funds and Negative 3.8% to NAV for Cdn funds!!!!  (the discount is starting to disappear)
Percentage of fund in gold 60.6%
Percentage of fund in silver:38.1%
cash .+1.3%( June 30/2016). /
2. Sprott silver fund (PSLV): Premium RISES  to +1.47%!!!! NAV (June 30/2016) 
3. Sprott gold fund (PHYS): premium to NAV  RISES TO +0.72% to NAV  ( June 30/2016)
Note: Sprott silver trust back  into POSITIVE territory at +1.47% /Sprott physical gold trust is back into positive territory at +0.72%/Central fund of Canada’s is still in jail.


And now your overnight trading in gold,THURSDAY MORNING and also physical stories that may interest you:

Trading in gold and silver overnight in Asia and Europe
Mark O’Byrne (Goldcore)

Silver Surges, Up 16% In Dollars In Month as Breaks Out Above $18

Silver is another 0.5% higher today after yesterday’s 3% gains when silver flew through resistance at the $18 level to close at $18.26/oz. Silver has surged by similar amounts in euros and by 22% in beleaguered sterling.


Silver in USD – 10 Years

The rally for silver yesterday and today was more impressive than gold’s and saw prices at their highest since mid-September of 2014. Silver has now surged 16% in a month and the next level of resistance is $21.40/oz which silver touched in July 2014.

“Silver looks very bullish now and our clients are allocating to it in a big way,” we told Dow Jones Marketwatch (see below). “Silver is like gold on steroids when it gets going due to the very small size of the physical silver market versus stock, bond and even the gold market.”

Gold and Silver News
Gold settles near 2-year high; silver soars nearly 3% (Marketwatch)
“Silver looks very bullish now and our clients are allocating to it in a big way” (Marketwatch)
Biggest Gold ETF Tops Record as Angst Drives Inflows: Chart (Bloomberg)
Forget December. Forget Next Year. The Fed’s Done Hiking Until 2018 (Bloomberg)

Silver Surges To Post-Brexit Highs (Zero Hedge)
The Italians Need Some Gold! (Investor Intel)
Gold sending a dark sign that ‘almost everything has changed’ in market (Yahoo Finance)
Calm descends on markets – but for how long? (Money Week)
Read More Here

Gold Prices (LBMA AM)
30 June: USD 1,317.00, EUR 1,183.59 & GBP 976.82 per ounce
29 June: USD 1,318.00, EUR 1,191.64 & GBP 984.36 per ounce
28 June: USD 1,312.00, EUR 1,185.79 & GBP 985.84 per ounce
27 June: USD 1,324.60, EUR 1,200.49 & GBP 996.36 per ounce
24 June: USD 1,313.85, EUR 1,181.28 & GBP 945.58 per ounce
23 June: USD 1,265.75, EUR 1,112.22 & GBP 850.96 per ounce
22 June: USD 1,265.00, EUR 1,122.31 & GBP 862.98 per ounce

Silver Prices (LBMA)
30 June: USD 18.36, EUR 16.48 & GBP 13.61 per ounce
29 June: USD 18.21, EUR 16.42 & GBP 13.55 per ounce
28 June: USD 17.57, EUR 15.84 & GBP 13.17 per ounce
27 June: USD 17.70, EUR 16.06 & GBP 13.40 per ounce
24 June: USD 18.04, EUR 16.32 & GBP 13.18 per ounce
23 June: USD 17.29, EUR 15.16 & GBP 11.61 per ounce
22 June: USD 17.20, EUR 15.23 & GBP 11.72 per ounce

Recent Market Updates
– BREXIT Day – Markets Becalmed – Gold Panic Prelude – Trading Hours
– Gold Lower Despite “Panic” Due To “Supply Issues” In Inter Bank Gold Market
– Gold Slips Despite UK Gold Demand Surging – Investors “Seek Stability”
– Gold Prices Surge to Highest in Nearly Two Years On FED and Brexit Haven Demand
– Gold Bullion Has Little Downside, Brexit Or Not, Says HSBC
– Central Bank of Ireland Warns Risks are Debt, Brexit, Geopolitical Tensions and Migration
– Gold In Euros Surges 6.5% In June and 17% YTD On BREXIT Concerns
– Soros Buying Gold On BREXIT, EU “Collapse” Risk
– UK Gold Demand Rises On BREXIT “Nerves”
– Pensions Timebomb in “Slow Motion Detonation” In UK, EU, U.S.
– Silver – Perfect Storm Brewing in the Market
– Martin Wolf: There Will Be Another “Huge” Financial Crisis

Mark O’Byrne
Executive Director



Silver surges past the key $18.50 price level!

(courtesy zero hedge)

Silver Surges To 21-Month Highs, Gold-Ratio Crashes

While gold surged to its highest since March 2014 on Brexit; Silver is nearing $19, up almost 9% since Brexit, breaking above Jan 2015 highs to its highest since Sept 2014



Gold has not been this ‘cheap’ to Silver since May 2015…


If gold is institutional safe-haven buying then many argue the surge in silver is retail rotation out of fiat.


The third biggest derivative player raises their expectations to gold and silver due to declining physical supplies:

(courtesy zero hedge)

Credit Suisse Raises Gold, Silver Price Targets To $1,500; $18.75, Sees “Significant Physical Deficit”

Just days after Goldman threw in the towel on its bearish gold call, the gold bulls are crawling out of the woodwork and none has been more vocal than Credit Suisse which moments ago hiked its gold price forecast to $1,500 which the world’s 3rd most systematically risky bank expects the yellow metal will hit in the first quarter of 2017.

According to CS, gold and silver are now its top picks in the metals space: “gold forecast to peak at $1,500/oz in Q1/17: We raise our gold price forecast by 8% in H2/16 to $1,413/oz and 10% in 2017 to $1,450/oz on prolonged macro and political uncertainty following the Brexit vote. We see an extended timeframe for a negative real rate environment in the US and abroad and continued gold buying by central banks and consumers to diversify wealth.Our silver price forecast increases by 12%, to $18.75/oz, in H2/16 and by 15%, to $19.03/oz, in 2017, following gold.”

More details:

Gold shines again, hits our prior peak price six months ahead on Brexit

A gold price of US$1,350/oz was achieved briefly last week. This level was the peak price that we previously expected by 1Q-17. The Brexit result has pulled forward gold prices. Prolonged strength, on prolonged macro uncertainty.

A common argument we hear from gold participants is that gold is currently benefitting from a fear trade on Brexit, and that may indeed be the case. But we think this recent fear trade leads to something more enduring (similar to the 1Q-16 catalyst of China weakness and global implications). We forecast the gold price to increase through 2016 and believe the $1,500/oz mark could be tested by late 2016 or early 2017 as the macro implications of the Brexit vote are clarified, and the 8 November US election weighs on sentiment. Even before the Brexit vote, we saw positive price drivers: a strong chance of additional QE from the Eurozone, a 12-18 month period of negative real rates in the US and continued wealth diversification globally from central banks and consumers given the uncertain macro environment.

We believe the surprise Brexit vote has solidified and intensified macro and political uncertainty and extended the timeframe for a negative real rate environment in the US (ETF buyers), and potentially abroad (bar & coin buyers). The Brexit time-clock could begin in October 2016 and extend to October 2018 when negotiations between Britain and the EU are expected to conclude. In the interim, Scotland and potentially (Northern) Ireland may seek independence referendums in order to remain in the EU. There may also be further votes tabled in other EU nations which will continue to raise the question of the Eurozone’s sustainability.

Gold price forecasts revised upwards

Gold market deficits in 2016 and 2017 drive our higher price forecasts. We increase our investment demand forecasts for 2016 and 2017 to reflect continued strength from ETFs and bar/coin hoarding. Meanwhile, we continue to expect mine supply to decline over the next three years. We forecast the gold price to increase through 2016, averaging $1,475/oz in 4Q-16 and $1,500 in 1Q-17 with a price average of $1,450 in 2017.

Our LT gold price forecast increases to $1,300/oz from $1,200/oz as we incorporate our expectation of long term gold demand from a variety of drivers; including central bank diversification and consumer asset diversification in light of the current global economic outlook.

CS on silver:

Stronger financial asset drivers

The silver price continued its rally and outperformance vs. gold in 2Q-16, up 12% QoQ in absolute terms (2Q-16 average: $16.8/oz), compared to the gold price increase of 6%. Demand for silver has increased, not for physical/industrial uses, but as a precious metal financial asset. We believe there are international capital flows towards safe-haven asset classes due to a higher geopolitical risk premium on other assets, the FOMC’s focus on “global risks”, and a potentially toxic US election weighing on the USD. Against the higher demand we note that there is lower silver mine supply.

Revised silver price forecasts including LT to $20/oz

Based on our multi-factor regression model, we have made upward revisions to our silver price outlook of 6% to 15% throughout our forecast period, primarily reflecting a stronger gold price forecast and lower expectations for mine supply growth. Most significantly, our LT price moves to $20/oz from our previous $17.9/oz.

On supply & demand fundamentals, we forecast the physical market will be in a significant deficit of 114Moz in 2016 and 55Moz in 2017, and return to balance in 2019.

