Summarizing The Latest BPR

As you know, the CFTC-generated Bank Participation Report contains the evidence that the U.S. banks or, more likely a single U.S. bank, have "cornered" the Comex gold futures market. The latest BPR came out last Friday and it confirms that this condition still exists.

First, a refresher....What the heck is the "Bank Participation Report" anyway? It's a summary report issued by the CFTC, usually on the Friday following the first Tuesday of every month. As with all CFTC data, it is deliberately opaque in that individual firms are not specified. Instead, the report aggregates the positions of the four largest U.S. banks and the twenty largest non-U.S. banks. And just which firms are included in the report? Well, hands-down the largest U.S. bank in the report is JPM. They are the behemoth and likely 80% or more of the "U.S. bank" side of the report. The other banks that move onto and off of the report each month depending upon current positioning are TungstenmanSachs, MorganStanley and Citi. The "non-U.S. banks" include DeutshceBank, HSBC, Scotia, Barclays, UBS et al.

Before I begin, I strongly encourage you to research all of this yourself as I don't simply want you to take my word for it. This is very important stuff and you need to do your own homework, too: http://www.cftc.gov/marketreports/bankparticipationreports/index.htm

And you should also go back and re-read this post from last month because, in the end, this is where it's all headed: http://www.tfmetalsreport.com/blog/5018/evidence-gold-corner

Ultimately, what you need to understand is that this entire "correction", these painful 10 months of counter-intuitive selling, has all been schemed to the benefit of JPM and the other big, bullion banks. Caught massively short at the introduction of QE∞ last autumn, they had no choice but to smash price in order to cover. They had tried covering silver and gold into rising prices in 2011 with nearly disastrous (for them) results. They weren't about to make the same mistake twice so, instead, this recent selling scheme was hatched to create the conditions under which the banks could cover into lower prices, instead.

And it worked. Here's the data that illustrate the point:

DEC 2012 BPR (survey date 12/4/12 with price at $1706)

U.S. Banks: Long 37,790 contracts and short 144,183 contracts. Net short = 106,393 contracts

Non U.S. Banks: Long 35,326 contracts and short 80,033 contracts. Net short = 44,707 contracts (net short 2.26:1)

MAR 2013 BPR (survey date 3/5/13 with price at $1581)

U.S. Banks: Long 40,685. Short 86,924. Net short = 46,239 contracts

Non U.S. Banks: Long 29,219. Short 72,545. Net short = 43,426 contracts (net short 2.48:1)

Now something here should literally jump off the page at you. Price had declined $125 with much of it coming during a brutal, 2-day beatdown in mid-February but look at how the positions had changed! The non-U.S. banks had barely budged as their net short position had only declined by 1,281 contracts. The U.S. banks (JPM), however, had already trimmed their net short position by over 56% or over 60,000 contracts. Clearly, this strategy of inspiring lower prices and then covering shorts into the follow-on weakness created by a growing Large Spec short position was working beautifully. Why not keep going?? So they did....raiding price in mid-April. This intentional smash broke gold down through the bottom of its 19-month price range and inspired all sorts of "gold is now in a bear market" calls from the Gold Cartel, sycophant media.

MAY 2013 BPR (survey date 5/7/13 with price at $1453)

U.S. Banks: Long 59,829. Short 76,610. Net short = 16,781 contracts

Non U.S. Banks: Long 32,483. Short 54,957. Net short = 22,474 contracts (net short 1.69:1)

There are several things in this report that demand your attention:

  1. Price has now fallen $253 in six months. During this time, the U.S. banks have trimmed their net short position by over 84%. They've not only covered more than 67,000 shorts but they've added 22,000 new longs, increasing their gross long position by over 58%.
  2. The non-U.S. banks finally got the memo and used the weakness to lessen their net short position, too, cutting it nearly in half during March and April. Note the exact number here as this is important: As of 5/7/13, the non-U.S. banks were net short 22,474 Comex gold contracts.

JUNE 2013 BPR (survey date 6/4/13 with price at $1399)

U.S. Banks: Long 56,751. Short 27,129. Now net long, for the first time I can recall, an astonishing 29,622 contracts.

Non U.S. Banks: Long 24,035. Short 49,075. Net short = 25,040 contracts (with a net short ratio of 2.04:1)

This is a HUGE change for the U.S. banks. Note, however, that the non-U.S. bank net position is relatively unchanged. Price then bottomed three weeks later on Friday, June 28, at $1180.

