Trends Of The Latest Bank Participation Report

The price of gold has rallied to begin the year. With today's move UP through the 100-day moving average, price is now nearly $100 off of the lows of 12/31/13. Through January, you had to wonder which firms were buying and which were selling. With the release of the latest Bank Participation Report, we now have some idea.

First, some background. Recall that this  monthly report aggregates the positions of the four largest U.S. banks and the twenty largest non-U.S. banks. In the "U.S." category, this report always includes JPMorgan. The other three firms vary but often include the likes of Citi and MorganStanley. Firms included in the "non-U.S." category are HSBC, The Scoshe, DoucheBank, UnlimitedBS, Barclays and others.

The critical change to this report came last June. Up until then, both sides of the report were NET SHORT since time immemorial. Led by JPM on the U.S. side and HSBC on the non-U.S., the 24 bank total NET SHORT position reached 185,000 contracts on the report dated 10/2/12. (It's important to note that this was the beginning of the entire, post-QE∞ and counter-intuitive selloff that began at $1800 and concluded nine months later at $1180.) The report specifically looked like this:

DATE                              GROSS LONG             GROSS SHORT          NET

10/2/12    US Banks               40,625                              146,809                  -106,184

                  Non-U.S.                34,881                             113,445                    -78,564

                                                                                                                              -184,748

By the time price had bottomed, the report looked like this:

DATE                              GROSS LONG             GROSS SHORT          NET

7/2/13        US Banks             69,656                                 24,939                  +44,717

                   Non-U.S.              34,904                                 58,656                  -23,752

                                                                                                                               +20,965

Taken as a whole, that's a 205,713 contract FLIP. By ounces, that's 20,571,300. By metric ton, that's about 640!! Stated another way...At the onset of QE∞, the 24 largest banks were caught massively NET SHORT paper metal. Their only option was to smash price, creating speculative selling/shorting into which the banks could buy/cover. As you can see, this plan was remarkably effective.

In the seven months since, these summary positions have remained mostly unchanged. The total NET position dropped as low as 8,000 contracts on 9/3/13 and reached a peak of 43,000 on 12/3/13. As of last month, it looked like this:

DATE                              GROSS LONG             GROSS SHORT          NET

1/7/14         US Banks             59,291                               20,032                     +39,259

                    Non-U.S.             26,128                                32,492                     -6,364

                                                                                                                                +32,895

And, of of last Tuesday, it looks like this:

DATE                              GROSS LONG             GROSS SHORT          NET

2/4/14          US Banks            68,658                               24,937                     +43,721

                      Non-U.S.             18,752                               48,860                     -30,108

                                                                                                                                 +13,613

There are certainly quite a few things that should jump out at you:

  • First of all, JPM. They are The Big Tuna here. Of the U.S. Bank gross long position, I ascribe 90% to them. This gives them a current NET LONG position that once again exceeds 60,000 contracts. This is far and away the most significant factor that will effect price in the weeks ahead. As has been well-documented, JPM stopped over 6,000 contracts in December and that, along with their December rollovers, reduced the US Bank gross long position from 71,897 on 12/3/13 to 59,291 on 1/7/14. Note that JPM used the month of January to rebuild their position and the US Bank gross position is back to 68,658. Yes, I know that JPM does not appear to be stopping contracts in February. That's fine. Let's wait to see what they do in April and June.
  • To answer the question posed in the opening paragraph, the firms that were selling and attempting to cap the January rally were basically "everybody but JPM". The other three U.S. banks added some shorts but look at the massive change in the non-US position. They increased their NET SHORT position by over 400% or some 24,000 contracts. If you're wondering who was pounding price back from $1260 and attempting to keep it in check, now you have your answer.
  • And the similarities to the report of 9/3/13 must be noted. Back then, price had rallied well off the June lows and was UP over $200 at $1413. We all know what happened next. Price stalled and was beaten back through the fall of 2013 to the eventual Double Bottom. What did the BPR of 9/3/13 look like? Does it look familiar?

DATE                              GROSS LONG             GROSS SHORT          NET

9/3/13                                      69,510                                24,604                     +44,906

                                                 23,626                                60,350                      -36,724

                                                                                                                                 +8,182

So the question becomes...Will price continue to rally OR will price now falter, just as it did last September?