As for gold equities…

Gold equity outperformance to continue, upgrade Alamos and  Yamana to Outperform and IAMGold to Neutral:

We upgrade Alamos to Outperform from Neutral due to its strong project pipeline, favourable FX exposure, balance sheet and exploration opportunities. Yamana is upgraded to Outperform from Neutral as we see it continuing to benefit from gold leverage, with potential for a re-rating through portfolio optimization, execution on debt reduction and exploration success. IAMGold is upgraded to Neutral from  Underperform, as we believe it is turning the corner on operational and financial performance.

Gold top picks

In the gold space, our top pick is Agnico Eagle (AEM) for its strong exploration and project pipeline, favourable growth profile over the next five years, operational consistency and strong balance sheet. AEM trades at 1.44x P/NAV, a slight discount to the large cap average of 1.52x. AEM is on the Credit Suisse Global Focus List.

Eldorado (EGO) is a top pick for its potential P/NAV re-rating with a tighter focus on longer life assets. We note that EGO has delivered against production guidance for the past three years and is a consistent operator. EGO’s current valuation at 0.87x NAV is at a discount to our coverage average of 1.18x.

Detour (DGC) is also a top pick due to its long reserve life (+22 years), strong FCF, scale (+0.5Moz/year) and location in Canada. It trades at 1.11x P/NAV vs. our coverage average at 1.18x and senior gold equities at 1.52x.

Other Outperform-rated stocks are Barrick, Newmont, Yamana and Alamos: We like ABX for its gold leverage and capital allocation strategy, with a minimum IRR threshold targeted. Newmont for its operational consistency and attractive relative valuation vs. ABX and GG. AUY for its gold leverage and potential upside through portfolio optimization, balance sheet deleveraging and exploration opportunities. AGI for its strong project pipeline, favourable FX exposure, balance sheet and exploration opportunities.

Alas, now that the sellside’s attention is once again focused on gold, this only means that the BIS gold and FX trading desk will be extra busy; coupled with Goldman’s and Cramer bullishness on gold, this may be a near-term peak



Making The Case For $12,000 Gold & $360 Silver

SRSrocco Report on June 30, 2016

Global Financial Assets are more inflated and propped up than ever.  According to the most recent figures published by The City UK Fund Report, total Global Conventional Assets under management topped $105 trillion in 2014.  That’s one hell of a lot of future PAPER CLAIMS.

Unfortunately for most investors, the majority of these supposed assets will evaporate into thin air from where-ith they came.  Bubbles were designed for children to make and play with… not meant for adults to use in the financial industry.

Regardless, the global financial system is now polluted with a massive amount of toxic bubbles covering all corners of the planet.  When the first large one finally pops… WATCH OUT.

Gold & Silver As A Percentage Of Global Financial Assets Are Less Than Peanuts

I put together this chart from figures I found at Sharelynx.com.  According to the data, gold comprises 0.58 percentage of global financial assets, while silver comes in at a pathetic .013%:


Even though gold is a little more than a half of a percent of total global financial assets, it’s at least 45 times greater than silver.  Which is why Central Banks hate silver much more than gold.  Why?  Because very few Central Banks own silver and the market is so tiny that if a significant amount of funds decided to flow into silver, it would cause its price to skyrocket higher.

These next two charts show how gold and silver as a percentage of global financial assets have declined since 1980:



In 1980, gold represented a stunning 5% of the total global financial assets, while silver comprised of 0.25% (a quarter of a percent).  However, over the next three and a half decades, these percentages declined significantly.

Gold is now 9 times less of a percentage of global financial assets than it was in 1980, while silver is 20 times less.   The Fed, Central Banks and Wall Street did a wonderful job administering a FRONTAL LOBOTOMY on the public, which forced them out of real assets and into the largest financial ponzi scheme in history.

Making The Case For $12,000 Gold & $360 Silver

If investors decided to increase their gold and silver investments to equal the percentage in 1980, we would have the following:

Gold = $1,300 X 9 = $12,000

Silver = $18 X 20 = $360

Before some of the readers start rolling their eyes and BELLY-ACHING that this is just another attempt at precious metals hype, let me add a few logical points of view.

Many precious metals analysts including Jim Rickards and Jim Sinclair, believe we are going to see a gold price north of $10,000.  They base their forecast on backing all the outstanding U.S. Dollars by a certain percentage of gold.  The higher the percentage of gold backing, the higher the gold price.  However, $10,000 gold seems to be a base price when faith in the U.S. Dollar goes down the toilet.

So, the $12,000 gold price figure shown above is not all that crazy.  Furthermore, a $360 silver price when gold is $12,000 is a 33/1 Gold-Silver Ratio.  We already experienced a gold-silver ratio of 31/1 in April 2011.  Gold was trading at $1,500 when silver was trading at $48.  Which means a 33/1 gold-silver ratio at $12,000 gold and $360 silver is really not that insane after all.

That being said, I actually believe the future values of gold and silver could be even more silly and stupid than $12,00o or $360.  Why?  Because the popping of adult sized massive financial bubbles could actually push gold and silver investment percentages even higher than what they were in 1980.

What the hell happens when global investors try to invest 10% in gold or say just 1-2% in silver?  This may seem outlandish right now, but when financial institutions start going bankrupt and bankers start jumping off of roof tops, COMMON SENSE investing will likely return as proper investing logic like a 2 X4 across the head.

When the world finally experiences a global Lehman Brothers event that pushes us into massive depression, investors will seek safety in the precious metals.  Unfortunately, there will be very little supply… only a much higher prices.



John Embry talks about the huge amount of derivatives underwritten by western banks that are in severe trouble today

(courtesy John Embry/Kingworldnews)

Brexit isn’t end of the world, just end of elites, Embry tells KWN


5:30p ET Wednesday, June 29, 2016

Dear Friend of GATA and Gold:

Sprott Asset Management’s John Embry tells King World News today that the European elites are acting as if Britain’s withdrawal from the European Union is the end of the world. In fact, Embry says, it’s the end only for the elites and their banks. An excerpt from the interview is posted at KWN here:


CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


Your early THURSDAY morning currency, Asian stock market results,  important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight




2 Nikkei closed UP 9.09 OR 0.06% /USA: YEN RISES TO 102.81

3. Europe stocks opened ALL IN THE GREEN  /USA dollar index DOWN to 95.50/Euro UP to 1.1147

3b Japan 10 year bond yield: RISES  TO -.217%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 102.81

3c Nikkei now WELL BELOW 17,000

3d USA/Yen rate now well below the important 120 barrier this morning

3e WTI::  49.44  and Brent: 500.91

3f Gold DOWN  /Yen DOWN

3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.

Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.

3h Oil DOWN for WTI and DOWN for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund RISES to -.112%   German bunds BASICALLY negative yields from  10+ years out

 Greece  sees its 2 year rate FALL to 7.44%/: 

3j Greek 10 year bond yield FALL to  : 8.18%   (YIELD CURVE NOW COMPLETELY INVERTED)

3k Gold at $1316.50/silver $18.37(7:45 am est)   SILVER RESISTANCE AT $18.00 BROKEN 

3l USA vs Russian rouble; (Russian rouble DOWN 47/100 in  roubles/dollar) 64.18-

3m oil into the 49 dollar handle for WTI and 50 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/GOT a TINY REvaluation UP  from POBC.


30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9756 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0873 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.


3r the 10 Year German bund now NEGATIVE territory with the 10 year RISES to  -.112%

/German 10 year rate  negative%!!!


The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”.  Next step for Greece will be the recapitalization of the banks and that will be difficult.

4. USA 10 year treasury bond at 1.521% early this morning. Thirty year rate  at 2.331% /POLICY ERROR)

5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.

(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)

Day 3 Of Global Post-Brexit Rally: European Stocks, US Futures At Session Highs

Day three of the post-Brexit rally continues, and after some initial weakness due to concerns about Chinese currency devaluation, both European stock and US equity futures were trading at session highs, facilitated by yesterday’s stress test results which saw dozens of US banks unleash a tsunami of stock buyback announcement which in turn pushed S&P futures to new post-Brexit highs.

Risk assets saw a modest selloff around the European open following a Reuters report that the PBOC would let the Yuan weaken to 6.8 (down from 6.63) which would mean the currency matching last year’s record decline of 4.5 percent, policy sources said (more on that shortly). The report sent the Yuan tumbling, however,  it was promptly denied by the PBOC which alongside some intervention by the PBOC to restore the offshore yuan to pre-rumor levels, saw all the initial risk-off sentiment fizzle.

Indeed, as Bloomberg says for the 3rd consecutive day, it is all about central bank efforts to contain the fallout from the Brexit decision helped global equities recoup more than half of the $4 trillion of market value wiped out over Friday and Monday. While the FTSE 100 Index and a Bloomberg gauge of global commodities have recovered pretty much all of their losses since the vote, the rebounds have stalled as political upheaval in the U.K. following Prime Minister David Cameron’s resignation prevents the country from entering talks to determine its future relationship with the EU.