JULY 2013 BPR (survey date 7/2/13 with price at $1246)

U.S. Banks: Long 69,656. Short 24,939. Net long = 44,717 contracts (with a net long ratio of 2.79:1)

Non U.S. Banks: Long 34,904. Short 58,656. Net short = 23,752 contracts (with a net short ratio of 1.68:1)

It's time to stop again and summarize:

  1. Over the course of these seven months, The Federal Reserve of The United States has created from whole cloth approximately $550,000,000,000. During this time, the price of gold has counter-intuitively fallen $460 or about 27%.
  2. The four largest U.S. banks that are actively involved in the Comex gold market have utilized this time to move from a net short position of 106,393 contracts to a net long position of 44,717 contracts. That's the equivalent of 15,111,000 troy ounces of paper gold or 470 metric tonnes.
  3. The 20 largest non-U.S. banks have also utilized this price weakness to trim their combined net short position from 44,707 contracts to 23,752 contracts. Though nothing like JPM's the U.S. bank move, this is still a reduction of 47%.

AUGUST 2013 BPR (survey date 8/6/13 with price at $1282)

U.S. Banks: Long 90,949. Short 31,476. Net long = 59,473 (with a net long ratio of 2.89:1)

Non U.S. Banks: Long: 25,957. Short 47,996 Net short = 22,039 (with a net short ratio of 1.85:1)

Note that the size of the U.S. bank net long position has grown but the ratio is nearly unchanged.

SEPT 2013 BPR (survey date 9/3/13 with price at $1412)

U.S. Banks: Long 69,510. Short 24,604. Net long = 44,906 (with a net long ratio of 2.83:1)

Non U.S. Banks: Long 23,626. Short 60,350. Net short = 36,724 (with a net short ratio of 2.55:1)

OK, I've given you a lot of data. Here are the points I want you to consider:

  • After being net short since time immemorial, the U.S. banks are now net long. Not only that, even after the initial 20% rally from The Bottom, they are still net long nearly the same amount and ratio of gold contracts that they were at The Bottom.
  • Since early December of last year, the 20 non-U.S. banks have only reduced their net short position by 7,983 contracts or about 18%. In fact, when measured as a ratio, the non-U.S. banks are "more short" than they were last December with a current net short ratio of 2.55:1 versus last December's 2.26:1.
  • Over the same time period, the 4 U.S. banks have schemed and converted a 106,393 contract net short position into a 44,906 net long position. Again, that's a total net change of 151,299 contracts or 470 metric tonnes of paper gold.

I guess, ultimately, the question is this:

What do the U.S. banks, primarily JPMorgan, know about the future of gold prices?

The non-U.S. banks have not materially changed their net short position and the Bank Participation Reports for silver don't show anything of these same changes. In fact, the bank positions in silver have only deteriorated and worsened over the past 4 months. Check this out:

DEC 2012 BPR (survey date 12/4/12 with silver price at $32.98)

U.S. Banks: Long 625. Short: 40,198. Net short = 39,573 (with an astonishing net short ratio of 64.3:1)

Non U.S. Banks: Long 13,928. Short: 32,127. Net short = 18,199 (with a net short ratio of 2.31:1)

MAY 2013 BPR (survey date 5/7/13 with silver price at $23.92)

U.S. Banks: Long 5,148. Short 27,021. Net short = 21,873 (with a net short ratio of 5.25:1)

Non U.S. Banks: Long 13,223. Short 24,851. Net short = 11,628 (with a net short ratio of 1.88:1)

SEPT 2013 BPR (survey date 9/3/13 with silver price at $24.43)

U.S. Banks: Long 1,644. Short 25,319. Net short = 23,675 (with a net short ratio of 15.4:1)

Non U.S. Banks: Long 8,431, Short 27,418. Net short 18,987 (with a net short ratio of 3.25:1)

So I'll repeat myself, at the risk of being rude:

What do the U.S. banks, primarily JPMorgan, know about the future of gold prices?

Contrary to expectations, since the advent of QE∞, the price of gold has fallen over 20% while the U.S. Federal Reserve has created over 720,000,000,000 new dollars. While virtually ignoring silver, the four largest U.S. banks have eliminated an enormous potential liability and positioned themselves to profit from rising prices after years of  "managing the ascent".

Again, I ask you:

  • What do the U.S. banks, primarily JPM (the most primary of all Primary Dealers), know about the future?
  • What does this tell you about the future direction of price?
  • How might this U.S. bank net long position impact December deliveries?
  • With a current net position exceeding 65,000 long contracts, do you expect JPM to realize a massive loss or a massive gain in the months ahead?
  • Are you selling here or buying?

Prepare accordingly.