As much as you may not like it, the key will be the technicals such as horizontal resistance and the moving averages. Why? Because breaking these levels will spur the tech-based funds and WOPRs to cover shorts. Further rallies will create a double-buy by encouraging these specs to flip long, too.

Late last summer, as price rallied, it briefly exceeded the 50-day and the 100-day moving averages. This generated a virtuous cycle of buying and drove price all the way to $1434. However, back then the critical 200-day moving average was still all the way up near $1500 and price was never able to exceed it. Momentum faded. The non-US banks won and price receded.

What's different this time?

  1. Upside momentum appears to be growing as more and more market participants become aware of The Double Bottom.
  2. Price has exceeded the 50-day MA and, just today, has exceeded the 100-day MA. too.
  3. The miners, as reflected by the HUI, are rallying with many maintaining above their own 200-day MAs.
  4. And, most importantly, the all-important 200-day MA has continued to decline and now resides near $1315. That's just $40 away.

Though it won't be easy, I expect price to soon exceed the 200-day MA and break through significant horizontal resistance at $1320. Once this happens, price will begin to accelerate to the upside and will make a move to challenge the highs of last September. On the chart, it looks like this:

Now remember...I was just about the only guy in the entire blogosphere who told you in early December that the June lows would hold and that a Double Bottom would form before a rally in January. http://www.tfmetalsreport.com/blog/5295/courage-and-conviction Suddenly, there are quite a few rear-window "analysts" in the bullish camp and that's fine. Just remember, though, that I continue to urge patience. Crawling out of this Cartel Bank-induced hole has not and will not be easy. It will take time. As I've often stated, it took nine months to complete the Cartel book-flipping smash from $1800 to $1180. It will likely take another nine months before it is clear to everyone that price has turned and the bull market in paper gold has resumed. This means we could easily have another two months of slow, churning grind higher. Therefore, again, stay patient. If http://www.providentmetals.com or http://www.jmbullion.com are actually willing to sell you an ounce of gold for $1300, freaking take them up on it! Your days of acquisition at this dollar-conversion price level are numbered. You should be using this time ensure that you have enough "insurance" against the coming fiat disaster and TEOTGKE.

Have a great week!

TF

163 Comments

Turd Ferguson's picture

btw and fwiw

MODERATOR

I'll likely make this public and send it over to GATA sometime tomorrow.

Jerry T's picture

1st

1st 1st

Turd Ferguson's picture

HUI HUI HUI HUEEEEE

MODERATOR

HUI HUI HUI HUIIIIIIIII.

Looking good. IF it can close above 224, all will look good for a move to 230+ and a challenge of the 200-day MA.

Turd Ferguson's picture

Here's another way to look at it

MODERATOR

It's pretty hard NOT to be encouraged by this:

Urban Roman's picture

But for silver,

Not quite yet.

Hagarth's picture

Nope, not for silver...

Still holding though.

cavalier's picture

EXK Ring the bell or let it ride?

Turd

you previously suggested ringing the bell when EXK hit $5

it is real close right now

Given the strength of the HUI should we let it ride?

thanks for all your help

Maestro's picture

Thanks TURD!

Me likey Detour Gold again today!

Turd Ferguson's picture

This is not trading advice...

MODERATOR

...BUT...if it was...

Let's say I was long 1000 EXK just north of $4. I'd look to sell half of it near the open tomorrow if it opens UP near $5.25. I next would:

  • Sell the other half just below $6 if it keeps going
  • Buy the first half back when it drops back to $4.50-4.75 later this week, instead.

Turd Ferguson's picture

From Bill Holter

MODERATOR

MUST READ:

 I had the pleasure yesterday of hearing Jim Sinclair speak to a packed room of "CIGA's".  I met up with GATA/Lemetropole cafe's Bill Murphy ahead of time for lunch and then we headed on down to the conference.  Jim was in Dubai for most of the past week (on TRX business) and flew 24 hours to make the conference.  Though he claimed a massive case of jet lag, he was sharp, witty and did what I had "hoped" he would.  If you read Jim's website http://www.jsminest.com/ then you know that "he goes there" on nearly any and all topics financial and normally doesn't pull any punches.  I have seen him speak several times before this (I attended his very first conference in 2003 in Ct.) and if you listen carefully he says more than he writes, he did not disappoint yesterday!
  Before going any further I want to give you an idea of "who" Jim is.  He started right out of the box yesterday saying that "honor" in the financial world is completely gone and that fraud is everywhere.  Through his words to us you could feel his "genuity" both intellectually and spiritually.  I would have no problem ever doing any deal of any size on a "handshake" with him.  I've trained in various martial arts for 27 years and consider him the "master's master" of finance, not surprisingly his "Eastern studies" show through if you know what to look for.
  OK, so what did Jim tell us?  He did do a recap of derivatives and said that any and all "pre Lehman" derivatives are worthless and that "bail ins" are scary as hell and probably inevitable.  Because "honor and integrity" are long gone, no one really knows what they have in their bank accounts.  Your bank statements can say whatever they say but you won't know really know what you have until after the dust of bankruptcies and bail ins has settled.  He spoke of gold's "triple bottom" and believes it highly unlikely that the $1,180-$1,200 level will be broken or even tested again.  He rightly pointed out that gold has been acting very differently recently and the "feel" has changed 180 degrees.  He also does believe that the bullion banks have now become long rather than short and they will again as they did in 1979 make more money and faster than anyone else in the gold arena.          
  He said that even if another retest of support or even a break were to happen it will be meaningless in the big picture.  Gold and silver have been manipulated "too low" in price (under the cost of production) and that the unintended consequence of creating excess demand (especially from Asia) has put them on very solid ground and in very strong hands.  The "pricing" mechanism of gold and silver will change, COMEX will become a "cash settled" market and become irrelevant while the "physical settled" markets (like the one he is chairing in Singapore) that are popping up in Asia will come forward and become the pricing mechanism.  He also believes that 2014 will be a year of many many "events" which will cause changes and inflection points unlike any years in the past.  He believes the Euro will rise (because the dollar will drop) and that ".56" on the dollar index is the obvious target.  Not surprisingly he believes that Janet Yellen will flinch on "taper" and that "QE to infinity" will resume when she goes dovish.  This action by the Fed will probably move our stock markets higher and the lows may already be in. 
  Privately during a break, Murphy asked Jim that if the bullion banks were now long, who would take the short side?  The answer to this was "no one"...which would cause air pockets to the upside.  Air pockets as in no offers and flash crashes upwards faster, greater in size and more violent than we have experienced to the downside.  This is something that I've written about many times which would lead to a "reset".  My personal opinion is that we can see one occur at any time, Jim disagrees as he believes it may occur 2-3 years out.  This "3 years out" by the way is how long he believes that the next (he believes it may have already started) bull move will last which after listening to him will terminate in a "great reset".
  He had already told us all of the above through his writings, what follows is what he told us but has not put in print to my knowledge.  During the Q and A session he was asked about silver.  Much to my surprise he is wildly bullish!  In past sessions (and writings) whenever he was asked about silver he would say that "I am a gold guy", he was reluctant to and rarely spoke of silver.  This has changed, he said and I quote "silver will lead and it will be gold on steroids".  He followed up by mentioning that you will need to make a decision in the future about silver, while it will outperform gold by a huge margin there is a "monetary event" out there somewhere and that a decision will need to be made as to whether to hang on to your silver or to swap into gold.  Don't worry, he was not talking "now", now he believes that silver will trade to $50 and possibly even $100 this year.
  Another shocker to me was when a question was asked regarding the (waning) status of the Petrodollar.  The questioner mentioned that in the past, whenever the dollar came under attack the U.S. would respond in some measure to support it, "what might the U.S. do this time around?" was the question.  Jim answered bluntly and with one single sentence..."bomb Saudi Arabia".  There was an audible gasp from the crowd as this would be horrific...but guess what, it's very true in my opinion.  First off, were Saudi Arabia to accept anything other than dollars for their oil, that would be THE event that put a nail in the dollar's coffin.  I have written on this subject before that our "allies" Saudi Arabia and Israel have been thrown under the bus regarding Syria and Iran.  His answer was very logical yet you could feel the shockwave through the room as he said it.
  I stood in line to ask a question and naturally 2 of my questions were asked and answered while in line but Jim said something that I had not seen him definitively print before.  He was asked about the German gold and he bluntly said "it's gone".  He said (and I love the common sense and down to Earth analogy) "if I owe you $100 and you only pay me back $1.50, then you are either a deadbeat or you don't have it.  The German gold is gone".  Another question while standing in line was about his "crazy" (in his own words) speculation that gold could even go to $50,000 per ounce at some point.  He mentioned that a Goldman Sachs analyst (I did not catch the name) had also done a mathematical study and came up with the same number of $50,000 so he was no longer the "only crazy one out there" anymore.
  So I got to thinking and put these 2 together as I have written on this in the past.  To come up with a mathematical number for gold's price you must have 2 pieces (really 3) of information.  You must know exactly how much gold there is and how much money supply (and total debt) in order to do the math correctly.  In other words you need a numerator and denominator to put into your calculator (because we can no longer do math in our heads anymore) to come up with an answer.  The amount of total gold held is your numerator and that is divided by money supply/debt as your denominator...and presto you get a number. 
  So this is what I asked, "today is the very first time to my knowledge that you've said the German gold is gone, we have not had an audit since 1956 of the U.S. gold so that may also be gone (I kicked myself later because I did not ask him what he believed the U.S. gold holdings actually are).  How can you or anyone else mathematically come up with a dollar price of gold if in fact we don't have any left?  In order to come up with a true final number, we must have a real number as the numerator.  If the numerator is zero then the price of gold in dollars is actually infinity?".  Jim's answer to this was simply "you cannot, this is why I always say that gold may go to prices that amaze even me". 
  To finish, I want to thank Mr. Sinclair for everything he has done over the last nearly 15 years for us "little guys".  He has put more knowledge (for free) out and into the public on what was coming and how to ultimately protect yourselves than anyone else.  He was asked "why" he did this, what motivated him?  He wittily said that "Attila the Hun killed, Mother Theresa healed...it's what they do", he explained that trying to help people get out from in front of the coming economic and financial train wreck is "what he does".  When listening to him speak you can feel this, it's a "heart thing" and an act of selfless honor.  Jim Sinclair is truly a "master's master"!  Regards, Bill H.
mac's picture