Regarding Brexit, some remain cautious: “It would be premature to suggest the recovery in risk sentiment has solid legs,” said Rodrigo Catril, a currency strategist at National Australia Bank Ltd. in Sydney. “Post-Brexit, the expectations of a lower-for-longer yield environment and the U.K. political vacuum until September are providing a sense of calm and they are providing an uplift to risk assets. So risk appetite is reappearing, but only cautiously.”

Others however, are willing to forget it ever happened, especially with central banks there to prop everything higher: “The initial shock over the U.K. voting out of the EU is easing across the world,” Mitsushige Akino, a Tokyo- based executive officer at Ichiyoshi Asset Management, said by phone. “We’ve survived the event-related risk, and investors are beginning to see that the impact on the actual economy is limited. There’s hope for policy measures globally, not just in Japan, so that’s supporting markets

As a result, the Stoxx Europe 600 Index was higher for a third day in a rally that’s helped it recover about half of its losses since Britain’s EU referendum, while emerging-market equities and the Bloomberg Commodity Index also advanced. Yields on euro-area government bonds rose from near all-time lows. Crude oil slipped after touching $50 a barrel on Wednesday. The sterling corporate bond market reopened, with the first offerings since the U.K. voted to leave the EU.

“Now we’re in the stage where we don’t know where to go forward,” said Peter Dixon, global equities economist at Commerzbank AG in London. “We’ve walked into a huge right hook which nobody saw coming and businesses haven’t had enough time to plan for a Brexit. Now the clock starts ticking and only when companies start saying exactly what their plans are will investors be able to price Brexit properly.”

The Stoxx 600 added 0.2 percent at 11:11 a.m. in London, erasing declines of as much as 0.9 percent. The FTSE 100 advanced 0.4 percent after late Wednesday erasing its post-Brexit losses and returning to its highest level since April. It’s also the last day of trading for a second quarter that’s been complicated in the final week by Britain’s referendum. Futures on the S&P 500 were 0.4 percent higher, after U.S. equities posted their biggest two-day advance in four months.

Federal Reserve Bank of St. Louis President James Bullard is due to speak Thursday in London and may shed light on his unique flipflopping on the Fed’s rate forecast, which he now expects to not change for year. Taiwan’s central bank cut its benchmark rate at a monetary policy review, while Mexico’s is seen raising borrowing costs, according to a Bloomberg survey. Data on initial jobless claims and the Chicago Purchasing Manager Index are scheduled for release Thursday.

Market Wrap

  • S&P 500 futures up 0.4% to 2072
  • Stoxx 600 up 0.3% to 327
  • FTSE 100 up 0.4% to 6385
  • DAX up 0.2% to 9634
  • German 10Yr yield up 3bps to -0.1%
  • Italian 10Yr yield up 3bps to 1.4%
  • Spanish 10Yr yield up 2bps to 1.28%
  • S&P GSCI Index down 0.4% to 379
  • MSCI Asia Pacific up 0.8% to 129
  • Nikkei 225 up less than 0.1% to 15576
  • Hang Seng up 1.8% to 20794
  • Shanghai Composite down less than 0.1% to 2930
  • S&P/ASX 200 up 1.8% to 5233
  • US 10-yr yield up 1bp to 1.53%
  • Dollar Index down 0.11% to 95.66
  • WTI Crude futures down 1% to $49.40
  • Brent Futures down 0.9% to $50.13
  • Gold spot down less than 0.1% to $1,319
  • Silver spot up 0.5% to $18.39

Top Global News

  • Airport Attack Hits Turkey Tourism Industry When It’s Down: attack on city airport leaves 41 dead, 13 said to be foreign
  • Carney Strikes Preemptively With BOE Crisis Communication Blitz: BOE governor to make televised address in London on Thursday
  • Soros Says Brexit Has ‘Unleashed’ a Financial-Markets Crisis: George Soros speaks in European Parliament
  • Candidates Prep Pitches to Succeed Cameron as U.K. Leader: U.K. Home Secretary Theresa May and former Mayor of London Boris Johnson will make their pitches Thursday to succeed David Cameron as Conservative Party leader
  • Gove Joins U.K. Tory Race Saying Johnson Unfit to Be Premier: number of candidates now at least five
  • U.K.’s Fox Says No Snap Election If He’s Chosen as Tory Leader: Liam Fox speaks on BBC TV
  • Hollande Endorses Clinton Saying Trump Would Hurt EU-U.S. Ties: speaks in interview with Les Echos newspaper
  • Trump Campaign Broke Law by Soliciting Foreign Donations, Groups Allege: presumptive Republican presidential nominee reportedly sent a fundraising e- mail to foreign government officials
  • Italy to Boost Bank Rescue Fund Atlante by EU4b-EU5b: Repubblica: newspaper cites unidentified people familiar
  • Deutsche Bank May Be Top Contributor to Systemic Risk, IMF Says
  • BMW Is Said to Team Up With Intel, Mobileye on Self-Driving Cars: senior executives from each company will hold an event on Friday to discuss the driverless-vehicle initiative

Looking at regional markets, Asia stocks traded higher as the post-referendum rebound remained intact and also followed Wall St.’s firm lead where S&P 500 posted its largest 2-day gain in 4-months. Nikkei 225 (+0.1%) is positive although off best levels as a contraction in Industrial Production figures capped gains. The ASX 200 (+1.7%) was lifted amid strength in energy names after WTI rallied above the USD 49/bbl level on a DoE drawdown. Elsewhere, Chinese markets are mixed with the Shanghai Comp (-0.1%) the laggard amid weakness in Telecoms, while the Hang Seng (+1.8%) outperformed ahead of tomorrow’s market holiday. The MSCI Asia Pacific Index climbed 0.8 percent as benchmark stock indexes advanced across most of the region. Gauges in Australia, Hong Kong and Singapore all rallied more than 1 percent. Singapore Exchange Ltd. gained as much as 4 percent after UBS AG raised its stance on the stock to neutral. AU Optronics Corp. climbed more than 6 percent in Taipei, buoyed by an upgrade in Credit Suisse Group AG’s recommendation on the stock. Finally, 10yr JGBs were flat with a lack of demand seen amid the heightened risk-appetite in Asia, while the latest securities transaction figures showed foreign investors rapidly increasing their selling of Japanese bonds in the prior week.

Top Asian News

  • Japan’s Industrial Production Drops Much More Than Forecast: Manufacturers left with more stock as shipments also decline
  • SoftBank Said to Face U.S. Inquiry Over Alleged Arora Conflicts: U.S. SEC is checking complaints
  • Singapore’s UOB Halts London Property Loans After Brexit Vote: DBS, OCBC continue to offer loans, though urge caution
  • Hutchison, VimpelCom Said to Plan Italy Disposals to Sway EU: Cos. hoping to win speedy approval for Italian mobile JV
  • Headwinds Loom for Hong Kong Land Amid Rising Supply, Few Takers: Land premiums expected to fall faster than housing prices
  • Bank of Korea Has Rate ‘Adjustment’ Room, Board Member Says: Hahm says still too early for S. Korea to discuss adopting QE

In Europe, a choppy session has been seen in Europe as equities were initially pressured at the open after source reports stated that the PBoC are willing to let the CNY depreciate to 6.80/USD in 2016. This had been seen by some as contradictory to the recent rhetoric from the central bank, whereby they have suggested they would keep the CNY stable. However, equities went on to recover, with the upside attributed to month-end rebalancing with Goldman Sachs highlighting that equities are likely to be supported. As such, credit markets have been pressured with Bunds hovering around 166.50 albeit off their worst levels of the day, while the German yield curve have also seen some notable bear steepening.

Top European News

  • Hutchison, VimpelCom Said to Plan Italy Disposals to Sway EU: cites two people familiar with the EU probe
  • AB InBev-SAB Deal Gets Conditional Clearance in South Africa: approval moves $104b deal a step closer to completion
  • Hungary’s Richter Buys Swiss Biotech Co. Finox for CHF190m: comments in statement
  • Costain Says On Course for FY Result In Line With Expectations: co. says 1H trading has been strong
  • UBS’s Murphy and Naylor Leave as Orcel Overhauls Senior Team: Hanning also departs; co-heads take control of divisions

In FX, the offshore yuan touched its lowest level since January after Reuters reported that China’s central bank is prepared to allow the exchange rate to weaken to 6.8 per dollar in 2016 to support the economy. It fell as much as 0.7 percent to 6.7021 immediately after the report, before paring declines to 0.1 percent. The Reuters report cited unidentified government economists and advisers involved in regular policy discussions.

In commodities, crude oil fell 0.8 percent to $49.49 a barrel in New York, after jumping by almost 8 percent over the last two sessions as data showed U.S. stockpiles are declining. Goldman Sachs Group Inc. said the price may slip below its $50 forecast in the second half of 2016 because of a cease-fire between militants and the government in OPEC member Nigeria.  Gold fell 0.2 percent, trimming its post-Brexit surge to 4.8 percent.  Corn in Chicago rose 1.1 percent before the U.S. Department of Agriculture updates its quarterly reserve estimates on Thursday. U.S. corn inventories as of June 1 probably rose to a 28-year high for the date, while soybean stockpiles jumped 33 percent to the most for the second quarter since 2007, according to analysts surveyed by Bloomberg. Wheat supplies probably advanced 31 percent to the highest since 1988 for the date.