TF

123 Comments

ag1969's picture

First

First Amendment

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

Motley Fool's picture

New Fofoa post

For those that are interested, fofoa has a new post up that puts forward a good hypothesis that explains the census data which shows 4500 tonnes net export of gold for the US from 1991-2012.

http://fofoa.blogspot.com/2013/09/what-about-sprotts-4500-tonne-export-gap.html

Pining, I assume you at least would be interested.

pbfurn's picture

But Why

is JPM still short silver?

Mickey's picture

1350

they did a good job of blowing thru 1350 here huh? Almost as if someone was listening to you and decided to make it happen overnight in a few ticks

I would think that during this current hit would be a great time to load up on long options with a few months

I plan on buying miners into  Dec or Jan.

wrote calls covered calls yesterday sensing something but I really thought that something would be tomorrow or monday ahead of fed meeting. was planning to do more call writing and put buying today--too late. 

Mickey's picture

commodities

it appears that commodities in general did not take much of a hit here--maybe up--meaning this was an isolated hit which of course means......

John Galt's picture

Important Question

Will there be another hat eating if silver blows through $22.00?

;)

I'm just messing with you, Turd. You know we love you.

Fat Willie's picture

The Great American Banana Republic

Urban Roman's picture

Gold Slamdown

Tyler Durden's picture

Vicious Gold Slamdown Breaks Gold Market For 20 Seconds

There was a time when, if selling a sizable amount of a security, one tried to get the best execution price and not alert the buyers comprising the bid stack that there is (substantial) volume for sale. Of course, there was and always has been a time when one tried to manipulate prices by slamming the bid until it was fully taken out, usually just before close of trading, an illegal practice known as "banging the close." It appears that when it comes to gold, the former is long gone history, and...


I don't always sell 200,000 ounces of gold.

But when I do, I like to sell it all at once and get the worst possible price for it.

STAY THIRSTY MY FRIENDS.
-- Buckaroo Banzai

Turd Ferguson's picture

No but...

MODERATOR

As I've been telling subscribers for days, only a break and close below $22 would cause me to alter my current bullishness.

Response to: Important Question
engineering edge's picture

56 to 1 claims on COMEX Gold

I know this is a little off of your post on the "missing" 4500 tons of Au....

I am looking for some opinions on the possibility of the US Fed/Treasury tying the COMEX settlement of claims to the de-valuation of the USD, and the debt ceiling debates?

By running a best line fit through the correlation of the Gold Spot price versus the debt limit, we see a $3000 USD spot price with the debt limit raised to $17.8 Trillion USD from $16.7 Trillion USD.

At the ratio of 56:1 claims of Open/Interest vs Registered, a default is imminent.

hans007's picture

amazingly we are only a few

amazingly we are only a few cents away.  down 50 cents in the last 10 min

¤'s picture

Thanks...

...for the post. That took some effort and time. yes

I hope the metals stay like this or lower for at least the next 6-8 weeks. I'll be ready then but I'll be chomping at the bit with every price rise during that time.

The German election finishing up might provide some further interesting market reactions afterwards.

boatman's picture

gold has

decisively broken the lower channel of the last 2.5 month leg up and broke horizontal support at 1350.

a decent chance there is one last best time to back the truck up.

BEN speech wenesday,.........he wants to leave on a token taper if he can....let the next guy deal with the ramifications.

s1lverbullet's picture

Comment repost from ZeroHedge. Lol.

"I don't always sell 200,000 ounces of gold....

But when I do, I like to sell it all at once and get the worst possible price for it. 

Stay thirsty my friends."

What a farce these markets have become.

John Galt's picture

A Video Presentation of Today's PM Market Action

Just A Regular Guy's picture

Doubled down on a silver short

Glad I did that today.... will let it run into next week, sell, buy some stox/shiney. Ezy game.

Turd Ferguson's picture

What's wrong with this picture?

MODERATOR

Crude....UP

Bonds....UP

Metals....smashed.

Why? The tone was set at 3:00 am with the 2,000 contract dumping. Did someone know in advance that the jobless claims number was about to be manipulated way down due to the incomplete data? When that number was released, the algo HFT WOPRs took over and drove price to where it is at present.

And just whom do you think is buying? I'll give you one guess and it ryhmes with Ray Dee Semm.

jaw777's picture

$22

Good news is that if $22 doesn't break, we are at the bottom. Bad news is...

Turd Ferguson's picture

Exactly

MODERATOR

Though I hate to see $1350 fail as it breaks the UPtrend line from the June lows, $1320 is your key number. As is $22 in silver. CLOSES below there almost certainly postpone the still-impending rallies to $1500 and $26.

