Historic Comex Positioning and Other Oddities
In our endless effort to educate investors and, at the same time, draw attention to the unfairness of the fractional reserve bullion banking scheme, opportunity sometimes presents itself. In reviewing this post, you may find that this is one of those times.
We've spent countless hours writing about the fraudulent nature of the Comex pricing scheme. We've discussed how The Banks manipulate and control this paper derivative market and, by understanding this one simple fact, we're often able to correctly forecast short-term trend changes in price. This is why there's a TF Metals Report in the first place. As we've stated for over five years: "Turd Ferguson isn't a psychic, a soothsayer or a witch. After all this time, he simply has a decent handle of the precious metals markets".
Most recently, after observing another brutal Cartel Bank price capping effort in October, where The Banks adjusted their NET position by nearly 100,000 gold contracts and 38,000 silver contracts in just four weeks, we issued this public warning through our daily podcast platform. It's a public thread that was posted on October 16. Feel free to listen now, if you'd like: http://www.tfmetalsreport.com/podcast/7211/tfmr-podcast-friday-october-16
Over the next six weeks, we tried to warn subscribers as often as possible as to what was coming. Here are 12 posts in chronological order, all of them made public today (if they weren't already) for your review:
The purpose in listing these it not to gloat or sell subscriptions. What we want you to see is that this short-term stuff is, indeed, predictable...so long as you recognize what the motives are behind the paper trading. The Bullion Banks control these markets and the speculators are their playthings. Spec money piles into long positions and The Banks issue the shorts on the other side. Price is then crashed, inducing Spec liquidation and shorting while The Banks buy to cover their shorts and add longs. Once this cycle is complete, it begins again. Wash, rinse, repeat.
But we wouldn't take the time to write all of this up on a Sunday UNLESS this time looked and felt a bit different. In the article above entitled "The Rats and The Sinking Ship", we laid out a collection of anecdotal data points such as declining Comex vault gold and the apparent "run" on the vaults of Scotia Mocatta (http://www.tfmetalsreport.com/blog/7287/rats-and-sinking-ship).
To that list, let's add these points:
- It simply cannot be coincidence that, with Bank leverage at unprecedented levels on the Comex, reaching 325:1 registered to open interest on Thursday, that Dec15 gold deliveries are nearly non-existent. Check this out:
In Dec15 silver, where the leverage ratio is near historical norms at 19:1, there have been 3,513 posted "deliveries" this month while Dec15 open interest has fallen from 4,078 last Friday to Thursday's 480.
In Dec15 gold, however, where the leverage ratio is the aforementioned 325:1, there have been a whopping 91 posted deliveries while open interest has fallen from 7,849 to 2,993.
- Reports out of London suggest that GOFO rates, while no longer published by the LBMA, have fallen back to historically negative levels. The rates for 1-month, 2-month and 3-month GOFO were reported to be near record lows on Thursday, levels only seen prior for a few days in late November of 2014.
- GLD "inventory" now more than cut in half and down over 700 metric tonnes from the highs in 2012.
- Perhaps most importantly, the data found in Friday's CFTC-generated Commitment of Traders report: http://news.goldseek.com/COT/1449261204.php
- Also on Friday, the CFTC released its monthly Bank Participation Report, showing for the first time in memory, that the summary position of the 20 largest non-U.S. Banks was NET LONG 2,496 Comex gold contracts: http://www.cftc.gov/MarketReports/BankParticipationReports/deadec15f
Let's focus, though, on Friday's CoT report as it was truly historic and unprecedented. Why? Not only did it contain evidence of the smallest Large Spec NET long position in history. It also showed the smallest gold Commercial NET short position in memory at just 2,911 contracts.
Keep in mind that this data comes from the weekly CoT survey taken at the Comex close every Tuesday. So, as of last Tuesday, the Commercials in gold held just 2,911 contracts NET short. This is far and away the lowest NET short position for them we've ever recorded. This means that the current CoT structure is more constructive than:
- Late June 2013, when the Commercial NET short position fell to a then-record NET short position of 22,000 contracts. Over the next two months, price rallied from $1180 to $1430.
- Late November 2014, when the Commercial NET short position fell to a NET short position of 68,000 contracts. Over the next two months, price rallied from $1140 to $1310.
- Early August 2015, when the Commercial NET short position fell to a new record NET short position of 14,800 contracts. Over the next two months, price rallied from $1085 to $1190.
But we need to take this one step further. On Wednesday of last week, the day after this most recent CoT survey and therefore not included in this report, the price of gold fell sharply and finished the day down nearly $10. On that day, the total Comex open interest was reported to have grown by nearly 8,000 contracts. Years of experience lead us to conclude that the selloff on Wednesday was largely a Spec shorting affair and the rise in total open interest was due to the opening of brand new short contracts, with the Commercials (Banks) taking the other (long) side. If this is correct, then there can be no doubt that Wednesday's action further decreased both the NET long position of the Large Specs AND the NET short position of the gold Commercials. With the total open interest rising by 7,709 contracts that day, we therefore draw the following conclusion:
- At the close last Wednesday evening, December 2, 2015, the Gold Commercials were NET LONG gold futures for perhaps the first time since gold futures trading began on the Comex in December of 1974.
Think about that for a minute.
Now, think about that as it relates to the next price rally, given what we laid out above concerning the last three declines in the gold Commercial NET short position.
Now, think about that in terms of the history of the Gold Commercial positioning, a history replete with examples of a short position in excess of 200,000 contracts, even approaching 250,000 contracts in the autumn of 2012 right before the initiation of QE3 and the counter-intuitive paper price smash that continues to this day. Compare the latest CoT to those extremes of September 2012. At that time, gold was expected to rally as the massive $1T+ QE3 program was announced. Instead, a decline began that has smashed price from $1800 to this week's lows below $1050. And, over that same time period, the gold Commercial NET short position has been completely wiped out and covered, as we stated likely extending into NET LONG for perhaps the first time in history.
DATE PRICE GOLD COMM GROSS SHORT GOLD COMM GROSS LONG GOLD COMM NET
2/28/12 $1770 390,412 145,134 (245,278)
9/11/12 $1750 380,239 142,946 (237,293)
12/1/15 $1065 158,465 155,554 (2,911)
Now, think about the timing of all of this. The gold Commercials, a group made up in large part by the trading desks of the major Bullion Banks, have just moved to a NET position that is long gold futures contracts for what might be the first time.
Now, consider again all of the assorted, supposedly "anecdotal" data points we've laid out over the past few months.
Now, put all of this together in your head. Do you reach the conclusion that maybe, just maybe, the paper price of gold is set to rally in the days ahead rather than plunge...as all of the supposed "experts" in the financial media would have you believe?
We'll take it one step further...
Perhaps...maybe, just maybe, we are finally getting close to the end. The stresses within the fractional reserve bullion banking scheme are evident for all to see and they come at a time when the Comex market-making Banks and commercials have positioned themselves either long or neutral for the first time ever.
But even if this isn't "the end"...and The Banks are able to hold things together a bit longer...here at TFMR, there can be no doubt that the next move in the price of gold is UP, not down, as the next Spec wash-and-rinse cycle begins. You can use this information to either position yourself to make some fiat profits or simply add to your existing stack of physical metal. It's up to you. Either way, be ready. The next few months and, quite frankly ALL of 2016, are going to be interesting, to say the least.