Looking at today’s calendar, the highlight looks to be at 4pm BST when Bank of England Governor Carney is due to speak in London to members of the press and finance industry. In terms of data there’s actually a fair bit to get through, especially this morning in Europe. Kicking things off will be Germany where the May retail sales figures will be released. Following that we’ll get the June CPI report in France before we’re back to Germany with this month’s unemployment rate release. The final revision to Q1 GDP in the UK gets released a short time after that (no change to +0.4% qoq expected) before we then get the June CPI estimate for the Euro area (0.0% yoy expected). Over in the US this afternoon we’ll get the latest initial jobless claims print along with the Chicago PMI for June. It’s worth keeping an eye on the latter with tomorrow being the release of the manufacturing ISM.

* * *

Bulletin Headline Summary from RanSquawk and Bloomberg

  • Source reports suggesting the PBOC are willing to let the CNY fall to 6.80/USD in 2016 dictate play early European trade, seeing downside in commodity linked currencies and equities
  • Elsewhere, equities recovered by mid-morning, with the move attributed to month end rebalancing as we reach the last day of the month and H1
  • Highlights today include Canadian GDP, US Weekly Jobless Claims and comments from Fed’s Bullard

* * *

DB’s Jim Reid Concludes the overnight wrap

The risk asset recovery has been impressive with the FTSE 100 last night (+3.58%) closing above its pre ballot box closing levels and +9.87% higher than its lows early Friday morning. To be fair this index has seen dollar earners spike notably higher since the vote more than offsetting the collapse in bank shares. The domestic orientated FTSE 250 is still -7.68% lower since the results but this index was -13.74% at its intraday lows on Monday. The rebound for the Pound continued yesterday as Sterling closed up +0.64% versus the Dollar at 1.3429 although did actually trade above 1.350 for a brief moment during the afternoon. Sterling is now +2.35% higher than it its intraday Monday lows. Meanwhile there were similarly impressive gains across the rest of Europe. The Stoxx 600 closed up +3.09% and so trimmed its post-Brexit loss to -5.73%. It had been as much as -11.12% intraday on Monday. Peripherals also had a good session with the IBEX and FTSE MIB closing +3.45% and +2.21% respectively. The post-Brexit losses for those markets now are -8.78% and -11.24% although that compares to being down as much as -14.69% and -16.41% at the Monday lows. It’s worth noting that a possible bank bailout in Italy came under scrutiny by German Chancellor Merkel yesterday who insisted that Italy needs to stick to the rulebook that was put in place to prevent taxpayer bailouts.

While we’re on banks, after initially being at the forefront of the selloff (the Euro Stoxx Banks index dropped -18.02% on Friday and -6.23% on Monday), the recovery in the last two days – while being positive – has been relatively small by comparison (+2.88% on Tuesday and +2.05% on Wednesday) and so leaving the index a little more than -19% down from its Thursday closing level. With no immediate liquidity or credit events in the sector, this is probably more of a reflection of the move lower in bond yields (to more negative in some cases) which adds to concerns about long-term profit deterioration for the sector.

Elsewhere Wall Street carried on the positive risk tone into the evening with the S&P 500 finishing up +1.70% and so moving back into positive territory YTD. EM currencies were the big winners in the FX space with +2% rallies for currencies in South Africa, Brazil and Colombia. A big rally for Oil (WTI +4.24%) and the wider commodity complex (Gold included) helped, while credit markets were also materially tighter. Indeed the iTraxx Main and Crossover indices were 8bps and 19bps tighter respectively (Main is now just c.10bps wider than pre-Brexit) while in the US CDX IG was 3bps tighter. Look no further than the primary markets in credit for the change in sentiment. Over $20bn of deals priced in the US IG market yesterday which was said to be the biggest volume day since May 17th so it looks like corporates have been given the green light again. The primary market in Euros has been a little more hesitant although Molson Coors did break the Brexit ice with an €800m tranche as part of their wider bumper deal yesterday.

In terms of the actual newsflow yesterday it was unsurprisingly centred on the various snippets coming out of the EU Leaders summit again. The final statement to emerge from the leaders revealed that ‘there is a need to organize the withdrawal of the UK from the EU in an orderly fashion’ and that ‘this should be done as quickly as possible’. So nothing that was particularly new. France President Hollande warned that should the UK want to access the single market then it ‘would have to accept all the rules and all the obligations, especially one which is to financially contribute to the functioning of the single market’. EU Council President Tusk added that ‘there will be no single market a la carte’ while the generally adamant mood was shared by various other European leaders.

The prospect of Scotland potentially staying in the EU appears to be more dividing however. EC President Juncker said that Scotland has ‘won the right to be heard’. However Spanish PM Rajoy said ‘I am radically against it, the treaties are radically against, and I think everyone else is radically against’. Clearly with the situation in Catalonia it’s unsurprising to see Rajoy adopt a fairly hard stance on the matter.
Refreshing our screens this morning the positive tone has continued into Asia again where it looks like most major bourses are going to close the quarter on a positive note. Indeed the Hang Seng (+1.83%) and ASX (+1.81%) are leading the way, with the Nikkei (+0.82%) and Kospi (+0.50%) also up. Markets in China are flat to modestly higher while credit markets are a few basis points tighter. Sterling has weakened a relatively modest -0.17%. There was also a bit of data out of Japan this morning where industrial production declined sharply in May and alot more than expected (-2.3% mom vs. -0.2% expected).
Meanwhile US equity futures are up slightly this morning. In the wake of the Fed’s stress tests yesterday (of which 31 out of 33 banks passed) Morgan Stanley, Citi, JP Morgan, Goldman Sachs and Bank of America all announced that they were to undertake stock buybacks which sent their respective share prices up in extended trading.

Away from that it was actually a relatively busy day for data yesterday. Across the pond personal income rose +0.2% mom in May which was a little less than the +0.3% expected. Personal spending rose +0.4% mom as expected while both readings also received a marginal upward revision to the April numbers. In terms of the inflation data, both the PCE deflator and core readings came in at +0.2% mom as expected for May. That saw the YoY rate for the former dip two-tenths to +0.9%, while the YoY rate for the core has held steady at +1.6%. Elsewhere, pending home sales in May were down a sharp -3.7% mom (vs. -1.1% expected). On the back of yesterday’s data the Atlanta Fed nudged up their Q2 GDPNow forecast to 2.7% (an increase of one-tenth).

Prior to this in Europe the European Commission had released its latest sentiment surveys. The headline economic confidence indicator held in relatively well at 104.4 for June (vs. 104.7 expected) which is down from 104.6 in May. Again however like the US data from Tuesday the survey period was done prior to the Brexit outcome so next month’s reading is the key one. Elsewhere, German CPI for June rose a little less than expected (+0.1% mom vs. +0.2% expected) although that has lifted the YoY rate by two-tenths to +0.3%. In the UK mortgage approvals rose 67.0k in May (vs. 65.3k expected)

Looking at the day ahead, the highlight looks to be at 4pm BST when Bank of England Governor Carney is due to speak in London to members of the press and finance industry. In terms of data there’s actually a fair bit to get through, especially this morning in Europe. Kicking things off will be Germany where the May retail sales figures will be released. Following that we’ll get the June CPI report in France before we’re back to Germany with this month’s unemployment rate release. The final revision to Q1 GDP in the UK gets released a short time after that (no change to +0.4% qoq expected) before we then get the June CPI estimate for the Euro area (0.0% yoy expected). Over in the US this afternoon we’ll get the latest initial jobless claims print along with the Chicago PMI for June. It’s worth keeping an eye on the latter with tomorrow being the release of the manufacturing ISM.


i)Late  WEDNESDAY night/THURSDAY morning: Shanghai closed DOWN 1.98 POINTS OR 0.07% / /Hang Sang closed UP 358.25 OR 1.75%. The Nikkei closed UP 9.09 POINTS OR 0.06% Australia’s all ordinaires  CLOSED UP 1.71% Chinese yuan (ONSHORE) closed UP at 6.6439 /Oil ROSE to 49.44 dollars per barrel for WTI and 50.91 for Brent. Stocks in Europe ALL IN THE GREEN . Offshore yuan trades  6.6635yuan to the dollar vs 6.6439 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS AS MORE USA DOLLARS LEAVES ITS SHORES




A Reuters report suggests that China is comfortable to let the yuan tumble to 6.80 as it is worried about global growth. That initially sent the yuan southbound and then POBC currency traders intervened, supporting the yuan. As the yuan depreciates, it sends a massive wave of deflation throughout the globe.

(courtesy zero hedge)

Yuan Tumbles, Stabilizes After Reuters Report China Willing To Weaken Yuan To 6.80

Until Boris Johnson’s shocking announcement moments ago that he would not run for Tory leadership or the UK premiership, the key macro event overnight was a report out of Reuters that China’s central bank is willing to let the yuan fall to 6.8 per dollar in 2016 to support the economy, which would mean the currency matching last year’s record decline of 4.5 percent.