Response to: $22
hans007's picture

i am going to be so

i am going to be so surprised, when they announce they are delaying the taper or making it very small, and someone was able to buy up a ton of metal the week before.  i will be so shocked that i might lose faith in the financial system.

the_circle's picture

Keiser

Nice Keiser Report, Turd! 

AGAU's picture

Holy crap if i backed up the

Holy crap if i backed up the truck every time this happened I would have worn out reverse gear by now

Hic!

Fat Willie's picture

Turd

Any thoughts on this:  Slam the metals this week ( below 22 / 1320 ) on the premise that the farcical "taper" is smaller than expected, and hence a pretty significant metals rally?  Better to start from 21.80 than 23.50 when you are trying to stay under 26.  Similar to the jobs number earlier this month, but more important.

Still seems the overall downtrend is firmly in place, until we break the weekly downtrend line going back to Sep2011 / May 2011 for gold/silver.

My only other  thought is that the runup seems to be entirely "war-premium" related.  No war, no runup.

UnicycleJuggler's picture

Sometimes I wonder if

Sometimes I wonder if slamming the gold market in the middle of the night might not actually be a *good* strategy for selling a large amount. Big traders might see it and think it's just another slam and therefore a good opportunity to BTFD, thus providing instant liquidity. Usually it keeps on going down. Who knows when the slammer buys it back, if ever.

ancientmoney's picture

@AGAU re: holy crap . . .

"Holy crap if i backed up the truck every time this happened I would have worn out reverse gear by now"

----------------------------------------------------------------------------------------------------------------------------------------

Yeah, but think of the humongous stack you would have!  You could afford to fix the tranny by selling a bit.

cc's picture

Hi, Turd

I'm so sick of the recent price speculation and all the taper talks.  If QE4 did not even help gold price at all, why would taper hurt gold price???

Turd, can you calculate by reducing around 15k contracts in Aug, how many oz of real gold did US banks take for delivery?  Of course they know it's just paper, and they can only get a very small portion of the real thing out of their long position.  But what's the agenda behind the paper long if no delivery can be guaranteed?

Dyna mo hum's picture

Every time I get ready to add to my stack this guy does

something stupid again!  >>> 

flyinkel's picture

Great Max Keiser!!!

The one thing that sticks in my craw is that JPM is long while the others are not.  Is this a possibility, why or why not?

If I am JPM, I want to be the first to fail so gross public resources are spent trying to keep me alive so that I can rise from the ashes first.  I go long gold at the same time doing the following 1)  I take my physical overseas, 2)  I sell my expensive buildings to truck the $$, and any assets of value really, overseas.  I leave as many liabilities in the US as possible and engineer my own collapse driving the price of gold down one final time, and suddenly there is no other choice than to force the fail.  I hold my $$$ overseas and sneakily purchase the most bullion at the lowest prices.  At the same time  I greedily take everything given to me in the US being the first "too big to fail" to actually fail.  Thus I give myself a far better foundation than the other banks that come after me will get.  I become the one best positioned to run the US banking system after economic collapse.

ArtL's picture

McCain accuses Obama of thinking before going to war

http://www.newyorker.com/online/blogs/borowitzreport/2013/09/mccain-accuses-obama-of-thinking-before-using-force.html?mbid=nl_Borowitz%20%28165%29

WASHINGTON (The Borowitz Report)—Sen. John McCain (R-Arizona) was harshly critical today of President Obama’s nationally televised address about Syria this week, telling CNN’s Wolf Blitzer, “The President’s decision to think before attacking another country flies in the face of American foreign policy.”

“The United States of America has been involved in countless armed conflicts since this great nation was founded,” Mr. McCain said. “Many of those would never have happened if we’d stopped to think about them first. Sadly, the President seems not to have learned this lesson of history.”

Calling the President “an Ivy League law professor who never met a thought he didn’t like,” Mr. McCain said that he was urging Mr. Obama “to please take thinking off the table.”

“The stakes for America couldn’t be higher right now,” he said. “Our global reputation for rushing into war with no advance planning is hanging by a thread.”

Mr. McCain said that he is attempting to schedule a meeting in the Oval Office, where he plans to deliver a “strong and clear” message to Mr. Obama: “Mr. President, what you are doing is playing into the hands of the enemy. Thinking solves nothing.”

tmosley's picture

@jaw: Here is the funny thing

@jaw:

Here is the funny thing about technical analysis:  half the time its predictions are just tautologies. 

Of course this is the bottom if it doesn't break $22.  We are sitting on top of $22.  If it doesn't go through it, then it can only go sideways or up.  Either way, it would be a bottom.

But then, I suppose a tautology is the ultimate in common sense (identity function), so maybe that is a good thing.

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