"War, what in the world is it good for...."

- thanks for your work on the Bank positions.

- the levels do matter, as I can see today! shorts again helping out alot (as they read charts)...but I prepare for lift off any minute - war vibes all over the world, and as Celente says: "When all else fails they take us to war."

GoldisMoney's picture

Do we have a winner from last

Do we have a winner from last weeks hat contest?

tyberious's picture

2014…Déjà vu 2000 & 2008

2014…Déjà vu 2000 & 2008 ?

gold-eagle.com / By Vronsky / February 10, 2014

Those who do not learn from history are doomed to repeat it, which means those investors who cannot remember the past are condemned to suffer its financial consequences.

HISTORIC VIEWS

1929 vis-à-vis 2014:  Here are three charts covering the same theme that the Current Dow Index is following in the footsteps of the 1928-1930 Dow Stocks Index (just before the Great Stock Market Crash in late 1929).

READ MORE

SilverRunNW's picture

Reconciling a possible contradiction? Holter/Sinclair posting

"Privately during a break, Murphy asked Jim that if the bullion banks were now long, who would take the short side?  The answer to this was “no one”…which would cause air pockets to the upside."

Only the US bullion banks are long according to the latest BPR, and the same report shows the non-US banks are taking the short side.  Why would they (non-US banks) be doing this?  Did Germany finally come to the realization that their gold is really gone, and they will have to procure on the open market to rebuild their official reserves?  Keep the price low so they can procure?

If the US ever wants to repay that gold, they need to get prices back up and ramp up gold mining production!

tyberious's picture

50,000 Gold! You Bet!!

lakedweller2's picture

Thanks Turd

For the Sinclair summary.

Turd Ferguson's picture

Yes

MODERATOR

It was whitecastle123. He then donated the hat to another Turdite and I'm shipping it out today.

s1lverbullet's picture

Want to know why silver is fading?

Just take a look at the copper chart today.

Turd Ferguson's picture

exactly

MODERATOR

Sylvia is taking a bath, too.