The report promptly sent the offshore yuan tumbling, sliding much as 0.72% to 6.7021 per dollar, the lowest since January 11, however it promptly recovered losses following significant PBOC intervention in the open market.

In a longer-term context, the swoon in the CNH matched the lows from January.

As Reuters adds, the yuan was already trading at its lowest level in more than five years, so the central bank will aim to ensure a gradual decline for fear of triggering the sort of capital outflows that shook the economy earlier this year and criticism from trading partners such as the United States, said government economists and advisers involved in regular policy discussions.

A surprise devaluation of the yuan last August sent global markets into a spin on worries the world’s second-biggest economy was in worst shape than Beijing had let on, prompting massive capital outflows as investors sought safe havens overseas.

“The central bank is willing to see yuan depreciation, as long as depreciation expectations are under control,” said a government economist, who requested anonymity due to the sensitivity of the matter.”The Brexit vote was a big shock. The market volatility may last for some time.”

The yuan has dropped to the new lows following Britain’s vote to leave the European Union and so far the central bank has stood aside from intervening, suggesting it is happy with the currency’s depreciation. Other emerging market currencies have also fallen, but the yuan is the weakest major Asian currency against the dollar this year.

The yuan hovered near 6.64 per dollar on Thursday, just off the 5-1/2-year intraday lows and bringing its fall so far this year to about 2.3 percent.

Currency dealers said the strength of the dollar and the weakness in economic growth, which hit a 25-year low in 2015, justified a decline in the yuan. But investors and trading partners will be wary of any significant decline after August’s devaluation and a sharp decline in the currency over a matter of days in January that analysts said was engineered by the central bank.

In the past decade, China has also faced criticism from Western lawmakers who say it held back the appreciation of the yuan.

China’s premier, Li Keqiang, has repeatedly said China has no intention to stimulate exports via a competitive currency devaluation. The Foreign Ministry said on Wednesday the exchange rate was not the reason for unbalanced trade with the United States, which runs a goods and services trade deficit with China. However, the sources acknowledged the diplomatic risks of a steep fall in the yuan.

“The pressure from the United States could rise if China allows sharp depreciation,” said a government source.

Others are watching closely and ready to respond as the currency wars accelerate as China has the biggest global exports market share of any country since the United States in 1968, so the yuan’s exchange rate acts as a bellwether for other exporting countries and is a cause of concern for some.

“We are concerned at how quickly the yuan is falling and in turn how the won seems to be tracking its movements,” said a finance ministry official in South Korea, a major exporter that competes with China in textiles, electronics and petrochemicals among other sectors.

Japan was less concerned: a person familiar with Japan’s currency diplomacy, was less concerned, saying the yuan’s decline didn’t seem out of line considering the dollar’s strength. “I don’t think Japan has much to complain about,” this official said. Although Japan rivals China in exports including electronics and heavy machinery Tokyo is struggling with its own currency dilemma of how to contain a sharp rise in the yen following the Brexit vote last week.

* * *

No matter the overnight volatility, however, China’s yuan has already seen the biggest quarterly fall on record after hitting a six-month low. It stabilized because  as noted above, the CNH promptly recouped losses after at least two Chinese banks sold USD/CNY after 3pm local time, according to one FX trader in the region, following the Reuters report.  The USD/CNY quickly dropped to around 6.6430 after banks’ selling having hit as high as 6.6550.



Amazing!! the IMF admits that the greatest risk to the global financial system is Deutsche bank with their 72 + trillion in derivatives and yes they are correct!

(courtesy zero hedge).

“Deutsche Bank Poses The Greatest Risk To The Global Financial System”: IMF

Over three years ago we wrote “At $72.8 Trillion, Presenting The Bank With The Biggest Derivative Exposure In The World” in which we introduced a bank few until then had imagined was the riskiest in the world.

As we explained then “the bank with the single largest derivative exposure is not located in the US at all, but in the heart of Europe, and its name, as some may have guessed by now, is Deutsche Bank.The amount in question? €55,605,039,000,000. Which, converted into USD at the current EURUSD exchange rate amounts to $72,842,601,090,000….  Or roughly $2 trillion more than JPMorgan’s.”

So here we are three years later, when not only did Deutsche Bank just flunk the Fed’s stress test for the second year in a row, but moments ago in a far more damning analysis, none other than the IMF disclosed that Deutsche Bank poses the greatest systemic risk to the global financial system, explicitly stating that the German bank “appears to be the most important net contributor to systemic risks.”

Yes, the same bank whose stock price hit a record low just two days ago.

Here is the key section in the report:

Domestically, the largest German banks and insurance companies are highly interconnected. The highest degree of interconnectedness can be found between Allianz, Munich Re, Hannover Re, Deutsche Bank, Commerzbank and Aareal bank, with Allianz being the largest contributor to systemic risks among the publicly-traded German financials. Both Deutsche Bank and Commerzbank are the source of outward spillovers to most other publicly-listed banks and insurers. Given the likelihood of distress spillovers between banks and life insurers, close monitoring and continued systemic risk analysis by authorities is warranted.

Among the G-SIBs, Deutsche Bank appears to be the most important net contributor to systemic risks, followed by HSBC and Credit Suisse. In turn, Commerzbank, while an important player in Germany, does not appear to be a contributor to systemic risks globally. In general, Commerzbank tends to be the recipient of inward spillover from U.S. and European G-SIBs. The relative importance of Deutsche Bank underscores the importance of risk management, intense supervision of G-SIBs and the close monitoring of their cross-border exposures, as well as rapidly completing capacity to implement the new resolution regime.

The IMF also said the German banking system poses a higher degree of possible outward contagion compared with the risks it poses internally. This means that in the global interconnected game of counterparty dominoes, if Deutsche Bank falls, everyone else will follow.

Notwithstanding moderate cross-border exposures on aggregate, the banking sector is a potential source of outward spillovers. Network analysis suggests a higher degree of outward spillovers from the German banking sector than inward spillovers. In particular, Germany, France, the U.K. and the U.S. have the highest degree of outward spillovers as measured by the average percentage of capital loss of other banking systems due to banking sector shock in the source country.

The IMF concluded that Germany needs to urgently examine whether its bank resolution, i.e., liquidation, plans are operable, including a timely valuation of assets to be transferred, continued access to financial market infrastructures, and whether authorities can ensure control over a bank if resolution actions take a few days, if needed, by imposing a moratorium:

Operationalization of resolution plans and ensuring funding of a bank in resolution is a high priority. The authorities have identified operational challenges (e.g., the timely valuation of assets to be transferred, continued access to financial market infrastructures) and are working to surmount them. In some cases, actions to effect resolution may require a number of days to implement, and the authorities should ensure they can maintain control over the bank during this period, including by using their powers to impose a more general moratorium for a specific bank.

Here is the IMF’s chart showing the key linkages of the world’s riskiest bank:

And while DB is number 1, here are the other banks whose collapse would likewise lead to global contagion.

Considering two of the three most “globally systemically important”, i.e., riskiest, banks just saw their stock price scrape all time lows earlier this week, we wonder just how nervous behind their calm facades are the executives at the ECB, the IMF, and the rest of the handful of people who realize just close to the edge of collapse this world’s most riskiest bank (whose market cap is less than the valuation of AirBnB) finds itself right now.



Deutsche bank continues on its journey to reach its intrinsic value and that value is zero

(courtesy zero hedge)

World’s Most Systemically Dangerous Bank Crashes Back To Record Lows

More trouble on the horizon as the EU and the ECB try to contemplate how to rescue Italian banks.  The thought is to increase the firepower of bailout bad bank Atlante and then seek other financiers for Atlante to bailout the ailing banks.  Now we find there is trouble again in Portugal with respect to the sovereign and its banks:

(courtesy zero hedge)

Is Europe In Trouble Again: Hints Of Portuguese, Italian Bank Bailouts Suggest Not All Is Well

In the aftermath of Germany refusal to allow Italy to breach Eurozone regulations, and provide its banks with up to €40 billion in new capital, Italy has unveiled a new track to handle its insolvent banks and as Reuters reports, the Italian government may have to inject capital directly into weaker banks to bolster their financial strength, a government source said on Thursday, adding it was waiting for the results of stress tests being conducted by European banking authorities. The results of the tests are expected to be published at the beginning of the third quarter.

The source told Reuters the government was also working on a plan to increase the firepower of bank bailout funds Atlante, which was set up in April to help lenders raise cash and sell bad loans, by 3-5 billion euros ($3.34-5.57 billion) by the summer. The source said the government was in talks with private pension funds to seek additional contributions for Atlante.

Other contributions were expected to come from the state lender Cassa Depositi e Prestiti and from a public company called Societa per la Gestione di Attivita.

And then, in a surprising follow up, the EU appears to have once again backtracked when Reuters headlines emerged suggesting that Europe would provide up to €150 billion for Italian banks”




Which, technically is none of them, but practically any bank can – after the sufficient non-GAAP adjustments – pass for solvent.

So is another major bank bailout event on the horizon? It appears so. And Italy may not be alone. In comments that were little noticed yesterday, Germany’s Schauble said that Portugal may see another bailout too, saying “It would have to apply for a new program, which it would get. But the terms would be severe and it is not in Portugal’s interests.”

As Reuters reported, German Finance Minister Wolfgang Schaeuble pressed Portugal on Wednesday to stick to its European fiscal targets and said that if it were to apply for a new aid program the terms would be harsh. Portugal’s left-leaning government has set out to reverse its predecessor’s austerity policies, aiming to grow its way out of trouble by boosting demand and set an example for other post-bailout euro zone countries.

“Portugal would be making a big mistake if it does not stick to its commitments,” Schaeuble told a news conference in Berlin.

Pressed by journalists, Schaeuble stressed that Portugal would not need a new aid program if it sticks to EU rules. “They (the Portuguese) don’t want it (a new package) and they don’t need it if they stick to the European rules,” he said. Portugal insists it will meet this year’s budget deficit target of 2.2 percent, which is half last year’s gap, and that no new measures will be necessary after solid budget execution in the first five months of the year.

The Portuguese finance ministry said Lisbon was not considering asking for any new bailouts and was working to meet its EU targets and to cut its budget deficit.

“Regarding the remarks made by Wolfgang Schaeuble, although he himself immediately corrected them, the finance ministry clarifies that no new aid program is being considered for Portugal,” it said in a statement.

Still, was Schauble’s Freudian slip earlier that “it would get a new program” if it only just asked for it a hint of things to come?

And then there is, of course, the world’s most systemically risky bank, Deutsche Bank…

In retrospect, the UK may have exited Europe just in time.




Mark Carney speaks and tells the world that the UK will ease:

(courtesy Mark Carney/BOE/zero hedge)

Mark Carney Speaks, Says BOE Will Likely Ease Monetary Policy Over The Summer – Live Webcast

Bank of England Gov. Mark Carney is delivering a speech on Thursday, a week after Britons voted to leave the European Union, the central bank said Wednesday. Carney stepped in to soothe financial markets Friday in the immediate aftermath of the shock Brexit vote, pledging the BOE would backstop the financial system with at least £250 billion ($334 billion) of loans to banks that needed them.

And, as many suspected, he just announced that the BOE will likely ease further over the summer:


Here are the key sections:

Even before 23rd June, we observed the growing influence of uncertainty on major economic decisions. Commercial real estate transactions had been cut in half since their peak last year. Residential real estate activity had slowed sharply. Car purchases had gone into reverse. And business investment had fallen for the past two quarters measured. Given otherwise accommodative financial conditions and a solid  domestic outlook, it appeared likely that uncertainty related to the referendum played an important role in this deceleration.

It now seems plausible that uncertainty could remain elevated for some time, with a more persistent drag on activity than we had previously projected. Moreover, its effects will be reinforced by tighter financial conditions and possible negative spill-overs to growth in the UK’s major trading partners.

In my view, and I am not pre-judging the views of the other independent MPC members, the economic outlook has deteriorated and some monetary policy easing will likely be required over the summer.

The Committee will make an initial assessment on 14 July, and a full assessment complete with a new forecast will follow in the August Inflation Report. In August, we will also discuss further the range of instruments at our disposl.

HIS full speech can be found here. Watch him live after the jump.




The markets reaction:  down goes GILT yields and the pound tumbles:

(courtesy zero hedge)

In a very surprising move, Boris Johnson, leader of the BREXIT campaign decided not to run for the leader of the Conservative party and thus he will not run for UK Prime Minister

Sterling rises:


(courtesy zero hedge)

There is a kicker:  and is a complete joke!


“only solvent banks would qualify for the liquidity support program, which has been authorized until the end of the year.” The problem is that with €360 billion in NPLs, every bank in Italy is insolvent, which implicitly means that they will all be found to be solvent or otherwise nobody will benefit.


courtesy zero hedge)

Mexico raises its interest rate bigger than expected by 50 basis points as they are facing huge food inflation:

(courtesy zero hedge)

Crude is about to slide southbound as China’s SPR is now close to full capacity

(courtesy zero hedge)


Oil Bulls Beware: Crude Demand Is About To Slide As China’s SPR Is “Close To Capacity”

Throughout oil’s torrid rally from the February lows, one major driver of demand – namely China – had been broadly ignored by the punditry which instead focused on supply, whether excess OPEC oversupply or lack thereof, due to production disruptions in Canada or Nigeria. And yet, China and specifically its demand, may have been the elephant in the room all along.

Two months ago we reported that “China Is Hoarding Crude At The Fastest Pace On Record“, a move which among other things was attributed to China’s aggressively filling up its Strategic Petroleum Reserve.  However, just a few weeks ago, we followed up with “China Oil Imports Drop To Four Month Low As Demand Is Expected To “Moderate Significantly” In 2016.”

We now may have an answer what has caused this drop.

As Bloomberg says, citing a JPM report, “one of the pillars of oil’s recovery from the lowest price in 12 years may be on the verge of crumbling.

The reason: as many speculated, a big source of China’s demand in the past 5 months was Beijing’s decision to stockpile oil for its SPR. However, that is now over as China is likely close to filling its strategic petroleum reserves after doubling purchases for it this year as prices plunged. JPM estimates that China’s SPR demand was equivalent to approximately 1mm bpd. More importantly, stopping shipments for the reserve would wipe out about 15 percent of the country’s imports, according to the bank.

A guard stands before the oil SPR tanks at Zhoushan

Here are the details from JPM:

China has taken the opportunity of lower oil prices since early-2015 to accelerate the strategic petroleum reserve (SPR) builds at c.1mbd, pushing the total oil in stock under SPR to an estimated 400mmbbl, or 53 days of net crude oil import equivalent, based on JPM calculation of multiple data points announced publicly. This volume might be close to the capacity limit, in our view, and together with potential teapot utilization pullback andslower-than-expected demand from China could increase near-term risks to global oil prices (c.1.2mbd impact). We stay cautious on upstream plays and continue with our relative bias on the downstream.



JPM SPR methodology. China regularly publishes four data points for  crude oil: domestic production, net imports, commercial inventories and refinery throughput. Given the exclusive consumption of crude oil at refineries in China, we derive the SPR monthly changes to account for the balance implied by the four data sets. Furthermore, based on China government’s official release of SPR level in 2014/15, we arrive at the current SPR volume, which compared with China’s previously announced SPR plans seems to be close to the max . 


Implication to China’s oil imports. Partially confirmed with our discussion with oil traders, our base case assumes China continuing high volumes of (1mbd) SPR builds through August, while factoring in 7% domestic crude production decline and 2% refinery throughput increase. This means 15% mom decline in China’s crude imports in September, or 1.2mbd loss from the China inventory demand. China’s net oil imports ytd has expanded 16% yoy, versus a flat consumption growth.

Below is JPM’s estimate of the stunning rate of increase in Chinese SPR build, which rose from 491Kbpd average in 2015 to a record 1.191MMbpd in 2016 through May.

Bloomberg reminds us that Chinese crude imports have risen 16 percent this year, and the country is rivaling the U.S. as the world’s biggest oil purchaser. That demand, along with supply disruptions from Canada to Nigeria, has helped boost oil prices about 80 percent since January. Chinese imports surged to a record 8.04 million barrels a day in February. The nation may surpass the U.S. as the world’s largest crude importer this year with average inbound shipments of 7.5 million barrels a day, according to Zhong Fuliang, vice president with China International United Petroleum & Chemicals Co., the trading arm of the nation’s biggest refiner.

However, if JPM is right, China’s imports are about to hit a brick wall.

So how does JPM calculate the capacity of China’s SPR and how much capacity is left? Here is the answer:

There are very limited data points regarding China’s SPR levels and hence questions arise about the reliability of our derived volume because the data base on which our calculations are made come from various sources: crude oil production and refinery throughput from the China National Bureau of Statistics (NBS), net imports from China Customs, and commercial inventory changes from the official newswire Xinhua News Agency. There might be a data consistency issue.


We attempt to test the quality of our data by comparing the only publicly available SPR volumes that the NBS formally reported for November 2014 and mid-2015. According to the authorities, China had 91mmbbl (12.43mt) of SPR stored in tanks as of November 2014 (versus SPR capacity of 103mmbbl) and the volume increased to 191mmbbl (versus SPR capacity of 180mmbbl) as of mid-2015. China government rented some commercial tanks for SPR filling for the mid-2015 volume, according to NBS.


Adding our calculated monthly SPR changes to the 91mmbbl base as of November 2014 gives us 201mmbbl at end-2015, versus NBS-reported 180mmbbl, or a 12% difference.


Although the difference is not desirably narrow, we think it is acceptable, or at least it gives us a sense of how to adjust for the potential actual volume. Based on this finding, we further interpolate the current SPR volume by applying the monthly volume changes to the 180mmbbl base reported by the NBS for Dec 2015. And our calculated SPR level as of May 2016 is 444mmbbl. Applying a 10% discount as indicated by the end 2015 data discrepancy, we get 400mmbbl, or 53 days of net import equivalent. That compares with 25 days at Dec 2015 and 15 days at Nov 2014.