J.P. Cubish's picture

Feeling Giddy

Silver spot aint doin nothing today, but I'm deep in the money on both MAG and SVL.  Seems like the miners have disconnected from the silver price today.  If silver could work its way up to $22, whoa baby!!!  PVG is a double for me too.  Showed that sucker a lot of love when that Strathcona guy walked off.   2 years of throwing paychecks at a floundering market is finally paying off.  And we're just getting started.  I hope everyone in Turdville is making money (ie gold) today.  Trench warfare all the way.   Hang in there soldiers.

s1lverbullet's picture

Turd

At what point does silver de-couple from copper?  I feel like silver needs an inflationary environment, one in which copper is rising, for it to thrive.  It's been like watching paint dry lately.

s1lverbullet's picture

@ J.P.

Bought my PVG at 3.35/share.  Loving the action of the last three months.  If gold gets to 1320 I think we are going to 7+.

Turd Ferguson's picture

GOFO

MODERATOR

While one-month remains negative for the 5th straight day, take a look at the dropping 3-month. Hmmmm.....

DATE          1-mo           2-mo              3-mo            6-mo         12-mo

31-Jan-14    0.04000    0.05167       0.06167    0.09333    0.16500                                        
03-Feb-14    0.02800    0.03600     0.04600     0.08600    0.15400                                        
04-Feb-14    -0.00400    0.02600    0.03600    0.08000    0.14600                                        
05-Feb-14    -0.01600    0.00600     0.02400    0.07600    0.14800                                        
06-Feb-14    -0.01200    0.00000    0.02000     0.07400    0.14600                                        
07-Feb-14    -0.01400    0.00200     0.01800     0.07200    0.14600                                        
10-Feb-14    -0.01400    -0.00200    0.01200    0.06400    0.14000  

Turd Ferguson's picture

This is one of the reasons

MODERATOR

This is one of the reasons I'm focusing so much on gold, at present.

As gold continues to rise, it will eventually help silver be considered again as a monetary metal, not industrial or inflationary.

This is all part of the "patience thingy". Silver might easily stay below $22 until mid to late March...4-6 more weeks. But, from there, move toward $24 and $26 pretty quickly.

Response to: Turd
Gamble's picture

1465 cnd to buy

1 Maple 1465 to buy 

Clarki Stomias's picture

Silver $20.20 Glass Ceiling and Holter/Sinclair

WHEN we finally do crack away from $20.20, it appears it will fly.  They must not have their house in order regarding silver yet and thus the invisible hand pushing it down there.  I see the correlation with copper, but it feels like there's also something more with that price level.  Anyone with better technical skills/Turd understand why the $20.20 level seems to be so important?

And regarding Sinclair and silver, I wouldn't say he was never bullish.  What I heard him say when I went to the Arizona Q&A last summer was that silver will lead gold up into the triple digits (100 to mid-100's) but then at that point it will be overvalued and gold will lead from there.  He had a hard time seeing the $300 to $500 dollar silver price that some project.  And he thought after that first spike up, silver would then lag gold and not move the same way (maybe even crash back a bit) and that it would make sense to then rotate to gold (which that part sounds the same as what Bill said).  So what Holter relayed doesn't really seem to have changed too much from what I heard Sinclair say, but it sounds like the timing on a silver move is now much closer/imminent in Sinclair's mind.  That said, Holter's info is much fresher, so maybe Sinclair is now showing a bullishness that he didn't before.  But to me it sounds more like a question of interpretation rather than a mindset change.

What the hell, $150 silver is fine with me!

Mickey's picture

Sinclair assumption more qe ramps markets

at some point, when you have MCD reporting same store sales down 3% , and revenues of many places declining there might be an awareness that the stock market is a suckers game.

Maestro's picture

EXK

Thanks for the thoughts on EXK update Turd.

Swift Boat Vet's picture

One of My 'Urges' --- What does Turd and the 'Gang" Think?

I am, and always have been a stacker only.  Never invested in any mines or explorers, large or small.   BUT!  I have to say that I have had an urge to buy Jim's TRX ever since it was around $1.80.

Without all the "due diligence" lectures,  what are your thoughts on TRX ?

Thanks for your opinions in advance, and happy stacking!

Swifty

rl999's picture

Thoughts

Can we also get some thoughts on Oil breaking out over $100

I own TRX (along with 52 other miners).

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