Based on the previous government plans cited by state media, the total capacity of China’s SPR under all three phases would be 511mmbbl. The current SPR volume calculated above implies 22% distance from the previously announced capacity target, meaning the cap will be hit after continuous builds at the current speed (1mbd) for another three months.


The implication if JPM is accurate is simple: China will import far less oil starting in September, 1.2mbd to be specific.

Based on our base case of assuming another high SPR builds through August and the following three assumptions listed below, our model suggests a 15% mom decline in China’s crude oil net imports in September, or a loss of 1.2mmbbl versus August and 0.8mmbbl less from the 12-month average. Although it’s difficult to have an accurate forecast of the specific timing of the drop, we think it’s worth noting this risk and previous accumulation looks high based on our assessment. We do not believe the 16% growth in oil imports ytd is sustainable despite a domestic oil production decline, as demand is weak (2% expansion in oil processing with gasoline an increased risk), if inventory capacity reaches the limit.



As for the future SPR capacity additions, we think there has been lower urgency from the Chinese government to push for new construction because they are also seeing lower for longer oil prices with government funding possibly another issue. This also explains their intention to include company contributions under the new regulations and delay the Phase III to after 2020.


What does the market think of JPM’s assessment? As of this moment WTI is down, 2.4%, below $49, on a day when it would otherwise be soaring and keeping up with the rest of the risk complex. Because between a 1 million drop in demand, and the increase in supply which Goldman warned about last night as Canadian and Nigerian disruptions fade away, suddenly the market will find itself oversupplied by 2 million more barrels. This excess oil will either have to be stored somewhere, most likely offshore with Cushing also close to operational capacity and ARA stocks at multi-year highs, or it will have to be sold. If it is the latter, a rerun of last year’s second half swoon is now on the table.

Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings/THURSDAY morning 7:00 am

Euro/USA   1.1147 UP .0026 (STILL  REACTING TO BREXIT)



USA/CAN 1.2927 DOWN .0007

Early THIS THURSDAY morning in Europe, the Euro ROSE by 26 basis points, trading now JUST above the important 1.08 level FALLING to 1.1087; Europe is still reacting to BREXIT,deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP, and NOW THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE / Last night the Shanghai composite  CLOSED DOWN 1.98 POINTS OR 0.07%   / Hang Sang CLOSED UP 358.25 POINTS  OR 1.75%   AUSTRALIA IS HIGHER BY 1.71%/ EUROPEAN BOURSES ARE ALL IN THE GREEN  as they start their morning/(RELIEF RALLY)

We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;

1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies and especially with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.

2, the Nikkei average vs gold carry trade ( NIKKEI blowing up and the yen carry trade HAS BLOWN up/and now NIRP)

3. Short Swiss franc/long assets blew up ( Eastern European housing/Nikkei etc.

These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>

The NIKKEI: this THURSDAY morning: closed UP 9.09 POINTS OR 0.06% 

Trading from Europe and Asia:

2/ CHINESE BOURSES / : Hang Sang CLOSED UP 358.25 POINTS OR 1.75% . ,Shanghai CLOSED DOWN 1.98 POINTS OR 0.07% / Australia BOURSE IN THE GREEN: (RESOURCES UP)/Nikkei (Japan) CLOSED  IN THE GREEN/India’s Sensex IN THE GREEN

Gold very early morning trading: $1317.20


Early THURSDAY morning USA 10 year bond yield: 1.521% !!! UP 4 in basis points from WEDNESDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield RISES to 2.331 UP 5 in basis points from WEDNESDAY night. (SPREAD GOES AGAINST THE BANKS)

USA dollar index early WEDNESDAY morning: 95.50 DOWN 15 CENTS from WEDNESDAY’s close.

This ends early morning numbers THURSDAY MORNING




And now your closing THURSDAY NUMBERS

Portuguese 10 year bond yield:  3.00% DOWN 8 in basis points from WEDNESDAY  (does not buy the rally)

JAPANESE BOND YIELD: -0.214% UP 1 1/2  in   basis points from WEDNESDAY

SPANISH 10 YR BOND YIELD: 1.16%  DOWN 10 IN basis points from WEDNESDAY (does not buy rally) AND THIS IS TOTALLY NUTS!!

ITALIAN 10 YR BOND YIELD: 1.26  DOWN 11 IN basis points from WEDNESDAY(does not buy the rally) AGAIN TOTALLY NUTS

the Italian 10 yr bond yield is trading 10 points HIGHER than Spain.




Closing currency crosses for THURSDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/3:30 PM

Euro/USA 1.1088 DOWN .0033 (Euro =DOWN 33 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 103.24 UP .456 (Yen DOWN 46 basis points )


USA/Canada 1.2944-UP 0.0009 (Canadian dollar DOWN 9 basis points  AS OIL ROSE  (WTI AT $49.56).


This afternoon, the Euro was DOWN by 33 basis points to trade at 1.1088

The Yen FELL to 103.24 for a LOSS of 46 basis points as NIRP is STILL a big failure for the Japanese central bank/

The POUND was DOWN 172 basis points, trading at 1.3275

The Canadian dollar FELL by 9 basis points to 1.2944, WITH WTI OIL AT:  $48.74

The USA/Yuan closed at 6.6459

the 10 yr Japanese bond yield closed at -.214% UP 1 & 1/2  IN BASIS  points in yield/

Your closing 10 yr USA bond yield:DOWN 1 IN basis points from WEDNESDAY at 1.476% //trading well below the resistance level of 2.27-2.32%)

USA 30 yr bond yield: 2.291 UP 1 in basis points on the day ( HUGE POLICY ERROR)


Your closing USA dollar index, 96.09 UP 27 CENTS  ON THE DAY/4 PM

Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for THURSDAY

London:  CLOSED UP 144.27 OR 2.27%
German Dax :CLOSED UP 67.82 OR  0.71%
Paris Cac  CLOSED UP 42.66  OR 1.00%
Spain IBEX CLOSED UP 58.00 OR 0.72%
Italian MIB: CLOSED UP 250.85 OR 1.57%

The Dow was UP 235.31  points or 1.33%

NASDAQ UP 63.42 points or 1.33%
WTI Oil price; 48.74 at 4:30 pm;

Brent Oil: 49.87




This ends the stock indices, oil price, currency crosses and interest rate closes for today

Closing Price for Oil, 5 pm/and 10 year USA interest rate:


BRENT: 49.74

USA 10 YR BOND YIELD: 1.469% 

USA DOLLAR INDEX: 95.93 up 27 cents

The British pound at 5 pm: Great Britain Pound/USA: 1.3286 down .0158 or 158 basis pts.

German 10 yr bond yield at 5 pm: -.130%


And now your more important USA stories which will influence the price of gold/silver


Stocks Bounce, Bonds Bid, But Gold Soars To Best Year Since 1980

Overheard everywhere this week…


But it seems something changed…

*  *  *

Across global assets…

Half-way through the year and judging by the last 3 days, everything is awesome… Gold and Silver are massive outperformers, stocks just broke even, and bonds are surging…


This is gold’s best H1 since 1980…


Stocks bounced hard off their End-QE3 levels…


But Nasdaq -4% and Trannies remain the laggards year-to-date…


*  *  *

In Q2, Silver and Crude were best performers, stocks and HY debt worst with bonds and gold doing well…


This was the worst quarter for the Chinese Yuan since 1994’s Q1 49% devaluation…


Trannies ended the quarter down 6% and Nasdaq -1.6% while Small Caps short-squeezed themselves to a 4% gain…


*  *  *

And finally, for June…stocks managed to scramble back into the green barely this week but Silver soared with bonds and bullion big winners…


A 3rd 200-point plus gain in The Dow was the first since the face-ripping rally off mid-Feb lows…


If ever there was a presence of The PPT to be found, we note that the last 3 days are the first time since the August crash rebound that The Dow has ripped over 200 points from the open to the high…same as in Oct 2014 when Bullard saved the world…

Makes sense – if The PPT is going to step in then they will want cash investors to take the momentum… not overnight futures traders.

Here is June – The S&P scrambled all the way back to unchanged (ending June +2pts)…

Manipulation instrument of choice – VIX – collapsed almost 40% (yes we know we don’t like using %ages with VIX) – the most since the Bullard bounce in Oct 2014…notice VIX is stuck right at its 50DMA


*  *  *

Since Brexit, gold remains the winner but stocks are catching back up to unch…


While Trannies and Small Caps are laggards, Dow & S&P surge desperately for the pre-Brexit levels…


“Most Shorted” stocks were squeeezed perfectly to unchanged post Brexit


VIX broke down to 15.29 intrday today, but was unable to hold below its 50DMA at 16.05…


Treasury yields were crazy today – spiking higher early at the EU open, then plunging on BoE, spiking again on ECB, then tanking into the close…


Notably on the day (this is bond futures) – Gilts gained (BoE easing), TSYs unch to lower (safety/yield), and Bunds tumbled (ECB buying elsewhere)


FX Markets were nosiy…Cable dumped on Carney but rallied back, JPY dumped (to support stocks) and EUR dumped and pumped…


Commodities were mixed as the USD swung around. Crude was weakest as Silver soared…


Crude ramped into the NYMEX close yet again… and then crashed…


Finally, Precious Metals are soaring. Silver is at its highest since Sept 2014…


Charts: Bloomberg



Consumer confidence for the over 55’s falters!  The jobless rate rose a modest 10,000 to 268,000

(courtesy zero hedge)

Confidence Crushed Despite Collapsing Jobless Claims

The trend of jobless claims continues lower (despite a modest 10k rise this week to 268k from a revised lower 258k last week). The problem is… as we have shown numerous times, this ‘measure’ of the labor market appears to have seasonally adjusted itself into being totally-useless as an indicator of anything factual. With Consumer Confidence for over-55s at its lowest in 2 years, it seems the job exuberance is just not rubbing off…

Consumer Confidence (red) has tumbled to two year lows (inverted) as jobless claims trend careens back near 42 year lows…

Nothing else matters but keeping the jobs recovery narrative alive.

Another phony report:  Chicago PMI rises to a 18th month high of 56.8 from last month’s 49.3 and about a 7 standard deviation from expectations.
(courtesy zero hedge)

David Stockman talks about the true figures on the USA economy and how the S and P is trading at 23.7 x earnings, totally unheard of in modern financial circles. And all of the USA stimulus was meant to benefit only the elite bankers

a must read..

(courtesy David Stockman/ContraCorner)

The Curse Of ‘Wealth Effects’ Central Banking

The robo-machines and perma-bulls are at it again, delivering another volumeless dead-cat bounce in a market that has churned sideways for 600 days now.

That’s right. The S&P 500 first crossed the 2060 threshold around mid-November of 2014, and has made upwards of 40 attempts to rally since then—-all of which have failed to be sustained.
^SPX Chart

^SPX data by YCharts

Nevertheless, there is a reason for the churn and there is a culprit behind the abortive rallies.

As to the former, it’s all about the cycle peak. The profits cycle peaked six quarters ago when S&P 500 reported earnings came in at $106 per share for the LTM period ended in September 2014. For the LTM ending in March 2016, by contrast, reported earnings were $87 per share.

So profits are down by 18%, and even that has been flattered by upwards of $700 billion of share repurchases in the interim.

Likewise, almost every measure of the real business economy peaked at about that time, too. For instance, non-defense CapEx orders are down 12% since September 2014, rail and trucking shipments are off by 21 and 6%, respectively, and export shipments are down by 13%.

But the most comprehensive measures of economic activity—total business sales and the inventory/sales ratio—– tell the real story. Total sales are down by nearly 5% from their August 2014 peak, and the inventory sales ratio has climbed steadily higher into what historically has been the recession zone.

Moreover, not only is the current 84 month-long simulacrum of a domestic business cycle expansion coming to an end, but so is the global super-cycle.

We are referring here to the unprecedented central bank fueled credit boom of the past two decades, which elevated the world’s debt mountain from $40 trillion to $225 trillion.Not only has that become a tremendous burden on current activity, but it also caused a massive spree of wasteful, inefficient capital spending and infrastructure building which can’t be sustained and which will eventually generate staggering losses of real capital.

The heart of this super-cycle, of course, was China’s Red Ponzi and the monumental digging,building, investing, borrowing and speculating campaign that was unleashed by the People’s Printing Press of China after 1994. But the incendiary hot house  economy which resulted is now pinned under $30 trillion of unserviceable debt and the greatest eruption of malinvestment, excess capacity and sheer investment waste in recorded economic history (the Pharaohs perhaps wasted more building the Pyramids).

It was all fueled by endless state supplied credit and a build it and they will come predicate. As noted in a nearby post, for example, it appears that China even built massive wind farms on that predicate. But, alas, the winds didn’t come.

In short, the world economy is fundamentally changing gears. A two-decade long credit-fueled crack-up boom which was centered in China and which cascaded throughout its EM supply chain and its DM base of capital equipment and luxury goods suppliers, such as Germany and the US, is coming to an end. We are now entering the crack-up phase and a long twilight era of deflation, liquidation, stagnation and payback.

So the stock market desperately needs to correct and correct deeply. Today’s closing valuation at 23.8X  earnings is just plain ludicrous—given that corporate profits are falling sharply and have no prospect of recovering as far as the eye can see. Even 15X or 1300 on the S&P 500  would be a sporty valuation in a world heading into the economic dumpster.

And that gets us to the culprit—-the ship of fools domiciled in the Eccles Building. The stock market and other risk asset markets cannot correct because honest price discovery has essentially been destroyed by what amounts to wealth effects central banking.

That is, under conditions of Peak Debt interest rate repression and massive expansion of central bank credit are pointless relative to the main street economy. That’s because the historical credit channel of monetary policy transmission is broken and done.

Other than mobilizing the last auto buyer that can fog a rearview mirror and the last young person who can scratch a signature on a student loan, cheap interest rates have done nothing to stimulate the old Keynesian “borrow and spend” gambit among 90% of the US households. The latter are either not credit worthy or have already borrowed up to the limits of their stagnant real incomes.

At the same time, the business channel of cheap credit transmission—-the cycling of borrowed funds into enhanced fixed asset investment—-has been even more badly impaired. The speculative financial market casino enabled by the Fed has turned America’s corporate C-suites into stock trading rooms and business strategy into an endless exercise in financial engineering.

Accordingly, even though non-financial business debt has risen from $11 trillion on eve of the great financial crisis to $13.5 trillion today, the entirety of that gain has been recycled into the inflation of secondary markets for existing assets, not primary investments in plant, equipment, technology and other avenues of capital enabled real investment.

In short, the Fed’s massive monetary stimulus has never really left the canyons of Wall Street. It has not rejuvenated and reflated the main street economy, but only inflated an even more gargantuan financial bubble than the two earlier busted bubbles of this century.

This week’s update of the tepid 1.1% “growth” of Q1 real GDP provides one more example of how monetary “stimulus” has been reduced to financial asset inflation and wealth effects manipulation of the money and capital markets.

On its third revision, the BEA concluded that real GDP grew by $44 billion, but that Healthcare was responsible for $26 billion or 58.4% of total.

Stated differently, aside from the nation’s massively bloated and supremely inefficient health care sector—-a condition made decidedly worse by Obamacare—-real GDP grew by just 0.47% during the first quarter. That’s close enough to zero for even the paint-by-the-numbers hairsplitters at the Fed and among their megaphones in the financial press.

The point is this. How can anyone in their right mind think that 90 months of ZIRP or $3.5 trillion of government debt monetization has anything at all to do with the one sector of the US economy that has generated a vastly disproportionate share of the nation’s meager growth?

The fact is, virtually all of the new jobs created in the US since the turn of the century have been in what we call the HES Complex, or health, education and social welfare. Yet these are overwhelmingly enabled by the nation’s fiscal machinery and the entitlement programs and tax preferences which deliver it.

Indeed, it is upwards of $4 trillion of medicare, Medicaid, tax preferred employer health benefits, public education spending and tax subsidies and social welfare programs that drive the growth and the jobs. Monetary stimulus and ZIRP have done squat by comparison.

Yet outside of the HES Complex, the US economy has only generated 2.9 million jobs—-all of which have been in the marginal part-time sector—since Bill Clinton packed his bags in January 2001. That’s just 16,000 jobs per month in an economy that needs 150,000 per month, at minimum.

Nonfarm Payrolls Less HES Complex

At the end of the day, therefore, monetary stimulus boils down to wealth effects pumping in the context of today’s debt besotted economy.

Since it was launched by Alan Greenspan in response to Black Monday in October 1987, there have been two fundamental consequences. To wit, the real incomes of the 90% at the bottom of the US economic ladder have been stagnant, real wealth levels are lower and its share of the pie has steadily declined.

In fact, the entire 13 percentage points of lost share has been captured by the 120,000 households at the tippy-top (0.1%) of the wealth ladder. This tiny slice of the nation has been the true beneficiary of wealth effects pumping by the Fed..

At the same time, financial bubbles and busts have become more frequent and violent because the Fed has destroyed the natural checks and balances of an honest financial market. The inability of the insanely over-valued stock market to correct itself, as demonstrated once again in the last two days, is proof positive.

It is also evidence of the extreme danger just ahead. Recession is fast approaching as indicated by virtually every measure of business activity. As shown below, even traffic at the fast food joints has ground to a halt during the past three months.

But when the fact of recession becomes undeniable, look out below. The Fed is stranded on the zero bound with no credible instruments of main street stimulus.

In fact, a desperate launch into negative interest rates would virtually guarantee a populist uprising against the Fed led by Donald Trump. In the alternative, a reversion to a massive new round of QE would surely cause a stampede for the exists in the casino; it would be a blatant admission that QE has been an abysmal failure.



Well that is all for today

To all our Canadian friends, hope you have a safe holiday weekend

I will bring you a commentary tomorrow night




  1. Before I read through another great post, I just want to thank you Harvey for making this information available – esp. after having to close your earlier site.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: